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Book Reviews | Why Some Countries Are Poor and Others Are Rich: A Review of the Book That Won the Nobel Prize in Economics
"Why are some countries poor and others rich?" A review of the book for which the author received the Nobel Prize in Economics
The Nobel Prize in Economics was awarded to three American scientists (Darren Asmogl, Simon Johnson and James Robinson) who studied differences in wealth between countries. The importance of state institutions for the well-being of each country: I read a book on these ideas a few years ago and wrote a detailed review. Let's go back one more time.
This book is a vast journey through world history, aiming to understand why some countries became developed nations while others went down the wrong path and remain mired in poverty and conflict.
The book's greatest strength is that it examines dozens of countries on all continents and at different periods of development. It makes for fascinating reading.
The authors are American economists Daron Acemoglu and James Robinson. They argue that differences in geography, people's thinking, race, culture or religious views are secondary factors in economic and social development.
The main influence on development is exerted by the economic and political institutions (inclusive or extractive) that prevail in the country.
👉 Inclusiveness – guarantees property rights, creates a level playing field and attracts investment in new technologies and knowledge, which contributes to further economic growth.
👉 Extraction is the taking of resources from the many for the benefit of the few, without providing property rights or incentives for economic activity. This implies an exploitative political system that concentrates power in the hands of the few.
The authors try to explain why inclusive institutions emerge in some countries of the world and not in others.
A striking example is the split between the United States and Mexico in the 19th century. In the same year that the Industrial Revolution took place in the United States, Mexico began to become poor due to political upheavals: revolutions and endless changes of rulers. The economy did not develop and was monopolized.
✔️ Patent system. Protecting the rights to inventions allowed authors to sell their patents or develop a business. A striking example is Thomas Edison, who received 1,093 patents in the United States and 1,500 patents in other countries.
✔️ In conditions of fierce competition, a financial market has emerged that provides access to loans at significantly lower interest rates.
Although countries can grow very quickly under extractive institutions, the authors argue that there are natural limits to the growth of extractive activity.
“Until he does, such growth may leave a huge impression on his contemporaries. Many people in the Soviet Union (and many others elsewhere) were impressed by the Soviet economic growth from the 1920s to the 1960s and even the 1970s, and are now amazed by the remarkable growth of the Chinese economy. But Communist China is another example of a country that grows rapidly under exploitative systems but cannot sustain that growth until it undertakes fundamental political reforms and builds inclusive political systems.”
Throughout history, innovation has not been easy. We can find many examples of how authorities in the imperial period feared the political consequences of “creative destruction,” that is, the introduction of innovations that could undermine the existing way of life.
Our country is a particularly striking example of the postponement of such changes. Let us recall how serfdom was later abolished and reformed, which stimulated industrial development in the 19th century.
Why did the Industrial Revolution start in England and achieve its greatest success?
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