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

The guards thus embarked on a path that would ultimately lead to institutions that were even more inclusive than those back in Britain. Convicts were given a set of tasks to do, and if they had extra time, they could work for themselves and sell what they produced.
    The guards also benefited from the convicts’ new economic freedoms. Production increased, and the guards set up monopolies to sell goods to the convicts. The most lucrative of these was for rum. New South Wales at this time, just like other British colonies, was run by a governor, appointed by the British government. In 1806 Britain appointed William Bligh, the man who seventeen years previously, in 1789, had been captain of the H.M.S.
Bounty
, during the famous “Mutiny on the
Bounty
.” Bligh was a strict disciplinarian, a trait that was probably largely responsible for the mutiny. His ways had notchanged, and he immediately challenged the rum monopolists. This would lead to another mutiny, this time by the monopolists, led by a former soldier, John Macarthur. The events, which came to be known as the Rum Rebellion, again led to Bligh’s being overpowered by rebels, this time on land rather than aboard the
Bounty
. Macarthur had Bligh locked up. The British authorities subsequently sent more soldiers to deal with the rebellion. Macarthur was arrested and shipped back to Britain. But he was soon released, and he returned to Australia to play a major role in both the politics and economics of the colony.
    The roots of the Rum Rebellion were economic. The strategy of giving the convicts incentives was making a lot of money for men such as Macarthur, who arrived in Australia as a soldier in the second group of ships that landed in 1790. In 1796 he resigned from the army to concentrate on business. By that time he already had his first sheep, and realized that there was a lot of money to be made in sheep farming and wool export. Inland from Sydney were the Blue Mountains, which were finally crossed in 1813, revealing vast expanses of open grassland on the other side. It was sheep heaven. Macarthur was soon the richest man in Australia, and he and his fellow sheep magnates became known as the Squatters, since the land on which they grazed their sheep was not theirs. It was owned by the British government. But at first this was a small detail. The Squatters were the elite of Australia, or, more appropriately, the Squattocracy.
    Even with a squattocracy, New South Wales did not look anything like the absolutist regimes of Eastern Europe or of the South American colonies. There were no serfs as in Austria-Hungary and Russia, and no large indigenous populations to exploit as in Mexico and Peru. Instead, New South Wales was like Jamestown, Virginia, in many ways: the elite ultimately found it in their interest to create economic institutions that were significantly more inclusive than those in Austria-Hungary, Russia, Mexico, and Peru. Convicts were the only labor force, and the only way to incentivize them was to pay them wages for the work they were doing.
    Convicts were soon allowed to become entrepreneurs and hire other convicts. More notably, they were even given land after completing their sentences, and they had all their rights restored. Some ofthem started to get rich, even the illiterate Henry Cable. By 1798 he owned a hotel called the Ramping Horse, and he also had a shop. He bought a ship and went into the trade of sealskins. By 1809 he owned at least nine farms of about 470 acres and also a number of shops and houses in Sydney.
    The next conflict in New South Wales would be between the elite and the rest of the society, made up of convicts, ex-convicts, and their families. The elite, led by former guards and soldiers such as Macarthur, included some of the free settlers who had been attracted to the colony because of the boom in the wool economy. Most of the property was still in the hands of the elite, and the ex-convicts and their descendants wanted an end to transportation, the opportunity of trial by a jury of their peers, and access to free land. The elite wanted none of these. Their main concern was to establish legal title to the lands they squatted on. The situation was again similar to the events that had transpired in North America more than two centuries earlier. As we saw in chapter 1 , the victories of the indentured servants against the Virginia Company were followed by the struggles in Maryland and the Carolinas. In New South