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South Korea and North Korea diverged due to different institutions from "summary" of Why Nations Fail by Daron Acemoglu,James A. Robinson
South Korea and North Korea provide a compelling case study of how institutions can shape the destiny of nations. Decades ago, these two countries were relatively similar in terms of their economic development and living standards. However, over time, they diverged significantly, with South Korea becoming a prosperous and democratic nation, while North Korea remains impoverished and totalitarian. The key difference between the two Koreas lies in their institutions. South Korea embraced inclusive institutions that allowed for economic growth and innovation. In contrast, North Korea adopted extractive institutions that stifled entrepreneurship and progress. In South Korea, property rights were protected, the rule of law was upheld, and political power was distributed among various groups. These inclusive institutions created a conducive environment for businesses to thrive, leading to economic prosperity. On the other hand, North Korea's extractive institutions concentrated power in the hands of a select few, leading to widespread corruption and inefficiency. The lack of property rights and the absence of the rule of law deterred investment and innovation. As a result, North Korea remains mired in poverty, with its citizens suffering from deprivation and repression. The divergent paths taken by South Korea and North Korea illustrate the profound impact that institutions can have on a nation's development. Inclusive institutions promote economic growth, social stability, and political freedom, while extractive institutions breed poverty, inequality, and authoritarianism. The case of the two Koreas serves as a stark reminder of the importance of building inclusive institutions to ensure the long-term success of a nation.
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