Why Nations Fail: The Origins of Power, Prosperity, and Poverty - Daron Acemoğlu, James A. Robinson (2012)

Chapter 5. “I’VE SEEN THE FUTURE, AND IT WORKS”: GROWTH UNDER EXTRACTIVE INSTITUTIONS

I’VE SEEN THE FUTURE

INSTITUTIONAL DIFFERENCES PLAY the critical role in explaining economic growth throughout the ages. But if most societies in history are based on extractive political and economic institutions, does this imply that growth never takes place? Obviously not. Extractive institutions, by their very logic, must create wealth so that it can be extracted. A ruler monopolizing political power and in control of a centralized state can introduce some degree of law and order and a system of rules, and stimulate economic activity.

But growth under extractive institutions differs in nature from growth brought forth by inclusive institutions. Most important, it will be not sustained growth that requires technological change, but rather growth based on existing technologies. The economic trajectory of the Soviet Union provides a vivid illustration of how the authority and incentives provided by the state can spearhead rapid economic growth under extractive institutions and how this type of growth ultimately comes to an end and collapses.

THE FIRST WORLD WAR had ended and the victorious and the vanquished powers met in the great palace of Versailles, outside Paris, to decide on the parameters of the peace. Prominent among the attendees was Woodrow Wilson, president of the United States. Noticeable by its absence was any representation from Russia. The old tsarist regime had been overthrown by the Bolsheviks in October 1917. A civil war then raged between the Reds (the Bolsheviks) and the Whites. The English, French, and Americans sent an expeditionary force to fight against the Bolsheviks. A mission led by a young diplomat, William Bullitt, and the veteran intellectual and journalist Lincoln Steffens was sent to Moscow to meet with Lenin to try to understand the intentions of the Bolsheviks and how to come to terms with them. Steffens had made his name as an iconoclast, a muckraker journalist who had persistently denounced the evils of capitalism in the United States. He had been in Russia at the time of the revolution. His presence was intended to make the mission look credible and not too hostile. The mission returned with the outlines of an offer from Lenin about what it would take for peace with the newly created Soviet Union. Steffens was bowled over by what he saw as the great potential of the Soviet regime.

“Soviet Russia,” he recalled in his 1931 autobiography, “was a revolutionary government with an evolutionary plan. Their plan was not to end evils such as poverty and riches, graft, privilege, tyranny, and war by direct action, but to seek out and remove their causes. They had set up a dictatorship, supported by a small, trained minority, to make and maintain for a few generations a scientific rearrangement of economic forces which would result in economic democracy first and political democracy last.”

When Steffens returned from his diplomatic mission he went to see his old friend the sculptor Jo Davidson and found him making a portrait bust of the wealthy financier Bernard Baruch. “So you’ve been over in Russia,” Baruch remarked. Steffens answered, “I have been over into the future, and it works.” He would perfect this adage into a form that went down in history: “I’ve seen the future, and it works.”

Right up until the early 1980s, many Westerners were still seeing the future in the Soviet Union, and they kept on believing that it was working. In a sense it was, or at least it did for a time. Lenin had died in 1924, and by 1927 Joseph Stalin had consolidated his grip on the country. He purged his opponents and launched a drive to rapidly industrialize the country. He did it via energizing the State Planning Committee, Gosplan, which had been founded in 1921. Gosplan wrote the first Five-Year Plan, which ran between 1928 and 1933. Economic growth Stalin style was simple: develop industry by government command and obtain the necessary resources for this by taxing agriculture at very high rates. The communist state did not have an effective tax system, so instead Stalin “collectivized” agriculture. This process entailed the abolition of private property rights to land and the herding of all people in the countryside into giant collective farms run by the Communist Party. This made it much easier for Stalin to grab agricultural output and use it to feed all the people who were building and manning the new factories. The consequences of this for the rural folk were calamitous. The collective farms completely lacked incentives for people to work hard, so production fell sharply. So much of what was produced was extracted that there was not enough to eat. People began to starve to death. In the end, probably six million people died of famine, while hundreds of thousands of others were murdered or banished to Siberia during the forcible collectivization.

Neither the newly created industry nor the collectivized farms were economically efficient in the sense that they made the best use of what resources the Soviet Union possessed. It sounds like a recipe for economic disaster and stagnation, if not outright collapse. But the Soviet Union grew rapidly. The reason for this is not difficult to understand. Allowing people to make their own decisions via markets is the best way for a society to efficiently use its resources. When the state or a narrow elite controls all these resources instead, neither the right incentives will be created nor will there be an efficient allocation of the skills and talents of people. But in some instances the productivity of labor and capital may be so much higher in one sector or activity, such as heavy industry in the Soviet Union, that even a top-down process under extractive institutions that allocates resources toward that sector can generate growth. As we saw in chapter 3, extractive institutions in Caribbean islands such as Barbados, Cuba, Haiti, and Jamaica could generate relatively high levels of incomes because they allocated resources to the production of sugar, a commodity coveted worldwide. The production of sugar based on gangs of slaves was certainly not “efficient,” and there was no technological change or creative destruction in these societies, but this did not prevent them from achieving some amount of growth under extractive institutions. The situation was similar in the Soviet Union, with industry playing the role of sugar in the Caribbean. Industrial growth in the Soviet Union was further facilitated because its technology was so backward relative to what was available in Europe and the United States, so large gains could be reaped by reallocating resources to the industrial sector, even if all this was done inefficiently and by force.

