Whilst one may be tempted to view this query as a complex question requiring burdensome, eye tiring diagrams and graphs, with lots of academic technical babble thrown for good measure, the authors surprisingly expound their argument with simplistic graphics and everyday prose.
They illustrate their thesis with numerous historical examples ranging from the bubonic plague of the fourteenth century – when half of the infected perished – to the beginning of the Industrial Revolution in 19th century England.
Underlying their main argument is how political and economic institutions impact the development of any given society throughout history. The impact can either be positive or negative, or initially positive (where extractive institutions are involved) to begin with, but eventually reverting back to negative territory when the real nature of the implementation of extractive institutional policy takes on its natural effect.
I’m probably using more complex language than what the authors used throughout the book – what they simply believe, is that when political and economic institution in any given society are inclusive in nature, for example, recognising citizens’ private property rights, incentivizing creativity by allowing inventors to commercially benefit from their hard work, then the overwhelming impact on that particular society will be positive and will lead to greater wealth and prosperity for them.
On the flip side of the coin, where political and economic institutions of a society or nation are extractive – in which the leaders accumulate all the wealth and resources for their own exclusive benefit – then such a society will experience hardship, poverty and eventual collapse because of bellicose competition among rival elite groups who want a slice of the action.
The authors also propound that nations need to provide inclusive environments that are conducive to creativity and innovation. They define innovation as new people, with new ideas, providing new solutions to old problems. However, they argue that the elite of any given society or polity, whose intention is to retain power and control over the population and resources, are inimical to such new advancements because it would potentially be a threat to their hegemony or dilute their powers.
Creative destruction – a phrase coined by the economist Schumpeter – a necessary component of prosperous societies, according to the authors, is met with elitist resistance and sometimes the execution of inventors whose brilliant ideas would politically emasculate them. Change, they write, does not come easily and in most cases, is always challenged by the ruling class who always have the most to lose from innovative change.
In the current digital age and economic global downturn, many similarities can be seen. Information, freedom and individual rights are the big current issues being fought over in the ‘Occupy’ tents, ‘Arab Springs’ and Wiki-style websites, all vying for some form of creative destruction. Disturbingly, such societal upheavals, according to the authors, do not always have immediate positive outcomes and in some instances, may take centuries before any beneficial effects are felt by the masses.