Acemoglu and Robinson - Book Report/Review Example

? Acemoglu and Robinson THE THESIS OF ACEMOGLU AND ROBINSON. Acemoglu and Robinson said that the modern economic history is directly related to the political events of Europeans of one to two centuries ago. In the 18th and 19th centuries, the colonizers were all over the world. In each section of the world, the colonizers had to make a choice. They had to settle on that part of the world or use it from outside as a colonial power. According to Robinson and Acemoglu the colonizers had to decided to stay in parts where disease were not common, that is going to stay in healthier parts of the world and exploiting others which were not healthy from far. In parts, which the Europeans migrated, places like the U.S, and Australia, they make “Neo-Europe … with strong emphasis on private property and checks against government power”. This is “inclusive” political institutions. In the parts, which they decide to exploit more from afar, they put undemocratic political institutions that they describe as “extractive”. These made institutions became deeply rooted because they cast a long shadow. Extractive political institutions made in the 19th century stay by large extractive political institutions today. Robinson and Acemoglu say, “The colonial state and institutions persisted even after independence.” ( Acemoglu & Robinson 2006). They believe that inclusive 19th century political institutions lead to inclusive economic institutions, which then lead to prosperity.  On the contrary, extractive political institutions lead to extractive an economic institution, which brings economic failure. The theory says that, today’s economic winners are the parts, which Europeans went to and settled practically two centuries ago. Those nations, which have failed, are the ones, which the Europeans created long-lasting extractive economic and political institutions. Acemoglu and Robinson think that political institutions matter most. Therefore, political institutions play a significance role for economic performance and geographical factors does not really count. Actually, Acemoglu and Robinson put that the fact that a town is next to a rich country is likely to grow and is “an entirely different proposition from the geography hypothesis which claims that geographical factors are a crucial determinant of cross-country or cross region income differences” ( Acemoglu & Robinson 2006). Although, the thesis of Robinson and Acemoglu, link political institutions to economic performance. We find that the as already noted, countries like Taiwan and Korea in the 1960s and 1970s and China 1980s had a rapid growth in economic development despite the political institutions because they invested heavily in infrastructure, technological and heavily in education. In conclusion, Robinson and Acemoglu highlight innovation as the root to economic growth, while inclusive political institutions as the key to innovation. They believe that inclusive political institutions will make room for changing innovation. At the hub of their case is the idea that only comprehensive political institutions will create the room for dynamic innovation.  Otherwise, stakes of the politicians and the major present economic powers will suppress the innovation. As shown countries that have inclusive political governments, which extend political and property rights as wide as possible in providing infrastructure and enforce laws has the greatest economic growth and have the most growth in the end. Acemoglu and Robinson emphasize that, those countries with "extractive" political systems which small number of people has power fail, to grow broadly after small economic growth (Acemoglu & Robinson 2006). COUNTRIES CHOOSEN TO EXPLAIN THE THESIS OF AR . China as the Richest Country . In a country like China, institutions are vital for development to occur. We find that democratic which is inclusive institution is vital for stable economic growth experienced in China. The democratic political institutions with inclusive economic institutions are required for a long-term development. In China, the effective governance requires institutions that are exclusive for outsiders and inclusive for insiders.hen the market reforms took place in 1978, china has moved from a market-based economy to an experiences social and economic development. Their GDP growth is about 10 percent per year, more than 500 million people has moved out of poverty. China is the second, largest economy and is currently playing an important role in the economy. Base on the arguments of AR, it is clear that the issue of inclusive and “extractive” and “inclusive” institutions does not apply here; China is still a developing country. In 2012, China had a gross national income per capita of $6,091 making it 90th in the world. As shown by these data Population 1.351 billion 2012 GDP $8.358 trillion 2012 GDP growth 7.8%2012 Inflation 2.7%2012. However, they were about 128 million people who still live in poverty of about $1.8 