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June 24, 2017

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Recipes for nations of the world to fail or succeed

August is the holiday month — the time when we pause to take stock of a hectic first half year, and wonder what lies ahead.

Nestled in the hills of northern Laos, the ancient city of Luang Prabang sits around a bend in the river Mekong, isolated for centuries and renowned today as a city of 15th century Buddhist temples, protected as a UNESCO Heritage site.

It was a good place to catching up on one's history to try to comprehend the uncertain future.

The recent best-seller by MIT Economics Professor Daron Acemoglu and Harvard political scientist James Robinson:

"Why Nations Fail: The Origins of Power, Prosperity and Poverty" (Penguin 2012) argued that national failure were all due to man-made factors, more specifically, how political institutions became extractive, rather than inclusive.

Acemoglu and Robinson is provocative because they stir up the debate on why Latin American economies never quite made it, even though they were resource rich.

They did not succeed despite huge wealth because their political institutions remained extractive, meaning a few hundred families or elite essentially controlled the key resources of the continent for their own benefit. Another obvious example is the difference between North Korea, one of the poorest countries around, and South Korea, an innovative and dynamic economy capable of challenging the best of the West, by learning from the West.

The Acemoglu and Robinson book touches on a raw nerve because many in the West are unsure whether they will continue to be dominant in the years to come.

They argue that China will sooner or later stop growing because the institutions there are becoming extractive.

But as one review argued, it cannot be ruled out that Chinese institutions would evolve into inclusive systems.

After all, China could not have succeeded without being inclusive — taking more than half a billion out of poverty.

In the same genre, Stanford Professor of Classics and History, Ian Morris's 2011 book, "Why the West Rules — For Now: The Patterns of History and What They reveal about the Future," takes also the grand sweep, arguing not only about the factors of biology and sociology, but also about geography.

So instead of Acemoglu and Robinson's dictum, "institutions, institutions and institutions," Morris considers that it is more about "location, location, location."

He argues that biology and sociology explain the similarities in development between the East and West, but "it is geography that explains why the West rules."

This view concurs with Asian historian Wang Gung-wu's perceptive insight that the West developed maritime and today air and cyberspace technology and power, whereas China remains essentially a continental or land-based power.

Geography does shape behavior and perception.

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