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

particular area and of the elite families who signed treaties with the
British in the late nineteenth century. Chiefs were elected, but not
democratically. A body called the Tribal Authority, whose members
were lesser village chiefs or were appointed by paramount chiefs,
village chiefs, or the British authorities, decided who would become
the paramount chief. One might have imagined that this colonial
institution would also have been abolished or at least reformed after
independence. But just like the marketing board, it was not, and
continued unchanged. Today paramount chiefs are still in charge of
collecting taxes. It is no longer a hut tax, but its close descendant, a
poll tax. In 2005 the Tribal Authority in Sandor elected a new
paramount chief. Only candidates from the Fasuluku ruling house,
which is the only ruling house, could stand. The victor was Sheku
Fasuluku, King Suluku’s great-great-grandson.
The behavior of the marketing boards and the traditional systems
of land ownership go a long way to explain why agricultural
productivity is so low in Sierra Leone and much of sub-Saharan
Africa. The political scientist Robert Bates set out in the 1980s to
understand why agriculture was so unproductive in Africa even
though according to textbook economics this ought to have been the
most dynamic economic sector. He realized that this had nothing to
do with geography or the sorts of factors discussed in 
chapter 2
that
have been claimed to make agricultural productivity intrinsically low.
Rather, it was simply because the pricing policies of the marketing
boards removed any incentives for the farmers to invest, use
fertilizers, or preserve the soil.
The reason that the policies of the marketing boards were so
unfavorable to rural interests was that these interests had no political
power. These pricing policies interacted with other fundamental
factors making tenure insecure, further undermining investment
incentives. In Sierra Leone, paramount chiefs not only provide law
and order and judicial services, and raise taxes, but they are also the
“custodians of the land.” Though families, clans, and dynasties have
user rights and traditional rights to land; at the end of the day chiefs

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have the last say on who farms where. Your property rights to land
are only secure if you are connected to the chief, perhaps from the
same ruling family. Land cannot be bought or sold or used as
collateral for a loan, and if you are born outside a chieftaincy, you
cannot plant any perennial crop such as coffee, cocoa, or palm for
fear that this will allow you to establish “de facto” property rights.
The contrast between the extractive institutions developed by the
British in Sierra Leone and the inclusive institutions that developed in
other colonies, such as Australia, is illustrated by the way mineral
resources were managed. Diamonds were discovered in Kono in
eastern Sierra Leone in January 1930. The diamonds were alluvial,
that is, not in deep mines. So the primary method of mining them was
by panning in rivers. Some social scientists call these “democratic
diamonds,” because they allow many people to become involved in
mining, creating a potentially inclusive opportunity. Not so in Sierra
Leone. Happily ignoring the intrinsically democratic nature of
panning for diamonds, the British government set up a monopoly for
the entire protectorate, called it the Sierra Leone Selection Trust, and
granted it to De Beers, the giant South African diamond mining
company. In 1936 De Beers was also given the right to create the
Diamond Protection Force, a private army that would become larger
than that of the colonial government in Sierra Leone. Even so, the
widespread availability of the alluvial diamonds made the situation
difficult to police. By the 1950s, the Diamond Protection Force was
overwhelmed by thousands of illegal diamond miners, a massive
source of conflict and chaos. In 1955 the British government opened
up some of the diamond fields to licensed diggers outside the Sierra
Leone Selection Trust, though the company still kept the richest areas
in Yengema and Koidu and Tongo Fields. Things only got worse after
independence. In 1970 Siaka Stevens effectively nationalized the
Sierra Leone Selection Trust, creating the National Diamond Mining
Company (Sierra Leone) Limited, in which the government,
effectively meaning Stevens, had a 51 percent stake. This was the
opening phase of Stevens’s plan to take over diamond mining in the
country.

