Why Nations Fail

By September 20, 2019Other

In early 1966, armed with a letter of introduction, I went to the Harvard offices of Seymour Martin Lipset, arguably at that time the most distinguished political scientist in the USA, if not the world. His offices were simple but extensive. You passed from one to another until you arrived at the real office. He had more books on his shelves in the other offices than had my first university. The great man was most pleasant, affable and prepared to give me time. It must have been what was inside the letter of introduction, whose contents I did not see. Anyway, he asked what I was planning to do with myself. I had a PhD, had been to Oxford and had now spent some most useful time at the Institute for Social Research at the University of Michigan. Lipset was pretty good at survey research himself.

   ‘So you’re planning to do an Australian version of that stuff, are you?’

   I said modestly that I was.

   He didn’t quite explode. ‘No, no, no! That’s all been done!’ (It hadn’t actually, and I was later to do it). ‘What you need to do is to compare Australia and Argentina. They were both at the same stage in the 19thcentury. Australia has grown and grown. Argentina is a basket case. No one’s done that work, and it’s important!’

   I had never thought of such a project, and had no Spanish except how to ask for beer (for those who need such assistance, ‘podria tomar una cerveza, por favor). A thoroughly thirsty look, raised eyebrows, and the word ‘therevetha, por favor’ will get you a fair way. The Spanish pronunciation gives you ‘th’ for our ‘c’, and the stress is on the second last syllable — vaytha.

   I didn’t in fact do that job, and to the best of my knowledge no-one else has, either. But it is a great question, and it is partly answered in another fascinating book I’ve been reading: Why Nations Fail: the Origins of Power, Prosperity and Poverty, by Acemoglu and Robinson. Oh no, you think, another economists’ bible. But it isn’t. If anything, the authors are political scientists, and their approach is political. Again, this is a long book, but great reading. The general argument I think I know, and knew, but the astonishing detail just filled me with admiration. And the shifts from continent to continent and era to era were no less impressive.

So here is my summary. Some nations succeed, and for a long time. Then slowly, or quickly, something goes wrong. Why? The authors offer three candidate explanations which anyone who is interested in history will have come across. The most popular is the geographic explanation. The successful nations lie in the temperate zone where conditions are just right for agriculture, for animal husbandry and for weather (plenty of rain plus good soils for the most part). You can’t do much in deserts. The authors do a neat job of demolishing that one, though it has a lot going for it. For one thing, the early civilisations were in the torrid zone, and today’s Singapore is hardly temperate.

Culture is the second. Some ‘nations’ just don’t develop a culture that encourages agriculture. They never invent the wheel, for example; they don’t protect and domesticate animals; they get set in hunter-gatherer cultures that work for them. If there are not too many of them, moving from place to place makes good sense; they know where the good food is at the right time. But this strategy keeps birth-rates and population slow, and such ‘nations’ are barely more than tribes. Pre-1788 Australia provides a good example. But other groups in similar situations did learn about domestication, food production and settlements. Why not the indigenous Australians?

Ignorance is the third. Some populations simply don’t ever get it, and continue not to get it. Here there is a mixture of culture and ignorance. The authors point out that similar groups in similar situations do in fact sort it out, and get past ignorance. In those cases what happens then is a growth in wealth for the community.

Who gets the wealth? Ah. The authors distinguish between ‘extractive’ and ’inclusive’ political systems. In the first a small group — elites — gain control and tax the others. They build palaces, tombs, pyramids, and live in a luxurious style. The inclusive system offers everyone, or most people, an opportunity to do their own thing, and to prosper. Most political systems are extractive, but the vibrant, prosperous ones are inclusive. Australia is one, the USA another. So are the ‘Western democracies’. But they were not always like this. England was the first, and it took time and civil unrest to reduce the power of the wealthy and to open trade, both internal and foreign, to anyone who wanted to engage in it. Once this had happened it was impossible for the elites to recapture their former power. More, the political system became increasingly democratic, which increased inclusiveness. Why didn’t Australia become ‘extractive’? Slavery, the source of wealth in the 17th and 18thcenturies, was not possible — there simply weren’t enough indigenous people, unlike Africa. There was an attempt at a kind of local aristocracy in Australia, but it failed: too many people objected, and their labour was needed everywhere. Inclusiveness won quite quickly. Nonetheless there is still a move towards elites in Australia, people with a great deal of wealth, just as there is in all the inclusive democracies. They see themselves as the real rulers of our country.

