Reading Snippet - Why Nations Fail (7)

How to prevent inclusive political and economic institutions from emerging - a historical perspective

It is often observed that successful nations are concentrated in Western Europe, North America and the former white settlements, whereas previously fertile nations in the Middle East and Asia have failed and Africa had struggled to be successful from the start. Instead of blaming it on culture or climate, the authors offered a powerful alternative criticism to the West.

They noted that prior to European trades, Asia had been commercially active as the Asia and Middle Eastern merchants exchange silk, china, grains and spices. However, as the Europeans joined in the trade and faced competition from other European companies or Middle Eastern traders, their intention to monopolise these profitable trades resulted in local warfare, taking over from local rulers and forcibly closing the markets or demanding locals to cultivate the spices and selling at low prices. The result was the imposition of extractive political & economic institutions (the natives were next to being enslaved) or causing the local rulers to withdraw from market economies (e.g. closing down their own markets or demanding their own farmers not to plant spices lest they would attract the Europeans' attention) which removed their chances of moving from primitive institutions towards modern institutions in the way European states could.

The Africa story was more heart-breaking. As the plantations in the Caribbean developed, demand for slave went through the roof and some African local polities started to profit by capturing other Africans. As these polities grew rich, they organised themselves into centralised administrations with the sole intention of attacking other tribes and selling the tribesmen as slaves. As a result, these administrations were highly extractive in nature with power concentrated among the few leaders who organised the raids and shared the spoils, without any intention of developing their own sustainable economy. As these polities were military in nature, coups and internal unrests were common as different factions tried to control the leading positions. On the flip side, the weaker tribes that were attacked had to withdraw from fertile grounds into the geographically difficult areas to avoid further tragedies, meaning that they lost the ability to develop their own economic institutions. For some polities that did not attack other tribes, their leadership instead sold their fellow citizens to the Europeans, by making every minor crime punishable by slavery, or by fabricating oracles to legitimise the sending-away of believers. These administrations gradually evolved into extractive institutions through slavery.

These two sets of examples serve to show that when states are affected by extreme historical events (economic warfares and slavery), there will be perverse incentives that can cause them to develop highly extractive institutions or institutions that are withdrawn from potential evolution towards inclusiveness. It is not just their internal setups and internal affairs that would decide their subsequent institutional developments, but also external or international events. The next time we discuss why Africa has not evolved into inclusive states, we should understand that the Europeans should shoulder as much blame as the Africans themselves.