Why Nations Fail

Illustrate with eg from Somalia, Haiti, Nepal and Afghanistan, how can States impv pol centralization to special devp?

chapter 8

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In Europe, the printing press changed everything. By 1800, 60% of European men and 40% of European women were literate. But the Ottoman Empire banned the use of the printing press for centuries and when they finally allowed it assigned a panel of religious experts to ensure that the books printed met with the moral and religious standards of the political elite. The consequence: by 1800, only 2% of the Ottoman population was literate. And all because extractive institutions made it possible for elites to dominate and control the populace. The Ottoman Empire was an extractive institution and held back Arab growth until its collapse after World War I. While the Ottomans and other absolutist regimes held back growth, however, some societies that lacked centralized states remained very powerful, since there was no state to produce order and create rules and property rights. States can be too elite and too weak. Both provide barriers to development.

So the authors identify two, opposing, barriers to development and in Chapter 8, they show how many nations missed the critical junctures that led to the Industrial Revolution, with the Ottoman Empire and Somalia representing opposing extremes. But an important contrast arises in the development of Spain and England. In the 16th century, Spain was much richer than England, but by the 19th century, the two positions had reversed, in large part due to the discovery of precious metals in the New World allowing the Spanish crown to centralize its power and impose extractive institutions on the populace. Similar stagnation occurred in Spanish colonies, again in contrast with English colonies.

The Hapsburg or Austro-Hungarian Empire, prior to World War I, was the third largest country in Europe and had a seventh of its population. But merchants in the empire had a much lower social status than in England and serfdom prevailed in many of its eastern lands. The late 18th and early 19th century rulers opposed industry and promoted absolutism. The core of Hapsburg institutions was feudalism and absolute monarchy.

Opposition to innovation was common among the ruling class, and led to the opposition of industry which would lead to factories which in turn would concentrate the power in the cities and could support democratic revolts. There was also strong opposition to the construction of railways. Russia would adopt similar restrictions. Absolutism allowed rulers to create barriers to entry and so continue extracting profits.

In Asia, much of the barriers to development arose in the form of shipping restrictions. The Chinese once led the world in inventions during the Song dynasty, from 960 to 1279. But by 1500 China began to stagnate. The people had no representatives in the bureaucracy and merchants often had an unstable place in the social order. The dynasties gradually centralized power over time and continued to extract wealth from the people. But this was no worse than restrictions on international trade. The authors then tell a related story about the history of Ethiopia and Somalia.

After the Industrial Revolution broke out in England, countries faced a choice of whether to mimic England's institutions or not. Those that did grew, and those that did not stagnated or grew more slowly due to extractive institutions.

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