Why Nations Fail: The Origins of Power, Prosperity, and Poverty

producing textiles, Indians were buying them from Britain and growing opium for the East India Company to sell in China.
    The Atlantic slave trade repeated the same pattern in Africa, even if starting from less developed conditions than in Southeast Asia and India. Many African states were turned into war machines intent on capturing and selling slaves to Europeans. As conflict between different polities and states grew into continuous warfare, state institutions, which in many cases had not yet achieved much political centralization in any case, crumbled in large parts of Africa, paving the way for persistent extractive institutions and the failed states of today that we will study later. In a few parts of Africa that escaped the slave trade, such as South Africa, Europeans imposed a different set of institutions, this time designed to create a reservoir of cheap labor for their mines and farms. The South African state created a dual economy, preventing 80 percent of the population from taking part in skilled occupations, commercial farming, and entrepreneurship. All this not only explains why industrialization passed by large parts of the world but also encapsulates how economic development may sometimes feed on, and even create, the underdevelopment in some other part of the domestic or the world economy.

10.

T HE D IFFUSION OF P ROSPERITY
H ONOR A MONG T HIEVES
    E IGHTEENTH-CENTURY E NGLAND —or more appropriately, Great Britain after the 1707 union of England, Wales, and Scotland—had a simple solution for dealing with criminals: out of sight, out of mind, or at least out of trouble. They transported many to penal colonies in the empire. Before the War of Independence, the convicted criminals, convicts, were primarily sent to the American colonies. After 1783 the independent United States of America was no longer so welcoming to British convicts, and the authorities in Britain had to find another home for them. They first thought about West Africa. But the climate, with endemic diseases such as malaria and yellow fever, against which Europeans had no immunity, was so deadly that the authorities decided it was unacceptable to send even convicts to the “white man’s graveyard.” Their next option was Australia. Its eastern seaboard had been explored by the great seafarer Captain James Cook. On April 29, 1770, Cook landed in a wonderful inlet, which he called Botany Bay in honor of the rich species found there by the naturalists traveling with him. This seemed like an ideal location to British government officials. The climate was temperate, and the place was as far out of sight and mind as could be imagined.
    A fleet of eleven ships packed with convicts was on its way to Botany Bay in January 1788 under the command of Captain Arthur Phillip. On January 26, now celebrated as Australia Day, they set up camp in Sydney Cove, the heart of the modern city of Sydney. They called the colony New South Wales. On board one of the ships, the
Alexander
, captained by Duncan Sinclair, were a married couple of convicts, Henry and Susannah Cable. Susannah had been found guilty of stealing and was initially sentenced to death. This sentence was later commuted to fourteen years and transportation to the American colonies. That plan fell through with the independence of the United States. In the meantime, in Norwich Castle Jail, Susannah met and fell in love with Henry, a fellow convict. In 1787 she was picked to be transported to the new convict colony in Australia with the first fleet heading there. But Henry was not. By this time Susannah and Henry had a young son, also called Henry. This decision meant the family was to be separated. Susannah was moved to a prison boat moored on the Thames, but the word got out about this wrenching event and reached the ears of a philanthropist, Lady Cadogan. Lady Cadogan organized a successful campaign to reunite the Cables. Now they were both to be transported with young Henry to Australia. Lady Cadogan also raised £20 to purchase goods for them, which they would receive in Australia. They sailed on the
Alexander
, but when they arrived in Botany Bay, the parcel of goods had vanished, or at least that is what Captain Sinclair claimed.
    What could the Cables do? Not much, according to English or British law. Even though in 1787, Britain had inclusive political and economic institutions, this inclusiveness did not extend to convicts, who had practically no rights. They could not own