attempting to centralize power would not only have faced
stiff resistance but would have lost its existing power and
privileges. As a consequence of this lack of political
centralization and the implied absence of even the most
basic security of property rights, Somali society never
generated incentives to invest in productivity-enhancing
technologies. As the process of industrialization was under
way in other parts of the world in the nineteenth and early
twentieth centuries, Somalis were feuding and fending for
their lives, and their economic backwardness became
more ingrained.
E NDURING B ACKWARDNESS
The Industrial Revolution created a transformative critical
juncture for the whole world during the nineteenth century
and beyond: those societies that allowed and incentivized
their citizens to invest in new technologies could grow
rapidly. But many around the world failed to do so—or
explicitly chose not to do so. Nations under the grip of
extractive political and economic institutions did not
generate such incentives. Spain and Ethiopia provide
examples where the absolutist control of political
institutions and the implied extractive economic institutions
choked economic incentives long before the dawn of the
nineteenth century. The outcome was similar in other
absolutist regimes—for example, in Austria-Hungary,
Russia, the Ottoman Empire, and China, though in these
cases the rulers, because of fear of creative destruction,
not only neglected to encourage economic progress but
also took explicit steps to block the spread of industry and
the introduction of new technologies that would bring
industrialization.
Absolutism is not the only form of extractive political
institutions and was not the only factor preventing
industrialization. Inclusive political and economic
institutions necessitate some degree of political
centralization so that the state can enforce law and order,
uphold property rights, and encourage economic activity
when necessary by investing in public services. Yet even
today, many nations, such as Afghanistan, Haiti, Nepal, and
Somalia, have states that are unable to maintain the most