Why Nations Fail

particular area and of the elite families who signed treaties
with the British in the late nineteenth century. Chiefs were
elected, but not democratically. A body called the Tribal
Authority, whose members were lesser village chiefs or

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were appointed by paramount chiefs, village chiefs, or the
British authorities, decided who would become the
paramount chief. One might have imagined that this
colonial institution would also have been abolished or at
least reformed after independence. But just like the
marketing board, it was not, and continued unchanged.
Today paramount chiefs are still in charge of collecting
taxes. It is no longer a hut tax, but its close descendant, a
poll tax. In 2005 the Tribal Authority in Sandor elected a
new paramount chief. Only candidates from the Fasuluku
ruling house, which is the only ruling house, could stand.
The victor was Sheku Fasuluku, King Suluku’s great-great-
grandson.
The behavior of the marketing boards and the traditional
systems of land ownership go a long way to explain why
agricultural productivity is so low in Sierra Leone and much
of sub-Saharan Africa. The political scientist Robert Bates
set out in the 1980s to understand why agriculture was so
unproductive in Africa even though according to textbook
economics this ought to have been the most dynamic
economic sector. He realized that this had nothing to do
with geography or the sorts of factors discussed in 
chapter
2
that have been claimed to make agricultural productivity
intrinsically low. Rather, it was simply because the pricing
policies of the marketing boards removed any incentives
for the farmers to invest, use fertilizers, or preserve the soil.
The reason that the policies of the marketing boards
were so unfavorable to rural interests was that these
interests had no political power. These pricing policies
interacted with other fundamental factors making tenure
insecure, further undermining investment incentives. In
Sierra Leone, paramount chiefs not only provide law and
order and judicial services, and raise taxes, but they are
also the “custodians of the land.” Though families, clans,
and dynasties have user rights and traditional rights to land;
at the end of the day chiefs have the last say on who farms
where. Your property rights to land are only secure if you
are connected to the chief, perhaps from the same ruling
family. Land cannot be bought or sold or used as collateral
for a loan, and if you are born outside a chieftaincy, you
cannot plant any perennial crop such as coffee, cocoa, or
palm for fear that this will allow you to establish “de facto”

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property rights.
The contrast between the extractive institutions
developed by the British in Sierra Leone and the inclusive
institutions that developed in other colonies, such as
Australia, is illustrated by the way mineral resources were
managed. Diamonds were discovered in Kono in eastern
Sierra Leone in January 1930. The diamonds were alluvial,
that is, not in deep mines. So the primary method of mining
them was by panning in rivers. Some social scientists call
these “democratic diamonds,” because they allow many
people to become involved in mining, creating a potentially
inclusive opportunity. Not so in Sierra Leone. Happily
ignoring the intrinsically democratic nature of panning for
diamonds, the British government set up a monopoly for the
entire protectorate, called it the Sierra Leone Selection
Trust, and granted it to De Beers, the giant South African
diamond mining company. In 1936 De Beers was also
given the right to create the Diamond Protection Force, a
private army that would become larger than that of the
colonial government in Sierra Leone. Even so, the
widespread availability of the alluvial diamonds made the
situation difficult to police. By the 1950s, the Diamond
Protection Force was overwhelmed by thousands of illegal
diamond miners, a massive source of conflict and chaos. In
1955 the British government opened up some of the
diamond fields to licensed diggers outside the Sierra
Leone Selection Trust, though the company still kept the
richest areas in Yengema and Koidu and Tongo Fields.
Things only got worse after independence. In 1970 Siaka
Stevens effectively nationalized the Sierra Leone Selection
Trust, creating the National Diamond Mining Company
(Sierra Leone) Limited, in which the government, effectively
meaning Stevens, had a 51 percent stake. This was the
opening phase of Stevens’s plan to take over diamond
mining in the country.
In nineteenth-century Australia it was gold, discovered in
1851 in New South Wales and the newly created state of
Victoria, not diamonds, that attracted everyone’s attention.
Like diamonds in Sierra Leone, the gold was alluvial, and a
decision had to be made about how to exploit it. Some,
such as James Macarthur, son of John Macarthur, the
prominent leader of the Squatters we discussed earlier

