Is it culture, the weather, geography? Perhaps ignorance of what the right policies are?
Simply, no. None of these factors is either definitive or destiny. Otherwise, how to explain why Botswana has become one of the fastest growing countries in the world, while other African nations, such as Zimbabwe, the Congo, and Sierra Leone, are mired in poverty and violence?
Daron Acemoglu and James Robinson conclusively show that it is man-made political and economic institutions that underlie economic success (or lack of it). Korea, to take just one of their fascinating examples, is a remarkably homogeneous nation, yet the people of North Korea are among the poorest on earth while their brothers and sisters in South Korea are among the richest. The south forged a society that created incentives, rewarded innovation, and allowed everyone to participate in economic opportunities. The economic success thus spurred was sustained because the government became accountable and responsive to citizens and the great mass of people. Sadly, the people of the north have endured decades of famine, political repression, and very different economic institutions—with no end in sight. The differences between the Koreas is due to the politics that created these completely different institutional trajectories.
Based on fifteen years of original research Acemoglu and Robinson marshall extraordinary historical evidence from the Roman Empire, the Mayan city-states, medieval Venice, the Soviet Union, Latin America, England, Europe, the United States, and Africa to build a new theory of political economy with great relevance for the big questions of today, including:
China has built an authoritarian growth machine. Will it continue to grow at such high speed and overwhelm the West?
Are America’s best days behind it? Are we moving from a virtuous circle in which efforts by elites to aggrandize power are resisted to a vicious one that enriches and empowers a small minority?
What is the most effective way to help move billions of people from the rut of poverty to prosperity? More philanthropy from the wealthy nations of the West? Or learning the hard-won lessons of Acemoglu and Robinson’s breakthrough ideas on the interplay between inclusive political and economic institutions?
Why Nations Fail will change the way you look at—and understand—the world.
Is inequality harmful for economic growth? Is the underdevelopment of Latin America related to its
unequal distribution of wealth? A recently emerging consensus claims not only that economic inequality
has detrimental effects on economic growth in general, but also that differences in economic inequality
across the American continent during the 19th century are responsible for the radically different economic
performances of the north and south of the continent. In this paper we investigate this hypothesis using
unique 19th century micro data on land ownership and political office holding in the state of Cundinamarca,
Colombia. Our results shed considerable doubt on this consensus. Even though Cundinamarca is indeed
more unequal than the Northern United States at the time, within Cundinamarca municipalities that
were more unequal in the 19th century (as measured by the land gini) are more developed today. Instead,
we argue that political rather than economic inequality might be more important in understanding
long-run development paths and document that municipalities with greater political inequality, as measured
by political concentration, are less developed today. We also show that during this critical period
the politically powerful were able to amass greater wealth, which is consistent with one of the channels
through which political inequality might affect economic allocations. Overall our findings shed doubt
on the conventional wisdom and suggest that research on long-run comparative development should
investigate the implications of political inequality as well as those of economic inequality.
In this paper we exploit the invasion of Europe, particularly Germany, by French Revolutionary armies as a natural experimentto investigate the causal effect of the institutions
of the ancien régime on economic development. A central hypothesis which can account for
comparative development within Europe is that economic growth emerged first in places which
earliest escaped ancien régime and feudal institutions. However, though there is a correlation
between these two events, this does not demonstrate that it was the collapse of the ancien régime that caused the rise of capitalism. This is because there may be problems of reverse
causation and omitted variable bias. We show how the institutional reforms (essentially the
abolition of the ancien régime) brought by the French in Germany can be exploited to resolve
these problems. These reforms were akin to an exogenous change in institutions unrelated
to the underlying economic potential of the areas reformed. We can therefore compare the
economic performance of the areas reformed to those not reformed before and after the Revolutionary period to examine the impact of the reforms. The evidence we present is consistent
with the hypothesis that the institutions of the ancien régime did indeed impede capitalism.
This paper revisits and critically reevaluates the widely-accepted modernization hypothesis which claims that per capita income causes the creation and the consolidation of democracy. We argue that existing studies find support for this hypothesis because they fail to control for the presence of omitted variables. There are many underlying historical factors that affect both the level of income per capita and the likelihood of democracy in a country, and failing to control for these factors may introduce a spurious relationship between income and democracy. We show that controlling for these historical factors by including fixed country effects removes the correlation between income and democracy, as well as the correlation between income and the
likelihood of transitions to and from democratic regimes. We argue that this evidence is consistent with another well-established approach in political science, which emphasizes how events
during critical historical junctures can lead to divergent political-economic development paths,
some leading to prosperity and democracy, others to relative poverty and non-democracy. We
present evidence in favor of this interpretation by documenting that the fixed effects we estimate
in the post-war sample are strongly associated with historical variables that have previously been
used to explain diverging development paths within the former colonial world.
We construct a model of simultaneous change and persistence in institutions. The model
consists of landowning elites and workers, and the key economic decision concerns the form
of economic institutions regulating the transaction of labor (e.g., competitive markets versus
labor repression). The main idea is that equilibrium economic institutions are a result of the
exercise of de jure and de facto political power. A change in political institutions, for example
a move from nondemocracy to democracy, alters the distribution of de jure political power,
but the elite can intensify their investments in de facto political power, such as lobbying or
the use of paramilitary forces, to partially or fully offset their loss of de jure power. In the
baseline model, equilibrium changes in political institutions have no effect on the (stochastic)
equilibrium distribution of economic institutions, leading to a particular form of persistence in
equilibrium institutions, which we refer to as invariance. When the model is enriched to allow
for limits on the exercise of de facto power by the elite in democracy or for costs of changing
economic institutions, the equilibrium takes the form of a Markov regime-switching process
with state dependence. Finally, when we allow for the possibility that changing political institutions
is more difficult than altering economic institutions, the model leads to a pattern ofcaptured democracy, whereby a democratic regime may survive, but choose economic institutions
favoring the elite. The main ideas featuring in the model are illustrated using historical
examples from the U.S. South, Latin America and Liberia.
This book develops a framework for analyzing the creation and
consolidation of democracy. Different social groups prefer different
political institutions because of the way they allocate political power
and resources. Thus democracy is preferred by the majority of citizens,
but opposed by elites. Dictatorship nevertheless is not stable when
citizens can threaten social disorder and revolution. In response, when
the costs of repression are sufficiently high and promises of
concessions are not credible, elites may be forced to create democracy.
By democratizing, elites credibly transfer political power to the
citizens, ensuring social stability. Democracy consolidates when elites
do not have strong incentives to overthrow it. These processes depend
on the strength of civil society, the structure of political
institutions, the nature of political and economic crises, the level of
economic inequality, the structure of the economy, and the form and
extent of globalization.
Winner, John Bates Clark Medal, American Economic Association, 2005 Winner, Woodrow Wilson Foundation Award, 2007 Winner, William H. Riker Award, Political Economy Section, 2007