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Extractive institutions discourage investment and entrepreneurship from "summary" of Why Nations Fail by Daron Acemoglu,James A. Robinson
Extractive institutions are those that are designed to extract resources from the economy for the benefit of a small elite, rather than to promote economic growth and development. In extractive societies, the political and economic institutions are set up in a way that discourages investment and entrepreneurship. This is because individuals and companies are unlikely to invest in an economy where property rights are not secure, contracts are not enforced, and there is rampant corruption. When property rights are not secure, individuals have little incentive to invest in improving their assets or starting new businesses. Without the confidence that they will be able to reap the benefits of their investments, people are hesitant to take risks. In extractive societies, property rights are often controlled by those in power, who can easily confiscate assets or change the ru...
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