Why Nations Fail: The Origins of Power, Prosperity, and Poverty

by Daron Acemoğlu

At the turn of the fourteenth century, Europe had a feudal order, an organization of society that first emerged in Western Europe after the collapse of the Roman Empire.

serfs,

their lord, who was not just the landlord, but also the judge, jury, and police force.

The massive scarcity of labor created by the plague shook the foundations of the feudal order.

Statute of Laborers,

tried to fix wages at the levels paid before

punishment for leaving employment without permission

In 1381 the Peasants’ Revolt

Wat Tyler,

inclusive labor market began to emerge in England, and wages rose.

freedoms. But in the East, a more powerful contradictory logic was at work. Fewer people meant higher wages in an inclusive labor market. But this gave lords a greater incentive to keep the labor market extractive and the peasants servile.

Eastern landlords started to take over large tracts of land and expand their holdings,

The effects became especially clear after 1500, when Western Europe began to demand the agricultural goods, such as wheat, rye, and livestock, produced in the East.

Second Serfdom,

In Korczyn, Poland, all work for the lord in 1533 was paid. But by 1600 nearly half was unpaid forced labor. In 1500, workers in Mecklenberg, in eastern Germany, owed only a few days’ unpaid labor services a year. By 1550 it was one day a week, and by 1600, three days per week. Workers’ children had to work for the lord for free for several years. In Hungary, landlords took complete control of the land in 1514, legislating one day a week of unpaid labor services for each worker. In 1550 this was raised to two days per week. By the end of the century, it was three days. Serfs subject to these rules made up 90 percent of the rural population by this time.

critical juncture, a major event or confluence of factors disrupting the existing economic or political balance in society.

The culmination of the institutional struggles of the sixteenth and seventeenth centuries were two landmark events: the English Civil War between 1642 and 1651, and particularly the Glorious Revolution of 1688.

The Glorious Revolution

As a consequence, economic institutions also started becoming more inclusive.

the Industrial Revolution depended on major technological advances exploiting the knowledge base that had accumulated in Europe during the past centuries.

The full force of this revolution came from the market that created profitable opportunities for technologies to be developed and applied.

It also relied on education and skills,

James Watt

Richard Trevithick

Richard Ar...

Isambard Kingdo...

First were political institutions, including a centralized state, that enabled her to take the next radical—in fact, unprecedented—step toward inclusive institutions with the onset of the Glorious Revolution.

The events leading up to the Glorious Revolution forged a broad and powerful coalition able to place durable constraints on the power of the monarchy and the executive,

All were battling with assemblies of citizens—such as the Parliament in England, the Cortes in Spain, and the Estates-General in France—that were demanding more rights and control over the monarchy.

Elizabeth I was far less financially independent,

it was only after 1600 that a huge expansion of world trade, particularly in the Atlantic, started to take place.

England, Atlantic trade and colonization started creating a large group of wealthy traders with few links to the Crown,

Fronde Rebellion between 1648 and 1652.

the opponents to absolutism would prevail because they were relatively wealthy and more numerous than the opponents to absolutism in Spain and France.

critical junctures are important because there are formidable barriers against gradual improvements,

Once a critical juncture happens, the small differences that matter are the initial institutional differences that put in motion very different responses.

matter. The kingdom of Poland-Lithuania, for example, was ruled by an elite class called the

Szlachta,

Russian emperor Peter the Great was also consolidating an absolutism far more intense and extractive than even Louis XIV could manage.

But where do the small institutional differences that start this process of divergence arise in the first place?

even societies that are far less complex than our modern society create political and economic institutions that have powerful effects on the lives of their members.

These differences are often small to start with, but they cumulate, creating a process of institutional drift.

institutional drift

The richly divergent patterns of economic development around the world hinge on the interplay of critical junctures and institutional drift.

Because in 1346 in Western Europe peasants had more power and autonomy than they did in Eastern Europe, the Black Death led to the dissolution of feudalism in the West and the Second Serfdom in the East. Because Eastern and Western Europe had started to diverge in the fourteenth century, the new economic opportunities of the seventeenth, eighteenth, and nineteenth centuries would also have fundamentally different implications for these different parts of Europe. Because in 1600 the grip of the Crown was

weaker in England than in France and Spain, Atlantic trade opened the way to the creation of new institutions with greater pluralism in England, while strengthening the French and Spanish monarchs.

The outcome, however, is not historically predetermined but contingent.

The victory of the winning groups was inexorably linked to the critical juncture created by the rise of Atlantic trade that enriched and emboldened merchants opposing the Crown.

Bad weather and strategic mistakes by Sidonia, who had been put in charge at the last minute after a more experienced commander died, made the Spanish Armada lose their advantage.

Against all odds, the English destroyed much of the fleet of their more powerful opponents. The Atlantic seas were now open to the English on more equal terms.