embrace the whole community in its bound, leaving capital to flow in its natural channels, and enterprise to regulate its own pursuits.61

Advocates of mandatory general incorporation hammered away at the political costs of special legislation. E. P. Hurlbut, a New York lawyer, wrote in 1845 that general incorporation would annihilate “the lobby, or third house, that embodiment of selfishness and gross corruption. The halls of legislation would be cleansed, and the representatives of the people would breathe a purer and freer atmosphere. All ‘logrolling’ . . . would cease.”62 In the end, it was the political arguments that carried the day. In 1846, New York wrote a new constitution that mandated general incorporation laws.

The adoption of general incorporation laws was an economic solution to a political problem. Instead of creating corporate privileges for a few groups, general incorporation allowed everyone access to this form of valuable organization. Open access eliminated the corruption and rent-creation aspect associated with the corporate form. By the early 1850s, open access to political and economic organizations had been institutionalized in the United States.

6.8 Institutionalizing Open Access: Why the West?

The transition from limited to open access orders occurs in two steps, and each step must be consistent with elite self-interest. The transition does not require a discontinuous leap of faith on the part of elites, a radical change of circumstances, or a deliberate and conscious attempt to transform a limited access society into an open access one. The two steps are different, however, particularly in historical and chronological terms. Reaching the doorstep conditions involved several centuries of technological, intellectual, and institutional change in Western European society. The transition proper occurred over a period of decades.

If the transition involves a two-step process, then answering why the West went first divides into two components: first, how did the West come to meet the doorstep conditions and in the process come to dominate the world militarily; and second, why did the transition proper first occur in the West? Previous attempts to tackle this issue have not kept the component

61Leggett, Democratick Editorials (1984, p. 342). The column appeared in the Plaindealer, December 3, 1836.

62Hurlbut, Essays on Human Rights, pp. 11–15, as quoted in Gunn (1988, p. 231). Wallis (2006) describes how the influence of republican ideas created fears for democracy that eventually led to the growth of open access in the United States.

parts of the answer separate. The strong tendency has been to emphasize the preconditions for the transition at the expense of understanding the transition itself.

6.8.1 Creating the Doorstep Conditions and the West’s

Dominance of the World

We have provided an alternative hypothesis about the transition to the military revolution thesis advanced by Bates (2001), Parker (1996), Tilly (1992), and others. Tilly argues that long-term military competition drove state formation in early modern Europe. Bates asks why did early modern Europe develop when modern Africa has not; his answer is persistent military competition. These arguments hold that, as states adopted newer and more expensive military technologies, they forced others to adapt as well – or succumb to those that had. The rising expense of war meant all states had to grow; that is, had to devise new institutions for administering and financing war. Similarly, Schultz and Weingast (2003), building on North and Weingast (1989), argue that liberal states had an advantage: credible commitments allowed them to foster growing economies and to borrow funds to finance larger and longer wars with lower deadweight costs to the economy.

We do not dispute the facts of this literature, but provide a new interpretation. The problem with this approach is that it begins by assuming elements that were actually end products of the process. The monopoly on violence enjoyed by modern open access orders is the result of a long evolution of state-building to create the doorstep conditions; it did not hold for the competing states of early modern Europe in 1700. Instead, the major Western European states were natural states with dispersed access to violence. All these states had major internal wars in this period. Although the king in seventeenth-century England had official control of the state, the opposition – capital in Tilly’s terms – had sufficient access to military resources to defeat the king in the mid-century civil war. Similarly, French nobles had sufficient military resources to fight against the revolutionary state during the revolution. These illustrations show that we cannot view the process of state-building during this period as representing a deal among capital and coercion. In the fragile and basic natural states of early modern Europe, access to violence was widely dispersed. These states failed to meet the Weberian assumption of a monopoly on violence.

Where the military revolution thesis emphasizes war, our approach emphasizes organizations, institutions, and the internal dynamics of the

dominant coalition in combination with war. Where models of the military revolution thesis (Bates, 2001; Tilly, 1992) begin with the assumption that the state has a monopoly on violence, we begin with the assumption of dispersed violence and argue that these states attain a monopoly on violence only at the end of the process of completing the doorstep conditions in the late eighteenth and early nineteenth centuries. What distinguished early modern Western Europe was the rise of independent organizations and the movement from basic natural states to mature ones and from mature natural states to the doorstep conditions. In particular, organizations distinguish the Western European competition from military competition in the rest of the world, explaining why European competition produced different results.

