Why Nations Fail : Economic Growth And Prosperity

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Question 1:

The central thesis of AR in their book “Why Nations Fail” is that inclusive economic and political institutions drives economic growth and prosperity. Extractive institutions, on the other hand, where the majority work for the benefit of the few impedes and sometimes block economic prosperity. The other part to the theory is that inclusive economic and political institutions are often the outcome of conflict between elites resisting economic growth and political change and those working to put limits and constrains on the economic and political power of existing ruling elites.

Inclusive institutions emerge during critical junctures, for example during the Glorious Revolution in England. This happens when circumstances weaken the grip of elites of power and control, their opponents become stronger, and incentives for pluralistic society are created.

There many characteristics for inclusive institutions: They allow free press to flourish, respect for property rights, fair and independent judicial system, removes barriers to entry for new businesses, and allow people to make decisions and choices that they like. They also provide public services such as roads, communication and health services that support business and trade.

As an Example, AR provide England, USA and Australia as countries with inclusive institutions. The inclusive institutions in England came into existence as a result of conflict with monarchy and the ruling elites that led to the
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