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Chapter 6
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
In “Trouble with Stockings,” Acemoglu and Robinson explain how the English priest William Lee invented a knitting machine in 1589. But Queen Elizabeth I and King James I both denied him a patent because they worried that it would put knitters out of business. This illustrates how “the fear of creative destruction” froze human living standards for most of recorded history. Innovation threatens elites’ power and workers’ livelihoods, so both groups have continuously resisted it throughout history. (The elites have usually succeeded, while the workers have usually failed.) Thus, between the Neolithic Revolution and the Industrial Revolution, most institutions were extractive, and wages and life expectancy barely changed at all.
Two hundred years after Lee showed the queen and king his invention, similar textile machines drove the Industrial Revolution. Acemoglu and Robinson’s point is clear: England couldn’t industrialize in the 16th century because its political institutions weren’t inclusive enough. In fact, similar processes prevented industrialization all over the world for many centuries. Had other countries developed institutions like England’s, the authors imply, they would have been able to industrialize much earlier.
Themes
In the section “Ever-present Political Conflict,” Acemoglu and Robinson note that early conflicts over resources and power pushed England toward pluralism. The Magna Carta, a famous agreement between the king and the aristocracy in 1215, established a council of barons to limit the king’s power. In 1265, England built a Parliament of elites who represented a relatively broad set of interests and also fought to limit the monarchy’s power.
Acemoglu and Robinson repeatedly emphasize that historical events always depend on earlier events. Thus, while the Magna Carta and formation of Parliament couldn’t create inclusive institutions on their own, they did make it easier for England to develop these institutions later on, since they put checks on the monarchy’s power and made it possible for diverse groups to have a voice in the English government.
Themes
But English elites also fought over the monarchy, which led to the War of Roses and Henry VII’s ascension to the throne in 1485. Henry VII weakened the aristocracy and started centralizing state power in his own hands. Then, his son Henry VIII created a government bureaucracy and took all land and power away from the Church. State centralization can lead to absolutism if leaders manage to keep all the power, but it can also lead to pluralism if other parties insist on getting representation and power in the state. This is what happened in England: the aristocracy pushed for Parliament to have more control over the highly centralized state (and the Crown to have less). Around the same time, peasants revolted and made their own demands.
The War of the Roses actually began as elite infighting under extractive institutions: the aristocracy and monarchy both wanted more power for themselves. However, neither side won outright, so England had to form a kind of hybrid government that balanced power between the Crown and Parliament. In fact, precisely because it had to balance power in this way, the English government was already taking crucial first steps toward inclusiveness. The first step to building inclusive institutions, then, can simply be for multiple competing groups to win a meaningful voice in the government. Acemoglu and Robinson also return in this section to the crucial concept of centralization. Readers are likely to associate it with absolutism, probably because dictators often try to expand their power and impose it as widely as they can. However, the authors emphasize that centralization is really just the expansion of the state, so it isn’t always associated with absolutism. In Henry VIII’s case, centralization actually backfired: he wanted to increase his own power, but instead, he increased the state’s overall power while decreasing his control over the state.
Themes
Although it was somewhat pluralistic, the English state was still highly extractive. For instance, nearly every industry was monopolized. Angry that they couldn’t profit through competition, members of Parliament prevented King James I from establishing new monopolies for domestic production. James’s son, King Charles I, circumvented this by establishing several monopolies on international trade. He also implemented several other absolutist policies.
Parliament’s anti-monopoly rules were fundamentally selfish: they were designed to help the merchant elite increase its profits. Of course, Charles I also clearly wanted to increase his own power and profits. Thus, Parliament wasn’t inching England toward inclusive institutions because it believed in democracy or pluralism. Instead, it did so because it had to gradually take power away from the king in order to pursue its own interests. This naturally created a more balanced, less concentrated system of power. Parliament also could have tried to overthrow the king and set up an extractive dictatorship of its own—but it wasn’t powerful or unified enough to do so.
Themes
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But when King Charles I wanted to invade Scotland, Parliament protested his policies by refusing to fund the war effort. In response, Charles I fought the English Civil War against Parliament. Charles I and the monopoly owners who supported him wanted to create an absolutist state, while the Parliamentarians and their supporters wanted more pluralistic institutions. The Parliamentarians won and their leader, Oliver Cromwell, took power as a dictator. After Cromwell’s death in 1658, Charles I’s son Charles II took the throne. But eventually (after several generations of Charles I’s bloodline ruled) the Parliamentarians regained power in the Glorious Revolution of 1688, installing William III and Mary II on the throne as king and queen.
England’s transformation from extractive to inclusive institutions was a long process that unfolded slowly over the course of many decades. Parliament used its limited power over revenue to sabotage the king’s war effort. This shows how even slightly pluralistic institutions can stop absolutism by checking leaders’ power. Meanwhile, the English Civil War wasn’t merely a conflict between two different factions: it was also a fight between two different visions of government. Of course, the Parliamentarians didn’t intend on extending power to commoners, women, or really anyone but themselves. However, their victory still created more pluralistic institutions because they at least divided power between multiple groups.
