In Why Nations Fail, Daron Acemoglu provides a compelling argument for the role that institutions played in the development of North and South America. I highly recommend the book as it is relatively easy to read and covers this very subject.

The default system that was used to colonize the New World was subjugation and extractive institutions. The Spanish pioneered the system in South America. Daron believes that they colonized South America first because the indigenous populations valued gold and silver and had already mined it for their own purposes, creating an opportunity for the Spanish to pillage. While North America also had these metals, the indigenous populations there did not value them as much as they did victuals so it wasn't as apparent to the conquistadors the value of North America. South America was also more populated because of well developed native empires, creating a large labor force to help them mine these metals, and a large population to pillage. Through war they dominated the native empires and created slave systems of labor.

When the British arrived on the scene almost a century after the Spanish, they were elbowed out of South America because of the presence of the Spanish, Portuguese, and the Dutch. Naturally they looked towards the unconquered North American lands. In attempting to replicate the Spanish system that worked in South America, they encountered some difficulties. The native tribes, who perhaps had by now heard of the atrocities committed by the conquerors in South America, were more resistant to subjugation. Vastly outnumbered, the settlers quickly encountered hardships including the cessation of trade by native tribes that rejected domination. The financiers of these trips then tried to subjugate the settlers, likewise yielding poor results in productivity. After so many years of failure, they turned towards incentive systems that had already been developed in the merchant classes in England. This worked. 50 acres for every member of the household, and the colonies started to flourish. This would not be the last attempt to try to create the extractive institutions that flourished in South America, but each time they ran into the same resistance by colonists who became more and more emboldened to resist attempts of one group to subvert pluralistic economic systems. Democratic institutions that were inclusive continued to develop in North America since that time and up until today.

In South America, extractive institutions continued to develop even up until the time of independence. Daron notes that extractive institutions have a tendency to replicate themselves even when under new leadership. He calls it the vicious cycle. When a group is successfully exploiting the resources of the masses, they have an increased risk of other groups trying to knock them off the top perch. The group that is capable of knocking off the top dog, is likely to be the most cutthroat and vicious. Unsurprisingly, these new cutthroat groups will take over the political power, and continue to usurp the resources for themselves. There is no incentive for them to share the wealth and power any more than they need to get to the top.

In North America, inclusive political and economic institutions have a quirk that Daron calls the virtuous circle. Because political power is spread across several institutions, because economic power is spread across multiple swaths of society, whenever a tyrant group tries to seize power, there is push back across the system because the varying groups in the system understand that their place in society rests on pluralism in the political and economic systems.

Daron rejects arguments against culture, race, geographic position, or even the material wealth as the deciding factor in the success of a nation. He does give some relevance to some of these factors, but overall his theory of extractive versus inclusive political and economic institutions, is held up as the primary reason for the success of a nation. He uses the difference between South and North America as one of his prime examples.