Dynamics among Nations: The Evolution of Legitimacy and Development in Modern States

© 2013 Massachusetts Institute of Technology

All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher.

Library of Congress Cataloging-in-Publication Data

Root, Hilton L.

Dynamics among nations : the evolution of legitimacy and development in modern states / Hilton L. Root.

   p.  cm.

Includes bibliographical references and index.

ISBN 978-0-262-01970-5 (hardcover : alk. paper)

ISBN 978-0-262-31827-3 (retail e-book)

1. International economic relations. 2. Globalization. 3. State, The. 4. Economic development. 5. Evolutionary economics. I. Title.

HF1359.R66 2013

337—dc23

2013010260

[CIP DATA]

10 9 8 7 6 5 4 3 2 1

d_r1

Contents

Preface and Acknowledgments

1    Post-Globalization: Complexity in the Governance of a Networked Global Society

2    Opening the Doors of Complexity

3    Economic Incentives and the Replication of Social Complexity

4    Coevolution versus Liberal Internationalism

5    Promises and Pitfalls of New Institutional Economics

6    Dancing Landscapes: How Interdependency Shapes the Optimization Challenge of Globalization

7    Accelerators of Stateness: System Structure and Network Behavior in the Making of the Modern State

8    Democracy’s Hybrid Architecture

9    Achieving State Capacity: Parallel Political Modernization in China and Europe

10    Does China Challenge the Global Legitimacy of Liberalism?

11    No Captain at the Helm

Glossary

Notes

References

Index

Preface and Acknowledgments

Nature’s evolutionary processes have generated a burgeoning area of inquiry, the study of complexity, which examines how environments and their constituent parts continuously adapt to and transform one another. Complex systems, found everywhere from rain forests to ant colonies to birds in flight, can help us understand how complexity also arises in socioeconomic systems, which is the subject of this book.

Descriptions of international relations routinely concede complexity, but not in the scientific sense. Employed here, complexity is a property of systems comprising many interdependent parts, arising when the behavior of the whole emerges from the interactions of its components. A change in one part of the system affects other parts until the system acquires new properties that its individual components did not possess. Thus, to understand the collective behavior of a social system, and how it arises from the relationships of its constituent parts, one must think about systems in ways that differ significantly from conventional approaches to solving large-scale social problems.

Shifts in trade and in geopolitical influence have created new networks and brought about an interconnectedness of the world’s many social and economic systems that exist at different stages of development. These networks are not only interconnected, they are constantly reacting to the behaviors, or anticipated behaviors, of other networks that are also repositioning themselves as the landscape they share is altered. Together they shape the larger system, creating rules and identities at the macro level that differ from those at the micro levels.

Interdependence among connected but diverse parts is a characteristic that distinguishes complex from merely complicated systems. In a complex system, the removal of a single part will change the behaviors of the remaining components; in a merely complicated system, such as a clock or a nuclear reactor, the removal of one part will not cause a change in the remaining parts, although the system itself may cease to function. Complex systems may be organized hierarchically, but they can also self-organize without design, making it impossible to predict the behaviors of numerous components in constantly shifting environments and organization formations. What happens in one component may affect seemingly unrelated components, so distinguishing cause and effect is not easy

My own search for the rules of social complexity began without any idea or language to describe what I was trying to unravel. First, there was a dissertation on the social origins of different land-use patterns in pre-modern Europe, completed at the University of Michigan in 1983. Interest in economic history took me to the California Institute of Technology later that year. Upon my arrival, Professor Murray Gell-Mann, the Nobel laureate in physics and part-time specialist in economic history, greeted me with harsh words, warning that I should expect little progress toward understanding economic development or how to accelerate its progress around the world. The tools of contemporary economics, he maintained, were insufficient for the understanding of a complex world. Instead of trying to comprehend the implications of complexity for policy, economists were using tools that dealt only with systems in equilibrium or that treated one part of a system as a microcosm of the whole. It made just as little sense, he warned, to look to the sister social sciences, which were similarly reductionist and just as likely to envision economic development as a universal change agent that would advance all societies along the same institutional and social trajectory.

