The Best Quotes From “Why Nations Fail: The Origins of Power, Prosperity, and Poverty.”

From the outstanding book, Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James Robinson.

Countries such as Great Britain and the United States became rich because their citizens overthrew the elites who controlled power and created a society where political rights were much more broadly distributed, where the government was accountable and responsive to citizens, and where the great mass of people could take advantage of economic opportunities. — P.3-4

The differences between the United States and Mexico are in turn small compared with those across the entire globe. The average citizen of the United States is seven times as prosperous as the average Mexican and more than ten times as the resign of Peru or Central America. She is about twenty times as prosperous as the average inhabitant of Sub-Saharan Africa, and almost forty times as those living in the poorest African countries such as Mali, Ethiopia, and Sierra Leone. And it’s not just the United States. There is a small but growing group of rich countries — mostly in Europe and North America, joined by Australia, Japan, New Zealand, Singapore, South Korea, and Taiwan — whose citizens enjoy very different lives from those of the inhabitants of the rest of the globe. — P.42

Political and economic institutions, which are ultimately the choice of society, can be inclusive and encourage economic growth. Or they can be extractive and become impediments to economic growth. Nations fail when they have extractive economic institutions, supported by extractive political institutions that impede or even block economic growth. — P.83

John Kay, English inventor of the “flying shuttle” in 1733, one of the first significant improvements in the mechanization of weaving, had his house burned down by Luddites in 1753. James Hargreaves, inventors of the “spinning Jenny,” a complementary revolutionary improvement in spinning, got similar treatment. — P.85

The success and failure of specific groups notwithstanding, one lesson is clear; powerful groups often move against economic progress and against the engines of prosperity. Economic growth is not just a process of more and better machines, and more and better educated people, but also a transformative and destabilizing process associated with widespread creative destruction. Growth thus moves forward only if not blocked by the economic losers who anticipate that their economic privileges will be lost and by the political losers who fear that their political power will be eroded. — P.86

In fact, extractive political and economic institutions create a general tendency for infighting, because they lead to the concentration of wealth and power in the hands of a narrow elite. — P.95

There should be no presumption that any critical juncture will lead to a successful political revolution or to change for the better. History is full of examples of revolutions and radical movements replacing one tyranny with another… — P.111

As late as 1977, a leading academic textbook by an English economist argued that Soviet-style economies were superior to capitalist ones in terms of economic growth, providing full employment, and price stability and even in producing people with altruistic motivation. — P.127

Since its inception, the Communist Party had used not just carrots but also sticks, big sticks, to get its way. Productivity in the economy was no different. A whole set of laws created criminal offenses for workers who were perceived to be shirking. In June 1940, for example, a law made absenteeism, defined as any twenty minutes unauthorized absence or even idling on the job, a criminal offense that could be punished by six months’ hard labor and a 25 percent cut in pay. All sorts of similar punishments were introduced, and were implemented with astonishing frequency. Between 1940 and 1955, 36 million people, about one-third of the adult population, were found guilty of such offenses. Of these, 15 million were sent to prison and 250,000 were shot. In any year, there would be 1 million adults in prison for labor violations; this is not to mention the 2.5 million people Stalin exiled to the gulags of Siberia. Still, it didn’t work. — P.131

The growth generated from extractive institutions is very different in nature from growth created under inclusive institutions, however. Most important, it is not sustainable. By their very nature, extractive institutions do not foster creative destruction and generate at best only a limited amount of technological progress. The growth they engender only lasts for so long. The Soviet experiences gives a vivid illustration of this limit. Soviet Russia generated rapid growth as it caught up rapidly with some of the advanced technologies in the world, and resources were allocated out of the highly inefficient agriculture sector and into industry. But ultimately the incentives faced in every sector, from agriculture to industry, could not stimulate technological prowess. — P.150

We will see in this chapter that, in contrast with what one would expect from the geography or culture theories, England where the decisive step toward inclusive institutions would take place in the seventeenth century, was a backwater… — P.157

