The Great Divergence Of Wealth Among Nations In The Nineteenth Century

Extractive and Inclusive Institution

The Great Divergence refers to the divergence of wealth amongst nations in the nineteenth century. For a then-unknown reason, “Western Europe and parts of North America had become fabulously wealthy. Almost everywhere else was horribly poor” (What Was, 1). Popular explanations for this phenomena are outlined in Acemoglu and Robin’s writing in which they explain the geography, culture, and ignorance hypotheses, then discount each one. What the authors then come to is their assertion that inclusive institutions will always be more prosperous than their extractive counterparts. According to Acemoglu and Robinson, development is less likely under extractive intuition than inclusive institution; this is

In North Korea, where extractive institution is implemented, the people “grow up in poverty, without entrepreneurial initiative, creativity, or adequate education to prepare them for skilled work” (Acemoglu and Robinson). As stated by Acemoglu and Robinson, education received in North Korea is illegitimate, as books and computers are scarce, and the education only exists to elevate officials. Additionally, the North Korean market is exclusive, as there is no property ownership, or venues to start a business. “Lack of private property meant that few people had incentives to invest or to exert effort to increase or even maintain productivity” (Acemoglu and Robinson). This leads to failure to industrialize further than their current state because people have no incentive to work hard and no venue to create new technologies and advance society. These people know that no matter what they do they will not be able to buy what they need or want; “they are even unsure about what kind of human rights they will have” (Acemoglu and Robinson). In an environment that does not foster creativity, allow for the beginning of new buisnesses, or give incentive for education or creation, the country’s economy will become

This can be seen in South Korea and the United States, countries in which participation in economic activities is encouraged as well as placement in jobs that most greatly utilize the talents and skills that a given person has. People who live in a state with inclusive institution have the ability to choose. In South Korea, for example, people have the opportunity to “obtain a good education, and face incentives that encourage them to exert effort and excel in their chosen vocation” (Acemoglu and Robinson). Inclusive institutions, as stated in recitation on October 23, “allow people to optimize their talents or skills and make the choices they want to make” (Recitation, October 23). This type of environment promotes innovation, economic activity, and overall prosperity for a country, in contrast to extractive institutions which do