The increasing Western European ability to project military force required more than larger militaries, new financial institutions, and bigger systems of taxation. It required the attainment of the doorstep conditions: rule of law for elites, perpetual life for both organizations and the state, and consolidated control over the military. We illustrated these developments with the evolution of British naval victualling. Even though the British Navy was significantly larger than the French Navy in 1756, it could not take “command of the ocean.” The changes in ship supply during the Seven Years’ War enabled the navy to keep the blockade fleet at sea for six months, giving it a distinct military advantage. In part, the changes reflect the pressure of war, but they also illuminate in fine detail the transition from personal elite relationships in a natural state to impersonal elite relationships of the doorstep conditions.

The changes in the process of supply involved, first, fostering a small number of large organizations that competed for contracts. Although the new system retained some personalistic characteristics – there were still a small number of elite firms – it had significant advantages over the old system. Intra-elite competition helped drive down prices and gave firms incentives to innovate, creating better systems of administration and supply. Second, the system transformed government organizations, such as Victualling and Ordinance Boards, into perpetually lived public organizations. This transformation enabled the third change, the new system of credit involving the creation of impersonal financial instruments for paying suppliers. These instruments allowed suppliers to sell them and obtain cash, significantly lowering the risk of participating in the supply system. The instruments also created a dispersed set of interests in maintaining this system. Importantly, the development of an impersonal market for navy bills created a

means of punishing the government if it failed to honor the bills: the cost of future financing would rise.

Although war played an obvious role in the transformation of Western Europe, it was not the sole or even the most important force propelling the doorstep conditions in the West’s transition. A great many steps in attaining these conditions were taken for wholly internal reasons. They include the major institutional changes throughout seventeenth-century England, including Charles I’s innovations, those following both the English Civil War and Restoration, and those of the Glorious Revolution and Revolution Settlement. Although the Glorious Revolution allowed the British to finance much larger wars against France, these changes did not result from war, but from the English attempts to solve the domestic political and constitutional problems of the previous century (North and Weingast, 1989). The same point holds for many of the institutional changes in France, notably those fostering the rise of Louis XIV as a far more powerful monarch in the midseventeenth century and many of those following the revolution in the late eighteenth century. A great many of the institutional and organizational changes propelling these countries to the doorstep followed from domestic politics.

6.8.2 The Transition Proper

In the conceptual framework, getting to the doorstep conditions and establishing impersonal relations among elites are necessary conditions for institutionalizing open access. Yet, the historical developments that bring a particular society to the doorstep may not be sufficient to propel it to complete the transition, nor will the same historical developments necessarily bring another society to the doorstep. Differences in how societies get to the doorstep conditions are likely to be magnified in later transitions. After the first societies succeed in making a transition, beliefs about how the world works will change in other societies, therefore altering the process they will follow to the doorstep. These caveats apply a fortiori to the transition proper.

The critical period for the transition proper in the West was the nineteenth century when open access occurred in the structure of access to political and economic organizations and the transformation of Western societies. Nonetheless, analysis of why the West developed usually ignores the nineteenth century, focusing instead on the long period from the sixteenth to the eighteenth century and the buildup of nation-states, military prowess, technological innovation, global colonial domination, financial

markets, and institutional change generally conceived. In other words, previous explanations focus on what got the West to the doorstep rather than what pushed through the transition.

The long historical view provides many insights. One narrative about the rise of modern societies in Britain, France, and the United States focuses on the intellectual cultivation of the Enlightenment and the eventual transfer of those ideas into concrete political institutions, a process lasting centuries. By the late eighteenth century, elites in Britain, France, and the United States had articulated a set of rights that all citizens should enjoy. Yet, not even all elites enjoyed the rights in equal measure in 1800. Access to economic and political organizations was not open even within the elite, and enlightened political thinking of the time regarded parties and organized economic interests as the greatest threats to elite rights.

Much of the intellectual, political, and economic history of modernity identifies the preconditions for the emergence of the institutions of the new Western proto-democracies. Peter Gay’s history of the Enlightenment ends with an essay on the Federalist Papers and quotes approvingly George Washington’s circular to the state governors after the victory in 1783:

“The foundation of our empire was not laid in the gloomy age of Ignorance and Superstition, but at an Epocha when the rights of mankind were better understood and more clearly defined than at any former period; the researches of the human mind after social happiness, have been carried to a great extent, the treasurers of knowledge, acquired by the labours of Philosophers, Sages, and Legislators, through a long succession of years, are laid open for our use, and their collected wisdom may be happily applied in the Establishment of our forms of Government” (Gay, 1969, p. 560).

[The Federalist papers] achieved and fully deserved, immortality as a classic in the art of politics. It is also a classic work of the Enlightenment, a worthy successor to Montesquieu’s De l’esprit des lois and a worthy companion to Rousseau’s Social Contract (Gay, 1969, p. 563).

