The book is divided in 15 chapters. My review will go over them in order.

In the first one, “So Close and Yet so Different”, the authors bring a very symbolic
example when they compare two cities with the very same name in the two sides of the
U.S.-Mexico border: North American and Mexican Nogales. The differences in the
development, mainly visible in the infrastructure and standards of living, are very well-
pronounced between them. And bring their main core arguments that the differences
can be explained by distinct political and economic institutions these countries display.
At the U.S. side of the border, there is freer choice of occupations, more acquisition of
schooling and skills and superior technology. Politics-wise, more North Americans take
part in the democratic processes than Mexicans do. All these elements form inclusive
and political institutions, the root for prosperity and development. And why are some
institutions so much more conducive to economic success? They believe this is
explained by the way societies formed during the early colonial period. The chapter
shows other interesting comparisons, not only of rich-poor countries but also of
apparently peer countries or regions, which differed throughout historical evolutions. For
example, Spain was richer than England until the latter won key maritime battles against
the former. And cities such as Buenos Aires and Asuncion are different because of their
different settlements: one for living and the other one for pure exploration.

In Chapter 2 (“Theories that Don’t Work”), the authors reinforce the historical element as
a drive for development. And propose to rule out some theories that are used to explain
developmental differences such as the geography hypothesis or the religious factor.
The authors defend that productivity levels don’t change much because of the distance
to Ecuador, but rather and more importantly due to “get-rich quick” discoveries such as
gold or oil. On religion, the authors defend that the primary reason for the Islamic
countries’ underdevelopment is much more linked to the type of colonial rule they were
subjected to, than anything else. Nevertheless, culture plays a role in explaining
developmental differences, as divergent paths of accumulated cultural aspects can
explain differences.

In the Arizonan half the average income is $30 000 U.S dollars, the majority
of adults are high school graduates, the roads are paved, there is law and
order, most live until over 65. In the Southern half, the average income
is three times less and everything else is similarly worse.

The authors point out that the difference cannot be because of environment
or culture, it must be because of politics and economic opportunities.

They also argue that in order to understand the difference, you need to go
right back to early Colonialism in the 16th and 17th centuries.

Mexico was the first to be colonised, under a system of slavery and

extraction. In the 15th century, the Spanish basically used already existing
systems of slavery to their own benefit and extracted mountains of gold and
silver, leaving a legacy of elite-governance and a dearth of political rights
for the majority.

In North America, settled by mainly the English 100 years later, the
absence of slavery among indigenous populations and much lower
population densities meant that slave systems simply would not work,
although this didn’t stop them trying for the first twenty years or so.
Eventually, however, the original settler company (The Virginia company)
back in England realized the only way colonialism was going to work was to
provide incentives for the settlers – So they offered them land in return for
work. It was this that set the basis for the democratic constitution and
congress of the US, which then went on to create problems for the English
government.

The rest of chapter goes on to argue that the next 300 years of history are
crucial to understanding why the US is now so wealthy, and why most of
Latin America is so poor.

America has had 300 years of political stability, where political institutions
control economic institutions, at least to an extent (the authors cite the
breaking up of the Microsoft Monopoly as an example) broadly making them
work for everyone. Other factors such as the patent system, credit systems,
and education provide opportunities for anyone to make it rich and enjoy
the benefits of the wealth.

By contrast in Latin America (Mexico), up until the 1990s most countries

saw political turmoil and a series of dictatorships where a series of small
elites ruled for their own benefit. This instability has lead to the rise of
monopoly power, and it acts as a disincentive for anyone to try and do well
and become rich (the next dictator might just take all your money away),
also lack of finance and education prevents competition anyway.

Crucially, historical good fortune appears to be central to explaining why a

country is rich now, so figuring out how a current poor country can develop
is not that straight forward if a culture of monopoly, corruption and lack of
political rights are the norm…..

Chapter 3 (“The Making of Prosperity and Poverty”) begins with a similar but perhaps
more disparate border comparison than the Nogales example: the abysmal difference
between the economies of the two Koreas, the Northern one representing one tenth of
the size of that of their Southern neighbors. And in this chapter, the root
characterization of inclusive economic institutions take place, as they are defined as
“those that allow and encourage participation by the great mass of people in economic
activities that make best use of their talents and skills and that enable individuals to
make the choices they wish; to be inclusive, economic institutions must feature secure
private property, an unbiased system of law, and a provision of public services that
provides a level playing field in which people can exchange and contract” (ACEMOGLU
and ROBINSON 2012, pp. 74-75). Additionally, the chapter brings another key
theoretical concept which catalyzes the process of economic growth and technological
change, which is the one of creative destruction, by economist Joseph Schumpeter.