Before 1928 most Russians lived in the countryside. The technology used by peasants was primitive, and there were few incentives to be productive. Indeed, the last vestiges of Russian feudalism were eradicated only shortly before the First World War. There was thus huge unrealized economic potential from reallocating this labor from agriculture to industry. Stalinist industrialization was one brutal way of unlocking this potential. By fiat, Stalin moved these very poorly used resources into industry, where they could be employed more productively, even if industry itself was very inefficiently organized relative to what could have been achieved. In fact, between 1928 and 1960 national income grew at 6 percent a year, probably the most rapid spurt of economic growth in history up until then. This quick economic growth was not created by technological change, but by reallocating labor and by capital accumulation through the creation of new tools and factories.

Growth was so rapid that it took in generations of Westerners, not just Lincoln Steffens. It took in the Central Intelligence Agency of the United States. It even took in the Soviet Union’s own leaders, such as Nikita Khrushchev, who famously boasted in a speech to Western diplomats in 1956 that “we will bury you [the West].” As late as 1977, a leading academic textbook by an English economist argued that Soviet-style economies were superior to capitalist ones in terms of economic growth, providing full employment and price stability and even in producing people with altruistic motivation. Poor old Western capitalism did better only at providing political freedom. Indeed, the most widely used university textbook in economics, written by Nobel Prize-winner Paul Samuelson, repeatedly predicted the coming economic dominance of the Soviet Union. In the 1961 edition, Samuelson predicted that Soviet national income would overtake that of the United States possibly by 1984, but probably by 1997. In the 1980 edition there was little change in the analysis, though the two dates were delayed to 2002 and 2012.

Though the policies of Stalin and subsequent Soviet leaders could produce rapid economic growth, they could not do so in a sustained way. By the 1970s, economic growth had all but stopped. The most important lesson is that extractive institutions cannot generate sustained technological change for two reasons: the lack of economic incentives and resistance by the elites. In addition, once all the very inefficiently used resources had been reallocated to industry, there were few economic gains to be had by fiat. Then the Soviet system hit a roadblock, with lack of innovation and poor economic incentives preventing any further progress. The only area in which the Soviets did manage to sustain some innovation was through enormous efforts in military and aerospace technology. As a result they managed to put the first dog, Leika, and the first man, Yuri Gagarin, in space. They also left the world the AK-47 as one of their legacies.

Gosplan was the supposedly all-powerful planning agency in charge of the central planning of the Soviet economy. One of the benefits of the sequence of five-year plans written and administered by Gosplan was supposed to have been the long time horizon necessary for rational investment and innovation. In reality, what got implemented in Soviet industry had little to do with the five-year plans, which were frequently revised and rewritten or simply ignored. The development of industry took place on the basis of commands by Stalin and the Politburo, who changed their minds frequently and often completely revised their previous decisions. All plans were labeled “draft” or “preliminary.” Only one copy of a plan labeled “final”—that for light industry in 1939—has ever come to light. Stalin himself said in 1937 that “only bureaucrats can think that planning work ends with the creation of the plan. The creation of the plan is just the beginning. The real direction of the plan develops only after the putting together of the plan.” Stalin wanted to maximize his discretion to reward people or groups who were politically loyal, and punish those who were not. As for Gosplan, its main role was to provide Stalin with information so he could better monitor his friends and enemies. It actually tried to avoid making decisions. If you made a decision that turned out badly, you might get shot. Better to avoid all responsibility.

An example of what could happen if you took your job too seriously, rather than successfully second-guessing what the Communist Party wanted, is provided by the Soviet census of 1937. As the returns came in, it became clear that they would show a population of about 162 million, far less than the 180 million Stalin had anticipated and indeed below the figure of 168 million that Stalin himself announced in 1934. The 1937 census was the first conducted since 1926, and therefore the first one that followed the mass famines and purges of the early 1930s. The accurate population numbers reflected this. Stalin’s response was to have those who organized the census arrested and sent to Siberia or shot. He ordered another census, which took place in 1939. This time the organizers got it right; they found that the population was actually 171 million.

Stalin understood that in the Soviet economy, people had few incentives to work hard. A natural response would have been to introduce such incentives, and sometimes he did—for example, by directing food supplies to areas where productivity had fallen—to reward improvements. Moreover, as early as 1931 he gave up on the idea of creating “socialist men and women” who would work without monetary incentives. In a famous speech he criticized “equality mongering,” and thereafter not only did different jobs get paid different wages but also a bonus system was introduced. It is instructive to understand how this worked. Typically a firm under central planning had to meet an output target set under the plan, though such plans were often renegotiated and changed. From the 1930s, workers were paid bonuses if the output levels were attained. These could be quite high—for instance, as much as 37 percent of the wage for management or senior engineers. But paying such bonuses created all sorts of disincentives to technological change. For one thing, innovation, which took resources away from current production, risked the output targets not being met and the bonuses not being paid. For another, output targets were usually based on previous production levels. This created a huge incentive never to expand output, since this only meant having to produce more in the future, since future targets would be “ratcheted up.” Underachievement was always the best way to meet targets and get the bonus. The fact that bonuses were paid monthly also kept everyone focused on the present, while innovation is about making sacrifices today in order to have more tomorrow.

