Institutions are the fundamental cause of long-run growth and prosperity. The sources argue that the types of institutions a nation has, whether they are inclusive or extractive, are the most important factor in determining its economic success. Inclusive institutions encourage participation, innovation, and investment, leading to sustained growth. Extractive institutions, on the other hand, concentrate power and wealth in the hands of a small elite, hindering development. For example, the sources contrast the inclusive institutions of Botswana, which have fostered economic growth, with the extractive institutions of Zimbabwe and Sierra Leone, which have led to poverty and instability1234.Critical junctures are periods of significant change that can lead to institutional transformation. The sources highlight how critical junctures—major events or confluences of factors—can disrupt existing power structures and create opportunities for institutional change. The Black Death, the Atlantic trade, and colonialism are cited as examples of critical junctures that shaped institutional development in different parts of the world5678. The way societies respond to these junctures depends on the pre-existing institutional differences, leading to divergent development paths.The interplay of small institutional differences and critical junctures can result in significant divergence in institutional development. The sources emphasize that even small institutional differences can have a profound impact on a nation's trajectory, particularly during critical junctures. These small differences can be amplified over time, leading to vastly different outcomes. For example, the sources discuss how subtle institutional variations between England, France, and Spain in the 16th century led to distinct responses to the opportunities presented by Atlantic trade, with England ultimately experiencing the most transformative impact and embarking on a path toward greater inclusivity
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