An important property of open access orders is the seeming independence of economic and political systems. Economic organizations in open access orders do not need to participate in politics to maintain their rights, to enforce contracts, or to ensure their survival from expropriation; their right to exist and compete does not depend on maintaining privileges. Markets in open access orders therefore appear more autonomous than in natural states where all major market organizations must also serve political ends. The same logic holds for politics, which in open access orders appears to intervene – that is, constrain, control, and regulate – markets that seem to exist without action or support of the political system. This apparent autonomy is endogenous to open access, however.

An integral feature of the open access order is the growth of government. Incorporation of mass citizenry induces responsiveness to their interests (Acemoglu and Robinson, 2006). The widespread sharing in open access orders just noted entails large government. Public goods spending on education and infrastructure involves expensive programs, as do the various programs that provide social insurance, including unemployment insurance, old age insurance, disability, and health insurance. Governments in open access orders are therefore larger than those in natural states, and their actions and policies are more complementary to markets.

4.2 Commonalities: Characteristics of an Open Access Order

Open access orders differ widely, both over the 150 or so years of their existence and among themselves at any given moment in time.2 Some are parliamentary systems while others are presidential; some are small trading states while others are large countries with complex, diversified economies. Nonetheless, all open access orders have a series of characteristics in common. First, all are characterized by a set of beliefs widely held among the population. These beliefs include various forms of inclusion, equality, and shared growth. All citizens are equal. All citizens have the ability to form organizations, to write contracts, to use the courts and the bureaucracy, and to access public goods and services. The specific nature of these beliefs differs across open access orders, with the Anglo-American countries tending to emphasize equality before the law and the East Asian countries tending to emphasize shared growth. The nature of these beliefs has differed over

2Throughout this chapter, we assume that an open access order exists. We treat the important question of the transition – of how natural states become open access orders – in Chapters 5 and 6.

time. In the open access orders of the midand late nineteenth century, beliefs of inclusion centered on incorporating the masses as citizens, with rights of political participation and equal access to the market and to the institutions of the state, including the courts. Prior to that time, as countries on the doorstep, these states limited access to many rule-of-law institutions to elites. During the transition, these countries widely increased rights and access. Inclusion in most post-World War II open access orders emphasizes a much wider sense of equality and equity, including a range of social programs that share the gains and lower the personal risk of the market economy.

Second, the eponymous characteristic, open access, is central to all open access orders. The civil society encompasses a wide range of organizations independent of the state. Open access also fosters competition in all systems, specifically in politics and economics. Systematic competition for control of the state means these states are democratic; systematic competition in the economy means that these states are market economies. All open access orders have constitutions, including institutions and incentive systems to sustain them.

Third, all open access orders are, largely, impersonal. These societies have the only type of governments that can systematically provide services and benefits to citizens and organizations on an impersonal basis; that is, without reference to the social standing of the citizens or the identity and political connections of an organization’s principals. Programs for unemployment insurance actually deliver benefits to those recently unemployed rather than well-connected individuals or clients of powerful patrons. Food subsidies go to those individuals meeting the relevant characteristics rather than, as in the case of ration cards in India, being sold by corrupt bureaucrats to the highest bidders. An important feature of impersonality is the rule of law: rights, justice, and enforcement are rule bound and impartial. Economies in these states are also characterized by impersonal exchange.

Finally, open access orders cannot easily manipulate interests. Because open access orders deliver public goods for all citizens, it is harder for these states to force potential opponents to support the state by threatening to cut off important services if they fail to do so. Another part of the open access order’s inability to manipulate interests arises because these states are characterized by limited government: their constitutions create what philosophers sometimes call a realm of private action beyond the reach of the government. Rights, for example, limit government action in ways that grant individuals freedom from political manipulation and harassment.

We summarize the characteristics of an open access order as follows. In addition to meeting the second two doorstep conditions – a perpetually lived state and consolidated political control over violence – an open access order has the following characteristics:

1.A widely held set of beliefs about the inclusion of and equality for all citizens.

2.Entry into economic, political, religious, and educational activities without restraint.

3.Support for organizational forms in each activity that is open to all (for example, contract enforcement).

4.Rule of law enforced impartially for all citizens.

5.Impersonal exchange.

As we discuss next, these characteristics have implications for the structure of the state and its institutions. The first characteristic requires that reality not be so far off from the ideal that beliefs in equality and inclusion cannot be sustained. Without some basis in reality, citizens in open access orders could not sustain beliefs in equality.

