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Why Nations Fail

the Origins of Power, Prosperity and Poverty
Community comment are the opinions of contributing users. These comment do not represent the opinions of Jefferson County Public Library.
Jul 13, 2016
[I originally wrote this for my blog. It is crossposted there.] The authors of Why Nations Fail dichotomize economies into two basic types: extractive and inclusive. In extractive economies political institutions try to extract as much wealth as possible from the populace. In inclusive economies laws are crafted to distribute wealth in proportion to contributions to the economies. So someone who contributes a great deal would receive a great deal. In an extractive economy all the gains go to the elite. At first an extractive economy can be successful but over time there is little incentive for the vast majority of the populace to do any more than the bare minimum necessary to survive because all the extra gains will inevitably just go to the elite. What makes the book so poignant to me reading it now is that a big part of what makes a nation inclusive is an ascendable and descendible socioeconomic ladder. In his January 18, 2014 blog post economist Robert Reich wrote: "…America’s shrinking middle class also hobbles upward mobility. Not only is there less money for good schools, job training, and social services, but the poor face a more difficult challenge moving upward because the income ladder is far longer than it used to be, and its middle rungs have disappeared." It does seem that the middle rungs are disappearing. The middle rungs Reich mentions are "good schools, job training, and social services." To those I would add good public libraries, affordable good universities and healthcare, access to a neutral Internet/information and a justice system that works well for everyone. Without those middle rungs it becomes very difficult for anyone to climb the ladder. According to Acemoğlu and Robinson when the ladder no longer functions, in time even the very rich become poor, because plutocrats are not rich in isolation. Their wealth is built on a foundation of comprised of everyone else in the society. The socioeconomic ladder forms not only a means of vertical movement, it is also a means structural support for the higher levels. Without that structural support, most of the populace stops innovating and just does what is essential to survive. Eventually the entire economy falls apart and the nation fails. A couple of good books to read along with Why Nations Fail are Winner Take All Politics and The Unwinding: An Inner History of the New America.