If we are allowed visual recreation of how this issue is addressed, we believe that making a parallel with a play could help a lot to express the context in which we operate.
Thus, the scenario is the global economy (both current and timeless as the authors approach their theory also from a historical point of view). The main actors are the States (which usually develop monologues) while setting it up political institutions and economic institutions. The stage floor, would, of course, the rights …show more content…
Perhaps the most graphic example is in China relatively recently. When Mao agrees with the CPC and the world to be first in the world in production of iron [6] , the gold price soared. Farmers sold all their tools and the consequence was a major famine that has lived the history of mankind.
Vicious circles create powerful forces aimed at perpetuating the extractive institutions. Exceptions
It is somewhat ironic to think that the first two world economic powers have divergent political institutions (in the US are inclusive while in China are extractive). The defense of the authors' argument is that China's growth is not sustainable over time. The main reason is that the extractive institutions can not generate sustained technological change because of (1) the lack of economic incentives and (2) the resistance from the …show more content…
However the theory of economic openness and political stagnation is only sustainable because Chinese labor is very cheap and this resource is immense. The theory of this work we analyze sheds more heat than light, foreshadowing a constant slowdown if China remains steadfast in this theory. We are therefore in this case, approaching inevitably to the next step, which is none other than the social demands and finally to the political demands.
Why countries fail?
Countries fail, according to the authors, because they extractive institutions who live in a constant vicious circle and they do not have enough recurring resources to support their population status comfortable life [7] . Its economic institutions do not create the necessary incentives for people to save, invest and innovate. The extractive political institutions support these economic institutions to consolidate their power goals.
The roadmap used by extractive institutions usually occurs as follows:
Abolition of private