Institutions Are Destiny

With the 4th of July this past week, it seems appropriate to review the hottest academic book on politics of the past year, "Why Nations Fail."

The book is written for a general audience, and if you're feeling smart and ambitious, it is well worth reading. It aims to be the "Guns, Germs, and Steel" of the social sciences. The thesis in "Guns, Germs, and Steel" is that Geography/Climate is Destiny. Civilization arose and thrived where geography and climate endowed people with the most nutritious and easily cultivatable food. Those locations created dynamic human societies that gave rise to complex socio-political institutions, sophisticated languages, inventions, and so forth.

"Why Nations Fail" addresses not the rise of civilization but rather the success and failure of modern nation-states. Why, for example, has the United States succeeded so much better than Mexico? The answer: Institutions are Destiny. Where inclusive, democratic-style political institutions are put in place early on, they produce economic progress and all good things, like rapid technological advances. American colonists got it right; Spanish colonists did not. All else flows from this. (Though, if forced to pick a single moment on which the fulcrum of history swings, "Why Nations Fail" would choose the 1688 Glorious Revolution in England rather than the founding of America.)

Most people I know already believe that the founding of the United States and its associated institutions (Declaration of Independence and the Constitution) are in fact responsible for the great things that have happened in this country. But this book only occasionally looks at the United States. It gazes more frequently at examples of poor political institutions, probably because there are many more examples to choose from. In recounting all the political institutions you've never heard of (from long-gone African kingdoms to colonial patterns in Central America), the book takes readers on a fascinating journey.

The book excels at drawing connections between those institutions and good economic outcomes, like growth and innovation. I've always believed that institutions are destiny. This book illustrates the ways in which institutions shape social and economic activity by using broad patterns and, at times, careful historical process-tracing. The case of the Southern United States is a fascinating example. The South failed to get its institutions right after the Civil War and thus descended into another 100-plus years of less robust growth and economic progress than the rest of the United States.

What does the book not do? It does not explain how these institutions arise, though at times it wants to. It also does not give enough credit to the importance of values and ideas. It might also underplay the importance of human capital (i.e., education). Wordiness is a problem; many chapters repeat main points far too frequently. But, all in all, a fabulous book and amazing achievement.