DailyPost 313


 Failed states is a concept and a reality which takes a huge share of our discussions on the fate of countries which make their way to success & the ones who are stuck up in a vicious cycle, never to emerge.  A deep analysis of the issue in a book  Why Nations Fail by Acemoglu Robinson ascribes the main reason to Extractive Institutions.  The nature of these institutions may differ in detail,  the purpose by far remains the same , is spread across South America, Africa & South Asia.

The nations don’t fail because of economic policies, geography, culture, or value systems as  projected,  rather it is because of political institutions.  The authors differentiate the political institutions into two; first the  Extractive, “small”  group exploits the population at large and  Inclusive institutions , as the name suggests has  “many”  people in the governance mechanism.  Extractive Institutions that impoverish people & block to economic development.  It paves way way for conflict of different dimensions.

 Extractive political institutions as a direct corollary give birth to extractive economic institutions.  Such institutions don’t create incentives necessary for the population at large to  save, invest & innovate.  Extractive political institutions consolidate power in hands of a  few who benefit from the extraction.   Extreme examples of Zimbabwe & Sierra Leone where these institutions paved way for  complete state failure,  decimating not only law & order but even most basic economic incentives.

In Argentina, growth happened with extractive institutions but like other such experiences, their was  no creative destruction and for sure no innovation. And for sure, it could not be sustained.  Growth with extraction has no meaning.  The failure is inbuilt & that is the reason why nations fail.  The ultimate reality, well proven, is that  only inclusive political institutions leading to the creation & sustenance of inclusive economic institutions are the roadmap for the world.


    Sanjay Sahay

Leave a Comment

Your email address will not be published. Required fields are marked *

The reCAPTCHA verification period has expired. Please reload the page.

Scroll to Top