“Why Nations Fail?” by Acemoglu and Robinson

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Table of Contents

Introduction
The Role of Extractive Institutions
Democracy and Extractive Institutions
Non-Western Success Case: Botswana
Inclusivity
Keeping Inclusivity
Conclusion
Works Cited

Introduction

The success of any country can be achieved in many ways considering that a state fulfills specific criteria. It seems that the idea of abusing power for people’s corrupt interests is as old as the world. However, its deeply penetrating social roots have severely hindered many countries from developing good institutions. Some may argue that having good institutions is not the essential element of achieving steady progress for a country. However, the main idea argued by Acemoglu and Robinson in their book Why Nations Fail? Contradicts this opinion. What Acemoglu and Robinson state is that the critical difference between developed and underdeveloped countries is that of inclusive and extractive economic institutions. The purpose of this essay is to embrace the argument of the book by Acemoglu and Robinson and develop it further to the extent of answering the question of how to get and keep good institutions.

The Role of Extractive Institutions

In today’s world, there is a clear distinction between success and failure, which sometimes turns into an obsession with always doing better and reaching higher. However, at the level of states, such obsession is necessary because they have to do their best for their citizens. The distinction, therefore, between the countries where the state puts an absolute priority on their people and ones where power positions are utilized for vested interests is tremendous. Acemoglu and Robinson, throughout the entire book, make the answer to the central question of it, which replicates its title, clear: the presence of extractive institutions in the “failed” countries. Although the answer may seem rather simple, it makes one understand in what direction to search for the root causes of underdevelopment.

One of the examples made in the book covers Zimbabwe, the country which had been ruled by the same leader for three decades. The combination of extractive institutions rooted in the colonial past, together with tight political control and repressive regime, resulted in a crumbling economy in the case of Zimbabwe (Acemoglu and Robinson 371). Neither economic nor political institutions in Zimbabwe have ever been inclusive. Based on the Corruption Perception Index, Zimbabwe is one of the most corrupt countries in the world (Nyoni 285). Given the story of Mugabe winning a lottery in 2000, it is not shocking at all that the country is not characterized by the positive development of either politics or the economy.

Democracy and Extractive Institutions

To state that democracies are not prone to having extractive institutions is debatable. For example, Latin American has many cases of states where the democratic system hasn’t guaranteed economic inclusivity. For instance, the authors consider Colombia to be one such example of democratic countries with a lack of inclusive institutions (Acemoglu and Robinson 377). Taylor also finds Colombia to be a country having the necessary requisites to be classified as a democracy (170). However, because of continuous violence and the state’s incapacity to put an end to it, the country hasn’t achieved its democratic status yet.

Political centralization is essential for building good institutions. However, centralization does not guarantee efficient egalitarian governance. At the same time, without powerful centralization, the existence of a prosperous state is barely possible (Cook 83). Countries such as Afghanistan, Haiti, and Nepal lack political centralization, and therefore, even though they are national states, they cannot provide the rule of law and property rights (Acemoglu and Robinson 216). It is crucial then to maintain a balance between the interests of the majorities and minorities for managing good inclusive institutions and not creating opportunities for absolutist tendencies.

There are also examples of states that have semi-inclusive efficient institutions. One particular case that stands out is the People’s Republic of China. Deng Xiaoping invented the idea to establish inclusive economic institutions in China to achieve better standards of living for its citizens while keeping political control of the country by Communists (Acemoglu and Robinson 421). As Acemoglu and Robinson argue, this transformation in China also occurred as a consequence of antecedent historical events such as the Great Leap Forward, the Cultural Revolution, and the death of Mao (426). At the moment, there is an ongoing debate whether, in times of governance crisis, democracies with inclusive institutions stand a chance against systems like Chinese-style meritocracy (Bell 4). However, even though this type of system may seem to be liable and effective at the moment, its future is rather unclear.

