Daron Acemoglu & James Robinson

by Prosperity;Poverty Why Nations Fail: The Origins of Power

  Though the railway to the south was initially designed by the British to rule Sierra Leone, by 1967 its role was economic, transporting most of the country’s exports: coffee, cocoa, and diamonds. The farmers who grew coffee and cocoa were Mende, and the railway was Mendeland’s window to the world. Mendeland had voted hugely for Albert Margai in the 1967 election. Stevens was much more interested in holding on to power than promoting Mendeland’s exports. His reasoning was simple: whatever was good for the Mende was good for the SLPP, and bad for Stevens. So he pulled up the railway line to Mendeland. He then went ahead and sold off the track and rolling stock to make the change as irreversible as possible. Now, as you drive out of Freetown to the east, you pass the dilapidated railway stations of Hastings and Waterloo. There are no more trains to Bo. Of course, Stevens’s drastic action fatally damaged some of the most vibrant sectors of Sierra Leone’s economy. But like many of Africa’s postindependence leaders, when the choice was between consolidating power and encouraging economic growth, Stevens chose consolidating his power, and he never looked back. Today you can’t take the train to Bo anymore, because like Tsar Nicholas I, who feared that the railways would bring revolution to Russia, Stevens believed the railways would strengthen his opponents. Like so many other rulers in control of extractive institutions, he was afraid of challenges to his political power and was willing to sacrifice economic growth to thwart those challenges.

  Stevens’s strategy at first glance contrasts with that of the British. But in fact, there was a significant amount of continuity between British rule and Stevens’s regime that illustrates the logic of vicious circles. Stevens ruled Sierra Leone by extracting resources from its people using similar methods. He was still in power in 1985 not because he had been popularly reelected, but because after 1967 he set up a violent dictatorship, killing and harassing his political opponents, particularly the members of the SLPP. He made himself president in 1971, and after 1978, Sierra Leone had only one political party, Stevens’s APC. Stevens thus successfully consolidated his power, even if the cost was impoverishing much of the hinterland.

  During the colonial period, the British used a system of indirect rule to govern Sierra Leone, as they did with most of their African colonies. At the base of this system were the paramount chiefs, who collected taxes, distributed justice, and kept order. The British dealt with the cocoa and coffee farmers not by isolating them, but by forcing them to sell all their produce to a marketing board developed by the colonial office purportedly to help the farmers. Prices for agricultural commodities fluctuated wildly over time. Cocoa prices might be high one year but low the next. The incomes of farmers fluctuated in tandem. The justification for marketing boards was that they, not the farmers, would absorb the price fluctuations. When world prices were high, the board would pay the farmers in Sierra Leone less than the world price, but when world prices were low, they would do the opposite. It seemed a good idea in principle. The reality was very different, however. The Sierra Leone Produce Marketing Board was set up in 1949. Of course the board needed a source of revenues to function. The natural way to attain these was by paying farmers just a little less than they should have received either in good or bad years. These funds could then be used for overhead expenditures and administration. Soon the little less became a lot less. The colonial state was using the marketing board as a way of heavily taxing farmers.

  Many expected the worst practices of colonial rule in sub-Saharan Africa to stop after independence, and the use of marketing boards to excessively tax farmers to come to an end. But neither happened. In fact, the extraction of farmers using marketing boards got much worse. By the mid-1960s, the farmers of palm kernels were getting 56 percent of the world price from the marketing board; cocoa farmers, 48 percent; and coffee farmers, 49 percent. By the time Stevens left office in 1985, resigning to allow his handpicked successor, Joseph Momoh, to become president, these numbers were 37, 19, and 27 percent, respectively. As pitiful as this might sound, it was better than what the farmers were getting during Stevens’s reign, which had often been as low as 10 percent—that is, 90 percent of the income of the farmers was extracted by Stevens’s government, and not to provide public services, such as roads or education, but to enrich himself and his cronies and to buy political support.

