Bill Gates jumps into the ‘Why Nations Fail’ debate

Daron Acemoglu and James Robinson’s book Why Nations Fail, makes the case that strong inclusive institutions rather than geographic, cultural, or market-based factors are the primary reasons why nations succeed or fail, continues to provoke strong responses from the leading voices on aid and international development.

Last October, a critical review by Jeffrey Sachs in Foreign Affairs, argued that their argument was too simplistic, by dismissing cases where authoritarian regimes had instituted successful economic reforms as well as the frequently pivotal role of natural resources and geography. The review prompted a rare rebuttal from the authors that spilled over into an ongoing argument on Twitter. 

Now, Bill Gates has joined the debate with his own critical take on the book. "Normally, I’m fairly positive about the books I review, but here’s one I really took issue with," the CEO-turned philantropist writes:

The authors believe that political “inclusiveness” must come first, before growth is achievable. Yet, most examples of economic growth in the last 50 years–the Asian miracles of Hong Kong, Korea, Taiwan, and Singapore–took place when their political tended more toward exclusiveness.

When faced with so many examples where this is not the case, they suggest that growth is not sustainable where “inclusiveness” does not exist. However, even under the best conditions, growth doesn’t sustain itself. I don’t think even these authors would suggest that the Great Depression, Japan’s current malaise, or the global financial crisis of the last few years came about because of a decline in inclusiveness.

The authors ridicule “modernization theory”–which observes that sometimes a strong leader can make the right choices to help a country grow, and then there is a good chance the country will evolve to have more “inclusive” politics. Korea and Taiwan are examples of where this has occurred.

Gates also rejects the book’s favorable comparison of how he made his fortune to the path taken by Mexican billionaire — and re-confirmed richest man in the world — Carlos Slim, writing, "Almost certainly, the competition laws in Mexico need strengthening, but I am sure that Mexico is much better off with Slim’s contribution in running businesses well than it would be without him." The two magnates recently announced a collaboration to fund efforts to reduce hunger. 

Some of the response is clearly also related to Acemoglu and Robinson’s highly critical take on the effectiveness of foreign aid. But these days, it’s a rare book on economics or public policy that still provokes strong responses nearly a year after its release.