“Why Nations Fail”: A book that took 15 years to write

From ancient civilisations to present day nation-states; the failures of colossal powers and nations is not new in the tides of history. But WHY do these nations..fail? And quite importantly, which ones are next?

“Why Nations Fail” is an in depth analysis on this very topic, written by authors Daron Acemoglu, a nobel laureate and professor of economics at MIT, and  James A Robinson, who’s also a nobel laureate, political scientist and professor of economics at Chicago university. 

Let’s dive into “Why Nations Fail” and REALLY see what this book’s about, why it’s so famous, why it’s still relevant, and if it really is the perfect book for your next read. (With no spoilers!)

Spoiler-Free Summary

“Why Nations Fail” explores the political institutions, social conditions and economic policies that lead to the decline and collapse of a country. 

Drawing from case studies of countries across the world, from the Americas to Africa, from Europe to Asia, the book explains why and how countries are where they are, and what really matter for a country and its prosperity in the long run. It explores why exactly are nations different.

To first understand why nations fail, we must understand why they succeed. 

WHY NATIONS SUCCEED

The book begins with the argument which rejects the idea that the success of a nation, whether economical, political, or social are not largely determined by culture, geographical conditions or climate. On the other hand, they might not play any major role at all. 

We learn of this through the example of United States and Mexico; more specifically, through the example of the region of Nogales, which is separated by the US-Mexico border into Nogales, Arizona and Nogales, Sonora. 

As we analyse the economic, social and political conditions of this specific region, it becomes clear that there isn’t any major difference in geography, climate, diseases prevalent in the area, and if you dig a bit deeper, even in the ancestral background of the residents on both sides of Nogales. 

The only key differences between the two halves are the political institutions that govern them.  As the book explains it:

“Nogales, Arizona, is in the United States. Its inhabitants have access to the economic institutions of the United States, which enable them to choose their occupations freely, acquire schooling and skills, and encourage their employers to invest in the best technology, which leads to higher wages for them. They also have access to political institutions that allow them to take part in the democratic process, to elect their representatives, and replace them if they misbehave. In consequence, politicians provide the basic services (ranging from public health to roads to law and order) that the citizens demand. 

Those of Nogales, Sonora, are not so lucky. They live in a different world shaped by different institutions. These different institutions create very disparate incentives for the inhabitants of the two Nogaleses and for the entrepreneurs and businesses willing to invest there. These incentives created by the different institutions of the Nogaleses and the countries in which they are situated are the main reason for the differences in economic prosperity on the two sides of the border.”.

And this, the authors argue, is precisely the reason for the differences and disparities among the nations of the world. What largely matters isn’t the geography or climate or even natural resources, but rather the political institutions that govern them. 

The economic development, or rather, sustained economic development of a nation depends on the systems created by it. ‘Successful’ countries are characterised by the systems created by them, such as the rule of law, secure human and property rights, social and economic inclusion, sound policymaking and creation of economic incentive. 

TWO TYPES OF NATIONS

The authors then proceed to broadly classify the nature of the institutions that govern the nations of the modern (and former) nations of the world into two types of frameworks. 

Firstly, extractive institutions refer to political and economic institutions that prioritise the wants of the few over the needs of the many. 

This includes most monarchies and the poorer countries of the world we see today. These nations are characterised by worse economic incentives, malfunctioning governance, insecure property rights, and lawlessness. 

Adding to these, the authors also explain why we see certain nations and empires that are generally considered authoritarian and “extractive” in this sense may see a high amount of economic development in a short time. It is also proven how in every single scenario the development of these countries never actually persists, rather ending in its fall from glory or complete collapse.

The second major archetype of institutions is an inclusive institution. 

These institutions are those which prioritise creating opportunities for the common citizens rather than just the elite. Ideal democracies are generally thought of as “inclusive”. These systems are characterised by efforts to create equality, rule of law, and strong economic incentives. 

A feature across most considerably “inclusive” countries is that development in all aspects is rather slow, generally faced by setbacks but still consistent and more desirable in the long run for the sustained well-being of the nation. 

Conclusion

That is essentially, the essence of the whole book. “How Nations Fail” shows us the systemic reasons for the extreme gaps between the richest and the poorest nations in the world. More importantly, it shows us how effective systems can (and surely must) be created for the greater good of society. 

As a reader the book is a very engaging read, not only because it analyses key questions but because it insists for us to do the same. A high proportion of the book is dedicated to mapping the history, and cause and effect of the situations faced by most nations of the world in varying degrees. What I personally quite liked was that it also acknowledged the role of pure luck in certain instances- right things happening at the right time. 

Whether you have an existing preference for history, economics, politics or you do not, “Why Nations Fail” is genuinely a very fascinating book that I personally feel most people can enjoy. As a reader, I can easily give this book a solid rating of

8/10