In 1984, Gell-Mann embarked upon the establishment of the Santa Fe Institute, the pivotal center for the study of complex adaptive systems. SFI’s work also began to call into question many of the key assumptions of contemporary economics. But at the same time, mainstream academic political economy circles were framing a new theory, in all you need to know packaging, about the causes of economic growth. New institutional economics became the blueprint of enlightened social engineering, with prescriptions for boosting the level of a society’s positive incentives for economic growth when they did not occur naturally.

I too was swept up with the NIE and institutional development. I owe much of my intellectual development that followed to constructive engagement with economic historians Lance E. Davis, Philip T. Hoffman, Douglass North, and Roger. S. Schofield; comparative politics specialist Robert Bates; political theorist Norman Schofield; and philosopher Brian Barry. All were essential architects of the new consensus on the primacy of institutions. I left Caltech in 1985 for the University of Pennsylvania, where my career took an unexpected turn toward global development policy, thanks to economists and global rainmakers Mancur Olson and Larry Summers. Both were seeking a holistic approach to economic development, one that included social institutions. Olson invited me to participate in field studies for his USAID-funded program, Institutional Reform and the Informal Sector (IRIS), applying perspectives on the economics of organization developed by regulatory economists (Armen Alchian, Harold Demsetz, and Michael Jensen) to the study of institutional capacity in francophone Africa. A schema of good governance began to take shape. An invitation by Summers, then chief economist at the World Bank, to research the institutional foundations of East Asia’s high-performing economies strengthened that framework of good governance. For the next decade, with many international organizations standing behind my efforts, I explored the functional and structural attributes of the institutions required for emerging regions to yield capitalist economies.

Real-time opportunities to implant good governance through donor assistance kept coming my way. In 2001, John Taylor, then undersecretary at the Treasury Department, provided an opportunity to work on a concept that eventually became a major US foreign aid program, the Millennium Challenge Corporation. Several years later, I was tapped by USAID to lead a multi-country program, Enhancing Government Effectiveness, in Islamic-majority countries that were heavily dependent on US donor assistance. Over a five-year span, we examined government institutions in justice, finance, and planning, along with the social programs in education and health, and later, the management of investments in physical infrastructure, water, sewerage, and transportation. The demand for expertise on building institutions in targeted third world environments became a major specialization within the development community. But setting functional goals and delegating instructions for filling gaps of social capacity has rarely proved successful.

All of these opportunities ultimately helped clarify why institutional reform is not sufficient to define a functioning social system. Explanations of economic growth that focus on institutions do not define how relationships among the institutional components give rise to the collective behavior of the system of international relations. They reveal too little about how collections of parts form functioning wholes, which details are critical, or even what rules of interaction transform the collections of parts into wholes. Even when well-intentioned institutional reforms result in seemingly successful projects and programs, donor assistance is rarely found to be the source of the rise of a functioning society equipped to undertake complex collective tasks.

To decrease the gaps between good intentions and failed outcomes, we must improve our understanding of how collective and networked properties of a system arise. And to understand how these properties arise, we must understand why. For this, two key ideas of complexity science—emergence and interdependence—are needed. Emergence is what occurs in a system when the behaviors between and among agents contribute to a more complex behavior of the whole. The system acquires new structures and properties that its individual components did not possess. Interdependence describes how the parts of a system affect other parts.

Conventional approaches to international relations and to other complex human environments presume the necessity of a hierarchical command, but when an activity requires the coordination of many different levels of knowledge, experience, and organization, then the problem-solving capacity of any single individual or institution, and their efforts to centralize control, will fail. Solving problems of complexity requires specialization in distributing action and authority. For this reason increasing competition among firms and nations for obtaining resources needed to produce and distribute goods and services is creating a networked global civilization.

