Why Nations Fail | James Robinson | Talks at Google

[elliesaksena]

Full summary with key concepts highlighted:

economic development
innovation + patents
incentives
positive externalities
economic potential
extractive v inclusive economic systems
centralized government + political systems
globalization + trade
quality of life
infrastructure

Technology drives economic development and benefits countries' quality of life. However, some nations are organized in a way that hinders economic development often through Incentives and opportunities. For example, while innovation is good and creates a spillover effect of positive externalities, innovation is disincentivized by monopolies and antitrust laws in certain countries decreasing national economic potential.

This is highlighted by Gambia where extraction is indeed incentivized over an inclusive economy. In Gambia, one has little incentive to go into the business industry because this would intentionally create positive externalities (jobs). Why would one do this when they can simply take all the wealth for themselves? The limited centralized government has much to do with the incentives for this extractive economy. With a weak centralized government, not much funding goes into public goods/services (so fewer positive externalities are created). Now, Gambia has horrible roads which are only worsening. Poor infrastructure and limited funding from a centralized government hinders the trade of ideas and technology, thus hindering economic growth potential.

A Nation must have inclusive economic institutions to bring the economy to its full potential. This is demonstrated through the US patent system created by the founding fathers to incentivize an inclusive economy. With centralized power, the government had the ability to create an equitable patent process that protects innovators and therefore incentivizes innovation, thus emphasizing the desire for an inclusive economy.

However, in order to create an inclusive economy, one needs an inclusive political system. Despite the Zimbabwe people wanting a more inclusive economy, their political system is extractive, and therefore not inclusive. Policies are made on behalf of what would give the politicians more money instead of serving the people.

The same thing happened in China after the Cultural revolution. The government pushed for a more inclusive economy, yet the politicians maintained an extractive agenda. In fact, even now, the country is divided between “individuals” and “the elite”. The Communist government restricts the flow of ideas, therefore restricting innovation. For example, if journalists are censored, change (instability) will be less likely to occur. Throughout history, many countries such as China intentionally hindered economic potential and trade, instead valuing national stability and tradition. Although ancient China was thought to be super ahead of the game, it was only due to the free flow of ideas into the country at the time. This has changed in the last 100 years or so.

Some dictator countries did economically well, not because of their specific government, but despite it. For example, Russia and Singapore were just lucky enough to have massive reserves of natural resources. Overall, a democracy serves in the best interest of the people through ideological globalization and an inclusive economy. These factors boost economic potential and a nation's quality of life.

So what's the key to a more inclusive economy? The talk said representative politicians can create policies reflecting the people’s values, but I disagree. The cultural shift comes first in my mind. Because why would I elect a politician who doesn't reflect my views? Actually, this seems more complicated. Not sure.

In the Q&A, the author mentions a Botswana success story which I want to dig into more. The author describes how Botswana was able to maintain a centralized government even through being colonized by the British. Bozwana skillfully kept the best of both the traditional Botswana system and the British political system, merging it into one inclusive economic system. Huh. the talk was from 2015 so I wonder how that's working out now.

[hendalagedonsumanaratne]

Thanks for the presentation. In Sri Lanka during the colonial period before independence, the country was under total authority of the British colonial masters. Legality was upheld and free entrepreneurships were at their best. So country was second only to Japan in Asia (53 countries) before the independence. With its freedom, got the democracy and local politicians destroyed the state structure to manipulate all affairs on their whims and fancies. Now legality at its worst. Politically affiliated members to the ruling party can act disregarding the law. Favoritism is rampart. Now the country is in a real mess. Apparently two basic criteria for success are legality and free enterprises. So, democracy seems to be immaterial, I feel. Democracy without legality is worse than dictatorships, if uphold the legality. Thank you!

[theodoroseidler]

Very good book. Changed my view in many subjects and areas. I'd like you to dissect what those institutions are and what specific purposes they must fulfil.

[BramowitchIII]

It's interesting to point out that South Africa's current corruption points to extractive institutions: it's not about the colour of people's skin. It's about incentives and checks & balances to power.

[ngaismedia]

My new friends, the scholars using their Creation's gift to face the truth, study history, produce knowledge, share with the world and make this place more informed so that people can make better, prior and informed decisions. Acemoglu, Robinson and Johnson are my new friends in this journey of history and global economics...

[pututp]

It is awesome to find that Econometrician like Acemoglu wrote a book of development economics without single Greek letter.

[lkrnpk]

One thing that can be noted is democracy itself does not grant a country success. What you need more than political freedom is economic freedom and clear rules, rule of law, good judicial system etc. Even an authoritarian country can achieve good results if those who want to invest and start a business know the rules and they know that the rules will not change and their investments will not be taken away by some populist who comes to power. That is why China can be successful or Singapore in the first decades of its existence. Of course it is hard to get an authoritarian ruler (group of rulers) who understands this, who also promotes and works to increase level of education in the country, battles tribalism (if it exists in the country), permits some pluralism of opinions just to know what the people want and what are the possible futures etc., but sometimes it is also hard to do it in democracy like India, where there are a lot of various groups each having their own interests... You can be a rather decent democracy by region standards, like India or Ukraine, but it does not guarantee economic success if corruption is rampant and politicians do not care about state interests

[CaptainEggbert]

Lol. "Please welcome me in joining..." Poor guy probably knew he screwed that up the second after he said it.

[ThinkHuman]

very informative and thought provoking speech.

[deepakgehlot]

Summery
Successful contries take advantage of innovation
Successful countries are economic inclusive
Economic inclusion and political inclusion are correlated
You can't have have economic inclusive economy with extractive political institutions

[УлугбекУринов-ьб]

I'm agree with every word that sounds here and in my opinion if "we" have some inclusive institutions now and "we" can to achieve inclusive full institutions in the world

[andreeailiescu]

Would love to see him in conversation with Jared Diamond

[rhalfik]

To me it's simple.
Dictatorship develops good economy if the dictator is good. That;s why auth countries are all over the place, while democraies have slower but steady and predictable development.
An example of how Chinese political system hinders development is recent flooding which was caused by local politicians spending money on luxurious cars rather than on fixing the dams.

[MINDSCAPE_BE]

Ultimately, Acemoglu and Robinson's optimism about the transformative power of institutions is inspiring but perhaps too simplistic in the face of real-world complexity.

[hernanjuri]

Very accurate reference of Chile at. 1:00:36

[hassanrajput]

The economic fate of a nation is determined by their institutions.

[DAWN]

36:32 no kidding. I actually bought an old economics book to see how Soviet Union was shown to be such a successful case

[bemacoulibaly]

31:00-32:45 system of life, goal tell you, your system.

[ozland]

the other Author of the book Daron Acemoglu is a genius.. i highly recommend his speeches ..

[Wilson]

The way he took China as Soviet Union really shows his ignorance on this topic... I guess he got nothing better to explain China as an excursion in his theory...