Failure of Logic: ‘Why Nations Fail’ Is an Unenlightening Skim of History

Lewis Lapham, renowned editor at Harper’s for many years and himself a wary student of history, once wrote that “History is a work in progress, a constant writing and rewriting as opposed to museum-quality sculpture in milk-white marble.”

Sadly, the two economists (from MIT and Harvard, respectively) who have authored Why Nations Fail have constructed a museum-quality hypothesis about modern prosperity that not only fails to consider vital facts from paleobotany, medicine, geography, ethnography and plate tectonics (among other things), but also accomplishes much of its sleight of hand in argument by the post hoc method of assuming as a premise what must be proven.

Setting out to examine why nations differ in wealth and power, the authors focus on institutional factors, concluding that some nations (apparently, only nations are allowed prosperity) were able to take advantage of the Industrial Revolution and the technologies and methods of organization that it brought while others were unable to do so. Continuing, they argue that countries now differ in economic success because of their different economic and political institutions.

Prosperity is brought about by “inclusive” institutions, organized property rights, courts, police and government bureaucracies that serve citizens’ needs and give people incentives to work hard, save and innovate. On the other hand, “extractive” institutions exist to benefit elites, government officials, the rich, or narrow factions (clans, chiefs, political leaders etc.). Power is thus constrained in an inclusive nation, allowing citizens access to money, votes, esteem and hope.

Much of Why Nations Fail entails an examination of narrow realms of political history like England’s Glorious Revolution of 1688, the rise of the factory system in the early 19th century, and the French and American revolutions.

The authors point to side-by-side political/economic systems as indicative of the fulcrum of success and failure, taking particular pride in pointing out that Nogales, Mexico, (poor) and Nogales, Arizona, (prosperous) differ only in the fact that one exists under an extractive system while the other operates under an inclusive one. The same, the authors point out, can be said for North and South Korea, or East and West Germany.

Prosperity, they conclude, has a number of steps, including open inclusive institutions, innovative technology approaches, acceptance of “creative destruction” (which means allowing old forms of economic activity to die), market-based economies and a strong, corruption-free central government. The authors cite as counter-examples the Ottoman Empire’s resistance to building roads and trade and the Hapsburg reluctance to build railroads, among others. This is, obviously, the post hoc side of their argument.

Very much is wrong with Why Nations Fail. As Jared Diamond (author of Guns, Germs and Steel, a far better book about prosperity) points out in the New York Review of Books, the authors here rely on many unsupported factual arguments, like the one they make that inclusive institutions sponsored the rise of agriculture, a claim contradicted by a century of research by paleobiologists who have shown that a wealth of wild plant and animal species in certain parts of the world drove agriculture’s emergence.

Our two economists fail to understand the vital importance of glaciation on soil ecology in the Northern Hemisphere, the extreme effect of Africa’s disease vectors as a negative to human and animal development, and Africa’s lack of navigable rivers, its tropical rains which leach soils and plant nutrients, and its lack of long mountain ranges. The authors cavalierly dismiss geography and culture as factors in the rise and fall of peoples, tribes, and nations.

Why Nations Fail also assumes prosperity as a constant not needing definition. As late as the ’30s, most rural Americans were living without electricity or indoor plumbing, the country’s African-Americans continued to live under an apartheid system, and .S corporations were robbing Central and Latin America of economic goods on a regular basis, overthrowing governments, and even assassinating political leaders.

In fact, the “inclusive institutions” of England (the authors’ paradigm prosperous nation) regularly plundered, enslaved or colonized large portions of humanity in order to profit, while plunging masses of their own people into misery. Thus, one man’s “inclusive” might be another’s “extractive.”

Our own American prosperity (whatever that is) surely comes at a high price — think of stress, obesity, diabetes, mental illness, family dysfunction, crime and pollution, and our American history includes the genocide of native populations, environmental disaster and continual war.

Why Nations Fail gives no credit to happiness, health or spirituality. Surely, unhappy, unhealthy and unspiritual nations can be said to have failed too. For example, Bhutan, one of the poorest nations in Asia, is often judged the happiest in the UN’s happiness index. In fact, psychologists have long known that money, up to a point, buys a certain amount of security but happiness is elusive and can’t be bought. And many modern economists have taken to incorporating other values into their computations of prosperity instead of staking everything on GDP.

Mostly, Why Nations Fail reads like a poorly written pamphlet dropped from the bomb-bay door of an airplane owned by a conservative think tank. One has to think that the Roman republic must have thought itself the most prosperous empire in the world — a museum-quality model for the poor Parthians or Gauls to emulate.