Political Science 242 Notes
Why Nations Fail: Daron Acemoglu and James Robinson
Week 1:
Chapter 1: so close and yet so different
● Overview:
○ Looking at how England and Spain’s colonisation strategies impacted two different parts
of the world; how the colonisation strategy shaped South America (largely controlled by
Spain) becoming relatively poor compared to North America.
■ Until the 1500s, the Latin American countries were wealthier before the Spanish
arrived, and North America were the poor countries.
■ How did this shift take place?
● Introduction:
○ The institutions of certain countries are so much more conducive to economic success
than others because of how different societies were formed during the early colonial
period. An institutional divergence took place then, with implications lasting into the
present day.
● Spanish colonisation strategy:
○ Spanish expansion and colonisation of the Americas began in earnest with the invasion
of Mexico by Hernán Cortés in 1519, the expedition of Francisco Pizarro to Peru a
decade and a half later, and the expedition of Pedro de Mendoza to the Río de la Plata
just two years after that. Over the next century, Spain conquered and colonised most of
central, western, and southern South America, while Portugal claimed Brazil to the east.
○ The Spanish strategy of colonisation was highly effective. First perfected by Cortés in
Mexico, they established control in two steps:
■ 1) They captured the indigenous leader and subdued the opposition; once they
captured the leader, they would force him to give the accumulated wealth to the
colonisers and make ordinary people pay tribute and food.
■ 2) They set themselves up as the new elite of the indigenous society, forcing
indigenous people to work for them, and taking control of the existing methods of
taxation, tribute, and, particularly, forced labour.
○ The military conquest of the Aztecs was completed by 1521. But this time, Cortés and the
Spanish created a number of institutions/rules/systems by which they extracted wealth,
labour and land from indigenous people. Pizarro captured the Inca Empire on the
strategies of the Mexican conquest.
, ○ To exploit the silver, the Spanish needed a lot of miners. They sent a new viceroy, the
chief Spanish colonial official, Francisco de Toledo, whose main mission was to solve the
labour problem. He implemented a number of systems set out below.
■ Encomienda: a grant of indigenous peoples to a Spandiard, a forced labour
system similar to slavery; people were paid for service to the Spanish crown with
people to work for them.
■ The role of silver was NB in the Spanish Empire; it gave Spain the power to
become a world power.
● The city of Potosi in 1650 had a massive population where silver was
extracted.
● The mita system, another forced labour system, was also imposed. In de
Toledo’s hands the mita, especially the Potosí mita, was to become the
largest and most onerous scheme of labour exploitation in the Spanish
colonial period.
■ Repartimiento (redistribution) also became widespread during de Toledo’s
tenure. This meant, literally, ‘distribution of goods’, and was the practice of
reselling products to locals at prices set by the Spanish government; there was
no free market (high taxes).
■ De Toledo also introduced the trajín, literally meaning “the burden”, which was a
punitive form of labour where people were used as pack animals to carry heavy
loads of goods.
○ The full gamut of encomienda, mita, repartimiento, and trajin was designed to force
indigenous people’s living standards down to a subsistence level and thus extract all
income in excess of this for Spaniards. These practices made the Spanish very wealthy
but increased wealth inequalities still present in many Latin American countries today.
○ ‘Extractive institutions’ had been established.
○ Map 1 of the Inca Empire important.
● Key concepts:
○ “The English got the leftovers”: Canada and the US; not considered prizewinning
territories to colonise because they did not have mineral wealth that the Spanish
discovered in South America.
○ Pocahontas, Wahunsunacock & John Smith.
○ North America was a vast territory with fertile land, but there was no way for the
Company to force settlers to work for it.
○ Population density had different impacts on colonisation strategies.
● The English Attempt:
, ○ As the Spanish began their conquest of the Americas in the 1490s, England was a minor
European power recovering from the devastating effects of a civil war, the Wars of the
Roses. Only when England beat Spain in a bloody battle in their attempt to invade, and
when it settled its domestic conflict, could it be prosperous and seek colonies. Spain was
the superpower still, and England only had North America left to conquer.