Themes
In the section “The Glorious Revolution,” Acemoglu and Robinson explain how Parliament took power over the English state after 1688. William III agreed to the Declaration of Rights, which gave Parliament the power to replace the monarch, set all laws, approve all taxes, and call or disband the army. Informally, William ceded many more powers to Parliament. This ended absolutism in England. Because Parliament’s interests were mainly commercial, it strongly protected property rights and dedicated more resources to the navy (which protected commercial ships).
The Glorious Revolution definitively tipped the balance of power away from the monarchy and toward Parliament. However, this didn’t necessarily have to make England more pluralistic—instead, Parliament could have banded together to impose new extractive institutions on the country. One reason this didn’t happen was that Parliament was made up of businessmen who engaged in international trade, competed with one another, and cared more about protecting their property and wealth than about taking power for themselves. In fact, the authors suggest that representative bodies like Parliament are generally more likely to create pluralistic institutions because they represent multiple groups whose interests don’t align.
Themes
The Glorious Revolution also gave the public much more political sway. It could elect Parliament—although less than two percent of people could actually vote, and Parliament was strongly biased towards rural landowners. However, people of all trades and classes could also petition Parliament for change—and Parliament actually listened to them. For instance, in 1689, a judge gave Parliament the power to cancel the Royal African Company’s slave trading monopoly. Parliament decided to do so after receiving hundreds of anti-monopoly petitions containing thousands of signatures. Parliament also made the Industrial Revolution possible by strengthening property rights, taxing land instead of manufacturing, and founding the Bank of England, which allowed practically anyone to receive a loan.
Acemoglu and Robinson again stress that political institutions don’t have to include everyone or be truly egalitarian in order to create economic prosperity. Instead, they just need to be inclusive enough that their members choose a competitive market over monopolies. The wealthy men who dominated the English Parliament stood to benefit more from competition than monopolies, so they chose to create inclusive economic institutions. In turn, Acemoglu and Robinson argue, such competitive markets make political institutions more egalitarian over time. Moreover, because Parliament was theoretically supposed to represent the people, petitions could have some effect on its decisions. Thus, the Glorious Revolution gave commoners a proverbial foot in the door of politics—they didn’t have true representation, but their concerns were at least heard, and when they banded together they had a certain amount of political power.
Themes
Finally, during the Glorious Revolution, Parliament continued to centralize and expand the state. Its budget became about ten percent of the nation’s total income, which is larger than many state budgets today. It raised this revenue by hiring thousands of professional tax inspectors, which shows how it created a powerful, consistent, meritocratic bureaucracy to enforce its policies.
Again, just like pluralism, centralization and the expansion of the state were crucial to building inclusive institutions. This is because they allowed the state to actually enforce its decisions. Thus, while tax bureaucracy might seem like an irrelevant topic, it was actually an important political tool in 17th and 18th century England because it helped Parliament collect taxes as fairly as possible. In turn, Parliament was able to fund the country’s pro-business activities and establish the rule of law (which is the idea that the law applies to everyone, thereby preventing elites from abusing their power).
Themes
In the section “The Industrial Revolution,” Acemoglu and Robinson argue that the British state supported innovators and fostered the Industrial Revolution by protecting property rights. For example, Parliament helped reduce the cost of transporting goods by protecting private infrastructure investments. Before the Glorious Revolution, the Crown technically owned England’s land, and laws prevented most of this land from being sold or used for commercial activity. But Parliament gradually changed this system after 1688.
Parliament didn’t invest in transportation and privatize land because it wanted to help enrich the whole population—rather, it did so to increase profits for its members and their close allies. However, Parliament represented a wide range of businessmen—and not just a tiny group of oligarchs. Therefore, the best way to protect their profits was not by using the state’s power to gift them land, resources, and labor (like in post-independence Mexico), but by protecting their equal rights to participate in a competitive market.
Themes
Parliament also reorganized the British economy by protecting domestic industries—especially textiles. For instance, English wool and silk manufacturers convinced Parliament to pass laws banning the use of less expensive, imported Asian fabrics, but cotton-linen blend manufacturers stopped the wool and silk manufacturers from banning linen. Thus, Parliament balanced different groups’ interests and protected the domestic textile industry, which eventually drove the Industrial Revolution. By establishing a national monopoly for international commerce—only English ships could trade with English colonies—it also created enormous profits for English merchants.
