Daron Acemoglu & James Robinson

by Prosperity;Poverty Why Nations Fail: The Origins of Power

  While the virtuous circle creates a tendency for inclusive institutions to persist, it is neither inevitable nor irreversible. Both in Britain and the United States, inclusive economic and political institutions were subject to many challenges. In 1745 the Young Pretender got all the way to Derby, a mere hundred miles from London, with an army to unseat the political institutions forged during the Glorious Revolution. But he was defeated. More important than the challenges from without were potential challenges from within that might also have led to the unraveling of inclusive institutions. As we saw in the context of the Peterloo Massacre in Manchester in 1819 (this page), and as we will see in more detail next, British political elites thought of using repression to avoid having to further open the political system, but they pulled back from the brink. Similarly, inclusive economic and political institutions in the United States faced serious challenges, which could have conceivably succeeded, but didn’t. And of course it was not preordained that these challenges should be defeated. It is due to not only the virtuous circle but also to the realization of the contingent path of history that British and U.S. inclusive institutions survived and became substantially stronger over time.

  THE SLOW MARCH OF DEMOCRACY

  The response to the Black Act showed ordinary British people that they had more rights than they previously realized. They could defend their traditional rights and economic interests in the courts and in Parliament through the use of petitions and lobbying. But this pluralism had not yet delivered effective democracy. Most adult men could not vote; neither could women; and there were many inequities in the existing democratic structures. All this was to change. The virtuous circle of inclusive institutions not only preserves what has already been achieved but also opens the door to greater inclusiveness. The odds were against the British elite of the eighteenth century maintaining their grip on political power without serious challenges. This elite had come to power by challenging the divine right of kings and opening the door to participation by the people in politics, but then they gave this right only to a small minority. It was only a matter of time until more and more of the population demanded the right to participate in the political process. And in the years leading up to 1831, they did.

  The first three decades of the nineteenth century witnessed increasing social unrest in Britain, mostly in response to increasing economic inequities and demands from the disenfranchised masses for greater political representation. The Luddite Riots of 1811–1816, where workers fought against the introduction of new technologies they believed would reduce their wages, were followed by riots explicitly demanding political rights, the Spa Fields Riots of 1816 in London and the Peterloo Massacre of 1819 in Manchester. In the Swing Riots of 1830, agricultural workers protested against falling living standards as well as the introduction of new technology. Meanwhile, in Paris, the July Revolution of 1830 exploded. A consensus among elites was starting to form that the discontent was reaching the boiling point, and the only way to defuse social unrest, and turn back a revolution, was by meeting the demands of the masses and undertaking parliamentary reform.

  It was no surprise then that the 1831 election was mostly about a single issue: political reform. The Whigs, almost one hundred years after Sir Robert Walpole, were much more responsive to the wishes of the common man and campaigned to extend voting rights. But this meant only a small increase in the electorate. Universal suffrage, even only for men, was not on the table. The Whigs won the election, and their leader, Earl Grey, became the prime minister. Earl Grey was no radical—far from it. He and the Whigs pushed for reform not because they thought a broader voting franchise was more just or because they wanted to share power. British democracy was not given by the elite. It was largely taken by the masses, who were empowered by the political processes that had been ongoing in England and the rest of Britain for the last several centuries. They had become emboldened by the changes in the nature of political institutions unleashed by the Glorious Revolution. Reforms were granted because the elite thought that reform was the only way to secure the continuation of their rule, albeit in a somewhat lessened form. Earl Grey, in his famous speech to Parliament in favor of political reform, said this very clearly:

  There is no-one more decided against annual Parliaments, universal suffrage and the ballot, than I am. My object is not to favour, but to put an end to such hopes and projects … The principle of my reform is, to prevent the necessity of revolution … reforming to preserve and not to overthrow.

  The masses did not just want the vote for its own sake but to have a seat at the table to be able to defend their interests. This was well understood by the Chartist movement, which led the campaign for universal suffrage after 1838, taking its name from its adoption of the People’s Charter, named to evoke a parallel with the Magna Carta. Chartist J. R. Stephens articulated why universal suffrage, and the vote for all citizens, was key for the masses:

  The question of universal suffrage … is a knife and fork question, a bread and cheese question … by universal suffrage I mean to say that every working man in the land has a right to a good coat on his back, a good hat on his head, a good roof for the shelter of his household, a good dinner upon his table.

  Stephens had well understood that universal suffrage was the most durable way of empowering the British masses further and guaranteeing a coat, a hat, a roof, and a good dinner for the working man.

  Ultimately, Earl Grey was successful both in ensuring the passage of the First Reform Act and in defusing the revolutionary tides without taking any major strides toward universal mass suffrage. The 1832 reforms were modest, only doubling the voting franchise from 8 percent to about 16 percent of the adult male population (from about 2 to 4 percent of all the population). They also got rid of rotten boroughs and gave independent representation to the new industrializing cities such as Manchester, Leeds, and Sheffield. But this still left many issues unresolved. Hence there were soon further demands for greater voting rights and further social unrest. In response, further reform would follow.

