Why Nations Fail

by Daron Acemoglu

  These descriptions suggest major similarities between the political and economic structures of Ethiopia and those of European absolutism, though they also make it clear that absolutism was more intense in Ethiopia, and economic institutions even more extractive. Moreover, as we emphasized in chapter 6, Ethiopia was not subject to the same critical junctures that helped undermine the absolutist regime in England. It was cut off from many of the processes that shaped the modern world. Even if this had not been the case, the intensity of its absolutism would probably have led the absolutism to strengthen even more. For example, as in Spain, international trade in Ethiopia, including the lucrative slave trade, was controlled by the monarch. Ethiopia was not completely isolated: Europeans did search for Prester John, and it did have to fight wars against surrounding Islamic polities. Nevertheless, the historian Edward Gibbon noted with some accuracy that “encompassed on all sides by the enemies of their religion, the Aethiopians slept near a thousand years, forgetful of the world by whom they were forgotten.”

  As the European colonization of Africa began in the nineteenth century, Ethiopia was an independent kingdom under Ras (Duke) Kassa, who was crowned Emperor Tewodros II in 1855. Tewodros embarked on a modernization of the state, creating a more centralized bureaucracy and judiciary, and a military capable of controlling the country and possibly fighting the Europeans. He placed military governors, responsible for collecting taxes and remitting them to him, in charge of all the provinces. His negotiations with European powers were difficult, and in exasperation he imprisoned the English consul. In 1868 the English sent an expeditionary force, which sacked his capital. Tewodros committed suicide.

  All the same, Tewodros’s reconstructed government did manage to pull off one of the great anticolonial triumphs of the nineteenth century, against the Italians. In 1889 the throne went to Menelik II, who was immediately faced with the interest of Italy in establishing a colony there. In 1885 the German chancellor Bismarck had convened a conference in Berlin where the European powers hatched the “Scramble for Africa”—that is, they decided how to divide up Africa into different spheres of interest. At the conference, Italy secured its rights to colonies in Eritrea, along the coast of Ethiopia, and Somalia. Ethiopia, though not represented at the conference, somehow managed to survive intact. But the Italians still kept designs, and in 1896 they marched an army south from Eritrea. Menelik’s response was similar to that of a European medieval king; he formed an army by getting the nobility to call up their armed men. This approach could not put an army in the field for long, but it could put a huge one together for a short time. This short time was just enough to defeat the Italians, whose fifteen thousand men were overwhelmed by Menelik’s one hundred thousand in the Battle of Adowa in 1896. It was the most serious military defeat a precolonial African country was able to inflict on a European power, and secured Ethiopia’s independence for another forty years.

  The last emperor of Ethiopia, Ras Tafari, was crowned Haile Selassie in 1930. Haile Selassie ruled until he was overthrown by a second Italian invasion, which began in 1935, but he returned from exile with the help of the English in 1941. He then ruled until he was overthrown in a 1974 coup by the Derg, “the Committee,” a group of Marxist army officers, who then proceeded to further impoverish and ravage the country. The basic extractive economic institutions of the absolutist Ethiopian empire, such as gult (this page), and the feudalism created after the decline of Aksum, lasted until they were abolished after the 1974 revolution.

  Today Ethiopia is one of the poorest countries in the world. The income of an average Ethiopian is about one-fortieth that of an average citizen of England. Most people live in rural areas and practice subsistence agriculture. They lack clean water, electricity, and access to proper schools or health care. Life expectancy is about fifty-five years and only one-third of adults are literate. A comparison between England and Ethiopia spans world inequality. The reason Ethiopia is where it is today is that, unlike in England, in Ethiopia absolutism persisted until the recent past. With absolutism came extractive economic institutions and poverty for the mass of Ethiopians, though of course the emperors and nobility benefited hugely. But the most enduring implication of the absolutism was that Ethiopian society failed to take advantage of industrialization opportunities during the nineteenth and early twentieth centuries, underpinning the abject poverty of its citizens today.

  THE CHILDREN OF SAMAALE

  Absolutist political institutions around the world impeded industrialization either indirectly, in the way they organized the economy, or directly, as we have seen in Austria-Hungary and Russia. But absolutism was not the only barrier to the emergence of inclusive economic institutions. At the dawn of the nineteenth century, many parts of the world, especially in Africa, lacked a state that could provide even a minimal degree of law and order, which is a prerequisite for having a modern economy. There was not the equivalent of Peter the Great in Russia starting the process of political centralization and then forging Russian absolutism, let alone that of the Tudors in England centralizing the state without fully destroying—or, more appropriately, without fully being able to destroy—the Parliament and other constraints on their power. Without some degree of political centralization, even if the elites of these African polities had wished to greet industrialization with open arms, there wouldn’t have been much they could have done.

