In the Shadow of Violence: the Problem of Development in Limited Access Societies

Douglass North (Washington University (St Louis))
John Wallis (University of Maryland)
Steven Webb (World Bank)
Barry Weingast (Stanford University)
Alberto Diaz-Cayeros (University of California San Diego)
Gabriella Montinola (University of Californa Davis)
Jong-Sung You (University of California San Diego)

Abstract: The limited access order (LAO) framework explains how political and economic institutions limit violence. In LAOs the political system creates rents and manipulates economic interests so that powerful groups have an interest in restraining violence. Because fighting reduces rents, granting privileges and rents to organizations with violence capacity gives them an incentive to cooperate rather than fight—to make and sustain elite bargains. Our research with nine case studies shows how some LAOs have been able to promote substantial development, income growth and poverty reduction. But sometimes they have failed. The session presents an overview of the findings and three of the case studies—Mexico, Philippines and South Korea. In our cases, the rent-sharing commitments were initially on a personal level, and sometimes these converted into rule-based institutions. The LAOs were not static. As circumstances changed, so too did important features of each LAO, even while they remained in the LAO logic for decades and centuries. LAOs in our cases matured at times, and this was along several dimensions—control of violence, the credibility of rule of law, and the durability of organizations and agreements. But typically the pace and even the direction of change was not the same on all dimensions. LAOs often copied institutions from upper income countries – elections, commercial banks, stock markets, etc—but these institutions operated differently in LAOs and thus had different effects than in open access societies.

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