Even when bonuses and incentives were effective in changing behavior, they often created other problems. Central planning was just not good at replacing what the great eighteenth-century economist Adam Smith called the “invisible hand” of the market. When the plan was formulated in tons of steel sheet, the sheet was made too heavy. When it was formulated in terms of area of steel sheet, the sheet was made too thin. When the plan for chandeliers was made in tons, they were so heavy, they could hardly hang from ceilings.

By the 1940s, the leaders of the Soviet Union, even if not their admirers in the West, were well aware of these perverse incentives. The Soviet leaders acted as if they were due to technical problems, which could be fixed. For example, they moved away from paying bonuses based on output targets to allowing firms to set aside portions of profits to pay bonuses. But a “profit motive” was no more encouraging to innovation than one based on output targets. The system of prices used to calculate profits was almost completely unconnected to the value of new innovations or technology. Unlike in a market economy, prices in the Soviet Union were set by the government, and thus bore little relation to value. To more specifically create incentives for innovation, the Soviet Union introduced explicit innovation bonuses in 1946. As early as 1918, the principle had been recognized that an innovator should receive monetary rewards for his innovation, but the rewards set were small and unrelated to the value of the new technology. This changed only in 1956, when it was stipulated that the bonus should be proportional to the productivity of the innovation. However, since productivity was calculated in terms of economic benefits measured using the existing system of prices, this was again not much of an incentive to innovate. One could fill many pages with examples of the perverse incentives these schemes generated. For example, because the size of the innovation bonus fund was limited by the wage bill of a firm, this immediately reduced the incentive to produce or adopt any innovation that might have economized on labor.

Focusing on the different rules and bonus schemes tends to mask the inherent problems of the system. As long as political authority and power rested with the Communist Party, it was impossible to fundamentally change the basic incentives that people faced, bonuses or no bonuses. Since its inception, the Communist Party had used not just carrots but also sticks, big sticks, to get its way. Productivity in the economy was no different. A 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 that individuals 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.

THE SOVIET UNION 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.

ON THE BANKS OF THE KASAI

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 of the things they build are similar in style, including their houses, clothes, and crafts.

Yet when the anthropologist Mary Douglas and the historian Jan Vansina studied these groups in the 1950s, they discovered some startling differences between them. As Douglas put it: “The Lele are poor, while the Bushong are rich … Everything that the Lele have or can do, the Bushong have more and can do better.” Simple explanations for this inequality are easy to come by. One difference, reminiscent of that between places in Peru that were or were not subject to the Potosí mita, is that the Lele produced for subsistence while the Bushong produced for exchange in the market. Douglas and Vansina also noted that the Lele used inferior technology. For instance, they did not use nets for hunting, even though these greatly improve productivity. Douglas argued, “[T]he absence of nets is consistent with a general Lele tendency not to invest time and labor in long-term equipment.”

There were also important distinctions in agricultural technologies and organization. The Bushong practiced a sophisticated form of mixed farming where five crops were planted in succession in a two-year system of rotation. They grew yams, sweet potatoes, manioc (cassava), and beans and gathered two and sometimes three maize harvests a year. The Lele had no such system and managed to reap only one annual harvest of maize.

There were also striking differences in law and order. The Lele were dispersed into fortified villages, which were constantly in conflict. Anyone traveling between two or even venturing into the forest to collect food was liable to be attacked or kidnapped. In the Bushong country, this rarely, if ever, happened.

What lay behind these differences in the patterns of production, agricultural technology, and prevalence of order? Obviously it was not geography that induced the Lele to use inferior hunting and agricultural technology. It was certainly not ignorance, because they knew about the tools used by the Bushong. An alternative explanation might be culture; could it be that the Lele had a culture that did not encourage them to invest in hunting nets and sturdier and better-built houses? But this does not seem to have been true, either. As with the people of Kongo, the Lele were very interested in purchasing guns, and Douglas even remarked that “their eager purchase of firearms … shows their culture does not restrict them to inferior techniques when these do not require long-term collaboration and effort.” So neither a cultural aversion to technology nor ignorance nor geography does a good job of explaining the greater prosperity of the Bushong relative to the Lele.

The reason for differences between these two peoples lies in the different political institutions that emerged in the lands of the Bushong and the Lele. We noted earlier that the Lele lived in fortified villages that were not part of a unified political structure. It was different on the other side of the Kasai. Around 1620 a political revolution took place led by a man called Shyaam, who forged the Kuba Kingdom, which we saw on Map 6, with the Bushong at its heart and with himself as king. Prior to this period, there were probably few differences between the Bushong and the Lele; the differences emerged as a consequence of the way Shyaam reorganized society to the east of the river. He built a state and a pyramid of political institutions. These were not just significantly more centralized than what came before but also involved highly elaborate structures. Shyaam and his successors created a bureaucracy to raise taxes and a legal system and police force to administer the law. Leaders were checked by councils, which they had to consult with before making decisions. There was even trial by jury, an apparently unique event in sub-Saharan Africa prior to European colonialism. Nevertheless, the centralized state that Shyaam constructed was a tool of extraction and highly absolutist. Nobody voted for him, and state policy was dictated from the top, not by popular participation.