  As part of their indirect rule, the British had also stipulated that the office of the paramount chief would be held for life. To be eligible to be a chief, one had to be a member of a recognized “ruling house.” The identity of the ruling houses in a chieftaincy developed over time, but it was essentially based on the lineage of the kings in a particular area and of the elite families who signed treaties with the British in the late nineteenth century. Chiefs were elected, but not democratically. A body called the Tribal Authority, whose members were lesser village chiefs or were appointed by paramount chiefs, village chiefs, or the British authorities, decided who would become the paramount chief. One might have imagined that this colonial institution would also have been abolished or at least reformed after independence. But just like the marketing board, it was not, and continued unchanged. Today paramount chiefs are still in charge of collecting taxes. It is no longer a hut tax, but its close descendant, a poll tax. In 2005 the Tribal Authority in Sandor elected a new paramount chief. Only candidates from the Fasuluku ruling house, which is the only ruling house, could stand. The victor was Sheku Fasuluku, King Suluku’s great-great-grandson.

  The behavior of the marketing boards and the traditional systems of land ownership go a long way to explain why agricultural productivity is so low in Sierra Leone and much of sub-Saharan Africa. The political scientist Robert Bates set out in the 1980s to understand why agriculture was so unproductive in Africa even though according to textbook economics this ought to have been the most dynamic economic sector. He realized that this had nothing to do with geography or the sorts of factors discussed in chapter 2 that have been claimed to make agricultural productivity intrinsically low. Rather, it was simply because the pricing policies of the marketing boards removed any incentives for the farmers to invest, use fertilizers, or preserve the soil.

  The reason that the policies of the marketing boards were so unfavorable to rural interests was that these interests had no political power. These pricing policies interacted with other fundamental factors making tenure insecure, further undermining investment incentives. In Sierra Leone, paramount chiefs not only provide law and order and judicial services, and raise taxes, but they are also the “custodians of the land.” Though families, clans, and dynasties have user rights and traditional rights to land; at the end of the day chiefs have the last say on who farms where. Your property rights to land are only secure if you are connected to the chief, perhaps from the same ruling family. Land cannot be bought or sold or used as collateral for a loan, and if you are born outside a chieftaincy, you cannot plant any perennial crop such as coffee, cocoa, or palm for fear that this will allow you to establish “de facto” property rights.

  The contrast between the extractive institutions developed by the British in Sierra Leone and the inclusive institutions that developed in other colonies, such as Australia, is illustrated by the way mineral resources were managed. Diamonds were discovered in Kono in eastern Sierra Leone in January 1930. The diamonds were alluvial, that is, not in deep mines. So the primary method of mining them was by panning in rivers. Some social scientists call these “democratic diamonds,” because they allow many people to become involved in mining, creating a potentially inclusive opportunity. Not so in Sierra Leone. Happily ignoring the intrinsically democratic nature of panning for diamonds, the British government set up a monopoly for the entire protectorate, called it the Sierra Leone Selection Trust, and granted it to De Beers, the giant South African diamond mining company. In 1936 De Beers was also given the right to create the Diamond Protection Force, a private army that would become larger than that of the colonial government in Sierra Leone. Even so, the widespread availability of the
alluvial diamonds made the situation difficult to police. By the 1950s, the Diamond Protection Force was overwhelmed by thousands of illegal diamond miners, a massive source of conflict and chaos. In 1955 the British government opened up some of the diamond fields to licensed diggers outside the Sierra Leone Selection Trust, though the company still kept the richest areas in Yengema and Koidu and Tongo Fields. Things only got worse after independence. In 1970 Siaka Stevens effectively nationalized the Sierra Leone Selection Trust, creating the National Diamond Mining Company (Sierra Leone) Limited, in which the government, effectively meaning Stevens, had a 51 percent stake. This was the opening phase of Stevens’s plan to take over diamond mining in the country.

  In nineteenth-century Australia it was gold, discovered in 1851 in New South Wales and the newly created state of Victoria, not diamonds, that attracted everyone’s attention. Like diamonds in Sierra Leone, the gold was alluvial, and a decision had to be made about how to exploit it. Some, such as James Macarthur, son of John Macarthur, the prominent leader of the Squatters we discussed earlier (this page–this page), proposed that fences be placed around the mining areas and the monopoly rights auctioned off. They wanted an Australian version of the Sierra Leone Selection Trust. Yet many in Australia wanted free access to the gold mining areas. The inclusive model won, and instead of setting up a monopoly, Australian authorities allowed anyone who paid an annual mining license fee to search and dig for gold. Soon the diggers, as these adventurers came to be known, were a powerful force in Australian politics, particularly in Victoria. They played an important role in pushing forward the agenda of universal suffrage and the secret ballot.

