Many studies estimate that only about 10 or at most 20 percent of aid ever reaches its target.
Many politicians around the world were spending more than they were raising in tax revenue and were then forcing their central banks to make up the difference by printing money.
Many have long believed that growth in China would bring democracy and greater pluralism. There was a real sense in 1989 that the Tiananmen Square demonstrations would lead to greater opening and perhaps even the collapse of the communist regime. But tanks were unleashed on the demonstrators, and instead of a peaceful revolution, history books now call it the Tiananmen Square Massacre. In many ways, Chinese political institutions became more extractive in the aftermath of Tiananmen; reformers such as Zhao Ziyang, who as general secretary of the Communist Party lent his support to the students in Tiananmen Square, were purged, and the party clamped down on civil liberties and press freedom with greater zeal. Zhao Ziyang was put under house arrest for more than fifteen years, and his public record was gradually erased, so that he would not be even a symbol for those who supported political change.
Today the party’s control over the media, including the Internet, is unprecedented. Much of this is achieved through self-censorship: media outlets know that they should not mention Zhao Ziyang or Liu Xiaobo, the government critic demanding greater democratization, who is still languishing in prison even after he was awarded the Nobel Peace Prize. Self-censorship is supported by an Orwellian apparatus that can monitor conversations and communications, close Web sites and newspapers, and even selectively block access to individual news stories on the Internet. All of this was on display when news about corruption charges against the son of the general secretary of the party since 2002, Hu Jintao, broke out in 2009. The party’s apparatus immediately sprang into action and was not only able to prevent Chinese media from covering the case but also managed to selectively block stories about the case on the New York Times and Financial Times Web sites.
[...] the principle of the rule of law opens the door for greater participation in the political process and greater inclusivity, as it powerfully introduces the idea that people should be equal not only before the law but also in the political system.
[...] Menem’s victory against the Supreme Court set in motion the type of slippery-slope dynamics we mentioned earlier. His next step was to rewrite the constitution to remove the term limit so he could run for president again. After being reelected, Menem moved to rewrite the constitution again, but was stopped not by Argentina political institutions but by factions within his own Perónist Party, who fought back against his personal domination.
In 1990 Argentina finally experienced a transition between democratically elected governments—one democratic government followed by another. Yet, by this time democratic governments did not behave much differently from military ones when it came to the Supreme Court. The incoming president was Carlos Saúl Menem of the Perónist Party. The sitting Supreme Court had been appointed after the transition to democracy in 1983 by the Radical Party president Raúl Alfonsín. Since this was a democratic transition, there should have been no reason for Menem to appoint his own court. But in the run-up to the election, Menem had already shown his colors. He continually, though not successfully, tried to encourage (or even intimidate) members of the court to resign. He famously offered Justice Carlos Fayt an ambassadorship. But he was rebuked, and Fayt responded by sending him a copy of his book Law and Ethics, with the note “Beware I wrote this” inscribed. Undeterred, within three months of taking office, Menem sent a law to the Chamber of Deputies proposing to expand the Court from five to nine members. One argument was the same Roosevelt used in 1937: the court was overworked. The law quickly passed the Senate and Chamber, and this allowed Menem to name four new judges. He had his majority.
[...] Perhaps Roosevelt would have decided next that obtaining legislative majorities took too much compromise and time and that he would instead rule by decree, totally undermining pluralism and the U.S. political system. Congress certainly would not have approved this, but then Roosevelt could have appealed to the nation, asserting that Congress was impeding the necessary measures to fight the Depression. He could have used the police to close Congress. Sound farfetched? This is exactly what happened in Peru and Venezuela in the 1990s. Presidents Fujimori and Chávez appealed to their popular mandate to close uncooperative congresses and subsequently rewrote their constitutions to massively strengthen the powers of the president. The fear of this slippery slope by those sharing power under pluralistic political institutions is exactly what stopped Walpole from fixing British courts in the 1720s, and it is what stopped the U.S. Congress from backing Roosevelt’s court-packing plan. Roosevelt had encountered the power of virtuous circles.
The French Revolution had replaced a rotten edifice and opened the way for inclusive institutions not only in France, but throughout much of Western Europe. But Burke’s caution was not entirely off the mark. The gradual process of British political reform, which had started in 1688 and would pick up pace three decades after Burke’s death, would be more effective because its gradual nature made it more powerful, harder to resist, and ultimately more durable.
