Impersonal Rules: Reconciling Democracy, Capitalism, and Equality

In their paper "Democracy, Capitalism, and Equality: The Importance of Impersonal Rules," Naomi R. Lamoreaux and John Joseph Wallis present a compelling argument about the relationship between political and economic systems. They draw upon an extensive range of literature, from the measurement of democracy to the dynamics of political instability and economic growth, and employ a comparative historical analysis. This analysis reveals the transformative role of impersonal rules in the emergence of advanced capitalist democracies, a critical point in their argument.

Lamoreaux and Wallis delve into the experiences of the United States, Britain, and Germany, tracing the distinct trajectories each nation followed in their transition from identity rules to impersonal ones. The United States and Britain successfully adopted impersonal rules, which facilitated the emergence of consolidated political parties with long time horizons and an interest in preserving the new regime. These changes removed barriers to the free flow of resources, allowing capitalism to thrive. In contrast, Germany's partial adoption of impersonal rules, limited to business corporations, proved insufficient to prevent the collapse of its factionalized democracy.

Their analysis reveals a striking pattern: a robust positive correlation between economic prosperity and democratic development among the wealthiest nations, contrasted with a lack of significant correlation among the poorest. This finding underscores the pivotal role of impersonal rules in transforming unstable, factionalized societies into thriving, advanced capitalist democracies. The authors argue that societies governed by identity rules are inherently unstable and constrain capitalist development, as elites rely on rent-seeking to maintain short-term political stability. Introducing democracy in such societies often exacerbates instability and rent-seeking, creating a vicious cycle that can only be broken by adopting impersonal rules.

Lamoreaux and Wallis's work serves as a significant contribution to the scholarly discourse and a call to action. They invite readers to embark on a journey of intellectual exploration that challenges preconceived notions, enriches understanding, and illuminates potential pathways toward a more equitable and prosperous future for all. Their call to action encourages readers to consider the implications of the research and its potential impact on the future of political and economic systems.

As readers navigate the pages of this paper, they will find themselves immersed in a rich tapestry of ideas and evidence woven together with care and precision. Lamoreaux and Wallis's work is a testament to the power of rigorous scholarship to shed light on the forces that shape the course of nations and inspire new avenues of exploration and understanding. The authors provide a solid foundation for further inquiry and debate, sparking the imagination of those who seek to unravel the complex interplay between political and economic systems.

Questions

How did the specific historical, cultural, and institutional contexts of the United States, Britain, and Germany influence their paths toward the adoption or non-adoption of impersonal rules, and what can we learn from these experiences to better understand the challenges faced by other countries in transitioning from identity rules to impersonal ones? ??

In an era of increasing political polarization and rising economic inequality, how can countries with factionalized democracies and identity rules overcome the resistance of entrenched elite interests to adopt impersonal rules, and what role can grassroots movements, civil society organizations, and international institutions play in supporting such transitions? ??

As rapid technological change and globalization continue to reshape the economic and political landscape, what new challenges and opportunities may arise for the relationship between impersonal rules, capitalism, and democracy? ?? How can policymakers, scholars, and citizens work together to adapt and strengthen these institutions to ensure their resilience and effectiveness in the face of evolving circumstances? ??

Reference ??

Lamoreaux, N. R., & Wallis, J. J. (2024). Democracy, Capitalism, and Equality: The Importance of Impersonal Rules (NBER et al. No. 32930). National Bureau of Economic Research. Retrieved from: https://www.nber.org/papers/w32930