Why Nations Fail

by Daron Acemoglu

  The sociologist Jonathan Wiener studied the persistence of the planter elite in five counties of the Black Belt, prime cotton country, of southern Alabama. Tracking families from the U.S. census and considering those with at least $10,000 of real estate, he found that of the 236 members of the planter elite in 1850, 101 maintained their position in 1870. Interestingly, this rate of persistence was very similar to that experienced in the pre–Civil War period; of the 236 wealthiest planter families of 1850, only 110 remained so a decade later. Nevertheless, of the 25 planters with the largest landholdings in 1870, 18 (72 percent) had been in the elite families in 1860; 16 had been in the 1850 elite group. While more than 600,000 were killed in the Civil War, the planter elites suffered few casualties. The law, designed by the planters and for the planters, exempted one slaveholder from military service for every twenty slaves held. As hundreds of thousands of men died to preserve the southern plantation economy, many big slaveholders and their sons sat out the war on their porches and thus were able to ensure the persistence of the plantation economy.

  After the end of the war, the elite planters controlling the land were able to reexert their control over the labor force. Though the economic institution of slavery was abolished, the evidence shows a clear line of persistence in the economic system of the South based on plantation-type agriculture with cheap labor. This economic system was maintained through a variety of channels, including both control of local politics and exercise of violence. As a consequence, in the words of the African American scholar W.E.B. Du Bois, the South became “simply an armed camp for intimidating black folk.”

  In 1865 the state legislature of Alabama passed the Black Code, an important landmark toward the repression of black labor. Similar to Decree 177 in Guatemala, the Black Code of Alabama consisted of a vagrancy law and a law against the “enticement” of laborers. It was designed to impede labor mobility and reduce competition in the labor market, and it ensured that southern planters would still have a reliable low-cost labor pool.

  Following the Civil War, the period called Reconstruction lasted from 1865 until 1877. Northern politicians, with the help of the Union Army, engineered some social changes in the South. But a systematic backlash from the southern elite in the guise of support for the so-called Redeemers, seeking the South’s redemption, re-created the old system. In the 1877 presidential election, Rutherford Hayes needed southern support in the electoral college. This college, still used today, was at the heart of the indirect election for president created by the U.S. Constitution. Citizens’ votes do not directly elect the president but instead elect electors who then choose the president in the electoral college. In exchange for their support in the electoral college, the southerners demanded that Union soldiers be withdrawn from the South and the region left to its own devices. Hayes agreed. With southern support, Hayes became president and pulled out the troops. The period after 1877 then marked the real reemergence of the pre–Civil War planter elite. The redemption of the South involved the introduction of new poll taxes and literacy tests for voting, which systematically disenfranchised blacks, and often also the poor white population. These attempts succeeded and created a one-party regime under the Democratic Party, with much of the political power vested in the hands of the planter elite.

  The Jim Crow laws created separate, and predictably inferior, schools. Alabama, for example, rewrote its constitution in 1901 to achieve this. Shockingly, even today Section 256 of Alabama’s constitution, though no longer enforced, still states:

  Duty of legislature to establish and maintain public school system; apportionment of public school fund; separate schools for white and colored children.

  The legislature shall establish, organize, and maintain a liberal system of public schools throughout the state for the benefit of the children thereof between the ages of seven and twenty-one years. The public school fund shall be apportioned to the several counties in proportion to the number of school children of school age therein, and shall be so apportioned to the schools in the districts or townships in the counties as to provide, as nearly as practicable, school terms of equal duration in such school districts or townships. Separate schools shall be provided for white and colored children, and no child of either race shall be permitted to attend a school of the other race.

  An amendment to strike Section 256 from the constitution was narrowly defeated in the state legislature in 2004.

  Disenfranchisement, the vagrancy laws such as the Black Code of Alabama, various Jim Crow laws, and the actions of the Ku Klux Klan, often financed and supported by the elite, turned the post–Civil War South into an effective apartheid society, where blacks and whites lived different lives. As in South Africa, these laws and practices were aimed at controlling the black population and its labor.

  Southern politicians in Washington also worked to make sure that the extractive institutions of the South could persist. For instance, they ensured that no federal projects or public works that would have jeopardized southern elite control over the black workforce ever got approved. Consequently, the South entered the twentieth century as a largely rural society with low levels of education and backward technology, still employing hand labor and mule power virtually unassisted by mechanical implements. Though the proportion of people in urban areas increased, it was far less than in the North. In 1900, for example, 13.5 percent of the population of the South was urbanized, as compared with 60 percent in the Northeast.

  All in all, the extractive institutions in the southern United States, based on the power of the landed elite, plantation agriculture, and low-wage, low-education labor, persisted well into the twentieth century. These institutions started to crumble only after the Second World War and then truly after the civil rights movement destroyed the political basis of the system. And it was only after the demise of these institutions in the 1950s and ’60s that the South began its process of rapid convergence to the North.