Moreover many different network systems arise in global political economy; some can strengthen system-level adaptability while others can weaken it. Already the global environment faces an important change as various control structures arising locally compete as standards of global governance. At the end of the cold war, modernization theory described a globalization that would propel all aspirants to higher income-generating economies along the developmental trajectory already traveled by the West. Instead, many emerging democracies are becoming full-fledged threats to the stability of international system. This should caution us that no particular developmental pathway of either failure or success attains universal rank. Social systems evolve in the local contexts in which they find themselves. The iconoclastic seeds that Murray Gell-Mann planted are growing into a large and fertile forest.

The economist and social psychologist Herbert Simon has demonstrated the extent of human cognitive limitations. We can never fit into our minds the entire system of which we are a part, so we work from maps, metaphors, or other systems of symbolic representation. We are part of whatever prediction or strategy we devise, and this impedes our objectivity. Acknowledging these constraints, let us consider the implications of the scientific study of complex systems for social policy. My hope is that this effort will demonstrate how policy makers can better manage change as the world we inhabit becomes increasingly interdependent.

Discovering complexity in social systems has been a journey, but the path has not been a lonely one. I have encountered many fellow travelers, and much of the knowledge that I have gained and hope to impart in writing this book is from scholars and policy practitioners who share little in common with my own background. Here are some of the landmarks.

In 2010, Sven Steinmo commented on one of the chapters at an annual meeting of the American Political Science Association. Robert Axtell invited me on two occasions to share views with colleagues and students in the Department of Computational Social Science at George Mason University’s Krasnow Institute for Advanced Study.

In March 2011, Mercatus Center program director Claire Morgan organized a book conference at the Center in which Paul Dragos Aligica, Aaron Frank, Armando Geller, Alexander Hamilton, Garrett Jones, Siona Listokin-Smith, John Nye, Itir Ozer, Jessica Heineman-Pieper, Ian Vasquez, and Chunjuan Nancy Wei, offered many different perspectives to consider. What emerged from Jack Goldstone’s adept moderating was the wisdom of the crowd, and from it, ideas that will germinate in the works of all the participants.

Later in 2011, Robert Lempert convoked a meeting on the manuscript at Rand’s Frederick S. Pardee Center for Longer Range Global Policy and the Future Human Condition. Michael D. McGinnis and Elinor Ostrom organized a talk on Dynamics in Social Systems: The Study of Complexity and Institutional Change at The Workshop in Political Theory and Policy Analysis Fall 2011 Colloquia at Indiana University. On Michael Woolcock’s invitation I presented chapter 7, Accelerators of ‘Stateness, at the World Bank’s Development Economics Research Group (DECRG) Social Science and Policy Seminar Series.

In June 2011, a National Endowment for the Humanities fellowship allowed me to participate in the Institute for Advanced Topics in the Digital Humanities at the University of North Carolina, Charlotte, and gave me access to the expertise of Jason McKenzie Alexander, Aaron Bramson, and Patrick Grim. The research on Chinese influence in Sri Lanka was collected under a Fulbright Specialist Grant, Project 3945, Grantee ID No. 8841810. In-country interviews were conducted between June 23, 2011, and July 2, 2011, under strict assurances by the author of complete anonymity.

In December 2011 at Peking University, a multi-departmental, two-week workshop/course on this book manuscript was organized by Jun Fu, dean of the university’s School of Government; Shiding Liu, a professor of the university’s Center for Research on Development of China Society; Zeqi Qiu, dean of the Center; and Tianbiao Zhu, vice dean of the School of Government. Two brilliant students, Wanshun Liu and Hu Peng, made all the local arrangements. Noel D. Johnson chaired a meeting of the Economic History Workshop at George Mason University’s Department of Economics in 2012.

Alice Amsden, Philip Auerswald, Ray Bowen, Yi Feng, William Ferguson, Lloyd Fernando, Jacek Kugler, Peter Lewis, Yan Li, Shoji Nishimoto, Paul Ormerod, Nancy Overholt, Ben Ramalingam, and Qing Tian shared insights on the manuscript at various stages.