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In nineteenth-century Australia it was gold, discovered in 1851 in
New South Wales and the newly created state of Victoria, not
diamonds, that attracted everyone’s attention. Like diamonds in
Sierra Leone, the gold was alluvial, and a decision had to be made
about how to exploit it. Some, such as James Macarthur, son of John
Macarthur, the prominent leader of the Squatters we discussed earlier
(
this page
–
this page
), proposed that fences be placed around the
mining areas and the monopoly rights auctioned off. They wanted an
Australian version of the Sierra Leone Selection Trust. Yet many in
Australia wanted free access to the gold mining areas. The inclusive
model won, and instead of setting up a monopoly, Australian
authorities allowed anyone who paid an annual mining license fee to
search and dig for gold. Soon the diggers, as these adventurers came
to be known, were a powerful force in Australian politics, particularly
in Victoria. They played an important role in pushing forward the
agenda of universal suffrage and the secret ballot.
We have already seen two pernicious effects of European expansion
and colonial rule in Africa: the introduction of the transatlantic slave
trade, which encouraged the development of African political and
economic institutions in an extractive direction, and the use of
colonial legislation and institutions to eliminate the development of
African commercial agriculture that might have competed with
Europeans. Slavery was certainly a force in Sierra Leone. At the time
of colonization there was no strong centralized state in the interior,
just many small, mutually antagonistic kingdoms continually raiding
one another and capturing one another’s men and women. Slavery
was endemic, with possibly 50 percent of the population working as
slaves. The disease environment meant that large-scale white
settlement was not possible in Sierra Leone, as it was in South Africa.
Hence there were no whites competing with the Africans. Moreover,
the lack of a mining economy on the scale of Johannesburg meant
that, in addition to the lack of demand for African labor from white
farms, there was no incentive to create the extractive labor market
institutions so characteristic of Apartheid South Africa.
But other mechanisms were also in play. Sierra Leone’s cocoa and

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coffee farmers did not compete with whites, though their incomes
were still expropriated via a government monopoly, the marketing
board. Sierra Leone also suffered from indirect rule. In many parts of
Africa where the British authorities wished to use indirect rule, they
found peoples who did not have a system of centralized authority
who could be taken over. For example, in eastern Nigeria the Igbo
peoples had no chiefs when the British encountered them in the
nineteenth century. The British then created chiefs, the warrant
chiefs. In Sierra Leone, the British would base indirect rule on existing
indigenous institutions and systems of authority.
Nevertheless, regardless of the historical basis for the individuals
recognized as paramount chiefs in 1896, indirect rule, and the powers
that it invested in paramount chiefs, completely changed the existing
politics of Sierra Leone. For one, it introduced a system of social
stratification—the ruling houses—where none had existed previously.
A hereditary aristocracy replaced a situation that had been much
more fluid and where chiefs had required popular support. Instead
what emerged was a rigid system with chiefs holding office for life,
beholden to their patrons in Freetown or Britain, and far less
accountable to the people they ruled. The British were happy to
subvert the institutions in other ways, too, for example, by replacing
legitimate chiefs with people who were more cooperative. Indeed, the
Margai family, which supplied the first two prime ministers of
independent Sierra Leone, came to power in the Lower Banta
chieftaincy by siding with the British in the Hut Tax Rebellion against
the reigning chief, Nyama. Nyama was deposed, and the Margais
became chiefs and held the position until 2010.
What is remarkable is the extent of continuity between colonial and
independent Sierra Leone. The British created the marketing boards
and used them to tax farmers. Postcolonial governments did the same
extracting at even higher rates. The British created the system of
indirect rule through paramount chiefs. Governments that followed
independence didn’t reject this colonial institution; rather, they used
it to govern the countryside as well. The British set up a diamond
monopoly and tried to keep out African miners. Postindependence