What prevents the return of the extractive elites? Democratic elections, a strong central government, the rule of law, and so on. These are more or less embedded in our system. They are not immovable, however, and they need protection. Why doesn’t Somalia, for example, follow our example, and simply copy what we do and have done? First, no strong central government, second, no shared sense of values, third, no decent public service or police force, fourth strong tribal loyalties that are more important than national feeling. Changing this is possible, either through popular demand or through the dominance of one tribal heavy over the others. Both are difficult. The tribal heavy is likely to extract as much wealth as he can, and Somalia is engaged in tribal conflicts as I write. Yet it has been done, and it could be done.

A lot has been done through simply copying, especially where countries are close and cultures are similar. But, to repeat, none of it is easy. The authors have scads of examples to offer, and they are as interesting as the general argument. And why didn’t Argentina succeed like Australia? My guess is that despite enormous foreign investment, fertile land and a lot of immigration, Argentina was beset with local wars and a failure to establish a strong central government that defended inclusiveness. Their rulers throughout the19th century were too keen on extracting as much as they could for themselves. We in Australia have to watch out for the ‘extractors’. They’re always there, waiting.

Join the discussion 45 Comments

  • Stu says:

    Don, That takes me back to university and studying “Economic Development”. We did consider the “Argentina question”. As I recall, by 1900 we were at a similar stage of development and prosperity. Then why had such similar countries in 1900 developed so differently? And this was 50 years ago so not that long after the period in question. I confess, the answers have been forgotten, by me at least.

    As for open systems of trade and prosperity I fear the elites have re-emerged in USA, just look at the distribution of wealth and income. We are heading the same way but are not as bad yet. A measure I have wistfully considered is the study of the age of super yachts as some sort of indicator. Time will prove whether the re-emergence of mega yachts, last seen in the late ‘20s, now, is a warning of trauma ahead.

    And that was all before DT disrupted the world trade system. Time will tell.

  • Mike Burston says:

    In other words, a nation thrives on trust

  • Tony Tea says:

    Niall Ferguson’s tv show about how England invented the modern world has a tidy comparison between North and South America.

  • spangled drongo says:

    The leftists have argued that the development of the west has come at a heavy price – tremendous income inequalities, exploitation of workers, colonialism and imperialism.

    Leftists still say to me, ” The only way people like you get rich is by ripping off others”.

    But in fact western countries succeeded because they created conditions that encouraged innovations in trade, technology and organization and produced goods cheaper and better than they had ever been produced before..

    It became easy to set up enterprises. Trading took place without much restriction. Owners of enterprises could set up business with almost no requirement for particular licenses and if these owners had particular expertise in their enterprise success was almost guaranteed.

    Free enterprise had become a unit for making a wide range of economic decisions and its gains and losses from the decisions were expected to accrue to its owners.

    Virtually, without thought or discussion, the west delegated to enterprises the making of a decision basic in the innovation process: which ideas should be tested and which should be allowed to die. For economic innovation requires not only an idea but an experimental test of the idea in laboratory, factory and market.

    It could only ever be and certainly was a great success.

    Stu says above; “And that was all before DT disrupted the world trade system” not being the slightest bit aware that it is countries like China that really have caused the disruption by their total control and Trump is trying to untangle the problem they have introduced.

  • spangled drongo says:

    Remember that China and the Islamic nations were at one point of time well ahead of western countries in science and technology yet they were left behind.

    Now, of course, China is using Marxist “free enterprise” to gain trade advantage.

    • Boambee John says:


      “Remember that China and the Islamic nations were at one point of time well ahead of western countries in science and technology yet they were left behind.”

      I suspect that part of the reason these countries were left behind is that an obsession with their former greatness, and the minutiae of their historie, led them to neglect the future.

      We recently had a Shia Muslim procession through Sydney mourning a battle lost against Sunnis more than a millennium ago. How many 19th Century Saxons in Britain annually marched to Hastings to mourn the death of Harold and scream imprecations against those of Norman descent? They were too busy developing new industries and improving old ones.

      China still obsesses over its former glories, and puts massive effort, for example, into developing island bases in the South China Sea to attempt to reinforce its claims to regain all that once was theirs, while stealing intellectual property in an attempt to gain the industrial and military power to enforce those claims.

  • Stu says:

    SD, off on a tangent again. “Stu says above; “And that was all before DT disrupted the world trade system” not being the slightest bit aware that it is countries like China that really have caused the disruption by their total control and Trump is trying to untangle the problem they have introduced.”

    The origin of the current trade imbalance lies in the actions of manufacturers seeking least cost solutions for production. That is something that has occurred in waves going way back (in the recent era) to the rebirth of Japan, then other low cost Asian countries.

