What Took You So Long? looks at the cargo system and its likely consequences for economic development:
As is often the case in rural Latin America, there is strong social pressure on the most economically successful villagers to take a turn at the helm. During his term, the leader is expected to basically burn up his personal fortune to pay for public services. If he persistently refuses, he loses a lot of respect… and maybe more. (Insert thinly veiled threats here). This set-up is known as the cargo system.
Despite the low level of formal taxation, the effective marginal tax rate in rural Latin America is probably above Swedish levels — maybe 80%:
If Schoeck’s wide-ranging observations are correct, virtually the whole primitive world has something akin to the cargo system. If one member of a primitive tribe starts to be more economically successful than others, relatives, friends, and everyone else usually starts demanding hand-outs. As in the cargo system, this basically leaves two choices: either surrender most of your surplus, or become a hated pariah. And you know what happens to hated pariahs during a hunt! The upshot is that informal social pressure effectively gives primitive societies very high marginal tax rates — and very bad incentives.I have a strong suspicion that these incentives of village life are a big part of the explanation for why it took so long for economic growth to take off. For hundreds of thousands of years, human beings were stuck in societies with informal norms that choked off creativity and entrepreneurship. No wonder the miracle of modernity took so long. For economic growth to really take off, the individual needed a relatively anonymous society where he could turn his back on his neighbors without worrying if an envious neighbor would sink a dagger into it.