why nations fail: the origins of power, prosperity and poverty

WHY NATIONS FAIL: The Origins Of Power, Prosperity and Poverty Daron Acemoglu & James A. Robinson

Presentation by: Mahvish ShafiqueRoll # 04

Sequence of presentation

Introduction of Authors Introduction of book Chapter wise Summary Thesis of Authors Analysis Relevance of the book with Pakistan Conclusion

Authors Daron Acemoglu

Turkish Born American Economist Professor of Economics at MIT

James A. Robinson An Economist Political Scientist Professor at Harvard University

Introduction of the Book

Title: WHY NATIONS FAIL Authors: DARON ACEMOGLU AND JAMES A. ROBINSON Language: English Subject: Comparative Politics Genre: Non-Fiction Publisher: Crown Business, New York. Place of Publication: United States of America Date of Publication: March 20, 2012.

Chapter 1: So Close And Yet So Different Comparison of two sides of Nogales city

American side of Nogales Mexican side of Nogales

Reason of Difference Difference in political and economic institutions Historical development of institutions

Chapter 2: Theories That Don’t Work

The geography hypothesis People in tropical areas tend to be lazy

The culture hypothesis Religion, beliefs, values and ethics determine the fate of the nation

The ignorance hypothesis Rulers do not know how to make poor countries rich

All three hypothesis are flawed

Chapter 3: The Making of Prosperity and Poverty North Korea vs South Korea Inclusive Political Institutions

Centralised and pluralistic Extractive political institutions

Narrow, absolutist and uncostrained Inclusive political institutions give birth to inclusive economic

institutions Extractive political institutions give birth to extractive economic

institutions

Chapter 4: Small Differences and Critical Junctures: The weight of History History and critical junctures shape the path of political and economic

trajectory

Why some nations make the transition to inclusive economic and political institutions

while others do not

Chapter 5: Growth under Extractive Institutions Growth can take place under extractive institutions

Sustainable growth needs technological changes

Growth under extractive institutions will not be sustainable

Chapter 6: Drifting Apart

Inclusive institutions can be reversed

Example of Venice

Political and economic institutions were overthrown

Prosperity was reversed

Today it is rich because people want to spend their money, admiring its past glory

Chapter:7 The Turning Point

Fear of creative distruction is a hindance in development

New technology renders old prectices obsolete

Resistence is shown by the victims of creative destruction

Industrial revolution in England

Chapter 8: Barriers to development

Opposition to new technology is barrier to development

Ottomans opposed printing press

Absolutist regimes blocked the spread of industry

Consequence; they lagged behind

Chapter 9: Reversing Development

European colonalism impoverished large parts of the world

Colonies did not benefit from industrialisation

Rather strengthened already extractive institutions

Chapter 10: The Diffusion of Prosperity

Some parts of the world took different parts to prosperity from that of Britain

Industrial Revolution of the English economy to the United States and Australian transformation

Chapter 11: The Virtous Cycle(1/2)

Dictatorship is not welcomed in inclusive political institutions

Inclusive political institutions support and are supported by inclusive economic institutions

Removes extractive economic relations

Slavery and serfdom

Chapter 11: The Virtous Cycle(2/2)

Reduces the importance of monopolies

create a dynamic economy

Reduce the economic benefits that one can secure by using political power.

Allow a free media to flourish

Chapter 12: The Vicious Cycle

Extractive political institutions lead to extractive economic institutions

Enrich a few at the expense of many

Create the platform for extractive political institutions to persist

Provide no checks against abuses of power

Creation of unconstrained power and great income

Inequality increases the potential stakes of the political game

Chapter 13: Why Nations Fail Today

Institutions, Institutions, Institutions

Extractive economic institutions do not create incentives

Extractive political institutions support economic institutions

Extractive economic and political institutions are root of failure

Chapter 14: Breaking the Mold

Vicious circle and extractive institutions can be replaced by inclusive institutions

Examples of China, Botswana and the U.S

Glorious Revolution in England

Chapter 15: understanding prosperity and Poverty Explains huge differences in living standards around the world

Differences in living standards are a result of distinction between extractive and inclusive economic and political institutions

Growth in extractive economic and political institutions is possible, but it is not sustainable

Thesis of the Authors (1/2)

Economic prosperity depends upon institutions Political institutions Economic institutions

Further divided into two categories Inclusive political and economic institutions Extractive political and economic institutions

Thesis of the Authors (2/2)

Virtuous circle strengthens inclusive institutions

Viciuous circle strengthens extractive instututions

Analysis

Not purely economic theory General reader can understand it Explains huge swathes of human history Use of multiple historical examples to show institutional developments Balance between the logic of political and economic behavior Use of maps and pattern Structurally well written book

Shortcomings(1/2)

Fails to tell how nations can prevent the build-up of institutions that cause poverty

Does not ponder upon the reasons of emergence of inclusive and extractive institutions

Ignores the role geography, culture and ignorance have to play in a Nation’s failure or success.

Shortcomings(2/2)

Growth cannot also sustain even under inclusive institutions. global financial meltdown of 2008

Goes too far back in time in citing examples, reducing its relevance in current world situations

Use of too many historical examples makes the reading a little boring

Relevance to Pakistan(1/2)

Extractive political institutions in Pakistan

Monopoly of civil and military elite on politics

Elections stregthen position of narrow elite

Feudal lords use political institutions for their own benefit

Relevance to Pakistan(2/2)

Foreign aid induced development benefits the rich

Huge inflow during military dictatorship was not helpful

Causes dependence on other countries