Political centralization can lead to extractive institutions from "summary" of Why Nations Fail by Daron Acemoglu,James A. Robinson
Political centralization can be a double-edged sword. On one hand, it can promote economic growth and development by establishing law and order, infrastructure, and public services. However, on the other hand, it can also lead to the creation of extractive institutions. When power is concentrated in the hands of a few individuals or a single entity, there is a high risk of abuse of power. This can result in the creation of institutions that are designed to extract resources from the majority of the population for the benefit of the ruling elite.
In extractive institutions, the political and economic systems are designed to serve the interests of a narrow group of people, often at the expense of the broader population. This can lead to widespread poverty, inequality, and social unrest.
Moreover, extractive institutions are characterized by a lack of property rights, weak rule of law, corruption, and limited economic opportunities for the majority of the population. This creates a vicious cycle where those in power use their control over political institutions to maintain their grip on economic resources.
In contrast, inclusive institutions are designed to promote the participation of a broad segment of society in the political and economic systems. These institutions are characterized by strong property rights, the rule of law, and equal access to economic opportunities.
By promoting inclusive institutions, countries can ensure that the benefits of economic growth are shared more equitably among the population, leading to greater social stability and long-term prosperity.
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