Inclusive economic institutions led to the development of inclusive markets, inducing a more efficient allocation of resources, greater encouragement to acquire education and skills, and further innovations in technology.
The rule of law is a very strange concept when you think about it in historical perspective. Why should laws be applied equally to all? If the king and the aristocracy have political power and the rest don’t, it’s only natural that whatever is fair game for the king and the aristocracy should be banned and punishable for the rest. Indeed, the rule of law is not imaginable under absolutist political institutions. It is a creation of pluralist political institutions and of the broad coalitions that support such pluralism. It’s only when many individuals and groups have a say in decisions, and the political power to have a seat at the table, that the idea that they should all be treated fairly starts making sense. By the early eighteenth century, Britain was becoming sufficiently pluralistic, and the Whig elites would discover that, as enshrined in the notion of the rule of law, laws and institutions would constrain them, too.
But why did the Whigs and parliamentarians abide by such restraints? Why didn’t they use their control over Parliament and the state to force an uncompromising implementation of the Black Act and overturn the courts when the decisions didn’t go their way? The answer reveals much about the nature of the Glorious Revolution—why it didn’t just replace an old absolutism with a new version—the link between pluralism and the rule of law, and the dynamics of virtuous circles. As we saw in chapter 7, the Glorious Revolution was not the overthrow of one elite by another, but a revolution against absolutism by a broad coalition made up of the gentry, merchants, and manufacturers as well as groupings of Whigs and Tories. The emergence of pluralist political institutions was a consequence of this revolution. The rule of law also emerged as a by-product of this process. With many parties at the table sharing power, it was natural to have laws and constraints apply to all of them, lest one party start amassing too much power and ultimately undermine the very foundations of pluralism. Thus the notion that there were limits and restraints on rulers, the essence of the rule of law, was part of the logic of pluralism engendered by the broad coalition that made up the opposition to Stuart absolutism.
Napoleon also had a genuine desire to continue and deepen the reforms of the revolution. Most important, he codified the Roman law and the ideas of equality before the law into a legal system that became known as the Code Napoleon. Napoleon saw this code as his greatest legacy and wished to impose it in every territory he controlled.
The French revolutionary armies quickly started carrying out a radical process of reform in the lands they’d conquered, abolishing the remaining vestiges of serfdom and feudal land relations and imposing equality before the law. The clergy were stripped of their special status and power, and the guilds in urban areas were stamped out or at the very least much weakened. This happened in the Austrian Netherlands immediately after the French invasion in 1795 and in the United Provinces, where the French founded the Batavian Republic, with political institutions very similar to those in France. In Switzerland the situation was similar, and the guilds as well as feudal landlords and the Church were defeated, feudal privileges removed, and the guilds abolished and expropriated.
EIGHTEENTH-CENTURY ENGLAND—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.
In 1661 the emperor Kangxi ordered that all people living along the coast from Vietnam to Chekiang—essentially the entire southern coast, once the most commercially active part of China—should move seventeen miles inland. The coast was patrolled by troops to enforce the measure, and until 1693 there was a ban on shipping everywhere on the coast. This ban was periodically reimposed in the eighteenth century, effectively stunting the emergence of Chinese overseas trade. Though some did develop, few were willing to invest when the emperor could suddenly change his mind and ban trade, making investments in ships, equipment, and trading relations worthless or even worse.
Books spread ideas and make the population much harder to control. Some of these ideas may be valuable new ways to increase economic growth, but others may be subversive and challenge the existing political and social status quo.
[...] opposition to the printing press had the obvious consequences for literacy, education, and economic success. In 1800 probably only 2 to 3 percent of the citizens of the Ottoman Empire were literate, compared with 60 percent of adult males and 40 percent of adult females in England. In the Netherlands and Germany, literacy rates were even higher. The Ottoman lands lagged far behind the European countries with the lowest educational attainment in this period, such as Portugal, where probably only around 20 percent of adults could read and write.
As early as 1485 the Ottoman sultan Bayezid II issued an edict that Muslims were expressly forbidden from printing in Arabic. This rule was further reinforced by Sultan Selim I in 1515. It was not until 1727 that the first printing press was allowed in the Ottoman lands. Then Sultan Ahmed III issued a decree granting İbrahim Müteferrika permission to set up a press. Even this belated step was hedged with restraints. Though the decree noted “the fortunate day this Western technique will be unveiled like a bride and will not again be hidden,” Müteferrika’s printing was going to be closely monitored.
