Extractive institutions

Extractive institutions

Extractive economic institutions exclude large segments of the population from the distribution of income from their own activities. They prevent everyone, except the elite, from benefiting from participation in economic relations, who, on the contrary, are allowed to even alienate the property of those who do not belong to the elite. Examples include slavery, serfdom, and encomienda. In the context of such institutions, workers have no incentive to increase labour productivity, since all or almost all of the additional income will be withdrawn by the elite. Such economic institutions are accompanied by extractive political institutions that exclude large sections of the population from governing the country and concentrate all political power in the hands of a narrow stratum of society (for example, the nobility). Examples are absolute monarchies and various types of dictatorial and totalitarian regimes, as well as authoritarian regimes, with external elements of democracy (constitution and elections), which are so widespread in the modern world, where power is supported by power structures: the army, the police, and dependent courts. The very fact that there are elections in a country does not mean that its institutions cannot be classified as extractive: competition can be dishonest, candidates' opportunities and their access to the media are unequal, and voting is conducted with numerous violations, and in this case the elections are just a spectacle, the ending of which is known, in advance.