  Somalia, situated in the Horn of Africa, illustrates the devastating effects of lack of political centralization. Somalia has been dominated historically by people organized into six clan families. The four largest of these, the Dir, Darod, Isaq, and Hawiye, all trace their ancestry back to a mythical ancestor, Samaale. These clan families originated in the north of Somalia and gradually spread south and east, and are even today primarily pastoral people who migrate with their flocks of goats, sheep, and camels. In the south, the Digil and the Rahanweyn, sedentary agriculturalists, make up the last two of the clan families. The territories of these clans are depicted on Map 12.

  Somalis identify first with their clan family, but these are very large and contain many subgroups. First among these are clans that trace their descent back to one of the larger clan families. More significant are the groupings within clans called diya-paying groups, which consist of closely related kinspeople who pay and collect diya, or “blood wealth,” compensation against the murder of one of their members. Somali clans and diya-paying groups were historically locked in to almost continual conflict over the scarce resources at their disposal, particularly water sources and good grazing land for their animals. They also constantly raided the herds of neighboring clans and diya-paying groups. Though clans had leaders called sultans, and also elders, these people had no real power. Political power was very widely dispersed, with every Somali adult man being able to have his say on decisions that might affect the clan or group. This was achieved through an informal council made up of all adult males. There was no written law, no police, and no legal system to speak of, except that Sharia law was used as a framework within which informal laws were embedded. These informal laws for a diya-paying group would be encoded in what was called a heer, a body of explicitly formulated obligations, rights, and duties the group demanded others obey in their interactions with the group. With the advent of colonial rule, these heers began to be written down. For example, the Hassan Ugaas lineage formed a diya-paying group of about fifteen hundred men and was a subclan of the Dir clan family in British Somaliland. On March 8, 1950, their heer was recorded by the British district commissioner, the first three clauses of which read

  1. When a man of the Hassan Ugaas is murdered by an external group twenty camels of his blood wealth (100) will be taken by his next of kin and the remaining eighty camels shared amongst all the Hassan Ugaas.

  2. If a man of the Hassan Ugaas is wounded by an outsider and his injuries are valued at thirty-three-and-a-third camels, ten camels must be given to him and the remained to his jiffo-group (a sub-group of the diya gro
up).

  3. Homicide amongst members of the Hassan Ugaas is subject to compensation at the rate of thirty-three-and-a-third camels, payable only to the deceased’s next of kin. If the culprit is unable to pay all or part, he will be assisted by his lineage.

  The heavy focus of the heer on killing and wounding reflects the almost constant state of warfare between diya-paying groups and clans. Central to this was blood wealth and blood feuding. A crime against a particular person was a crime against the whole diya-paying group, and necessitated collective compensation, blood wealth. If such blood wealth was not paid, the diya-paying group of the person who had committed the crime faced the collective retribution of the victim. When modern transportation reached Somalia, blood wealth was extended to people who were killed or injured in motor accidents. The Hassan Ugaas’s heer didn’t refer only to murder; clause 6 was “If one man of the Hassan Ugaas insults another at a Hassan Ugaas council he shall pay 150 shillings to the offended party.”

  In early 1955, the flocks of two clans, the Habar Tol Ja’lo and the Habar Yuunis, were grazing close to each other in the region of Domberelly. A man from the Yuunis was wounded after a dispute with a member of the Tol Ja’lo over camel herding. The Yuunis clan immediately retaliated, attacking the Tol Ja’lo clan and killing a man. This death led, following the code of blood wealth, to the Yuunis clan offering compensation to the Tol Ja’lo clan, which was accepted. The blood wealth was to be handed over in person, as usual in the form of camels. At the handing-over ceremony, one of the Tol Ja’lo killed a member of the Yuunis, mistaking him for a member of the diya-paying group of the murderer. This led to all-out warfare, and within the next forty-eight hours thirteen Yuunis and twenty-six Tol Ja’lo had been killed. Warfare continued for another year before elders from both clans, brought together by the English colonial administration, managed to broker a deal (the exchange of blood wealth) that satisfied both sides and was paid over the next three years.

  The paying of blood wealth took place in the shadow of the threat of force and feuding, and even when it was paid, it did not necessarily stop conflict. Usually conflict died down and then flared up again.

  Political power was thus widely dispersed in Somali society, almost pluralistically. But without the authority of a centralized state to enforce order, let alone property rights, this led not to inclusive institutions. Nobody respected the authority of another, and nobody, including the British colonial state when it eventually arrived, was able to impose order. The lack of political centralization made it impossible for Somalia to benefit from the Industrial Revolution. In such a climate it would have been unimaginable to invest in or adopt the new technologies emanating from Britain, or indeed to create the types of organizations necessary to do so.

  The complex politics of Somalia had even more subtle implications for economic progress. We mentioned earlier some of the great technological puzzles of African history. Prior to the expansion of colonial rule in the late nineteenth century, African societies did not use wheeled transportation or plow agriculture and few had writing. Ethiopia did, as we have seen. The Somalis also had a written script, but unlike the Ethiopians, they did not use it. We have already seen instances of this in African history. African societies may not have used wheels or plows, but they certainly knew about them. In the case of the Kingdom of Kongo, as we have seen, this was fundamentally due to the fact that the economic institutions created no incentives for people to adopt these technologies. Could the same issues arise with the adoption of writing?

