WHY NATIONS FAIL

DAREN ACEMOGLU AND JAMES A.

ROBINSON
GROUP MEMBERS: AMIN UL HAIDER 171559
&
TAHIR AZAD 171571
I'VE SEEN THE FUTURE, AND IT WORKS
GROWTH UNDER EXTRACTIVE
INSTITUTIONS
What Stalin, King Shyaam, the Neolithic Revolution, and the Maya city-
states all had in common and how this explain why China’s current
economic growth cannot last
 CONTENTS

• Growth under extractive institutions

• I have seen the future and it works
• Growth in Soviet Union
• Un-sustainability of growth
• On the bank of Kasai
• The Long Summer
• The unsustainable extraction
• What goes wrong
 GROWTH UNDER EXTRACTIVE INSTITUTIONS

Basic logic of growth under extractive institutions

 Growth is possible only under centralized state
Allocation of resources to highly productive sectors
Growth is based on existing technologies
Growth is not sustained
I. Lack of innovation
II. Infighting among elites
 I HAVE SEEN THE FUTURE AND IT WORKS

1917 Bolsheviks overthrown tsarist regime: civil war started

Mission was led by diplomat William Bullet and a journalist Lincoln Steffen
Steffen inspired from the great potential of Soviet Regime
On return Steffen remarked “I have seen the future and it works”
 GROWTH IN SOVIET UNION

Lenin died in 1924 and replaced by Joseph Stalin

Launched Gosplan between 1928 and 1933
Industrialization started at the expense of agriculture sector
Collectivize agriculture to easily raise taxes
Reallocation of labour force from agriculture toward industries started
Growth was about 6% annually from 1924 to 1960
Between 1924 to 1960 rapid economic growth occurred in Soviet Russia
 UNSUSTAINABILITY OF GROWTH

I. Property rights were abolished

II. Lack of technological innovation
a) Lack of economic incentives
b) Resistance by the elites
 ON THE BANK OF KASAI
Kasai river divides Lele people on western bank and bushongs on eastern bank
Anthropologists Mary Douglas studied these groups in 1950 and found some differences
Lele people are poor and Bushongs are rich
Lele people use inferior technology while Bushongs use advanced technology
Lele people produced for subsistence while Bushongs produced for exchange
Lele people harvest maize once in a year while Bushong people harvest three times a year
Difference is not caused by geography, culture or ignorance
In 1620 political revolution took place in Bushongs led by Shyaam
Shyaam found Kuba Kingdom on eastern bank of Kasai
The political revolution introduced state centralization, bureaucratic system to raise taxes, police
force
New technology adopted and mixed farming system was introduced at that time
Boost agricultural productivity and extracted wealth through taxes
Shyaam introduced institutional innovations on Bushong side while Lele doesn’t have such
institutional innovations
 THE LONG SUMMER
About 15000 BC ice age ended
9600BC global temperatures rose and continue to rise till today
Archaeologist Brian Fagan called it the long summer
Sedentary life started first in the area known as Hilly Flanks
Extended into Israel, palatine, river Jordan, Syria, Turkey, Iraq and Iran
Later farming, herding and domestication started
Evidence from gazelle teeth: cementum
Archaeologist evidence suggest Natufians developed extractive institution
On the basis of hierarchy, order and inequality
Inequality evidences comes from graves
Natufians underpin Neolithic revolution
Due to extractive nature of institutions prosperity was short lived
Homeland of Natufians Palestine, Syria, Iraq etc are poor today
Conflicts over resource control
Some time replace the elites while sometime destroy the whole society
 THE UNSTABLE EXTRACTION
Maya cities established in some areas of Mexico, Belize, Guatemala and western Honduras
First developed at 500BC
1 AD failed and re-emerged with new political model between 250 AD to 900
Mayas were builders, invented cement
Build large monuments and palaces, improved irrigation system
Traded in obsidian, marine shells, salt, feathers etc
Institution are extractive therefore creative destruction does not occur
Maya cities collapsed due to inequality and infighting
 WHAT GOES WRONG

Extractive institutions exists in all these societies in different forms

In Caribbean plantation economy; in the form of elite, forced labour of slaves to produce sugar
Soviet union; in the form of communist party
Maya city states; infighting among elites
All societies possess unsustained growth due to these three main reasons
a) Lack of technological innovations
b) Lack of creative destruction
c) Infighting and instability (Maya City)
References
Acemoglu, D., & Robinson, J. A. (2012). Why Nations Fail: The Origins of Power,
Prosperity and Poverty. New York: Crown Business.