Neither culture nor geography can explain gaps between neighboring American and Mexcan cities, they argue, to say nothing of disparities between North and South Korea.
They offer instead a striking diagnosis: some governments get it wrong on purpose. Amid weak and accommodating institutions, there is little to discourage a leader from looting. Such environments channel society’s output towards a parasitic elite, discouraging investment and innovation. Extractive institutions are the historical norm. Inclusive institutions protect individual rights and encourage investment and effort. Where inclusive governments emerge, great wealth follows.
Britain, wellspring of the industrial revolution, is the chief proof of this theory.
—The Economist. “Creating economic wealth: The big why.” Review of Daron Acemoglu and James Robinson’s book Why Nations Fail: The Origins of Power, Prosperity and Poverty (2012).