BOOK REVIEW

WHY NATIONS FAIL: ORIGINS OF POWERS, POVERTY AND PROSPERITY

DARON ACEMOGLU AND JAME ROBINSON

Acemoglu and Robinson’s Why Nations Fail [2012] is a grand history in the style of

Diamond [1997] or McNeil [1963]. Like those books, this book is exceptionally fun to read and

full of interesting historical examples and provocative ideas. The basic theme of the book is that

what matters most in why some nations fail – and others succeed, for the book is as much about

success as failure – are not – as earlier authors have argued - economic policies, geography,

culture, or value systems – but rather institutions, more precisely the political institutions that

determine economic institutions.

In the book raises the example of Nogales that is divided only by a border but by

belonging to different countries show large disparities.

Chapter I: So Close and Yet So Different

The implications of the organization of colonial society and institutional laws are the

same that have created the current differences between the US and Latin America. This is

because Latin America was conquered by the Spanish who colonized countries by capturing the

leader and the people used to extract precious metals and food. While the English, touch them

what remained, colonized United States where the same mechanism of coercion did not work

because the people did not allow themselves to master the English had to work and were granted

incentives. Among the countries there are inequalities due to institutional factors both economic
and political. Political instability is an influential when people choose to live factor. innovations,

such as transportation, increased international trade was causing Latin America's poorest and

most unequal world.

Chapter II: Theories That Do Not Work

Many scientists have tried to explain the reasons for poverty and prosperity in the

countries, which have created different hypotheses. The first is related to geography, which states

that due to its location: the countries in the tropics are poor because people tend to be lazy soils

do not allow productive agriculture and disease have a major impact on worker productivity and

the rich tend to be found in temperate latitudes. The hypothesis of culture means that countries

do not thrive because of their beliefs, but by the example of China can realize that it is not

because he has had a high economic growth. While ignorance hypothesis states that the leaders

do not know how to turn a poor country into a rich, believes that countries are poor because of

market failures and economists and policymakers have given bad advice in the past.

Chapter III: The Making of Prosperity and Poverty

Inclusive economic institutions are promoting the participation of people in economic

activities that better use of their talents and skills, allow you to choose what they want and

distribute power in society. They promote economic activity, productivity growth and economic

prosperity through technology and education. Extractive institutions are those that give all the

power and gain an elite, so they tend to persist over time. The State is responsible for promoting

law and order, private property and in some cases provide public goods so this intertwined with

economic institutions. Political institutions determine economic institutions.

Chapter IV: Small Differences and Critical Junctures: The Weight of History
 In England the technological advances, the business unit to expand and invest, and

efficient use of the skills and talent by having inclusive institutions were. After a critical moment

happens small differences that are the initial institutional distinctions that create different

answers emerge. The countries have small differences between the decisions taken at the end of

the day affect their welfare in the long term. . The differences created by the institutional changes

have consequences, because they influence how society reacts to changes in economic or

political circumstances at critical junctures.

Chapter V: I've Seen the Future, and It Works

Both extractive institutions and generate inclusive growth, but this is different. Extractive

institutions this gain concentrated in the elites and for that growth to happen there must be a

policy that creates incentives centralization, but this always ends up collapsing because it is not

sustainable. There is evidence that the onset of extractive institutions a complex society,

characterized by the hierarchy, order and inequality leading to a sedentary life arises when

development. Extractive institutions cannot create sustained technological change, as the elites

are wary of them and there are no economic incentives.

Chapter VI: Drifting Apart

Rome and Venice were the cities with the extensive development of inclusive institutions

however these early steps were reversed. Economic growth supported by inclusive institutions

was accompanied by creative destruction, so they switched to extractive institutions, first

political and then economic, that the elite does not lose its power. It is because of differences,

which are often small, which can easily be reversed and are not necessarily the result of a simple

cumulative process. The fact that they can be reversed shows that there is a cumulative simple
process of institutional improvement. Small institutional differences that play a crucial role at

critical moments are by their nature ephemeral, they can be reversed or resurface.

Chapter VII: The Turning Point

This chapter expresses his main ideas through English history. It explains how at first

there was a monarchy and extractive institutions but over time the parliament was established

becomes more pluralistic, increased political centralization and allowing create inclusive

societies. Expressed as politicians are afraid of the destructive creation, for this is the

introduction of an innovation creating political instability and threatens to take power by

reflecting inefficient frees areas in the economy that can be used more efficiently. In inclusive

institutions greater incentives so germinate more easily, while mining may create conflicts as the

Glorious Revolution are created. Parliament took control of the state policy thus creating a more

pluralistic political institution and building the foundations for inclusive economic institution.

Chapter VIII: Not on Our Turf: Barriers to Development

The industrial revolution created a critical situation that affected almost all countries.

With the Industrial Revolution which favored printing literature, education and economic

progress it arises. Some countries took advantage of this and encouraged its citizens to invest in

technology making them grow faster. However, there are cases such as ottomans that banned for

fear of destructive creation and for this reason compared to other countries fell behind.

