You may wonder why Cambodia, among other poor countries, fail to develop. Why we are poor and other are rich? You have answers, of course. You may point to the fact that we had wars, thus no human capital i.e. no knowledgeable persons who know how to develop the country. Some would point to the fact that we are born lazy, i.e. our culture does not induce hard working like Vietnamese culture or Japanese culture. Of course, very few would point to the fact that Cambodia does not have natural resource as we have too many including the sea. So what make us poor? Some would argue that we do not have a good leader. How to have a good leader then? Can another good leaders come and continue to be good after a good leader is dead of old age? In this book, Daron Acemoglu & James Robinson deal comprehensively with these theories.
Summary
A country fails to grow not because it does not have natural resources. Case study, Japan.
A country fails to develop not because of culture. Case study South Korea versus North Korea.
A country does not grow not because of the lack of human capital. Knowledge can be bought these days. Case study, Japan and other countries (Cambodia as well before the France took over the country) bought Western technology and knowledge and even fought with the West like Japan did against Russia.
A country fails because it does not have an inclusive institution. Rather, it has extractive institution. That is it has a system where growth, or wealth, is extracted to a group of people from another group of people. A typical example is when a country has a government which taxes their citizens (of course every government lives by money from tax) and provide no or little service in return. The government does not protect the property rights of its citizens, for instance.
Conundrums
Theories in this book are mostly in direct contrast to those in The Wealth and Poverty of Nations. If you want to dig deeper into this debate, the latter is a good start. In economics, Acemoglu along with other prominent economists such as Douglas North are categorized as institutional economists. They tend to favor institutions as a cause of growths.
In this book, by emphasizing that institutions, i.e. the systems, make a country rich or poor, the authors do know shed lights on how those systems can be made. If you were the United States who imposed system on Japan after WWII, this book is best for you, except you cannot be one. This book is also best for policy makers of aid organizations such as Jica, USAID, AusAid etc. For politicians, especially opposition politicians in a dictatorship countries this book only brings hopelessness. I suggest another book From Dictatorship to Democracy.
I hope you would read the book, republished in 2012, after this review. My rating is 5/5.
Authors: Daron Acemoglu, James Robinson.
Publisher: Crown Business; 1 edition (March 20, 2012)
Authors: Daron Acemoglu, James Robinson.
Publisher: Crown Business; 1 edition (March 20, 2012)
