False economy What’s in it for me? Understand what makes the

Single events taking place at critical 
junctures 
may 
result 
in 
diverging 
institutional paths.
One event more than any other shaped the 
medieval and early modern periods in Europe. In 
the mid-fourteenth century, the Black Death 
traveled along established trading routes from 
the Far East to the European continent. Almost 
half its population died in the plague’s 
devastation.
Alongside the human devastation, the ensuing 
economic fallout shaped Europe for centuries to 
come.
The Black Death is therefore an example of what 
is known as a critical juncture – that is, an event 
capable of overturning the sociopolitical balance 
of a nation, a continent or even the entire world.
Prior to the arrival of the Black Death in Europe, 
the continent’s social and economic systems 
were shaped by a highly extractive form of 
governance and control called feudalism.
A country’s monarch owned land that he allotted 
among his lords, who, in turn, were obliged to 
provide military capabilities when needed. This 
land was then tended to by the lord’s peasants, 
who had to pay most of their harvest back to 
their lord in taxes. Peasants were not permitted 
to migrate without their lord’s permission. To top 
it off, the lord also held judicial power over them.
However, the Black Death caused massive labor 
shortages. In Western Europe, this meant that 
peasants finally felt they had the capacity to 
demand lower taxes and more rights.
But the same cannot be said of Eastern Europe. 
There, the peasants were less well-organized. 
Landowners managed to bring peasants under 
the yoke by taking advantage of their lack of 
organization. In contrast to their Western 
European counterparts, Eastern European 
institutions became increasingly extractive, as 
higher and higher taxes were extracted from the 
peasants.
It can therefore be said that the Black Death 
formed a critical juncture. It resulted in both the 
eventual dissolution of feudalism and, somewhat 
more swiftly, in less extractive institutions in 
Western Europe. But the opposite was true just 
a little further east.
There is a name for the phenomenon by which 
critical junctures lead to divergent paths. It’s 
known as institutional drift. This means that 
regions that are otherwise quite similar bifurcate 
in different directions.
Something similar happened just a few centuries 
later. This time the critical juncture was the 
expansion of global trade and the colonization of 
the Americas. These advents accelerated the 
path of institutional drift, as not all countries in 
Europe profited economically from them.
It may take centuries, but all it takes is a few 
critical junctures and the resulting institutional 
drift to result in huge differences between the 
institutional landscapes of countries that were 
once alike.