Book Report: Why Nations Fail: The Origins of Power, Prosperity, and Poverty

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SUMMARY
Geographically, Nogales in Arizona, USA, and Nogales in Sonoma, Mexico are in the same location. You would think both cities would be the same if they also share history and demographics. Yet, Nogales, AZ, is prosperous and Mexican Nogales is the opposite. Is it because the United States can provide social services such as transportation, health care, and education? Or is it because Nogales, Sonoma, is corrupt and has a high rate of crime? Daron Acemoglu and James A. Robinson, authors of ‘Why Nations Fail’, argue that it is because the Unite States have inclusive institutions and Mexico has extractive ones. If inclusive policies generate prosperity, it would make sense to think that all nations should have such policies. Historically, when the Spaniards came to South America, they enriched themselves at others’ expenses. Impoverishing and enslaving locals, leaders and governments changed through time, but not the policies therefore it did not encourage people to work hard enough to get out of poverty, fearing that the government could seize everything at any moment. In the United States, inclusive policies were developed as colonists were gradually given rights and incentives to work.
Acemoglu and Robinson came up with three different theories that could explain world inequality, but they do not in reality. The first is the geography hypothesis where some claim that certain areas in the world have more natural resources or more adequate land to grow crops. If we go back to the first example of the book, obviously this theory does not work since both Nogales are in the same geographic location. The second theory, the culture hypothesis, is about how different demographics or cultures may lack in work ethics or suffer from ...

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...the United Sates were not welcoming British convicts anymore. Hence, with Africa out of the question “because it was unacceptable to send even convicts to the “white man’s graveyard”” (Acemoglu & Robinson 274), they sent them to Australia. The Cables, a married convict couple, on board of the Alexander, decided to sue a ship captain for theft. The couple could not do much according to English laws, but these laws did not apply in Australia and the Cables won their case. Unknown at the time, this would lead Australia and Britain down two different paths in history. Facing different conflicts, Australia did not need a Glorious Revolution and did not have to overthrow any absolutist ruler to be on the path towards inclusive institutions. Australia did take advantage of different opportunities, such as the Industrial Revolution, to strive and become a prosperous nation.

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