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governments did the same. It is true that the British thought that
building railways was a good way to rule Mendeland, while Siaka
Stevens thought the opposite. The British could trust their army and
knew it could be sent to Mendeland if a rebellion arose. Stevens, on
the other hand, could not do so. As in many other African nations, a
strong army would have become a threat to Stevens’s rule. It was for
this reason that he emasculated the army, cutting it down and
privatizing violence through specially created paramilitary units loyal
only to him, and in the process, he accelerated the decline of the little
state authority that existed in Sierra Leone. Instead of the army, first
came the Internal Security Unit, the ISU, which Sierra Leone’s long-
suffering people knew as “I Shoot U.” Then came the Special Security
Division, the SSD, which the people knew as “Siaka Stevens’s Dogs.”
In the end, the absence of an army supporting the regime would also
be its undoing. It was a group of only thirty soldiers, led by Captain
Valentine Strasser, that pitched the APC regime from power on April
29, 1992.
Sierra Leone’s development, or lack thereof, could be best
understood as the outcome of the vicious circle. British colonial
authorities built extractive institutions in the first place, and the
postindependence African politicians were only too happy to take up
the baton for themselves. The pattern was eerily similar all over sub-
Saharan Africa. There were similar hopes for postindependence
Ghana, Kenya, Zambia, and many other African countries. Yet in all
these cases, extractive institutions were re-created in a pattern
predicted by the vicious circle—only they became more vicious as
time went by. In all these countries, for example, the British creation
of marketing boards and indirect rule were sustained.
There are natural reasons for this vicious circle. Extractive political
institutions lead to extractive economic institutions, which enrich a
few at the expense of many. Those who benefit from extractive
institutions thus have the resources to build their (private) armies and
mercenaries, to buy their judges, and to rig their elections in order to
remain in power. They also have every interest in defending the
system. Therefore, extractive economic institutions create the

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platform for extractive political institutions to persist. Power is
valuable in regimes with extractive political institutions, because
power is unchecked and brings economic riches.
Extractive political institutions also provide no checks against
abuses of power. Whether power corrupts is debatable, but Lord
Acton was certainly right when he argued that absolute power
corrupts absolutely. We saw in the previous chapter that even when
Franklin Roosevelt wished to use his presidential powers in a way
that he thought would be beneficial for the society, unencumbered by
constraints imposed by the Supreme Court, the inclusive U.S. political
institutions prevented him from setting aside the constraints on his
power. Under extractive political institutions, there is little check
against the exercise of power, however distorted and sociopathic it
may become. In 1980 Sam Bangura, then the governor of the central
bank in Sierra Leone, criticized Siaka Stevens’s policies for being
profligate. He was soon murdered and thrown from the top floor of
the central bank building onto the aptly named Siaka Stevens Street.
Extractive political institutions thus also tend to create a vicious circle
because they provide no line of defense against those who want to
further usurp and misuse the powers of the state.
Yet another mechanism for the vicious circle is that extractive
institutions, by creating unconstrained power and great income
inequality, increase the potential stakes of the political game. Because
whoever controls the state becomes the beneficiary of this excessive
power and the wealth that it generates, extractive institutions create
incentives for infighting in order to control power and its benefits, a
dynamic that we saw played out in Maya city-states and in Ancient
Rome. In this light, it is no surprise that the extractive institutions
that many African countries inherited from the colonial powers sowed
the seeds of power struggles and civil wars. These struggles would be
very different conflicts from the English Civil War and the Glorious
Revolution. They would not be fought to change political institutions,
introduce constraints on the exercise of power, or create pluralism,
but to capture power and enrich one group at the expense of the rest.
In Angola, Burundi, Chad, Côte d’Ivoire, the Democratic Republic of

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Congo, Ethiopia, Liberia, Mozambique, Nigeria, Republic of Congo
Brazzaville, Rwanda, Somalia, Sudan, and Uganda, and of course in
Sierra Leone, as we will see in more detail in the next chapter, these
conflicts would turn into bloody civil wars and would create
economic ruin and unparalleled human suffering—as well as cause
state failure.