Non-Western Success Case: Botswana

The range of states’ successes caused by their inclusive institutions is not limited to Western democracies, as it is believed by many. In the book, there are a lot of non-Western examples, such as Botswana. The country is indeed an interesting case of a state in Sub-Saharan Africa that managed to establish inclusive economic and stable democratic institutions (Acemoglu and Robinson 410). It happened because Botswana, according to Acemoglu and Robinson, was able to “seize a critical juncture, postcolonial independence, and set up inclusive institutions,” which was widely based on the different historical development of the country (413). The example made is indeed interesting, but it is not particularly persuasive in terms of inclusive institutions’ efficacy.

There is another opinion on what Botswana has achieved and how crucial a democratic system of governance is for this. You compared Botswana with Singapore and concluded that in the case of the former, democracy had not guaranteed its economic success as in the case of the latter, where democracy is not fully functioning (327). Botswana has not managed to achieve the results demonstrated by Singapore, in the opinion of You (327). What can be deduced from this is that a more nuanced understanding of the interrelation between inclusive political institutions and sustainable economic growth should be acquired.

Inclusivity

The point advocating for the establishment of good inclusive institutions is clearly made in Why Nations Fail?, what is less evident is how these institutions can be introduced and kept. What Acemoglu and Robinson state is that inclusive institutions can not emerge by themselves. In other words, there should be incentives for stimulating the initiation of inclusive institutions in society (332). As history has shown, they are the outcome of a conflict between elites defending the status quo and those who aspire to limit the power of elites.

In some cases, these conflicts end with a new distribution of power, which may lead to the establishment of inclusive political and economic institutions. Some authors (Acemoglu et al. 5) suggest that even temporary shifts in power lead to the creation of new institutions. Therefore, as Acemoglu et al. argue, the distribution of power within the society is essential (1886). The type of institutions and policies a system generates is contingent on totally contingent on the way the power is distributed among different interest groups.

What is called the conflict in this context implies a revolution such as the Glorious Revolution, the Carnation Revolution, the ‘Velvet revolutions’ in Czechoslovakia, and several other Eastern European states. It should also be kept in mind that revolutions resulting in the establishment of inclusive institutions are rather an exception than a rule (Grinin and Korotayev 117). The transition from extractive to inclusive institutions is based on the concept called “virtuous circle” (Acemoglu and Robinson 332). The virtuous circle becomes possible only when institutional winners give away some of their privileges to institutional losers (Mingiu-Pippidi and Johnston 3). The conditions are very important, as they determine whether the change is insight and a virtuous circle is tangible.

Once set off, the virtuous circle stands a chance to persist through three mechanisms. The mechanisms include the following: pluralistic political institutions, the rule of law, and inclusive economic institutions (Acemoglu and Robinson 308). The first mechanism prevents one from the usurpation of power, even for well-intentioned people and groups. The second one implies that all people are equal, as it doesn’t limit them; it just ensures that everybody is equal before the law (Bugaric and Kuheli 32). The third one eradicates egregious labor relations such as slavery, reduces the significance of monopoly, and creates an economy from which anybody could benefit (Soderbaum 16). However, as argued by Schmelzle and Stollenwerk, solely relying on the virtuous circle as a panacea can be problematic (463). Cases of the states with limited statehood, such as Haiti, the republic of NGOs, prove it.

Keeping Inclusivity

Assuming that the theory developed in the book is not delusional, there are grounds for many countries of the world today to try to become more prosperous. As argued in the book, states are not condemned to poverty because of their geographies or cultures. The reason for underdevelopment lies in the lack of institutional drift in the country at some point in its history. Thus, based on what has been written so far, countries have to create intuitional drift and establish inclusive good institutions to be able to do better in such a competitive world.

To prove that inclusivity is essential and all the arguments advocating for it are not blatant, one can turn to the current agenda of the UN in the form of Sustainable Development Goals (SDGs). As the current commitment of the most significant international organization is to “leave no one behind” (Thorpe et al. 2), it is then apparent how vital inclusivity is for the successful development of states all over the world. SDGs, to a great extent, is focused on the issues of equal participation and inclusivity.