Similarly, Bernard Bailyn captured the impetus given to social change by these Enlightenment ideas in the title of his book, To Begin the World Anew: The Genius and Ambiguities of the American Founders (2004).

The long historical precedents are important. Yet claims that the modern world owes its development to the British Whigs, the French Republicans, and the American founding generation, that their ability to begin the world anew created the modern world, present us with a profound historical problem. Although the founding generations took important steps in the transition, their ideas did not take their countries through the transition

proper. Their ideas were backward-looking; they tried to make sense of the world and history that they experienced. To the extent that they looked on a new world, it was because they believed they had figured out solutions to the problems of the seventeenth and eighteenth centuries. They identified the historical source of weakness in republics as the dangers of faction, party, and concentrated economic power. They hoped to minimize and contain these dangers by the construction of balanced governments with separation of powers and checks and balances. They faced an unknown world and could not envision an open access society that had yet to exist. What they saw as dangers – political parties and corporations – turned out to be the solutions to making an open access republic sustainable.

The republican history ends too soon to understand the transition proper. The struggles to create open access continued well into the middle of the nineteenth century and required considerable conceptual, organizational, and institutional innovation that went well beyond republican ideas. In the critical areas of political parties and economic organizations, republican ideas had to be dramatically transformed. Resolving intra-elite conflicts and ensuring that elite rights were secure from conflict ultimately led to institutionalizing open access in economics and politics. Attributing the mid-nineteenth-century innovations in open access economic and political organization to the inevitable playing out of Enlightenment ideas hinders our ability to understand these nineteenth-century changes. In America, the Constitution of 1787 and the Federalist Papers were insufficient to produce the modern world; they did not produce the transition to an open access order.

Another explanatory narrative of the transition hinges on the masses threatening or forcing elites to give up privileges and share power. Acemoglu and Robinson (2006) are the most recent and theoretically sophisticated proponents of non-elite assertion. They argue that, to forestall a worse outcome, elites create democracy as a durable method of redistribution that allows them both to redistribute wealth today and to commit to do so in the future. As we have emphasized, the formation of rights in England and, after the Act of Union in 1707, Britain resulted from the process of converting elite privileges into rights and was the product of intra-elite politics, a process assumed away in the Acemoglu and Robinson framework where elites act as a unified group. The first reform act in 1832 was largely an intra-elite bargain, reallocating political representation among different elite groups, not a power-sharing agreement with the masses. The internal dynamism of natural states leads to the regular

reallocation of rights and privileges as individuals and groups become more or less powerful. The first reform act reallocated political representation in part to reflect the new political realities after many decades of industrialization, finally enfranchising the new industrial urban centers of Birmingham, Leeds, and Manchester at the expense of the weakest of the traditional elite rotten boroughs. This act also enfranchised copyholders with at least £10 of property. Finally, this reform provided for registration, which had the unintended consequence of helping parliamentary parties organize their electoral counterparts. The reforms of 1832 undoubtedly set in motion forces that mobilized the masses as a political force; and furthermore, those forces were an important factor in the later reforms, as Acemoglu and Robinson suggest. However, intra-elite politics was also important in these reforms, including the incentives facing elite politicians and their new political parties to extend the franchise to the masses to gain electoral advantages, as Peel suggested.

Other histories, as we have noted, revolve around the role of military and production technology in changing conditions over the long term. The military revolution literature focuses on events that antedate the problems of the transition in the nineteenth century. We examined in Chapter 5 the idea that changing military technology forced governments to become larger and more sophisticated. The scale of militaries in Western Europe increased after the seventeenth century, and sovereign states grew to finance and administer those armies. Larger militaries required bigger budgets; but they also required bigger, better, and more complex organizations. Societies well along the road to developing those organizations possessed real advantages. Similarly, Britain and France, by virtue of their military power, possessed global empires by the eighteenth century, including sophisticated institutions and organizations necessary to administer a global empire. However, it is far from clear that the global dimensions of their power and wealth played an important role in the institutional developments of the nineteenth century at issue in this chapter. The same changes proceeded in the United States without the spur of global competition.

