NOEL KING, HOST:
Why do some countries succeed while others fail? It's been a shaky few years for American institutions. And many of us have asked that question in one form or another. Greg Rosalsky from our Planet Money podcast asked some researchers.
GREG ROSALSKY, BYLINE: It's one of the oldest questions in economics. Why do some nations get rich while others stay poor? Some have argued it's all about geography. Others have argued it's all about culture. Now MIT economist Daron Acemoglu and University of Chicago economist James Robinson have another argument.
JAMES ROBINSON: Yeah, I mean, the central thesis is that economic prosperity, you know, hinges on inclusive institutions.
ROSALSKY: Inclusive institutions like representative governments, good public schools and open markets. Countries with inclusive institutions educate their population. They fight poverty and disease. They create opportunities and incentives for people to prosper by doing work that is useful to society. Acemoglu and Robinson contrast inclusive institutions with extractive institutions. In countries with extractive institutions, elites use state power to get rich through corruption or exploitation. In their book, "Why Nations Fail," Acemoglu and Robinson tell the story of Carlos Slim, who became the richest man in Mexico by getting ownership of the country's national phone and telecommunications network.
ROBINSON: Carlos Slim made his money by getting his friends in the government to privatize a monopoly, you know? And that was shuffling money, taking money from ordinary Mexicans and giving it to Carlos Slim. But it also reduced national income in Mexico.
ROSALSKY: When Acemoglu and Robinson wrote "Why Nations Fail" a decade ago, they began with a chapter comparing Mexico with the United States. And they argued America is a richer country because of its more inclusive institutions. While they acknowledge America's serious flaws, like its history of racism, they say our institutions have enabled us to make progress. They say the country has prospered because of institutions like a robust legal and patent system, world-renowned universities and a government that has historically been responsive to social movements for change. So how do they feel about American institutions now? Acemoglu was blunt.
DARON ACEMOGLU: U.S. institutions are really coming apart at the seams. And we have an amazingly difficult task of rebuilding them ahead of us.
ROSALSKY: In their view, our institutions have become less inclusive and more extractive, contributing to growing economic problems. Wage growth for most has stagnated. Social mobility has plummeted. Our labor market has been splitting into two, where the college-educated thrive, and those without a degree watch their opportunities shrivel.
ACEMOGLU: Working-class people in the United States have been left out both economically and culturally.
ROSALSKY: And that, he says, is a big factor leading people to lose faith in the country's institutions.
ACEMOGLU: We are still at a point where we can reverse things. But we - I think if we were to paper over these issues, we will most likely see huge deterioration in institutions. And it can happen very rapidly.
ROSALSKY: Ten years ago, Acemoglu and Robinson used chapter one of their book to explain why America was a story of institutional success. Let's hope they don't have to revise their book. Greg Rosalsky, NPR News.
(SOUNDBITE OF MOKHOV'S "GOLDEN WAVES") Transcript provided by NPR, Copyright NPR.