  The U.S. South shows another, more resilient side of the vicious circle: as in Guatemala, the southern planter elite remained in power and structured economic and political institutions in order to ensure the continuity of its power. But differently from Guatemala, it was faced with significant challenges after its defeat in the Civil War, which abolished slavery and reversed the total, constitutional exclusion of blacks from political participation. But there is more than one way of skinning a cat: as long as the planter elite was in control of its huge landholdings and remained organized, it could structure a new set of institutions, Jim Crow instead of slavery, to achieve the same objective. The vicious circle turned out to be stronger than many, including Abraham Lincoln, had thought. The vicious circle is based on extractive political institutions creating extractive economic institutions, which in turn support the extractive political institutions, because economic wealth and power buy political power. When forty acres and a mule was off the table, the southern planter elite’s economic power remained untarnished. And, unsurprisingly and unfortunately, the implications for the black population of the South, and the South’s economic development, were the same.

  THE IRON LAW OF OLIGARCHY

  The Solomonic dynasty in Ethiopia lasted until it was overthrown by a military coup in 1974. The coup was led by the Derg, a group of Marxist army officers. The regime that the Derg pitched from power looked like it was frozen in some earlier century, a historical anachronism. The emperor Haile Selassie would start his day by arriving in the courtyard at the Grand Palace, which had been built by Emperor Menelik II in the late nineteenth century. Outside the palace would be a crowd of dignitaries anticipating his arrival, bowing and desperately trying to get his attention. The emperor would hold court in the Audience Hall, sitting on the imperial throne. (Selassie was a small man; so that his legs were not left swinging in the air, it was the job of a special pillow bearer to accompany him wherever he went to make sure there was a suitable pillow to put under his feet. The bearer kept a stock of fifty-two pillows to cope with
any situation.) Selassie presided over an extreme set of extractive institutions and ran the country as his own private property, handing out favors and patronage and ruthlessly punishing lack of loyalty. There was no economic development to speak of in Ethiopia under the Solomonic dynasty.

  The Derg initially formed out of 108 representatives of different military units from all over the country. The representative of the Third Division in Harar province was a major named Mengistu Haile Mariam. Though in their initial declaration of July 4, 1974, the Derg officers declared their loyalty to the emperor, they soon started to arrest members of the government, testing how much opposition it would create. As they became more confident that the support for Selassie’s regime was hollow, they moved on the emperor himself, arresting him on September 12. Then the executions began. Many politicians at the core of the old regime were swiftly killed. By December, the Derg had declared that Ethiopia was a socialist state. Selassie died, probably murdered, on August 27, 1975. In 1975 the Derg started nationalizing property, including all urban and rural land and most kinds of private property. The increasingly authoritarian behavior of the regime sparked opposition around the country. Large parts of Ethiopia were put together during the European colonial expansion in the late nineteenth and early twentieth centuries by the policies of Emperor Menelik II, the victor of the battle of Adowa, which we encountered before (this page). These included Eritrea and Tigray in the north and the Ogaden in the east. Independence movements in response to the Derg’s ruthless regime emerged in Eritrea and Tigray, while the Somali army invaded the Somali-speaking Ogaden. The Derg itself started to disintegrate and split into factions. Major Mengistu turned out to be the most ruthless and clever of them. By mid-1977 he had eliminated his major opponents and effectively taken charge of the regime, which was saved from collapse only by a huge influx of weapons and troops from the Soviet Union and Cuba later in November of that year.

  In 1978 the regime organized a national celebration marking the fourth anniversary of the overthrow of Haile Selassie. By this time Mengistu was the unchallenged leader of the Derg. As his residence, the place from where he would rule Ethiopia, he had chosen Selassie’s Grand Palace, left unoccupied since the monarchy was abolished. At the celebration, he sat on a gilded armchair, just like the emperors of old, watching the parade. Official functions were now held once again at the Grand Palace, with Mengistu sitting on Haile Selassie’s old throne. Mengistu started to compare himself to Emperor Tewodros, who had refounded the Solomonic Dynasty in the mid-nineteenth century after a period of decline.

  One of his ministers, Dawit Wolde Giorgis, recalled in his memoir:

  At the beginning of the Revolution all of us had utterly rejected anything to do with the past. We would no longer drive cars, or wear suits; neckties were considered criminal. Anything that made you look well-off or bourgeois, anything that smacked of affluence or sophistication, was scorned as part of the old order. Then, around 1978, all that began to change. Gradually materialism became accepted, then required. Designer clothes from the best European tailors were the uniform of all senior government officials and members of the Military Council. We had the best of everything: the best homes, the best cars, the best whiskey, champagne, food. It was a complete reversal of the ideals of the Revolution.

  Giorgis also vividly recorded how Mengistu changed once he became sole ruler:

  The real Mengistu emerged: vengeful, cruel and authoritarian … Many of us who used to talk to him with hands in our pockets, as if he were one of us, found ourselves standing stiffly to attention, cautiously respectful in his presence. In addressing him we had always used the familiar form of “you,” ante; now we found ourselves switching to the more formal “you,” ersiwo. He moved into a bigger, more lavish office in the Palace of Menelik … He began using the Emperor’s cars … We were supposed to have a revolution of equality; now he had become the new Emperor.

