Authors: Daron Acemoglu and James Robinson
I heard about this book in the most unlikely of places. I was at a party in Bangalore, India and got talking to an old friend about books in general. He told me about this great book that outlined a criteria for what makes nations succeed or fail and then went on to evaluate all the major countries in the world and discuss their prospects. He said that the authors were from M.I.T and Harvard, thereby getting instant credibility and added that the U.S. did not fare that well. I was hooked, and had to figure out what the top minds in world economics had in store for me and my adopted country.
For a rather academic treatise, the book is very well written and has numerous examples that bolster the authors' thesis which is as follows: For nations to succeed they need political institutions that are "inclusive" and allow the entire population to have the opportunity to be part of. Nations fail, when power is confined to a few select individuals who "extract" economic benefits from the rest of the population. The authors argue repeatedly that the latter is not sustainable and eventually collapses.
The examples are spread all over history and it is quite insightful to read all of these through the lens of "extractive" politics. The authors contrast the fact that the Spanish colonization of South America was not sustainable and quickly collapsed, versus the early American settlers who went on to build a nation that is the economic powerhouse that it is today. The authors argue that the spanish conquerors were interested in "extracting" all the economic benefits from the region at the expense of the local serfs. Whereas the early American pioneers were more focused on defining "inclusive" political institutions that guaranteed stability and formed the underpinning for "inclusive" economic growth. They evaluate China which has made huge economic gains in the recent years and credit the entrepreneur-friendly, "inclusive" economic policies that they have adopted. However, their political system is closed and in the authors opinion not something that can be sustained in the long run. There's a similar analysis for Russia and the political upheaval that followed when their top-down economic policies ultimately failed.
A book of this stature has received a lot of scrutiny from many smart people all over the world, and it is quite entertaining to read the long missives of love and hate floating in the blogosphere. I read a few reviews from economists who complained that the book was rather simplistic. Folks from Latin America were miffed that the book drubbed their economies a failure. There were historians who felt that the historical treatment lacked accuracy. Thomas Friedman, wrote in the New York Times, that he found the book fascinating, especially the "warning flares the authors put up about both America and China". One very high profile criticism was the scathing review from Bill Gates in his GatesNotes blog. Bill disagrees with the authors dim view on the prospects for China and criticism for Carlos Slim, one of the richest men in the world. Apparently, this review got a lot of publicity and prompted the authors to respond with "Did the Microsoft Founder even read our book before he criticized it?" In an article in the Foreign Policy Magazine, they tear apart Bill's review including his gratuitous remark that the book "refers to me in a positive light". The authors clarify that they do no such thing and maybe Bill didn't understand what they had to say. In their words "sadly there are few heroes in the book. Bill Gates was not one of them".
Overall, I enjoyed the book and do find the thesis quite compelling. It will provide endless hours of debate and discussion on the age-old question of why some countries are successful while many others struggle.
I heard about this book in the most unlikely of places. I was at a party in Bangalore, India and got talking to an old friend about books in general. He told me about this great book that outlined a criteria for what makes nations succeed or fail and then went on to evaluate all the major countries in the world and discuss their prospects. He said that the authors were from M.I.T and Harvard, thereby getting instant credibility and added that the U.S. did not fare that well. I was hooked, and had to figure out what the top minds in world economics had in store for me and my adopted country.
For a rather academic treatise, the book is very well written and has numerous examples that bolster the authors' thesis which is as follows: For nations to succeed they need political institutions that are "inclusive" and allow the entire population to have the opportunity to be part of. Nations fail, when power is confined to a few select individuals who "extract" economic benefits from the rest of the population. The authors argue repeatedly that the latter is not sustainable and eventually collapses.
The examples are spread all over history and it is quite insightful to read all of these through the lens of "extractive" politics. The authors contrast the fact that the Spanish colonization of South America was not sustainable and quickly collapsed, versus the early American settlers who went on to build a nation that is the economic powerhouse that it is today. The authors argue that the spanish conquerors were interested in "extracting" all the economic benefits from the region at the expense of the local serfs. Whereas the early American pioneers were more focused on defining "inclusive" political institutions that guaranteed stability and formed the underpinning for "inclusive" economic growth. They evaluate China which has made huge economic gains in the recent years and credit the entrepreneur-friendly, "inclusive" economic policies that they have adopted. However, their political system is closed and in the authors opinion not something that can be sustained in the long run. There's a similar analysis for Russia and the political upheaval that followed when their top-down economic policies ultimately failed.
A book of this stature has received a lot of scrutiny from many smart people all over the world, and it is quite entertaining to read the long missives of love and hate floating in the blogosphere. I read a few reviews from economists who complained that the book was rather simplistic. Folks from Latin America were miffed that the book drubbed their economies a failure. There were historians who felt that the historical treatment lacked accuracy. Thomas Friedman, wrote in the New York Times, that he found the book fascinating, especially the "warning flares the authors put up about both America and China". One very high profile criticism was the scathing review from Bill Gates in his GatesNotes blog. Bill disagrees with the authors dim view on the prospects for China and criticism for Carlos Slim, one of the richest men in the world. Apparently, this review got a lot of publicity and prompted the authors to respond with "Did the Microsoft Founder even read our book before he criticized it?" In an article in the Foreign Policy Magazine, they tear apart Bill's review including his gratuitous remark that the book "refers to me in a positive light". The authors clarify that they do no such thing and maybe Bill didn't understand what they had to say. In their words "sadly there are few heroes in the book. Bill Gates was not one of them".
Overall, I enjoyed the book and do find the thesis quite compelling. It will provide endless hours of debate and discussion on the age-old question of why some countries are successful while many others struggle.
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