Why nations fail

Question 1

One sentence summary

Answer 1

Why Nations Fail dives into the reasons why economic inequality is so common in the world today and identifies that poor decisions of those in political power are the main reason for unfairness rather than culture, geography, climate, or any other factor.

Question 2

What do the authors explain in the book?

Answer 2

The authors explain that the difference between countries actually is a result of economic and political institutions put in place during critical junctures in history.

Question 3

3 lessons from the book

Answer 3

1. The best way to explain the difference in living standards between countries is by looking at their institutional differences.
2. A single event at a critical juncture can make a big difference for a country’s success.
3. It can be really hard to break out of the cycle of poverty, but it is possible.

Question 4

Inclusive economic institution

Answer 4

Inclusive economic institutions pave the way for economic success because they encourage citizens to participate in economic activities. They are strong in economic freedom. EX. US, South Korea

Question 5

Extractive economic institution

Answer 5

Extractive economic institutions receive income from one group in society for the benefit of another group. EX.colonial Latin America, North Korea

Question 6

Inclusive political institution

Answer 6

An inclusive political institution has:
- Pluralism.
↳ This means every group in society is being represented politically.
- Centralized power
↳ Ensure that the rule of law is being upheld and groups don’t overrun one another.

An inclusive political institution is best because all groups are represented, which doesn’t allow for extractive economic policies.

Question 7

Extractive political institution

Answer 7

An extractive polotical institution does not have pluralism or centralization

Question 8

Institutional drift

Answer 8

Institutional drift is the result of this difference that led to divergent paths. It’s where two similar regions grow in different directions.

Question 9

Critical juncture in history

Answer 9

An event that is influential enough to overturn the sociopolitical balance of a nation or continent.

Inclusive and extractive institutions can grow from critical junctures. The cycle can be broken.

Critical junctures can mean institutional drift that creates drastically different economic landscapes between once-similar areas.

Question 10

Explain how the black death was a critical juncture in history

Answer 10

Before:
the economic and political systems in Europe were extremely extractive

After:
For Western Europe, it spelled the end of extractive feudalism. But in the east, it grew worse. Example of institutional drift.

Question 11

What can countries do to fix the extractive institutions they have in place?

Answer 11

1. Make sure we encourage inclusive institutions so these countries can grow their own prosperity
2. Direct foreign aid in a more meaningful way. The groups that are excluded from institutions need to have ways to defy the institutions that are oppressing them

Question 12

Make a reflection about the book

Answer 12

Why Nations Fail will change the way you see the world. I never realized that such simple differences in institutions could mean such drastic differences in standards of living. I think this is an extremely important book that everyone can learn something from, and it helps that it is also an engaging read!