22 October, 2012

Why Nations Fail

This is an interesting book by Daron Acemoglu. an MIT economist and James A Robinson.a political scientist from Harvard. When they talk about failure, it is not a country disappearing or wipe off from the map but a failure of its socio-economic and political systems leading to abrupt change or revolutions.

"Countries such as Great Britain and the United States became rich because 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 citizens, and where the great mass of people could take advantage of economic opportunities" - Extract from the book.
Acemoglu amd Robinson studied the histories of numerous countries describing and found a common cause of failue. What they found is the key differentiator between countries is “institutions.” Nations thrive when they develop “inclusive” political and economic institutions, and they fail when those institutions become “extractive” and concentrate power and opportunity in the hands of only a few.

Nations that thrive and succeed are those that empower their people both politically and economically. Power is distributed "puralistically" and "extractive" power structures that  reinforce extractive economic institutions to hold power are avoided.

Authors show that there is a common historic pattern that you cannot sustain your economy if don't have the correct political structure i n place. They argue that China has not found the magic formula for combining political control and economic growth - its system in inherently unsustainable and the full historic outcome of current system has not been played out. (Lucky Tan)