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(
this page
–
this page
), proposed that fences be placed
around the mining areas and the monopoly rights auctioned
off. They wanted an Australian version of the Sierra Leone
Selection Trust. Yet many in Australia wanted free access
to the gold mining areas. The inclusive model won, and
instead of setting up a monopoly, Australian authorities
allowed anyone who paid an annual mining license fee to
search and dig for gold. Soon the diggers, as these
adventurers came to be known, were a powerful force in
Australian politics, particularly in Victoria. They played an
important role in pushing forward the agenda of universal
suffrage and the secret ballot.
We have already seen two pernicious effects of
European expansion and colonial rule in Africa: the
introduction of the transatlantic slave trade, which
encouraged the development of African political and
economic institutions in an extractive direction, and the use
of colonial legislation and institutions to eliminate the
development of African commercial agriculture that might
have competed with Europeans. Slavery was certainly a
force in Sierra Leone. At the time of colonization there was
no strong centralized state in the interior, just many small,
mutually antagonistic kingdoms continually raiding one
another and capturing one another’s men and women.
Slavery was endemic, with possibly 50 percent of the
population working as slaves. The disease environment
meant that large-scale white settlement was not possible in
Sierra Leone, as it was in South Africa. Hence there were
no whites competing with the Africans. Moreover, the lack
of a mining economy on the scale of Johannesburg meant
that, in addition to the lack of demand for African labor from
white farms, there was no incentive to create the extractive
labor market institutions so characteristic of Apartheid
South Africa.
But other mechanisms were also in play. Sierra Leone’s
cocoa and coffee farmers did not compete with whites,
though their incomes were still expropriated via a
government monopoly, the marketing board. Sierra Leone
also suffered from indirect rule. In many parts of Africa
where the British authorities wished to use indirect rule,
they found peoples who did not have a system of
centralized authority who could be taken over. For example,

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in eastern Nigeria the Igbo peoples had no chiefs when the
British encountered them in the nineteenth century. The
British then created chiefs, the warrant chiefs. In Sierra
Leone, the British would base indirect rule on existing
indigenous institutions and systems of authority.
Nevertheless, regardless of the historical basis for the
individuals recognized as paramount chiefs in 1896,
indirect rule, and the powers that it invested in paramount
chiefs, completely changed the existing politics of Sierra
Leone. For one, it introduced a system of social
stratification—the ruling houses—where none had existed
previously. A hereditary aristocracy replaced a situation
that had been much more fluid and where chiefs had
required popular support. Instead what emerged was a
rigid system with chiefs holding office for life, beholden to
their patrons in Freetown or Britain, and far less
accountable to the people they ruled. The British were
happy to subvert the institutions in other ways, too, for
example, by replacing legitimate chiefs with people who
were more cooperative. Indeed, the Margai family, which
supplied the first two prime ministers of independent Sierra
Leone, came to power in the Lower Banta chieftaincy by
siding with the British in the Hut Tax Rebellion against the
reigning chief, Nyama. Nyama was deposed, and the
Margais became chiefs and held the position until 2010.
What is remarkable is the extent of continuity between
colonial and independent Sierra Leone. The British created
the marketing boards and used them to tax farmers.
Postcolonial governments did the same extracting at even
higher rates. The British created the system of indirect rule
through paramount chiefs. Governments that followed
independence didn’t reject this colonial institution; rather,
they used it to govern the countryside as well. The British
set up a diamond monopoly and tried to keep out African
miners. Postindependence governments did the same. It is
true that the British thought that building railways was a
good way to rule Mendeland, while Siaka Stevens thought
the opposite. The British could trust their army and knew it
could be sent to Mendeland if a rebellion arose. Stevens,
on the other hand, could not do so. As in many other African
nations, a strong army would have become a threat to
Stevens’s rule. It was for this reason that he emasculated