The differences cannot be explained by anything other than institutions.

In the South, private property and markets were encouraged (albeit by

dictators initially) and thus investment and economic growth were
encouraged. At the same time, the government invested in education and
new industries took advantage of a better educated population.

In North Korea, private property and markets were banned, and a centrally
planned economy instigated. This simply led to stagnation.

Extractive and Inclusive economic institutions

Countries differ in their economic success becasue of their different

institutions – the rules influencing how the economy works and the
incentives that motivate people. Crucial is private property rights – which
needs to be backed by the state…. In South Korea, people know that they
will be rewarded for their efforts, in North Korea, there is no incentive to
innovate and invest because the state will expropriate the benefits of any
such initiatives.

In order to develop a society needs to have ‘inclusive economic institutions’

– A state that guarantees prosperity for the massess – Such a state provides
a degree of infrastructure that is necessary for economic growth – for
example enforcing private property rights, contract rights for all, not just a
minority, and providing education and physical infrastructure such as roads.
Private enterprise uses and needs such institutions.

What doesn’t work for development is extractive institutions – where the

state is used to extract wealth from one subset of the population to
another…. Such as slave and colonial systems
Engines of Prospertity

Education for the masses is crucial for innovation in an advanced

technological world – This is what all developed nations have, and what
many undeveloped nations lack. Education needs to be well financed and
parents need to have the incentive to send their kids to school.

Inclusive and extractive political institutions

A state needs to be inclusive for economic growth to occur – that is, it needs
to both be chosen by its citizens and have a centralized control over
legitimate violence.

Extractive political and economic institutions tend to support each other

(which then means the masses don’t support them

Why not always choose prosperity?

The simple fact is that where technological change is the engine of

economic growth, this means social change, and with change there are
winners and losers… Thus existing elites may resist changes that make
institutions more inclusive even if this means greater prosperity for all,
because it will mean less prosperity for them.

The long agony of the Congo

The Congo has not developed since independence because it has not been in
the interests of the ruling elite to build a centralised state which includes all
voices, or in their interests to use the state to provide public services which
will benefit the masses – instead the institutions remain extractive.

As an independent polity, Congo experienced almost unbroken economic

decline and poverty under the rule of Jospeh Mobutu between 1965 and
1997. Mobutu created a set of highly extractive economic institutions. The
citizens were impoverished but Mobutu and the elite around him (known as
the Grosses Legumes or The Big Vegetables) became fabulously wealthy.
Mobutu built himself a palace at his birthplace, Gbadolite, with an airport
large enough to land a supersonic Concord jet, a plane he frequently rented
from Air France for travel to Europe. In Europe he bought castles and
owned large tracts of the Belgian capital Brussels.
The simple truth is that if Mobutu had introduced more inclusive economic
institutions he would not have been as rich.

Growth under extractive institutions

Growth can occur under extractive instiuttions – as in Russia and South

Korea at first and China today but this is unlikely to be sustained unless
both economic and political insitutions become inclusive.

Chapter 4, “Small Differences and Critical Junctures: The Weight of History”, as its
name suggests goes back to history reinforcing its shaping power on development. The
different routes that Western Europe and Eastern Europe underwent by the
consequences of the plague and death started at the Middle Ages are highlighted. In
the West, the massive scarcity of labor created shook the foundations of the feudal
order, encouraging peasants to demand that things changed. That led to more inclusive
markets being created. On the other hand, Eastern Europe saw the continuity of
extractive institutions as the owners of land had bigger tracts of soil and took advantage
of their position to exert their power over the poorer individuals. The chapter also
touches on other comparisons such as the unequal passing of power from the kings to
the merchant class that took different paths in Spain and in the United Kingdom: while
monarch absolutism grew in the former, it got challenged and weakened by the Glorious
Revolution of 1688 in the latter. Similarly, in Asia, China walked an absolutist path while
Japan broke its former feudal order at the Meiji Restoration in the nineteenth century.
The divergent paths just mentioned, were decisive to the enhancement (or weakening)
of the inclusive (or extractive) political institutions of the countries.