○ England eventually realised they couldn’t do what the Spanish had done in South
America: the indigenous populations were different, it was hard to capture them, and they
did not have vast amounts of gold and silver.
○ Jamestown:
■ Jamestown was one of the first settlements on what is today the East Coast of
the US. The English wanted to take it over, but it was in a territory which owed
allegiance to a king called Wahunsunacock. As the winter of 1607 closed in, the
settlers ran low on food because they did not plan ahead to plant crops and did
not realise they could not rely on the locals to feed them through coercion or
trade. The situation was rescued by Captain John Smith, whose life was
apparently saved by Pocahontas, Wahunsunacock’s daughter. It was Smith who
was the first to realise that the model of colonisation that had worked so well for
Cortés and Pizarro simply would not work in North America.
■ The Virginia Company refused to change their approach, and more winters
came: one year, sixty settlers were left after five hundred, and many had resorted
to cannibalism.
■ The Virginia Company then decided to attempt to exploit the colonists, but
realised they could not coerce the settlers either. The alternative was to give
them incentives, providing each male settler fifty acres of land and fifty more for
each member of his family. A General Assembly was introduced, ushering in
institutions governing the colonies.
○ This was the start of democracy in the US - ‘inclusive institutions’ were established.
● What do I need to understand:
○ 1. Understand why the English-based Virginia Company could not establish control over
the territory of chief Wahunsunacock in Jamestown the same way as the Spanish
established control over the Aztecs and other indigenous groups in Latin-America.
○ 2. Why was the issue regarding population density in the America’s in the 1500s so
fundamental to the different outcomes about political and economic control in Jamestown
and Latin America?
● What changed:
○ The Civil War was bloody and destructive. But both before and after it there were ample
economic opportunities for a large fraction of the population, especially in the northern
, and western United States. The situation in Mexico was very different. If the United
States experienced five years of political instability between 1860 and 1865, Mexico
experienced almost nonstop instability for the first fifty years of independence.
○ Between 1824 and 1867 there were fifty-two presidents in Mexico, few of whom assumed
power according to any constitutionally sanctioned procedure. The consequence of this
unprecedented political instability for economic institutions and incentives should be
obvious. Such instability led to highly insecure property rights. It also led to a severe
weakening of the Mexican state, which now had little authority and little ability to raise
taxes or provide public services. These institutions, by basing the society on the
exploitation of indigenous people and the creation of monopolies, blocked the economic
incentives and initiatives of the great mass of the population.
○ As the United States began to experience the Industrial Revolution in the 1st half of the
nineteenth century, Mexico got poorer.
● Making a Billion or Two:
○ The enduring implications of the organisation of colonial society and those societies’
institutional legacies shape the modern differences between the United States and
Mexico. The contrast between how Bill Gates and Carlos Slim became the two richest
men in the world illustrates the forces at work.
■ In Mexico, Carlos Slim did not make his money by innovation. Initially he excelled
in stock market deals, and in buying and revamping unprofitable firms. His major
coup was the acquisition of Telmex, the Mexican telecommunications monopoly.
■ Bill Gates with Microsoft could not create a monopoly in the same way; Microsoft
had to give assurance to the US that it would not become the sole supplier.
■ The US prevented this kind of monopoly but Mexico did not have the same
restrictions.
○ The Ted Talk by James Robinson explains this very will (stop listening when he starts
talking about Greece).
■ Protection of patents; people have an incentive to create more things; without
such protections, societies will not become prosperous.
○ Towards theory of world inequality:
■ The United States is far richer today than either Mexico or Peru because of the
way its institutions, both economic and political, shape the incentives of
businesses, individuals, and politicians. Each society functions with a set of
economic and political rules created and enforced by the state and the citizens
collectively. Economic institutions shape economic incentives: the incentives to
become educated, to save and invest, to innovate and adopt new technologies,
and so on. It is the political process that determines what economic institutions
Why Nations Fail: Daron Acemoglu and James Robinson
Week 1:
Chapter 1: so close and yet so different
● Overview:
○ Looking at how England and Spain’s colonisation strategies impacted two different parts
of the world; how the colonisation strategy shaped South America (largely controlled by
Spain) becoming relatively poor compared to North America.
