Book Review
Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James A. Robinson1 offers clear, practical lessons for readers interested in economic history, political science, and international relations; I found it especially relevant as the global landscape drifts further away from the liberal international order. I’m fearful that one day this book will be viewed as an artifact of the post–Cold War years and a bygone Pax Americana. Even in 2012, Acemoglu and Robinson walked a fine ideological line: by praising liberal institutions, private property and free markets, they risked provoking an intellectual left convinced that capitalism and imperialism explain every injustice, even as they confronted—and dispelled—celebratory narratives of Western predominance rooted in hyper nationalism and cultural essentialism.
What explains the disparities of wealth, political stability, and societal accord between countries? Why Nations Fail argues a country’s success hinges on the quality of its institutions–the political and economic systems that establish rules and define incentives governing human action. Institution is used broadly but never specifically defined. Instead, it’s explained functionally, as “rules created and enforced by the state and the citizens collectively”2 through political bodies, government agencies, laws and regulations, business entities, and industry associations. Acemoglu and Robinson consider rival theories to explain inequality among counties, including those based on geography, culture, or levels of education and sophistication among a populace. Institutional theory offers the best explanation for divergences between nations.
The analytical approach is one of the book’s main strengths. Rather than simply asserting and defending a hypothesis for national success, the authors take an inductive approach using historical evidence, comparative political analysis, and national case studies. Their opening chapter’s contrast between Nogales, Arizona, and Nogales, Sonora illustrates this method: despite sharing the same geographical space, the two communities operate under vastly different institutional frameworks, leading to divergent outcomes. Institutional theory emerges as a superior explanation through multiple examples: the Industrial Revolution’s origins in England; the disparate outcomes between English colonies and Spanish and Portuguese colonies in the Americas; and the East-West divergence in Europe.
Acemoglu and Robinson identify durable, inclusive institutions as the linchpin of long-term national success. However, their argument is neither monocausal nor deterministic. Institutional development is shaped by historical contingencies, societal structures, cultural imperatives, and economic conditions. They describe “critical junctures” where historical circumstances align, affecting incumbent institutions and forcing changes that, in some cases, begin “a virtuous circle associated with inclusive economic and political institutions.” Definitionally, critical junctures are turning points in history, “major events that disrupt the existing political and economic balance in one or many societies” such as the Black Death, the development of Atlantic commerce, and the First Industrial Revolution.3
Moreover, once in place institutions tend to endure—for better or worse. Consider sixteenth-century Spain, whose imperial holdings seemed to promise Habsburg hegemony in Western Europe. The monarch concentrated power in a strong central government and pursued mercantilist policies. Over time, Spanish royalty resisted power sharing and avoided participatory governance with nobles, clergy, and the emerging urban class in the Cortes. In contrast, the relatively weak British monarchy needed Parliament’s approval of taxes and trade. Unable to exert total control, the British crown partnered with entrepreneurs and adventurers to trade and settle overseas, incentivizing risk taking and paving the way for economic innovation. Spain’s centralization produced command-and-control institutions, while Britain’s flexible, rule-based framework nurtured a more open, freewheeling economy. The British Empire outlasted the Spanish Empire, but more importantly, by the late nineteenth century England was far richer and more technologically advanced than Spain.
I think the book is effective in showing how inclusive political and economic institutions serve as cornerstones of national success. Following the Glorious Revolution, England’s institutional development was shaped by Atlantic settlement and commerce, setting the stage for the Industrial Revolution. The countries of the Anglosphere alongside the Dutch Republic managed to transform institutions to favor further inclusivity. The key component of this virtuous circle is the rule of law, which “opens the door for greater participation in the political process” and enforces equality “before the law but also in the political system.”4 Meanwhile, many European and Asian autocratic governments clung to command-and-control economies, typically enforcing institutional governance that was extractive in nature—aimed at benefiting monarchs, nobles, and the narrow elite class which served them. Autocratic governments resisted change and often fought against the technological adaptations of the Industrial Revolution. However, the European overseas empires that emerged alongside global commerce often replaced indigenous extractive systems with colonial ones. This not only truncated development in what would be called the “Global South,” but also allowed local elites to keep running politically repressive and economically extractive institutions post-independence.
The book is excellent in its nuanced analysis of political centralization. This challenges some of my own deeply held beliefs. I prefer to think superior outcomes come from maximum liberty, voluntary communities, and spontaneous order. Nevertheless, Acemoglu and Robinson make a persuasive case for the need for a certain degree of political centralization in order to industrialize and open up technological innovation. On the other hand, historically, too much centralization is most often accompanied by intransigent, extractive institutions. There are, however, notable autocracies that transformed into more politically inclusive states (France and Japan, and more recently South Korea and Singapore). Worse still, there’s a tendency for inclusive institutions to break down over time. Here the authors draw on sociologist Robert Michels and his “iron law of oligarchy” which posits that large, complex political systems inevitably concentrate power in the hands of a small ruling elite. This leads to a vicious circle of successive regimes fighting for over control of extractive institutions (e.g., Sierra Leone and Ethiopia).
Whether intended or not, Why Nations Fail offers a brilliant defense for liberalism. It pairs nicely with How the World Became Rich: The Historical Origins of Economic Growth by Mark Koyama and Jared Rubin. Much of How the World Became Rich focuses on the institutional theory advanced by Acemoglu and Robinson. Furthermore, I see distinct Hayekian overtones: centralization is limited by the knowledge problem; institutions that allow for individual freedom and rule of law will benefit by spontaneous order to solve complex problems; and institutions evolve by trial and error. Despite its liberal leanings, Why Nations Fail reinforces the core conservative message of thinkers like Edmund Burke and G.K. Chesterton about preserving institutions for cultural and moral continuity, as well as skepticism toward grand, revolutionary projects.
Why Nations Fail is for serious intellectuals grappling with what might be humanity’s most vexing questions. A stable, peaceful, and prosperous country is its own reward. A critical mass of such countries, coexisting in trade, commerce, and cultural exchange, constitutes civilization. More importantly, they provide a world civilization with a future—one that can adapt to challenges, advance technologically, and improve its citizens’ socioeconomic well-being. So far, liberal democratic capitalism has offered the only feasible path to this future. Through individual liberty, private property, free (if not entirely unfettered) markets, and a degree of centralized state governance, liberal democratic institutions have advanced humanity in ways never seen before. This marks the proverbial high-water mark, but the fact is liberal democratic capitalism is hard to sustain. The West has evaded backsliding and catastrophic failure–so far. If there is one lesson people should remember from Why Nations Fail, it’s the power of historical contingency. That’s why I think it’s reckless to slip into an ideological mindset or utilize bombastic, attention-craving rhetoric. This is an inconvenient truth for the Very Online, whether they be right wing MAGA nationalists or social justice zealots of the far left. Disrupting Western institutions merely for change’s sake is tantamount to societal suicide. After reading Why Nations Fail, one will have a deeper appreciation of the need to preserve liberal democratic institutions and be even more dismayed by the prevalent nihilism of the perpetually disgruntled that Martin Gurri describes in The Revolt of the Public.