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

This chapter provides a contemporary examination of how extractive institutions continue to impede national progress. The chapter begins with an anecdote from Zimbabwe, where in January 2000 President Robert Mugabe, the authoritarian ruler since 1980, won a national lottery organized by a state-owned bank. This event exemplifies the deep-rooted extractive institutions in Zimbabwe, where the elite exploit resources for personal gain, leading to economic and social decay. Between Zimbabwe’s independence in 1980 and 2008, per capita income halved, accompanied by a complete collapse of basic public services and a soaring unemployment rate.

The roots of Zimbabwe’s and other African nations’ economic and political institutions can be traced to colonial times. In South Africa, for example, colonial powers established extractive institutions, which were then perpetuated by post-independence leaders. The chapter details the process of colonization in Southern Rhodesia (now Zimbabwe), highlighting the nation’s establishment of a dual economy and an apartheid state after gaining self-government in 1923.

After Zimbabwe gained independence in 1980, President Mugabe maintained the extractive economic institutions established by the white colonial regime, preventing the emergence of an independent African business class. This situation parallels what happened in Ghana in the 1960s.