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Being towards death

Heed not to the tree-rustling and leaf-lashing rain, Why not stroll along, whistle and sing under its rein. Lighter and better suited than horses are straw sandals and a bamboo staff, Who's afraid? A palm-leaf plaited cape provides enough to misty weather in life sustain. A thorny spring breeze sobers up the spirit, I feel a slight chill, The setting sun over the mountain offers greetings still. Looking back over the bleak passage survived, The return in time Shall not be affected by windswept rain or shine.
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A Brief Reading of Acemoglu and Robinson's "Why Nations Fail"

First, if we summarize the viewpoint of this book in the simplest terms, there is actually only one core idea, which is the concept of inclusive institutions and extractive institutions. The author's viewpoint suggests that it is precisely the difference between inclusive institutions and extractive institutions that leads to the differences in national development.

Two different government structures determine the different outcomes of economic development. To clarify the logic here, we first need to introduce what inclusive institutions are and what extractive institutions are.

Firstly, inclusive institutions can be simply described as being centered around sharing wealth, while extractive institutions are centered around extracting social resources and wealth. This fundamental difference also leads to different social forms. Under inclusive institutions, to achieve the goal of sharing wealth, the focus is on encouraging people to participate in economic activities, and to better share wealth, it emphasizes maintaining the normal operation of market economic activities, which means protecting private property. At the same time, to ensure that wealth can continue to expand and productivity can improve, inclusive institutions must ensure that emerging enterprises can emerge normally without being suppressed. In contrast, the main responsibility of extractive institutions is different.

Extractive institutions primarily serve a small number of rulers, and their main responsibility is to extract social wealth for these rulers. Therefore, the entire society pays more attention to establishing a complete extraction system to ensure that wealth can be earned. In simple terms, inclusive institutions aim to allow everyone to prosper together, while extractive institutions have the sole goal of making the rulers wealthy.

To illustrate what inclusive institutions and extractive institutions are, the author uses South Korea and its northern neighbor as examples. Young people in South Korea can receive a good education, allowing them to participate in the process of sharing and creating wealth. At the same time, companies established in South Korea can also protect your private wealth, etc. In this larger context, everyone can actively participate in economic construction and share in the results of economic development. In contrast, the northern neighbor has the opposite situation, where students do not receive a good education and must enlist in the military after graduation. Moreover, even if they work, the vast majority of the wealth they create is extracted by the most powerful families of the post-80s generation.

Having discussed inclusive institutions and extractive institutions, let's talk about their impact on economic development. First, regarding why extractive institutions are bound to fail while inclusive institutions are bound to succeed.

Before clarifying this issue, we need to mention another concept, which is creative destruction. We must first understand this concept to grasp the subsequent content. What is creative destruction? It is a theory proposed by Austrian political economist Joseph Schumpeter.

A typical case is the emergence of the iPhone, which revolutionized the mobile phone industry and ushered in the era of smartphones. Most people benefited from the advantages brought about by this transition to smartphones, but traditional phone manufacturers like Nokia and BlackBerry suffered greatly; this illustrates the negative effects of technological progress on certain groups. Of course, this is just the simplest example. If we look at creative destruction on a larger scale, these innovations can even disrupt social classes. For instance, the invention of the steam engine brought about the Industrial Revolution, which facilitated the rise of the bourgeoisie and completely overturned the rule of monarchy in Europe. Technological progress not only creates wealth but also reshapes social structures, and the European monarchy would certainly be negatively affected by this technological advancement. In the concept of creative destruction, technological progress is always accompanied by an increase in productivity, and this increase in productivity is also always accompanied by changes in social classes. Regardless of the nature of these class changes, they will inevitably harm the interests of the current ruling class, so they will do everything possible to prevent such innovations; this is Schumpeter's theory of creative destruction.

Schumpeter believed that Western monopolistic capitalists would become stumbling blocks to technological progress, and thus predicted that capitalism would inevitably perish. However, it is clear that the outcome did not unfold as he anticipated.

With the introduction of various antitrust laws in Europe and the United States, America and Europe have achieved continuous creative destruction. Of course, this does not mean that Schumpeter's theory has completely failed. The author of "Why Nations Fail" has patched Schumpeter's theory, refining it. In the new theory, the obstacle to creative destruction will not be capitalists but rather an extractive institution. As long as a country has inclusive institutions, it will not hinder the emergence of creative destruction.

A classic case of this narrative is the Qing Dynasty. The products of the West brought technological progress to the rulers of the Qing Dynasty, but these technological advancements posed a threat to their rule rather than benefits.

Technological innovation can lead to the growth of the bourgeoisie, changes in people's thoughts, and uncertainties regarding their rule; this is the fundamental reason why the Qing Dynasty rejected the entry of such technologies into China.

Rulers always create an economic system that benefits themselves. If the rulers are just a small group of people, they actually lack the motivation to embrace technological innovation. This is because new technological innovations are often not created by the ruling class; just as the steam engine could not have been invented by Kangxi, those who create and utilize technological innovations will certainly gain a rise in social class, which is the motivation for these individuals to innovate. However, this rise in social class will inevitably be resisted by the current rulers.

Extractive institutions inherently reject technological innovation. However, if the rulers are the majority, it is different. Although the inventors of technological innovations may benefit the most, the majority of people can still gain advantages from these innovations. At this point, the entire society will have the motivation to promote innovation. Only when the beneficiaries of technological innovation, that is, the majority, become the rulers of society will technological innovation be accepted. Therefore, inclusive institutions align with technological innovation.

Thus, regarding why the Industrial Revolution occurred in the West, the author provides a different narrative. He believes that it was precisely because the Glorious Revolution transformed England from an extractive institution into an inclusive institution that the Industrial Revolution occurred in England. Only under inclusive institutions can the emergence of creative destruction be guaranteed; this is a fundamental logic of the author.

Some may ask, why can some countries with extractive institutions still achieve development? The author also provides an explanation here. While it is said that extractive institutions have no future, countries under extractive institutions can develop to a certain extent. He categorizes extractive institutions into three types.

The first type is one where centralized extractive institutions cannot be established at all, a typical example being Somalia. Such a system will not develop in any way, and not only is the private sector underdeveloped, but the wealth extracted by the rulers is also limited.

The second type includes the northern neighbor of South Korea and the Congo during Mobutu's rule. This type of extractive institution has achieved centralization, but the rulers focus all their energy on extracting from the people. In this case, the top tier of the state is generally quite wealthy, but due to high levels of extraction, the people are very poor.

The third type resembles the state of South Korea during Park Chung-hee's era and the former Soviet Union. This type of government has achieved centralization, and the rulers understand better how to gain benefits through economic development, realizing that only by enlarging the economic pie can they extract more. In this situation, society can also develop, but this development has a limit: when development requires innovation, it will come to a halt. This is because their development belongs to the industrialization period, where progress relies not on technological innovation but on technological learning, capital accumulation, and advancements in production machinery. This type of development is completely controllable for the rulers, as they know what is being developed and which industries can grow. Therefore, they can strategically position themselves in advance to divide the majority of the benefits of societal development.

Moreover, due to this advance positioning, even if development occurs, their ruling status will not be shaken. However, when true technological innovation is needed, this development will abruptly stop. This is because genuine technological innovation is inherently unpredictable. For example, the emergence of AI is completely unpredictable, and such innovations will instill fear and instinctive resistance in the rulers. The result of this resistance from the rulers is the suppression of innovation, and after suppressing innovation, economic development will inevitably stagnate.

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