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Chapter 10
Themes
Key
LitCharts assigns a color and icon to each theme in Why Nations Fail, which you can use to track the themes throughout the work.
Global Inequality and Economic Growth
History and Institutional Change
Cycles of Wealth and Poverty
Diversity, Pluralism, and Empowerment
Summary
Analysis
Acemoglu and Robinson open the section “The Black Act” by explaining how, in England in the 1700s, bandits went “blacking”—they painted their faces black, destroyed property, and killed animals. After the Glorious Revolution, the Stuart monarchs tried and failed to take back power for a century. Meanwhile, the Whig Party led Parliament, but the Tory Party and new parliamentary rules limited its power. So did blacking, which gave angry citizens—or “Blacks”—a way to protest Whig abuses of power. For instance, the powerful earl William Cadogan expanded his estate by kicking his neighbors off their land and turning it into a deer park. In response, the Blacks raided his property and killed his deer.
Although it was covert and illegal, “blacking” was actually an important part of the English political system after the Glorious Revolution. It served as a check on power. After all, the English people had no guarantee that the Whigs wouldn’t just set up extractive institutions and start ruling as an aristocracy. The only way to prevent this was by limiting their power. For instance, Cadogan’s land grab was similar to the tactics that Roman senators used to amass more land (see Chapter Six). Even if the Blacks’ raid didn’t stop Cadogan, it signaled the public’s opposition and prevented politicians like him from taking their extractive tactics even further.
Themes
In 1723, the Whigs made “blacking” punishable by death. When Prime Minister Walpole turned traditional common land into a private park, local citizens revolted. Walpole personally prosecuted one of them, John Huntridge, for aiding the Blacks—but a jury acquitted him. While many other suspected Blacks were hanged, Huntridge’s acquittal shows that England’s legal system had changed: the powerful couldn’t use the courts as a weapon anymore. Instead, there was rule of law—meaning that the laws applied equally to everyone.
Once again, the future of a society’s institutions depended on a conflict between elites and the masses. But in 18th-century Britain, the rule of law ensured that the legal system decided this conflict fairly. This would never have been possible under the previous system, in which the monarchy dominated the government. Thus, the rule of law is another example of how inclusive institutions tend to become more inclusive over time. In short, elites have a much harder time grabbing power in nations with fair legal institutions.
Themes
The Glorious Revolution built the rule of law in England. It meant the Whigs couldn’t pass laws that violated citizens’ fundamental rights. But historically, under absolutist governments, rule of law was unthinkable: the king and aristocracy would never follow the same rules as everyone else. Only pluralist institutions made this possible: when many different groups share power, they have good reason to treat each other equally. During the Glorious Revolution, pluralists actually used the rule of law as a key argument against absolutism. And once England created inclusive institutions, the rule of law reinforced itself in a virtuous circle.
In Chapter Seven, the authors explained that the aristocrats and merchants who led the Glorious Revolution built pluralist institutions because this was the only way for them to all protect their wealth and property. The authors now suggest that these pluralist institutions required the rule of law to function smoothly. If people’s property rights weren’t equal, for instance, then the faction that controlled Parliament could simply take property away from the minority (much like Cadogan and Walpole did to common people). This is why pluralism and the rule of law tend to work together.
Themes
This explains why inclusive institutions tend to survive over time: most groups can’t participate in politics without pluralism and the rule of law, so few are willing to threaten them. Moreover, as institutions become more inclusive, societies tend to become more economically equal. This process gives formerly disenfranchised groups more power. Finally, pluralism also creates a freer media environment, which helps people stop abuses of power and protect inclusive institutions. However, inclusive institutions aren’t invincible—absolutists can still challenge and overthrow them. Fortunately, most of these challengers have failed in countries like Britain and the US.
Pluralism reinforces the rule of law because the multiple groups who share power all want their rights protected (so they won’t lose power). Conversely, the rule of law reinforces pluralism because it actually protects those rights against people who try to violate them. Both are key elements of the inclusive political institutions that also reinforce (and are reinforced by) inclusive economic institutions in the “virtuous circle.”
Themes
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In “The Slow March of Democracy,” Acemoglu and Robinson note that British democracy still wasn’t particularly inclusive in the 1700s—for instance, the vast majority of people still couldn’t vote. But “the virtuous circle of inclusive institutions” made it more and more pluralistic over time. In the early 19th century, workers rioted against industrialization, and elites decided to partially extend them voting rights rather than risk a revolution.
