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Chapter 9
Themes
and Colors
Key
LitCharts assigns a color and icon to each theme in Why Nations Fail, which you can use to track the themes throughout the work.
Global Inequality and Economic Growth
History and Institutional Change
Cycles of Wealth and Poverty
Diversity, Pluralism, and Empowerment
Summary
Analysis
In “Honor Among Thieves,” Acemoglu and Robinson explain that Great Britain dealt with its convicts by sending them to Australia. Henry and Susannah Cable, a married couple of convicts who met in jail, were set to be separated, but a wealthy philanthropist took up their case and ensured that they could go to Australia together with their son and a parcel of goods. But the parcel mysteriously disappeared on their way to Australia. Presumably, the ship’s captain took it. Under British law, the Cables couldn’t sue him because convicts had no legal property rights. In Australia, however, a judge still ruled in the Cables’ favor.
In the previous chapter, the authors explained how European colonialism and the slave trade prevented most of the world from building inclusive institutions or taking advantage of the Industrial Revolution. In this chapter they show why, on the other hand, a select few nations did build inclusive institutions and industrialize. Some of these were even European colonies whose economies followed a very different path. For instance, the Cables’ case shows that Australia’s legal institutions gave convicts many more rights than Britain’s. Australia’s institutions became more inclusive because it was a society of convicts that faced a set of unique challenges.
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Different laws applied in Australia, and different institutions formed. The soldiers guarding the penal colony hoped to profit off the convicts’ labor, but they soon realized that convicts simply wouldn’t work without an incentive. Therefore, they allowed convicts to work and sell goods after completing their official tasks. Convicts started trading with the soldiers, who set up a rum monopoly and a vast sheep and wool industry. But they weren’t absolutists—rather, in order to profit, they had to pay the convicts for their labor and give them economic rights, including land once their sentences were up. In other words, the soldiers created inclusive institutions, which allowed convicts like Henry Cable, who was illiterate, to create businesses and build wealth.
Australia’s early economy was similar to the colonial US’s. Namely, there simply weren’t enough other people around for elites to build extractive institutions and expect to profit. Instead, these elites quickly realized that inclusive institutions were their only shot at making money. Of course, these institutions weren’t completely inclusive (for instance, there were still monopolies). Still, convicts in Australia ended up having roughly the same economic rights as free men in England. The Cables’ prosperity shows that Australia’s inclusive institutions gave all white men a fair shot at building wealth.
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Soon, ex-convicts, free settlers, and their descendants started demanding political representation and protesting against the Australian elite (wealthy former soldiers). Britain created a council to rule alongside the governor, and in 1831 it started letting ex-convicts and free settlers sit on the council. In the 1850s, Australia let all white adult men vote, and it was the first place in the world to vote by secret ballot.
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There simply weren’t enough people or resources in Australia to build an extractive colony, so an inclusive one was the only viable model. But other nations built inclusive institutions in other ways. For instance, Britain did so through the Glorious Revolution. Similarly, the French Revolution brought inclusive institutions to France, while its aftermath did so to the rest of Western Europe.
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In the section “Breaking the Barriers: The French Revolution,” Acemoglu and Robinson explain that France was an absolutist monarchy from the 1400s to 1789. The clergy and nobility—or First and Second Estates—had special rights, were exempt from taxes, and held the most political power. Meanwhile, the masses—or the Third Estate—mostly lived in a feudal system of rural poverty. But the French Revolution abolished feudalism and revoked the elite’s tax exemptions. It also mandated political and economic equality and removed the restrictions that let guilds monopolize certain trades. Eventually, France dismantled the monarchy and built the same kind of inclusive parliamentary system as England.
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The French Revolution occurred because of several historically contingent factors. In the late 1600s, Louis XIV greatly consolidated power and built certain government controlled, extractive industries to enrich the monarchy, nobility, and clergy. But by 1789, the monarchy faced a deep fiscal crisis because it couldn’t tax the nobility. To fix this crisis, it had to consult the Estates-General, a body of representatives from the First, Second, and Third Estates. But the Third Estate’s representatives, supported by mass protests, forced the Crown to call a National Constituent Assembly instead. Shortly after, the people stormed the Bastille, a significant fortress and prison in the heart of Paris. The National Constituent Assembly then approved a new constitution that revoked most of the king’s power.
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Eventually, France fell into war. Next, during the so-called Terror, the radical Jacobins executed their opponents, much of the aristocracy, and—most famously—both Louis XVI and Marie Antoinette. From 1799 to 1815, Napoleon Bonaparte took control of France and conquered much of Europe. But eventually, France developed the inclusive political institutions long promised by the Revolution. This soon spread to the rest of Europe.
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In “Exporting the Revolution,” Acemoglu and Robinson explain how, from the Middle Ages to the French Revolution, Jewish people faced draconian restrictions across Europe. For instance, in Frankfurt, they were confined to a ghetto and couldn’t freely move, marry, or open businesses. But the French Revolution eliminated such restrictions in France, and Napoleon did the same in the lands he conquered—including Germany. This gave Jewish people citizenship and new rights. For instance, it allowed the Rothschild family to grow their business into Europe’s largest bank.
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In 1792, other European powers invaded France to stop the Revolution, but France managed to build a stronger army due to its policy of mass conscription. After successfully defending France, the army invaded other areas in the 1790s—including Belgium, the Netherlands, Switzerland, the western part of Germany, and most of Italy. In all these places, the French army abolished serfdom, ended the clergy and guilds’ privileges, and established rule of law. After taking control of France, Napoleon advanced these same interests. After his defeat, some territories reversed his reforms, but many didn’t. Thus, French rule actually ended feudalism and absolutism in many parts of Europe, which later allowed inclusive economic institutions and industrialization to flourish.
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In the section “Seeking Modernity,” Acemoglu and Robinson explain how, in 1868, regional leaders overthrew Japan’s ruling Tokugawa family, which had run the country as an extractive, feudal society much like medieval Europe. These leaders claimed that their goal was to restore the emperor to power, but they really wanted to build new, inclusive institutions. They took power in the Meiji Restoration, then defeated the Tokugawa family in a civil war and transformed Japanese institutions.
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The Meiji Restoration ended Japanese feudalism, created a modern tax bureaucracy, made all social classes legally equal, and lifted restrictions on trade, migration, and property ownership. The new regime also invested heavily in infrastructure and industry. These reforms allowed Japan to grow rapidly after the Industrial Revolution. Thus, until the mid-1800s, China and Japan were very similar: they were poor, absolutist, closed to the world, and vulnerable to Western military conquest. But Japan’s shogun was overthrown much earlier than China’s emperor, and as a result, the countries’ fates diverged sharply after the Industrial Revolution.
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In “Roots of World Inequality,” Acemoglu and Robinson summarize their argument in the last three chapters. England led the Industrial Revolution because of its inclusive institutions. Then, industrialization quickly spread to countries with similar institutions—including the US and Australia, but not Europe’s extractive colonies in Asia, Africa, and Latin America. In Eastern Europe and the Ottoman Empire, absolutists opposed industrialization because they knew that creative destruction would threaten their profits and political power.
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Meanwhile, France built inclusive institutions during the French Revolution and exported them through military conquest. This allowed much of Western Europe to industrialize very quickly. Absolutist China resisted industrialization, while Japan embraced it after the Meiji Restoration built inclusive institutions. Finally, while Ethiopia remained absolutist, the slave trade created extractive societies and destroyed centralized institutions throughout much of Africa. These patterns are the foundation for contemporary global inequalities. With few exceptions, the countries that started industrializing in the 19th century are rich today, while those that didn’t are poor.
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