The graduate students who have taken my PhD seminar on global public policy deserve mention. I thank them all for their interest and their time. Special thanks go to PhD students at the George Mason School of Public Policy who acted as research assistants, Kanishka Balasuriya, Ammar Malik, and Ha Vu.

Dinah McNichols’s editing has been indispensible. Victor Teicher provided generous financial support.

The voice of each one of my mentors, some now gone, grows more audible every day of my life. I would like to thank Kenneth Arrow, Gary S. Becker, Marvin Becker, David D. Bien, James Coleman, Milton Friedman, François Furet, Robert Hartwell, Robert P. Inman, Alan Charles Kors, Emmanuel Le Roy Ladurie, Bruce Bueno de Mesquita, Douglass North, Mancur Olson, Elinor and Vincent Ostrom, George Schultz, John Taylor, Charles Tilly, and James Allen Vann. The record reveals I have been a taker for far too long. I hope it is not too late to reform myself.

Washington, DC

January 2013

1

Post-Globalization: Complexity in the Governance of a Networked Global Society

All development and security policies presume a theory of change. This book considers the partnership of modernization theory, the dominant theory of social change since World War II, and liberal internationalism, the foreign policy agenda the West has promoted in political and economic development since the cold war.¹ It will contrast the analytical framework of modernization theory with that of the evolutionary theory of complexity to explain unforeseen development failures, governance trends, and alliance shifts.

International liberalism presumes that if developing societies adopt trade, and monetary and fiscal reforms that integrate them into the global economy, the intensified speed of economic change will lead to changes in other societal structures and expedite a sociopolitical convergence toward global cooperation—a truly international society. It did not anticipate that social and political change move at a much slower pace than economic and technological change, and that considerable divergence can occur between the pace of economic and technological transition and the more glacial pace of cultural and societal transitions. Instead of the anticipated convergence toward a common framework of values, the growing economic interconnectedness is establishing new norms of optimal governance based on growing diversity and disparity between the West and newly rising powers.

As it transitions from regional applications to global repercussions, liberalism must face many challenges it did not anticipate, and for which it is ill prepared. The world’s population growth and the flow of interregional trade are concentrating among regimes that operate far from liberal conceptions of optimality. Both of these trends, trade shifts and demographic pressures, have implications for the evolution of global cooperation and for the kinds of policies that can be sustained through international cooperation. Liberal internationalism’s linkages with modernization theory fail to provide convincing explanations for the unanticipated variations in governance that can arise from the local pursuit of wealth and power.²

The liberal West, which has existed at the summit of liberal internationalism’s hierarchical ladder since the end of the cold war, anticipated a period of stable and consistent evolution toward the best practices in governance that its economic success had made legitimate. But the predictions of modernization theory, which presumes that as societies urbanize and prosper, they will converge to adopt the values of liberal internationalism, have not materialized. Since the collective behavior of the global system depends on the behavior of its parts, variations in the latter can cause systemwide effects that make the maintenance of system’s stability more complex.

Although liberal internationalism is premised on the classical idea of cooperation among equals, which obviates the need for a central enforcer, to make it a global standard of development requires top-down guidance from the West.³ A central administrator, the United States, provides the system’s organization and management. In the future, however, there may be no place at the top for a central power that can organize and manage the system. There may not be a top at all. Conventional thinking in geopolitics holds that a world in which no single nation can maintain an undisputed place at the top cannot be stable: it is a world adrift, in search of a leader. Every facet of global interaction is being affected by this transition from hierarchies to networked systems, requiring a new language for comprehending change processes.⁴

The system of international relations, like most complex ecosystems, such as the nervous system or a rain forest, is yielding to its rules of complexity. In complex systems, a central administrator rarely guides the collective behaviors that characterize developmental processes. The system itself has a collective behavior that depends on all its parts. Rather than convergence toward a dominant model, or global optimum, the interactive dynamics are coevolutionary; their interactions result in reciprocal and evolving change. In the global social system, interdependence is causing a transition with qualitatively different impacts for each of its affected regions. Illiberal and liberal regimes alike engage in a pattern of co-creation, each shaping the other. This coevolutionary process is dispelling expectations of convergence, and it can cause shifts to the larger system.

