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PRAISE FOR Why Nations Fail
“Acemoglu and Robinson have made an important contribution to the debate as to why
similar-looking nations differ so greatly in their economic and political development.
Through a broad multiplicity of historical examples, they show how institutional
developments, sometimes based on very accidental circumstances, have had enormous
consequences. The openness of a society, its willingness to permit creative destruction,
and the rule of law appear to be decisive for economic development.”
—Kenneth J. Arrow, Nobel laureate in economics, 1972
“The authors convincingly show that countries escape poverty only when they have
appropriate economic institutions, especially private property and competition. More
originally, they argue countries are more likely to develop the right institutions when they
have an open pluralistic political system with competition for political office, a
widespread electorate, and openness to new political leaders. This intimate connection
between political and economic institutions is the heart of their major contribution, and
has resulted in a study of great vitality on one of the crucial questions in economics and
political economy.”
—Gary S. Becker, Nobel laureate in economics, 1992
“This important and insightful book, packed with historical examples, makes the case that
inclusive political institutions in support of inclusive economic institutions is key to
sustained prosperity. The book reviews how some good regimes got launched and then
had a virtuous spiral, while bad regimes remain in a vicious spiral. This is important
analysis not to be missed.”
—Peter Diamond, Nobel laureate in economics, 2010
“For those who think that a nation’s economic fate is determined by geography or culture,
Daron Acemoglu and Jim Robinson have bad news. It’s manmade institutions, not the lay
of the land or the faith of our forefathers, that determine whether a country is rich or
poor. Synthesizing brilliantly the work of theorists from Adam Smith to Douglass North
with more recent empirical research by economic historians, Acemoglu and Robinson
have produced a compelling and highly readable book.”
—Niall Ferguson, author of The Ascent of Money
“Acemoglu and Robinson—two of the world’s leading experts on development—reveal
why it is not geography, disease, or culture that explain why some nations are rich and
some poor, but rather a matter of institutions and politics. This highly accessible book
provides welcome insight to specialists and general readers alike.”
—Francis Fukuyama, author of The End of History and the Last Man
and The Origins of Political Order
“A brilliant and uplifting book—yet also a deeply disturbing wake-up call. Acemoglu and
Robinson lay out a convincing theory of almost everything to do with economic
development. Countries rise when they put in place the right pro-growth political
institutions and they fail—often spectacularly—when those institutions ossify or fail to
adapt. Powerful people always and everywhere seek to grab complete control over
government, undermining broader social progress for their own greed. Keep those people
in check with effective democracy or watch your nation fail.”
—Simon Johnson, coauthor of 13 Bankers and professor at MIT Sloan
“Two of the world’s best and most erudite economists turn to the hardest issue of all: why
are some nations poor and others rich? Written with a deep knowledge of economics and
political history, this is perhaps the most powerful statement made to date that
‘institutions matter.’ A provocative, instructive, yet thoroughly enthralling book.”
—Joel Mokyr, Robert H. Strotz Professor of Arts and Sciences and
Professor of Economics and History, Northwestern University
“In this delightfully readable romp through four hundred years of history, two of the
giants of contemporary social science bring us an inspiring and important message: it is
freedom that makes the world rich. Let tyrants everywhere tremble!”
—Ian Morris, Stanford University, author of Why the West Rules—for
Now
“Imagine sitting around a table listening to Jared Diamond, Joseph Schumpeter, and
James Madison reflect on more than two thousand years of political and economic
history. Imagine that they weave their ideas into a coherent theoretical framework based
on limiting extraction, promoting creative destruction, and creating strong political
institutions that share power, and you begin to see the contribution of this brilliant and
engagingly written book.”
—Scott E. Page, University of Michigan and Santa Fe Institute
“In this stunningly wide-ranging book, Acemoglu and Robinson ask a simple but vital
question, why do some nations become rich and others remain poor? Their answer is also
simple—because some polities develop more inclusive political institutions. What is
remarkable about the book is the crispness and clarity of the writing, the elegance of the
argument, and the remarkable richness of historical detail. This book is a must-read at a
moment when governments across the Western world must come up with the political
will to deal with a debt crisis of unusual proportions.”
