‘Why Nations Fail’

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AT the time of the discovery of the Americas by Columbus, Mexico, Central America, Peru, and Bolivia held the great Aztec and Inca civilizations, according to a book “Why Nations Fail” by Daron Acemoglo and James A. Robinson.

But at the time of the Aztecs and the Incas, the United States, Canada, Argentina, and Chile were still in the Stone Age. Today, the US, Canada, Argentina, and Chile are the opposite of Mexico, Central America, Peru, and Bolivia.

The book tackled the Culture Hypothesis as one of the causes of inequality in wealth.

It cited German sociologist Max Weber who argued that the Protestant Reformation and the Protestant ethic played a key role in facilitating the rise of modern industrial society. “Many people still maintain that Africans are poor because they lack good work ethic, still believe in witchcraft and magic, or resist new Western technologies.”

“Many still believe that Latin America will never be rich because its people are intrinsically profligate and impecunious and suffer from the Iberian mañana culture.”

While culture is very different between the North and South Koreans today, “it played no role in causing the diverging economic fortunes of these two nations,” the look continues. What matters is the border.

To the north is a regime that imposes different institutions, creating different incentives. Any difference in culture between south and north of the border cutting through Korea is not a cause of the differences in prosperity, but, rather a consequence.

On the other hand, the Ignorance Hypothesis asserts that inequality exists because our rulers do not know how to make poor countries rich.

It wasn’t difference in knowledge or intentions between John Smith and Hernando Cortez that laid the seeds of divergence during the colonial period.

Or the difference in knowledge between Woodrow Wilson and Porfirio Diaz that made Mexico choose economic institutions that enriched the elite at the expense of the rest of society.

So, if geography, culture, and ignorance are not the causes of poverty, what does?

The authors said institutions that allow its citizens freedoms, such as those practiced by democratic states have room to flourish.