"Why nations fail" is a book written by Turkish American professor Daron Acemoglu and British economist James Robinson. This book is one of the best books to understand global politics, the economies of the nations, and why they suffer or prosper.
The first query that popped up is why some nations fail. And if we have to respond to this question by mere only one statement, we will say "Most common reason why nations fail today is because of the presence of extractive institutions".
So what are extractive institutions?
Extractive institutions are the ones that permit the elite to rule over and exploit others, extracting wealth and resources from those who are non-elite.
Extractive institutions generate limited prosperity while at the same time distributing it into the hands of a small elite. For this growth to happen, there must be political centralization. Consider Haiti, Afghanistan, and Nepal as poor instances of countries that lacked political centralization. Without a centralized state to provide order and enforce rules and property rights, inclusive institutions don't emerge. Congo is poor because of its extractive institution. Zimbabwe is poor because of its extractive institution. Same reason for north Korea and Mexico. Ottoman institutions were extractive, which is why they subsequently started to quiver.
On the other hand, we have inclusive institutions as we have in the US, UK, and France. People are given equal opportunities in every walk of life. They are given every right. They have all the basic facilities like health, education, and sanitation. They have the freedom to choose their profession, education, and leader. They elect their leader and when the leader doesn't perform, they topple them. Leaders are accountable. There is law and order. Elites don't monopolize things and they don't exploit or dominate or extract the wealth of non-elites.
To better comprehend why certain countries are impoverished and others are rich, Take the example of Nogales, Arizona USA, and Nogales, senora Mexico. There is a hell of a difference. Nogales Arizona, where people have access to the economic institution. They can choose their occupation freely. They can invest in the best technology. They have access to political institutions. Nogales senora lacked institutions and businessmen hesitate to invest here. The USA has political instability between 1860-65 while Mexico experienced almost non-stop instability for the first fifty years of independence. In Mexico, banks have a significant monopoly and refrain from lending money to their residents ( in 1910 they had only 42 banks), And if they provide loans, they provide them at a higher interest rate. In contrast, the USA has many banks (there were 27864 in 1914), and since there is fierce rivalry among them, interest rates are likely to be low. This help citizen to get loans at a lower interest rate to launch their business. Talking about their leadership, USA leaders uphold the constitution. They don't use force to get into power and nor did they use force to avoid having to relinquish power. Leaders in Mexico, however, could only be overthrown using the same violent means by which they had come to power. This is the reason for their difference in economic prosperity. The same is the condition in South Korea and North Korea. World inequality is not because of geographic, cultural, or ignorance-based theories. These are just fallacies according to both writers.
So, how did countries like the United States, the United Kingdom, and France create inclusive institutions? And how long does it takes to build these inclusive institutions?
The French Revolution aided France's exit from extractive institutions. The French Revolution also aided in the convergence of Western European institutions with those of England, while Eastern Europe diverged farther
The USA also established the framework for its inclusive institutions early on. In 1776, when they were a British colony, and the Britisher increased taxation,they battled against the British for equal rights. When Abraham Lincoln was president in 1865, the United States struggled once more time to abolish slavery and grant all people without exception equal rights and opportunity.
If we talk about England, There was a transition from extractive Economic institutions to inclusive institutions. England becomes more and more inclusive after two events. English civil war(1642-51), Glorious revolution (1688).Monopolies were eliminated, and arbitrary taxation was stopped. The English government aided in infrastructural development supported domestic industry and promoted trade. England built its inclusive institutions in this way.
But this had a disadvantage too. World inequality also increase with the industrial revolution because only some parts of the world adopted innovations and new technologies while other remained in poverty.
The prerequisite factor is poor countries are poor because those who have power make choices that create poverty. They get it wrong not by mistake or ignorance but on purpose.
Another pertinent question can be, so is there no prosperity under extractive institutions?That's not true either. A little economic development is conceivable under extractive institutions, but that is unimpressive, the Soviet Union or the later Roman Empire, for instance
China, however, stands out in this regard. It is an exception. It has an extractive political system but an inclusive economic and industrial system within respective institutions. That is why it is prosperous despite having an extractive political system.
In the case of Pakistan, we have an extractive institution. we are subjected to a small elite rule who are ruling over us and sucking the juice from our bones and making us weak . Inclusive policies for security, health, education, economy, and politics are compulsory for Pakistan to survive in the new world order and the game of international affairs.
In a nutshell, countries with inclusive institutions tend to be wealthy, whereas those with extractive institutions tend to be underdeveloped. Inclusive governments and institutions mean plenty, progress prosperity, growth, and sustained development; extractive governments and institutions mean deprivation, privation, stasis, and stagnation over the centuries.