The book “Why nations fail” is worth reading because it provides deep insight and remarkable underlying facts, accounting for why some nations are prosperous and some are in misery. The conjunction of the historical analysis with the existing inequalities of the globe is one of the most critical aspects of the book. The authors of the book “Daron Acemoglu and James A. Robinson” made commendable efforts; thereby, it could become New York Times’s best-selling book.
Inclusive vs. Extractive Institutions:
Nogales provinces: Arizona vs Sonora:
Nogales is a region that constitutes two different modern cities: Arizona (USA) and Sonora (Mexico). Although both geographies hold the same climate, ethnicity, and historical lineage, the living conditions of people are pretty different. In Arizona, people with high average incomes and health security, receive a quality education and enjoy vacations are living a life dreamed of by various low-income countries.
On the other hand, those privileges given to Arizona’s inhabitants are unavailable to Sonora’s public. Robinson and Acemoglu explain these discrepancies very eloquently. They argue that the differences between the conditions of Nogales are because of the different institutions under which people are governed. Arizonians are under the shelter of the USA’s constitution and institutions, while the people in Sonora live under Mexican authorities. It is clear from the facts that the institutions matter very much. The USA holds an inclusive economic system, while Mexico is glued to the extractive. People in the USA are freer to do business and become entrepreneurs more quickly than in Mexico.
Moreover, not only are intellectual property rights effective in America, but the government also ensures fair market competition. The new one in the market feels no systematic hindrance in the US market. Two billionaires’ tales were highlighted to exemplify the differences: Bill Gates and Carlos Slums. Bill Gates, when sued by his opponent for his attempt to create a monopoly in the market, the institution took action against him. On the contrary, Carlos Slums remained unrestrained (due to his influence in the political realm) and exploited the system’s loopholes. However, when he entered the US market to do business with the same intent, he faced immense challenges and losses.
Hence, it has been clear that the US is not a superpower for its military might but because some concrete institutional factors are behind America’s sustainable growth and prosperity that make it uncommon to the world. Furthermore, those were the US’s historically inherited democratic and inclusive nature.
North Korea vs. South Korea:
South and North Korea are both geographically and culturally interconnected. Nevertheless, why is South Korea among the top GDPs, and why the top world technological companies such as Samsung originated there? On the other hand, North Korea remained backward despite the gruesome military and nuclear weapons.
Robinson asked whether that was because of the authoritarian regime in North Korea. However, that is not the case in his view. Because South Korean progress had started long before when it was also under a military dictator, “General Park.” Likewise, North Korea was also and still governed under an absolutist regime. Nevertheless, how could it be possible; if democracy is linked to prosperity, why would South Korea take the lead in the economic race? Perhaps, some other factors should be counted. South Koreans owing to the geopolitical proximity to the US and estrangement from the Soviets, adopted the inclusive economic system after the Korean war.
That inclusiveness marked a systematic change in the whole South Korean politics, and the era of entrepreneurship began, and the country’s economy began to scale. Today, youth are determined to contribute with their creativity to national growth. Intellectual property rights are effective like in any developed state. On the other hand, North Korea remained completely extractive and under a dictator’s rule. There is no concept of private property, and elites are stagnating the whole country.
A real story of two separated brothers is mentioned in the book. They were separated after the Korean war. When they got the opportunity to meet, the brother on the South Korean side found that his North Korean brother was living under severe constraints. He could not even share the actual situation of his country because of the government’s fear. Moreover, he noticed that people living in North Korea are technologically backward. People do not have basic facilities, freedom, and the internet.
Historically and culturally the same, but politically and economically different, “North Korea and South Korea” are clear manifestations of how the inclusive system can create a huge difference between people and nations.