Book Review: Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James A. Robinson

In my last post I wrote down some thoughts this book inspired in me about how its themes relate to the world of publishing.  Now I want to directly confront what it says about global economics.  The basic premise of the book is that inclusive political and economic systems thrive, while extractive systems impoverish countries they control.  Once either type of system is in place, it is very difficult to dislodge, as it has inherent factors that strengthen it against adverse or opposite influences.  Critical junctures in history, however, can impact either type of system and bring about change.

Early on in the book, the authors spend several chapters refuting other explanations for global poverty and plenty, and in later chapters they reinforce their own theories with numerous examples.  The weight of example is compelling.  It’s hard to refute so much evidence.  And yet, I found myself wondering about certain aspects of their arguments.  Not the basics; the basics are sound.  There’s too much evidence to refute their postulations about the economic strength of inclusive systems and the inherent weakness of extractive ones.

The problem is, it doesn’t offer any solutions.  It presents the situation of why some countries are sinking in poverty with great clarity, but offers no way out.  It explains why extractive societies begin and endure but offers no alternative to the heartbreaking torment the mass of people go through under them.  All right, perhaps offering solutions wasn’t the intentions of the authors, but it leaves readers with a dilemma.  It’s as if you can see a mugger murdering someone and robbing them of everything they own but being helpless to do anything about it.  Dictators throughout history have exploited the poor, and in many countries in this present time they still do, and we see the evil but feel powerless.  Knowing what prompts social forces to give rise to and sustain the evil does nothing to mitigate it.

Don’t get me wrong; the book is still fascinating.  But I get a sinking feeling as I read and contemplate historical instance after instance of the depravity of human nature.  What is the solution?  What can we do about it?  This book presents no answers.

Another problem I have with this book is its writing style.  Perhaps I’m spoiled by reading too many historians like David Halberstam who are also stellar writers.  This book is written in workmanlike, academic, but hardly lively prose.  Part of the problem may be that there are two authors so there is no distinctive voice.  Part of it may be that the subject matter is so complex that it’s hard to express it in a lively, engaging manner.  Or perhaps it’s just me.  I found myself getting muddled sometimes and having to go back over parts to be able to extract their full meanings.  I seldom have to do that when I’m reading something by Halberstam, for instance.  The subject matter and approaches are different, you may say, and I might agree with you.  Nevertheless, if you tackle this tome, don’t expect an easy read.

All in all, this book is too valuable to ignore.  It’s important reading.  You have to diagnose the sickness and discover its causes before you can eradicate it and prevent it from happening again.  It’s discouraging, though, that throughout history, as the authors so efficiently expose, strong leaders are only too happy to seize control and enrich themselves at the expense of their fellow humans, their society, and their country.  It’s a very sad situation.

*     *     *

A few more thoughts to wind this up:

Near the end of the book the authors discuss the failure of foreign aid to alleviate the economic problems of poor countries.  They use Afghanistan as an example.  When the Taliban were defeated, aid organizations swarmed into the county, yet instead of setting up an infrastructure of inclusive economic and political institutions, they proceeded to construct an infrastructure of airfields so they could fly around from one place to another in their private jets.  Additionally, donated aid was siphoned off for administrative costs of the main aid organizations, contractors, sub-contractors, sub-sub-contractors, and so on, until there was little or nothing left for the people for whom it was intended.  Transport organizations and other hired Afghanis were typically exploitive, extractive former Taliban who hiked up their rates many-fold for the aid organizations.  This is a common pattern concerning aid to underdeveloped countries.

The authors also bring up the inability of international organizations to engineer prosperity using the ignorance hypothesis.  This theory posits that poor countries are poor because they do not have the wisdom to follow proper economic guidelines without assistance.  If they only have the proper guidance, they will prosper.

A stark example of the failure of this theory in my own experience is the case of the Greek economic collapse, which I experienced while living in Greece.  A number of things precipitated the Greek crisis.  Its political system is predicated on extraction, on the ruling political parties awarding positions and business perks to their cronies, on bribery, on siphoning funds out of public treasuries.  But it took a turn for the worse when Greece joined the European Union and all of a sudden had access to vast loans from the EU.  It’s not that they used the money unwisely, although they did; it’s that they never should have had access to the funds in the first place.  It reminds me of the crazy credit card offers I receive all the time in the mail.  Those damned companies are not doing me any favors by offering me those cards; what they are doing is trying to sink their hooks in, hoping to be able in the future to extract interest and penalty fees and so on.  Greece should never have been lent so much money.  Once it was done and Greece couldn’t pay it back, the huge burden of debt accumulated from the compiling interest.  And then what did the EU do?  Crush Greek economic growth by unreasonable demands on its infrastructure.  The EU never should have distributed such large loans so liberally, and once it did, it should never have expected that a struggling country like Greece would somehow morph into a model economic entity that would be able to instantly make good on the loans.  And now, the EU is in a bind because Greece is a part of it, intricately woven into the European economic body, and to cut Greece loose would involve an amputation that would precipitate irrevocable side effects.  If the EU wants to help out, it needs to back off and let the Greek economy, however small and fragile, reassert itself, instead of imposing ever more draconian measures that only grind it into the dust.

As you can see, having lived there so long and having invested myself so much in Greece, I get a bit emotional when I see its present sad and sorry state.

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