As environments become more interdependent, strategies for survival depend increasingly on the cost functions agents must face under local circumstances. Instead of the mimicry of higher order adaptations that conventional social theorists predict, functional segregation intensifies as new tiers of organization emerge. Unfilled niches in ecosystems are rare. As nations jostle for wealth and power, competition and aggression coexist within webs of symbiosis and cooperation, creating an unforeseen range of governance variations (Smil 2008, 163–65). An analogy is the physics of aviation, although they are the same for all aircraft, wartime requirements cause cascades of innovation to fill special functions, resulting in the rapid divergence of military and civilian aircraft. Combat structures with well-separated traits arise.

Similarly adversaries have become more diverse since the end of the cold war, when the targets were other states. Today’s adversaries are decentralized transnational networks that appear in many sizes and shapes; they are not geographically fixed, hierarchically governed, or bureaucratically managed, and they can come from a number of sources, confronting all corners of the globe with the potential for disaster. Islamic fundamentalism is but one of many forms of stateless adversaries without fixed boundaries that can turn asymmetries of power to their advantage (Treverton and Wilhelm 2009).⁵

Competition in highly interdependent global environments produces far greater local variation and diversity of structures and strategies than modernization theory ever anticipated. Rather than a one-to-one mapping of the traits of successful incumbents by their emerging challengers, heightened competition drives social agents to alter their environments by creating niches that offer new opportunities for interaction, and that competition in turn reveals new niches that other actors can exploit.⁶ Even strategies that are suboptimal or second best, from an economy’s production possibility curve, may contribute to overall system durability (Arthur, Durlauf, and Lane 1997).

Collective Security and Collective Values

In the post–cold war period, the long-term security strategy of the West has been based on the belief that as countries embrace liberalism, they become more reliable allies.⁷ Thus heavy investments in promoting the values of liberal internationalism have been guided by the hope that establishing a universal norm will ensure global security.

Victories in the Second World War and the cold war placed the liberal market democracies of the West in a position to be administrators of the global system, possessing the authority to determine the rules of legitimate economic and political order by which others might play (Amsden 2007). Economic success bestowed another system-defining role on the West—it could now designate the characteristics of the effective state. But while liberal internationalism enjoys voluntary compliance among like-minded liberal regimes of European descent, its reach is parochial.

A consensus among the Western powers on domestic policy goals, such as social protection against unemployment, disability, poverty, ill health, and the frailties of old age, made it easy to agree on the rules needed to operate within the world economy.⁸ Shared values and ideas facilitated agreement about what public goods would enhance collective security and well-being. Enforcement capabilities were thin and the specifics of cooperation never fully articulated, but cooperative security had a mutually reinforcing logic—rather than balancing each other as potential rivals, the Western states built institutions that matched their common outlook. States that shared fundamental principles could act cooperatively without a central enforcer.

The West presumed that aspirants would accept the same values, and that participating in an open system of international trade would signal acceptance of a common framework of the norms that constitute political advancement. By the late 1980s the West’s macroeconomic beliefs had also converged toward global optima: the axiomatic Washington Consensus of standard economic policy reform (Williamson 1990). Thus both the future course of political legitimacy and the course of economic effectiveness were framed in terms predicated by the historical experience of the West.

Confidence in the universal appeal and ultimate triumph of liberal internationalism rests on the belief that both markets (the desire to truck and barter) and democracy (the quest for social recognition) arise out of human nature, and that harnessing these two human drives is the most efficient means to resolve complex universal dilemmas of collective action. Democracy is inherent to the nature of politics and can be suppressed, but only for so long (Fukuyama 1992). Its ascendency gains further support from its strong relationship to capitalist market economics and from the forceful example of prosperous democratic states (Mandelbaum 2007a, b).