  We have already seen two pernicious effects of European expansion and colonial rule in Africa: the introduction of the transatlantic slave trade, which encouraged the development of African political and economic institutions in an extractive direction, and the use of colonial legislation and institutions to eliminate the development of African commercial agriculture that might have competed with Europeans. Slavery was certainly a force in Sierra Leone. At the time of colonization there was no strong centralized state in the interior, just many small, mutually antagonistic kingdoms continually raiding one another and capturing one another’s men and women. Slavery was endemic, with possibly 50 percent of the population working as slaves. The disease environment meant that large-scale white settlement was not possible in Sierra Leone, as it was in South Africa. Hence there were no whites competing with the Africans. Moreover, the lack of a mining economy on the scale of Johannesburg meant that, in addition to the lack of demand for African labor from white farms, there was no incentive to create the extractive labor market institutions so characteristic of Apartheid South Africa.

  But other mechanisms were also in play. Sierra Leone’s cocoa and coffee farmers did not compete with whites, though their incomes were still expropriated via a government monopoly, the marketing board. Sierra Leone also suffered from indirect rule. In many parts of Africa where the British authorities wished to use indirect rule, they found peoples who did not have a system of centralized authority who could be taken over. For example, in eastern Nigeria the Igbo peoples had no chiefs when the British encountered them in the nineteenth century. The British then created chiefs, the warrant chiefs. In Sierra Leone, the British would base indirect rule on existing indigenous institutions and systems of authority.

  Nevertheless, regardless of the historical basis for the individuals recognized as paramount chiefs in 1896, indirect rule, and the powers that it invested in paramount chiefs, completely changed the existing politics of Sierra Leone. For one, it introduced a system of social stratification—the ruling houses—where none had existed previously. A hereditary aristocracy replaced a situation that had been much more fluid and where chiefs had required popular support. Instead what emerged was a rigid system with chiefs holding office for life, beholden to their patrons in Freetown or Britain, and far less accountable to the people they ruled. The British were happy to subvert the institutions in other ways, too, for example, by replacing legitimate chiefs with people who were more cooperative. Indeed, the Margai family, which supplied the first two prime ministers of independent Sierra Leone, came to power in the Lower Banta chieftaincy by siding with the British in the Hut Tax Rebellion against the reigning chief, Nyama. Nyama was deposed, and the Margais became chiefs and held the position until 2010.

  What is remarkable is the extent of continuity between colonial and independent Sierra Leone. The British created the marketing boards and used them to tax farmers. Postcolonial governments did the same extracting at even higher rates. The British created the system of indirect rule through paramount chiefs. Governments that followed independence didn’t reject this colonial institution; rather, they used it to govern the countryside as well. The British set up a diamond monopoly and tried to keep out African miners. Postindependence governments did the same. It is true that the British thought that building railways was a good way to rule Mendeland, while Siaka Stevens thought the opposite. The British could trust their army and knew it could be sent to Mendeland if a rebellion arose. Stevens, on the other hand, could not do so. As in many other African nations, a strong army would have become a threat to Stevens’s rule. It was for this reason that he emasculated the army, cutting it down and privatizing violence through specially created paramilitary units loyal only to him, and in the process, he accelerated the decline of the little state authority that existed in Sierra Leone. Instead of the army, first came the Internal Security Unit, the ISU, which Sierra Leone’s long-suffering people knew as “I Shoot U.” Then came the Special Security Division, the SSD, which the people knew as “Siaka Stevens’s Dogs.” In the end, the absence of an army supporting the regime would also be its undoing. It was a group of only thirty soldiers, led by Captain Valentine Strasser, that pitched the APC regime from power on April 29, 1992.

