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

whole set of laws created criminal offenses for workers who were perceived to be shirking. In June 1940, for example, a law made absenteeism, defined as any twenty minutes unauthorized absence or even idling on the job, a criminal offense that could be punished by six months’ hard labor and a 25 percent cut in pay. All sorts of similar punishments were introduced, and were implemented with astonishing frequency. Between 1940 and 1955, 36 million people, about one-third of the adult population, were found guilty of such offenses. Of these, 15 million were sent to prison and 250,000 were shot. In any year, there would be 1 million adults in prison for labor violations; this is not to mention the 2.5 million people Stalin exiled to the gulags of Siberia. Still, it didn’t work. Though you can move someone to a factory, you cannot force people to think and have good ideas by threatening to shoot them. Coercion like this might have generated a high output of sugar in Barbados or Jamaica, but it could not compensate for the lack of incentives in a modern industrial economy.
    The fact that truly effective incentives could not be introduced in the centrally planned economy was not due to technical mistakes in the design of the bonus schemes. It was intrinsic to the whole method by which extractive growth had been achieved. It had been done by government command, which could solve some basic economic problems. But stimulating sustained economic growth required thatindividuals use their talent and ideas, and this could never be done with a Soviet-style economic system. The rulers of the Soviet Union would have had to abandon extractive economic institutions, but such a move would have jeopardized their political power. Indeed, when Mikhail Gorbachev started to move away from extractive economic institutions after 1987, the power of the Communist Party crumbled, and with it, the Soviet Union.
    T HE S OVIET U NION was able to generate rapid growth even under extractive institutions because the Bolsheviks built a powerful centralized state and used it to allocate resources toward industry. But as in all instances of growth under extractive institutions, this experience did not feature technological change and was not sustained. Growth first slowed down and then totally collapsed. Though ephemeral, this type of growth still illustrates how extractive institutions can stimulate economic activity.
    Throughout history most societies have been ruled by extractive institutions, and those that have managed to impose some extent of order over the countries have been able to generate some limited growth—even if none of these extractive societies have managed to achieve sustained growth. In fact, some of the major turning points in history are characterized by institutional innovations that cemented extractive institutions and increased the authority of one group to impose law and order and benefit from extraction. In the rest of this chapter, we will first discuss the nature of institutional innovations that establish some degree of state centralization and enable growth under extractive institutions. We shall then show how these ideas help us understand the Neolithic Revolution, the momentous transition to agriculture, which underpins many aspects of our current civilization. We will conclude by illustrating, with the example of the Maya city-states, how growth under extractive institutions is limited not only because of lack of technological progress but also because it will encourage infighting from rival groups wishing to take control of the state and the extraction it generates.
O N THE B ANKS OF THE K ASAI
    One of the great tributaries of the River Congo is the Kasai. Rising in Angola, it heads north and merges with the Congo northeast of Kinshasa, the capital of the modern Democratic Republic of Congo. Though the Democratic Republic of Congo is poor compared with the rest of the world, there have always been significant differences in the prosperity of various groups within Congo. The Kasai is the boundary between two of these. Soon after passing into Congo along the western bank, you’ll find the Lele people; on the eastern bank are the Bushong (Map 6, this page ). On the face of it there ought to be few differences between these two groups with regard to their prosperity. They are separated only by a river, which either can cross by boat. The two different tribes have a common origin and related languages. In addition, many