4.3 Institutions, Beliefs, and Incentives Supporting Open Access

However, we are not home yet. How does political competition secure open access? Unleashing creative destruction in the political system by itself seems unlikely to secure the rights of losers (Przeworski, 1991). Effective political competition requires credible guarantees that losers will not be expropriated and that losing political organizations continue to enjoy access to future competition. What then credibly guarantees the rights of losers to continued political access?

4.3 Institutions, Beliefs, and Incentives Supporting Open Access

Officials in open access orders face a citizenry with shared beliefs that emphasize various forms of inclusion and equality. To be sustained, such beliefs must have a basis in reality. Open access orders implement these beliefs through a series of public goods and services that open opportunities to a large portion of the population (such as education, access to the courts, and infrastructure provision) and that share the gains of economic growth while lowering the risks to individuals of markets (such as various social insurance programs).

Open access orders also subject political officials to competition in both economic and political realms, which limits their ability to solidify their advantage through rent-creation (as we discuss later in Section 4.6). Where limited access orders use rent-creation and limited access to provide order and stability, open access orders use competition and open access. Individuals and groups may freely form organizations and enter into most economic, political, social, and other activities, subject to general rules applied impersonally, such as refraining from violence. Open access therefore results in a thick and variegated structure of organizations, often called the civil society. Political scientists and philosophers have long emphasized the importance of the civil society for open and democratic societies (Gellner, 1994; Lipset, 1963; O’Donnell and Schmitter, 1986; Putnam, 1993; Tocqueville, 1969[1835]; Widner, 2001). For our purposes, the civil society is relevant in two ways. First, open access is a necessary condition for a broad-based and active civil society. Restrictions on the ability to form organizations directly inhibit the civil society. Second, as emphasized in the literature, a civil society reflects a wide range of organizations that are easily adapted to political purposes when a government threatens an open access order. Organizations from garden clubs and soccer leagues to multinational corporations and nongovernmental organizations (NGOs) to interest groups and political parties all form pools of interest that can independently affect the political

process. Rents in this system attract entry and competition, which erode these rents.

Institutions provide for the credible commitments that support the rule of law, including open access and competition. Here too beliefs are central, in the form of the consensus condition: that is, citizens in open access orders share beliefs about the appropriateness of central tenets of their constitution so that they help police the rules by withdrawing support from officials who seek to violate these tenets.

4.4 Incorporation: The Extension of Citizenship

Perhaps the most central feature of open access orders is the transformation of a society based on elites to one based on a mass citizenry. This transformation also combines beliefs in equality and open access to markets, the institutional apparatuses of rule of law, and mass political participation.

Incorporation of citizens encompasses different groups at different times. At the beginning of the first transitions, only a portion of native males became citizens, although some (such as the United States) had relatively liberal citizenship laws for male immigrants from some regions. Later these states widened suffrage for males and incorporated other groups, notably women, in the early twentieth century. The process of incorporation is ongoing today, as is evident with the struggles in Europe with Muslim immigrants and in the United States with more than a century-long struggle to incorporate African Americans.

Political incorporation under open access implies mass politics, including the development of perpetually lived political parties that compete electorally for citizens’ votes. Along with political participation comes political responsiveness: as Bueno de Mesquita et al. (2003) suggest, political officials facing mass electorates respond by providing public rather than private goods.

Historically, open access orders have provided different types of public goods in a sequence. In the beginning of the first transitions, societies extended the rule of law from elites to all citizens, a process we discuss in Chapter 6. Next typically came infrastructure and the beginning of mass education. For example, transportation infrastructure often transformed large areas of traditionally organized, low-income, and self-sufficient peasant economies into specialized food producers in integrated regional, national, or international markets, greatly increasing efficiency of both production and incomes. Third, after considerable struggles, often violent, open

access orders began to ensure labor against vicissitudes that result from participation in impersonal labor markets. Some policies focused directly on labor markets, such as policies allowing labor to form unions and bargain with employers. These policies were controversial and played out over several generations in both Europe and the United States. The other type of policies grew more slowly over the twentieth century and became especially important after World War II: social insurance programs that protect labor against a range of new set of uncertainties that arose with integrated markets in the late nineteenth and early twentieth centuries. These programs, which significantly reduced the individual risk of market participation, include unemployment insurance, accident insurance, health insurance, and oldage insurance.