Chapter IX: Reversing Development

This chapter expresses his main ideas by certain examples such as Bands Islands and

South Africa. These constituted extractive economic institutions which were imposed as a result

of absolutist regimes or lack of centralized states that did not allow the technological changes
brought prosperity and poverty targeting of these countries. In the case of the Bands Islands we

see is made up of solid states however due to genocide, including the death of the leaders, I

resulted in the creation of an extractive institutions. This destroyed the commercial and industrial

activity bringing underdevelopment. African societies were less centralized and although the

purchase of slaves was abolished by the Europeans in Africa are still using slaves making them

work there. In South Africa the Europeans imposed new institutions based on cheap labor

creating a dual economy.

Chapter X: The Diffusion of Prosperity

In Australia they convict they are incentivized to work and fought them more inclusive

economic institutions. These inclusive institutions allowed by the Industrial Revolution the

country began to get rich. In France in order absolutism institutions that were inclusive and to

expand through the French Revolution imposed in the rest of Europe were created. These

changes created inclusive institutions that allowed industrialization is spreading. The Industrial

Revolution also brought consequences in China and Japan, which diverged through this critical

time. While Japanese institutions were in the process of transformation and the economy had

embarked on a path of rapid growth, China forces fighting for institutional change were not

strong enough and persisted extractive institutions.

Chapter XI: The Virtuous Circle

Political and economic institutions persist over time due to the virtuous circle: a powerful

positive feedback process that keeps these institutions against attempts to undermine and set in

motion forces that drive these are even more inclusive. The virtuous circle emerges from

pluralism, the rule of law and inclusive political institutions because they tend to support
inclusive economic institutions. Pluralism also creates a more open system and allows

independent media to flourish, making it easier for groups that have an interest in the

continuation of inclusive institutions and organize awareness against threats to such institutions.

Chapter XII: The Vicious Circle

The process creates a vicious circle of negative feedback extractive extractive political

institutions that shape economic institutions that enrich a few who have the resources at the

expense of many and ensuring the continuity of his power and succeed in doing so. Extractive

economic institutions create a basis for the persistence of extractive political institutions.

Extractive political institutions tend to create a vicious circle because they do not provide line of

defense against those who would usurp and to misuse the powers of the State.

Chapter VIII: Not on Our Turf: Barriers to Development

The industrial revolution created a critical situation that affected almost all countries.

With the Industrial Revolution which favored printing literature, education and economic

progress it arises. Some countries took advantage of this and encouraged its citizens to invest in

technology making them grow faster. However, there are cases such as ottomans that banned for

fear of destructive creation and for this reason compared to other countries fell behind.

Absolutism and lack of political centralization are two different barriers to the spread of the

industry. But they are also connected, both are held in place by fear of creative destruction and

because the process of political centralization often creates a tendency towards absolutism.

Chapter IX: Reversing Development

This chapter expresses his main ideas by certain examples such as Bands Islands and

South Africa. These constituted extractive economic institutions which were imposed as a result
of absolutist regimes or lack of centralized states that did not allow the technological changes

brought prosperity and poverty targeting of these countries. In the case of the Bands Islands, we

see is made up of solid states however due to genocide, including the death of the leaders, I

resulted in the creation of an extractive institutions.

Chapter X: The Diffusion of Prosperity

Australia followed the steps inclusive institutions. Britain sent convicts to Australia, but

in this country a new system of laws both countries diverged in their political and economic

institutions created accordingly. In Australia they convict they are incentivized to work and

fought them more inclusive economic institutions. These inclusive institutions allowed by the

Industrial Revolution the country began to get rich. In France in order absolutism institutions that

were inclusive and to expand through the French Revolution imposed in the rest of Europe were

created. These changes created inclusive institutions that allowed industrialization is spreading.

The Industrial Revolution also brought consequences in China and Japan, which diverged

through this critical time. While Japanese institutions were in the process of transformation and

the economy had embarked on a path of rapid growth, China forces fighting for institutional

change were not strong enough and persisted extractive institutions.

Chapter XI: The Virtuous Circle

Political and economic institutions persist over time due to the virtuous circle: a powerful

positive feedback process that keeps these institutions against attempts to undermine and set in

motion forces that drive these are even more inclusive. The virtuous circle emerges from

pluralism, the rule of law and inclusive political institutions because they tend to support

inclusive economic institutions. Pluralism also creates a more open system and allows
independent media to flourish, making it easier for groups that have an interest in the

continuation of inclusive institutions and organize awareness against threats to such institutions.

Chapter XII: The Vicious Circle

The process creates a vicious circle of negative feedback extractive political institutions

that shape economic institutions that enrich a few who have the resources at the expense of many

and ensuring the continuity of his power and succeed in doing so. Extractive economic

institutions create a basis for the persistence of extractive political institutions. Extractive

political institutions tend to create a vicious circle because they do not provide line of defense

against those who would usurp and to misuse the powers of the State. There is a kind of vicious

circle that leads to the persistence of extractive institutions and the same ruling elites with the

permanence of underdevelopment as is the case of Guatemala and southern United States.