Why Nations Fail

10.
THE DIFFUSION OF PROSPERITY
H
ONOR
 A
MONG
 T
HIEVES
E
IGHTEENTH-CENTURY
E
NGLAND
—or more appropriately,
Great Britain after the 1707 union of England, Wales, and
Scotland—had a simple solution for dealing with criminals:
out of sight, out of mind, or at least out of trouble. They
transported many to penal colonies in the empire. Before
the War of Independence, the convicted criminals, convicts,
were primarily sent to the American colonies. After 1783
the independent United States of America was no longer
so welcoming to British convicts, and the authorities in
Britain had to find another home for them. They first thought
about West Africa. But the climate, with endemic diseases
such as malaria and yellow fever, against which Europeans
had no immunity, was so deadly that the authorities
decided it was unacceptable to send even convicts to the
“white man’s graveyard.” Their next option was Australia. Its
eastern seaboard had been explored by the great seafarer
Captain James Cook. On April 29, 1770, Cook landed in a
wonderful inlet, which he called Botany Bay in honor of the
rich species found there by the naturalists traveling with
him. This seemed like an ideal location to British
government officials. The climate was temperate, and the
place was as far out of sight and mind as could be
imagined.
A fleet of eleven ships packed with convicts was on its
way to Botany Bay in January 1788 under the command of
Captain Arthur Phillip. On January 26, now celebrated as
Australia Day, they set up camp in Sydney Cove, the heart
of the modern city of Sydney. They called the colony New
South Wales. On board one of the ships, the 
Alexander
,
captained by Duncan Sinclair, were a married couple of
convicts, Henry and Susannah Cable. Susannah had been
found guilty of stealing and was initially sentenced to death.

---

This sentence was later commuted to fourteen years and
transportation to the American colonies. That plan fell
through with the independence of the United States. In the
meantime, in Norwich Castle Jail, Susannah met and fell in
love with Henry, a fellow convict. In 1787 she was picked to
be transported to the new convict colony in Australia with
the first fleet heading there. But Henry was not. By this time
Susannah and Henry had a young son, also called Henry.
This decision meant the family was to be separated.
Susannah was moved to a prison boat moored on the
Thames, but the word got out about this wrenching event
and reached the ears of a philanthropist, Lady Cadogan.
Lady Cadogan organized a successful campaign to reunite
the Cables. Now they were both to be transported with
young Henry to Australia. Lady Cadogan also raised £20 to
purchase goods for them, which they would receive in
Australia. They sailed on the 
Alexander
, but when they
arrived in Botany Bay, the parcel of goods had vanished, or
at least that is what Captain Sinclair claimed.
What could the Cables do? Not much, according to
English or British law. Even though in 1787, Britain had
inclusive 
political 
and 
economic 
institutions, 
this
inclusiveness did not extend to convicts, who had
practically no rights. They could not own property. They
could certainly not sue anyone in court. In fact, they could
not even give evidence in court. Sinclair knew this and
probably stole the parcel. Though he would never admit it,
he did boast that he could not be sued by the Cables. He
was right according to British law. And in Britain the whole
affair would have ended there. But not in Australia. A writ
was issued to David Collins, the judge advocate there, as
follows:
Whereas Henry Cable and his wife, new
settlers of this place, had before they left
England a certain parcel shipped on board
the Alexander transport Duncan Sinclair
Master, consisting of cloaths and several
other articles suitable for their present
situation, which were collected and bought at
the expence of many charitable disposed
persons for the use of the said Henry Cable,

---

his wife and child. Several applications has
been made for the express purpose of
obtaining the said parcel from the Master of
the Alexander now lying at this port, and that
without effect (save and except) a small part
of the said parcel containing a few books, the
residue and remainder, which is of a more
considerable value still remains on board the
said ship Alexander, the Master of which,
seems to be very neglectfull in not causing
the same to be delivered, to its respective
owners as aforesaid.
Henry and Susannah, since they were both illiterate,
could not sign the writ and just put their “crosses” at the
bottom. The words “new settlers of this place” were later
crossed out, but were highly significant. Someone
anticipated that if Henry Cable and his wife were described
as convicts, the case would have no hope of proceeding.
Someone had come up instead with the idea of calling
them new settlers. This was probably a bit too much for
Judge Collins to take, and most likely he was the one who
had these words struck out. But the writ worked. Collins did
not throw out the case, and convened the court, with a jury
entirely made up of soldiers. Sinclair was called before the
court. Though Collins was less than enthusiastic about the
case, and the jury was composed of the people sent to
Australia to guard convicts such as the Cables, the Cables
won. Sinclair contested the whole affair on the grounds that
the Cables were criminals. But the verdict stood, and he
had to pay fifteen pounds.
To reach this verdict Judge Collins didn’t apply British
law; he ignored it. This was the first civil case adjudicated
in Australia. The first criminal case would have appeared
equally bizarre to those in Britain. A convict was found guilty
of stealing another convict’s bread, which was worth two
pence. At the time, such a case would not have come to
court, since convicts were not allowed to own anything.
Australia was not Britain, and its law would not be just
British. And Australia would soon diverge from Britain in
criminal and civil law as well as in a host of economic and
political institutions.

---

The penal colony of New South Wales initially consisted
of the convicts and their guards, mostly soldiers. There
were few “free settlers” in Australia until the 1820s, and the
transportation of convicts, though it stopped in New South
Wales in 1840, continued until 1868 in Western Australia.
Convicts had to perform “compulsory work,” essentially just
another name for forced labor, and the guards intended to
make money out of it. Initially the convicts had no pay. They
were given only food in return for the labor they performed.
The guards kept what they produced. But this system, like
the ones with which the Virginia Company experimented in
Jamestown, did not work very well, because convicts did
not have the incentives to work hard or do good work. They
were lashed or banished to Norfolk Island, just thirteen
square miles of territory situated more than one thousand
miles east of Australia in the Pacific Ocean. But since
neither banishing nor lashing worked, the alternative was to
give them incentives. This was not a natural idea to the
soldiers and guards. Convicts were convicts, and they were
not supposed to sell their labor or own property. But in
Australia there was nobody else to do the work. There were
of course Aboriginals, possibly as many as one million at
the time of the founding of New South Wales. But they were
spread out over a vast continent, and their density in New
South Wales was insufficient for the creation of an
economy based on their exploitation. There was no Latin
American option in Australia. The guards thus embarked
on a path that would ultimately lead to institutions that were
even more inclusive than those back in Britain. Convicts
were given a set of tasks to do, and if they had extra time,
they could work for themselves and sell what they
produced.
The guards also benefited from the convicts’ new
economic freedoms. Production increased, and the guards
set up monopolies to sell goods to the convicts. The most
lucrative of these was for rum. New South Wales at this
time, just like other British colonies, was run by a governor,
appointed by the British government. In 1806 Britain
appointed William Bligh, the man who seventeen years
previously, in 1789, had been captain of the H.M.S.