To illustrate this process of policy responsiveness, consider the United States. At its founding, the United States was transitioning to an open access order. The country was geared toward elites based on property ownership. Nonetheless, access to the elite was relatively open because, in comparison with Europe, abundant land and scarce labor made access to property far easier in America than in Europe (North, 1961). As the United States expanded, new states and territories on the frontier competed for scarce labor. In Schumpeterian fashion, political entrepreneurs in these states sought to make themselves attractive to labor by innovating through providing an array of institutions and public goods, including secure property rights, rule of law, and universal white male suffrage. Often their competitive innovations forced older states to follow their lead.3 Public goods provided by frontier states and territories included infrastructure granting citizens access to markets in the established state, including roads, canals, and, later, railroads, but also banks to finance the shipment of produce to markets.4 Whereas many people moving to the frontier in 1800 did so as self-sufficient farmers, those moving in the 1840s typically did so as prospective market specialists in interregional or international markets. Universal education also expanded along the frontier. Finally, the frontier’s extension of suffrage in turn forced the established states on the eastern seaboard to follow suit. By the 1840s, white males were enfranchised across the United States. Moreover, as we detail in Chapter 6, mass political parties organized for the first time to mobilize citizens’ votes.

3Engerman and Sokoloff (2005) trace this history.

4An extensive literature studies this economic and political history. See Goodrich (1960), Heckleman and Wallis (1997), North (1961), Taylor (1951), and Wallis, Sylla, and Legler (1994).

Evolving rights of organized labor reflect another set of struggles in all open access orders, at times violent. In the United States as in Europe, union activity was met at times with legal suppression and state-sponsored violence. This situation changed dramatically in the 1930s in large part due to the Great Depression. Directly, the Depression put so many people out of work that industrial unionism took off. Indirectly, the Depression brought the Democrats to power who crafted their New Deal, including the National Labor Relations Act of 1935, granting workers the right to organize, to bargain collectively through unions, to take part in strikes, and to bring their disputes with firms to a new agency, the National Labor Relations Board, for resolution. Union membership increased dramatically, violence against organized labor virtually disappeared, and the government ceased to collude with firms to use violence against workers (Davis et al. 1972, pp. 223–7).

Extension to other groups came in the twentieth century, beginning with white women. During this period, many European immigrants of the late nineteenth and early twentieth centuries remained suspect, especially German, Irish, and Jewish immigrants. By the mid-twentieth century, these groups had been incorporated. In the 1960s, following major political and social confrontations, a series of steps were taken to incorporate African Americans with the Civil Rights Act of 1964 and the Voting Rights Act of 1965. Simultaneously, the national government created a range of new Great Society programs to serve these constituencies. The courts have been involved through policies such as school integration, equal protection, and affirmative action. Nonetheless, the process of incorporation of African Americans remains incomplete.

Another feature of political responsiveness is that as citizen incomes, values, and preferences have changed, so too has governmental policy. For example, throughout most of the nineteenth century, economic regulation in the United States was undertaken by the states rather than the national government. The system of federalism induced competition among states, including competition for solutions to common problems.5 This system worked reasonably well, especially when much economic activity was local or regional. By the latter portion of the century, however, the increasingly integrated, national economy created several economic problems that states could not solve on their own; notably, problems with the extensive, integrated railroad network and antitrust. Both problems became

5The importance of federalism in sustaining open access (although not in that specific term) is the subject of Stepan (2004) and Weingast (2006b).