Underlying sources of growth: institutions and the state

This chapter explains how and why democracy, capitalism, and wealth have been correlated since 1870. It uses broadly the North, Wallis, and Weingast (2009) framework to demonstrate that representative political institutions and ready access to incorporation or similar enterprise forms have been mutually reinforcing and conducive to high living standards, widely shared. But linear development or convergence towards such ‘open access’ societies cannot be taken for granted. History suggests that the existence of workably attractive capitalist democracies is unlikely to prevent nationalist, revolutionary, and populist leaders continuing to fashion alternatives, whether by force or by democratic debate.