This political revolution introducing state centralization and law and order in the Kuba country in turn led to an economic revolution. Agriculture was reorganized and new technologies were adopted to increase productivity. The crops that had previously been the staples were replaced by new, higher-yield ones from the Americas (in particular, maize, cassava, and chili peppers). The intense mixed-farming cycle was introduced at this time, and the amount of food produced per capita doubled. To adopt these crops and reorganize the agricultural cycle, more hands were needed in the fields. So the age of marriage was lowered to twenty, which brought men into the agricultural labor force at a younger age. The contrast with the Lele is stark. Their men tended to marry at thirty-five and only then worked in the fields. Until then, they dedicated their lives to fighting and raiding.

The connection between the political and economic revolution was simple. King Shyaam and those who supported him wanted to extract taxes and wealth from the Kuba, who had to produce a surplus above what they consumed themselves. While Shyaam and his men did not introduce inclusive institutions to the eastern bank of the Kasai, some amount of economic prosperity is intrinsic to extractive institutions that achieve some degree of state centralization and impose law and order. Encouraging economic activity was of course in the interest of Shyaam and his men, as otherwise there would have been nothing to extract. Just like Stalin, Shyaam created by command a set of institutions that would generate the wealth necessary to support this system. Compared to the utter absence of law and order that reigned on the other bank of the Kasai, this generated significant economic prosperity—even if much of it was likely extracted by Shyaam and his elites. But it was necessarily limited. Just as in the Soviet Union, there was no creative destruction in the Kuba Kingdom and no technological innovation after this initial change. This situation was more or less unaltered by the time the kingdom was first encountered by Belgian colonial officials in the late nineteenth century.

KING SHYAAM’S ACHIEVEMENT illustrates how some limited degree of economic success can be achieved through extractive institutions. Creating such growth requires a centralized state. To centralize the state, a political revolution is often necessary. Once Shyaam created this state, he could use its power to reorganize the economy and boost agricultural productivity, which he could then tax.

Why was it that the Bushong, and not the Lele, had a political revolution? Couldn’t the Lele have had their own King Shyaam? What Shyaam accomplished was an institutional innovation not tied in any deterministic way to geography, culture, or ignorance. The Lele could have had such a revolution and similarly transformed their institutions, but they didn’t. Perhaps this is for reasons that we do not understand, because of our limited knowledge of their society today. Most likely it is because of the contingent nature of history. The same contingency was probably at work when some of the societies in the Middle East twelve thousand years ago embarked upon an even more radical set of institutional innovations leading to settled societies and then to the domestication of plants and animals, as we discuss next.

THE LONG SUMMER

About 15,000 BC, the Ice Age came to an end as the Earth’s climate warmed up. Evidence from the Greenland ice cores suggests that average temperatures rose by as much as fifteen degrees Celsius in a short span of time. This warming seems to have coincided with rapid increases in human populations as the global warming led to expanding animal populations and much greater availability of wild plants and foods. This process was put into rapid reverse at about 14,000 BC, by a period of cooling known as the Younger Dryas, but after 9600 BC, global temperatures rose again, by seven degrees Celsius in less than a decade, and have since stayed high. Archaeologist Brian Fagan calls it the Long Summer. The warming-up of the climate was a huge critical juncture that formed the background to the Neolithic Revolution, where human societies made the transition to sedentary life, farming, and herding. This and the rest of subsequent human history have played out basking in this Long Summer.

There is a fundamental difference between farming and herding and hunting-gathering. The former is based on the domestication of plant and animal species, with active intervention in their life cycles to change genetics to make those species more useful to humans. Domestication is a technological change that enables humans to produce a lot more food from the available plants and animals. The domestication of maize, for example, began when humans gathered teosinte, the wild crop that was maize’s ancestor. Teosinte cobs are very small, barely a few centimeters long. They are dwarfed by a cob of modern maize. Yet gradually, by selecting the larger ears of teosinte, and plants whose ears did not break but stayed on the stalk to be harvested, humans created modern maize, a crop that provides far more nourishment from the same piece of land.

The earliest evidence of farming, herding, and the domestication of plants and animals comes from the Middle East, in particular from the area known as the Hilly Flanks, which stretches from the south of modern-day Israel, up through Palestine and the west bank of the River Jordan, via Syria and into southeastern Turkey, northern Iraq, and western Iran. Around 9500 BC the first domestic plants, emmer and two-row barley, were found in Jericho on the west bank of the River Jordan in Palestine; and emmer, peas, and lentils, at Tell Aswad, farther north in Syria. Both were sites of the so-called Natufian culture and both supported large villages; the village of Jericho had a population of possibly five hundred people by this time.

Why did the first farming villages happen here and not elsewhere? Why was it the Natufians, and not other peoples, who domesticated peas and lentils? Were they lucky and just happened to be living where there were many potential candidates for domestication? While this is true, many other people were living among these species, but they did not domesticate them. As we saw in chapter 2 in Maps 4 and 5, research by geneticists and archaeologists to pin down the distribution of the wild ancestors of modern domesticated animals and plants reveals that many of these ancestors were spread over very large areas, millions of square kilometers. The wild ancestors of domesticated animal species were spread throughout Eurasia. Though the Hilly Flanks were particularly well endowed in terms of wild crop species, even they were very far from unique. It was not that the Natufians lived in an area uniquely endowed with wild species that made them special. It was that they were sedentary before they started domesticating plants or animals. One piece of evidence comes from gazelle teeth, which are composed of cementum, a bony connective tissue that grows in layers. During the spring and summer, when cementum’s growth is most rapid, the layers are a different color from the layers that form in the winter. By taking a slice through a tooth you can see the color of the last layer created before the gazelle died. Using this technique, you can determine if the gazelle was killed in summer or winter. At Natufian sites, one finds gazelles killed in all seasons, suggesting year-round residence. The village of Abu Hureyra, on the river Euphrates, is one of the most intensively researched Natufian settlements. For almost forty years archaeologists have examined the layers of the village, which provides one of the best documented examples of sedentary life before and after the transition to farming. The settlement probably began around 9500 BC, and the inhabitants continued their hunter-gatherer lifestyle for another five hundred years before switching to agriculture. Archaeologists estimate that the population of the village prior to farming was between one hundred and three hundred.