A long tradition in economic history emphasizes production technologies and control of nature. This approach embeds the rapid economic development of Western economies after 1850 in technological developments stretching back long before. The beginning of the Industrial Revolution is usually dated to the late eighteenth century in Britain, but a main strand of economic history acknowledges the many precedents to earlier European technological changes (Mokyr, 1990, 2002). Improvements in financial institutions go back to the Italians of the sixteenth and seventeenth centuries, the

Dutch of the seventeenth and eighteenth centuries, and the British financial revolution of the late seventeenth and early eighteenth centuries. European colonial expansion originates with the late fifteenth-century Spanish and Portuguese, joined by the Dutch, French, and British after 1600, long before 1800.63 Long-term comparisons of Europe and China (Jones, 1981; Pomeranz, 2000) emphasize the importance of “ghost acres,” the ability of Europeans to draw on the acreage of colonial holdings around the globe to lessen resource constraints and avoid Malthusian dynamics. Mokyr (2009) and McCloskey (2006) emphasize the long intellectual developments in Europe, culminating in the Enlightenment that not only produced a scientific revolution and the idea that humankind could be improved through conscious and rational effort but also an increasing faith in the ability of competitive markets to allocate resources. These histories typically conclude in the early nineteenth century; few consider periods later than 1850 (the economic history of late nineteenth-century Britain grapples with relative economic decline, not relative development).

Economic historians have therefore not explained events in the midand late nineteenth century. Although no decisive year or decade exists of when growth began to accelerate, nonetheless the onset of modern economic growth rates, per capita income growth in the neighborhood of 1 to 1.5 percent per year, does not occur in any of the countries until after 1840.64 After the 1850s, and with modest ups and downs, this steady growth occurred until the present day, with the exceptions of wars and the depressions of the 1920s and 1930s.

Economic historians have directed an enormous amount of effort to measuring the standard of living of workers in agriculture and industry from 1750 to 1850. The evidence shows that standards of living for most workers did not begin rising in an indisputable and quantitatively clear way until after 1850.65 Not only did wages begin rising in all three first movers, but in

63Moreover, by the early nineteenth century, Europeans had found that they could also lose their colonies, as occurred with British North America and the Spanish colonies in Latin America.

64Rostow’s (1960) hypothesis about the “take-off” into sustained economic growth in the nineteenth century has been much abused by economic historians, but the basic fact of an increasing rate of economic growth after the middle of the nineteenth century has never been disputed. For evidence on the performance of aggregate economies and national income statistics for Britain see Crafts (1998), for the United States see Weiss (1992), and for France see Hoffman and Rosenthal (2000).

65For example, the great debate about the standard of living of workers in Britain has both proponents of elevation and immiseration of workers, but neither side disputes that living standards began rising significantly, and to date, almost irreversibly over the long term

involves a fundamental change in the relationship among individuals and organizations throughout the society.

Rulers head the dominant coalition and are only powerful to the extent that they command the respect and cooperation of other elites. We have emphasized the inadequacy of the single-actor approach to the state. Placing the ruler under the law requires that the identity of the ruler be transformed into a perpetually lived organization; it is not simply the ruler that must be brought under the law but the state itself. Rule of law that limits the state results from the entire dominant coalition devising credible and enforceable rules for intra-elite relationships. Natural states, in which the dominant coalition constantly adjusts rents and privileges as circumstances change, cannot attain credible rule of law.

In each of the two parts of the transition – the doorstep conditions and the transition proper – institutions develop that transform the ability of elites to form organizations inside and outside of the state. These new institutions and organizations supply the tools that allow elites to credibly commit to respect fundamental elite rights, which all elites share. The transformation of elite privileges into rights marks the steps in the transition from natural states to open access orders. Institutions create a perpetually lived state and allow it to sustain perpetually lived organizations throughout society. These organizations and institutions transform the identity of the ruler from a powerful individual with a unique social persona into an impersonal office. Because they are perpetually lived, these institutions and organizations are also binding on tomorrow’s leaders and coalitions. The social identity of the ruler becomes embedded in the larger identity of the state as a perpetually lived organization. It is the state that comes under the rule of law. That we continue to identify the state with the ruler is understandable, but it is a convenience that causes enormous confusion.

The birth of the nation-state did not occur with the apotheosis of the ruler, but by subsuming the personal identity of all rulers in a durable and perpetual corporate organization of the state.66 Perpetually lived organizations and institutions with veto powers, such as parliaments and independent judiciaries, become an integral part of the state. Consolidated control of the military concentrates military power and involves limits that constrain its use against the citizenry.

66The literature on the rise of the nation-state is enormous. For considerations on the rise of the nation-state, particularly with respect to identity, see Anderson [2006[1983]), Gellner (1983), and Tilly (1992, 1996, 2005a, and 2005b). Recent political theory studies of the rise of the nation-state include Ertman (1997) and Spruyt (1994).

Most importantly, however, the institutions of the transition proper ensure open access in the polity and economy. Open access competition is the fundamental constraint on states, actuated in the polity through organized political parties and in the economy through organized business entities. The building of state capacity associated with the doorstep and the transition are therefore central to constraining the state to be bound by the law.