Liberal internationalists presume that a growing middle-class roster of countries will bolster system stability, and that the rising middle classes will champion liberal values, further stabilizing the global system by changing countries from within. As international relations theorist John Ikenberry writes (2011, 190):

The American Vision of postwar order also had progressive aspirations. . . . One was that the liberal international order, although first established within the West, would spread outward to non-Western and the developing societies. Democracy and integration into the open capitalist system would, in time, envelope the emerging regions of the world . . . and . . . would drive social and political advancement within the societies that became part of it.

Yet the connection between economic growth and the construction of liberal democracy is rarely exemplified in the trajectories of emerging states. Instead of a liberal system based on universal values, the newcomers protest the invitation to join a Western system. Brazil, Russia, India, and China enjoy the advantages of international law and organization, but they contest the legitimacy of liberal internationalism’s core values—democracy, labor and human rights, an open domestic economy—to be the systemwide ethos. They rebuff limits on state sovereignty, such as the idea of interventionism to protect populations from abuses committed by their own governments. The universal legitimacy of the rule of law, they maintain, need not be bound to Western norms.

The system built upon liberal internationalism is vulnerable to alteration when its values are no longer shared among the dominant powers. If enough actors act myopically, the liberal consensus may collapse or be severely undermined. It only takes enough of these countries, or the right mixes of these countries, and the international ecology will change, calling into question the dominance of liberalism. What will happen to system stability when the core group of liberal democracies no longer constitutes the dominant power but is joined or supplanted by the rising non-Western powers formerly on the periphery of global trade or production?

Policy Diffusion and Unfolding Global Megatrends

The system of global trade has long been characterized by vertical flows overseen by the liberal West, which has assumed that adoption of its values would follow a similar top-town learning process. But emerging economic and demographic trends are changing the global ecosystem in ways that are unfavorable to the continued dominance of liberalism. Changes in the pattern of world trade are transforming its economic geography by reshaping economic borders. In the new geography, the South is moving from the periphery of global trade to the center (Amsden 2001, 2007; Khanna 2008). Emerging economies, which provide 40 percent of global output measured by market exchange rates, are expected to continue growing at rates of 6 percent, while advanced economies stagnate. Economists Uri Dadush and William Shaw (2011) predict that developing countries will increase their share of global exports from 30 to 70 percent of the total by 2050. If they maintain current rates of growth by that time, six of the seven largest economies will be those of developing nations. Economic development scholar Alice Amsden has reported that growth spreads first within regions before it spreads among regions. Being in a fast-growing region makes a difference. In East Asia the growth of interregional trade is motivating the idea of an Asia bloc (2007, 154–59).

The distribution of interregional trade once predominantly North–South is also changing, diminishing the West’s centrality to global interregional trade and production. Trade flows are moving along new paths, and the percentage of global trade that is South–South has increased as a percentage of total trade. Between 2001 and 2011 China’s trade with Latin American, for example, grew 1,200 percent, from $10 billion to $130 billion. This means that Latin American countries like Bolivia, and Venezuela that have adversarial relations with the West will have new outlets for trade and investment. If those trends continue, at some point along the horizon, horizontal South–South flows will overtake vertical North–South flows. And as trade flows are altered, what began as commercial networks based narrowly on national interests may evolve into cultural, political, and intellectual affinities.

Many countries that have become dependent on China for trade have also become dependent on China for access to military and other vital technologies. South American militaries were once dependent on the West for military supplies, but China is already the primary source of weapons for both Bolivia and Venezuela. At least twenty regimes in Africa similarly depend on Chinese civil and military technology. Dependence on China’s technological expertise opens up many venues for reshaping the political rule, along with the economic arrangements, of its partners. Once dependence on Chinese technologies (and integration into technopolitical systems that originate in Beijing) becomes essential to the stability of a regime, the dependency will influence the regime’s interactions with the world. This is illustrated by the example of China’s relationship with Sri Lanka, addressed in chapter 10. Although the new geopolitical trends are not irreversible, the new patterns of global commercial and technological change will shape how political power will be exercised in the twenty-first century.