In Chapter 5, “I’ve Seen the Future, and it Works: Growth Under Extractive Institutions”,
the authors bring this sarcastic title to the ill-founded belief that leaders from countries
with extractive institutions have that this model can succeed over a long period of time.
The chapter goes back to pre-historic times (the Natufians-brought human
enhancement from nomadism to sedentarism) but also stays in more recent times.
Soviet Russia is a subject that is explored in more detail. Per Acemoglu and Robinson,
this was planned to work as “a scientific rearrangement of economic forces which would
result in economic democracy first and political democracy last” (ACEMOGLU and
ROBINSON 2012, pp. 122-23). It resulted that neither of them was fully achieved,
especially the second one. In similar fashion, the authors bring current China to the
table asking whether their model can be sustainable in the long run.

Chapter 6 (“Drifting Apart”) brings more historical observations as key elements to

explain developmental differences constructed over a sequence of decisions. The
Roman Empire is firstly presented as an example of a dynasty that lost its force due to
the change from republic to empire status. At the republican phase, peoples’ voices and
rights were more respected, whereas the international military conquests led to an
empire that became more egocentric within its layers of power. Per the authors,
“Rome’s increasingly extractive political and economic institutions generated its demise
because they caused infighting and civil war” (ACEMOGLU and ROBINSON 2012, p.
168). Interestingly, also the authors claim that England, perhaps the country most used
by them throughout the book to define a positive example of increasingly inclusive
institutions overtime, was where Roman hold was the weakest. And therefore, where
“feudal order made way for commercially minded farmers and independent urban
centers, where merchants and other industrialists could flourish” (ACEMOGLU and
ROBINSON 2012, pp. 180-81). Connected to this last thought, the authors go to the
United States and differentiate the different developmental evolutions (until the middle
of the twentieth century) of its North-South by the fact that the former had no slavery
while the latter had.

Chapter 7, “The Turning Point”, focuses on the evolution of England, from its pioneering
Magna Carta (1215) to the absolutist political status that was weakened by the Glorious
Revolution of 1688. The authors claim that prior to this last event, extractive institutions
were the norm; and the Industrial Revolution was a dynamic process that was
unleashed by the institutional changes that flowed from it. The Industrial Revolution per
se was not the source of England’s development, but its subsequent events such as
multiple gradual steps toward democracy and liberalism (such as the state-led
infrastructure boom of the end of the eighteenth century, the repeal of the Corn Laws in
1846, wider suffrage achieved at the end of the century, among other events).

Chapters 8 and 9, “Not on Our Turf: Barriers to Development” and “Reversing

Development”, respectively, show the other side of the coin: states that sabotaged
common prosperity due to absolutism, fear of creative destruction, segregation policies
and lack of political pluralism. As examples of states that followed this recipe, partially or
fully, the authors bring the Ottoman Empire, Russia, the Austro-Hungarian Empire,
segregationist states in the south of Africa and an African state that is one of the few
cases that has not suffered any colonialism (Ethiopia). For most of these cases, bi-
products such as dual economies (a concept proposed by Sir Arthur Lewis in 1955
which asserts that many less-developed or undeveloped countries present a clear
distinction between modern urban life and traditional “backward” institutions in the rural
side) and technology adoption tardiness arose.
Chapter 10, “The Diffusion of Prosperity” brings back England related history as the
main protagonist. At some point in the book, the authors question how come England
colonies turned into very different countries in terms of development, naming the
outcomes of Canada and Australia versus the ones of Nigeria and Sierra Leone. But the
question can be expanded to a Europe-Colonies dimension. For Australia, the authors
point out that its extremely low demographic density in the early colonial years was
fundamental to develop more inclusive institutions versus extractive ones. As the
authors assert, there was no Latin American option in Australia, meaning that the
convicts were the only labor force available to develop the territory, so, they were
enabled to be entrepreneurs once they ended their sentences.

