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

by Daron Acemoğlu

THE FOCUS OF our book is on explaining world inequality and also some of the easily visible broad patterns that nest within it.

The first country to experience sustained economic growth was England—or Great Britain, usually just Britain, as the union of England, Wales, and Scotland after 1707 is known.

Growth emerged slowly in the second half of the eighteenth century as the Industrial Revolution, based on major technological breakthroughs and t...

Industrialization in England was soon followed by industrialization in most of Western Europe and the United States. English prosperity also spread rapidly to Britain’s “settler...

A list of the thirty richest countries today would include them, plus Japan, Singapore, and South Korea. The prosperity of these latter three is in turn part of a broader pattern in which many East Asian nations, including Taiwan...

IN THE NINETEENTH CENTURY, absolutism not so different from that in Africa or Eastern Europe was blocking the path of industrialization in much of Asia.

In China, the state was strongly absolutist, and independent cities, merchants, and industrialists were either nonexistent or much weaker politically.

China was a major naval power and heavily involved in long-distance trade centuries before the Europeans. But it had turned away from the oceans just at the wrong time, when Ming emperors decided in the late fourteenth and early fifteenth centuries that increased long-distance trade and the cr...

In India, institutional drift worked differently and led to the development of a uniquely rigid hereditary caste system that limited the functioning of markets and the allocation of labor across occupations muc...

It also underpinned another strong form of absolutism under...

Most European countries had similar systems in the Middle Ages. Modern Anglo-Saxon surnames such as Baker, Cooper, and Smith are direct descendants of hereditary occupational categories. Bakers baked, coopers made barrels, and smiths forged metals. But these categories were never as rigid as Indian caste dis...

Though Indian merchants did trade throughout the Indian Ocean, and a major textile industry developed, the caste system and Mughal absolutism were serious impediments to the develop...

By the nineteenth century, things were even less hospitable for industrialization as India became an extractive colony of the English. China was never formally colonized by a European power, but after the English successfully defeated the Chinese in the Opium Wars between 1839 and 1842, and then again between 1856 and 1860, C...

As China, India, and others failed to take advantage of commercial and industrial opportunities, Asia, except for Japan, lagged behin...

THE COURSE OF institutional development that Japan charted in the nineteenth century again illustrates the interaction between critical junctures and small ...

Japan, like China, was under absolutist rule. The Tokugawa family took over in 1600 and ruled over a feudal system that also banned international trade. Japan, too, faced a critical juncture created by Western intervention as four U.S. warships, commanded by Matthew C. Perry, entered Edo Bay in July 1853, demanding tra...

But this critical juncture played out very differently in Japan. Despite their proximity and frequent interactions, by the nineteenth century China and Japan...

While Tokugawa rule in Japan was absolutist and extractive, it had only a tenuous hold on the leaders of the other major feudal doma...

Even though there were peasant rebellions and civil strife, absolutism in China was stronger, and the oppositio...

There were no equivalents of the leaders of the other domains in China who could challenge the absolutist rule of the emperor and tra...

This institutional difference, in many ways small relative to the differences separating China and Japan from Western Europe, had decisive consequences during the critical juncture created b...

China continued in its absolutist path after the Opium Wars, while the U.S. threat cemented the opposition to Tokugawa rule in Japan and led to a political revolution, the M...

This Japanese political revolution enabled more inclusive political institutions and much more inclusive economic institutions to develop, and laid the foundations for subsequent rapid Japan...

How Japan reacted to the threat posed by U.S. warships, by starting a process of fundamental institutional transformation, helps us understand another aspect of the lay of the land arou...

South Korea, Taiwan, and finally China achieved breakneck rates of economic growth since the Second World War through a path similar to the one that Japan took. In each of these cases, growth was preceded by historic changes in the countries’ economic institutions—though no...

The logic of how episodes of rapid growth come to an abrupt end and are reversed is also related. In the same way that decisive steps toward inclusive economic institutions can ignite rapid economic growth, a sharp turn away ...

But more often, collapses of rapid growth, such as in Argentina or the Soviet Union, are a consequence of growth under extrac...

As we have seen, this can happen either because of infighting over the spoils of extraction, leading to the collapse of the regime, or because the inherent lack of innovation and creative destruction under e...

IF THE POLITICAL and economic institutions of Latin America over the past five hundred years were shaped by Spanish colonialism, those of the Middle East were shaped by Ottoman colonialism.

In 1453 the Ottomans under Sultan Mehmet II captured Constantinople, making it their capital. During the rest of the century, the Ottomans conquered large parts of the Balkans and most of the rest of Turkey. In the first half of the sixteenth century, Ottoman rule spread throughout the Middle East and North Africa.

By 1566, at the death of Sultan Süleyman I, known as the Magnificent, their empire stretched from Tunisia in the East, through Egypt, all the way to Mecca in the Arabian...

The Ottoman state was absolutist, with the sultan accountable to few and sharing power with none. The economic institutions the Ottomans imposed were highly extractive. There was no private property in land, which all formally belonged to the state. Taxation of land and agricultural outp...

However, the Ottoman state did not dominate the Middle East in the same way that it could dominate its heartland in Anatolia or even to the extent that the Spanish state dominated Latin American society. The Ottoman state was continuously challenged by Bedouins and other tribal powers in the Arabian Peninsula. It lacked not only the ability to impose a s...

So it “farmed” them out to individuals, selling off the right to others to collect taxes in whatever way they could. These tax farmers became autonomous and powerful. Rates of taxation in the Middle Eastern territories were very high, v...