Why Nations Fail

What is the book about as a whole?

'Why Nations Fail' dives into history and analyses a lot of nations to provide a theory on economical growth or lack thereof.

What is being said in detail, and how?

The book ties economical growth to political institutions. It makes the following notable claims:

## The first prerequisite to growth is political centralisation

This point is a bit more obvious so the authors don't spend as much time on it but they do provide examples of nations without centralisation and how 'failed' they are in comparison. ## Extractive vs inclusive

Extractive is defined as political entities are set up in a way to extract resources from the nation and subvert economical activity. Inclusive is defined as political entities are set up in a way to enable nations to have agency in economical activity. The book argues that the two are polar opposites and are playing a key role in sustained economical growth.

## political and economical inclusion/extraction are coupled

The book makes the claim that it's not sustainable to have extractive political institiution with economic inclusion or vice versa. Economical activity follows the political setup and inclusive economical situation does imply creative destruction that invetibly destroys the political established order. And economical growth can't be inclusive without the political support for that.

## once a nation goes on inclusive/extractive path, it is (somewhat) self-sustaining

### The extractive vicious cycle - extractive institutions mean a lot of power in concentrated elite - infighting is rampant as the benefit of having political power is great - infighting causes economical instability - there is natural resistance to anything that can destroy the established order - growth is possible but always from the position of catch-up

### The inclusive virtuous cycle - creative destruction means the economical winners are switching hands - there is less power in political elite and less infighting incentive - once on inclusive path, switching to extractive institutions will destroy the economical growth

Is the book true, in whole or part?

The book appears to provide a sound theory. It uses a lot of examples from history and I did learn a lot. There is some nuance - the claim that growth under extractive institutions is limited is not absolute as it is more akin to "eventually" limited so it could take several decades to be proven right, especially for popular counter-examples like today's China or Singapore.

The book does an amazing job at looking through a lot of nations but no book can ever go throgh all of history and of course there are curious counter-examples that the book doesn't explain. Notable one is the oil states of the Arabian peninsula - the book simply states that they are rich because of oil and doesn't expand on extractive/inclusive nuance there.

What of it?

The implications are that nations should make a conscious effort towards more inclusive political institutions. Creative destruction is vital for sustained economical growth but this can't happen without political support. Nations with extractive establishment