Reading Snippet - Why Nations Fail (11)

Why extractive states persist

When the author reviewed world history, it's not hard to identify that most historical states were extractive in nature, and their institutions are too sticky to shake off.

A noteworthy discussion is why so many ex-colonial states are extractive, despite being given independence and free votes at the start. The authors' exploration suggested that the colonies were extractive in nature, such as the Africa white colonies which blatantly discriminated against the natives and removed their property rights and kept them as cheap labour; the setting up of 'marketing boards' which forced farmers to sell their produce to government agencies at rock-bottom prices; the sale of mining rights to monopolies which prevented the people to enjoying the windfall; The Spanish colonies' forced labour policies against the natives. When independence was granted, the natives replaced the colonial masters as the new elite, and preserved these extractive institutions. New masters, same tricks.

Another stickiness comes from ex-elites' hold on the political and economic institutions, allowing them to maintain the privileges and extractions. The authors raised the example of Southern US states, in which the landowners started by successfully unwound the policy of giving ex-slaves land and animals for establishing greater economic parity. When the opportune moment appeared, they introduced discriminatory policies that subjected the blacks to poor education and convoluted access to politics (literacy tests for voting rights). These were possible as they retained their economic prowess which gave some leverage into politics, allowing them to wait by the side and for  political opportunities.

Yet another reason is the insufficient centralisation of government. The authors quoted Columbia, where the central government's traditional power base did not extend to the rural areas, allowing the local elites to build up extractive political and economic institutions that introduced forced labour and discouraged tenant farmers from owning land. When insurgent groups were formed, counter-insurgent groups gained central and local government recognition and solicited collaboration. However, this in turn gave these groups confidence to muddle with politics, such as forcing voters to back their candidates and forcing governments to pay 'protection money'. In this way, the counter-insurgents have effectively taken over the regional governments and extracted political and economic powers from formal institutions.

As seen above, there are multiple ways for elites to inherit extractive institutions, persist their existing extractive power, or seize opportune moments to gain extractive powers when formal government is weak. Furthermore, elite factions would try to out-manoeuvre each other to gain pole position and then further concentrate the power, leading to even greater extractiveness and coupling or economic and political power. This leads to more warfare and faction wars, making inclusiveness even more remote.