An interesting example is the comparison between Nogales, Mexico and Nogales, Arizona. On one side of the border, in the US north of the city has been around since the late 18th century a funktioniernden state with a liberal constitution and guaranteed rights that are allowed to perform on the principle of equality to everyone who is willing to be entrepreneurial in the to engage private industry. This sets the right incentives for individual performance readiness for hard work, the fruits of which are largely granted to the individual who has earned it. The American "pursuit of happiness" is the real engine of economic success and where he is disturbed at least by government intervention, he is the most successful. It leaves the individual free space to develop themselves and to be "his own fortune". At the same fundamental democratic rights guaranteed in the Constitution and state power will be reined in by politically sophisticated "checks and balances". The result is stable demokratisce conditions within which the economy can develop. The essence of democracy in America (Tocqueville) offers the guarantee of an open and stable social order. Completely different picture on the other side of the border. There also live citizens of Nogales, who find the same ground and the same weather and sometimes the same families come. Only they are doing on this side of the border not even halfway as good as their American brothers and sisters. Mexico has never recovered, compared to the United States from the exploitative colonial rule of the Spaniards. Instead of a democratic constitution, there were revolutions. The governments gave the jack in the hand and stability and progress could be set at any time in the genetics of Mexicans. There is no creative destruction (Schumpeter), no innovation and no technological progress, because there is no effective competition which would be protected by the state (or do you know about except chili and tacos a product of importance from Mexico?). In America the government is against monopolies like Microsoft before by legal means. In Mexico there are monopolists like Carlos Slim (the currently richest people in the world), who pulled through targeted lobbying the state as an ally on their side. We see similar in India (see Lakshmi Mital).
We Germans know an example of a closed society. The GDR was a perfect example of an exploitative, undemocratic, extractive State in which there was no competition and therefore innovation and progress never came to pass. An even more extreme example, North and South Korea.
Of all these (sister) countries can not say that people have to take here in different geographical circumstances or consideration would be marked by a fundamentally different culture. Rather, it is the state institutions that determine whether it is a country up or with more or less large steps towards decline and decay.
One may ask why the Soviet Union well into the 80ies was able to present such a breathtaking growth figures of course. Because without a doubt, it was at the Comrades behind the eiserenen curtain around a closed society, good life in the party cadres, officials and activists, the rest of the people, however, had to starve. Acemoglu & Robinson can explain this effect. While centralized States, whose economies are characterized by command and coercion rather than by a price system of the market, certain sectors can be very effective conduct to a higher output of products and services, no meaningful incentives for autonomous action and thus sustainable growth are set elsewhere. Sooner or later, there is no appreciable progress more and innovations get dressed, if at all, over years (the "Trabant" says hello). The result is the rapid economic decline and the resolution that can be prevented if necessary by military force (as in North Korea by a de facto military dictatorship).
So let's take stock: failure States when trying to enforce the "wrong" political institutions to the welfare of the population. That may work for some time, however, leads to the result to an exploitation of the majority by a few cadres and monopolists who the state system firmly in her grasp. The rest has no incentive to be productive and thus remain almost inevitably innovations and it threatens the gradual decay.
The thesis of Acemoglu & Robinson may be simple, but it is now forgotten. Appalling that nowadays dominates the view of capitalism English coinage was on all miseries debt. Here cause is actually mistaken for effect. Since the great business ethics Adam Smith, we know that a strong community needs the "invisible hand" of the market and equal opportunities to prosper and grow. With command and forced contrast, the wrong incentives are set and few enrich themselves at the expense of the majority. Let us learn from our own history, rather than relying on the current political mainstream. Reading this book is a first step in the right direction.
