Question

What are examples of extractive institutions? What kind of consequences do extract institutions generate?

Answer 1

"Extractive" institutions as ones that permit the elite to rule over and exploit others, extracting wealth from those who are not in the elite. The higher class or the rulers exploit the lower class people and acquire their wealth and use them for their own profit.

The examples of extractive institutions may be -

• Monarchy system - Where the ruler had all the powers and they used others for their own profit by collecting a very high tax etc.
• The Slavery system - Where a lower class people who were considered slaves were forced to do very lower grade works ( like manual scavenging) and were not even paid for it.
• Zamindari System - In this institutional setup, a group of people called zamindars were very powerful and they exploited lower class people.
• Colonisation

These extractive institutions generates many consequences such as-

• These institutions decreases the productivity of people or misuses the productivity.
• In the long run, due to this misuse of the productivity the country lack behind in development.
• The exploitation of the lower class people if an inhuman work and hence it must not be carried on. Everyone must be given equal opportunity to live.
• These extractive institutions brings hatred in the people who are being exploited and hence there is a chance of revolt or social uprising in the country.