As Rome declined, Mediterranean trade collapsed, and some scholars have even argued that it did not return to its Roman height until the nineteenth century. — P.170

As we will see many times in this book, economies based on the repression of labor and systems such as slavery and serfdom are notoriously non-innovative. This is true from the ancient world to the modern era. — P.172

Arkwright’s innovations were complemented by Hargreave’s invention in 1764 of the spinning jenny, which was further developed by Samuel Crompton in 1779 into the “mule” and later by Richard Roberts into the “self acting mule.” The effects of these innovations were truly revolutionary: Earlier in the century it took 50,000 hours for hand spinners to spin one hundred pounds of cotton. Arkwright’s water frame could do it in 300 hours, and the self-acting mule in 135. — P.204

The Industrial Revolution created a transformative critical juncture for the whole world during the nineteenth century and beyond: those societies that allowed and incentivized their citizens to invest in new technologies could grow rapidly. But many around the world failed to do so — or explicitly chose not to do so. — P.243

In the United States, southern slavery was often referred to as the “peculiar institution.” But historically, as the great classical scholar Moses Finlay pointed out, slavery was anything but peculiar, it was present in almost every society. It was, as we saw earlier, endemic in Ancient Rome and in Africa, long a source of slaves for Europe, though not the only one. — P.251

After repeated failures, in 1807 the abolitionists persuaded the British Parliament to pass a bill making the slave trade illegal. The United States followed with a similar measure the next year. The British government went further, though: it actively sought to implement this measure by stationing naval squadrons in the Atlantic to try to stamp out the slave trade. Though it took some time for these measures to be truly effective, and it was not until 1834 that slavery itself was abolished in the British Empire, the days of the Atlantic slave trade, by far the largest part of the trade, were numbered. — P.255

Though accurate figures are hard to come by, a number of existing accounts written by travelers and merchants during this time suggest in the African kingdoms of Asante and Dahomey and in the Yoruba city-states well over half of the population were slaves. More accurate data exist from early French colonial records for the western Sudan, a large swath of western Africa, stretching from Senegal, via Mali and Burkina Faso, to Niger and Chad. In this region 30 percent of the population was enslaved in 1900. — P.257

Liberia, just south of Sierra Leone, was likewise founded for freed American slaves in the 1840s. Yet there, too, slavery lingered into the twentieth century; as late as the 1960s, it was estimated that one-quarter of the labor force were coerced, living and working in conditions close to slavery. — P.258

With a few exceptions, the rich countries of today are those that embarked on the process of industrialization and technological change starting in the nineteenth century, and the poor ones are those that did not. — P.301

Nations fail today because their extractive economic institutions do not create the incentives needed for people to save, invest, and innovate. — P.372

Even if Chinese economic institutions are incomparably more inclusive today than three decades ago, the Chinese experience is an example of growth under extractive political institutions. Despite the recent emphasis in China on innovation and technology, Chinese growth is based on the adoption of existing technologies, not creative destruction. An important aspect of this is that property rights are not entirely secure in China. — P.439

Zimbabwe’s president Mugabe decided to heed international advice; he declared the Zimbabwean central bank independent in 1995. Before this, the inflation rate in Zimbabwe was hovering around 20 percent. By 2002 it had reached 140 percent; by 2003, almost 600 percent; by 2007, 66,000 percent; and by 2008, 230 million percent! — P.448

The idea that rich Western countries should provide large amounts of “developmental aid” in order to solve the problem of poverty in sub-Saharan Africa, the Caribbean, Central America, and South Asia is based on an incorrect understanding of what causes poverty. Countries such as Afghanistan are poor because of their extractive institutions — which result in lack of property rights, law and order, or well functioning legal systems and the stifling dominance of national, and, more often local elites over political and economic life. The same institutional problems mean that foreign aid will be ineffective, as it will be plundered and it is unlikely to be delivered where it is supposed to go. In the worst-case scenario, it will prop up the regimes that are at the very root of the problems of those societies. — P.452-453

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