  Why did the British elites give in to the demands? Why did Earl Grey feel that partial—indeed, very partial—reform was the only way to preserve the system? Why did they have to put up with the lesser of the two evils, reform or revolution, rather than maintaining their power without any reform? Couldn’t they just have done what the Spanish conquistadors did in South America, what Austria-Hungarian and Russian monarchs would do in the next several decades when the demands for reform reached those lands, and what the British themselves did in the Caribbean and in India: use force to put down the demands? The answer to this question comes from the virtuous circle. The economic and political changes that had already taken place in Britain made using force to repress these demands both unattractive for the elite and increasingly infeasible. As E. P. Thompson wrote:

  When the struggles of 1790–1832 signalled that this equilibrium had changed, the rulers of England were faced with alarming alternatives. They could either dispense with the rule of law, dismantle their elaborate constitutional structures, countermand their own rhetoric and rule by force; or they could submit to their own rules and surrender their hegemony … they took halting steps in the first direction. But in the end, rather than shatter their own self-image and repudiate 150 years of constitutional legality, they surrendered to the law.

  Put differently, the same forces that made the British elite not wish to tear down the edifice of the rule of law during the Black Act also made them shun repression and rule by force, which would again risk the stability of the entire system. If undermining the law in trying to implement the Black Act would have weakened the system that merchants, businessmen, and the gentry had built in the Glorious Revolution, setting up a repressive dictatorship in 1832 would have entirely undermined it. In fact, the organizers of the protests for parliamentary reform were well aware of the importance of the rule of law and its symbolism to the British political institutions during this period. They used its rhe
toric to bring home this point. One of the first organizations seeking parliamentary reform was called the Hampden Club, after the member of Parliament who had first resisted Charles I over the ship money tax, a crucial event leading up to the first major uprising against Stuart absolutism, as we saw in chapter 7.

  There was also dynamic positive feedback between inclusive economic and political institutions making such a course of action attractive. Inclusive economic institutions led to the development of inclusive markets, inducing a more efficient allocation of resources, greater encouragement to acquire education and skills, and further innovations in technology. All of these forces were in play in Britain by 1831. Clamping down on popular demands and undertaking a coup against inclusive political institutions would also destroy these gains, and the elites opposing greater democratization and greater inclusiveness might find themselves among those losing their fortunes from this destruction.

  Another aspect of this positive feedback is that under inclusive economic and political institutions, controlling power became less central. In Austria-Hungary and in Russia, as we saw in chapter 8, the monarchs and the aristocracy had much to lose from industrialization and reform. In contrast, in Britain at the beginning of the nineteenth century, thanks to the development of inclusive economic institutions, there was much less at stake: there were no serfs, relatively little coercion in the labor market, and few monopolies protected by entry barriers. Clinging to power was thus much less valuable for the British elite.

  The logic of the virtuous circle also meant that such repressive steps would be increasingly infeasible, again because of the positive feedback between inclusive economic and political institutions. Inclusive economic institutions lead to a more equitable distribution of resources than extractive institutions. As such, they empower the citizens at large and thus create a more level playing field, even when it comes to the fight for power. This makes it more difficult for a small elite to crush the masses rather than to give in to their demands, or at least to some of them. The British inclusive institutions had also already unleashed the Industrial Revolution, and Britain was highly urbanized. Using repression against an urban, concentrated, and partially organized and empowered group of people would have been much harder than repressing a peasantry or dependent serfs.

  The virtuous circle thus brought the First Reform Act to Britain in 1832. But this was just the beginning. There was still a long road to travel toward real democracy, because in 1832 the elite had only offered what they thought they had to and no more. The issue of parliamentary reform was taken up by the Chartist movement, whose People’s Charter of 1838 included the clauses

  A vote for every man twenty-one years of age, of sound mind, and not undergoing punishment for crime.

  The ballot.—To protect the elector in the exercise of his vote.

  No property qualification for members of Parliament—thus enabling the constituencies to return the man of their choice, be he rich or poor.

  Payment of members, thus enabling an honest tradesman, working man, or other person, to serve a constituency, when taken from his business to attend to the interests of the Country.

  Equal Constituencies, securing the same amount of representation for the same number of electors, instead of allowing small constituencies to swamp the votes of large ones.

  Annual Parliaments, thus presenting the most effectual check to bribery and intimidation, since though a constituency might be bought once in seven years (even with the ballot), no purse could buy a constituency (under a system of universal suffrage) in each ensuing twelve-month; and since members, when elected for a year only, would not be able to defy and betray their constituents as now.

  By the “ballot,” they meant the secret ballot and the end of open voting, which had facilitated the buying of votes and the coercion of voters.