You can think of all sorts of reasons why a society might find it advantageous to become sedentary. Moving about is costly; children and old people have to be carried, and it is impossible to store food for lean times when you are on the move. Moreover, tools such as grinding stones and sickles were useful for processing wild foods, but are heavy to carry. There is evidence that even mobile hunter-gatherers stored food in select locations such as caves. One attraction of maize is that it stores very well, and this is a key reason why it became so intensively cultivated throughout the Americas. The ability to deal more effectively with storage and accumulate food stocks must have been a key incentive for adopting a sedentary way of life.

While it might be collectively desirable to become sedentary, this doesn’t mean that it will necessarily happen. A mobile group of hunter-gatherers would have to agree to do this, or someone would have to force them. Some archaeologists have suggested that increasing population density and declining living standards were key factors in the emergence of sedentary life, forcing mobile people to stay in one place. Yet the density of Natufian sites is no greater than that of previous groups, so there does not appear to be evidence of increasing population density. Skeletal and dental evidence does not suggest deteriorating health, either. For instance, food shortage tends to create thin lines in people’s tooth enamel, a condition called hypoplasia. These lines are in fact less prevalent in Natufian people than in later farming people.

More important is that while sedentary life had pluses, it also had minuses. Conflict resolution was probably much harder for sedentary groups, since disagreements could be resolved less easily by people or groups merely moving away. Once people had built permanent buildings and had more assets than they could carry, moving away was a much less attractive option. So villages needed more effective ways of resolving conflict and more elaborate notions of property. Decisions would have to be made about who had access to which piece of land close to the village, or who got to pick fruit from which stand of trees and fish in which part of the stream. Rules had to be developed, and the institutions that made and enforced rules had to be elaborated.

In order for sedentary life to emerge, it therefore seems plausible that hunter-gatherers would have had to be forced to settle down, and this would have to have been preceded by an institutional innovation concentrating power in the hands of a group that would become the political elite, enforce property rights, maintain order, and also benefit from their status by extracting resources from the rest of society. In fact, a political revolution similar to that initiated by King Shyaam, even if on a smaller scale, is likely to have been the breakthrough that led to sedentary life.

The archaeological evidence indeed suggests that the Natufians developed a complex society characterized by hierarchy, order, and inequality—beginnings of what we would recognize as extractive institutions—a long time before they became farmers. One compelling piece of evidence for such hierarchy and inequality comes from Natufian graves. Some people were buried with large amounts of obsidian and dentalium shells, which came from the Mediterranean coast near Mount Carmel. Other types of ornamentation include necklaces, garters, and bracelets, which were made out of canine teeth and deer phalanges as well as shells. Other people were buried without any of these things. Shells and also obsidian were traded, and control of this trade was quite likely a source of power accumulation and inequality. Further evidence of economic and political inequality comes from the Natufian site of Ain Mallaha, just north of the Sea of Galilee. Amid a group of about fifty round huts and many pits, clearly used for storage, there is a large, intensively plastered building close to a cleared central place. This building was almost certainly the house of a chief. Among the burials at the site, some are much more elaborate, and there is also evidence of a skull cult, possibly indicating ancestor worship. Such cults are widespread in Natufian sites, particularly Jericho. The preponderance of evidence from Natufian sites suggests that these were probably already societies with elaborate institutions determining inheritance of elite status. They engaged in trade with distant places and had nascent forms of religion and political hierarchies.

The emergence of political elites most likely created the transition first to sedentary life and then to farming. As the Natufian sites show, sedentary life did not necessarily mean farming and herding. People could settle down but still make their living by hunting and gathering. After all, the Long Summer made wild crops more bountiful, and hunting and gathering was likely to have been more attractive. Most people may have been quite satisfied with a subsistence life based on hunting and gathering that did not require a lot of effort. Even technological innovation doesn’t necessarily lead to increased agricultural production. In fact, it is known that a major technological innovation, the introduction of the steel axe among the group of Australian Aboriginal peoples known as Yir Yoront, led not to more intense production but to more sleeping, because it allowed subsistence requirements to be met more easily, with little incentive to work for more.

The traditional, geography-based explanation for the Neolithic Revolution—the centerpiece of Jared Diamond’s argument, which we discussed in chapter 2—is that it was driven by the fortuitous availability of many plant and animal species that could easily be domesticated. This made farming and herding attractive and induced sedentary life. After societies became sedentary and started farming, they began to develop political hierarchy, religion, and significantly more complex institutions. Though widely accepted, the evidence from the Natufians suggests that this traditional explanation puts the cart before the horse. Institutional changes occurred in societies quite a while before they made the transition to farming and were probably the cause both of the move to sedentarism, which reinforced the institutional changes, and subsequently of the Neolithic Revolution. This pattern is suggested not only by the evidence from the Hilly Flanks, which is the area most intensively studied, but also by the preponderance of evidence from the Americas, sub-Saharan Africa, and East Asia.

