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

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.
T HE I RON L AW OF O LIGARCHY
    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 partsof 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