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Chapter 11
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 “You Can’t Take the Train to Bo Anymore,” Acemoglu and Robinson explain that, after the British took over Sierra Leone and started demanding taxes, local leaders rebelled, especially in the south. To help crush the rebellion, the British built a railway through the South. In the 1960s, Sierra Leone became an independent country with two main parties: the SLPP, which was strongest in the south, and the APC, which mostly represented the north. The old British railway helped the south export chocolate, coffee, and diamonds. But when APC leader Siaka Stevens won power, he dismantled the railway to punish the SLPP. He simply cared more about power than the economy.
The railway’s construction and destruction both show how extractive institutions pit the government against the people. First, the British built it to extract wealth from the country and violently suppress calls for political freedom. Then, Siaka Stevens dismantled it to protect his own power and wealth at the expense of his rivals and the public. While he shamelessly prioritized his own personal future over his country’s collective future, this was no different from what the British did. That is the central question in this chapter: why do leaders like Stevens recreate the same extractive institutions that they overthrow? Why don’t institutions change when power changes hands?
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In fact, when Stevens eliminated the SLPP and created an absolutist one-party dictatorship, he simply followed the British model of extractive institutions. For instance, the British heavily taxed farmers by forcing them to sell all their product through the Sierra Leone Produce Marketing Board. Stevens kept this system in place and paid farmers even less than the British—as little as ten percent of their harvests’ true value. Similarly, the British let local leaders rule for life as “paramount chiefs,” and this institution still exists today. Throughout Africa, policies like these have held back agricultural productivity. Farmers don’t have an incentive to improve their crops or secure property rights to their land.
Siaka Stevens’s government wasn’t just as ineffective as the British colonial one: it also kept the exact same extractive institutions in place. However, Stevens’s motives were relatively obvious: it was extraordinarily profitable and easy for him to keep using these same institutions. Thus, after winning their independence, the people of Sierra Leone had to live under virtually the same conditions as they lived under during the colonial period.
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The British colonial mining policies in Sierra Leone and Australia exemplify the difference between extractive and inclusive institutions. In Sierra Leone, the British gave a single company a monopoly over diamond mining and helped it recruit a private army. After independence, Siaka Stevens transferred this monopoly to the government. Similarly, when gold was discovered in Australia, elites wanted to sell control to a monopoly. But instead, the public convinced the government to open mining up to everyone.
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The slave trade and British colonial policy are chiefly responsible for creating extractive institutions in Sierra Leone. Most importantly, the British used indirect rule—they governed by delegating most authority to loyal chiefs. Before British colonialism, chiefs needed public support to keep power. But under colonialism, chiefs ruled for life. This made them accountable to the British, not the people. Sierra Leone’s independent government simply kept all the colonial era’s extractive institutions in place. While Stevens did decide to tear down the old British railroad, he only did so because he knew his army wasn’t strong enough to put down a rebellion (unlike Britain’s). In fact, Stevens deliberately weakened the army so that it wouldn’t overthrow him.
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Ultimately, as throughout Africa, the vicious circle of extractive institutions has impoverished Sierra Leone and prevented it from developing. Colonial elites built extractive economic institutions to enrich themselves, then used their wealth to build extractive political institutions rigged in their favor. Under such institutions, whoever runs the government can easily amass wealth because nothing stops them from abusing their power. Worse still, nothing stops challengers from overthrowing the government and seizing power. In fact, infighting is common in extractive institutions because the benefits of holding power are so great. Such elite infighting has led many African countries into civil wars after independence.
Under the heading “From Encomienda to Land Grab,” Acemoglu and Robinson point out that, in 1993, Guatemala’s president and key cabinet members were all directly descended from Spanish conquistadors. In fact, from 1531 to the present, 22 families have monopolized power in Guatemala. In many countries, including Guatemala, elites build extractive institutions that keep themselves in power and keep the country underdeveloped.
