So, why are some countries rich and others poor? While a nation’s geography and culture may have some influence, the overwhelming evidence from history tells a clear story. The Korean experiment and the Reversal of Fortune both demonstrate that institutions are the most important fundamental cause of differences in prosperity.

A society’s economic destiny is not sealed by its latitude or its ancient traditions. It is shaped by the “rules of the game” it chooses to live by. Countries are prosperous when they have inclusive institutions that create incentives for their citizens to invest, innovate, and save. They are poor when they have extractive institutions that fail to do so. This is a powerful and ultimately hopeful message: poverty is not inevitable, but is instead a consequence of choices about how we organize our societies.