  The pattern of vicious circle depicted by the transition between Haile Selassie and Mengistu, or between the British colonial governors of Sierra Leone and Siaka Stevens, is so extreme and at some level so strange that it deserves a special name. As we already mentioned in chapter 4, the German sociologist Robert Michels called it the iron law of oligarchy. The internal logic of oligarchies, and in fact of all hierarchical organizations, is that, argued Michels, they will reproduce themselves not only when the same group is in power, but even when an entirely new group takes control. What Michels did not anticipate perhaps was an echo of Karl Marx’s remark that history repeats itself—the first time as tragedy, the second time as farce.

  It is not only that many of the postindependence leaders of Africa moved into the same residences, made use of the same patronage networks, and employed the same ways of manipulating markets and extracting resources as had the colonial regimes and the emperors they replaced; but they also made things worse. It was indeed a farce that the staunchly anticolonial Stevens would be concerned with controlling the same people, the Mende, whom the British had sought to control; that he would rely on the same chiefs whom the British had empowered and then used to control the hinterland; that he would run the economy in the same way, expropriating the farmers with the same marketing boards and controlling the diamonds under a similar monopoly. It was indeed a farce, a very sad farce indeed, that Laurent Kabila, who mobilized an army against Mobutu’s dictatorship with the promise of freeing the people and ending the stifling and impoverishing corruption and repression of Mobutu’s Zaire, would then set up a regime just as corrupt and perhaps even more disastrous. It was certainly farcical that he tried to start a Mobutuesque personality cult aided and abetted by Dominique Sakombi Inongo, previously Mobutu’s minister of information, and that Mobutu’s regime was itself fashioned on patterns of exploitation of the masses that had started more than a century previously with King Leopold’s Congo Free State. It was indeed a farce that the Marxist officer Mengistu would start living in a palace, viewing himself as an emperor, and enriching himself and his entourage just like Haile Selassie and other emperors before him had done.

  It was all a farce, but also more tragic than the original tragedy, and not only for the hopes that were dashed. Stevens and Kabila, like many other rulers in Africa, would start murdering their opponents and then innocent citizens. Mengistu and the Derg’s policies would bring recurring famine to Ethiopia’s fertile lands. History was repeating itself, but in a very distorted form. It was a famine in Wollo province in 1973 to which Haile Selassie was apparently indifferent that did so much finally to solidify opposition to his regime. Selassie had at least been only indifferent. Mengistu instead saw famine as a political tool to undermine the strength of his opponents. History was not only farcical and tragic, but also cruel to the citizens of Ethiopia and much of sub-Saharan Africa.

  The essence of the iron law of oligarchy, this particular facet of the vicious circle, is that new leaders overthrowing old ones with promises of radical change bring nothing but more of the same. At some level, the iron law of oligarchy is harder to understand than other forms of the vicious circle. There is a clear logic to the persistence of the extractive institutions in the U.S. South and in Guatemala. The same groups continued to dominate the economy and the politics for centuries. Even when challenged, as the U.S. southern planters were after the Civil War, their power remained intact and they were able to keep and re-create a similar set of extractive institutions from which they would again benefit. But how can we understand those who come to power in the name of radical change re-creating the same system? The answer to this question reveals, once again, that the vicious circle is stronger than it first appears.

  Not all radical changes are doomed to failure. The Glorious Revolution was a radical change, and it led to what perhaps turned out to be the most important political revolution of the past two millennia. The French Revolution was even more radical, with its chaos and excessive violence and the ascent of Napoleon Bonaparte, but it did not re-create the ancien régime.


  Three factors greatly facilitated the emergence of more inclusive political institutions following the Glorious Revolution and the French Revolution. The first was new merchants and businessmen wishing to unleash the power of creative destruction from which they themselves would benefit; these new men were among the key members of the revolutionary coalitions and did not wish to see the development of yet another set of extractive institutions that would again prey on them.

  The second was the nature of the broad coalition that had formed in both cases. For example, the Glorious Revolution wasn’t a coup by a narrow group or a specific narrow interest, but a movement backed by merchants, industrialists, the gentry, and diverse political groupings. The same was largely true for the French Revolution.

  The third factor relates to the history of English and French political institutions. They created a background against which new, more inclusive regimes could develop. In both countries there was a tradition of parliaments and power sharing going back to the Magna Carta in England and to the Assembly of Notables in France. Moreover, both revolutions happened in the midst of a process that had already weakened the grasp of the absolutist, or aspiring absolutist, regimes. In neither case would these political institutions make it easy for a new set of rulers or a narrow group to take control of the state and usurp existing economic wealth and build unchecked and durable political power. In the aftermath of the French Revolution, a narrow group under the leadership of Robespierre and Saint-Just did take control, with disastrous consequences, but this was temporary and did not derail the path toward more inclusive institutions. All this contrasts with the situation of societies with long histories of extreme extractive economic and political institutions, and no checks on the power of rulers. In these societies, there would be no new strong merchants or businessmen supporting and bankrolling the resistance against the existing regime in part to secure more inclusive economic institutions; no broad coalitions introducing constraints against the power of each of their members; no political institutions inhibiting new rulers intent on usurping and exploiting power.