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

C
HAPTER
 3 : T
HE
 M
AKING OF
 P
ROSPERITY AND
 P
OVERTY
The reconstruction of the meeting between Hwang Pyŏng-Wŏn and
his brother is taken from James A. Foley’s interview of Hwang
transcribed in Foley (2003), pp. 197–203.
The notion of extractive institutions originates from Acemoglu,
Johnson, and Robinson (2001). The terminology of inclusive
institutions was suggested to us by Tim Besley. The terminology of
economic losers and the distinction between them and political losers
comes from Acemoglu and Robinson (2000b). The data on Barbados
comes from Dunn (1969). Our treatment of the Soviet economy relies
on Nove (1992) and Davies (1998). Allen (2003) provides an
alternative and more positive interpretation of Soviet economic
history.
In the social science literature there is a great deal of research
related to our theory and argument. See Acemoglu, Johnson, and
Robinson (2005b) for an overview of this literature and our
contribution to it. The institutional view of comparative development
builds on a number of important works. Particularly notable is the
work of North; see North and Thomas (1973), North (1982), North
and Weingast (1989), and North, Wallis, and Weingast (2009). Olson
(1984) also provided a very influential account of the political
economy of economic growth. Mokyr (1990) is a fundamental book
that links economic losers to comparative technological change in
world history. The notion of economic losers is very widespread in
social science as an explanation for why efficient institutional and
policy outcomes do not occur. Our interpretation, which builds on
Robinson (1998) and Acemoglu and Robinson (2000b, 2006b), differs
by emphasizing the idea that the most important barrier to the
emergence of inclusive institutions is elites’ fear that they will lose
their political power. Jones (2003) provides a rich comparative
history emphasizing similar themes, and Engerman and Sokoloff’s
(1997) important work on the Americas also emphasizes these ideas.
A seminal political economy interpretation of African

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underdevelopment was developed by Bates (1981, 1983, 1989),
whose work heavily influenced ours. Seminal studies by Dalton
(1965) and Killick (1978) emphasize the role of politics in African
development and particularly how the fear of losing political power
influences economic policy. The notion of political losers was
previously implicit in other theoretical work in political economy, for
instance, Besley and Coate (1998) and Bourguignon and Verdier
(2000). The role of political centralization and state institutions in
development has been most heavily emphasized by historical
sociologists following the work by Max Weber. Notable is the work of
Mann (1986, 1993), Migdal (1988), and Evans (1995). In Africa,
work on the connection between the state and development is
emphasized by Herbst (2000) and Bates (2001). Economists have
recently begun to contribute to this literature; for example, Acemoglu
(2005) and Besley and Persson (2011). Finally, Johnson (1982),
Haggard (1990), Wade (1990), and Amsden (1992) emphasized how
it was the particular political economy of East Asian nations that
allowed them to be so economically successful. Finley (1965) made a
seminal argument that slavery was responsible for the lack of
technological dynamism in the classical world.
The idea that growth under extractive institutions is possible but is
also likely to run out of steam is emphasized in Acemoglu (2008).

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