While protectionist policies made the market less competitive internationally, they made it more competitive domestically. English textile manufacturers therefore had a strong incentive to grow, which is why they eagerly adopted industrial technologies. Translating this into the language of Acemoglu and Robinson’s theory, inclusive economic institutions created an inclusive and competitive market. Private property rights let entrepreneurs reap the benefits of their investments, and a level legal and economic playing field allowed the best products and firms to succeed. In other words, the competitive market incentivized innovations.
Themes
All these legal factors promoted innovation during the 18th century, which culminated in the Industrial Revolution. For instance, James Watt significantly improved the steam engine by combining his own original ideas with earlier inventors’ designs, like Dionysius Paupin’s steamboat—which, fearing competition, the German boatmen’s guild destroyed in 1705. In fact, society changed rapidly during the Industrial Revolution because many different innovations came together. For instance, a series of new machines, each of which built on the last and appeared within a decade of one another, made spinning cotton into yarn 300 times more efficient. This new loom technology revolutionized the English textile industry and made English exports soar.
The Industrial Revolution highlights how inclusive economic institutions spur innovation and growth by protecting intellectual property. While the German political system punished and stifled innovation, the English patent system encouraged and rewarded it. By protecting Watt’s patent rights, England empowered him to spread his invention as widely as possible—and rewarded him for doing so. What’s more, by protecting other inventors’ patents, too, the English government made it possible for Watt to learn about their inventions and build on them. This same effect rapidly improved loom technology, too: inventors knew they would receive credit and profit for their individual contributions, so they could freely work together and build off of one another’s ideas.
Themes
Innovation and prosperity were possible in England because of the country’s institutions, which rewarded “new people with new ideas.” For example, the most innovative canal, road, and railway builders were mostly skilled tradesmen, not trained transportation engineers. While wool businesses still had their workers spinning and weaving at home, new cotton entrepreneurs quickly outcompeted them by building factories.
Strong property rights and an equal economic playing field let virtually any English male take up trades like roadbuilding. These inclusive economic institutions rewarded whoever did the best job, not whoever had the most power or access. In fact, effective amateurs replacing lackluster professionals and wool factories replacing domestic weavers are both classic examples of creative destruction. In both cases, new technologies made old ones obsolete. While this disrupted old social arrangements and put many people out of work, it ultimately made the economy more efficient and productive.
Themes
Meanwhile, factory owners and workers alike started demanding greater political power. After military cavalry killed 11 protestors during the Peterloo Massacre, Parliament agreed to give manufacturing cities greater representation and passed laws amenable to the manufacturing industry. The government now enabled creative destruction rather than stopping it.
Again, while they didn’t include everyone (or even most of society), inclusive political institutions in England made it possible for more people to gain political rights over time. But this was primarily because of the inclusive economic institutions they created. The Industrial Revolution enriched new classes of people, allowing the basic conflict behind the Glorious Revolution to repeat itself: new aristocrats demanded and seized power for themselves, which made the political system a little bit more inclusive, too.
Themes
In the chapter’s final section, Acemoglu and Robinson ask, “Why in England?” They conclude that England fueled the Industrial Revolution because its political and economic institutions were more inclusive than anywhere else in the world. Specifically, the Glorious Revolution made its political system inclusive, and then the political system created inclusive economic institutions that incentivized innovation and blocked the formation of monopolies.
English history supports Acemoglu and Robinson’s theory of economic change: political changes during critical junctures created inclusive political institutions, which built inclusive economic institutions, which in turn spurred innovation and generated sustainable economic growth. If other nations had built the right institutions earlier in history, the authors suggest, they might have been able to industrialize in the same way.
Themes
The Glorious Revolution was possible because of a longstanding conflict between absolutists and pluralists—who wanted to transform institutions, not just take them over. Due to small institutional differences in feudal landlords’ power, Western European nations like Britain became more pluralistic in the aftermath of the Black Death (whereas Eastern European nations became more absolutist).
As in every society, in 17th century England, conflict over power was the engine behind political change. While Acemoglu and Robinson argue that different groups are always competing for power, including the masses and the elite, the masses didn’t take power in the Glorious Revolution. Instead, a pluralistic group of elites did. However, this shift moved English institutions far enough toward inclusiveness that it built inclusive economic institutions in the short term and an egalitarian democracy in the long term.
Themes
Similarly, because of Britain’s powerful Parliament, British businessmen traded freely across the Atlantic, created vibrant industries in British port cities, and used their wealth to fight absolutism. Crucially, since many different groups banded together to fight the monarchy, once they won, they created pluralist institutions that represented all of them. Without this broad coalition, England would have never become pluralistic. However, this outcome was never inevitable in England—rather, it was part of “the contingent path of history.”
Like everything in history, the Glorious Revolution was contingent—it depended on human decisions, earlier historical events, and the small institutional differences they created. In other words, were it not for the Black Death, the Roman Empire, or even the defeat of the Spanish Armada, the Glorious Revolution might not have happened and the Industrial Revolution might not have kicked off in England.
Themes
