Why some nations become wealthy and powerful, while others remain stuck in poverty

March 26, 2012

Roman ruins in modern Rome (credit: Zuffe/Wikimedia Commons)

Why do some nations, such as the United States, become wealthy and powerful, while others remain stuck in poverty? And why do some of those powers, from ancient Rome to the modern Soviet Union, expand and then collapse?

Politics makes the difference, say economists Daron Acemoglu of MIT and James Robinson of Harvard University in their new book, Why Nations Fail. Countries that have what they call “inclusive” political governments — those extending political and property rights as broadly as possible, while enforcing laws and providing some public infrastructure — experience the greatest growth over the long run.

By contrast, Acemoglu and Robinson assert, countries with “extractive” political systems — in which power is wielded by a small elite — either fail to grow broadly or wither away after short bursts of economic expansion.

As Acemoglu and Robinson see it, the “turning point” in world economic history was England’s “Glorious Revolution” of the late 1600s, the key moment in a longer-term process that expanded the political and property rights (including patent protections) available to people. Plenty of innovators existed before then, but had not been rewarded for their efforts; by the late 1700s, England had embarked on the largest sustained period of economic growth since the Neolithic age.