Inclusive institutions protect property rights and distribute power. Extractive institutions concentrate both. This single distinction predicts economic prosperity.
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Daron Acemoglu
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Geography is not destiny. South Korea and North Korea share the same geography but have opposite institutions—and opposite outcomes.
The divergence between inclusive and extractive institutions started centuries ago and compounds every year, creating massive wealth gaps.
Institutions persist through inertia. But critical junctures—wars, revolutions, epidemics—create windows for institutional change.
Nations that switched from extractive to inclusive institutions (South Korea, Botswana) experienced explosive growth. Those locked in extraction stagnate.
Extractive elites have no incentive to invest in education or innovation. They extract what exists rather than create new wealth.
The book proves that institutions, not culture or geography, determine national prosperity. The evidence is overwhelming.
Understanding institutional dynamics explains why foreign aid, top-down development, and even resources can fail to create prosperity.
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