Why Nations Fail

F
EAR OF
 I
NDUSTRY
Without the changes in political institutions and political
power similar to those that emerged in England after 1688,
there was little chance for absolutist countries to benefit
from the innovations and new technologies of the Industrial
Revolution. In Spain, for example, the lack of secure
property rights and the widespread economic decline
meant that people simply did not have the incentive to
make the necessary investments and sacrifices. In Russia
and Austria-Hungary, it wasn’t simply the neglect and
mismanagement of the elites and the insidious economic
slide 
under 
extractive 
institutions 
that 
prevented
industrialization; instead, the rulers actively blocked any
attempt to introduce these technologies and basic
investments in infrastructure such as railroads that could
have acted as their conduits.
At the time of the Industrial Revolution, in the eighteenth
and early nineteenth centuries, the political map of Europe
was quite different from how it is today. The Holy Roman
Empire, a patchwork quilt of more than four hundred
polities, most of which would eventually coalesce into
Germany, occupied most of Central Europe. The House of
Habsburg was still a major political force, and its empire,
known as the Habsburg or Austro-Hungarian Empire,
spread over a vast area of around 250,000 square miles,
even if it no longer included Spain, after the Bourbons had
taken over the Spanish throne in 1700. In terms of
population, it was the third-largest state in Europe and
comprised one-seventh of the population of Europe. In the
late eighteenth century the Habsburg lands included, in the
west, what is today Belgium, then known as the Austrian
Netherlands. The largest part, however, was the contiguous

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block of lands based around Austria and Hungary, including
the Czech Republic and Slovakia to the north, and
Slovenia, Croatia, and large parts of Italy and Serbia to the
south. To the east it also incorporated much of what is
today Romania and Poland.
Merchants in the Habsburg domains were much less
important than in England, and serfdom prevailed in the
lands in Eastern Europe. As we saw in 
chapter 4
, Hungary
and Poland were at the heart of the Second Serfdom of
Eastern Europe. The Habsburgs, unlike the Stuarts, were
successful in sustaining strongly absolutist rule. Francis I,
who ruled as the last emperor of the Holy Roman Empire,
between 1792 and 1806, and then emperor of Austria-
Hungary until his death in 1835, was a consummate
absolutist. He did not recognize any limitations on his
power and, above all, he wished to preserve the political
status quo. His basic strategy was opposing change, any
sort of change. In 1821 he made this clear in a speech,
characteristic of Habsburg rulers, he gave to the teachers
at a school in Laibach, asserting, “I do not need savants,
but good, honest citizens. Your task is to bring young men
up to be this. He who serves me must teach what I order
him. If anyone can’t do this, or comes with new ideas, he
can go, or I will remove him.”
The empress Maria Theresa, who reigned between 1740
and 1780, frequently responded to suggestions about how
to improve or change institutions by remarking. “Leave
everything as it is.” Nevertheless, she and her son Joseph
II, who was emperor between 1780 and 1790, were
responsible for an attempt to construct a more powerful
central state and more effective administrative system. Yet
they did this in the context of a political system with no real
constraints on their actions and with few elements of
pluralism. There was no national parliament that would
exert even a modicum of control on the monarch, only a
system of regional estates and diets, which historically had
some powers with respect to taxation and military
recruitment. There were even fewer controls on what the
Austro-Hungarian Habsburgs could do than there were on
Spanish monarchs, and political power was narrowly
concentrated.
As Habsburg absolutism strengthened in the eighteenth

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century, the power of all non-monarchical institutions
weakened further. When a deputation of citizens from the
Austrian province of the Tyrol petitioned Francis for a
constitution, 
he 
responded, 
“So, 
you 
want 
a
constitution! … Now look, I don’t care for it, I will give you a
constitution but you must know that the soldiers obey me,
and I will not ask you twice if I need money … In any case I
advise you to be careful what you are going to say.” Given
this response, the Tyrolese leaders replied, “If thou thinkest
thus, it is better to have no constitution,” to which Francis
answered, “That is also my opinion.”
Francis dissolved the State Council that Maria Theresa
had used as a forum for consultation with her ministers.
From then on there would be no consultation or public
discussion of the Crown’s decisions. Francis created a
police state and ruthlessly censored anything that could be
regarded as mildly radical. His philosophy of rule was
characterized by Count Hartig, a long-standing aide, as the
“unabated maintenance of the sovereign’s authority, and a
denial of all claims on the part of the people to a