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

era. But they were much less prominent throughout Sierra Leone’s history, and to the extent that they existed, they were warped by indirect rule. The same was true in other British colonies in Africa, such as Kenya and Nigeria. They never existed in the absolutist kingdom of Ethiopia. In the Congo, indigenous institutions were emasculated by Belgian colonial rule and the autocratic policies of Mobutu. In all these societies, there were also no new merchants, businessmen, or entrepreneurs supporting the new regimes and demanding secure property rights and an end to previous extractive institutions. In fact, the extractive economic institutions of the colonial period meant that there was not much entrepreneurship or business left at all.
    The international community thought that postcolonial African independence would lead to economic growth through a process of state planning and cultivation of the private sector. But the private sectorwas not there—except in rural areas, which had no representation in the new governments and would thus be their first prey. Most important perhaps, in most of these cases there were enormous benefits from holding power. These benefits both attracted the most unscrupulous men, such as Stevens, who wished to monopolize this power, and brought the worst out of them once they were in power. There was nothing to break the vicious circle.
N EGATIVE F EEDBACK AND V ICIOUS C IRCLES
    Rich nations are rich largely because they managed to develop inclusive institutions at some point during the past three hundred years. These institutions have persisted through a process of virtuous circles. Even if inclusive only in a limited sense to begin with, and sometimes fragile, they generated dynamics that would create a process of positive feedback, gradually increasing their inclusiveness. England did not become a democracy after the Glorious Revolution of 1688. Far from it. Only a small fraction of the population had formal representation, but crucially, she was pluralistic. Once pluralism was enshrined, there was a tendency for the institutions to become more inclusive over time, even if this was a rocky and uncertain process.
    In this, England was typical of virtuous circles: inclusive political institutions create constraints against the exercise and usurpation of power. They also tend to create inclusive economic institutions, which in turn make the continuation of inclusive political institutions more likely.
    Under inclusive economic institutions, wealth is not concentrated in the hands of a small group that could then use its economic might to increase its political power disproportionately. Furthermore, under inclusive economic institutions there are more limited gains from holding political power, thus weaker incentives for every group and every ambitious, upstart individual to try to take control of the state. A confluence of factors at a critical juncture, including interplay between existing institutions and the opportunities and challengesbrought by the critical juncture, is generally responsible for the onset of inclusive institutions, as the English case demonstrates. But once these inclusive institutions are in place, we do not need the same confluence of factors for them to survive. Virtuous circles, though still subject to significant contingency, enable the institutions’ continuity and often even unleash dynamics taking society toward greater inclusiveness.
    As virtuous circles make inclusive institutions persist, vicious circles create powerful forces toward the persistence of extractive institutions. History is not destiny, and vicious circles are not unbreakable, as we will see further in chapter 14 . But they are resilient. They create a powerful process of negative feedback, with extractive political institutions forging extractive economic institutions, which in turn create the basis for the persistence of extractive political institutions. We saw this most clearly in the case of Guatemala, where the same elite held power, first under colonial rule, then in independent Guatemala, for more than four centuries; extractive institutions enrich the elite, and their wealth forms the basis for the continuation of their domination.
    The same process of the vicious circle is also apparent in the persistence of the plantation economy in the U.S. South, except that it also showcases the vicious circle’s great resilience in the face of challenges. U.S. southern planters lost their