Jean-Paul Faguet

Now, for context, this phone call happens in about 2016, early 2017. No, 2016.

And this is a time when people like Nathan Nunn, who was then at Harvard, and Leonard Wanchikun at Princeton, and a bunch of other people are putting out a lot of papers, really innovative, empirically sophisticated papers that show the horrible effects of slavery, not just then in those places where slavery happened, but today in those places that had suffered slavery over the past two or three hundred years.

So the things like... in places where there was severe slave trafficking on the western coast of Africa, today people trust each other less. And they can link that empirically to the fact that you had marauding slave parties and different ethnic groups that were pitched against one another by the English and Portuguese and others for the sake of trading slaves.

And that has impacts today on people's inter-group trust, like between different ethnicities in Africa. let alone things that are easier to understand, like education and health outcomes are worse today in places that suffered a lot of slavery. So the encomienda is not slavery. It's very broad similarities. It's also forced labor.

But when you look at the specifics, it's quite different from slavery, but equally nasty, actually arguably worse than slavery in some ways. How could it be having positive effects on development outcomes today? And it's very strong effects, not just economic development as in GDP per capita or productivity or wages, but also health, education, infant mortality, literacy.

Also institutions, like local institutions and places that did have encomienda are stronger and more capable today in Colombia than comparable places that had no encomienda. So how can this be true? And so the story of this paper is that we spent the past seven years trying to break this down, like throwing everything we can trying to make the result go away.

And it's there regardless of what we do. And so we think it's a really strong empirical result.

It is complicated. Yeah, that's a fantastic. So, you know, part of the next frontier of research is to make those sorts of comparisons. But we're not there yet. And it would be methodologically complicated. But I mean, but hugely interesting as you lay out.

So our answer, and it took us years to, you know, we had an intuition about it, but it took us years to prove it, to really show it econometrically, is that, and I want to be really clear about this, the encomienda, so let me say quickly how the encomienda worked, because it's important to understand this.

So encomienda comes from the Spanish word encomendar, which is to recommend or to put in the care of. And so the deal with the encomienda is that you had a Spanish Lord, a conquistador, who just finished conquering a bunch of indigenous people.

And then he received a license from the empire to extract labor, to force them to give him labor on his farm or in the mines or in his household, like to cook his food and clean his house, work his fields. And in exchange for that, the Lord taught them the one true Catholic and apostolic faith, which meant that they had a chance of going to heaven.

And this was seen as, you know, an exchange, right? I think I don't need to say anything more about that exchange. So this is what the word encomienda means. So the way in which the encomienda worked was that the Spanish Lord taught the indigenous people Catholicism and therefore gave them a chance to go to heaven. And they, in exchange, had to work for him.

We're adamant in the paper that the encomienda itself, this labour extraction institution, is not what led 500 years ago, is not what led to better development outcomes today, but rather There is a chain, which is, I think, a nice, neat, logical chain that makes a lot of sense.

The presence of encomienda gave these lords a very strong incentive to set up local institutions to protect their property rights. One of which, one of the key ones of which was the encomienda. So, you know, a lord arrives, they conquer the indigenous people. He has a thousand indigenous people working for him.

Over the following 100 years, who's to say that somebody else isn't going to come and grab them from him or his children, right? He wants to maintain this. He wants his kids to inherit it, so on and so forth, along with the grand estate and the house and all of the goods and wealth that these indigenous people working for him have. have permitted him to accumulate.

So the presence of encomienda itself doesn't create great development outcomes 500 years later. It generates strong incentives to invest in local institutions. And then those local institutions, once they get going,

in a context of an empire that was very distant from Spain, where the imperial government in Bogota, in Lima, in Mexico was chronically weak forever, for the entire 300 years that the Spanish were in South America. Then having a strong local institution really matters in terms of dispute resolution, protecting property rights of these Spanish lords.

And then later on, they start doing other things almost immediately when they're set up. And this is very clear in the historical records. So one very SFI aspect of this paper is that it's multidisciplinary and it has lots of different kinds of evidence, including deep history from observers at the time in 1530 and 1560. And we're just quoting them alongside the econometrics.

Well, yeah. So going back to medieval Spain, if you actually believe that – and I think some of them probably did. Some of the Spanish probably did. But I'm sure many of them were cynical. But then – exactly. These guys are going to hell. At least we're going to save them from that.

Exactly. So these institutions, another parenthesis, that when we talk in political economy or public economics about the state, the state in the sense that we know it today really only comes about in the 20th century in most of the world. It has its origins in the 19th century. in Europe and North America. But in the rest of the world, the state is doing almost nothing, like the national state.