Book Review: Acemoglu D., & Robinson J., Why Nations Fail: The Origins of Power, Prosperity, and Poverty (NY: Crown Business, 2012), pp. 529

The ongoing riots and chaos in Cairo against President Morsi’s unwise move to grab more presidential powers underscores the explanatory power of Acemoglu and Robinson’s argument in their well researched and compelling book. In general, the book main argument is that nations fail or succeed due to economic and political institutions that they have in place. They categorize these institutions into two types- inclusive institutions and extractive institutions. Extractive institutions are those institutions that don’t give equal opportunities to all citizens to participate and to engage in the countries’ socio-economic/political activities. Important to note is that extractive institutions may lead to economic growth but this kind of growth will only benefit the elite class and it will not last.

On the other side, inclusive institutions are those that give opportunities for all citizens to participate and engage in socio-economic/political affairs. These kinds of institutions enable sustainable growth that benefits all citizens.  The main reasons for that, Acemoglu and Robinson argue, is because inclusive institutions allow what Joseph Schumpeter called ‘creative destruction’. Creative destruction- i.e. replacing the old with new: new sectors attract resources away from old ones. Similarly, they argue that the fear of creative destruction is often at the root of the opposition to inclusive economic and political institutions (p.84). Impressively, the authors use appealing and thoroughly explained examples to illustrate these two types of institutions. They use historical trends to trace the formulations and persistence of these institutions.  To further justify their theories, the author took a whole chapter (chapter 2) to explain other mega theories that try to explain economic failure and success and show each of those theories weaknesses.

In connection to that, the authors expound on the arguments that extractive and inclusive institutions create a vicious and virtuous circles respectively. By these they mean that the type of institutions set will perpetuate similar institutions over time.  They type of institutions created lead to a path that makes it difficult to break or change hence leading to the similar institutions over and over.  For the extractive institutions, they use Robert Michel’s concept of the Iron Law of Oligarchy to explain vicious circle. With regards to this, the authors clearly expressed their doubts on the 2011 Egyptian Revolution- they argue that ‘ Thus the fact that the extractive regime of President Mubarak was overturned by popular protests in February 2011 does not guarantee that Egypt will move onto a path to more inclusive institutions. Instead extractive institutions may re-create themselves despite the vibrant and hopeful pro-democracy movement’ (p. 436).   Seeing how President Morsi shamelessly grab more power for his own, I cannot agree more with Acemoglu and Robinson’s arguments.

One of the arguments from the authors that I am not completely buying is that their theory is not based on historical determinism. This, they argue, is because there are may be critical junctures through which change occurs. In fact they have a chapter titled ‘Breaking the Mold’ whereby they give examples of countries and societies that broke from extractive institutions to inclusive institutions. Although I agree with the concept of critical juncture and that change occurs, I still think their theory has to do with historical determinism.

In spite the fact that the authors do not mention historical institutionalism, which is a sub- theory within one of the Political Science theories known new institutionalism theory- a Political Science theory that explain institutional persistence and change using concepts such as path dependency, critical moments, critical junctures, layering, drifting, and displacement, Acemoglu and Robinson arguments are more or less those of historical institutionalism. History determines whether nations fail or succeed. This is because institutions follow the path created at a certain historical point. I do not even understand how  could the authors maintain that their theory is not based on historical determinism while they use historical examples to explain the success stories of the Western world and failures of Latin America and Africa.  In connection to this, when the authors talked about critical junctures that only resulted to the re-creation of similar institutions (i.e. vicious circle), I think it would have been best if they would classify those moments as critical moments rather than critical junctures. This is because the events were not critical junctures as institutions keep the same path that recreates similar trends.  In addition, it would be more helpful if the authors could define institutions. There is no doubt that most scholars, especially in Economics or Political Science, would understand what kind of ‘institutions’ Acemoglu and Robinson are talking about, but other readers might not understand. In fact, the theory of new institutionalism (which I think it informs Acemoglu and Robinson’s arguments) takes a great deal in defining institutions.

Nevertheless, Acemolgu and Robinson work is a classic piece that can be read and understood by scholars, policymakers, and any person who is interested in development and economic prosperity.  The book is especially useful for policy makers as they can use its main concepts for policy analysis. For example, Tanzanian policymakers can analyze our country’s policies to see whether they are extractive or inclusive. They can use the arguments in the book to explore if our institutions allow for creative destruction and how we can improve our situation by making policies that will embrace inclusiveness and so prosperity to all.

 All in all, this is a must read book for everyone in the developing country who wants to change the situation in his/her country for sustainable growth. It is also enjoyable with great historical examples. Even if someone does not agree with the authors’ institutionalism arguments, the book is almost a history book with good accounts of major historical events.

2 thoughts on “Book Review: Acemoglu D., & Robinson J., Why Nations Fail: The Origins of Power, Prosperity, and Poverty (NY: Crown Business, 2012), pp. 529

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