Limited Access Orders in the Developing World: A New Approach to the Problems of Development
Author: Douglass C. North et al.
Size: 50 pages (555 KB)
Why do existing development approaches based on transfer of western social and political dynamics to non-western countries often fail? This paper proposes a conceptual model of developed countries, or open access orders (OAOs) and developing countries, or limited access orders (LAOs). OAOs organise themselves around competition and a government monopoly over violence. Since they do not have a secure state monopoly on violence, LAOs organise themselves to control violence among elite factions which divide the country's economy among themselves. Development reforms will fail if they attempt to create OAOs in societies ill-prepared for such fundamental change in their social and political dynamics.
OAOs are upper-income, advanced industrial countries that have open competition, multi-party democratic political systems and a secure government monopoly over violence. In general, OAOs allow all citizens to enter into economic, political, religious and educational activities, form organisations and enjoy an impartially-enforced rule of law. OAOs have developed institutional forms and mechanisms that allow the delivery of public goods and services based on relatively objective, impersonal and impartial criteria. All OAOs have sophisticated public and private organisations. The OAO state uses specialised institutions and division of labour.
In LAO states, however, elite factions divide up control of the economy, each getting some share of the rents. Elite access to rents creates incentives for them to control violence most of the time.
LAOs take any institutional form or mechanism and bend it to the purpose of rent-creation to sustain the existing dominant coalition. The standard development approach aims to introduce elements of property rights, rule of law and democratic governance in unmodified OAO form into developing societies. These elements can fail in LAOs if the distribution of the potential for violence is not addressed. Increased competition, open access and market freedom can weaken the rent-creation system that holds the LAO together. Attempts to remove corruption, create the rule of law and institute democracy with competitive parties can destabilise an LAO. Such reforms threaten the basis of order and risk generating violence.
North, D. et al, 2007, 'Limited Access Orders in the Developing World: A New Approach to the Problems of Development', Policy Research working paper, WPS 4359, World Bank, Washington, D.C.