Chapters 11 and 12, respectively “The Virtuous Cycle” and “The Vicious Cycle” confront
“winning” and “losing” economic development paths. For the virtuous case, the authors
rely on the history of the United Kingdom and the United States. In these places,
economic liberalism and political pluralism made gradual steps that were able to bring
their superior economic output of today. Making direct comparisons, the authors cite the
anti-trust legislation that was passed back in 1890 in the United States, confronting it to
the current absence of a political body to restrict the ultra-monopolist status of Mexican
businessman Carlos Slim. In terms of politics, the authors compare the failed and
successful interference attempts of the executive power against the other powers
(legislative and judiciary). Here, they cite that U.S. President Roosevelt tried to interfere
but was held back in the 1930s, whereas many decades later South American
presidents such as Perón (Argentina), Fujimori (Peru) and Chávez (Venezuela) were
able to do it, in detriment of democracy. For the vicious cases, the authors regret some
instances where failed models are perpetuated in various countries of Africa (such as
Sierra Leone, Zimbabwe and Ghana) or in Guatemala, where the current elites in power
descend to the old same main families that were privileged back in 1531. Acemoglu and
Robinson claim that “as virtuous circles make inclusive institutions persist, vicious
cycles create powerful forces toward the persistence of extractive institutions”
(ACEMOGLU and ROBINSON 2012, p. 168). Despite the unfavorable examples, the
authors show a certain optimism claiming that history is not destiny and vicious cycles
are not unbreakable, although resilient.

The authors paint the vicious circle as starting off with extractive
institutions established by a colonial power (which builds on previous
extractive institutions), which, on leaving, becomes even more extractive
under corrupt post-colonial rulers, which in turn leads to civil war as
competing factions fight for control over the extractive institutions – which
then leads to a decent into chaos!

The British Colonial Authorities built extractive institutions which many

post independence African politicians were only too happy to continue in
order to enrich themselves. This happened in countries such as Sierra
Leone, Ghana, Kenya and Zambia. The postcolonial rulers used their wealth
to build personalized security forces which were answerable to them and
also to rig elections – money thus became essential to maintain power, with
only those who have money able to maintain power. This creates incentives
among the opposition to depose the existing leaders in order to gain power
and wealth themselves, and to protect themselves from being killed off by
the said existing leaders. The point here is that power has become an end in
itself rather than as a means to developing a country.

This is best illustrated through the example of Sierra Leone –

All of the West African nation of Sierra Leone became a British colony in
1896. The British identified important rulers and and gave them a new title
– paramount chief. In Eastern Sierra Leone, for example, they encountered
Suluku, a powerful warrior king, who was made Paramount Chief Suluku.

In 1898 the British tried levying a hut tax of five shillings, which resulted in
a civil war known as the hut tax rebellion. It started in the north, but was
strongest and lasted longest in the South.

In 1904, the British stopped construction of a railway line from Freetown to

the North East and instead diverted it south, to Bo, in Mendeland, to give
them quick access to put down this rebellion.

When Sierra Leone became independent in 1961 the British handed power
to to the SLPP, which attracted support from the South, and in 1967 this
party lost the election to the opposition party, the APC which drew support
from the North.

Though the railway line was initially established to rule SL, by 1967, its role
was economic – it allowed transportation of the country’s exports – coffee,
cocoa, and diamonds, which came mostly from Mendeland in the south.

The then leader of the APC, Siaka Stevens, who drew his political support
from the north, ripped up the railway line and sold off the track and rolling
stock in order to weaken the opposition in the south and consolidate his
political power. This decimated the SL economy, but when it came to a
choice between consolidating power and economic growth, the
consolidation of power won out. Today, you can’t take the train to Bo
anymore.

There is continuity between Colonial rule and Steven’s government – both

extracted wealth from the people.

The Colonial rulers did this through agricultural marketing boards – farmers
had to sell their goods to these boards, which typically paid much less than
the market price (impoverishing farmers and enriching the elite). When
Stevens took power, he kept these marketing boards in place, but it got
worse – under colonial rule, the colonialists extracted about 50% of the
value of agricultural products, under Stevens, the rate of extracting rose to
90%.
Along with marketing boards, the old system of Paramount Chiefs remain in
place today…. They control local politics at the village level, and local land
rights and taxation – Paramount chiefs are elected, but only members of the
ruling house can stand – and in 2005 the victor was Sheku Fasuluka, King
Suluku’s great, great grandson.

The combination of these two institutions means there is very little

incentive for farmers to increase productivity – because they have insecure
land rights due to the paramount chief system and are the victim of
extractive institutions in the form of the marketing boards.

Thirdly, there was the control of the diamond mines – The British essentially
set up a monopoly for the entire country and handed it to DeBeers in 1936,
and shortly after independence, Stevens simply nationalized this
arrangement, through which he effectively personally controlled 51% of the
diamonds in SL.

Stevens used his vast fortune to buy political influence and to set up his own
private security forces – the ISU (known locally as the ‘I Shoot You’ and the
Special Security Division – known as Siaka Steven’s Dogs).

