Title: Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History
Author: Douglass C. North, John Joseph Wallis and Barry R. Weingast
Scope: 4 stars
Readability: 3 stars
My personal rating: 4.5 stars
See more on my book rating system (add link to this page).
Topic of Book
Despite its title, this book focuses more on the role of institutions than on violence. They seek to explain the general outlines of human history over the last 10,000 years.
While I believe that the authors exaggerate the influence of institutions on human development, the authors make some interesting points. In particular, they note how elites within “limited access orders”, which I would label as Agrarian societies, maintain their power by strictly limiting the number of institutions that can be created. This undermines economic growth and innovation.
- Human history can be divided into three stages:
- Hunter-gatherer societies (not the subject of this book)
- Limited access orders have dominated recorded history until very recently. These societies are dominated by small coalitions of elites who extract rent and taxes from the masses. These elites deliberately constrain the abilities of the masses to form new institutions that might overturn this order.
- Open access orders have become common only within the last century. Elites in these societies allow the formation of new political, economic and other institutions that compete against each other. Political parties and corporations are particularly important. These institutions form the basis of a dynamic and innovative society.
- The transition from the limited-access order to open-access order has been one of the most important political themes in the last century.
Important Quotes from Book
This book lays out a set of concepts that show how societies have used the control of political, economic, religious, and educational activities to limit and contain violence over the last ten thousand years.
Our intention is to put these examples in a new context, to provide a new framework for interpreting the course of human history over the past ten thousand years, and to open new ways of thinking about the pressing problems of political and economic development facing the world today.
Violence, organizations, institutions, and beliefs are the elements of our conceptual framework.
All of human history has had but three social orders. The first was the foraging order: small social groups characteristic of hunter–gatherer societies.
Our primary concern is with the two social orders that arose over the last ten millennia. The limited access order or natural state emerged in the first social revolution.
Natural states limit the ability of individuals to form organizations. In the open access orders that emerged in the second social revolution, personal relations still matter, but impersonal categories of individuals, often called citizens, interact over wide areas of social behavior with no need to be cognizant of the individual identity of their partners. Identity, which in natural states is inherently personal, becomes defined as a set of impersonal characteristics in open access orders. The ability to form organizations that the larger society supports is open to everyone who meets a set of minimal and impersonal criteria. Both social orders have public and private organizations, but natural states limit access to those organizations whereas open access societies do not.
Strikingly, the richest countries are not distinguished by higher positive growth rates when they do grow. In fact, the richest countries have the lowest average positive growth rates by a substantial amount… When they grow, poor countries grow faster than rich countries.
They are poor because they experience more frequent episodes of shrinking income and more negative growth during the episodes.
Countries exhibit a marked correlation between the number of organizations and the extent of economic and political development.
There are two basic social patterns in the modern world. The open access pattern is characterized by:
1. Political and economic development.
2. Economies that experience much less negative economic growth.
3. Rich and vibrant civil societies with lots of organizations.
4. Bigger, more decentralized governments.
5. Widespread impersonal social relationships, including rule of law, secure property rights, fairness, and equality – all aspects of treating everyone the same.
The limited access pattern is characterized by:
1. Slow-growing economies vulnerable to shocks.
2. Polities without generalized consent of the governed.
3. Relatively small numbers of organizations.
4. Smaller and more centralized governments.
5. A predominance of social relationships organized along personal lines, including privileges, social hierarchies, laws that are enforced unequally, insecure property rights, and a pervasive sense that not all individuals were created or are equal.
We argue that the default social outcome is the natural state, not open access. Until two hundred years ago, there were no open access orders; even today, 85 percent of the world’s population live in limited access orders. The dominant pattern of social organization in recorded human history is the natural state.
The natural state reduces the problem of endemic violence through the formation of a dominant coalition whose members possess special privileges. The logic of the natural state follows from how it solves the problem of violence. Elites – members of the dominant coalition – agree to respect each other’s privileges, including property rights and access to resources and activities. By limiting access to these privileges to members of the dominant coalition, elites create credible incentives to cooperate rather than fight among themselves. Because elites know that violence will reduce their own rents, they have incentives not to fight. Furthermore, each elite understands that other elites face similar incentives. In this way, the political system of a natural state manipulates the economic system to produce rents that then secure political order.
The logic of controlling violence in the open access order involves three elements: 1) consolidated organization of military and police forces is subject to the control of the political system; 2) the political system must be constrained by a set of institutions and incentives that limit the illegitimate use of violence; and 3) for a political faction or party to remain in power, it must enjoy the support of economic and social interests, broadly defined. Open access in the economic system prevents the political system from manipulating economic interests and ensures that if a political group abuses its control of the military it loses office.
Control of the political system is open to entry by any group and contested through prescribed, and typically formal, constitutional means. All citizens have the right to form organizations.
Individuals and organizations pursue rents as vigorously in an open access society as they do in a natural state, but impersonal economic and political competition result in the rapid erosion of rents. Joseph Schumpeter (1942) described this process of innovation and change in the economy as “creative destruction.” Innovation itself is a source of rents. An important form of economic competition occurs through the development of new products and services rather than lower prices or higher quality.
Organizations form to exploit new opportunities and pursue the rents associated with innovation. Open entry and access to sophisticated economic organizations are prerequisites for creative destruction and a dynamic economy.
Creative economic destruction produces a constantly shifting distribution of economic interests, making it difficult for political officials to solidify their advantage through rent-creation. Similarly, open access in politics results in creative political destruction through party competition.