  We can get some sense of this from the Kingdom of Taqali, situated to the northwest of Somalia, in the Nuba Hills of southern Sudan. The Kingdom of Taqali was formed in the late eighteenth century by a band of warriors led by a man called Isma’il, and it stayed independent until amalgamated into the British Empire in 1884. The Taqali kings and people had access to writing in Arabic, but it was not used—except by the kings, for external communication with other polities and diplomatic correspondence. At first this situation seems very puzzling. The traditional account of the origin of writing in Mesopotamia is that it was developed by states in order to record information, control people, and levy taxes. Wasn’t the Taqali state interested in this?

  These questions were investigated by the historian Janet Ewald in the late 1970s as she tried to reconstruct the history of the Taqali state. Part of the story is that the citizens resisted the use of writing because they feared that it would be used to control resources, such as valuable land, by allowing the state to claim ownership. They also feared that it would lead to more systematic taxation. The dynasty that Isma’il started did not gel into a powerful state. Even if it had wanted to, the state was not strong enough to impose its will over the objections of the citizens. But there were other, more subtle factors at work. Various elites also opposed political centralization, for example, preferring oral to written interaction with citizens, because this allowed them maximum discretion. Written laws or orders could not be taken back or denied and were harder to change; they set benchmarks that governing elites might want to reverse. So neither the ruled nor the rulers of Taqali saw the introduction of writing to be to their advantage. The ruled feared how the rulers would use it, and the rulers themselves saw the absence of writing as aiding their quite precarious grip on power. It was the politics of Taqali that kept writing from being introduced. Though the Somalis had even less of a well-defined elite compared with the Taqali kingdom, it is quite plausible that the same forces inhibited their use of writing and their adoption of other basic technologies.

  The Somali case shows the consequences of the lack of political centralization for economic growth. The historical literature does not record instances of attempts to create such centralization in Somalia. However, it is clear why this would have been very difficult. To politically centralize would have meant that some clans would have been subject to the control of others. But they rejected any such dominance, and the surrender of their power that this would have entailed; the balance of military power in the society would also have made it difficult to create such centralized institutions. In fact, it is likely that any group or clan attempting to centralize power would not only have faced stiff resistance but would have lost its existing power and privileges. As a consequence of this lack of political centralization and the implied absence of even the most basic security of property rights, Somali society never generated incentives to invest in productivity-enhancing technologies. As the process of industrialization was under way in other parts of the world in the nineteenth and early twentieth centuries, Somalis were feuding and fending for their lives, and their economic backwardness became more ingrained.

  ENDURING BACKWARDNESS

  The Industrial Revolution created a transformative critical juncture for the whole world during the nineteenth century and beyond: those societies that allowed and incentivized their citizens to invest in new technologies could grow rapidly. But many around the world failed to do so—or explicitly chose not to do so. Nations under the grip of extractive political and economic institutions did not generate such incentives. Spain and Ethiopia provide examples where the absolutist control of political institutions and the implied extractive economic institutions choked economic incentives long before the dawn of the nineteenth century. The outcome was similar in other absolutist regimes—for example, in Austria-Hungary, Russia, the Ottoman Empire, and China, though in these cases the rulers, because of fear of creative destruction, not only neglected to encourage economic progress but also took explicit steps to block the spread of industry and the introduction of new technologies that would bring industrialization.

  Absolutism is not the only form of extractive political institutions and was not the only factor preventing industrialization. Inclusive political and economic institutions necessitate some degree of political centralization so that the state can enforce law and order, uphold property rights, and encourage economic activity when necessary by investing in public services. Yet even
today, many nations, such as Afghanistan, Haiti, Nepal, and Somalia, have states that are unable to maintain the most rudimentary order, and economic incentives are all but destroyed. The case of Somalia illustrates how the process of industrialization also passed by such societies. Political centralization is resisted for the same reason that absolutist regimes resist change: the often well-placed fear that change will reallocate political power from those that dominate today to new individuals and groups. Thus, as absolutism blocks moves toward pluralism and economic change, so do the traditional elites and clans dominating the scene in societies without state centralization. As a consequence, societies that still lacked such centralization in the eighteenth and nineteenth centuries were particularly disadvantaged in the age of industry.

  While the variety of extractive institutions ranging from absolutism to states with little centralization failed to take advantage of the spread of industry, the critical juncture of the Industrial Revolution had very different effects in other parts of the world. As we will see in chapter 10, societies that had already taken steps toward inclusive political and economic institutions, such as the United States and Australia, and those where absolutism was more seriously challenged, such as France and Japan, took advantage of these new economic opportunities and started a process of rapid economic growth. As such, the usual pattern of interaction between a critical juncture and existing institutional differences leading to further institutional and economic divergence played out again in the nineteenth century, and this time with an even bigger bang and more fundamental effects on the prosperity and poverty of nations.

  North of the fence: Nogales, Arizona Jim West/imagebroker.net/Photolibrary