This is in contrast to inclusive institutions, which are set up for the benefit of all or most of the population. The institutional perspective of cross-country differences in economic outcomes gives contrasting explanations on the persistence of extractive institutions in developing countries. Extractive economic institutions, which lack these properties, create poverty. Colonization, social fragmentation and the existence and use of natural resources are the most frequently discussed causes in the available literature. Extractive political institutions are narrow, authoritarian and controlled by a small political elite. Why Nations Fail: The Origins of Power, Prosperity, and Poverty , by Daron Acemoglu and James A. Robinson tells the story of Venice. How to use extractive in a sentence. In his new book, Professor of Economics at the University of the Free State, Phillipe Burger, argues that in many cases, these institutions became even more extractive: ‘legislation passed by the ANC-government [has] strengthened the powers of traditional chiefs and continue to undermine the tenure rights of the population’. Economies and Societies can either be inclusive or extractive. We call such institutions … extractive because such institutions are designed to extract incomes and wealth from one subset of society to benefit a different subset. Daron Acemoglu and James Robinson. Variation in economic institutions is created by di⁄erences in political institutions. Natural resources have the potential to drive growth, development and poverty reduction in developing countries. These political institutions lack a rule of law, a system of checks and balances, and keeps power concentrated in the hands of a small group without checks and balances. Inclusive economic institutions are the result of polit-ical choices which arise under inclusive political institutions; a strong state and a broad Extractive institutions can only deliver growth when the economy is "catching up" to the technological frontier: when innovation is needed to push the frontier they will fail. Extractive institutions are institutions which are set up to provide benefit to a select elite. Extractive economic institutions are typically a result of extractive political institutions, which similarly favor those in positions of power. One of the strengths of the book is its emphasis on the intrinsic randomness of history. Key to our argument in Why Nations Fail is the idea that elites, when sufficiently political powerful, will often support economic institutions and policies inimical to sustained economic growth. In short, states that developed inclusive economic and political institutions prospered, while countries with extractive economic and political institutions stagnated. Who Are the Extractive Elites? The extractive industries sector plays a dominant economic, social and political role in the lives of 3.5 billion people living in 81 countries, 51 of which are now compliant with the Extractive Industries Transparency Initiative, a global standard for transparency and accountability. The Beginning Logic of Extractive Institutions The Logic of Extractive Institutions Sustained growth only possible under inclusive institutions. Extractive definition is - of, relating to, or involving extraction. Growth, and inclusive institutions that will support it, will create both winners and losers.
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