All of this set the scene for the brutal civil war

The book advances to its final three chapters, “Why Nations Fail Today”, “Breaking the
Mold” and “Understanding Prosperity and Poverty”, where they recap the main concepts
previously presented and propose ways, depicted by practical examples, so that
development can be achieved by poorer nations. So, why nations fail? The answer, per
the authors, is connected to their extractive political and economic institutions, the
fundamental root of the problems. The solution is fairly simple (although extremely
complex), nations need to transform their extractive political and economic institutions
toward inclusive ones. Or, in other words, they need to break the mold. How can the
mold be broken? The authors don’t bring a recipe but bring two cases of countries that
were able to do so: Botswana and China. Botswana is an African country that presents
superior indicators related to economic development, especially when compared to
other African counterparts. Botswana was able to break the vicious cycle, unlike most of
the other ones who couldn’t, because, since independence, it has been democratic,
holding regular and competitive elections, and has never experienced civil war or
military intervention. In Botswana, government enforces property rights, ensuring
macroeconomic stability, and the development of an inclusive market economy.
Botswana was fortunate to find diamonds in its subsoil. However, there are many
examples of other countries that were able to find similar riches but were unable to
break the mold. Botswana succeeded as it was wise in shaping its laws right after the
mineral discovery, establishing that all subsoil mineral rights were vested in the nation,
not in the tribes (which took place in Sierra Leone and led to conflicts between them).
The centralization of the resources at the government level, in addition to an efficient
and transparent management of them, enabled the country to invest in infrastructure
and public services. In China, after a disastrous economic performance under Mao
Zedong, where mandatory state purchasing of goods prevailed, after his death, the
central government decided to economically incentivize freer markets, and this was
crucial for the onset of the Chinese economic miracle that ensued. The authors highlight
the critical junctures of both countries – the post-independence measures of Botswana
and the death on Mao in China – as key elements for the breaking of the molds. But it’s
paramount that countries take advantage of these junctures to break the molds,
oftentimes countries lose the opportunity. So, every little step in getting economic and
political institutions to become more inclusive count. In the final chapter of the book, the
authors bring additional strategies that need to be considered as mold-breakers. Firstly,
they claim that prosperity can’t be engineered by multilateral institutions such as the
IMF, because they just provide a general solution to economic troubles, that normally
gets lost at the micro-level. The authors claim that the problems usually lie at the level
of micro-market failures. Oftentimes the funds from multilateral entities or international
donors end up in the hands of regimes that preside over extractive institutions. Thus, a
good portion of them get wasted and don’t reach the root of the problem. Secondly and
closely related to the goal of more political inclusion, the authors reinforce the
empowerment factor, meaning bringing up as many citizens as possible to participate in
the political processes of the country, as key to get it. Thirdly, media needs to be
independent, and can’t be bought, under any circumstance, by the ruling government.

Chapter 13 – Why Nations Fail Today

In the year 2000 Zimbabwe held a national lottery for everyone who had
kept more than 5000 Zimbabwean dollars in their bank account (following a
period of hyperinflation). The fact that it was Robert Mugabe who won this
lottery just goes to show the extent of his control over Zimbabwe’s
institutions and just how extractive those institutions had become.

The most common reasons nations fail today is because they have extractive
institutions – and Zimbabwe illustrates the economic and social
consequences of these…. By 2008 its per capita income was half that when
it gained its independence, and 2009 the unemployment rate stood at 94%.

The roots of the political and economic institutions lie in the colonial period.
Originally apartheid institutions were established for a white elite to extract
wealth from the country, but when Zimbabwe gained its independence,
these institutions were simply maintained by Mugabe. Eventually (because
of lack of inclusivity) his support waned until by the year 2000 he had to
find further resources to buy political support – so he expropriated the
 farms owned by white people and when that wasn’t enough he printed
money, which led to massive hyperinflation.

Nations fail today because their extractive institutions do not create the
incentives to save, invest and innovate. In many cases politicians stifle
economic activity because this threatens their power base (the economic
elite) – as in Argentina, Colombia and Egypt. In the cases of Zimbabwe and
Sierra Leone this led to total state failure and economic stagnation. The
countries in which this has happened include…

 Angola
 Cameroon
 Chad
 DRC
 Haiti
 Liberia
 Nepal
 Sierra Leone
 Sudan
 Zimbabwe

And the civil war, mass displacement, famines and epidemics that
accompany them… in terms of development many of these countries are
poorer today than they were in the 1960s.