Certainly the transition to farming led to greater agricultural productivity and enabled a significant expansion of population. For instance, in sites such as Jericho and Abu Hureyra, one sees that the early farming village was much larger than the prefarming one. In general, villages grew by between two and six times when the transition took place. Moreover, many of the consequences that people have traditionally argued as having flowed from this transition undoubtedly happened. There was greater occupational specialization and more rapid technological progress, and probably the development of more complex and possibly less egalitarian political institutions. But whether this happened in a particular place was not determined by the availability of plant and animal species. Instead, it was a consequence of the society’s having experienced the types of institutional, social, and political innovations that would have allowed sedentary life and then farming to emerge.

Though the Long Summer and the presence of crop and animal species allowed this to happen, it did not determine where or when exactly, after the climate had warmed up, it would happen. Rather, this was determined by the interaction of a critical juncture, the Long Summer, with small but important institutional differences that mattered. As the climate warmed up, some societies, such as the Natufians, developed elements of centralized institutions and hierarchy, though these were on a very small scale relative to those of modern nation-states. Like the Bushong under Shyaam, societies reorganized to take advantage of the greater opportunities created by the glut of wild plants and animals, and it was no doubt the political elites who were the main beneficiaries of these new opportunities and of the political centralization process. Other places that had only slightly different institutions did not permit their political elites to take similar advantage of this juncture and lagged behind the process of political centralization and the creation of settled, agricultural, and more complex societies. This paved the way to a subsequent divergence of exactly the type we have seen before. Once these differences emerged, they spread to some places but not to others. For example, farming spread into Europe from the Middle East starting around 6500 BC, mostly as a consequence of the migration of farmers. In Europe, institutions drifted away from parts of the world, such as Africa, where initial institutions had been different and where the innovations set in motion by the Long Summer in the Middle East happened only much later, and even then in a different form.

THE INSTITUTIONAL INNOVATIONS of the Natufians, though they did most likely underpin the Neolithic Revolution, did not leave a simple legacy in world history and did not lead inexorably to the long-run prosperity of their homelands in modern Israel, Palestine, and Syria. Syria and Palestine are relatively poor parts of the modern world, and the prosperity of Israel was largely imported by the settlement of Jewish people after the Second World War and their high levels of education and easy access to advanced technologies. The early growth of the Natufians did not become sustained for the same reason that Soviet growth fizzled out. Though highly significant, even revolutionary for its time, this was growth under extractive institutions. For the Natufian society it was also likely that this type of growth created deep conflicts over who would control institutions and the extraction they enabled. For every elite benefiting from extraction there is a non-elite who would love to replace him. Sometimes infighting simply replaces one elite with another. Sometimes it destroys the whole extractive society, unleashing a process of state and societal collapse, as the spectacular civilization that Maya city-states built more than one thousand years ago experienced.

THE UNSTABLE EXTRACTION

Farming emerged independently in several places around the world. In what is now modern Mexico, societies formed that established states and settlements, and transitioned to agriculture. As with the Natufians in the Middle East, they also achieved some degree of economic growth. The Maya city-states in the area of southern Mexico, Belize, Guatemala, and Western Honduras in fact built a fairly sophisticated civilization under their own brand of extractive institutions. The Maya experience illustrates not only the possibility of growth under extractive institutions but also another fundamental limit to this type of growth: the political instability that emerges and ultimately leads to collapse of both society and state as different groups and people fight to become the extractors.

Maya cities first began to develop around 500 BC. These early cities eventually failed, sometime in the first century AD. A new political model then emerged, creating the foundation for the Classic Era, between AD 250 and 900. This period marked the full flowering of Maya culture and civilization. But this more sophisticated civilization would also collapse in the course of the next six hundred years. By the time the Spanish conquistadors arrived in the early sixteenth century, the great temples and palaces of such Maya sites as Tikal, Palenque, and Calakmul had receded into the forest, not to be rediscovered until the nineteenth century.

The Maya cities never unified into an empire, though some cities were subservient to others, and they often appear to have cooperated, particularly in warfare. The main connection between the region’s city-states, fifty of which we can recognize by their own glyphs, is that their people spoke around thirty-one different but closely related Mayan languages. The Mayas developed a writing system, and there are at least fifteen thousand remaining inscriptions describing many aspects of elite life, culture, and religion. They also had a sophisticated calendar for recording dates known as the Long Count. It was very much like our own calendar in that it counted the unfolding of years from a fixed date and was used by all Maya cities. The Long Count began in 3114 BC, though we do not know what significance the Mayas attached to this date, which long precedes the emergence of anything resembling Maya society.

The Mayas were skilled builders who independently invented cement. Their buildings and their inscriptions provide vital information on the trajectories of the Maya cities, as they often recorded events dated according to the Long Count. Looking across all the Maya cities, archaeologists can thus count how many buildings were finished in particular years. Around AD 500 there are few dated monuments. For example, the Long Count date corresponding to AD 514 recorded just ten. There was then a steady increase, reaching twenty by AD 672 and forty by the middle of the eighth century. After this the number of dated monuments collapses. By the ninth century, it is down to ten per year, and by the tenth century, to zero. These dated inscriptions give us a clear picture of the expansion of Maya cities and their subsequent contraction from the late eighth century.