■ Until the 1500s, the Latin American countries were wealthier before the Spanish
arrived, and North America were the poor countries.
■ How did this shift take place?
● Introduction:
○ The institutions of certain countries are so much more conducive to economic success
than others because of how different societies were formed during the early colonial
period. An institutional divergence took place then, with implications lasting into the
present day.
● Spanish colonisation strategy:
○ Spanish expansion and colonisation of the Americas began in earnest with the invasion
of Mexico by Hernán Cortés in 1519, the expedition of Francisco Pizarro to Peru a
decade and a half later, and the expedition of Pedro de Mendoza to the Río de la Plata
just two years after that. Over the next century, Spain conquered and colonised most of
central, western, and southern South America, while Portugal claimed Brazil to the east.
○ The Spanish strategy of colonisation was highly effective. First perfected by Cortés in
Mexico, they established control in two steps:
■ 1) They captured the indigenous leader and subdued the opposition; once they
captured the leader, they would force him to give the accumulated wealth to the
colonisers and make ordinary people pay tribute and food.
■ 2) They set themselves up as the new elite of the indigenous society, forcing
indigenous people to work for them, and taking control of the existing methods of
taxation, tribute, and, particularly, forced labour.
○ The military conquest of the Aztecs was completed by 1521. But this time, Cortés and the
Spanish created a number of institutions/rules/systems by which they extracted wealth,
labour and land from indigenous people. Pizarro captured the Inca Empire on the
strategies of the Mexican conquest.
, ○ To exploit the silver, the Spanish needed a lot of miners. They sent a new viceroy, the
chief Spanish colonial official, Francisco de Toledo, whose main mission was to solve the
labour problem. He implemented a number of systems set out below.
■ Encomienda: a grant of indigenous peoples to a Spandiard, a forced labour
system similar to slavery; people were paid for service to the Spanish crown with
people to work for them.
■ The role of silver was NB in the Spanish Empire; it gave Spain the power to
become a world power.
● The city of Potosi in 1650 had a massive population where silver was
extracted.
● The mita system, another forced labour system, was also imposed. In de
Toledo’s hands the mita, especially the Potosí mita, was to become the
largest and most onerous scheme of labour exploitation in the Spanish
colonial period.
■ Repartimiento (redistribution) also became widespread during de Toledo’s
tenure. This meant, literally, ‘distribution of goods’, and was the practice of
reselling products to locals at prices set by the Spanish government; there was
no free market (high taxes).
■ De Toledo also introduced the trajín, literally meaning “the burden”, which was a
punitive form of labour where people were used as pack animals to carry heavy
loads of goods.
○ The full gamut of encomienda, mita, repartimiento, and trajin was designed to force
indigenous people’s living standards down to a subsistence level and thus extract all
income in excess of this for Spaniards. These practices made the Spanish very wealthy
but increased wealth inequalities still present in many Latin American countries today.
○ ‘Extractive institutions’ had been established.
○ Map 1 of the Inca Empire important.
● Key concepts:
○ “The English got the leftovers”: Canada and the US; not considered prizewinning
territories to colonise because they did not have mineral wealth that the Spanish
discovered in South America.
○ Pocahontas, Wahunsunacock & John Smith.
○ North America was a vast territory with fertile land, but there was no way for the
Company to force settlers to work for it.
○ Population density had different impacts on colonisation strategies.
● The English Attempt:
, ○ As the Spanish began their conquest of the Americas in the 1490s, England was a minor
European power recovering from the devastating effects of a civil war, the Wars of the
Roses. Only when England beat Spain in a bloody battle in their attempt to invade, and
when it settled its domestic conflict, could it be prosperous and seek colonies. Spain was
the superpower still, and England only had North America left to conquer.
