Why Nations Fail: FROM THE WINNERS OF THE NOBEL PRIZE IN ECONOMICS: The Origins of Power, Prosperity and Poverty

by Daron Acemoğlu

Sierra Leone’s development, or lack thereof, could be best understood as the outcome of the vicious circle. British colonial authorities built extractive institutions in the first place, and the postindependence African politicians were only too happy to take up the baton for themselves. The pattern was eerily similar all over sub-Saharan Africa. There were similar hopes for postindependence Ghana, Kenya, Zambia, and many other African countries. Yet in all these cases, extractive institutions were re-created

FROM ENCOMIENDA TO LAND GRAB

Casaús Arzú identified a core group of twenty-two families in Guatemala that had ties through marriage to another twenty-six families just outside the core. Her genealogical and political study suggested that these families have controlled economic and political power in Guatemala since 1531.

In Sierra Leone and in much of sub-Saharan Africa, the vicious circle took the form of the extractive institutions set up by colonial powers being taken over by postindependence leaders. In Guatemala, as in much of Central America, we see a simpler, more naked form of the vicious circle: those who have economic and political power structure institutions to ensure the continuity of their power, and succeed in doing so.

The Spanish conquistadors had no compunction about setting up an extractive political and economic system. That was why they had come all the way to the New World. But most of the institutions they set up were meant to be temporary. The encomienda, for example, was a temporary grant of rights over labor. They did not have a fully worked-out plan of how they would set up a system that would persist for another four hundred years. In fact, the institutions they set up changed significantly along the way, but one thing did not: the extractive nature of the institutions, the result of the vicious circle. The form of extraction changed, but neither the extractive nature of the institutions nor the identity of the elite did.

FROM SLAVERY TO JIM CROW

Shockingly, even today Section 256 of Alabama’s constitution, though no longer enforced, still states:

Separate schools shall be provided for white and colored children, and no child of either race shall be permitted to attend a school of the other race. An amendment to strike Section 256 from the constitution was narrowly defeated in the state legislature in 2004.

THE IRON LAW OF OLIGARCHY

(Selassie was a small man; so that his legs were not left swinging in the air, it was the job of a special pillow bearer to accompany him wherever he went to make sure there was a suitable pillow to put under his feet. The bearer kept a stock of fifty-two pillows to cope with any situation.)

At the beginning of the Revolution all of us had utterly rejected anything to do with the past. We would no longer drive cars, or wear suits; neckties were considered criminal. Anything that made you look well-off or bourgeois, anything that smacked of affluence or sophistication, was scorned as part of the old order. Then, around 1978, all that began to change. Gradually materialism became accepted, then required. Designer clothes from the best European tailors were the uniform of all senior government officials and members of the Military Council. We had the best of everything: the best homes, the best cars, the best whiskey, champagne, food. It was a complete reversal of the ideals of the Revolution.

NEGATIVE FEEDBACK AND VICIOUS CIRCLES