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ing how the carryover of practices and social relations from the previous regime promotes forms of privatization that offer great profits to a few individuals while diverting capital from productive long-term investments. Without drastic institutional reorganization, his analysis implies, Russia will follow a distinctive and dangerous path toward bandit capitalism.

In general, the more institutional a position taken by our authors, the more they consider existing state organization to constrain economic change and the less they suppose that expansion of markets will generally promote growth-enhancing governmental arrangements. On the relation between capitalism and democracy, however, arguments array differently along the continuum. At a liberal extreme, extensive capitalist markets more or less automatically dissolve authoritarian polities and move them toward democracy. Midway across the continuum, causality reverses, with analysts giving priority to democratic institutions; absent some minimum of equality and breadth of citizenship, plus binding consultation and protection of citizens, runs the argument, capitalist economic relations will not work. But at an institutional extreme, each regime changes so differently from others that—whatever the direction of causality—no general functional interdependence exists between capitalism and democracy. At that extreme, analysts tend to explain the rough empirical correspondence between capitalism and democracy in the contemporary world as a consequence either of joint diffusion from the West or of differential incorporation into a capitalist core.

Although theorists of democracy, capitalism, and economic growth commonly take strong positions on how each of these processes covaries with and affects the others, no consensus has emerged among students of these subjects. Even within this one section of our volume, opinions run from Åslund, who, while conceding that a "strong civil society" promotes economic growth, generally treats democracy as an outgrowth of capitalism, to Walder, who implies that China is experiencing rapid economic growth and extensive alteration of state structures without moving at all decisively toward democracy. Åslund's position approaches the liberal end of our continuum, Walder's the institutional end. In between stands Przeworski, who argues forcefully that certain sorts of democratic state institutions—but only certain sorts—provide essential underpinnings for capitalist economic growth. The debate continues.


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North, D. 1985 Transaction costs in history. Journal of European Economic History 14:557-576.

1991 Institutions. Journal of Economic Perspectives 5:97-112.

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