Q:

Why do nations fail?

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Quick Answer

The 2012 book "Why Nations Fail" by economist Daron Acemoglu and political scientist James A. Robinson posits that nations fail because they lack political and economic institutions necessary for success. Nations cannot succeed without centralized power and inclusive institutions. Other experts, such as Jeffrey Sachs, point out that geographical factors, such as being landlocked, or extreme environmental damage can also be factors in failure.

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Full Answer

Centralized power creates the order that is necessary for growth. Inclusive institutions encourage innovation through open access to opportunity, protection of property rights, and promotion of investments in skills and technology. Nations fail when one or more of these factors are missing. For instance, North and South Korea exist on the same peninsula. However, North Korea is one of the poorest countries on Earth because it has a strong central government but no institutions that encourage growth, whereas South Korea has both a strong government and a society full of economic opportunities. Another example is eastern Europe which, after the fall of communism, developed the institutions that enabled the countries to thrive. Merely passing aid on to struggling countries is not as effective as investing in a functional, open economic infrastructure.

Economist Jeffrey Sachs points out that the view espoused by Acemoglu and Robinson is simplistic, as the lack of an adequate resource base can cause a country with the other necessary prerequisites to fail, and the discovery of abundant resources can have the opposite effect. Additionally, unfavorable geography slows the development of technology, and environmental disasters can have a long-term impact on a nation's productivity.

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