Why Nations Fail: Lessons from the Top
November 21, 2024
The book Eenzaam aan de top ("Alone at the Top") focuses on the elite, a subject that recalls the Nobel Prize-winning Why Nations Fail. Both books touch on a central theme: how the behavior of elites impacts society's well-being.
A few days ago, I wrote the jury report for Award 5.0 and included a section on food prices. I discussed this with a past winner, an expert in the field, who corrected me by pointing out that high food prices in Curaçao are not solely due to imported inflation. The market's oligopolistic structure also drives them.
This insight was validated when I read in the Antilliaans Dagblad on November 20, 2024, that the price of fruits and vegetables has quadrupled over the past decade. Based on research by the Fair Trade Authority, this finding reflects systemic issues. Today, November 21, I read further confirmation in the news: supermarkets have collectively agreed on 30-40% profit margins.
The article doesn't mention the deteriorating quality of fruits, vegetables, and other products. Premium brands are becoming rare exceptions, replaced by goods of lower quality, often below "B-brand" standards. Expired or near-expired products are not uncommon.
A few years ago, a scandal erupted when frozen meat was discovered in a supermarket freezer years past its expiration date. The backlash was so severe that angry consumers nearly took matters into their own hands. In another incident, an importer of expired products suggested on live television that it was wasteful to discard them and that they should be donated to the poor.
This pattern isn’t limited to food. Another elite segment—medical specialists—also prioritizes profits, often charging exorbitant fees. Recently, the courts ruled that their earnings must be more balanced, signaling a shift. However, the underlying issue remains too many individuals and entities are focused on rent-seeking.
The Problem of Rent-Seeking
Rent-seeking is an economic concept in which individuals or entities seek to increase their wealth without contributing value to society. It’s a form of extraction driven by the desire to profit at any cost, regardless of the harm done to others. Often this profit is taken abroad, leaving the local economic chain.
The consequences are clear. Income inequality, reflected in the Gini coefficient, highlights the vast gap between rich and poor. When elites prioritize their gain, they foster extractive institutions—a hallmark of nations that fail. These institutions exclude rather than include, serving the interests of a few while destabilizing society as a whole.
The Alternative: Inclusion
Contrast this with the concept of inclusion. Books like Profits at the Bottom of the Pyramid show that it’s possible to adjust prices to fit the budgets of the poor while still allowing elites to earn a fair profit. This inclusive approach benefits all stakeholders and avoids the destabilizing effects of inequality.
While Why Nations Fail might feel abstract, the real-world examples of food and healthcare in Curaçao show how extraction plays out in everyday life.
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We’ll explore these topics in-depth during an upcoming webinar and book discussion. Don’t miss the opportunity to dive deeper into how inclusivity can shape a better future.
Here are the links to register:
[Webinar Registration]
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