The transition, then, has two stages. First, a natural state must develop institutional arrangements that enable elites to create the possibility of impersonal intra-elite relationships. Second, the transition proper begins when the dominant coalition finds it in the interest of elites to expand impersonal exchange within the elite and institutionalize open elite access to organizations, effectively creating open access for elites. We call the conditions that may evolve in a natural state that enable impersonal relationships among elites the doorstep conditions.
The three doorstep conditions are:
Doorstep Condition 1. Rule of law for elites.
Doorstep Condition 2. Perpetually lived forms of public and private elite
organizations, including the state itself.
Doorstep Condition 3. Consolidated political control of the military.
In combination, the doorstep conditions create an environment in which impersonal relations within the elite are possible.
A natural state manages the problem of violence by forming a dominant coalition that limits access to valuable resources – land, labor, and capital – or access to and control of valuable activities – such as trade, worship, and education – to elite groups. The creation of rents through limiting access provides the glue that holds the coalition together, enabling elite groups to make credible commitments to one another to support the regime, perform their functions, and refrain from violence. Only elite groups are able to use the third-party enforcement of the coalition to structure contractual organizations. Limiting access to organizational forms is the key to the natural state because limiting access not only creates rents through exclusive privileges but it also directly enhances the value of the privileges by making elites more productive through their organizations.
Natural state elites sit at the top of, but are also embedded in, patron–client networks that extend down into the rest of society.
The rewards (rents) for being at the top of the patronage system are typically far higher than those for the patron’s lieutenants, which are again far higher than for the rank and file.
Natural state coalitions face a fundamental trade-off. Expanding the coalition without increasing rent-generating activities adds members and increases the coalition’s ability to survive against internal and external threats. However, it also dissipates rents, which both lowers the value of being in the coalition and reduces the ability of members to punish the coalition by withdrawing their support. Because of this rent-dissipation, natural state coalitions are naturally self-limiting in size.
The actual structure of dominant coalitions in natural states is inherently unstable. The dominant coalition regularly changes size and composition by weeding out weaker members and by incorporating new strong members and, rearranging the entire composition of the coalition.
The forces leading natural states to integrate on the geographic dimension exhibit a similarity to those on the intensive dimension: bigger states command more military resources and are therefore more secure. Yet bigger states offer more opportunity for conflict within the coalition.
Increasing trade and promoting specialization and the division of labor raise productivity and increase the surplus available to elites. As a result, natural state coalitions have incentives to promote trade. However, increasing specialization and division of labor often requires opening entry and access, and doing so dissipates rents, thus threatening the stability of the dominant coalition. Both forces operate in a natural state and, over time, produce ebbs and flows of access and entry. At some times, natural states increase trade and entry at some margins; at other times they restrict trade and entry at others.
In all natural states, economics is politics by other means: economic and political systems are closely enmeshed, along with religious, military, and educational systems.
Land is the primary asset in agrarian societies. Access, use, and the ability to derive income from land therefore provide a rich set of tools with which to structure a dominant coalition and its relationship to the wider economy.
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.
Open access orders prevent disorder through competition and open access.
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.
Where limited access orders use rent-creation and limited access to provide order and stability, open access orders use competition and open access.
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.
As the two world wars and the Cold War of the twentieth century illustrate, external violence is a central if episodic aspect of the international environment. To survive, open access orders must have the ability to succeed, not only in economic competition but also in violent competition.
The success of open access orders in World War II and the Cold War demonstrates the need for these states to maintain economic, military, and adaptive superiority, or else risk being taken over or dramatically challenged by aggressive, powerful natural states.
International military competition has two closely related effects. The first is economic: thriving markets in open access orders provide the resource base from which these societies sustain long-term international struggles with hostile rivals. Open access orders that compromise their economies also compromise their ability to survive against hostile international rivals. The second is institutional: open access orders have the ability to make credible promises. With respect to sovereign debt, this ability allows open access orders to borrow heavily in times of need. Borrowing leverages a society’s resources so that it may spend well beyond what it can raise in taxes.
Competition in open access orders to address major social problems fosters adaptive efficiency, the ability of the society to survive in the face of an ever-changing array of problems and difficulties
Open access and the free flow of ideas generate a range of potential ways to understand and resolve new problems.
This process is far from perfect; indeed, it is often a mess. Nevertheless, in comparison with natural states, open access orders more readily generate a range of solutions to problems; they more readily experiment with solutions to problems; and they more readily discard ideas and leaders who fail to solve them.
The same institutions work differently in the presence of open access and competition than under limited access and the absence of competition.
Natural states short-circuit the open access and competitive mechanisms that provide for the virtuous circle in open access orders so that, although they may have elections and party competition, these institutions do not work in the same way that they do in open access orders.
Organizations are the lifeblood of both political and economic competition. They are the vehicles through which economic and political entrepreneurs implement their ideas and affect the dynamics of the economy and the polity.
Indeed, one of the principal purposes of open access orders is to unleash the power of organizations.
The essence of a natural state is linking control of military resources to economic resources and activities.
Natural states, however, have inherent limits to the type of social arrangements that can be supported: anything that threatens rent-creation may eventually threaten the provision of order. Rent-creation and limited access place limits on the long-term economic growth of natural states, limits that became glaringly apparent over the last two centuries in comparison to open access societies.
The adoption of similar [political] institutions in other societies later in the nineteenth century did not immediately foster transitions in those societies.
It is time to acknowledge that open access societies are not just modestly improved versions of the societies that preceded them… The development of an open access society has not only enabled societies to achieve a world of plenty but has also created efficient institutions and organizations that make violence more efficient.