The COVID-19 pandemic undoubtedly imprinted its presence on the world economy. From daily unsettling routines to disrupted markets, every nation in the world has been at its receiving end. And with various nations coping with the post-pandemic period, the core development principles provided by Why Nations Fail: The Origins of Power, Prosperity, and Poverty are a useful lens against which an examination can be made for various countries attempting to recover—or not recover—from the crisis.

For authors Daron Acemoglu and James A. Robinson, it all boils down to the institutions. In this piece, we consider how recovery efforts in various countries from the pandemic reflect their respective institutions' inclusivity or extractive nature and what lessons we might learn for a prosperous future.

A test of institutional resilience

Indeed, one of the core messages in Why Nations Fail is that inclusive institutions allow a wide grant of society to engage with economic activity to propel sustainable growth and development, while extractive institutions concentrate power and wealth in the hands of a select few, which leads to stagnation and eventual failure. Testing national institutions like no event before, the COVID-19 pandemic underlined weaknesses in governance, economic systems, and public health infrastructures.

Countries with inclusive institutions were better able to respond to the pandemic’s challenges. Take Germany, for example, where the government rapidly deployed financial support for businesses and citizens, ensuring stability in the face of widespread disruptions. Inclusive policies, such as furlough schemes, protected millions of jobs and laid the foundation for a quicker recovery. Similarly, New Zealand’s swift response, guided by transparent leadership and public trust, kept the country relatively shielded from the economic downturn.

While countries with extractive institutions struggled to cope, the pandemic pushed inequalities and failed to deliver economic support to the most vulnerable populations. It was characterized by political fragmentation and a lack of coordinated governance that left many devoid of essential healthcare or any other financial aid, hence delayed recovery and deepened poverty. Such examples outline how institutional frameworks determine the ability of nations to adapt and recover from global crises like COVID-19.

The role of leadership and accountability

Leadership and public accountability are central to the success of inclusive institutions. Countries with transparent, accountable governance often foster trust between the government and its citizens, allowing for effective policy implementation. In the case of South Korea, for example, early and decisive government action, paired with clear communication, allowed the country to manage the health crisis effectively while minimizing economic damage. South Korea’s model highlights how inclusive governance and trust in institutions can lead to a more effective recovery.

Conversely, in countries where leadership failed to act inclusively, the aftermath of the pandemic is marked by widespread disillusionment. India’s uneven pandemic response left millions of vulnerable citizens without adequate healthcare or financial aid. The lack of coordinated institutional response not only worsened the crisis but also hindered the country’s recovery. Such examples show that extractive institutions—where decision-making is concentrated among a few—can leave countries ill-prepared for crises and unable to recover sustainably.

Economic inclusion as a path to recovery

The pandemic also highlighted the importance of economic inclusion for national recovery. Inclusive institutions not only distribute resources equitably but also create environments where innovation and entrepreneurship can flourish. Countries that adopted inclusive economic policies, such as Denmark and Finland, have seen their economies bounce back faster, thanks in part to robust safety nets and a commitment to supporting small and medium-sized enterprises.

Countries with predominantly extractive institutions often favor the interests of a narrow elite. Even in the United States, substantial government support has taken a back seat, while large corporations captured most of the pandemic relief; for small businesses and poorer communities, the pain turned out much stronger. This disparity in economic policy balances is a signpost of extraction, which, in fact, diminishes the chances of long-term recovery and economic resilience.

Building back better: what comes next?

As nations look toward the future, the lessons of Why Nations Fail offer valuable insights into building more resilient, inclusive economies. The pandemic has laid bare the dangers of extractive institutions and the long-term benefits of inclusivity. For nations to recover and thrive in the post-pandemic world, they must focus on empowering broader segments of society, ensuring equitable access to resources, and fostering transparency and accountability in governance.

One promising development is the global push for sustainable recovery plans. Initiatives like the European Union’s Green Deal, which aims to create jobs while combating climate change, represent an inclusive approach to recovery that considers both economic and social well-being. This forward-thinking approach aligns with the principles of inclusive institutions, suggesting that nations focused on long-term, sustainable growth are more likely to succeed in the post-pandemic era.

Conclusion

The COVID-19 pandemic was a new experience and a global crisis that tested the resilience of every nation. Through the lens of Why Nations Fail, we can see that countries with inclusive institutions—where power is shared, and the broader population has a stake in economic success—have fared better in their recovery efforts. In contrast, nations with extractive institutions, where wealth and power are concentrated, have struggled to adapt and rebuild. As we move forward, the lessons of the pandemic reinforce the importance of inclusive governance and economic policies, providing a roadmap for building a more prosperous and equitable global economy.