“The virtuous circle” doesn’t just preserve inclusive institutions: it actually makes them more inclusive over the course of history. Once multiple groups share power, new groups can demand a place in the government and win their political rights much more easily. Even if the first inclusive political institutions in nations like England and the US didn’t actually include everyone, they were still the first and most important steps toward a truly inclusive form of democracy. In other words, while the Glorious Revolution didn’t create a democracy, England’s eventual democracy would have been impossible without the revolution.
Themes
Initially, Parliament only extended voting rights from two percent of the population to four percent. Still, it’s significant that British elites answered workers’ demands through reform—rather than through force, like they did throughout British colonies. Elites knew that choosing repression would mean abandoning the rule of law, pluralism, and inclusive economic institutions. They also knew that repression would probably fail, because inclusive institutions gave the people more resources and power than ever before. Instead, they allowed modest reform. Next, the Chartist movement started fighting for broader reforms, including universal suffrage and equal representation for all in Parliament. New legislation doubled the electorate twice more, in 1867 and 1884. By 1928, Britain enfranchised all adults, including women.
Acemoglu and Robinson emphasize that inclusive political and economic institutions also feed the virtuous circle by making violence riskier. Without violence, elites have to negotiate and compromise with the people instead of fighting them off. This small difference in political incentives actually transforms institutions through the process that Acemoglu and Robinson have called “institutional drift.” Every time the elites concede some power to the people, it might feel like a small necessary evil that isn’t likely to impact the country’s immediate future. But as these reforms build up over the course of generations, they can seriously impact the nation’s political course. Over time, for instance, these small steps toward inclusiveness made Britain into what it is today: a fully inclusive and egalitarian democracy.
Themes
Britain’s economic institutions also became more inclusive during this period. For instance, Parliament repealed the Corn Laws, which had artificially increased prices and protected large landholders. The government created many public services for workers, like health insurance and a minimum wage. It even started providing free, universal education. These changes all show how “the virtuous circle of inclusive institutions” can gradually make societies more democratic over the course of decades. Plus, this kind of gradual progress is more acceptable to elites and less likely to throw society into chaos or violence (like the French Revolution did).
As the political system starts including more people, these people start to demand policy change, not just more power. This policy change makes economic institutions more inclusive, but it also reinforces inclusive political institutions, too. In Britain, new economic policies challenged elite power, and resources like education and health insurance gave ordinary citizens the knowledge and support they needed to participate in politics. This illustrates how inclusive political institutions can transform society. When societies initially form somewhat inclusive political institutions, they’re usually already built on extractive ones. But through the virtuous circle, those inclusive institutions can gradually cause changes throughout the rest of society until, over the course of generations, it creates a truly inclusive society.
Themes
In the next section, “Busting Trusts,” Acemoglu and Robinson return to the United States. On the one hand, American institutions became more inclusive during the 19th century. On the other, during the same period, men like Cornelius Vanderbilt, John D. Rockefeller, J.P. Morgan, and Andrew Carnegie—the so-called Robber Barons—also became fabulously wealthy by building vast, monopolistic business empires. In response, Populists, Progressives, and farmworker organizations lobbied for antitrust (anti-monopoly) legislation. President Theodore Roosevelt made trust-busting and corporate regulation his signature issues. Presidents Taft and Wilson continued his work, breaking up monopolies like Rockefeller’s Standard Oil Company and creating agencies like the Federal Trade Commission to regulate monopolies.
While capitalism and entrepreneurship drove massive economic growth, they distributed the fruits of that growth very unevenly. Ultimately, such inequality ended up threatening the system itself. Just like under extractive institutions, elites set up monopolies and fear losing their wealth, power, and status to creative destruction. Thus, antitrust legislation keeps markets competitive and prevents capitalism from undermining itself. It’s really a kind of inclusive economic institution. But it relies on inclusive political institutions to survive. Thus, the US only kept its economy growing because its elected leaders managed to go after the Robber Barons—and win fairly in a court of law.
Themes
Acemoglu and Robinson reiterate that markets aren’t automatically inclusive—instead, they have to “create a level playing field and economic opportunities for the majority.” While monopolies corrupt markets, making them extractive and preventing new, better technologies from successful, inclusive political institutions (like the US government) can regulate and stop them. Meanwhile, the early 20th-century US also shows how muckrakers, or investigative journalists who expose corruption, can shift public opinion and spur political change. But muckrakers can’t succeed without inclusive political institutions supporting a free media system.
