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

partly because the regime was not directly supported by extractive
economic institutions. Differently from the Soviet Union and most

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other cases of growth under extractive institutions, South Korea
transitioned from extractive political institutions toward inclusive
political institutions in the 1980s. This successful transition was due
to a confluence of factors.
By the 1970s, economic institutions in South Korea had become
sufficiently inclusive that they reduced one of the strong rationales
for extractive political institutions—the economic elite had little to
gain from their own or the military’s dominance of politics. The
relative equality of income in South Korea also meant that the elite
had less to fear from pluralism and democracy. The key influence of
the United States, particularly given the threat from North Korea, also
meant that the strong democracy movement that challenged the
military dictatorship could not be repressed for long. Though General
Park’s assassination in 1979 was followed by another military coup,
led by Chun Doo-hwan, Chun’s chosen successor, Roh Tae-woo,
initiated a process of political reforms that led to the consolidation of
a pluralistic democracy after 1992. Of course, no transition of this
sort took place in the Soviet Union. In consequence, Soviet growth
ran out of steam, and the economy began to collapse in the 1980s and
then totally fell apart in the 1990s.
Chinese economic growth today also has several commonalities
with both the Soviet and South Korean experiences. While the early
stages of Chinese growth were spearheaded by radical market reforms
in the agricultural sector, reforms in the industrial sector have been
more muted. Even today, the state and the Communist Party play a
central role in deciding which sectors and which companies will
receive additional capital and will expand—in the process, making
and breaking fortunes. As in the Soviet Union in its heyday, China is
growing rapidly, but this is still growth under extractive institutions,
under the control of the state, with little sign of a transition to
inclusive political institutions. The fact that Chinese economic
institutions are still far from fully inclusive also suggests that a South
Korean–style transition is less likely, though of course not impossible.
It is worth noting that political centralization is key to both ways in
which growth under extractive political institutions can occur.

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Without some degree of political centralization, the planter elite in
Barbados, Cuba, Haiti, and Jamaica would not have been able to keep
law and order and defend their own assets and property. Without
significant political centralization and a firm grip on political power,
neither the South Korean military elites nor the Chinese Communist