ABSTRACT
This chapter focuses on the fundamental or primary institutions that underpin markets and capitalist development. It deals with the structure of the state that creates and enforces these institutions, whether centralized or fragmented and whether possessing collective and/or distributive power. The chapter then looks at the political nature of the state, how liberal states like Britain and the US became liberal and when and why this occurred, contrasting them with the continental European, Chinese and Tanzanian states with their greater centralization or nation-building impetus, broader public spheres of activity and less liberal stances towards regulation and the private sector. It outlines how that relates to the different variants of state, according to the North, Wallis and Weingast framework of limited access orders (LAOs) and open access orders (OAOs). The chapter finally explores how to interpret the idea of constraints on state power that limit the powers of the state.
