Chapter 3 outlines what makes for prosperity and poverty. The differences lie in extractive vs. inclusive economic and political institutions. There are some striking examples, from the Kingdom of the Congo and the plantation colony of Barbados, through to the modern-day South Korea and not so modern-day North Korea.
We have covered the drivers of growth and A&R refers to the engines of prosperity. They write:
The ability of economic institutions to harness the potential of inclusive markets, encourage technological innovation, invest in people, and mobilize the talents and skills of a large number of individuals is critical for economic growth. Explaining why so many economic institutions fail to meet these simple objectives is the central theme of this book.
They then explain the emergence of inclusive and extractive political institutions and how they interact with the economic institutions. This leads on to the story of extractive elites and how
Fear of creative destruction is at the root of the opposition to inclusive economic and political institutions.
This is required reading and goes to the heart of what we later want to discuss in the South African context. The Why Nations Fail blog have had some interesting posts on South Africa and we now also have Prof Raymond Parsons in the building. He was closely involved in the CODESA process. I am looking forward to those lectures in early October.