INSTITUTIONAL DIFFERENCES PLAY the critical role in explaining economic growth throughout the ages. But if most societies in history are based on extractive political and economic institutions, does this imply that growth never takes place? Obviously not. Extractive institutions, by their very logic must create wealth so that it can be extracted. A ruler monopolizing political power and in control of a centralized state can introduce some degree of law and order and a system of rules, and stimulate economic activity But growth under extractive institutions differs in nature from growth brought forth by inclusive institutions. Most important, it will be not sustained growth that requires technological change, but rather growth based on existing technologies. The economic trajectory of the Soviet Union provides a vivid illustration of how the authority and incentives provided by the state can spearhead rapid economic growth under extractive institutions and how this type of growth ultimately comes to an end and collapses.