In the very early 17th century, the English crossed the Atlantic in a bid to colonize North America. In this, they were following the Spanish who had a 100 years earlier colonized South America, which was considered the better half of the Americas because it was rich in gold and silver. The English colonists founded their first settlement called Jamestown in 1607. They planned to capture the Leader of the native Americans and through him force the rest of the populace to work for them, the same way the Spanish had conquered South America. However, they would soon find out that this was not possible because the native Americans of North America lived in widely dispersed, largely independent, relatively small groups. This was in stark contrast to the South America that the Spanish found, which had achieved very large degrees of political centralization, such that there were at least 3 major empires, the Aztec (central and southern Mexico, and parts of Guatemala), Incan (Peru, western Ecuador, south central Bolivia, northwest Argentina, a bit of southwestern Colombia and a large portion of Chile) and Mayan (southeastern Mexico, Guatemala, Belize, western Honduras and El Salvador) empires. Another major difference was that North America wasn’t rich in mineral resources such as gold and silver, the way South America was. The very different trajectories of North and South America up to the present after the initial founding of the English colony in Jamestown, again shows that true national wealth isn’t built on natural resources but on sound institutions and technology.
When the colonists realized that the native Americans couldn’t be made to work, they resorted to trying to trade with them as they were running dangerously low on supplies. It is here that a character some of us know from the Disney animated movie, Pocahontas made the most singular contribution. Captain John Smith was a part of the Jamestown colonists and he led the trading missions with the Indians. During one of them he was captured and taken to the chief of the Indian tribe that captured him. It is here that he was reportedly saved from death by the chief’s daughter, Pocahontas, but in real life at the time, Pocahontas was little more than a girl, probably around 11 and not the strapping young adult ready for her first taste of love as depicted in the movie. At some point, the colonists lost the trust of the Indians (with good reason) and so they would no longer trade with the colonists. At this point John Smith realized if the colonists were to survive they would have to work the land themselves to produce food and other needed supplies.
Now the colonists’ expedition had been sponsored by a company back in England called the Virginia company. They had been backing the expedition financially for 2 years at this point and had seen no profit. By this time, John Smith, after showing uncommon courage and resourcefulness that saved the colony from starvation on numerous occasions, had been sidelined by the company, and had since gone back to England, disgruntled. The Virginia company had by now, decided on a new mode of operation. If the natives could not be forced to work, they would force the English settlers they had sent into accepting a draconian work schedule that would generate the wealth they were looking for. This new scheme too, could not work because of the extremely low population densities of North America at the time (more than 500 times less than that of South America). If the work became too stressful, there was plenty of unoccupied land that the colonists could run away to. The Virginia company was then forced to provide incentives that would make the colonists they had sent to work willingly. These incentives would eventually grow into the inclusive institutions that would be developed by the original 13 colonies that would eventually form the United States of America. Note that this was not a smooth process, and it took roughly a century. In the original colonies there existed a governing elite who tried time and time again to put in place extractive institutions that benefited a privileged few like what Africa has had through much of its history and mostly has, till now. Each time the attempt failed for the reasons cited above.
America’s inclusive institutions would eventually become firmly grounded, making it possible for the Industrial Revolution to occur there in the 19th century, to such an extent that it would overtake Britain as the world’s leading economic powerhouse.
In 1868 Japan was an economically underdeveloped country that had been controlled since 1600 by the Tokugawa family, whose ruler had taken the title, shogun (commander) in 1603. At this time, Japan was as poor as Djibouti, a small country in the horn of East Africa. The Japanese emperor had been sidelined and played a purely ceremonial role. The Tokugawa family, along with their military retainers, the famous samurai warriors, ruled a society that had strict occupational categories (Your occupation as an adult was determined by the part of the social hierarchy that you were born into), restrictions on trade, and high rates of taxation on farmers.
The Tokugawa’s domination of Japanese society wasn’t complete though. In the south of Japan, there were parts that were relatively free of the Tokugawa’s control. In one such area, an enlightened samurai realized that Japan’s institutions required radical reform if it was to make real progress. He formulated a plan to overthrow the shogun but disguised it under the pretext of wanting to restore the emperor to his rightful position. The plan was successful. Soon after, there was a radical transformation of Japan’s institutions which provided the foundation for the modern, successful, wealthy Japan that we know today. The event is referred to as the Meiji Restoration.
By 1890 Japan was the first Asian country to adopt a written constitution, and it created a constitutional monarchy with an elected parliament, the Diet, and an independent judiciary. These changes were decisive factors in enabling Japan to be the first beneficiary from the Industrial Revolution in Asia.
Over this three-part series (Here are part 1 and part 2), we have looked at examples of both extractive and inclusive institutions operating in very different societies and at different points in time throughout history. It should be clear that despite these differences, extractive and inclusive institutions where ever they occur manifest themselves in similar ways that we all can recognize. They transcend skin color, religion, tribe and any other marker for differentiating human beings into groups. We might have also noticed that preventing extractive institutions from dominating a society requires active resistance by the populace. The reason this is so lies in a fundamental fact of human nature. Given the opportunity, most human beings would set up a system to benefit themselves, to the exclusion of others. This is true of human beings in general, not just politicians. So in order to avoid this, those who stand the risk of being exploited need to stand up to the potential exploiters. This fact highlights what the major attraction of democracy is.
The major attraction of democracy is not that it is perfect or that democrats are supposed to be honest but that it is a system of government that formally recognizes the right for the populace to express dissatisfaction and provides mechanisms for expressing it, the most well-known being the vote. That in itself, is a great advance over the monarchism, feudalism and military dictatorships of the past. Unfortunately, expressing dissatisfaction and suing for social change will often need to go beyond mere voting. Two notable examples of this would be the civil rights movement of 1960s America and the feminist movement globally in 20th century and continuing into the 21st. These two groups couldn’t have used the vote to change things because one of the changes they were suing for was the right to vote. It should also be noted that these two groups largely achieved their aims without violence, hotheads would do well to take note.
Oftentimes, for meaningful changes to occur, broad coalitions of many disparate groups would have to apply concerted effort using the institutional mechanisms available for expressing dissent in a bid to influence public policy. Some may ask what would be the goal in concrete terms?
The goal would be a successful modern society. I have taken a lot of pains in my posts to a paint a picture of what a successful modern society looks like. A successful modern society runs along the lines of science, technology and reason, not faith, tradition and natural resources. It is almost impossible for the bulk of a society to live above subsistence, without that society running on scientific precepts. So the plan would be to look at what economic institutions and policies are necessary to bring this about and what is it about the current economic institutions and policies (or the lack of them), that prevents them from coming into being. Such an investigation will ultimately lead to the political institutions that shape the economic institutions. Reforming these too, would also be necessary. Constant monitoring by the broad coalition will be necessary to make sure that the changes are not merely a façade on the surface while things continue being done pretty much the same way on the inside. This is truly a tall order but only with the achievement of this, will we truly be on our way to mass prosperity.
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Bibliography
Acemoglu, Daron et al. 2012 Why Nations Fail: The Origins of Power, Prosperity and Poverty. London: Profile Books Ltd
Birkland, Thomas. 2015 An Introduction to the Policy Process: Theories, Concepts, and Models of Public Policy Making. London and New York: Routledge
