Reading Snippet - Why Nations Fail (4)

How political and economic institutions develop - the archaeological view

Having outlined the concept of extractive vs. inclusive institutions, the exploration now turns to why some countries developed inclusive institutions while the others are stuck with extractive institutions.

From an archaeological standpoint, human  civilisation only developed after some form of centralisation was possible. Like all animals, the initial human lived as hunter-gatherers, and rules and rights were primitive - if you do not agree, you simply break off the group and wander away. However, as human spotted fertile fruit trees and good hunting grounds, especially during the 'long summer' in 10,000BC during which warm climate allowed an explosion of plants & animals, human started storing surplus and identifying good spots, making settling a viable alternative to nomadic lifestyles.

The move from nomadic to sedentary lifestyle was not an easy transition, requiring the creation of additional laws & rules (such as mentioned above, property rights and how spoils should be divided) not necessary for nomadic lives, and then administer the rules and maintain order by resolving any arising conflicts from the created law & ensuring the resolutions were enforced. This required centralisation of power, i.e. a small group of powerful people among the nomadic group to set and enforce the sedentary-favourable rules, and then use the power to coerce or persuade the entire group into the new lifestyle.

With this centralisation of power for the purpose of rule creation, conflict resolution and rule administration, a political institution had been effectively created. With these political institutions, economic decisions for the benefit for the society (and elite) could be arrived at and enforced, e.g. creating new settlements, trying out agriculture, domesticating animals, taxing all spoils in preparation for lean years. Starting with political institutions, economic institutions were next created which were heavily controlled/influenced/dependent on the political institutions.

In short, when economic opportunities presented themselves (the Long Summer), effective exploitation depended on some centralisation of power to allow effective development of principles/method/structures/processes (changing from nomadic to sedentary lifestyle), leading to political institutions. With political institutions, economic institutions could then be created as a result of using the centralised power in designing the economic principles/methods/structures/processes to exploit the economic opportunities.