    The current problem Trump is claiming to address is based on his poor understanding of trade. The current account US trade deficit with China is not a rip-off. The US gets goods in return for its dollars.

    Further, one of the major issues for US factory employment is the ongoing shift to robotics. His current trade policies are unlikely to change that.

    Trump and SD need to study economics one and the idea of specialisation and exchange, the fundamentals if mutually profitable trade.

    Trumps attempt to shift from multi-lateral trade arrangements to a whole set of one on ones is a step back. His actions are destabilising all world trade.

    Good or bad, China is a very old society that has great patience. They will move slowly and hope to see off Trump next year. Xi is in a much stronger position than Trump politically.

    As shown by his other dealings, Trump is a novice, trying to operate without benefit of the corporate memory of the now decimated State Department.

    We live in perilous times. But this is shaping as the “Asian century”.

    Did you see the China news Australian puppet cartoon? A warning perhaps.

    • spangled drongo says:

      Stu sez;

      “The origin of the current trade imbalance lies in the actions of manufacturers seeking least cost solutions for production.”

      Give us a break!

      That is called the free enterprise solution – competition – the very basis of all world trade which, along with floating currencies, if all countries stuck to, we would have world-wide wealth and equality.

      It is only when countries rig the system and end up sending endless giant container ships of consumer goods to another country and bring back little more than promissory notes in exchange, that the system breaks down.

      That, along with many other problems, has been going on for decades between the two top world economies and it is well overdue for attention.

  • John Stankevicius says:

    Stu , agreed that manufacturers look for the cheapest cost of production. The shift of manufacturing to China is now effecting Western wages. Further as DT said a US car imported to China is taxed 200% while the US taxes Chinese cars at 2%. WAges in China are being kept artificially to keep its populace under control while in the US the great cities collapsed and its male population decended into substance abuse.

    Re the book Don, only read the first 30 or so pages . It’s a boring read with the authors repeating the same sentence , over and over with the threat of an example.

    • Stu says:

      “Further as DT said a US car imported to China is taxed 200% while the US taxes Chinese cars at 2%. ”. Have you not learned yet that DT has a bad reputation for not telling the truth and for just making things up as he goes. These figures are a classic case.

      Meantime according to Bloomberg. “Of China’s $51 billion of vehicle imports in 2017, about $13.5 billion came from North America, including sales of models made there by non-U.S. manufacturers including BMW. China imported 280,208 vehicles, or 10 percent of total imported cars, from the U.S. last year, according to China’s Passenger Car Association.

      U.S. exports of cars and light trucks to China were worth $9.5 billion in 2017 and have dropped off significantly since China imposed the retaliatory tariffs over the summer that gave exporters in Europe and Japan a significant advantage.”

      The problem for US manufacturers will get worse if they drop the emission standards as currently proposed by the administration. No one will want them after that. But that is another whole issue.

      • spangled drongo says:

        ‘“Further as DT said a US car imported to China is taxed 200% while the US taxes Chinese cars at 2%. ”. Have you not learned yet that DT has a bad reputation for not telling the truth and for just making things up as he goes. These figures are a classic case.”

        Some people are not telling the truth and it is not DT:


        Also the US administration is considering sweeping action to protect American intellectual property from Chinese incursions.

        Try the real world, stu.

        It’s not hard.

  • Chris Warren says:

    It is a pity I do not have time to read this book. But there is no reason why future nations may fail for entirely new reasons – as hinted at by the Club of Rome.

    If the goal of nation building is to produce happiness, then even a subsistence, hunter gatherer society can produce happiness.

    Once you have a successful state, even as a hunter gatherer, why are they to be provoked as a population that doesn’t get it?

    • spangled drongo says:

      That’s right blith. The Club of Rome got it so right with peak prosperity way back in 1968 and we have only gone backwards since.

      Haven’t we???

      Or could they and Paul Ehrlich possibly have got it wrong??

      Do you possibly think?

      And those stone age HGs didn’t realise how well off they were.

      Until they could collect siddown money from modern society and still maintain their stone age culture, that is.

      What a crazy, upside down view of the world you have.

      You better read the book.

      You sure need educating.

    • Boambee John says:


      “If the goal of nation building is to produce happiness, then even a subsistence, hunter gatherer society can produce happiness.”

      Yet, when subsistence societies in the modern world find out about what is available in the wider world, they want to have it, or they want to move to it.

      Your statement might contain a germ of truth if the whole world lived in subsistence societies (Nasty, brutish and short???), but not in a world where a better life is available.

