Why Nations Fail: The Origins of Power, Prosperity, and Poverty (48 page)

W
E SAW HOW INCLUSIVE
economic and political institutions emerge. But why do they persist over time? The history of the Black Act and the limits to its implementation illustrate the virtuous circle, a powerful process of positive feedback that preserves these institutions in the face of attempts at undermining them and, in fact, sets in motion forces that lead to greater inclusiveness. The logic of virtuous circles stems partly from the fact that inclusive institutions are based on constraints on the exercise of power and on a pluralistic distribution of political power in society, enshrined in the rule of law. The ability of a subset to impose its will on others without any constraints, even if those others are ordinary citizens, as Huntridge was, threatens this very balance. If it were temporarily suspended in the case of the peasants protesting against elites encroaching on their communal lands, what was there to guarantee that it would not be suspended again? And the next time it was suspended, what would prevent the Crown and aristocracy from taking back what the merchants, businessmen, and the gentry had gained in the intervening half century? In fact, the next time it was suspended, perhaps the entire project of pluralism would come crumbling down, because a narrow set of interests would take control at the expense of the broad coalition. The political system would not risk this. But this made pluralism, and the rule of law that it implied, persistent features of British political institutions.
And we will see that once pluralism and the rule of law were established, there would be demand for even greater pluralism and greater participation in the political process.

The virtuous circle arises not only from the inherent logic of pluralism and the rule of law, but also because inclusive political institutions tend to support inclusive economic institutions. This then leads to a more equal distribution of income, empowering a broad segment of society and making the political playing field even more level. This limits what one can achieve by usurping political power and reduces the incentives to re-create extractive political institutions. These factors were important in the emergence of truly democratic political institutions in Britain.

Pluralism also creates a more open system and allows independent media to flourish, making it easier for groups that have an interest in the continuation of inclusive institutions to become aware and organize against threats to these institutions. It is highly significant that the English state stopped censoring the media after 1688. The media played a similarly important role in empowering the population at large and in the continuation of the virtuous circle of institutional development in the United States, as we will see in this chapter.

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 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:

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:

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:

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 rhetoric 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