12 - Good Political Institutions

Summary

Are political institutions fundamental causes of economic growth, as a number of political economists have prominently argued (e.g., North, Wallis, and Weingast 2009; Acemoglu and Robinson 2012)? Are they fundamental causes of military prowess, as in the “strong democrats” thesis (Lake 1992)? Are they fundamental causes of financial credibility, so that democracies have a “borrowing advantage” (Schultz and Weingast 2003; Beaulieu, Cox, and Saiegh 2012)?

These general propositions derive, in good part, from particular understandings of England's Glorious Revolution. Indeed, one can rephrase each question in terms of that case. Did the Glorious spark the Industrial Revolution? Did the Revolution lead to England's many battlefield successes? Did the Revolution underpin England's financial revolution?

I have addressed the England-specific questions in Part I. In this conclusion, I focus on three broader questions. First, what are good political institutions? Second, in what sense are good political institutions fundamental causes of a state's ability to raise revenues or the health of its economy? Third, if good political institutions increase state revenue and economic performance, why haven't they been more widely imitated?

What Are Good Political Institutions?

In the view of Enlightenment theorists, good political institutions imposed “checks and balances.” As James Madison wrote in Federalist #51, the trick was to “so [contrive] the interior structure of the government as that its several constituent parts may, by their mutual relations, be the means of keeping each other in their proper places.” A bit more precisely, one must give “to those who administer each department [of government] the necessary constitutional means and personal motives to resist encroachments of the others” (italics added).

The “constitutional means” to which Madison referred have typically been construed as vetoes. Thus, we arrive at a classic formula for constraining the executive – namely, requiring that other constitutional veto players approve its decisions. I would, however, highlight three points that complicate the project of checking the executive by creating veto players.

First, as many have pointed out, if the executive appoints the other veto players, then it is unlikely they will use their powers to prevent tyrannical acts by the executive. Thus, formal veto powers must always be combined with sturdy reasons to expect that legislators and judges will be independent of the executive.