Why Nations Fail Analysis

Why Nations Fail In their book, Why Nations Fail, Daron Acemoglu and James Robinson explain that some nations fail and others succeed because of their political institutions, their economic institutions, and the contingent path of history. The authors also knock down popular alternative theories as to why nations fail. They argue that geography, culture, and ignorance are not the keys to a nation’s economic success or failure. Next, they discuss how extractive political and economic institutions prevent a nation from achieving any long-term national growth. This is not to say that nations with extractive institutions cannot achieve any growth. In fact, some nations have achieved economic growth under extractive institutions by centralizing

Likewise, as innovation takes economic fortitude away from the wealthy, the non-elite use their growing influence and demand more political power. Inclusive economic institutions promote inclusive political institutions and vice versa. This is what Acemoglu and Robinson call the virtuous circle. On the other hand, they also point out that the opposite is true as well: Extractive economic institutions fortify extractive political institutions and vice versa in the vicious circle. The vicious circle is often difficult to escape from. Because of the “iron law of oligarchy” many nations that have formed from independence movements or rebellions against oppressive regimes often do not leave the vicious circle, but instead continue the status quo of extractive political and economic institutions. Nations become engulfed in these circles for two reasons: contingency and critical junctures. Because of the unique path every country takes as time goes on, each country has reacted differently to the critical junctures that have occurred throughout history. Small differences between two countries can become massive after the occurrence of critical junctures, such as the black plague and the industrial revolution. As such, many nations have escaped the vicious circle while others have

First, he explains that the so-called “poverty trap” is not the cause of poor nations’ slow or nonexistent growth, despite the claims of foreign aid organizations. Easterly argues instead that bad governments and their interference with their economies may be the reason for many countries’ slow growth. To fix this problem, many aid organizations attempt to assist poor nations by restructuring their economic institutions from the top down. However, Easterly claims that these attempts have shown to be futile time and time again. He argues that this is because restructuring an entire economy from the top down is almost always bound to fail. This is because these methods often lack feedback from the people of poor nations who are actually suffering. According to Easterly, one of the main reasons foreign aid does not efficiently reach those in need is because the organizations’ top down method does not get past the corrupt governments of these poor nations. To fix this, he argues that aid should be given by a more pragmatic, bottom up approach, going directly to those in need. Easterly also says that aid should be given in a more scientific way, using statistical testing to discern which forms of aid work best. Likewise, he argues that aid agencies must be held more accountable for the results of the