Why does capital formation often fail to occur in developing countries? Capital and Collusion explores the political incentives that either foster growth or steal nations' growth prospects. Hilton Root examines the frontier between risk and uncertainty, analyzing the forces driving development in both developed and undeveloped regions. In the former, he argues, institutions reduce everyday economic risks to levels low enough to make people receptive to opportunities for profit, stimulating developments in technology and science. Not so in developing countries. There, institutions that specialize in sharing risk are scarce. Money hides under mattresses and in teapots, creating a gap between a poor nation's savings and its investment. As a consequence, the developing world faces a growing disconnect between the value of its resources and the availability of finance. What are the remedies for eliminating this disparity? Root shows us how to close the growing wealth gap among nations by building institutions that convert uncertainty into risk. Comparing China to India, Latin America to East Asia, and contemporary to historical cases, he offers lessons that can help the World Bank and the International Monetary Fund to tackle the political incentives that are the source of poor governance in developing nations.

The upheavals of recent decades show us that traditional models of understanding processes of social and economic change are failing to capture real-world risk and volatility. This has resulted in flawed policy that seeks to capture change in terms of the rise or decline of regimes or regions. In order to comprehend current events, understand future risks and decide how to prepare for them, we need to consider economies and social orders as open, complex networks. This highly original work uses the tools of network analysis to understand great transitions in history, particularly those concerning economic development and globalisation. Hilton L. Root shifts attention away from particular agents – whether individuals, groups, nations or policy interventions – and toward their dynamic interactions. Applying insights from complexity science to often overlooked variables across European and Chinese history, he explores the implications of China's unique trajectory and ascendency, as a competitor and counterexample to the West.

The Fountain of Privilege applies contemporary economic and political theory to answer long-standing historical questions about modernization. In particular, it contrasts political stability in Georgian England with the collapse of the Old Regime in France. Why did a century of economic expansion rupture France's political foundations while leaving those of Britain intact? Comparing the political and financial institutions of the two states, Hilton Root argues that the French monarchy's tight control of markets created unresolvable social conflicts whereas England's broader power base permitted the wider distribution of economic favors, resulting in more flexible and efficient markets. This title is part of UC Press's Voices Revived program, which commemorates University of California Press's mission to seek out and cultivate the brightest minds and give them voice, reach, and impact. Drawing on a backlist dating to 1893, Voices Revived makes high-quality, peer-reviewed scholarship accessible once again using print-on-demand technology. This title was originally published in 1994.

"A most interesting and informative work. The book contains excellent material and interesting analysis, and it will appeal to a broad audience."--Stanley Engerman, University of Rochester

"An ambitious book, "Capital and Collusion" identifies the institutional reasons for the divergent growth paths of major regions in the developing world. The topic is one that will interest a broad range of readers in both academic and policy circles."--David Stasavage, London School of Economics

"Root takes a very abstract notion like trust and provides a series of concrete demonstrations of how trust, or the lack of it, can affect economic performance and social welfare. He bases his arguments very skillfully on a variety of indicators that transform abstract concepts into observable phenomena and make his arguments come to life. This is a 'must read' in graduate and undergraduate courses that focus on institutions and development."--Lewis W. Snider, author of "Growth, Debt and Politics: Economic Adjustment and the Political Performance of Developing Countries"

"In this exciting book, Hilton Root calls into question some of the "sacred cows" of contemporary thought, knocking down some of the rigid boundaries that exist among the social sciences and among concepts like developed and developing countries. A very good read for all."--Elinor Ostrom, Indiana University, author of "Understanding Institutional Diversity"

""Capital and Collusion" is a breathtaking tour de force that adds significantly to the growing literature on the political economy of development and of state failure. Hilton Root has tackled the most important question facing policymakers, leaders of international financialinstitutions, and students of the political economy of development: how can the incentives of leaders be changed to promote risk taking and entrepreneurship, diminish uncertainty and self-insurance, and stimulate economic growth when they benefit personally from sustained national failure? No one who wishes to understand or shape economic and social welfare can afford not to read this book."--Bruce Bueno de Mesquita, Professor of Politics, NYU

How do political institutions help promote prosperity in some countries and poverty in others? What can be done to encourage leaders to govern not for patronage but for economic growth? In this book, such distinguished political economists as Douglass North, Robert Barro, and Stephen Haber answer these questions, providing a solution to one of the most important policy puzzles of the new century: how to govern for prosperity.

The authors begin from a premise that political leaders are self-interested politicians rather than benign agents of the people they lead. When leaders depend on only a few backers to stay in power, they dole out privileges to those people, thereby dissipating their country's total resources and national growth potential. On the other hand, leaders who need large coalitions to stay in office implement policies that generally foster growth and political competition over ideas. The result is that those who promote politics that lead to stagnation tend to stay in office for a long time, and those who produce prosperity tend to lose their jobs. Analyzing countries in North and South America and Asia, the authors discuss the range of political regimes that permit or even encourage leaders to rule by mismanaging their nation's resources. And they show that nations must forge institutions that allow all social groups to participate in and benefit from the economy as well as force political leaders to be responsible for policy outcomes.

"Easily the most informed and comprehensive analysis to date on how and why East Asian countries have achieved sustained high economic growth rates, this book] substantially advances our understanding of the key interactions between the governors and governed in the development process. Students and practitioners alike will be referring to Campos and Root's series of excellent case studies for years to come." Richard L. Wilson, The Asia Foundation

Eight countries in East Asia--Japan, South Korea, Taiwan, Hong Kong, Singapore, Thailand, Malaysia, and Indonesia--have become known as the "East Asian miracle" because of their economies' dramatic growth. In these eight countries real per capita GDP rose twice as fast as in any other regional grouping between 1965 and 1990. Even more impressive is their simultaneous significant reduction in poverty and income inequality. Their success is frequently attributed to economic policies, but the authors of this book argue that those economic policies would not have worked unless the leaders of the countries made them credible to their business communities and citizens.

Jose Edgardo Campos and Hilton Root challenge the popular belief that East Asia's high performers grew rapidly because they were ruled by authoritarian leaders. They show that these leaders had to collaborate with various sectors of their population to create an environment that was conducive to sustained growth. This required them to persuade the business community that their investments would not be expropriated and to convince the broader population that their short-term sacrifices would be rewarded in the future. Many of the countries achieved business cooperation by creating consultative groups, which the authors call deliberation councils, to enhance accountability and stability. They also obtained popular support through a variety of wealth-sharing measures such as land reform, worker cooperatives, and wider access to education.

Finally, to inhibit favoritism and corruption that would benefit narrow interest groups at the expense of broad-based development, these countries' leaders constructed a competent bureaucracy that balanced autonomy with accountability to serve all interests, including the poor.

This important book provides useful lessons about how developing and newly industrialized countries can build institutions to implement growth-promoting policies.

The example of Old Regime France provides a source for many of the ideas about capitalism, modernization, and peasant protest that concern social scientists today. Hilton Root challenges traditional assumptions and proposes a new interpretation of the relationship between state and society.