Why Nations Fail (by Acemoglu and Robinson) is a book I am currently reading that attempts to explain the enormous variations in wealth seen in the world today. It attributes these differences to economic institutions, which are largely dictated by political institutions. Institutions is intended in the broad meaning - eg property rights, democracy etc. It highlights how both the patterns in wealth and the patterns in these institutions have been very (though not entirely) stable over the last 150 years, and argues an institutional inertia (my term) that goes beyond the influence of the powerful individuals involved. It suggests why it is so hard to break the mold, and how to break it (not up to that part yet).

It also rejects some of the conventional arguments - eg:

* Culture - that Protestant, Judea-Christian, European or Roman culture is what makes the west so rich, while attempting to disentangle the various meanings of culture. Culture is part of the economic and political institutions that make countries rich or poor. He even argues that the middle east is not poor because of Islam, though I suspect he has never met anyone like Abu.

* Geography - that people in hot countries are lazy, or the soil is less fertile, and various more complicated version of this theory. It addresses the "Guns, Germs and Steel" hypothesis of Jared Diamond and puts it in it's place as an explanation for why the west was able to dominate the world, while highlighting the inability of this theory to explain vast differences in wealth seen in those countries colonised or settled by Europeans.

* Ignorance - that leaders or people in poor countries do not understand how to get rich. This is the explanation favoured by many modern economists. It highlights that even when they do understand, the people in power usually don't want to. Even when they are forced to or try to make the change, it is fraught with danger, because the problems are institutionalised within the economy and the politics. The idiotic economic policies of various tinpot dictators are not determined out of ignorance of economics, but by the economic and political institutions that for the tinpot dictators are an unchangeable reality they must work within.

The causes of wealth and poverty are economic and political freedoms and rights that are closely linked or interact. For example - secure property rights, including patents, economic freedom, democracy and a broad distribution (separation) of political power.

In historical terms, it largely attributes these differences to "accidents of history".

Niall Ferguson wrote some interesting points on the success of the West.

He outlines 6 points that made it succeed:

Competition, Science, Property, Modern Medicine, Consumerism, Work Ethic.

http://www.pbs.org/wnet/civilization-west-and-rest/killer-apps/#.UyOrp_mSySo

A big issue that causes countries to fail is when the elite see the population under them as a statistic . My workplace has just been purchased by Australia Post. First they sacked  the short term casuals, then the made the long term casuals part timers on $590 a week and slashed the wages for the rest. As a result morale is low, blokes chuck sickies and the place is failing. Who wants to work harder for less??? When the elite create such a gulf with the wider population problems occur. Understanding of needs and issues are always misjudged. Just like my Aus Post management and the poor workers. Ancient Rome all over again. Just over money. Money will damage our country.

Postmodern Trendoid III wrote on Mar 15^th, 2014 at 11:36am:


Here is a definition of a "failed State" by a US think tank which pretty much sums it up

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Enormous variations in wealth is the process which causes a nation to fail rather than a symptom of it.
Once you have an enormous variation in wealth then corruption and criminality is going to increase and the economy is going to decline. The government will also start to have less control as the corporations and billionaires start to influence all decisions.

freediver wrote on Mar 15^th, 2014 at 7:23am:


Utter nonsense ~ as he would well know.

The author is obviously a disciple of PC politics and a moral coward who simply cannot bring himself to say that the West beat the Rest because it's institutions of governance, industry, and learning were far superior to that of the Third World.

While the Third World countries were turned inwards on surviving on cottage industries and centuries-old traditions that discouraged change and experimentation, the West meanwhile exploded with technical innovation, empire-building, inventions and discoveries, etc ... it had its Renaissance while the rest of the world slept.

But your author is too much of a leftwing arsehole to give credit to the West lest this 'offend' a few sensitivities amongst our immigrant Third Worlders.

Postmodern Trendoid III wrote on Mar 15^th, 2014 at 11:36am:


These are societies from which large percentages have over the years chosen to abandon their ancestral homelands for the opportunities and the rich rewards that are found in countries whose success has been largely due to the broad and all-encompassing technical expertise and cultural excellence of the British and their cousins in the colonies.

The style of the book is similar to Jared Diamond - easy to read, using the best or most interesting examples to introduce concepts.

Some more interesting points:

* State centralisation is a prerequisite for wealth. Somalia for example has distributed political power, but this is because there is no central government. The result is chaos.

* Oppressive, or 'extractive' political and economic institutions tend to go hand in hand, and reinforce each other in a sort of positive feedback loop. If there is a mixture of the two, they will tend to sow the seeds of the other's destruction, and the society will eventually drift further in one direction. The extent of oppression is really only limited by the risk that if the entire economy is destroyed, there will be no wealth to extract from it.

* Economic and political inclusion (used to mean the opposite of oppression or extraction) always has losers as well as winners. But it is not just the wealthy elite who push a society down the path of oppression. The "creative destruction" of capitalism leads many to oppose it, for coherent reasons. The book gave the example of the British artisans who opposed the mechanisation of the industrial revolution because it undermined their profession. We see similar behaviour right here, with people complaining in a thread on the general board about the risk of check-out chicks losing their job because of automated or self service check-outs (drones thread). Sparky gave another good example.

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The book is really about wealth disparity. Failure is less wealth and a poorer standard of living, in relative terms. The poorer states are mostly 'functioning' in the normal sense of the word.

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Not really. This is mostly a symptom, not a cause. There are successful states with huge wealth discrepancies. There are failures who share the wealth (most communist states). Of course, truly huge variations are unlikely to arise or be sustained in a "good" system, but they will arise where the contribution of a group of people is genuinely significant (eg the modern tech barons).

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This is a genuine risk, though usually vastly overstated, IMO.

Lord Herbert wrote on Mar 15^th, 2014 at 12:19pm:


No, he is pretty much saying just that. He is merely pointing out which institutions are actually responsible, and which are the useless cultural baggage. This is not actually a theme of the book, but my interpretation of the explanation for why the situation in the US and Canada differs to much from the rest of the Americas.

If you insist on going off on long rants about how they got it wrong, based on a one-line comment from someone else, you will merely look like you don't know what you are talking about. You would probably like the book, and agree with it.

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No. It's not really about the 'status' of failure, and they do not mean failure in the sense you describe. He points to 150 years of stability in relative global wealth distribution. The longest timeline give is 70 years - the time that Russia managed to defy the trend he suggests. Most of the timelines for "evidence" to emerge are much shorter, however it gets worse over the centuries, and there are many examples (eg most of the Americas) that are a hangover from the 1600s. 500 years ago, the global trend was pretty much the opposite of what it is now.

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