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

Tasmania would become the first places in the world to introduce an effective secret ballot in elections, which stopped vote buying and coercion. Today we still call the standard method of achieving secrecy in voting in elections the Australian ballot.
    The initial circumstances in Sydney, New South Wales, were very similar to those in Jamestown, Virginia, 181 years earlier, though the settlers at Jamestown were mostly indentured laborers, rather than convicts. In both cases the initial circumstances did not allow for the creation of extractive colonial institutions. Neither colony had dense populations of indigenous peoples to exploit, ready access to precious metals such as gold or silver, or soil and crops that would makeslave plantations economically viable. The slave trade was still vibrant in the 1780s, and New South Wales could have been filled up with slaves had it been profitable. It wasn’t. Both the Virginia Company and the soldiers and free settlers who ran New South Wales bowed to the pressures, gradually creating inclusive economic institutions that developed in tandem with inclusive political institutions. This happened with even less of a struggle in New South Wales than it had in Virginia, and subsequent attempts to put this trend into reverse failed.
    A USTRALIA, LIKE THE U NITED S TATES , experienced a different path to inclusive institutions than the one taken by England. The same revolutions that shook England during the Civil War and then the Glorious Revolution were not needed in the United States or Australia because of the very different circumstances in which those countries were founded—though this of course does not mean that inclusive institutions were established without any conflict, and, in the process, the United States had to throw off British colonialism. In England there was a long history of absolutist rule that was deeply entrenched and required a revolution to remove it. In the United States and Australia, there was no such thing. Though Lord Baltimore in Maryland and John Macarthur in New South Wales might have aspired to such a role, they could not establish a strong enough grip on society for their plans to bear fruit. The inclusive institutions established in the United States and Australia meant that the Industrial Revolution spread quickly to these lands and they began to get rich. The path these countries took was followed by colonies such as Canada and New Zealand.
    There were still other paths to inclusive institutions. Large parts of Western Europe took yet a third path to inclusive institutions under the impetus of the French Revolution, which overthrew absolutism in France and then generated a series of interstate conflicts that spread institutional reform across much of Western Europe. The economic consequence of these reforms was the emergence of inclusive economic institutions in most of Western Europe, the Industrial Revolution, and economic growth.
B REAKING THE B ARRIERS: T HE F RENCH R EVOLUTION
    For the three centuries prior to 1789, France was ruled by an absolutist monarchy. French society was divided into three segments, the so-called estates. The aristocrats (the nobility) made up the First Estate, the clergy the Second Estate, and everybody else the Third Estate. Different estates were subject to different laws, and the first two estates had rights that the rest of the population did not. The nobility and the clergy did not pay taxes, while the citizens had to pay several different taxes, as we would expect from a regime that was largely extractive. In fact, not only was the Church exempt from taxes, but it also owned large swaths of land and could impose its own taxes on peasants. The monarch, the nobility, and the clergy enjoyed a luxurious lifestyle, while much of the Third Estate lived in dire poverty. Different laws not only guaranteed a greatly advantageous economic position to the nobility and the clergy, but it also gave them political power.
    Life in French cities of the eighteenth century was harsh and unhealthy. Manufacturing was regulated by powerful guilds, which generated good incomes for their members but prevented others from entering these occupations or starting new businesses. The so-called
ancien régime
prided itself on its continuity and stability. Entry by entrepreneurs and talented individuals into new occupations would create instability and was not tolerated. If life in the cities was harsh, life in the villages was probably