  • Peter E says:

    Yes, our ‘inclusive’ system is under threat from a number of directions at present. A proposed ‘Voice’ to Parliament from an already noisy minority, for example, would wreck it. Ah well, all is for the best in the best of all possible worlds.

  • spangled drongo says:

    Here’s one way nations fail. When we allow academics in our institutions to shut down debate on the vital aspects of everyday problems and existence.

    And we are well down the path of doing it in spades.

    The Public Service, the ABC, Universities and public schools and now ex ABC journalist Misha Ketchell at The Conversation feels that their taxpayer funded show should do likewise.

    Gerard Henderson points it out very mildly:

    “The left has attempted to eliminate dissent in more and more areas.

    “What used to be regarded as mob rule now has the seemingly respectable title of de-platforming. And whereas the left was willing to let a few ideologically unfashionable views exist, now there is a tendency to silence all debate by refusing to hear alternative views. There is a more vibrant debate outside the academy on a range of issues, including climate change:”


    Jo Nova brings it to our attention more strongly:


  • Bryan Roberts says:

    Ketchell’s appeal to “dob in a dissenter” is reminiscent of the worst days of totalitarianism. The ‘magazine’ or whatever it claims to be, should have its funding cancelled, and Ketchell himself should be fired forthwith.

  • spangled drongo says:

    “We are rapidly transitioning from the end of history to the demise of rationalism. Much of what underpins the success of Western liberal democracies — what Francis ­Fukuyama saw as the pinnacle of human history — is under threat.”


  • John Stankevicius says:

    SD interesting re your comment the club of Rome was at its peak in 1968. Why have we gone backwards – one demographics perhaps but stupidity and the election os stupidity. Living in Adelaide there was a drastic shift to the left then. Before my time in understanding of things. Apparently that was the year a newly elected govt sold back land the previous govt had purchased to widen south rd from myponga in the south to port Adelaide. The road went past the major industrial areas and biggest factories in the Southern Hemisphere.trucks would be able to drive freely without the fear of hitting power lines and less congestion with faster route to the airport. Instead the land was sold and the festival theatre was built. Now that was a job created.

    • spangled drongo says:

      Yes, JS.

      Why nations fail.

      SA had good government under Playford for over 26 years. An unbelievably long period of stability but when those periods end the upheavals are always painful, sensible long range plans are turfed out and stupid things are done as a result.

      I worked in the far extremes of SA in that era and Playford was a true statesman.

      We went through the same thing in Qld after 32 years of Country/National Party govt during which time the state went ahead in leaps and bounds and following which, much of the planned infrastructure was scrapped.

      Things like big dams for the future that need good, long term planning but niggling, negative politics [provided by Kevin Rudd for the new Labor premier, Wayne Goss] just destroyed the years of ground-work in those plans overnight.

  • Chris Warren says:

    School kids are crying, not that nations fail, but that the entire world is failing.

    Unless things change, in the future – there will be no nations.

  • Stu says:

    SD, as you seem so on side with the actions of Donald Trump can you please confirm that you think he is really smart, totally on top of his job, not completely out of his depth and is capable of sensible diplomacy and careful use of intelligence information and not a corrupt misuser of Presidential power. A yes or no to each of those points will be fine thank you.

    • spangled drongo says:

      Stu, ask a question about a specific point if you want an answer. Not a general blithering hand wave covering every topic that is the responsibility of the US president [and then some].

      • spangled drongo says:

        The questions that I ask you, stu, and you refuse to answer, go like this:

        1/ Please supply quantified scientific evidence for what part of the less-than-1c-warming since the LIA is due to Nat Var and what part is due to ACO2?

        or 2/ Please tell us what is happening today with CO2 levels at 410 ppm that hasn’t happened during the last 80 centuries when CO2 levels were below 300 ppm?

        or 3/ Please tell us what measureable evidence there is to validate the claim that CO2 produces global warming?

        Get it stu?

        Very specific and vital to the point of squandering the world’s wealth on a likely non-problem but you refuse to answer after how many years?

        Why is that?

  • Stu says:

    The same question goes for Neville and BJ and maybe even Don.

    • Boambee John says:


      I would simply say that, compared to Hilary Clinton (the alternative at the time of his election), he is clearly superior in all of those points.

      If you need me to spell out all the evidence of Clinton’s incapacity, you have not been watching.

      I do not seek perfection in a politician, that can never be attained. Better than the alternative is the realistic choice.

      Now, your assessment of the alternative please.

