While economic institutions are critical for determining whether a country is poor or prosperous, it is politics and political institutions that determine what economic institutions a country has. Ultimately the good economic institutions of the United States resulted from the political institutions that gradually emerged after 1619….

Different patterns of institutions today are deeply rooted in the past because once society gets organized in a particular way, this tends to persist…. This persistence and the forces that create it also explain why it is so difficult to remove world inequality and to make poor countries prosperous…

There is no necessity for a society to develop or adopt the institutions that are best for economic growth or the welfare of its citizens, because other institutions may be even better for those who control politics and political institutions.

The powerful and the rest of society will often disagree about which set of institutions should remain in place and which ones should be changed. Carlos Slim would not have been happy to see his political connections disappear and the entry barriers protecting his businesses fizzle-no matter that the entry of new businesses would enrich millions of Mexicans. Because there is no such consensus, what rules society ends up with is determined by politics: who has power and how this power can be exercised.

Carlos Slim has the power to get what he wants. Bill Gates’s power is far more limited. That’s why our theory is about not just economics but also politics. It is about the effects of institutions on the success and failure of nations — thus the economics of poverty and prosperity; it is also about how institutions are determined and change over time, and how they fail to change even when they create poverty and misery for millions — thus the politics of poverty and prosperity.