The story of Papin’s invention is another example of how, under extractive institutions, the threat of creative destruction impeded technological change. Papin developed a design for a “steam digester” in 1679, and in 1690 he extended this into a piston engine. In 1705 he used this rudimentary engine to build the world’s first steamboat. Papin was by this time a professor of mathematics at the University of Marburg, in the German state of Kassel. He decided to steam the boat down the river Fulda to the river Weser. Any boat making this trip was forced to stop at the city of Münden. At that time, river traffic on the Fulda and Weser was the monopoly of a guild of boatmen. Papin must have sensed that there might be trouble. His friend and mentor, the famous German physicist Gottfried Leibniz, wrote to the Elector of Kassel, the head of state, petitioning that Papin should be allowed to “… pass unmolested …” through Kassel. Yet Leibniz’s petition was rebuffed and he received the curt answer that “the Electoral Councillors have found serious obstacles in the way of granting the above petition, and, without giving their reasons, have directed me to inform you of their decision, and that in consequence the request is not granted by his Electoral Highness.” Undeterred, Papin decided to make the journey anyway. When his steamer arrived at Münden, the boatmen’s guild first tried to get a local judge to impound the ship, but was unsuccessful. The boatmen then set upon Papin’s boat and smashed it and the steam engine to pieces. Papin died a pauper and was buried in an unmarked grave.
The African continent would later interact in a very different capacity with Europe and Asia. East Africa became a major supplier of slaves to the Arab world, and West and Central Africa would be drawn into the world economy during the European expansion associated with the Atlantic trade as suppliers of slaves.
Feudal institutions, which relied on unfree, coerced labor (the serfs), were obviously extractive, and they formed the basis for a long period of extractive and slow growth in Europe during the Middle Ages. But they also were consequential for later developments. For instance, during the reduction of the rural population to the status of serfs, slavery disappeared from Europe. At a time when it was possible for elites to reduce the entire rural population to serfdom, it did not seem necessary to have a separate class of slaves as every previous society had had. Feudalism also created a power vacuum in which independent cities specializing in production and trade could flourish. But when the balance of power changed after the Black Death, and serfdom began to crumble in Western Europe, the stage was set for a much more pluralistic society without the presence of any slaves.
There is also direct evidence from the period of the Empire of the fear of the political consequences of creative destruction. Suetonius tells how the emperor Vespasian, who ruled between AD 69 and 79, was approached by a man who had invented a device for transporting columns to the Capitol, the citadel of Rome, at a relatively small cost. Columns were large, heavy, and very difficult to transport. Moving them to Rome from the mines where they were made involved the labor of thousands of people, at great expense to the government. Vespasian did not kill the man, but he also refused to use the innovation, declaring, “How will it be possible for me to feed the populace?” Again an inventor came to the government. Perhaps this was more natural than with the unbreakable glass, as the Roman government was most heavily involved with column mining and transportation. Again the innovation was turned down because of the threat of creative destruction, not so much because of its economic impact, but because of fear of political creative destruction. Vespasian was concerned that unless he kept the people happy and under control it would be politically destabilizing. The Roman plebeians had to be kept busy and pliant, so it was good to have jobs to give them, such as moving columns about. This complemented the bread and circuses, which were also dispensed for free to keep the population content. It is perhaps telling that both of these examples came soon after the collapse of the Republic. The Roman emperors had far more power to block change than the Roman rulers during the Republic.
A remarkable thing about new technologies in the Roman period is that their creation and spread seem to have been driven by the state. This is good news, until the government decides that it is not interested in technological development—an all-too-common occurrence due to the fear of creative destruction. The great Roman writer Pliny the Elder relates the following story. During the reign of the emperor Tiberius, a man invented unbreakable glass and went to the emperor anticipating that he would get a great reward. He demonstrated his invention, and Tiberius asked him if he had told anyone else about it. When the man replied no, Tiberius had the man dragged away and killed, “lest gold be reduced to the value of mud.” There are two interesting things about this story. First, the man went to Tiberius in the first place for a reward, rather than setting himself up in business and making a profit by selling the glass. This shows the role of the Roman government in controlling technology. Second, Tiberius was happy to destroy the innovation because of the adverse economic effects it would have had. This is the fear of the economic effects of creative destruction.
