This week we recommend Why nations fail: The origins of power, prosperity and poverty, by Daron Acemoglu and James A. Robinson
According to Google Maps, there is a distance of only 2.9 kilometers between two towns of the same name: Nogales, in the United States, and Nogales, in Mexico. But between the state of Arizona (United States) and the state of Sonora (Mexico), there is something more than just physical distance and a border-shaped bureaucratic barrier: the eternal north-south divide.
Both cities share a population with a similar sociological profile, a common culture, and geographic characteristics that vary very little from one to the other. However a middle-class American is several times more prosperous economically than the average Mexican. What’s the reason for this disparity?
Professors Daron Acemoglu (Economics at MIT) and James A. Robinson (Political Science at Harvard University) are in no doubt: political institutions are responsible for socio-economic inequalities worldwide.
It can be justified by neither the cultural or geographic hypothesis, nor the theory that points to political leaders. An exhaustive analysis of history allows the authors to sustain their main thesis: the institutional theory. The reason for the decline and poverty of nations lies in their political institutions, which in turn create the economic institutions that sustain their market and society. The authors offer their recipe for success: inclusive institutions and centralized power.
Inevitably, these requirements bring to mind the democratic free-market system of which the United States is the undisputed paradigm. But before we accept this theory as unassailable, it is worth pondering some easily refuted points: are there not inequalities within the United States itself? And how to explain the economic growth and prosperity of noninclusive regimes like today’s China?
The latest joint work by professors Acemoglu and Robinson is definitely recommended reading for a new insight into the dichotomy of the world we live in: Why can the same person live in poverty of one country and in prosperity only a few kilometers away? Why do nations fail?