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23 of 24 people found the following review helpful
5.0 out of 5 stars great academic treatise - part economic theory of growth, part history of the world, 8 Dec. 2012
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This review is from: Why Nations Fail: The Origins of Power, Prosperity and Poverty (Hardcover)
I approached this with hesitation, after reading other reviews. I thoroughly enjoyed reading it - but of course it is a long academic treatise, setting out bags of evidence and potential evidence and a simple central economic thesis for which it argues, at length.

The thesis is a thesis about growth, which the authors see as the test of the success of nations. (Others might think of course, that this isn't just about growth and GDP, but you can see what they have in mind.) Growth is only possible if there is a centralised state. No centralised state, as in Somalia, just means chaos and no prospect of growth. If there is a centralised state, there be what the authors call an 'absolutist' regime where all power is concentrated in the ruler and the ruling elite and there can be growth for a while and of a kind - centrally driven growth, as under Stalin in Russia between 1930 and 1970 as labour was moved from the fields to the cities, or under the Chinese regime today, which has done something to address the need for incentives economically. But such growth will come to an end (and often it doesn't happen at all, because it's against the personal interest of the ruler or ruling elite) - because the essence of ongoing growth is 'creative destruction' the invention of new technologies etc which will throw up a new class of rich people. That's only going to happen in a world in which property rights are secure and there are incentives to innovate and invest. Of course whether that will happen is a matter of history and history is 'contingent' - you can't tell what will happen. The Young Pretender reached Derby in 1745. If he had reached London and regained the throne for the Stuarts, history in England would have been different, and the Industrial Revolution might not have happened.

There are many powerful illustrations of the central thesis in the book. The two halves of Nogales, one half in Mexico and one in the US. The two halves of Korea. And there's a lot of history telling. There's also lots of interesting history. In terms of colonial exploitation of new lands, an accidental difference between North and South America. In the South, there were plentiful natives and plentiful gold and silver to exploit - and a playbook for the colonial power (capture the local king, torture him generally or often to death, and demand rooms of gold and silver). In the North by contrast, there is a sparse population of natives; and no gold or silver. The playbook doesn't work. And people need to be incentivised to work and earn for themselves. Hence inclusive economic and political institutions....Similarly story in Australia...

What might you wonder about here? Well, the 'history is contingent' line takes up a lot of the book. The authors develop a theory of virtuous and vicious circles and what makes it more likely that the right institutions will develop (you start off on the right path, and then it's not quite in the interests of anyone to seize control of the state, because there isn't quite such a thing - power is pretty dispersed already). I would be interested to know if game theory could help here - it isn't discussed. Then you might wonder about states that have been apparently inclusive that cease to be so. Germany under National Socialism for example is not discussed. And then you might wonder just how far political and economic institutions need to be inclusive to drive growth and the success of nations. England gets the thumbs up for the Magna Carta, the Glorious Revolution and so on, which points it on the right path. The industrial revolution happens, however, with a very limited franchise - and no votes at all for women.

Not the least of the merits of the book, though, are the hard thoughts that its 462 pages present. I would very strongly recommend it.
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