Global megatrends raise new questions about the direction of global political economy. As the South increases its share of interregional trade, what will the implications be for the evolution of networks of belief, ideas, and policy? Will it be a source of new alliances and new patterns of international cooperation? Can the global trading system maintain the identity it has acquired through the cold war and post–cold war periods if the new hubs of global trade are also hubs of ideas about global order? Will the rise of new centers of cultural and geographic affinity require new rules for global cooperation?⁹

Can Liberalism Survive Global Complexity in Transition?

From the middle of the nineteenth century, the international system had a geographical center, Europe and North America, with a large influence on the transmission of values and norms to peripheral regions. The West believed that after obtaining independence, countries would seek to emulate their larger trading partners in order to attain peak fitness. But since the end of the cold war, the likelihood of such bottom-up emulation has been reduced as connections among emerging nations, the North–South connections, proliferate faster than those with Europe and North America. As coevolving nations form new coalitions, they unlock new governance frontiers.

The end of cold war bipolarity affords local actors greater freedom to exercise local preferences and parochial identities. Global governance diversity arises from the internal discourse between elites who seek to preserve and increase their power and wealth, and the international system, particularly the international economy in which national elites try to integrate their national economies. In a global economy with no captain at the helm, diverse national and global elites can increasingly eschew the counsels for liberal democratic growth in favor of alternatives that serve their own sectarian interests (Kagan 2009).

The socioeconomic development sequence anticipated by liberal internationalism has failed to materialize for a number of reasons. Chief among them are the economic and social processes at work within the international system that can affect development within a national regime and result in the rise of elite internal factions that form alliances with external powers. Such alliances may speed global economic integration but deepen internal divisions within regimes. National elites enjoying first world incomes and lifestyles not accessible to the majority of their populations may incite resentment that threatens regime stability, producing populist backlashes.¹⁰

These apprehensions about the survival of liberalism as the ethos of the global trading system raise questions far beyond the scope of modernization theory. Global change processes are being shaped by the properties of networks of interdependent but diverse actors who respond to cues both from their local and their global situations.

Overview

The chapters that follow employ systems analysis, in which institutional change and economic development are understood as self-organizing complexities. An alternative, albeit rational, picture of institutional change and persistence will be constructed that challenges the paradigms of contemporary social theory.

The study of complexity contains a wealth of models and ideas through which global social change processes can be interpreted and understood, thanks to the pioneering efforts of Brian Arthur (1994, 2009); Robert Axelrod (1984, 1997, 2001); Robert Axtell and Joshua Epstein (1996); Albert-László Barabasi (2002); Eric Beinhocker (2006); Samuel Bowles (2004, 2011, 2012); Lars Cederman (1997); Richard Dawkins (1997, 2006); Herbert Gintis (2000a, b); Stephan J. Gould (1982); Mark Granovetter (1973, 1978); Geoffrey Hodgson (1993, 1996, 2006); John Holland (1975, 1992, 1995, 1998); Stuart Kauffman (1993); Susanne Lohmann (1993, 1994); Ian Lustick (2011); Joel Mokyr (1990a, b, 1991); Richard Nelson and Sidney Winter (1982); Paul Ormerod (1994, 1998, 2006); Elinor Ostrom (2005); Scott Page (2007, 2010); Anatol Rapoport (1986); Thomas Schelling (1978); Herbert Simon (1969); John Maynard Smith (Smith and Szathmáry 1995); and Sven Steinmo (2010). Their efforts have brought us to the threshold of what may be a major scientific revolution. This book seeks to carry their efforts further toward an understanding of global political economy by examining large sweeps of history in several important but not very well understood nations.

