In the course of 3 months in 2016, I have read 4 books to keep me cultured. I would like to summarize one of my book that I read. My friend had recommended me this book, when i was a college student. Why Nations Fail by Daron Acemoglu and James Robinson is brilliant and engagingly written. This book answers the question that has stumped the experts for centuries about why are some nations poor and others rich divided by wealth and poverty, health and sickness food and famine
Acemoglu and Robinson made a hypotheses answering the question about world inequality. Is it geography, culture, weather or the ignorance of its citizens? Simply, No. none of these factors is either definitive or destiny but extractive economic institutions does. There is strong synergy between economic and political institution. Extractive political institutions concentrate power in the hands of a narrow elite and place few constraints on the exercise of this power. Economic institutions are then often structured by this elite to extract resources from the rest of society. Extractive economic institution thus naturally accompany extractive political institutions.
To answer the big questions of today, Acemoglu and Robinson marshal historical evidence from Latin America, England, Europe, the United States, Africa, the Roman Empire, the Mayan city, medieval Venice, and Soviet Union to build a new theory of political economy. Based on their research, they conclusively show that it is manmade political and economic institutions that underlie economic success.
They also suggest that there has been a vicious circle and virtuous circle at work in many countries over the last centuries. The virtuous circle about how institutions that encourage prosperity create positive feedback loops that prevent the efforts by elites to undermine them. On the other hand vicious circle is about how institutions that create poverty generate negative feedback loops and endure, which than led to a decent.
Korea is one of the fascinating examples to explain world inequality. The South Korea is one of the richest countries in the world, while the North Korea grapples with periodic famine and object poverty. In the South Korea, economic institutions encouraged investment and trade. South Korean politicians invested in education, achieving high rates of literacy and schooling. Meanwhile, in the north is a different regime, imposing different institutions and creating different incentives. The contrast of south and North Korea illustrates a general principle. Inclusive economic institutions foster economic activity, productivity growth and economic prosperity.
How about Botswana? As we have known, differently from almost anywhere else in sub- Saharan Africa, Botswana manage to establish a stable democracy and pluralistic institutions and choose inclusive economic institution while most African countries did the opposite. Botswana has the highest per capita income in Sub Saharan Africa, this remarkable achievement because Seretse Khama, Quett Masire who worked hard and honestly to build inclusive institution.
Unlike Botswana, Sierra Leone and Zimbabwe are poor country because there is an elite who design economic institutions in order to enrich themselves and perpetuate their power. Extractive political institutions have created extractive economic institutions, transferring wealth and power toward the elite.
Acemoglu and Robinson also explain about economic growth of China under extractive institutions. They admit that extractive regimes can produce temporary economic growth as long as they are politically centralized. China’s economy was the bird; the party’s control, the cage, had to be enlarged to make the bird healthier and more dynamic, but it could not be unlocked or removed, lest the bird fly away. But while Chinese economic institutions are incomparably more inclusive today than three decades ago. Just as in the Soviet Union who achieved growth under extractive economic institutions and extractive political institutions because it forcibly allocated resources toward industry under a centralized command structure, particularly armaments and heavy industry. Such growth was feasible partly because there was a lot of catching up to be done. Chinese economic institutions are certainly more inclusive than those in the Soviet Union but china’s political institutions are still extractive.
In contrast with china and Soviet Union, countries such as United Kingdom and United states are wealthy because of inclusive institutions. Their citizens overthrew the elites who controlled power and created a society where political rights were much more broadly distributed, where the government was accountable and responsive to its citizens and where the great mass of people could take advantage of economic opportunities.
All of these analyses has come to conclusion that the only factor which can explain why one of these countries is poor and the other is rich because of the institutional infrastructure which has been established through the last few decades/centuries.
But how can society build inclusive institutions?
History, as we have seen, what is common among the political revolutions that successfully paved the way for more inclusive institutions and the gradual institutional changes in North America, in England in the nineteenth century, and in Botswana after independence—which also led to significant strengthening of inclusive political institutions—is that they succeeded in empowering a fairly broad cross-section of society. Pluralism, the cornerstone of inclusive political institutions, requires political power to be widely held in society, and starting from extractive institutions that vest power in a narrow elite, this requires a process of empowerment.
In the process of empowerment, we need media. Empowerment of society at large is difficult to coordinate and maintain without widespread information about whether there are economic and political abuses by those in power.
And how about our beloved country?
