Botswana wasn’t always an enriched country. At independence, Botswana was one of the poorest countries in the world and was surrounded by white regimes. Over a total of forty-five years, Botswana would rise above and become a flourishing county. This occurred because Botswana developed inclusive economic and political institutions after independence. Botswana was able to seize a critical juncture, postcolonial independence, and set up inclusive institutions. Botswana leaders exhibited inclusiveness which perpetuated its success as a nation. The reason Botswana was able to turn around their economy and begin perpetuating success is because they reacted positively to their critical juncture. Their critical juncture, in this case, was the end of colonial rule. When faced with the opportunity to change their structure, Botswana created open markets, the right to vote, and enforced property rights. Botswana was fortunate to have leaders such as Seretse Khama and Quett Masire, who worked to enrich their nation and not themselves.
Egypt, Sierra Leone, and Zimbabwe were less fortunate than Botswana. These nations adopted extractive institutions which lead to their demise. The political systems of these nations fail to restrain the elites from enriching themselves at the expense of many. These leaders were just a symptom of the exclusive political and economic institutions, but each did there share in impoverishing its people.
In Egypt, Hosni Mubarak led the country into a destructive cycle after the removal of the monarchy. His policies made it where the majority of the population had little economic opportunities. In Sierra Leone, its leader Stevens intensified extractive institutions by introducing a system of social stratification, centralized power, and restricted commerce. When Stevens resigned, he appointed Joseph Momoh to replace him which led to poorer conditions in Sierra Leone. Under Joseph Momoh rule, roads became unfit, schools disintegrated, and broadcasting stopped completely when the radio tower fail and never got replaced. Zimbabwe’s leader, Robert Mugabe, rigged the lottery so that he would win. The fact Mugabe could even win the lottery if he so desired showed how much control he had in the country of Zimbabwe.
The nations of Egypt, Zimbabwe, and Sierra Leone failed as nation states because of the result of the structure of their institution. Unlike successful nations who build their structure on the foundation of an inclusive institution, these three nations built their structure on the foundation of exclusiveness. Unlike Botswana, Egypt, Zimbabwe, and Sierra Leone responded negatively to their critical juncture leading them into a vicious cycle. These nations entered a vicious cycle which led to their failure.
Extractive institutions keep poor countries poor and prevent them from embarking on a path to economic growth. The extractive political institutions support these economic institutions by cementing the power of those who benefit from the extraction. Politicians extract resources or any type of independent economic activity that threatens them because they fear creative destruction. These factors work together to pave a way for complete state failure which destroys law and order, and destroys basic incentives.
According to Daron Acemoglu and James Robinson, nations fail because their extractive economic institutions do not create the incentives needed for people to save, invest, and innovate. Even though extractive institutions can generate some growth, they will usually not generate sustained economic growth, and certainly not the type of growth is accompanied by creative destruction. As Acemoglu and Robinson would gather, nations fail because they didn’t respond well to their critical junctures and as a result are locked into their vicious circle of exclusiveness.