—Steven Pincus, Bradford Durfee Professor of History and
International and Area Studies, Yale University
“It’s the politics, stupid! That is Acemoglu and Robinson’s simple yet compelling
explanation for why so many countries fail to develop. From the absolutism of the Stuarts
to the antebellum South, from Sierra Leone to Colombia, this magisterial work shows
how powerful elites rig the rules to benefit themselves at the expense of the many.
Charting a careful course between the pessimists and optimists, the authors demonstrate
history and geography need not be destiny. But they also document how sensible
economic ideas and policies often achieve little in the absence of fundamental political
change.”
—Dani Rodrik, Kennedy School of Government, Harvard University
“This is not only a fascinating and interesting book: it is a really important one. The
highly original research that Professors Acemoglu and Robinson have done, and continue
to do, on how economic forces, politics, and policy choices evolve together and constrain
each other, and how institutions affect that evolution, is essential to understanding the
successes and failures of societies and nations. And here, in this book, these insights
come in a highly accessible, indeed riveting form. Those who pick this book up and start
reading will have trouble putting it down.”
—Michael Spence, Nobel laureate in economics, 2001
“This fascinating and readable book centers on the complex joint evolution of political
and economic institutions, in good directions and bad. It strikes a delicate balance
between the logic of political and economic behavior and the shifts in direction created by
contingent historical events, large and small, at ‘critical junctures.’ Acemoglu and
Robinson provide an enormous range of historical examples to show how such shifts can
tilt toward favorable institutions, progressive innovation, and economic success or toward
repressive institutions and eventual decay or stagnation. Somehow they can generate
both excitement and reflection.”
—Robert Solow, Nobel laureate in economics, 1987
WHY N A T I ON S FA I L
THE ORIGINS OF POWER, PROSPERITY, AND POVERTY
Daron Acemoglu and
James A. Robinson
First published in Great Britain in 2012 by
PROFILE BOOKS LTD
3A Exmouth House
Pine Street
London EC1R 0JH
www.profilebooks.com
First published in the United States of America in 2012 by
Crown Publishers, a division of Random House Inc.
Copyright © Daron Acemoglu and James A. Robinson, 2012
1 3 5 7 9 10 8 6 4 2
Book design by Leonard Henderson
Maps by Melissa Dell
Printed and bound in Great Britain by
Clays, Bungay, Suffolk
The moral right of the authors has been asserted.
All rights reserved. Without limiting the rights under copyright reserved above, no part
of this publication may be reproduced, stored or introduced into a retrieval system,
or transmitted, in any form or by any means (electronic, mechanical, photocopying,
recording or otherwise), without the prior written permission of both the copyright
owner and the publisher of this book.
A CIP catalogue record for this book is available from the British Library.
Hardback ISBN 978 1 84668 429 6
Export edition ISBN 978 1 84668 610 8
eISBN 978 1 84765 461 8
The paper this book is printed on is certified by the © 1996 Forest Stewardship
Council A.C. (FSC). It is ancient-forest friendly. The printer holds FSC chain of custody
SGS-COC-2061
For Arda and Asu—DA
Para María Angélica, mi vida y mi alma—JR
CONTENTS
PREFACE
Why Egyptians filled Tahrir Square to bring down Hosni Mubarak
and what it means for our understanding of the causes of
prosperity and poverty
1.
SO CLOSE AND YET SO DIFFERENT
Nogales, Arizona, and Nogales, Sonora, have the same people,
culture, and geography. Why is one rich and one poor?
2.
THEORIES THAT DON’T WORK
Poor countries are poor not because of their geographies or cultures,
or because their leaders do not know which policies will enrich
their citizens
3.
THE MAKING OF PROSPERITY AND POVERTY
How prosperity and poverty are determined by the incentives
created by institutions, and how politics determines what
institutions a nation has
4.
SMALL DIFFERENCES AND CRITICAL JUNCTURES:
THE WEIGHT OF HISTORY
How institutions change through political conflict and how
the past shapes the present
5.
“I’VE SEEN THE FUTURE, AND IT WORKS”:
GROWTH UNDER EXTRACTIVE INSTITUTIONS
What Stalin, King Shyaam, the Neolithic Revolution, and the
Maya city-states all had in common and how this explains why
China’s current economic growth cannot last
6.