Characteristics 2 and 3 require that an open access order provide for open access to organizational forms in all walks of life and to anyone or group who meets a set of minimal, impersonal requirements. Open access for organizations in all activities means that open access orders have both political and economic competition markets and democracy. Stable democracy necessitates a range of self-enforcing limits on governmental activities in the sense that political officials have incentives to honor the rules (Przeworski, 1991; Weingast, 1997, 2006a).

Characteristic 4 requires a set of institutions that makes citizen rights impersonal, enforceable, and impartial across all citizens. Rule of law for all citizens, in turn, requires a perpetually lived state with the ability to maintain perpetually lived rights and organizations; and political control of the military requires that the state have a monopoly control over violence and be bound by appropriate rules governing the use of violence, especially against citizens. With respect to characteristic 5, all exchange in limited access order is dominated by personal knowledge. The big change in open access orders is impersonal exchange: people do not need to know one another anymore to exchange. As economic historians have long emphasized, impersonal exchange greatly expands the economic opportunities, allowing the economies of scale in modern capitalist economies (see Greif, 2006; North, 1981).

Each characteristic requires institutions to sustain it. The specific institutions providing for the doorstep conditions and various credible commitments differ from open access order to open access order. No simple template exists for specifying institutions that accomplish these tasks. We treat this topic in the next section.

Nonetheless, all open access orders have a common set of institutional elements. They have open access for organizations of all types, market economies that create a comparative advantage that generates a major portion of the society’s wealth, and competitive elections with every citizen enfranchised. Other instituitons support rights, such as a free press, freedom of expression, freedom of religion and conscience, and the right to assemble. All open access orders have some form of division of powers and multiple veto points (Tsebelis, 2002), sometimes explicit, as in the American Constitution’s separation of powers system, and sometimes implicit, as in the coalition governments of Europe with separate ministries, a prime minister, a cabinet within which coalition members negotiate and approve legislation, and parliament necessary to pass legislation. All open access orders also have judicial and bureaucratic mechanisms for enforcing citizen rights and contracts. And finally, they all have constitutions (whether official documents or small “c” constitutions) that provide for the limit condition – limiting the stakes of power so that everything is not up for grabs in the next election (Weingast, 2006a).

Open access orders prevent disorder through competition and open access. Consolidated, political control over violence combines with the rules governing the use of that violence to reduce and control access to violence. Constitutions and rule of law provide limits on governmental policymaking, thus limiting the ways in which citizens can feel threatened by the government that in natural states induce them to support the use of violence and extra-constitutional action to protect themselves. In addition, as we discuss in Section 4.5, competition is intimately involved in enforcing the constitution and rule of law that support these limits on violence.

4.2.1 Schumpeter’s Insight

A final aspect of all open access orders is Schumpeter’s notion of creative destruction, one of the most powerful descriptions of a competitive, open access economy. When Schumpeter wrote Capitalism, Socialism, and Democracy in the early 1940s, the economic theory of perfect competition among atomistic firms (i.e., firms too small to have market power) had come

under sustained attack as unrealistic. Large and powerful economic organizations dominated the new economy, and their behavior did not match the textbooks. Despite this dominance, the economy produced historically unprecedented, sustained economic development. Schumpeter asked, How could large businesses that were supposed to choke off competition and growth nonetheless generate such spectacular productivity increases in a world that seemed ever more competitive?

Schumpeter solved the paradox by transcending the textbook notion of competition, focusing on competition in a world of large organizations, which he termed creative destruction:

Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary . . . The fundamental impulse that sets and keeps the capitalist engine in motion comes from new consumers’ goods, the new methods of production or transportation, the new markets, and the new forms of industrial organization that capitalist enterprise creates . . . The opening up of new markets, foreign or domestic, and the organizational development from the craft shop to the factory to such concerns as U.S. Steel illustrate the same process of industrial mutation – if I may use that biological term – that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in (Schumpeter, 1942, pp. 82–3, emphasis in original).

Schumpeter’s entrepreneurs are both innovators and organizers who see new possibilities for products, processes, and markets and who take advantage of those opportunities by building new organizations and changing the structure of old ones. Schumpeter’s creative destruction requires open entry and access to organizational forms. The natural state cannot support creative destruction because the creation of new economic organizations directly threatens existing economic organizations and their patterns of rents.

How does creative economic destruction affect politics? First, in the economy, it constantly changes the pattern of economic interests and therefore the pressures facing political officials; second, in the polity, political entrepreneurs continually adapt, advancing new ideas and creating new coalitions. As organizations form to pursue whatever ends they desire and creative destruction continually produces new patterns of interests within society, political organizations form to channel those interests into political action. Political entrepreneurs who lead political parties seek to advance new ideas and programs in ways that increase the likelihood of success over their rivals.