  The Chartist movement organized a series of mass demonstrations, and throughout this period Parliament continually discussed the potential for further reforms. Though the Chartists disintegrated after 1848, they were followed by the National Reform Union, founded in 1864, and the Reform League, which was founded in 1865. In July 1866, major pro-reform riots in Hyde Park brought reform right to the top of the political agenda once more. This pressure bore dividends in the form of the Second Reform Act of 1867, in which the total electorate was doubled and working-class voters became the majority in all urban constituencies. Shortly afterward the secret ballot was introduced and moves were made to eliminate corrupt electoral practices such as “treating” (essentially buying votes in exchange for which the voter received a treat, usually money, food, or alcohol). The electorate was doubled again by the Third Reform Act of 1884, when 60 percent of adult males were enfranchised. Following the First World War, the Representation of the People Act of 1918 gave the vote to all adult males over the age of twenty-one, and to women over the age of thirty who were taxpayers or married to taxpayers. Ultimately, all women also received the vote on the same terms as men in 1928. The measures of 1918 were negotiated during the war and reflected a quid pro quo between the government and the working classes, who were needed to fight and produce munitions. The government may also have taken note of the radicalism of the Russian Revolution.

  Parallel with the gradual development of more inclusive political institutions was a movement toward even more inclusive economic institutions. One major consequence of the First Reform Act was the repeal of the Corn Laws in 1846. As we saw in chapter 7, the Corn Laws banned the import of grains and cereals, keeping their prices high and ensuring lucrative profits for large landowners. The new parliamentarians from Manchester and Birmingham wanted cheap corn and low wages. They won, and the landed interests suffered a major defeat.

  The changes in the electorate and other dimensions of political institutions taking place during the course of the nineteenth century were followed by further reforms. In 1871 the Liberal prime minister Gladstone opened up the civil service to public examination, making it meritocratic, and thus continuing the process of political centralization and the building of state institutions that started during the Tudor period. Liberal and Tory governments during this period introduced a considerable amount of labor market legislation. For example, the Masters and Servants Acts, which allowed employers to use the law to reduce the mobility of their workers, was repealed, changing the nature of labor relations in favor of workers. During 1906–1914, the Liberal Party, under the leadership of H. H. Asquith and David Lloyd George, began to use the state to provide far more public services, including health and unemployment insurance, government-financed pensions, minimum wages, and a commitment to redistributive taxation. As a result of these fiscal changes, taxes as a proportion of national product more than doubled in the last three decades of the nineteenth century, and then doubled again in the first three decades of the twentieth. The tax system also became more “progressive,” so that wealthier people bore a heavier burden.

  Meanwhile, the education system, which was previously either primarily for the elite, run by religious denominations, or required poor people to pay fees, was made more accessible to the masses; the Education Act of 1870 committed the government to the systematic provision of universal education for the first time. Education became free of charge in 1891. The school-leaving age was set at eleven in 1893. In 1899 it was increased to twelve, and special provisions for the children of needy families were introduced. As a result of these changes, the proportion of ten-year-olds enrolled in school, which stood at a disappointing 40 percent in 1870, increased to 100 percent in 1900. Finally, the Education Act of 1902 led to a large expansion in resources for schools and introduced the grammar schools, which subsequently became the foundation of secondary education in Britain.

  In fact, the British example, an illustration of the virtuous circle of inclusive institutions, provides an example of a “gradual virtuous circle.” The political changes were unmistakably toward more inclusive political institutions and were the result of demands
from empowered masses. But they were also gradual. Every decade another step, sometimes smaller, sometimes larger, was taken toward democracy. There was conflict over each step, and the outcome of each was contingent. But the virtuous circle created forces that reduced the stakes involved in clinging to power. It also spurred the rule of law, making it harder to use force against those who were demanding what these elites had themselves demanded from Stuart monarchs. It became less likely that this conflict would turn into an all-out revolution and more likely that it would be resolved in favor of greater inclusiveness. There is great virtue in this sort of gradual change. It is less threatening to the elite than the wholesale overthrow of the system. Each step is small, and it makes sense to give in to a small demand rather than create a major showdown. This partly explains how the Corn Law was repealed without more serious conflict. By 1846 landowners could no longer control legislation in Parliament. This was an outcome of the First Reform Act. However, if in 1832 the expansion of the electorate, the reform of the rotten boroughs, and the repeal of the Corn Laws had all been on the table, landowners would have put up much more resistance. The fact that there were first limited political reforms and that repeal of the Corn Laws came on the agenda only later defused conflict.

  Gradual change also prevented ventures into uncharted territories. A violent overthrow of the system means that something entirely new has to be built in place of what has been removed. This was the case with the French Revolution, when the first experiment with democracy led to the Terror and then back to a monarchy twice before finally leading to the French Third Republic in 1870. It was the case in the Russian Revolution, where the desires of many for a more equal system than that of the Russian Empire led to a one-party dictatorship that was much more violent, bloody, and vicious than what it had replaced. Gradual reform was difficult in these societies precisely because they lacked pluralism and were highly extractive. It was the pluralism emerging from the Glorious Revolution, and the rule of law that it introduced, that made gradual change feasible, and desirable, in Britain.