This analysis of dates can be complemented by examining the lists of kings the Mayas recorded. At the Maya city of Copán, now in western Honduras, there is a famous monument known as Altar Q. Altar Q records the names of all the kings, starting from the founder of the dynasty K’inich Yax K’uk’ Mo’, or “King Green-Sun First Quetzal Macaw,” named after not just the sun but also two of the exotic birds of the Central American forest whose feathers were greatly valued by the Mayas. K’inich Yax K’uk’ Mo’ came to power in Copán in AD 426, which we know from the Long Count date on Altar Q. He founded a dynasty that would reign for four hundred years. Some of K’inich Yax’s successors had equally graphic names. The thirteenth ruler’s glyph translates as “18 Rabbit,” who was followed by “Smoke Monkey” and then “Smoke Shell,” who died in AD 763. The last name on the altar is King Yax Pasaj Chan Yoaat, or “First Dawned Sky Lightening God,” who was the sixteenth ruler of this line and assumed the throne at the death of Smoke Shell. After him we know of only one more king, Ukit Took (“Patron of Flint”), from a fragment of an altar. After Yax Pasaj, the buildings and inscriptions stopped, and it seems that the dynasty was shortly overthrown. Ukit Took was probably not even the real claimant to the throne but a pretender.

There is a final way of looking at this evidence at Copán, one developed by the archaeologists AnnCorinne Freter, Nancy Gonlin, and David Webster. These researchers mapped the rise and fall of Copán by examining the spread of the settlement in the Copán Valley over a period of 850 years, from AD 400 to AD 1250, using a technique called obsidian hydration, which calculates the water content of obsidian on the date it was mined. Once mined, the water content falls at a known rate, allowing archaeologists to calculate the date a piece of obsidian was mined. Freter, Gonlin, and Webster were then able to map where pieces of dated obsidian were found in the Copán Valley and trace how the city expanded and then contracted. Since it is possible to make a reasonable guess about the number of houses and buildings in a particular area, the total population of the city can be estimated. In the period AD 400-449, the population was negligible, estimated at about six hundred people. It rose steadily to a peak of twenty-eight thousand in AD 750-799. Though this does not appear large by contemporary urban standards, it was massive for that period; these numbers imply that in this period, Copán had a larger population than London or Paris. Other Maya cities, such as Tikal and Calakmul, were undoubtedly much larger. In line with the evidence from the Long Count dates, AD800 was the population peak for Copán. After this it began to decline, and by AD 900 it had fallen to around fifteen thousand people. From there the fall continued, and by AD 1200 the population had returned to what it was eight hundred years previously.

The basis for the economic development of the Maya Classical Era was the same as that for the Bushong and the Natufians: the creation of extractive institutions with some degree of state centralization. These institutions had several key elements. Around AD 100, in the city of Tikal in Guatemala, there emerged a new type of dynastic kingdom. A ruling class based on the ajaw (lord or ruler) took root with a king called the k’uhul ajaw (divine lord) and, underneath him, a hierarchy of aristocrats. The divine lord organized the society with the cooperation of these elites and also communicated with the gods. As far as we know, this new set of political institutions did not allow for any sort of popular participation, but it did bring stability. The k’uhul ajaw raised tribute from farmers and organized labor to build the great monuments, and the coalescence of these institutions created the basis for an impressive economic expansion. The Maya’s economy was based on extensive occupational specialization, with skilled potters, weavers, woodworkers, and tool and ornament makers. They also traded obsidian, jaguar pelts, marine shells, cacao, salt, and feathers among themselves and other polities over long distances in Mexico. They probably had money, too, and like the Aztecs, used cacao beans for currency.

The way in which the Maya Classical Era was founded on the creation of extractive political institutions was very similar to the situation among the Bushong, with Yax Ehb’ Xook at Tikal playing a role similar to that of King Shyaam. The new political institutions led to a significant increase in economic prosperity, much of which was then extracted by the new elite based around the k’uhul ajaw. Once this system had consolidated, by around AD 300, there was little further technological change, however. Though there is some evidence of improved irrigation and water management techniques, agricultural technology was rudimentary and appears not to have changed. Building and artistic techniques became much more sophisticated over time, but in total there was little innovation.

There was no creative destruction. But there were other forms of destruction as the wealth that the extractive institutions created for the k’uhul ajaw and the Maya elite led to constant warfare, which worsened over time. The sequence of conflicts is recorded in the Maya inscriptions, with special glyphs indicating that a war took place at a particular date in the Long Count. The planet Venus was the celestial patron of war, and the Mayas regarded some phases of the planet’s orbit as particularly auspicious for waging war. The glyph that indicated warfare, known as “star wars” by archaeologists, shows a star showering the earth with a liquid that could be water or blood. The inscriptions also reveal patterns of alliance and competition. There were long contests for power between the larger states, such as Tikal, Calakmul, Copán, and Palenque, and these subjugated smaller states into a vassal status. Evidence for this comes from glyphs marking royal accessions. During this period, they start indicating that the smaller states were now being dominated by another, outside ruler.

