Why Nations Fail

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Nations fail economically because of extractive institutions.
These institutions keep poor countries poor and prevent
them from embarking on a path to economic growth. This is
true today in Africa, in places such as Zimbabwe and
Sierra Leone; in South America, in countries such as
Colombia and Argentina; in Asia, in countries such as
North Korea and Uzbekistan; and in the Middle East, in
nations such as Egypt. There are notable differences
among these countries. Some are tropical, some are in
temperate latitudes. Some were colonies of Britain; others,
of Japan, Spain, and Russia. They have very different
histories, languages, and cultures. What they all share is
extractive institutions. In all these cases the basis of these
institutions is an elite who design economic institutions in
order to enrich themselves and perpetuate their power at
the expense of the vast majority of people in society. The
different histories and social structures of the countries lead
to the differences in the nature of the elites and in the
details of the extractive institutions. But the reason why
these extractive institutions persist is always related to the
vicious circle, and the implications of these institutions in
terms of impoverishing their citizens are similar—even if
their intensity differs.
In Zimbabwe, for example, the elite comprise Robert
Mugabe and the core of ZANU-PF, who spearheaded the
anticolonial fight in the 1970s. In North Korea, they are the
clique around Kim Jong-Il and the Communist Party. In
Uzbekistan it is President Islam Karimov, his family, and his
reinvented Soviet Union–era cronies. These groups are
obviously very different, and these differences, along with
the variegated polities and economies they govern, mean
that the specific form the extractive institutions take differs.
For instance, because North Korea was created by a
communist revolution, it takes as its political model the one-