When analysing the first chapter, it presents why one country is rich and another is rich by comparing the two parts of Nogales. It compares their utilization of economic institutions and political control.
Each society functions with a set of economic and political rules created and enforced by the state and citizens. There are many variations of these rules. For instance, North Korea’s economic and political rules were only created by the state, and the citizens have very little rights. North Korean citizens are living in extreme poverty and corruption. Without efficient institutions cmes low standards of living, low GDP per capita, life expectancy, etc.
One example the author used was Bill Gates. Author writes that he had talent and ambition, but he ultimately responded to incentives because he was easily able to begin his own company. The rule of law existed, therefore Bill Gates was confident of his property rights. Economic institutions that do not guarantee safety do not succeed. Although, knowledge of what institutions work could help change nations, it is extremely uncommon. The different patterns of institutions in societies come from their pasts, and once a society organizes itself in a certain way, it continues. (go to theme 2 how the past shapes the present) An event that the author presents to explain how the past shapes the present is the Black Death.
Most of the population in Eastern and Western Europe decimated. Before the plague, there was a steady increase in people. Labor was scarce, wages were low, and people demanded greater freedoms because landlords could treat them poorly. Post-plague, Eastern European lords used the low population to their advantages.
Fewer people meant that lords had to pay their workers more, but it also created incentive to keep the labor market extractive and the peasants servile. Landlords expanded their holdings, and continued to treat their workers poorly, just as they did before the plague. Extractive institutions can be harmful and helpful to a nation.
In this case, it increased wealth, but created a higher wage gap than before, and transferred disadvantages to the working class. Institutional drifting is another main theme of Why Nations Fail. Institutional drifting is when two similar societies slowly drift apart institutionally. In the book, the term is compared to genetic drifting, where two isolated populations of organisms will stray from each other. Institutional drifting influences how society reacts to economic/political statuses during critical junctures. The Black Death is a critical juncture that disrupted the economic and political balance in European society. It dissolved feudalism in the West and made a second serfdom in the East. The contingent path of history is dependent on the origins of a country’s institutions.
The fear of creative destruction is the main reason why there was no sustained increase in living standards between the Neolithic and Industrial Revolutions. For example, in the early 1600’s William Lee invented the machine that allowed textiles to be mass produced. When he asked for patents, he was rejected many times because leaders were concerned that it would be politically destabilizing; it would take away jobs, create unemployment, and threaten royal power.Acemoglu and Robinson dissect countries histories and connect them to important themes excellently. The formatting of the book makes the information easier to take in because it has headers that section the chapters into significant chunks.Acemoglu and Robinson can be considered biased when it concerns the state and the citizens. When nations are being criticised, the government is mainly the accused.
In reality, the citizens are also at fault for a failing nation. Interactions between the upper and lower classes influences the basic societal structure of a country. Selfishness is a large contributor to inequality.
The Origins of Power, Prosperity, and Poverty teaches about how to differentiate between ways countries have come to power and ways countries languish. The informed writing is phenomenal and a showcase of economic rigor and knowledge.