Rich nations are rich largely because they managed to
develop inclusive institutions at some point during the past
three hundred years. These institutions have persisted
through a process of virtuous circles. Even if inclusive only
in a limited sense to begin with, and sometimes fragile,
they generated dynamics that would create a process of
positive feedback, gradually increasing their inclusiveness.
England did not become a democracy after the Glorious
Revolution of 1688. Far from it. Only a small fraction of the
population had formal representation, but crucially, she was
pluralistic. Once pluralism was enshrined, there was a
tendency for the institutions to become more inclusive over
time, even if this was a rocky and uncertain process.
In this, England was typical of virtuous circles: inclusive
political institutions create constraints against the exercise
and usurpation of power. They also tend to create inclusive
economic institutions, which in turn make the continuation
of inclusive political institutions more likely.
Under inclusive economic institutions, wealth is not
concentrated in the hands of a small group that could then
use its economic might to increase its political power
disproportionately. Furthermore, under inclusive economic
institutions there are more limited gains from holding
political power, thus weaker incentives for every group and
every ambitious, upstart individual to try to take control of
the state. A confluence of factors at a critical juncture,
including interplay between existing institutions and the
opportunities and challenges brought by the critical
juncture, is generally responsible for the onset of inclusive
institutions, as the English case demonstrates. But once
these inclusive institutions are in place, we do not need the
same confluence of factors for them to survive. Virtuous
circles, though still subject to significant contingency,
enable the institutions’ continuity and often even unleash
dynamics taking society toward greater inclusiveness.
As virtuous circles make inclusive institutions persist,
vicious circles create powerful forces toward the
persistence of extractive institutions. History is not destiny,
and vicious circles are not unbreakable, as we will see
further in chapter 14. But they are resilient. They create a
powerful process of negative feedback, with extractive
political institutions forging extractive economic institutions,