The Mechanisms and Persistence of the Virtuous Circle

Key Insight

Inclusive economic and political institutions, often born from conflict during critical junctures like the Glorious Revolution, tend to persist and expand through a powerful process of positive feedback known as the virtuous circle. This dynamic ensures that once established, these institutions are resilient to attempts at undermining them and foster greater inclusiveness. A core aspect is the logic of pluralistic political institutions, which inherently make it difficult for any single individual, faction, or even a well-intentioned leader, like Franklin Roosevelt when he attempted to 'pack' the Supreme Court, to usurp power. Such attempts are resisted because they threaten the very foundations of pluralism and the shared distribution of power.

The virtuous circle also enshrines the rule of law, dictating that laws must be applied equally to everyone, a principle impossible under absolutism. This means laws cannot be used by one group to unilaterally infringe on the rights of others. This principle not only constrains elites but also promotes greater participation and inclusivity in the political system, as it establishes the idea of legal equality leading to demands for political equality. This underlying logic made it challenging for the British political system to resist calls for broader democracy throughout the 19th century, facilitating the gradual extension of voting rights to all adults.

Furthermore, inclusive political institutions are mutually reinforcing with inclusive economic institutions. This creates another vital mechanism: inclusive economic systems abolish extractive practices like slavery, reduce monopolies, and foster dynamic economies, thereby decreasing the short-term economic benefits obtainable by seizing political power. By the 18th century, Britain's sufficiently inclusive economic institutions meant elites had less to gain from clinging to absolute power and more to lose from widespread repression. This aspect of the virtuous circle rendered Britain's gradual democratization less threatening to elites and more likely to succeed, contrasting sharply with absolutist regimes that maintained extractive economic institutions and met demands for inclusion with repression.