Many scholars in modern academia study SDGs and interlinkages between them today. It is made clear that the inability to achieve one of the goals has a negative impact on the achievement of the rest of the goals (Leininger et al. 3). If this is impossible at the macro-level, then one can deduce that similar aspirations will be successful if a combination of criteria, in other words, goals, is not fulfilled. States, once having established inclusive institutions, have to find a balance between different interests and actors. They need to find ways to mitigate the risks of falling into the trap of extractive institutions.

Conclusion

Extractive institutions are harmful mechanisms hampering a lot of modern states from becoming successful socio-political structures with good governance and steadily growing economies. The theory developed by Acemoglu and Robinson is helpful in terms of understanding the causes and evolution of both extractive and inclusive institutions in various countries of the world. The analysis of numerous cases from all around the world serves the purpose of making a point of the book persuasive. However, whether it is feasible to create a model of successfully managing inclusive institutions once they are insight is still unclear. It should be studied more in-depth, considering both differences and similarities in various countries’ experiences.

Works Cited

Acemoglu, Daron and James A. Robinson. Why Nations Fail?. Profile Books. 2012.

Acemoglu, Daron, et al. “The Power of the Street: Evidence from Egypt’s Arab Spring.” The Review of Financial Studies, vol. 31, no. 1, 2017, pp. 1-42.

Acemoglu, Daron, et al. “Democracy, Redistribution, and Inequality.” Handbook of income distribution, edited by Anthony B. Atkinson. Elsevier, 2015. pp. 1885-1966.

Bell, Daniel A. The China Model: Political Meritocracy and the Limits of Democracy. Princeton University Press, 2016.

Bugaric, Bojan, and Alenka Kuhelj. “Varieties of Populism in Europe: Is the Rule of Law in Danger?” Hague Journal on the Rule of Law, vol.10, no.1, 2018, pp. 21-33.

Cook, Brian J. “Bureaucracy and Democracy: Perils and Prospects.” Handbook of American Public Administration. Edited by Edmund C. Stazyk and H. G. Fredrickson. Edward Elgar Publishing, 2018.

Grinin, Leonid, and Andrey Korotayev. “Revolution and Democracy: Sociopolitical Systems in the Context of Modernisation.” Central European Journal of International and Security Studies, vol. 10, no.3, 2016, pp.118-139.

Leininger, Julia, et al. The Relevance of Social Policies for Democracy: Preventing Autocratisation through Synergies between SDG 10 and SDG 16. 2019. German Development Institute, Discussion Paper.

Mungiu-Pippidi, Alina, and Michael Johnston, eds. Transitions to Good Governance: Creating Virtuous Circles of Anti-corruption. Edward Elgar Publishing, 2017.

Nyoni, Thabani. “The Curse of Corruption in Zimbabwe.” International Journal of Advanced Research and Publications, vol. 1, no. 5, 2017, pp. 285-291.

Schmelzle, Cord, and Eric Stollenwerk. “Virtuous or Vicious circle? Governance Effectiveness and Legitimacy in Areas of Limited Statehood.” Journal of Intervention and Statebuilding, vol. 12, no. 4, 2018, pp. 449-467.

Soderbaum, Peter. “Toward Sustainable Development: from Neoclassical Monopoly to Democracy-oriented Economics.” Real-World Economics Review, no. 87, 2019, pp. 181-195.

Taylor, Steven L. “The State of Democracy in Colombia: More Voting, Less Violence?” The Latin Americanist, vol. 60, no. 2, 2016, pp. 169-190.

Thorpe, Jodie, et al. Building Participatory and Inclusive Institutions. UNTFSSE International Conference in Geneva, May 2019, Geneva, Switzerland.

You, Kevin. “The Roles of Political Inclusion and Democracy in Economic Development: Insights from Singapore and Botswana.” The Journal of Developing Areas, vol. 50, no.5, 2016, pp. 327-334.

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