Another fascinating way to find evidence of economic growth is from the Greenland Ice Core Project. As snowflakes fall, they pick up small quantities of pollution in the atmosphere, particularly the metals lead, silver, and copper. The snow freezes and piles up on top of the snow that fell in previous years. This process has been going on for millennia, and provides an unrivaled opportunity for scientists to understand the extent of atmospheric pollution thousands of years ago. In 1990–1992 the Greenland Ice Core Project drilled down through 3,030 meters of ice covering about 250,000 years of human history. One of the major findings of this project, and others preceding it, was that there was a distinct increase in atmospheric pollutants starting around 500 BC. Atmospheric quantities of lead, silver, and copper then increased steadily, reaching a peak in the first century AD. Remarkably, this atmospheric quantity of lead is reached again only in the thirteenth century. These findings show how intense, compared with what came before and after, Roman mining was. This upsurge in mining clearly indicates economic expansion.
The most famous was the commenda, a rudimentary type of joint stock company, which formed only for the duration of a single trading mission. A commenda involved two partners, a “sedentary” one who stayed in Venice and one who traveled. The sedentary partner put capital into the venture, while the traveling partner accompanied the cargo. Typically, the sedentary partner put in the lion’s share of the capital. Young entrepreneurs who did not have wealth themselves could then get into the trading business by traveling with the merchandise. It was a key channel of upward social mobility. Any losses in the voyage were shared according to the amount of capital the partners had put in. If the voyage made money, profits were based on two types of commenda contracts. If the commenda was unilateral, then the sedentary merchant provided 100 percent of the capital and received 75 percent of the profits. If it was bilateral, the sedentary merchant provided 67 percent of the capital and received 50 percent of the profits. Studying official documents, one sees how powerful a force the commenda was in fostering upward social mobility: these documents are full of new names, people who had previously not been among the Venetian elite. In government documents of AD 960, 971, and 982, the number of new names comprise 69 percent, 81 percent, and 65 percent, respectively, of those recorded.
The Glorious Revolution was the foundation for creating a pluralistic society, and it built on and accelerated a process of political centralization. It created the world’s first set of inclusive political institutions.
As a consequence, economic institutions also started becoming more inclusive. Neither slavery nor the severe economic restrictions of the feudal medieval period, such as serfdom, existed in England at the beginning of the seventeenth century. Nevertheless, there were many restrictions on economic activities people could engage in. Both the domestic and international economy were choked by monopolies. The state engaged in arbitrary taxation and manipulated the legal system. Most land was caught in archaic forms of property rights that made it impossible to sell and risky to invest in.
This changed after the Glorious Revolution. The government adopted a set of economic institutions that provided incentives for investment, trade, and innovation. It steadfastly enforced property rights, including patents granting property rights for ideas, thereby providing a major stimulus to innovation. It protected law and order. Historically unprecedented was the application of English law to all citizens. Arbitrary taxation ceased, and monopolies were abolished almost completely. The English state aggressively promoted mercantile activities and worked to promote domestic industry, not only by removing barriers to the expansion of industrial activity but also by lending the full power of the English navy to defend mercantile interests. By rationalizing property rights, it facilitated the construction of infrastructure, particularly roads, canals, and later railways, that would prove to be crucial for industrial growth.
These foundations decisively changed incentives for people and impelled the engines of prosperity, paving the way for the Industrial Revolution. First and foremost, the Industrial Revolution depended on major technological advances exploiting the knowledge base that had accumulated in Europe during the past centuries. It was a radical break from the past, made possible by scientific inquiry and the talents of a number of unique individuals. The full force of this revolution came from the market that created profitable opportunities for technologies to be developed and applied. It was the inclusive nature of markets that allowed people to allocate their talents to the right lines of business. It also relied on education and skills, for it was the relatively high levels of education, at least by the standards of the time, that enabled the emergence of entrepreneurs with the vision to employ new technologies for their businesses and to find workers with the skills to use them.
The attempt by the English state to stop the changes of institutions and wages that came in the wake of the Black Death didn’t work. In 1381 the Peasants’ Revolt broke out, and the rebels, under the leadership of Wat Tyler, even captured most of London. Though they were ultimately defeated, and Tyler was executed, there were no more attempts to enforce the Statute of Laborers. Feudal labor services dwindled away, an inclusive labor market began to emerge in England, and wages rose.