  Sierra Leone’s development, or lack thereof, could be best understood as the outcome of the vicious circle. British colonial authorities built extractive institutions in the first place, and the postindependence African politicians were only too happy to take up the baton for themselves. The pattern was eerily similar all over sub-Saharan Africa. There were similar hopes for postindependence Ghana, Kenya, Zambia, and many other African countries. Yet in all these cases, extractive institutions were re-created in a pattern predicted by the vicious circle—only they became more vicious as time went by. In all these countries, for example, the British creation of marketing boards and indirect rule were sustained.

  There are natural reasons for this vicious circle. Extractive political institutions lead to extractive economic institutions, which enrich a few at the expense of many. Those who benefit from extractive institutions thus have the resources to build their (private) armies and mercenaries, to buy their judges, and to rig their elections in order to remain in power. They also have every interest in defending the system. Therefore, extractive economic institutions create the platform for extractive political institutions to persist. Power is valuable in regimes with extractive political institutions, because power is unchecked and brings economic riches.

  Extractive political institutions also provide no checks against abuses of power. Whether power corrupts is debatable, but Lord Acton was certainly right when he argued that absolute power corrupts absolutely. We saw in the previous chapter that even when Franklin Roosevelt wished to use his presidential powers in a way that he thought would be beneficial for the society, unencumbered by constraints imposed by the Supreme Court, the inclusive U.S. political institutions prevented him from setting aside the constraints on his power. Under extractive political institutions, there is little check against the exercise of power, however distorted and sociopathic it may become. In 1980 Sam Bangura, then the governor of the central bank in Sierra Leone, criticized Siaka Stevens’s policies for being profligate. He was soon murdered and thrown from the top floor of the central bank building onto the aptly named Siaka St
evens Street. Extractive political institutions thus also tend to create a vicious circle because they provide no line of defense against those who want to further usurp and misuse the powers of the state.

  Yet another mechanism for the vicious circle is that extractive institutions, by creating unconstrained power and great income inequality, increase the potential stakes of the political game. Because whoever controls the state becomes the beneficiary of this excessive power and the wealth that it generates, extractive institutions create incentives for infighting in order to control power and its benefits, a dynamic that we saw played out in Maya city-states and in Ancient Rome. In this light, it is no surprise that the extractive institutions that many African countries inherited from the colonial powers sowed the seeds of power struggles and civil wars. These struggles would be very different conflicts from the English Civil War and the Glorious Revolution. They would not be fought to change political institutions, introduce constraints on the exercise of power, or create pluralism, but to capture power and enrich one group at the expense of the rest. In Angola, Burundi, Chad, Côte d’Ivoire, the Democratic Republic of Congo, Ethiopia, Liberia, Mozambique, Nigeria, Republic of Congo Brazzaville, Rwanda, Somalia, Sudan, and Uganda, and of course in Sierra Leone, as we will see in more detail in the next chapter, these conflicts would turn into bloody civil wars and would create economic ruin and unparalleled human suffering—as well as cause state failure.

  FROM ENCOMIENDA TO LAND GRAB

  On January 14, 1993, Ramiro De León Carpio was sworn in as the president of Guatemala. He named Richard Aitkenhead Castillo as his minister of finance, and Ricardo Castillo Sinibaldi as his minister of development. These three men all had something in common: all were direct descendants of Spanish conquistadors who had come to Guatemala in the early sixteenth century. De León’s illustrious ancestor was Juan De León Cardona, while the Castillos were related to Bernal Díaz del Castillo, a man who wrote one of the most famous eyewitness accounts of the conquest of Mexico. In reward for his service to Hernán Cortés, Díaz del Castillo was appointed governor of Santiago de los Caballeros, which is today the city of Antigua in Guatemala. Both Castillo and De León founded dynasties along with other conquistadors, such as Pedro de Alvarado. The Guatemalan sociologist Marta Casaús Arzú identified a core group of twenty-two families in Guatemala that had ties through marriage to another twenty-six families just outside the core. Her genealogical and political study suggested that these families have controlled economic and political power in Guatemala since 1531. An even broader definition of which families were part of this elite suggested that they accounted for just over 1 percent of the population in the 1990s.