Chapter fourteen – breaking the mold

This chapter looks at three case studies – Botswana, The South of America,
and China, which all managed to move from, or negotiate their way around
(in the case of Botswana) extractive to inclusive political institutions which
encouraged economic development.

Of particular interest to me is the case of Botswana – which today has the

same level of development as some Eastern European countries, despite
being as poor as most of the rest of Sub-Saharan Africa in the 1960s (at
which time there were less than 100 graduates in the entire country).

What’s especially interesting about Botswana is that in that particular

region of Africa a broadly inclusive political system was in existence pre-
colonialism – in the sense that any individual could rise up to become head
of one the various different chiefdoms in the region, and so chiefdom was
not hereditary, it was meritocratic, and someone could only be chief with
the will of the people. Thus the principal of ruling with the will of the
people, and on behalf of the people had been established for generations.

Another factor which promoted development was the fact that the English
weren’t particularly interested in Botswana. In fact in the 1890s, three
Twsana chiefs visited England and negotiated with the government to be
part of a British Protectorate (different to a colony) – In return for
protecting the region against Rhode’s South African expansionary policies
(the guy who colonised Zimbabwe and Zambia, and look how they turned
out!) all England wanted was enough land to build a railway in order to
open up the interior. For this the Twsana were pretty much left alone,
crucially unextracted and without interfering institutions which had been
set up to allow the extraction to take place.

Also significant is that, following Colonialism and the discovery of

diamonds, the Tswana chiefs passed a law that all diamond wealth was to
be national property, rather than giving the rights to individuals or
Corporations (like neoliberals would claim should be done, and like what
happened in Sierra Leone). The effect of this was masses of public money
which was then used to pay for public services. Hence development……

Something else emphasized in this chapter is that in all three cases certain
key actors made important decisions at crucial junctures in the country’s
history (when an existing leader died, such as Mao, creating a power
vacuum, or when Independence was gained in Botswana) – The decisions
taken at these crucial points in history in these countries involved either
fighting the power of entrenched elites (as in China) or establishing laws
which would prevent political corruption (like nationalising the diamond
supplies in Botswana) – it was these decisions, in contrast to decisions in
countries like Sierra Leone where a national rail line was sold off to benefit
an elite, which led to economic development.

Chapter 15 – understanding prosperity and poverty

The most interesting section of this concerns the predictive power of the
theory – which is limited given the role of agency and contingency in said
theory. However, the authors do predict that…

America and Europe are likely to get even richer than countries in most of
the rest of the world, because these are the most inclusive institutions (I’d
beg to differ given Tory Policy). Nations that have undergone no significant
state centralisation such as Afghanistan, Somalia and Haiti are unlikely to
witness any development. Some Latin American countries are set two grow
– most notably Brazil, Chile Mexico as are some African countries –
Tanzania and Ethiopia for example. Growth will not be sustained in China.

The irresistible charm of authoritarian growth…..

This section reminds us that modernisation theory is flawed – economic

growth (more Mcdonalds as Thomas Friedman might put it) does not
necessarily lead to to more inclusive political institutions.

Plenty of repressive regimes have pursued and achieve very rapid economic
growth in the last 60 years – Germany, for example, Russia, and China.

This chapter also deals with what probably won’t work in terms of
development… Firstly, any attempt at engineering policy changes such as
those attempted by neoliberalisation throughout the 1980s and 90s –
Because if a country is politically corrupt, they just subvert the policy
changes – Privatisation happens, but the people winning the contracts are
the brothers of the ministers for example, or the country says it implements
a policy but they just carries on as normal!

You can’t engineer prosperity

…because the actors within developing countries are constrained by their

institutions, and if these are extractive then any programmes designed to
engineer change will ultimately result in further extraction.

This is true of two approaches to foreign aid preferred by the West – both
the neoliberal ‘restructure your economy’ type approach and the micro-
economic approach which focuses on specific institutions.

The failure of foreign aid

As above, any aid money going into a country with extractive institutions
will ultimately end up being extracted. The authors do argue, however, that
even if only 20% of aid money reaches its ultimate destination then it’s
worth it!

What works….?
The chapter and book round off by going back to the English and US
revolutions which resulted in institutions becoming more inclusive – what is
required for development is a plurality of voices demanding to be heard by
government and actually being heard. This cannot be imposed from above,
but seems to have to become from below.

In this sense, any attempt to engineer growth and provide aid seem
pointless – the only things that make any sense are programmes oriented
towards empowerment and making sure media is free because the later
fosters the former.