Themes
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.
Themes
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.
Themes
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.
Just like in England after the Glorious Revolution, once common people got a foot in the door of the Australian government, they used their leverage to win even more power. Through this process, they managed to turn a limited slate of economic rights into a wide range of political ones. This clearly shows how inclusiveness begets inclusiveness over time.
Themes
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.
Just like there are multiple paths to economic stagnation through extractive institutions—including absolutism and state decentralization—there are also multiple paths to economic growth through inclusive ones. The authors have already covered the Glorious Revolution, so now they turn to the French Revolution, which took a very different form but ultimately produced a similar result.
Themes
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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.
Under feudalism, France’s extractive economic system was only possible because of its highly extractive political institutions. Although the French Revolution was largely motivated by economic dissatisfaction, its leaders knew that they had to reform the political system first. They were largely ordinary people, which made their priorities very unlike those of the disgruntled aristocrats who led the Glorious Revolution in England. Namely, they wanted more inclusive institutions. In fact, the French Revolution expanded citizens’ rights much faster than the Glorious Revolution, which only extended rights to a small minority and only allowed Britain to become democratic and egalitarian over the course of centuries.
Themes
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.
France’s monarchy fell for many of the same reasons as the England’s a century earlier and Spain’s a century later. Its overreach resembled the Spanish Crown’s excesses under Ferdinand and Isabella, and angry elites rebelled in both England and Spain. However, none of this had to translate into political change. Crucially, in all three nations, the people’s representatives had power over taxation. This institutional quirk was really a holdover from feudalism. But it gave the public in each nation the power to significantly weaken the monarchy and eventually build inclusive institutions at a particular critical juncture.
Themes
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.
Like the Glorious Revolution, the French Revolution was neither instantaneous nor free of conflict. But since the French Revolution represented a far more radical institutional change, it caused much more bloodshed and infighting among the small, ideological coalitions who led it. The authors emphasize that France wasn’t destined to have the inclusive institutions that it did ultimately build—instead, this outcome was contingent on many factors (including which faction seized power and why). Therefore, while the authors admire the French Revolution’s values, they also suggest that its method was less sure to lead to inclusive institutions than the Glorious Revolution’s—even though it was more inclusive at the beginning.
Themes
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.
Napoleon tore down the extractive institutions that limited Jewish people’s political and economic freedoms. These institutions kept Jewish people poor by preventing them from using many of the economic institutions that were available to the rest of the population—like markets and the legal system. Napoleon replaced these institutions with more inclusive ones—which, predictably, led to innovation and growth in the Jewish community, including the Rothschilds’ bank.
Themes
In fact, Napoleon eliminated medieval institutions—like serfdom and guilds—throughout all of the territories he conquered. By exporting the French Revolution, he made inclusive institutions and economic growth possible throughout much of Europe.
If Napoleon’s invasions caused most of Western Europe to build inclusive institutions, then they also explain why most nations in that region industrialized, achieved sustainable economic growth, and are prosperous today.
Themes
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.
France’s successful mass conscription policy shows that the French Revolution created more advanced, inclusive institutions than other parts of Europe. Just like England’s inclusive economic institutions allowed it to take the upper hand in international commerce, then, France’s inclusive political institutions gave it an advantage in war. While this provides historical precedent for the idea that nations can force inclusive institutions on other nations through war, the authors emphasize that this didn’t happen in every case. Rather, the outcome of French invasions was always highly contingent: it depended on each region’s specific history and context.
Themes
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.
In several important ways, the Meiji Restoration closely resembled other inclusive revolutions—especially the Glorious Revolution and American Revolution. While its leaders were aristocrats, their primary goal was not just seizing power, but transforming institutions. They had to fight off the incumbent elites in a civil war, but once they did, they had a chance to build the kind of inclusive institutions that spurred industrialization and economic growth throughout Europe.
Themes
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.
Acemoglu and Robinson clearly believe that the Meiji Restoration built inclusive institutions that were key to Japan’s economic success. Its modern tax bureaucracy allowed the state to become more centralized and rule more fairly. By giving all people the same legal rights, including to private property and trade, the Meiji Restoration met all the basic criteria for inclusive economic institutions. These reforms allowed innovators, investors, and entrepreneurs to freely experiment and direct their energy towards the most promising and productive economic activities. Ultimately, the difference between Japan and China is similar to the one between Western and Eastern Europe. It provides yet another example of how small institutional differences can lead nations in wildly different directions during a critical juncture.
Themes
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.
So far, Acemoglu and Robinson have argued that a nation’s growth depends on whether its institutions are inclusive or extractive. They’ve also explained how different nations form these institutions at critical junctures throughout history. Finally, they’ve argued that the way nations formed their institutions after the Industrial Revolution explains modern inequality in the world today. By outlining these events, Acemoglu and Robinson have shown how each region of the world went down its own institutional and economic path.
Themes
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.
In very broad terms, Acemoglu and Robinson divide different nations’ responses to the Industrial Revolution into four main categories. First, some nations (like France and Japan) built inclusive institutions through revolutions. Second, other nations (like the US and Australia) had no institutions on the eve of the Industrial Revolution, so they built inclusive ones from the ground up. Third, most monarchies and empires refused to build inclusive institutions because they were absolutist. And finally, some nations—especially in Africa—couldn’t build inclusive institutions because they lacked state centralization. However, while the authors’ analysis explains the lay of the land in the 1800s and early 1900s, one crucial question remains. Namely: why haven’t more countries built inclusive institutions since the 1800s? This is the subject of the next two chapters.
Themes
