Why Nations Don’t Fail: The Indian Counter to Western Institutional Theory

Western institutional theory, as popularised by economists James Robinson and Daron Acemoglu in their book "Why Nations Fail", hinges on a binary: inclusive institutions drive prosperity, while extractive institutions cause stagnation. But what if this framework—while elegant—is contextually flawed, even racially skewed? What if India’s most powerful industrial actors, often derided as oligarchs, are in fact building the very infrastructure that prevents nations from failing?

This blogpost reframes the extractive/inclusive debate through two archetypes: Mukesh Ambani and Gautam Adani, India's richest entrepreneurs by a long distance. I argue that they are not barons of extraction, exclusivity, and privilege; but are architects of sovereign-scale inclusion, resilience, development. 


Mukesh Ambani: The Consumer-Focused Visionary 

Reliance Industries’ expansion is not a tale of elite capture. It’s a story of massification—telecom, FMCG, OTT, cloud, financial services, and now enterprise AI. Each offering is designed for ubiquity, not exclusivity.

- Jio Infocomm disrupted India's hitherto extractive telecom industry and restructured India’s digital demand curve.

- Reliance Retail democratized access to everyday goods.

- Jio Financial Services and Reliance Enterprise Intelligence aim to empower the common person and small & medium enterprises respectively — not just boardrooms.

Ambani’s model resembles a foundational stack—layered infrastructure for everyday life. His wealth is a byproduct of India-scale saturation, not gated luxury.


Gautam Adani: The Infrastructure-Centric Nation-Builder

Adani’s empire is less visible to consumers, but arguably more foundational. Ports, airports, highways, energy parks, transmission lines, cement plants, copper plants, and data centers—these are the arteries of national resilience.

- They lower logistics costs, enable mobility, and power industrial productivity.

- They are not reserved for elites—they serve the entire economy.

- They are precisely the kind of infrastructure that helps large nations escape the middle-income trap.

Adani’s model is deeply inclusive in impact, even if less consumer-facing.


Rethinking Institutional Inclusion  

Instead of scrutinising whether an institution is procedurally democratic, we should ask:-

1. Is the operator financially transperant and sound?  

2. Does the operator meet public service standards?  

3. Will the project, upon completion, expand opportunity for the broader economy?

This triad shifts the focus from ownership to public impact.


Turning the Gaze Back to Robinson and Acemoglu

If we apply the same scrutiny to Robinson's and Acemoglu's employers when they wrote the book (ie, Harvard and MIT) — and broadly to USA's private academia — we find:-

- Prohibitive tuition fees  
- High overheads on public research grants  
- Gatekeeping mechanisms that limit access

Are these institutions truly inclusive? Or are they selectively inclusive, extracting public funds while serving narrow funnels of elite reproduction?


Toward a New Framework: Sovereign-Scale Inclusion  

Let’s define inclusion not by ideology, but by utilitarian legitimacy. Whether it’s Ambani’s consumer stack or Adani’s infra backbone, the key question is: Does it expand the opportunity frontier for the nation?

Mukesh Ambani (Reliance Industries Ltd):-
- Mode of inclusion: Consumer-centric  
- Sectoral footprint: Telecom, FMCG, Finance, AI  
- Public interface: High—direct engagement with millions of consumers  
- Strategic impact: Expands digital access, financial inclusion, and innovation diffusion

Gautam Adani (Adani Group):-
- Mode of inclusion: Infrastructure-centric  
- Sectoral footprint: Ports, airports, energy, cement, copper, logistics, defence 
- Public interface: Moderate—primarily through state and industrial channels  
- Strategic impact: Enhances industrial productivity, energy security, national defence, and logistics efficiency


The above framework allows us to evaluate any institution—public or private—on its sovereign-scale inclusion, focusing on public impact rather than procedural democracy.


Closing Thought  

The Indian economy's future will not be like any of the cases narrated by Robinson and Acemoglu. Instead, it will be shaped by foundational capitalism — where scale, inclusivity, accessibility, impact, and sustainability matter more than procedural democracy. For Indian academia, it is time to build an analytical framework that captures this emerging reality.

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