The topics chosen are among the most salient in scholarly debates about global development and institutional change: the great divergence of East and West; emergence of the European state, its contrast with the rise of China, and the network properties of their respective innovation systems; the trajectory of democracy in developing regions; Turkey’s emergence as a bridge between the Islamic countries of the Middle East; and the systemic impact of China on the liberal world order.

Chapter 2 explores how the interactive dynamics of system stability in an increasingly interdependent and networked global society are largely similar to the change processes studied by the sciences of complexity. Scientists from fields as diverse as neurology, ecology, and physics have developed a new understanding of networks as complex integrated systems, with useful applications for the study of social organization.

Chapter 3 asks that we reconsider the autonomy that markets enjoy in conventional theories of social change. It reviews the conventional narratives of modernization in which markets are the replicators (vehicles) that transfer liberal values to the rest of the polity. However, cultural and social norms, such as freedom of expression and the role of the individual in society, transfer sluggishly when compared to the rapid transfer of tools for financial management. Thus there is considerable latitude for residual sociopolitical factors to determine the form that a particular set of market institutions will take. Markets arise from and rely on networks of exchange among various buyers and sellers, producers and suppliers, who in turn coevolve in a network of interdependency with other components of the social system.

Chapter 4 traces liberal internationalism’s roots in modernization theory, which presumes economic growth and democracy to be mutually reinforcing. But warnings to authoritarian regimes that they will suffer eventual economic stagnation if they refuse to democratize are proving to be unconvincing. Modernization theory became the dominant logic of the liberal West’s post–World War II global development agenda, when it was common to argue that the wealthiest succeed because they possess the most virtuous social, economic, and political institutions. But as the global resources controlled by the industrial West shrink, modernization theory will come to be seen as just a triumphalist narrative, a mismatch for the trajectories of developing nations. Newly emerging powers will form their own narratives of modernization based on their own histories.

Chapter 5 examines efforts to unravel the mystery of economic growth by scholars who presume that its final building blocks are the institutions of capitalist societies and the rules that govern those institutions. But the comprehensive inventories of individual components of successful capitalist economies do little to solve the mystery of why some countries succeed and others fail at economic growth. Determining the final building blocks of modern capitalism is not sufficient to explaining how it arose or how it can be replicated.

Chapters 6 and 7 elaborate analytical perspectives on the macroevolutionary change processes. Chapter 6 examines how interactive agents create a shared ecology of the larger system through self-organization.¹¹ It posits a world in which there is no real distinction between a component (an agent) and its environment. To discover the laws that govern the interaction of agents, we construct fitness landscapes in which peaks are solutions, the highest being the optimal solution.

In fitness landscapes, the largest determinant of agent behavior comes from the fitness challenges (or time horizon) that a particular agent faces within a given landscape. Whereas global development policy presumes that globalization will produce convergence to a dominant model, here the choices an agent faces reflect its different locations or starting points that frame its position within the global system. The starting point determines the end point.¹² The shapes (or ruggedness) of a given fitness landscape will determine what its population chooses to optimize in order to survive. Many problems of international development require adaptations to a local peak, because paths to the global or highest peak (e.g., liberal democracy) are not visible from the population’s starting point. Institutional selection is generally a myopic choice from among local alternatives; the more rugged the landscape, the less likely a globally optimal solution will be found.

Local options are defined by the interactive effects of other agents operating on the same or on the adjacent landscape. As the intensity of interactions deforms the landscape, the optimization problem a particular agent faces becomes more complex, and as its time horizon shrinks, its behavior will become more opportunistic or shortsighted.

Complex, or rugged, environments are not easily controlled through interventions. This gives large developing economies an advantage over their smaller counterparts; they have more control over the key variables within their environments. Their local landscapes are not so easily deformed by the moves of other economies (Amsden 2007, 127–37, 149–64).

Complexity is obviously not a condition unique to contemporary social relations. Diversity and interconnectivity are as old as human civilization and appear in the writings of the ancient Greek and Roman historians Herodotus and Tacitus. Complexity theory, we will see, offers new knowledge of social relations