Even though extractive institutions can generate some growth, they will usually not generate sustained economic growth, and certainly not the type of growth that is accompanied by creative destruction. When both political and economic institutions are extractive, the incentives will not be there for creative destruction and technological change. For a while the state may be able to create rapid economic growth by allocating resources and people by fiat, but this process is intrinsically limited. When the limits are hit, growth stops, as it did in the Soviet Union in the 1970s. Even when the Soviets achieved rapid economic growth, there was little technological change in most of the economy, though by pouring massive resources into the military they were able to develop military technologies and even pull ahead of the United States in the space and nuclear race for a short while. But this growth without creative destruction and without broad-based technological innovation was not sustainable and came to an abrupt end.
In addition, the arrangements that support economic growth under extractive political institutions are, by their nature, fragile—they can collapse or can be easily destroyed by the infighting that the extractive institutions themselves generate. In fact, extractive political and economic institutions create a general tendency for infighting, because they lead to the concentration of wealth and power in the hands of a narrow elite. If another group can overwhelm and outmaneuver this elite and take control of the state, they will be the ones enjoying this wealth and power. Consequently, as our discussion of the collapse of the later Roman Empire and the Maya cities will illustrate (this page and this page), fighting to control the all-powerful state is always latent, and it will periodically intensify and bring the undoing of these regimes, as it turns into civil war and sometimes into total breakdown and collapse of the state.
One implication of this is that even if a society under extractive institutions initially achieves some degree of state centralization, it will not last. In fact, the infighting to take control of extractive institutions often leads to civil wars and widespread lawlessness, enshrining a persistent absence of state centralization as in many nations in sub-Saharan Africa and some in Latin America and South Asia.
Finally, when growth comes under extractive political institutions but where economic institutions have inclusive aspects, as they did in South Korea, there is always the danger that economic institutions become more extractive and growth stops. Those controlling political power will eventually find it more beneficial to use their power to limit competition, to increase their share of the pie, or even to steal and loot from others rather than support economic progress. The distribution and ability to exercise power will ultimately undermine the very foundations of economic prosperity, unless political institutions are transformed from extractive to inclusive.
Even though extractive institutions can generate some growth, they will usually not generate sustained economic growth, and certainly not the type of growth that is accompanied by creative destruction. When both political and economic institutions are extractive, the incentives will not be there for creative destruction and technological change. For a while the state may be able to create rapid economic growth by allocating resources and people by fiat, but this process is intrinsically limited. When the limits are hit, growth stops, as it did in the Soviet Union in the 1970s. Even when the Soviets achieved rapid economic growth, there was little technological change in most of the economy, though by pouring massive resources into the military they were able to develop military technologies and even pull ahead of the United States in the space and nuclear race for a short while. But this growth without creative destruction and without broad-based technological innovation was not sustainable and came to an abrupt end.
Another example is the economic growth and industrialization of the Soviet Union from the first Five-Year Plan in 1928 until the 1970s. Political and economic institutions were highly extractive, and markets were heavily constrained. Nevertheless, the Soviet Union was able to achieve rapid economic growth because it could use the power of the state to move resources from agriculture, where they were very inefficiently used, into industry.
The success and failure of specific groups notwithstanding, one lesson is clear: powerful groups often stand against economic progress and against the engines of prosperity. Economic growth is not just a process of more and better machines, and more and better educated people, but also a transformative and destabilizing process associated with widespread creative destruction. Growth thus moves forward only if not blocked by the economic losers who anticipate that their economic privileges will be lost and by the political losers who fear that their political power will be eroded.
Nations fail when they have extractive economic institutions, supported by extractive political institutions that impede and even block economic growth.
THE CONTRAST OF South and North Korea, and of the United States and Latin America, illustrates a general principle. Inclusive economic institutions foster economic activity, productivity growth, and economic prosperity. Secure private property rights are central, since only those with such rights will be willing to invest and increase productivity. A businessman who expects his output to be stolen, expropriated, or entirely taxed away will have little incentive to work, let alone any incentive to undertake investments and innovations.
South Korea was led, and its early economic and political institutions were shaped, by the Harvard- and Princeton-educated, staunchly anticommunist Syngman Rhee, with significant support from the United States. Rhee was elected president in 1948. Forged in the midst of the Korean War and against the threat of communism spreading to the south of the 38th parallel, South Korea was no democracy. Both Rhee and his equally famous successor, General Park Chung-Hee, secured their places in history as authoritarian presidents. But both governed a market economy where private property was recognized, and after 1961, Park effectively threw the weight of the state behind rapid economic growth, channeling credit and subsidies to firms that were successful.