○ England eventually realised they couldn’t do what the Spanish had done in South
America: the indigenous populations were different, it was hard to capture them, and they
did not have vast amounts of gold and silver.
○ Jamestown:
■ Jamestown was one of the first settlements on what is today the East Coast of
the US. The English wanted to take it over, but it was in a territory which owed
allegiance to a king called Wahunsunacock. As the winter of 1607 closed in, the
settlers ran low on food because they did not plan ahead to plant crops and did
not realise they could not rely on the locals to feed them through coercion or
trade. The situation was rescued by Captain John Smith, whose life was
apparently saved by Pocahontas, Wahunsunacock’s daughter. It was Smith who
was the first to realise that the model of colonisation that had worked so well for
Cortés and Pizarro simply would not work in North America.
■ The Virginia Company refused to change their approach, and more winters
came: one year, sixty settlers were left after five hundred, and many had resorted
to cannibalism.
■ The Virginia Company then decided to attempt to exploit the colonists, but
realised they could not coerce the settlers either. The alternative was to give
them incentives, providing each male settler fifty acres of land and fifty more for
each member of his family. A General Assembly was introduced, ushering in
institutions governing the colonies.
○ This was the start of democracy in the US - ‘inclusive institutions’ were established.
● What do I need to understand:
○ 1. Understand why the English-based Virginia Company could not establish control over
the territory of chief Wahunsunacock in Jamestown the same way as the Spanish
established control over the Aztecs and other indigenous groups in Latin-America.
○ 2. Why was the issue regarding population density in the America’s in the 1500s so
fundamental to the different outcomes about political and economic control in Jamestown
and Latin America?
● What changed:
○ The Civil War was bloody and destructive. But both before and after it there were ample
economic opportunities for a large fraction of the population, especially in the northern
, and western United States. The situation in Mexico was very different. If the United
States experienced five years of political instability between 1860 and 1865, Mexico
experienced almost nonstop instability for the first fifty years of independence.
○ Between 1824 and 1867 there were fifty-two presidents in Mexico, few of whom assumed
power according to any constitutionally sanctioned procedure. The consequence of this
unprecedented political instability for economic institutions and incentives should be
obvious. Such instability led to highly insecure property rights. It also led to a severe
weakening of the Mexican state, which now had little authority and little ability to raise
taxes or provide public services. These institutions, by basing the society on the
exploitation of indigenous people and the creation of monopolies, blocked the economic
incentives and initiatives of the great mass of the population.
○ As the United States began to experience the Industrial Revolution in the 1st half of the
nineteenth century, Mexico got poorer.
● Making a Billion or Two:
○ The enduring implications of the organisation of colonial society and those societies’
institutional legacies shape the modern differences between the United States and
Mexico. The contrast between how Bill Gates and Carlos Slim became the two richest
men in the world illustrates the forces at work.
■ In Mexico, Carlos Slim did not make his money by innovation. Initially he excelled
in stock market deals, and in buying and revamping unprofitable firms. His major
coup was the acquisition of Telmex, the Mexican telecommunications monopoly.
■ Bill Gates with Microsoft could not create a monopoly in the same way; Microsoft
had to give assurance to the US that it would not become the sole supplier.
■ The US prevented this kind of monopoly but Mexico did not have the same
restrictions.
○ The Ted Talk by James Robinson explains this very will (stop listening when he starts
talking about Greece).
■ Protection of patents; people have an incentive to create more things; without
such protections, societies will not become prosperous.
○ Towards theory of world inequality:
■ The United States is far richer today than either Mexico or Peru because of the
way its institutions, both economic and political, shape the incentives of
businesses, individuals, and politicians. Each society functions with a set of
economic and political rules created and enforced by the state and the citizens
collectively. Economic institutions shape economic incentives: the incentives to
become educated, to save and invest, to innovate and adopt new technologies,
and so on. It is the political process that determines what economic institutions