  • Boambee John says:

    Clinton’s incapacity and corruption,

    • Stu says:

      Corruption not proved. Links to Wall St, yes. But compare that with Trumps total sell out to Wall St interests, just look at the tax cuts. In any event Hilary is history, we are now well into US election 2020, so she is irrelevant, except for Trump.

      Trump is an intellectual minnow compared with many more than half the Democratic hopefuls . He is also corrupt. Their system sucks though.

      Do you ever watch him speak, when not reciting from a teleprompter? He is incoherent. Compare his presentation with Sanders, Warren, O’Rourke or Butigeig it is night and day. Unless of course your only vision is via Fox news media.

      If you think he is great I will not be surprised when you tell us that P Hansen is an intellectual genius.

      • Boambee John says:


        Corruption not proved??? Surely you jest. Consider the financial shenanigans surrounding the Clinton Foundation, if you dare. Or are you a denialist?

        And the Clinton connections to Wall Street? You see those as innocent?

        Speaks through a teleprompter? Are we discussing Trump or Obama? The latter’s teleprompter failed on a few occasions, and his talk devolved into random uhmms and aahs!

        But you are changing the goalposts. The question was about now. Clinton was the alternative. How do you rate her against Trump? Was she a top Secretary of State? Was she “capable of sensible diplomacy”? Was using an insecure non-official server to transmit highly classified intelligence “careful use of intelligence information”? Was her protection of her presidential president husband “corrupt (misuse) of Presidential power”?

        Answers please, if you dare.

  • Stu says:

    And further “incapacity”, you have to be kidding. Accuse the Clintons of many things but lacking ability to handle a wide range of issues does not stack up. You have to be heavily brainwashed by the Murdoch machine if you think Hilary lacked capacity for the job.

    • Boambee John says:


      LOL, I had to go out for a while, come back to read the next post.

      I agree that the Clintons had the “ability to handle a wide range of issues” at once. Why Bill could combine the duties of governor of Arkansas and then president with seducing (to put it tactfully) every woman he could.

      And Hilary, the supreme multitasker. She could combine the onerous duties of secretary of state, including the complexities of deciding whether to approve the sale of a significant proportion of US uranium reserves to Russian oligarchs, with arranging for Bill to give a couple of speeches in Moscow (for which he was paid several hundred thousand dollars), while managing multi million dollar Russian donations to the Clinton Foundation.

      Truly a pair of polymaths!!!

      PS, I am continually fascinated by your knowledge of the VRWC. You routinely quote Alan Jones and Bolt, neither of whose shows I listen to, and now show great familiarity with the Mudroch press, which I might read in a coffee or barber shop occasionaly. You, however, seem to be a great fan!

  • Michael James says:

    Here’s a link to an Australian comparative study of Australia and Argentina, published in 1984


  • spangled drongo says:

    More blither from model projections, hey blith?

    Crazy projections are not only why nations fail, they’re why f/witz fail, too.

    Why not do all of us a favour and stick to what you actually know?

    That’s not much, I know, but they’re called facts, blith!

    Here’s one, to start with:


    And just forget about these predictions from your Guru-Gods:


    • Boambee John says:


      Surely Chris is not offering the projections of models? The ones that NASA says are not capable of producing useful projections?

      I’m sure he said in an earlier thread that he did not rely on the models?

      Anyway, this thread is not about climate change. Are you suggesting that he is trying to change the subject?

  • PAREJA says:

    Hi, you might be interested on this review of Why Nations Fail: https://en-moangu.blogspot.com/2017/12/5-why-professors-fail.html Regards.

  • Boambee John says:

    UN Climate Action Summit in NY, where Secretary-General Guterres will call for a “full transformation of economies in line with sustainable development goals”.

    If anything can cause nations to fail, this will!!

    It seems that it is not just about the climate.

    • spangled drongo says:

      That’s right, BJ, nothing to do with climate.

      It’s all about power!

      They are well aware there are literally hundreds of peer reviewed science papers showing that during the Holocene seas have been up to 3 metres higher and tree lines much closer to the poles, caused by global temperatures that were up to 7c higher than today’s.

      Very verifiable stuff.

      But they are the greatest deniers of truth.

      They could show Lysenko a trick or two.

  • Pyrmonter says:

    Don – not sure if you’ve looked at it, but Ian McLean (and I think also Jonathan Pincus) have written on the conundrum of what happened in Argentina v Australia. It forms something of the ‘just so’ story McLean elaborates as having secured Australia’s relative retention of plurastic, law-based legal and commercial institutions

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