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the army, cutting it down and privatizing violence through
specially created paramilitary units loyal only to him, and in
the process, he accelerated the decline of the little state
authority that existed in Sierra Leone. Instead of the army,
first came the Internal Security Unit, the ISU, which Sierra
Leone’s long-suffering people knew as “I Shoot U.” Then
came the Special Security Division, the SSD, which the
people knew as “Siaka Stevens’s Dogs.” In the end, the
absence of an army supporting the regime would also be
its undoing. It was a group of only thirty soldiers, led by
Captain Valentine Strasser, that pitched the APC regime
from power on April 29, 1992.
Sierra Leone’s development, or lack thereof, could be
best understood as the outcome of the vicious circle.
British colonial authorities built extractive institutions in the
first place, and the postindependence African politicians
were only too happy to take up the baton for themselves.
The pattern was eerily similar all over sub-Saharan Africa.
There were similar hopes for postindependence Ghana,
Kenya, Zambia, and many other African countries. Yet in all
these cases, extractive institutions were re-created in a
pattern predicted by the vicious circle—only they became
more vicious as time went by. In all these countries, for
example, the British creation of marketing boards and
indirect rule were sustained.
There are natural reasons for this vicious circle.
Extractive political institutions lead to extractive economic
institutions, which enrich a few at the expense of many.
Those who benefit from extractive institutions thus have the
resources to build their (private) armies and mercenaries,
to buy their judges, and to rig their elections in order to
remain in power. They also have every interest in defending
the system. Therefore, extractive economic institutions
create the platform for extractive political institutions to
persist. Power is valuable in regimes with extractive
political institutions, because power is unchecked and
brings economic riches.
Extractive political institutions also provide no checks
against abuses of power. Whether power corrupts is
debatable, but Lord Acton was certainly right when he
argued that absolute power corrupts absolutely. We saw in
the previous chapter that even when Franklin Roosevelt

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wished to use his presidential powers in a way that he
thought would be beneficial for the society, unencumbered
by constraints imposed by the Supreme Court, the inclusive
U.S. political institutions prevented him from setting aside
the constraints on his power. Under extractive political
institutions, there is little check against the exercise of
power, however distorted and sociopathic it may become.
In 1980 Sam Bangura, then the governor of the central bank
in Sierra Leone, criticized Siaka Stevens’s policies for
being profligate. He was soon murdered and thrown from
the top floor of the central bank building onto the aptly
named Siaka Stevens Street. Extractive political
institutions thus also tend to create a vicious circle because
they provide no line of defense against those who want to
further usurp and misuse the powers of the state.
Yet another mechanism for the vicious circle is that
extractive institutions, by creating unconstrained power and
great income inequality, increase the potential stakes of the
political game. Because whoever controls the state
becomes the beneficiary of this excessive power and the
wealth that it generates, extractive institutions create
incentives for infighting in order to control power and its
benefits, a dynamic that we saw played out in Maya city-
states and in Ancient Rome. In this light, it is no surprise
that the extractive institutions that many African countries
inherited from the colonial powers sowed the seeds of
power struggles and civil wars. These struggles would be
very different conflicts from the English Civil War and the
Glorious Revolution. They would not be fought to change
political institutions, introduce constraints on the exercise of
power, or create pluralism, but to capture power and enrich
one group at the expense of the rest. In Angola, Burundi,
Chad, Côte d’Ivoire, the Democratic Republic of Congo,
Ethiopia, Liberia, Mozambique, Nigeria, Republic of
Congo Brazzaville, Rwanda, Somalia, Sudan, and Uganda,
and of course in Sierra Leone, as we will see in more detail
in the next chapter, these conflicts would turn into bloody
civil wars and would create economic ruin and unparalleled
human suffering—as well as cause state failure.