Key Points from Book: Why Nations Fail

The only option for an economically viable colony was to create institutions that gave the colonists incentives to invest and to work hard

Unlike in the US where competition was fierce, there was practically ni competition among Mexican banks. This lack of competition meant that the banks were able to charge their customers very high interest rates, and typically confined lending to the priveleged and the already wealthy, who would then use their access ro credit ro increase their grip over the various sectors of the economy

Dictators could be removed from power only the same way they had attained it, by the use of force

Economic institutions shape economic incentives: the incentives to become educated, to save and invest, to innovate and adopt new technologies, and so on. It is also necessary to consider more broadly the factors that determine how political power is distributed in society, particularly the ability of different groups to act collectively to pursue their objectives or to stop other people from pursuing theirs

The great inequality of the modern world that emerged in the nineteenth century was caused by the uneven dissemination of industrial technologies and manufacturing production.

How to solve the problem of poverty: if ignorance got us here, enloightened and informed rulers and policymakers can get us out and we should be able to engineer prosperity around the world by providing the right advice and bupy convincing politicians of what is good economics

Poor countries are poor because those whi have power to make choices that create poverty

When the state fails to achieve almost any political centralization, society sooner or later descend into chaos, as did somalia

Economic institutions that create incentives for economic progress may simultaneously redistribute income and power in such a way that a predatory dictator and others with political power may become worse off

Economic growth and prosperity are associated with inclusive economic and political insitutions, while extractive institutions typically lead to stagnatiom and poverty.

Growth from extractive institution will not be sustained. It will not be sustained growth that requires technological change, but rather growth based in existing technologies. The lack of economical incentives and resistance by the elites also inhibit growth

Allowing people to make their own decisions via markets is the best way for a society to efficiently use its resources

The fear of creative destruction is the main reason why there was no sustained increase in living standards between the Neolithic and Industrial revolutions

Books also undermine the power of those who control oral knowledge, since they make that knowledge readily available to everyone who can master literacy

Inclusive political and economic institutions necessitate some degree of political centralization so that the state can enforce law and order, uphold property rights, and encourage economic activity when necessary by investing in public services

Australia and US could industrialize and grow rapidly because their relatively inclusive institutions would not block new technologies, innovation, or creative destruction

Reforms were granted because the elite thought that reform was the only way to secure the continuation of their rule, albeit in somewhat lessened form

Inclusive economic institutions led to the development of inclusive markets, inducing more efficient allocatiin of resources, greater encouragement to acquire education and skills, and further innovations in technologies

Gradual reform was difficult because they lacked pluralism emerging from glorious revolution, and the rule of law that it introduced, that made gradual change feasible, and desirable, in Britain

If monopoly persists, monopoly will always sit at the helm of government. I do not expect to see monopoly restrain itself. If there are men in this country big enough to own the government of the United States, they are going to own it. -Wilsom, the new freedom

Inclusive political institutions allow a free media to flourish and a free media often provides information about and mobilizes opposition to threats against inclusive institutions

The essence of the iron law of oligarchy, this particular facet if the vicious circle, is that new leaders overthrow old ones sith promises of radical cahnge bring nothing but more of the same

Under inclusive economic institutions, wealth is not concentrated in the hands of a small geoup that could then use its economic might to increase its political power disproportionately

Nations fail today because their extractive economic institutions do not create the incentives needed for people to save, invest, and innovate

Educated workforce will naturally lead to democracy and better institutions

About Journeyman

A global macro analyst with over four years experience in the financial market, the author began his career as an equity analyst before transitioning to macro research focusing on Emerging Markets at a well-known independent research firm. He read voraciously, spending most of his free time following The Economist magazine and reading topics on finance and self-improvement. When off duty, he works part-time for Getty Images, taking pictures from all over the globe. To date, he has over 1200 pictures over 35 countries being sold through the company.
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