ABSTRACT
A common fallacy of our time is that because the institutions of the more advanced countries evolved over many generations so too must the developing countries follow their own evolutionary path and slowly create institutions that match their special needs and values. Any effort to shortcut the evolutionary process, goes the argument, will be a recipe for disaster. The error of this view lies in the conviction that there are no universal truths about institutions, that a society only sets itself such institutional tasks as it can solve through original experimentation and learning, and that the task only presents itself when the social conditions for its solution already exist. The argument advanced in this book is that if an institutional solution has been tried and tested, knowledge of it can be used to advantage by other societies. With appropriate knowledge, motives, resources, opportunities and leadership, it is possible to compress the evolutionary process by imitating the successful institutional systems. Contemporary societies in transition to capitalism have no need to rediscover by a long and costly route of trial and error the institutions that enable durable prosperity and dynamic social order. The term ‘capitalism’ is used unusually in this book to describe a particular kind of institutional system found in the more advanced societies, one which has arisen as a solution to the problem of coordinating the institutional subsystems of market regulation, law, public administration, and political representation. This is a general solution manifested in rules about institutional procedures, rules about the functions of key institutional subsystems, and rules about the formulation and enforcement of rules. It is quite different from the everyday temporal and conjunctural solutions that must continually be found to resolve problems of context, such as new regulations for new markets or new methods for managing a public service. Rather it encompasses overarching principles that enable modern society to coordinate its institutional forces in such a way that the everyday tasks can be accomplished most effectively without threatening the survival and further evolution of the system. I will examine the institutional nature of capitalism, and priorities of institutional change in a capitalist direction, themes which have a long history in the social sciences. I draw on the scholarship of Weber, Schumpeter, Hayek, Popper, and Parsons, among others. In contrast to many present-day social scientists,
these writers expressed considerable intellectual confidence in capitalism and had a keen sense of the policy dimensions of capitalist transitions. In exploring and adapting their work I have aimed for a composite and favourable analysis of capitalism’s institutional architecture and the methods of its construction. Two insights emerge, which can be the building blocks of ideas that communicate the nature of capitalist transition to the agents of change.
