Why Nations Fail

C
ONSEQUENCES OF
 E
ARLY
 G
ROWTH
The long period between the Neolithic Revolution, which
started in 9500 
BC
, and the British Industrial Revolution of
the late eighteenth century is littered with spurts of
economic growth. These spurts were triggered by
institutional innovations that ultimately faltered. In Ancient
Rome the institutions of the Republic, which created some
degree of economic vitality and allowed for the construction
of a massive empire, unraveled after the coup of Julius
Caesar and the construction of the empire under Augustus.
It took centuries for the Roman Empire finally to vanish, and
the decline was drawn out; but once the relatively inclusive
republican institutions gave way to the more extractive
institutions of the empire, economic regress became all but
inevitable.
The Venetian dynamics were similar. The economic
prosperity of Venice was forged by institutions that had
important inclusive elements, but these were undermined
when the existing elite closed the system to new entrants

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and even banned the economic institutions that had
created the prosperity of the republic.
However notable the experience of Rome, it was not
Rome’s inheritance that led directly to the rise of inclusive
institutions in England and to the British Industrial
Revolution. Historical factors shape how institutions
develop, but this is not a simple, predetermined, cumulative
process. Rome and Venice illustrate how early steps
toward inclusivity were reversed. The economic and
institutional landscape that Rome created throughout
Europe and the Middle East did not inexorably lead to the
more firmly rooted inclusive institutions of later centuries. In
fact, these would emerge first and most strongly in England,
where the Roman hold was weakest and where it
disappeared most decisively, almost without a trace, during
the fifth century 
AD
. Instead, as we discussed in 
chapter 4
,
history plays a major role through institutional drift that
creates institutional differences, albeit sometimes small,
which then get amplified when they interact with critical
junctures. It is because these differences are often small
that they can be reversed easily and are not necessarily the
consequence of a simple cumulative process.
Of course, Rome had long-lasting effects on Europe.
Roman law and institutions influenced the laws and
institutions that the kingdoms of the barbarians set up after
the collapse of the Western Roman Empire. It was also
Rome’s fall that created the decentralized political
landscape that developed into the feudal order. The
disappearance of slavery and the emergence of
independent cities were long, drawn out (and, of course,
historically contingent) by-products of this process. These
would become particularly consequential when the Black
Death shook feudal society deeply. Out of the ashes of the
Black Death emerged stronger towns and cities, and a
peasantry no longer tied to the land and newly free of feudal
obligations. It was precisely these critical junctures
unleashed by the fall of the Roman Empire that led to a
strong institutional drift affecting all of Europe in a way that
has no parallel in sub-Saharan Africa, Asia, or the
Americas.
By the sixteenth century, Europe was institutionally very
distinct from sub-Saharan Africa and the Americas. Though

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not much richer than the most spectacular Asian
civilizations in India or China, Europe differed from these
polities in some key ways. For example, it had developed
representative institutions of a sort unseen there. These
were to play a critical role in the development of inclusive
institutions. As we will see in the next two chapters, small
institutional differences would be the ones that would really
matter within Europe; and these favored England, because
it was there that the feudal order had made way most
comprehensively for commercially minded farmers and
independent urban centers where merchants and
industrialists could flourish. These groups were already
demanding more secure property rights, different economic
institutions, and political voice from their monarchs. This
whole process would come to a head in the seventeenth
century.

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