Why Nations Fail: The Origins of Power, Prosperity, and Poverty

repartimiento lasted until the 1920s; the libreta system and the full
gamut of vagrancy laws were in effect until 1945, when Guatemala
experienced its first brief flowering of democracy.
Just as before 1871, the Guatemalan elite ruled via military
strongmen. They continued to do so after the coffee boom took off.
Jorge Ubico, president between 1931 and 1944, ruled longest. Ubico
won the presidential election in 1931 unopposed, since nobody was
foolish enough to run against him. Like the Consulado, he didn’t
approve of doing things that would have induced creative destruction
and threatened both his political power and his and the elite’s profits.
He therefore opposed industry for the same reason that Francis I in
Austria-Hungary and Nicholas I in Russia did: industrial workers
would have caused trouble. In a legislation unparalleled in its
paranoid repressiveness, Ubico banned the use of words such as
obreros (workers), sindicatos (labor unions), and huelgas (strikes). You
could be jailed for using any one of them. Even though Ubico was
powerful, the elite pulled the strings. Opposition to his regime
mounted in 1944, headed by disaffected university students who
began to organize demonstrations. Popular discontent increased, and
on June 24, 311 people, many of them from the elite, signed the
Memorial de los 311, an open letter denouncing the regime. Ubico
resigned on July 1. Though he was followed by a democratic regime
in 1945, this was overthrown by a coup in 1954, leading to a
murderous civil war. Guatemala democratized again after only 1986.
The Spanish conquistadors had no compunction about setting up an
extractive political and economic system. That was why they had
come all the way to the New World. But most of the institutions they
set up were meant to be temporary. The encomienda, for example, was
a temporary grant of rights over labor. They did not have a fully
worked-out plan of how they would set up a system that would

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persist for another four hundred years. In fact, the institutions they
set up changed significantly along the way, but one thing did not: the
extractive nature of the institutions, the result of the vicious circle.
The form of extraction changed, but neither the extractive nature of
the institutions nor the identity of the elite did. In Guatemala the
encomienda, the repartimiento, and the monopolization of trade gave
way to the libreta and the land grab. But the majority of the
indigenous Maya continued to work as low-wage laborers with little
education, no rights, and no public services.
In Guatemala, as in much of Central America, in a typical pattern of
the vicious circle, extractive political institutions supported extractive
economic institutions, which in turn provided the basis for extractive
political institutions and the continuation of the power of the same
elite.