The empirical portion of his book begins with an unlikely contrast. Postcolonial institutional development in Chile and Peru has proceeded along trajectories that were quite unexpected given the colonial-era foundations on which they were built. It was Chile that launched a trajectory of effective, long-run institutional development, while Peru suffered persistent, almost irremediable stagnation. But it was Peru that was the colonial center and began with substantial advantages – it was a viceroyalty in the Spanish colonial administrative system, and Lima was home to an important Audiencia (a superior court that also had some legislative functions). And it was Peru that experienced extensive colonial-era immigration, allowing Spain to establish “numerous and deep footholds” (Mahoney 2010, 67). This not only entailed a much stronger governing bureaucracy and its associated coercive apparatus but also a much higher level of basic human capital – the literate, educated individuals on which a postcolonial state would have to rely. Not only were colonial institutions well developed in Peru, they had been undergoing a process of successful administrative reforms since the 1750s, abolishing venal office and imposing meritocratic norms on governmental bureaucracies, inter alia, that Mahoney (2010, 45) characterizes as “a resounding success in Mexico City and Lima.” This legacy of human capital and powerful institutions did not, however, lead to successful subsequent state building.

Chile, by contrast, was a colonial periphery. Not only was it nearly the most geographically remote part of the Spanish Empire but it was also thinly populated by Spanish immigrants, including the arrival of very few women. This led inevitably to miscegenation, which transformed the indigenous population of the Central Valley (estimated at between 800,000 and 1,200,000 before its decimation by disease) into a large mestizo populace dominated by a very small Creole and Peninsular class (Collier and Sater 2004, 3, 8). And while its colonial institutions were formally similar to the rest of Spanish America in their initial reliance on coercive production systems and enormous encomienda grants of control over indigenous labor, the Spanish did not invest enough military resources to conquer the Mapuche Indian population south of the Bío-Bío River or even to impose basic stability in the Central Valley until after the indigenous population had been largely decimated by disease or absorbed through intermarriage.