Many social scientists think of economic policy as the government regulating a free market that already exists. But Acemoglu and Robinson strongly believe that the government creates the market through policy. By opposing monopolies, it can make the market free, fair, and inclusive. But by defending them, it builds extractive, unequal markets that stifle innovation instead of promoting it. Furthermore, the media is also an important democratic institution (although not exactly an economic or political one). By giving citizens access to important information about their society, it ensures that they quickly identify and address abuses of power.
Themes
In the section “Packing the Court,” Acemoglu and Robinson summarize the New Deal programs that Franklin D. Roosevelt passed in response to the Great Depression. But the Supreme Court challenged many of these programs, like the National Industrial Recovery Act, the Social Security Act, and the National Labor Relations Act. In response, Roosevelt proposed legislation to reform and reorganize the Supreme Court. But Congress refused to pass it.
Roosevelt’s New Deal programs were important, inclusive economic policies, but he tried to achieve them by changing the structure of the Supreme Court. Because many people saw this as a bald abuse of power, Congress stopped his plan, most likely because the majority of US politicians shared Acemoglu and Robinson’s belief that inclusive economic institutions can’t survive under extractive political ones.
Themes
The story of Roosevelt’s failed attempt to pack the Supreme Court shows how inclusive institutions “resist attempts to undermine their own continuation.” While Roosevelt’s allies in Congress would have benefited in the short term from packing the court, they understood that they would be undermining their government’s institutions in the long term. Indeed, Acemoglu and Robinson note that Roosevelt might have tried to overrule Congress next.
When the authors say that inclusive institutions “resist attempts to undermine their own continuation,” they really just mean that these institutions have an automatic defense system built in. Politicians quickly band together and defeat anyone who tries to make their institutions extractive. During Roosevelt’s court-packing attempt, Acemoglu and Robinson believe that it was in most politicians’ best interest to resist Roosevelt’s plan, since they would likely lose power if he managed to gain more political influence in the Supreme Court. As a result, Acemoglu and Robinson argue, these politicians’ personal interests were aligned with their country’s best interests.
Themes
Presidents have done similar things in other countries, including Peru, Venezuela, and Argentina, where President Juan Perón simply replaced unfavorable Supreme Court justices with allies who let him do whatever he pleased. But this was only possible because of Argentina’s extractive economic and political institutions. Later Argentine presidents started doing the same as Perón. In 1990, President Carlos Menem expanded the court and changed other laws—like term limits—to consolidate his power. Like many Latin American countries, Argentina has been stuck in a vicious circle, not a virtuous one. In contrast, the US’s inclusive institutions have kept the Supreme Court independent.
In countries with extractive institutions, politicians’ incentives aren’t aligned with the interests of the people. Actually, it’s just the opposite: they make money by extracting money and resources from the population, ultimately gaining power by disempowering the masses. Perón and Menem successfully rigged the political system because Argentine politicians had no inclusive system to defend. (On the contrary: they stood to benefit more from getting close to the president than from supporting democracy.) Thus, extractive institutions become more extractive in the vicious circle, just as inclusive ones become more inclusive in the virtuous circle.
Themes
Acemoglu and Robinson conclude this chapter with “Positive Feedback and Virtuous Circles.” They argue that societies create inclusive institutions at critical junctures, when elites fail to protect their power. But after creating them, inclusive institutions tend to reinforce themselves through a virtuous circle, or positive feedback cycle. Such institutions make it difficult for leaders to concentrate power. Meanwhile, the rule of law prevents some groups from using the law as a weapon against others and gradually leads political systems to become more inclusive, too. Inclusive political institutions tend to create inclusive economic institutions, which spur economic growth and reduce the elite’s need to stay in power. And finally, inclusive institutions allow free, independent media to protect democracy.
By analyzing how inclusive institutions spread, Acemoglu and Robinson add useful nuance to their theory of inequality. It’s not enough to merely say that, after the Industrial Revolution, some countries formed inclusive institutions and some didn’t. Rather, all countries started with extractive institutions, but pluralistic coalitions managed to overthrow the political elite and create somewhat inclusive institutions in a select few societies. Over time, the virtuous circle has made those institutions more and more inclusive—and the societies they support more and more prosperous.
Themes