It was not the geography of the Middle East that made the Neolithic Revolution flourish in that part of the world, [...], and it was, again, not geography that made the Middle East poor. Instead, it was the expansion and consolidation of the Ottoman Empire, and it is the institutional legacy of this empire that keeps the Middle East poor today.
As early as the late eighteenth century, the great French political philosopher Montesquieu noted the geographic concentration of prosperity and poverty, and proposed an explanation for it. He argued that people in tropical climates tended to be lazy and to lack inquisitiveness. As a consequence, they didn’t work hard and were not innovative, and this was the reason why they were poor.
[...] most of current world inequality emerged since the late eighteenth century, following on the tails of the Industrial Revolution.
As institutions influence behavior and incentives in real life, they forge the success or failure of nations. Individual talent matters at every level of society, but even that needs an institutional framework to transform it into a positive force. Bill Gates, like other legendary figures in the information technology industry (such as Paul Allen, Steve Ballmer, Steve Jobs, Larry Page, Sergey Brin, and Jeff Bezos), had immense talent and ambition. But he ultimately responded to incentives. The schooling system in the United States enabled Gates and others like him to acquire a unique set of skills to complement their talents. The economic institutions in the United States enabled these men to start companies with ease, without facing insurmountable barriers. Those institutions also made the financing of their projects feasible. The U.S. labor markets enabled them to hire qualified personnel, and the relatively competitive market environment enabled them to expand their companies and market their products. These entrepreneurs were confident from the beginning that their dream projects could be implemented: they trusted the institutions and the rule of law that these generated and they did not worry about the security of their property rights. Finally, the political institutions ensured stability and continuity. For one thing, they made sure that there was no risk of a dictator taking power and changing the rules of the game, expropriating their wealth, imprisoning them, or threatening their lives and livelihoods. They also made sure that no particular interest in society could warp the government in an economically disastrous direction, because political power was both limited and distributed sufficiently broadly that a set of economic institutions that created the incentives for prosperity could emerge.
When the elite invested, the economy would grow a little, but such economic growth was always going to be disappointing.
The real way to make money from a patent was to start your own business. But to start a business, you need capital, and you need banks to lend the capital to you.
Inventors in the United States were once again fortunate. During the nineteenth century there was a rapid expansion of financial intermediation and banking that was a crucial facilitator of the rapid growth and industrialization that the economy experienced. While in 1818 there were 338 banks in operation in the United States, with total assets of $160 million, by 1914 there were 27,864 banks, with total assets of $27.3 billion. Potential inventors in the United States had ready access to capital to start their businesses. Moreover, the intense competition among banks and financial institutions in the United States meant that this capital was available at fairly low interest rates.
Between 1820 and 1845, only 19 percent of patentees in the United States had parents who were professionals or were from recognizable major landowning families. During the same period, 40 percent of those who took out patents had only primary schooling or less, just like Edison.
By the 1720s, all the thirteen colonies of what was to become the United States had similar structures of government. In all cases there was a governor, and an assembly based on a franchise of male property holders. They were not democracies; women, slaves, and the propertyless could not vote. But political rights were very broad compared with contemporary societies elsewhere. It was these assemblies and their leaders that coalesced to form the First Continental Congress in 1774, the prelude to the independence of the United States. The assemblies believed they had the right to determine both their own membership and the right to taxation. This, as we know, created problems for the English colonial government.
Since it was possible to coerce neither the locals nor the settlers, the only alternative was to give the settlers incentives. In 1618 the company began the “headright system,” which gave each male settler fifty acres of land and fifty more acres for each member of his family and for all servants that a family could bring to Virginia. Settlers were given their houses and freed from their contracts, and in 1619 a General Assembly was introduced that effectively gave all adult men a say in the laws and institutions governing the colony. It was the start of democracy in the United States.
Countries such as Great Britain and the United States became rich because their citizens overthrew the elites who controlled power and created a society where political rights were much more broadly distributed, where the government was accountable and responsive to citizens, and where the great mass of people could take advantage of economic opportunities.
The protestors in Tahrir Square spoke with one voice about the corruption of the government, its inability to deliver public services, and the lack of equality of opportunity in their country.