DRIFTING APART
How institutions evolve over time, often slowly drifting apart
7.
THE TURNING POINT
How a political revolution in 1688 changed institutions in
England and led to the Industrial Revolution
8.
NOT ON OUR TURF: BARRIERS TO DEVELOPMENT
Why the politically powerful in many nations opposed the
Industrial Revolution
9.
REVERSING DEVELOPMENT
How European colonialism impoverished large parts of the world
10.
THE DIFFUSION OF PROSPERITY
How some parts of the world took different paths to prosperity
from that of Britain
11.
THE VIRTUOUS CIRCLE
How institutions that encourage prosperity create positive feedback
loops that prevent the efforts by elites to undermine them
12.
THE VICIOUS CIRCLE
How institutions that create poverty generate negative feedback
loops and endure
13.
WHY NATIONS FAIL TODAY
Institutions, institutions, institutions
14.
BREAKING THE MOLD
How a few countries changed their economic trajectory by
changing their institutions
15.
UNDERSTANDING PROSPERITY AND POVERTY
How the world could have been different and how understanding
this can explain why most attempts to combat poverty have failed
ACKNOWLEDGMENTS
BIBLIOGRAPHICAL ESSAY AND SOURCES
REFERENCES
INDEX
PREFACE
THIS BOOK IS about the huge differences in incomes and standards of living that
separate the rich countries of the world, such as the United States, Great Britain, and
Germany, from the poor, such as those in sub-Saharan Africa, Central America, and South
Asia.
As we write this preface, North Africa and the Middle East have been shaken by the
“Arab Spring” started by the so-called Jasmine Revolution, which was initially ignited by
public outrage over the self-immolation of a street vendor, Mohamed Bouazizi, on
December 17, 2010. By January 14, 2011, President Zine El Abidine Ben Ali, who had ruled
Tunisia since 1987, had stepped down, but far from abating, the revolutionary fervor
against the rule of privileged elites in Tunisia was getting stronger and had already spread
to the rest of the Middle East. Hosni Mubarak, who had ruled Egypt with a tight grip for
almost thirty years, was ousted on February 11, 2011. The fates of the regimes in Bahrain,
Libya, Syria, and Yemen are unknown as we complete this preface.
The roots of discontent in these countries lie in their poverty. The average Egyptian has
an income level of around 12 percent of the average citizen of the United States and can
expect to live ten fewer years; 20 percent of the population is in dire poverty. Though
these differences are significant, they are actually quite small compared with those
between the United States and the poorest countries in the world, such as North Korea,
Sierra Leone, and Zimbabwe, where well over half the population lives in poverty.
Why is Egypt so much poorer than the United States? What are the constraints that
keep Egyptians from becoming more prosperous? Is the poverty of Egypt immutable, or
can it be eradicated? A natural way to start thinking about this is to look at what the
Egyptians themselves are saying about the problems they face and why they rose up
against the Mubarak regime. Noha Hamed, twenty-four, a worker at an advertising agency
in Cairo, made her views clear as she demonstrated in Tahrir Square: “We are suffering
from corruption, oppression and bad education. We are living amid a corrupt system
which has to change.” Another in the square, Mosaab El Shami, twenty, a pharmacy
student, concurred: “I hope that by the end of this year we will have an elected
government and that universal freedoms are applied and that we put an end to the
corruption that has taken over this country.” The protestors in Tahrir Square spoke with
one voice about the corruption of the government, its inability to deliver public services,
and the lack of equality of opportunity in their country. They particularly complained
about repression and the absence of political rights. As Mohamed ElBaradei, former
director of the International Atomic Energy Agency, wrote on Twitter on January 13, 2011,
“Tunisia: repression + absence of social justice + denial of channels for peaceful change =
a ticking bomb.” Egyptians and Tunisians both saw their economic problems as being
fundamentally caused by their lack of political rights. When the protestors started to
formulate their demands more systematically, the first twelve immediate demands posted
by Wael Khalil, the software engineer and blogger who emerged as one of the leaders of
the Egyptian protest movement, were all focused on political change. Issues such as
raising the minimum wage appeared only among the transitional demands that were to be
implemented later.
