In this third part of the examination of Why Nations Fail, we shall be looking at Chapters 8 to 12, while we hope to conclude next week.
The Industrial Revolution created a critical juncture that affected some countries positively but some absolutist regimes like the old China lagged behind as they blocked the spread of industry.
It should be noted that absolutism was and still a hindrance to development. Serfdom was also a problem as it blocked the emergence of a labour market removing economic incentives or initiative from the mass of the rural population.
Absolutist political institutions around the world impeded industrialisation directly or indirectly. Absolutism is one of the forms of extractive political institutions that prevented industrialisation.
Complex politics in countries such as Somalia has been quite ruinous to that beleaguered country as complex politics breeds rudderlessness, lack of economic disincentives, and absence of political centralisation. We are also witnessing a similar situation in Libya.
Next we are treated to reversing development. Some of the issues canvassed by the authors are monopoly, de-urbanisation and population decline owing to factors such as slave trade and warfare.
Ironically, the abolition of the slave trade rather than making slavery in Africa wither away, simply led to a redeployment of the slaves within Africa by tribal chiefs, conquerors and warlords. For example, kidnapping was rampant in some parts of the country, no thanks to inter and intra tribal wars.
The “dual economy” (modern sector and traditional sector) paradigm still shapes the way most social scientists think about the economic problems of less-developed nations; poor premodern economic institutions, backward technology and the selfish and despotic rule by chiefs contributed to why nations failed.
For example, African chiefs resisted improvements meant for the good of their peoples. World inequality therefore, exists today because in the 19th and 20th centuries, some countries did not take advantage of the Industrial Revolution, and technologies and methods of organisation.
Most African countries forgot that technological change is the most critical engine of prosperity. To boost their scrabble for Africa and other parts of the world, the Europeans imposed dual economy.
Squattocracy and the revolutionary reforms that took place in the 18th and 19th centuries led to diffusion of prosperity. Institutional transitions created new opportunities and challenges in Europe and determined which countries took advantage of the major opportunities.
The roots of the world inequality can be found in this divergence. The rich countries of today were those that embarked on the process of industrialisation and technological change that started in the 19th century, whilst the poor ones are those that did not.
On the virtuous circle, it is to be noted that pluralism creates a more open-system and allows independent media to flourish. It also breeds the logic of the rule of law; while inclusive political institutions tend to support inclusive economic institutions.
Equal distribution of income empowers a broad segment of society and makes the political playing field even more level. Also, inclusive political institutions played a great role in the virtuous circle which works through several mechanisms including pluralistic political institutions which make usurpation of power by a dictator quite difficult because it supports and it is supported by inclusive economic institutions and allows a free media to flourish.
Indeed, virtuous circle creates a powerful tendency for inclusive institutions to persist, to resist challenges, and to expand as they did in both Britain and the United States of America.
And, in the vicious circle. Acemoglu and Robinson disclose that extractive institutions equally create strong forces toward the persistence of vicious circle. In Africa particularly, there were no checks against abuses of power. We have increase in the potential stakes of the political game. Oligarchy is also a factor.
However, not all radical changes are doomed to failure. Vicious circles create powerful forces toward the persistence of extractive institutions, since “History is not destiny, and vicious circles are not unbreakable”.
We have more destructive facet of the vicious circle with huge inequalities, great wealth and unchecked power by or for those in control. Lawlessness, state failure and political chaos crushing all hopes of economic prosperity are what we witness with vicious circle.
These are immutable lessons for Nigeria, indeed Africa. We should learn from history and use the lessons to emancipate our country.