dollar per day. China is the second largest country with very poor people high economic growth has brought many challenges, which include rapid urbanization, high equality, and external imbalances. This is calling for policy adjustments in order for China to grow economically, to change from middle class to high class is difficult that to move from low class to middle class. China is planning 2011-2015 to address the problems they have. It includes the needs to improve needs of education and healthcare and increase social protection. The annual target is about 7 percent with intentions to improve the quality of life (World Bank Report, 2013). THE WORLD BANK DATA Economic review of china. Summarize of Doing Business 2014 and 2013 data for China (Acemoglu & Robinson 2006). Region East Asia & Pacific Income Category Upper middle income Population 1,350,695,000 GNI Per Capita (US$) 5,740 City covered Shanghai Doing Business 2014 Rank Doing Business 2013 Rank*** Change in Rank 96 99 3 Doing Business 2014 DTF** (% points) Doing Business 2013 DTF** (% points) Improvement in DTF** (% points) 61.51 60.18 1.33 Topics DB 2014 Rank DB 2013 Rank Change in Rank Starting a Business    158 153 -5 Dealing with Construction Permits    185 185 No change Getting Electricity    119 116 -3 Registering Property    48 47 -1 Getting Credit    73 82 9 Protecting Investors    98 95 -3 Paying Taxes    120 122 2 Trading Across Borders    74 74 No change Enforcing Contracts    19 19 No change Resolving Insolvency    78 80 2 =Doing Business reform making it easier to do business. =Doing Business reform making it more difficult to do business. Egypt as the Poorest Country . Egypt has a Population 80.72 million 2012, GDP $257.3 billion 2012 GDP Growth 2.2%2012 Inflation 7.1% 201.Egypt still undergo a process of political transition, the country has undergo many political changes from 2011 that toppled the term of former president Hosni Mubarak. Mohamed Morsi won the elections in june30, 2012 with 51.7 votes. He took office and a new constitution was passed in December2012 in a referendum. After a mass demonstrations the president was removed in July 2, 2013 and interim president was sworn in on July 4.constituion declaration was made on July 9 where by an interim government was formed on July 16, 2013(World Bank Report, 2013). The first interim government met for the first time in September 8, 2013. Now the country is planning to hold a presidential election in 2014.the economic growth of Egypt is weak, the gross public debt both domestic and external is increasing to nearly 100 percent by the end of June 2013. Most importantly is that about 15 to 29 people of age are unemployed. Egypt is lacking inclusive political instution, which according to AR, which is true, because according to Egypt, is not lagging behind in terms of economic growth. According to World Bank, doing business, freedom is achieved in democratic political environments where the governments answer their own people; the rule of law prevails; freedom of association, expression and belief and respect is there which then will bring economic development (World Bank Report, 2013). The economic review of Egypt Region Middle East & North Africa Income Category Lower middle income Population 80,721,874 GNI Per Capita (US$) 3,000 City covered Cairo Doing Business 2014 Rank Doing Business 2013 Rank*** Change in Rank 128 127 -1 Doing Business 2014 DTF** (% points) Doing Business 2013 DTF** (% points) Improvement in DTF** (% points) 56.31 56.18 0.13 Topics DB 2014 Rank DB 2013 Rank Change in Rank Starting a Business    50 44 -6 Dealing with Construction Permits    149 144 -5 Getting Electricity    105 104 -1 Registering Property    105 106 1 Getting Credit    86 82 -4 Protecting Investors    147 147 No change Paying Taxes    148 149 1 Trading Across Borders    83 81 -2 Enforcing Contracts    156 155 -1 Resolving Insolvency    146 141 -5 =Doing Business reform making its easier to do business. =Doing Business reform making its more difficult to do Conclusion of World bank and AR thesis. In conclusion, According to the president of World Bank in June 7, 2013, their main objective was to work on climate development in order to end poverty; therefore, there was no need for job creation to end poverty and boost economic growth in all countries. In Egypt economic freedom score is 54.8, it is economy is the 125th freest in the 2013 Index. The overall score is 3.1 points lower than previous year, showing decline in investment and labor freedom. While china economic is about 51.9, making it 136th freest in the 2013 index. It is overall score is 0.7 higher with improvement in 10economic freedoms. Therefore, AR had a somehow were right to analyze the economic growth in terms of their political institutions, that is in inclusive political institution led to economic development( Acemoglu & Robinson 2006). References Acemoglu, D., & Robinson, J. A. (2006). Economic origins of dictatorship and democracy.Cambridge: Cambridge University Press. Read More