Reviewed Date: September 25th, 2021
It is always bewildering to think about why some nations are poor while some are rich. On the surface, we can say some nations are poor because of wrecked politicians, corruption, and not using resources efficiently. But much of the inequality in the world dates back to the 18th century, the rise of industries.
200 years ago, there were many governments, empires, authoritarian regimes, and colonizations. As the Industrial Revolution happened, many nations welcomed innovations and changes in systems. While others refused technological advances and continued to practice their traditions. Later they would know that was a grave mistake.
If we think about what made nations prosper, two aspects float up. Inclusive Economic Institutions and Inclusive Political Institutions. The former encourages people to do economic activities by letting them use their talents and skills. Not only that, but it also secures private property (patents for ideas), features unbiased law, and provides a common ground where people can exchange and contract.
The reason why economic institutions need to be inclusive is they foster economic activity, productive growth, and economic prosperity. Speaking of Inclusive Political institutions, rather than power in the hands of a few people, have power broadly distributed among society. Elections are pluralistic. In this system, it is difficult to establish extractive economic activities.
If a nation wants to prosper, it has to have both institutions. The economic system should provide incentives for economic activities and also basic services like roads, transportation, drinking water, and education. More than anything, a nation has to adapt to new technologies rather than refusing to change. The political system should be open to taking criticism.
These are the institutions that made some nations wealthy. Though there are organizations trying to help people in Africa, most of them are failing due to a lack of coherent political stabilization and no incentives for people to work. There are some nations that fought foreign invasion in the context of authoritarianism; after struggling for freedom, they became authoritarian regimes (example: Cuba).
I highly recommend this book, as it covers the history of the wealth and poverty of nations. I didn’t know the fact that Australians are prisoners sent by the British until I read this book.
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