it is clear why this would have been very difficult. To politically centralize would have meant that some clans would have been subject to the control of others. But they rejected any such dominance, and the surrender of their power that this would have entailed; the balance of military power in the society would also have made it difficult to create such centralized institutions. In fact, it is likely that any group or clan attempting to centralize power would not only have faced stiff resistance but would have lost its existing power and privileges. As a consequence of this lack of political centralization and the implied absence of even the most basic security of property rights, Somali society never generated incentives to invest in productivity-enhancing technologies. As the process of industrialization was under way in other parts of the world in the nineteenth and early twentieth centuries, Somalis were feuding and fending for their lives, and their economic backwardness became more ingrained.
ENDURING BACKWARDNESS
The Industrial Revolution created a transformative critical juncture for the whole world during the nineteenth century and beyond: those societies that allowed and incentivized their citizens to invest in new technologies could grow rapidly. But many around the world failed to do so—or explicitly chose not to do so. Nations under the grip of extractive political and economic institutions did not generate such incentives. Spain and Ethiopia provide examples where the absolutist control of political institutions and the implied extractive economic institutions choked economic incentives long before the dawn of the nineteenth century. The outcome was similar in other absolutist regimes—for example, in Austria-Hungary, Russia, the Ottoman Empire, and China, though in these cases the rulers, because of fear of creative destruction, not only neglected to encourage economic progress but also took explicit steps to block the spread of industry and the introduction of new technologies that would bring industrialization.
Absolutism is not the only form of extractive political institutions and was not the only factor preventing industrialization. Inclusive political and economic institutions necessitate some degree of political centralization so that the state can enforce law and order, uphold property rights, and encourage economic activity when necessary by investing in public services. Yet even today, many nations, such as Afghanistan, Haiti, Nepal, and Somalia, have states that are unable to maintain the most rudimentary order, and economic incentives are all but destroyed. The case of Somalia illustrates how the process of industrialization also passed by such societies. Political centralization is resisted for the same reason that absolutist regimes resist change: the often well-placed fear that change will reallocate political power from those that dominate today to new individuals and groups. Thus, as absolutism blocks moves toward pluralism and economic change, so do the traditional elites and clans dominating the scene in societies without state centralization. As a consequence, societies that still lacked such centralization in the eighteenth and nineteenth centuries were particularly disadvantaged in the age of industry.
While the variety of extractive institutions ranging from absolutism to states with little centralization failed to take advantage of the spread of industry, the critical juncture of the Industrial Revolution had very different effects in other parts of the world. As we will see in chapter 10, societies that had already taken steps toward inclusive political and economic institutions, such as the United States and Australia, and those where absolutism was more seriously challenged, such as France and Japan, took advantage of these new economic opportunities and started a process of rapid economic growth. As such, the usual pattern of interaction between a critical juncture and existing institutional differences leading to further institutional and economic divergence played out again in the nineteenth century, and this time with an even bigger bang and more fundamental effects on the prosperity and poverty of nations.
North of the fence: Nogales, Arizona Jim West/imagebroker.net/Photolibrary
South of the fence: Nogales, Sonora Jim West/age fotostock/Photolibrary
Consequences of a level playing field: Thomas Edison’s 1880 patent for the lightbulb Records of the Patent and Trademark Office; Record Group 241; National Archives
Economic losers from creative destruction: machine-breaking Luddites in early-nineteenth-century Britain Mary Evans Picture Library/Tom Morgan
Consequences of a complete lack of political centralization in Somalia REUTERS/Mohamed Guled/Landov
Successive beneficiaries of extractive institutions in Congo:
King of Kongo © CORBIS King Leopold II The Granger Collection, NY
Joseph-Désiré Mobutu © Richard Melloul/Sygma/CORBIS
Laurent Kabila © Reuters/CORBIS
The Glorious Revolution: William III of Orange is read the Bill of Rights before being offered the crown of England by parliament After Edgar Melville Ward/The Bridgeman Art Library/Getty Images
The bubonic plague of