Why Nations Fail

part to fortunate turns of contingency.
• How many regimes reigning over absolutist and
extractive institutions steadfastly resisted the spread of
new technologies unleashed by the Industrial
Revolution.
• How Europeans themselves stamped out the
possibility of economic growth in many parts of the
world that they conquered.
• How the vicious circle and the iron law of oligarchy
have created a powerful tendency for extractive
institutions to persist, and thus the lands where the
Industrial Revolution originally did not spread remain
relatively poor.
• Why the Industrial Revolution and other new

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technologies have not spread and are unlikely to
spread to places around the world today where a
minimum degree of centralization of the state hasn’t
been achieved.
Our discussion will also show that certain areas that
managed to transform institutions in a more inclusive
direction, such as France or Japan, or that prevented the
establishment of extractive institutions, such as the United
States or Australia, were more receptive to the spread of
the Industrial Revolution and pulled ahead of the rest. As in
England, this was not always a smooth process, and along
the way, many challenges to inclusive institutions were
overcome, sometimes because of the dynamics of the
virtuous circle, sometimes thanks to the contingent path of
history.
Finally, we will also discuss how the failure of nations
today is heavily influenced by their institutional histories,
how much policy advice is informed by incorrect
hypotheses and is potentially misleading, and how nations
are still able to seize critical junctures and break the mold
to reform their institutions and embark upon a path to
greater prosperity.

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