To Egyptians, the things that have held them back include an ineffective and corrupt
state and a society where they cannot use their talent, ambition, ingenuity, and what
education they can get. But they also recognize that the roots of these problems are
political. All the economic impediments they face stem from the way political power in
Egypt is exercised and monopolized by a narrow elite. This, they understand, is the first
thing that has to change.
Yet, in believing this, the protestors of Tahrir Square have sharply diverged from the
conventional wisdom on this topic. When they reason about why a country such as Egypt
is poor, most academics and commentators emphasize completely different factors. Some
stress that Egypt’s poverty is determined primarily by its geography, by the fact that the
country is mostly a desert and lacks adequate rainfall, and that its soils and climate do not
allow productive agriculture. Others instead point to cultural attributes of Egyptians that
are supposedly inimical to economic development and prosperity. Egyptians, they argue,
lack the same sort of work ethic and cultural traits that have allowed others to prosper,
and instead have accepted Islamic beliefs that are inconsistent with economic success. A
third approach, the one dominant among economists and policy pundits, is based on the
notion that the rulers of Egypt simply don’t know what is needed to make their country
prosperous, and have followed incorrect policies and strategies in the past. If these rulers
would only get the right advice from the right advisers, the thinking goes, prosperity
would follow. To these academics and pundits, the fact that Egypt has been ruled by
narrow elites feathering their nests at the expense of society seems irrelevant to
understanding the country’s economic problems.
In this book we’ll argue that the Egyptians in Tahrir Square, not most academics and
commentators, have the right idea. In fact, Egypt is poor precisely because it has been
ruled by a narrow elite that have organized society for their own benefit at the expense of
the vast mass of people. Political power has been narrowly concentrated, and has been
used to create great wealth for those who possess it, such as the $70 billion fortune
apparently accumulated by ex-president Mubarak. The losers have been the Egyptian
people, as they only too well understand.
We’ll show that this interpretation of Egyptian poverty, the people’s interpretation,
turns out to provide a general explanation for why poor countries are poor. Whether it is
North Korea, Sierra Leone, or Zimbabwe, we’ll show that poor countries are poor for the
same reason that Egypt is poor. 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. We’ll show that to understand
why there is such inequality in the world today we have to delve into the past and study
the historical dynamics of societies. We’ll see that the reason that Britain is richer than
Egypt is because in 1688, Britain (or England, to be exact) had a revolution that
transformed the politics and thus the economics of the nation. People fought for and won
more political rights, and they used them to expand their economic opportunities. The
result was a fundamentally different political and economic trajectory, culminating in the
Industrial Revolution.
The Industrial Revolution and the technologies it unleashed didn’t spread to Egypt, as
that country was under the control of the Ottoman Empire, which treated Egypt in rather
the same way as the Mubarak family later did. Ottoman rule in Egypt was overthrown by
Napoleon Bonaparte in 1798, but the country then fell under the control of British
colonialism, which had as little interest as the Ottomans in promoting Egypt’s prosperity.
Though the Egyptians shook off the Ottoman and British empires and, in 1952, overthrew
their monarchy, these were not revolutions like that of 1688 in England, and rather than
fundamentally transforming politics in Egypt, they brought to power another elite as
disinterested in achieving prosperity for ordinary Egyptians as the Ottoman and British
had been. In consequence, the basic structure of society did not change, and Egypt stayed
poor.
In this book we’ll study how these patterns reproduce themselves over time and why
sometimes they are altered, as they were in England in 1688 and in France with the
revolution of 1789. This will help us to understand if the situation in Egypt has changed
today and whether the revolution that overthrew Mubarak will lead to a new set of
institutions capable of bringing prosperity to ordinary Egyptians. Egypt has had
revolutions in the past that did not change things, because those who mounted the
revolutions simply took over the reins from those they’d deposed and re-created a similar
system. It is indeed difficult for ordinary citizens to acquire real political power and
change the way their society works. But it is possible, and we’ll see how this happened in
England, France, and the United States, and also in Japan, Botswana, and Brazil.
Fundamentally it is a political transformation of this sort that is required for a poor
society to …
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