Yet a more important story for human welfare is the persistence of yawning gaps between the world 39 s haves and have nots. Adjusted for purchasing power, the average american income is 50 times that of a typical afghan and 100 times that of a zimbabwean. Despite two centuries of economic growth, over a billion people remain in dire poverty. In the late 1990s jared diamond and david landes tackled head on the most vexing questions: why did europe discover modern economic growth and why is its spread so limited? now, daron acemoglu, an economist at mit, and james robinson, professor of government at harvard, follow in their footsteps with why nations fail. They spurn the cultural and geographic stories of their forebears in favour of an approach rooted solely in institutional economics, which studies the impact of political environments on economic outcomes. Neither culture nor geography can explain gaps between neighbouring american and mexican cities, they argue, to say nothing of disparities between north and south korea. They offer instead a striking diagnosis: some governments get it wrong on purpose.

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Amid weak and accommodating institutions, there is little to discourage a leader from looting. Such environments channel society 39 s output towards a parasitic elite, discouraging investment and innovation. Inclusive institutions protect individual rights and encourage investment and effort.

Britain, wellspring of the industrial revolution, is the chief proof of this theory. Small medieval differences in the absolutism of english and spanish monarchs were amplified by historical chance. When european exploration began, britain 39 s more constrained crown left trade in the hands of privateers, whereas spain favoured state control of ocean commerce. The new world 39 s riches solidified spanish tyranny but nurtured a merchant elite in britain.

Its members helped to tilt the scales against monarchy in the glorious revolution of 1688 and counterbalanced the landed aristocracy, securing pluralism and sowing the seeds of economic growth. Within a system robust enough to tolerate creative destruction, british ingenuity not so different from french or chinese inventiveness was free to flourish. In central and south america european explorers found dense populations ripe for plundering. Britain 39 s north american colonies, by contrast, made poor ground for extractive institutions indigenous populations were too dispersed to enslave. Colonial governors used market incentives to motivate early settlers in virginia and massachusetts. Where it lapsed, in southern slaveholding colonies, a long period of economic backwardness resulted.

This destabilises existing industries, keeping economic and political power dispersed. A partnership in which capital poor sailors and rich venetians shared the profits from voyages, allowed those of modest background to rise through the ranks. From the late 13th century the ducal council began restricting political and economic rights, banning the commenda and nationalising trade.

By 1500, with a stagnant economy and falling population, venice 39 s descent from great power was well under way. The french revolution provides an example, but also demonstrates the authors 39 unfortunate habit of ignoring historical detail. Revolution put paid to absolutism and led, after a long and messy struggle, to the creation of an enduring republic. Institutions, in the form of a fledgling merchant class, provided momentum for reform, making the difference between the successful french revolution and failed uprisings elsewhere. But the authors give short shrift to the presence and meaning of enlightenment ideals. It is difficult to believe this did not matter for the french transition, yet the intellectual climate is left out of the story. History is contingent, the authors apologise, but history is what they hope to explain.

There, a co operative effort by tribal leaders secured the protection of the british government against the marauding imperialism of cecil rhodes. Despite its considerable diamond wealth, which might have spawned a corrupt and abusive elite, botswana became a rare success in africa, assisted by the benevolence of its leaders and by having a tiny population. At times the authors come dangerously close to attributing success to successfulness. The intuition behind the theory is nonetheless compelling, which makes the scarcity of policy prescriptions frustrating. China 39 s growth may be rooted in the removal of highly oppressive maoist institutions, but its communist government remains fundamentally extractive.