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In Guatemala, like in Mexico and Peru, the encomienda system enriched Spanish elites by imposing forced labor on the indigenous masses. Independence simply handed power from the Spanish Crown to local elites, whose merchant guild (the Consulado) resisted innovation and new infrastructure because it feared competition. When Guatemala’s coffee industry started booming in the 1800s, elites dismantled the Consulado. They then privatized a million acres of fertile land, auctioned it off to themselves, and forced indigenous people to grow coffee on it through a forced labor system.
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This forced labor system lasted until 1945, when the dictator Jorge Ubico resigned, leading the country into nine years of democracy and then a 30-year civil war. Ultimately, as Guatemala’s elite kept using extractive Spanish colonial institutions for their own benefit, it kept the country’s indigenous Maya majority poor, uneducated, and unrepresented in government.
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Next, in the section “From Slavery to Jim Crow,” Acemoglu and Robinson point out that the US South was very similar to Guatemala until the Civil War. Its extractive institutions enriched a tiny planter elite while giving millions of enslaved people no rights at all. As a result, the South was far poorer, less industrialized, and far less innovative than the North. The Civil War forced the South to change, but instead of building inclusive institutions, it maintained its extractive ones through Jim Crow segregation. Planter elites remained wealthy and powerful. Most survived the war, as enslavers were exempt from military service. And although slavery was over, they continued to run plantations where Black laborers had few legal rights.
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After Reconstruction ended in 1877, the Democrats established one-party rule throughout the South. They passed laws to prevent Black citizens from voting and segregated all public services, creating an apartheid system similar to South Africa’s. They also stopped the federal government from passing development projects that could empower Black people. The South remained largely unindustrialized until after World War II, and its economy didn’t start growing significantly until after the civil rights movement. Until that time, its vicious circle was similar to Guatemala’s: the entrenched elite built extractive economic institutions for its own benefit, then created extractive political institutions to support those economic institutions.
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In “The Iron Law of Oligarchy,” Acemoglu and Robinson explain how the Derg, a left-wing military group, overthrew Ethiopia’s traditional, absolutist emperor in 1974. The Derg began arresting and executing government officials and nationalizing private property, which led to independence and separatist movements all around the country. But then Derg leader Mengistu Mariam started ruling from the emperor’s old throne in the Grand Palace, holding the same official functions, and buying expensive clothes, liquor, and cars.
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Just like in Sierra Leone, Guatemala, and the US South, the same vicious circle kept recreating extractive institutions in Ethiopia. Sociologists call this “the iron law of oligarchy.” New leaders promise radical change, overthrow the government, and then rule exactly like their predecessors.
Acemoglu and Robinson ask why radical change sometimes works—like in the Glorious Revolution and French Revolution. These revolutions were unique. During both, businessmen pushed for inclusive economic institutions while broad coalitions of different groups pushed for inclusive political institutions. Meanwhile, England and France’s monarchies already shared power with independent parliaments. None of this was true in countries like Sierra Leone and Ethiopia, whose economies were more extractive and where no local institutions or independent businesspeople could check government power. Therefore, in these countries, the vicious circle continued.
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Acemoglu and Robinson summarize the last two chapters under the heading “Negative Feedback and Vicious Circles.” Inclusive institutions tend to become more inclusive over time, in a virtuous circle. Pluralism checks abuses of power and creates inclusive economic institutions, which spread wealth and power more broadly. But extractive institutions also tend to become more extractive over time, in a vicious circle. Extractive political institutions create extractive economic institutions, which enrich elites and protect their power.
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Guatemala is a good example of how the vicious circle can keep the same elite in power for centuries. And the US South shows how resilient this circle can be: after the Civil War ended slavery, the planter elite held onto power and rebuilt the same extractive economy that enriched them before. Elsewhere, the vicious circle continues even when the political elite changes because of the iron law of oligarchy. Extractive institutions don’t check the new elite’s power, but rather give them a huge financial incentive to abuse it. Some societies have broken the iron law. For instance, the Glorious Revolution and the Meiji Restoration were led by broad coalitions that wanted inclusive institutions. But revolutions in Ethiopia and Sierra Leone were led by narrow factions uninterested in pluralism.
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