Map 10 (this page) shows the main Maya cities and the various patterns of contact between them as reconstructed by the archaeologists Nikolai Grube and Simon Martin. These patterns indicate that though the large cities such as Calakmul, Dos Pilas, Piedras Negras, and Yaxchilan had extensive diplomatic contacts, some were often dominated by others and they also fought each other.

The overwhelming fact about the Maya collapse is that it coincides with the overthrow of the political model based on the k’uhul ajaw. We saw in Copán that after Yax Pasaj’s death in AD 810 there were no more kings. At around this time the royal palaces were abandoned. Twenty miles to the north of Copán, in the city of Quiriguá, the last king, Jade Sky, ascended to the throne between AD 795 and 800. The last dated monument is from AD 810 by the Long Count, the same year that Yax Pasaj died. The city was abandoned soon after. Throughout the Maya area the story is the same; the political institutions that had provided the context for the expansion of trade, agriculture, and population vanished. Royal courts did not function, monuments and temples were not carved, and palaces were emptied. As political and social institutions unraveled, reversing the process of state centralization, the economy contracted and the population fell.

In some cases the major centers collapsed from widespread violence. The Petexbatun region of Guatemala—where the great temples were subsequently pulled down and the stone used to build extensive defensive walls—provides one vivid example. As we’ll see in the next chapter, it was very similar to what happened in the later Roman Empire. Later, even in places such as Copán, where there are fewer signs of violence at the time of the collapse, many monuments were defaced or destroyed. In some places the elite remained even after the initial overthrow of the k’uhul ajaw. In Copán there is evidence of the elite continuing to erect new buildings for at least another two hundred years before they also disappeared. Elsewhere elites seem to have gone at the same time as the divine lord.

Existing archaeological evidence does not allow us to reach a definitive conclusion about why the k’uhul ajaw and elites surrounding him were overthrown and the institutions that had created the Maya Classical Era collapsed. We know this took place in the context of intensified inter-city warfare, and it seems likely that opposition and rebellion within the cities, perhaps led by different factions of the elite, overthrew the institution.

Though the extractive institutions that the Mayas created produced sufficient wealth for the cities to flourish and the elite to become wealthy and generate great art and monumental buildings, the system was not stable. The extractive institutions upon which this narrow elite ruled created extensive inequality, and thus the potential for infighting between those who could benefit from the wealth extracted from the people. This conflict ultimately led to the undoing of the Maya civilization.

WHAT GOES WRONG?

Extractive institutions are so common in history because they have a powerful logic: they can generate some limited prosperity while at the same time distributing it into the hands of a small elite. For this growth to happen, there must be political centralization. Once this is in place, the state—or the elite controlling the state—typically has incentives to invest and generate wealth, encourage others to invest so that the state can extract resources from them, and even mimic some of the processes that would normally be set in motion by inclusive economic institutions and markets. In the Caribbean plantation economies, extractive institutions took the form of the elite using coercion to force slaves to produce sugar. In the Soviet Union, they took the form of the Communist Party reallocating resources from agriculture to industry and structuring some sort of incentives for managers and workers. As we have seen, such incentives were undermined by the nature of the system.

The potential for creating extractive growth gives an impetus to political centralization and is the reason why King Shyaam wished to create the Kuba Kingdom, and likely accounts for why the Natufians in the Middle East set up a primitive form of law and order, hierarchy, and extractive institutions that would ultimately lead to the Neolithic Revolution. Similar processes also likely underpinned the emergence of settled societies and the transition to agriculture in the Americas, and can be seen in the sophisticated civilization that the Mayas built on foundations laid by highly extractive institutions coercing many for the benefit of their narrow elites.

The growth generated by extractive institutions is very different in nature from growth created under inclusive institutions, however. Most important, it is not sustainable. By their very nature, extractive institutions do not foster creative destruction and generate at best only a limited amount of technological progress. The growth they engender thus lasts for only so long. The Soviet experience gives a vivid illustration of this limit. Soviet Russia generated rapid growth as it caught up rapidly with some of the advanced technologies in the world, and resources were allocated out of the highly inefficient agricultural sector and into industry. But ultimately the incentives faced in every sector, from agriculture to industry, could not stimulate technological progress. This took place in only a few pockets where resources were being poured and where innovation was strongly rewarded because of its role in the competition with the West. Soviet growth, however rapid it was, was bound to be relatively short lived, and it was already running out of steam by the 1970s.

Lack of creative destruction and innovation is not the only reason why there are severe limits to growth under extractive institutions. The history of the Maya city-states illustrates a more ominous and, alas, more common end, again implied by the internal logic of extractive institutions. As these institutions create significant gains for the elite, there will be strong incentives for others to fight to replace the current elite. Infighting and instability are thus inherent features of extractive institutions, and they not only create further inefficiencies but also often reverse any political centralization, sometimes even leading to the total breakdown of law and order and descent into chaos, as the Maya city-states experienced following their relative success during their Classical Era.

Though inherently limited, growth under extractive institutions may nonetheless appear spectacular when it’s in motion. Many in the Soviet Union and many more in the Western world were awestruck by Soviet growth in the 1920s, ’30s, ’40s, ’50s, ’60s, and even as late as the ’70s, in the same way that they are mesmerized by the breakneck pace of economic growth in China today. But as we will discuss in greater detail in chapter 15, China under the rule of the Communist Party is another example of society experiencing growth under extractive institutions and is similarly unlikely to generate sustained growth unless it undergoes a fundamental political transformation toward inclusive political institutions.