California Supreme Court Justice & CASBS board chair Mariano-Florentino Cuéllar, Stanford political scientist & former CASBS fellow Barry Weingast, and CASBS director Margaret Levi use a recent article they coauthored as a jumping off point for a discussion on what we can learn from the U.S. in its political-economic development in the first half of the 20th century that applies to the U.S. and its state capacity today and in the future.
Their paper in the Harvard Journal on Legislation "Twentieth-Century America as a Developing Country: Conflict, Institutions, and The Evolution of Public Law"
Web page for CASBS's webcast series, Social Science for a World in Crisis
Notable events mentioned in this episode:
The National Labor Relations Act
Youngstown Sheet & Tube Co. v. Sawyer
Narrator: From the Center for Advanced Study in the Behavioral Sciences at Stanford University, this is Human Centered. Today we're going to take a break from our one-on-one interview format to bring you a recent episode from the new CASBS webcast series titled Social Science for a World in Crisis. The series explores the political, economic, and social infrastructure vulnerabilities amplified by the global pandemic and how to address them in ways that are realistic, durable, and more equitable. This particular episode was titled America as a Developing Country and features CASBS Director Margaret Levi, Associate Justice of the California Supreme Court Mariano Florentino Cuéllar, and Stanford political scientist and former CASBS fellow Barry Weingast. The three have an engaging discussion on what we can learn from the political economic development of the United States in the first half of the 20th century. We hope you enjoy it, and we'll be bringing you more from this series as it continues. Without further ado, here is America as a Developing Country.
Margaret Levi: Hello, everybody. I'm Margaret Levi, Director of the Center for Advanced Study in the Behavioral Sciences, known as CASBS, at Stanford University. Let me quickly introduce the two panelists. Mariano Florentino Cuéllar, known as Tino, Justice of the California Supreme Court. And chair of CASBS's board of directors, and Barry Weingast, the Ward C. Krebs Family Professor in the Department of Political Science at Stanford and a senior fellow at the Hoover Institution and a 1993-'94 CASBS fellow with me. The three of us will use our findings from an article we recently published in the Harvard Journal on Legislation as a jumping-off point Our focus today will be on what we can learn from the political economic development of the United States in the first half of the 20th century. Things that we can learn that will help us understand the US and its state capacity today and into the future. In the conclusion to our piece, we stated that the historical tumult that led to the New Deal will feel remote to most Americans. How different our mindsets are just months after publishing this piece. Tumult does not feel distant at all. It's about 5 blocks from where I'm living in Seattle. Let me first turn to Tino for his opening remarks. Tino?
Mariano-Florentino Cuéallar: Thank you, Margaret, and thank you, Barry. It's really an honor to be on this webcast with the two of you. I've long admired you, and my anticipation of what it would be like to be your co-author has been worn out, and it's been delightful. It's been quite rewarding. I knew both of you well, but I've gotten to know you even better. Let me take a step back and just share two opening thoughts. One is to give you a sense of why we were so motivated to do this project, and then I want to unpack a little bit what I think the three of us mean when we talk about America as a developing country. And appropriately enough, there are three of us co-authors, and there are three subtly different ideas that the title really conveys. I don't think that each one of us represents only one of those ideas. We sort of blend them together, but it will be a useful context for why this project was undertaken, why it's timely, why we are enthusiastic about continuing to work on it. So if you have ever thought in any sort of intellectually serious way about the United States, and many citizens who don't have the bandwidth to think deep academic thoughts would still probably reflect on this reality and find a lot that they would agree with. You'd see that the US is all about contradictions. It's been the primary architect of the global order, has enormous capacity, it's been more influential than any other country in the world. There's no way to tell a story about modern China which isn't partly about what the US has done in the last 20 or 30 years. And yet it's also replete with limitations that are apparent every single day. So COVID-19 testing, problems with policing, fraying trusted institutions, deeper questions about the basic common project of the country are all over the place. And we wanted to try to write a piece that would help us understand how the US navigated those tensions in the past and how it became the country that it is today. And that led us to think of America as a developing country in 3 different ways. So in one sense, America is still a developing country in that it's not set in stone. It's changing constantly. Its framework for institutions, its legal system, its response to lingering problems of race and diversity, its economic model— none of this is set in stone. Maybe that's true for every country, but we want to highlight that it's certainly true for the United States. But we also think of it as a developing country because it's had to overcome challenges that developed that confront the classic developing countries we now think about with that terminology, and particularly channeling conflict into institutions and managing violence. And I know Barry will have more to say about that. So there is no US today without having it navigate the stages in some ways that certain developing countries have had to navigate. Finally, it's a developing country in another sense, which is that even amidst all this wealth and power and institutions like Stanford and Harvard and Google Kugel and CASBS, there are aspects of our country that are rickety, that are imperfect, that doesn't always deliver the level of excellence and the high expectations that we have of it. And you can see that around COVID-19 testing, race and policing, culture wars not resolved. So that left us with a core problem, and here's— I'll turn it right back to you, which is how do we understand the techniques that were used in politics and the structures that were built in law to turn the US into its current state, and what has that resolved and what has that left as a source of conflict today?
Margaret Levi: Before I turn to Barry to begin to answer that question, Tino, there's a question that has come up from several people through emails, which is why did we call it America as a developing country and not just the US? And I'm turning that question to you because you're an American from two different parts of America. The United States of America and Latin America or Central America from Mexico?
Mariano-Florentino Cuéallar: So it's a totally fair question, and I think it would have worked fine if we had said the United States is a developing country. But look at here, I would say my vice in writing articles is my titles tend to be too long. I still recoil in horror when I look back at the title of, I think, a pretty good article that was one of my very first on money laundering, But it's like a 19-word title. So anything that we can do to cut down the number of words, I'm in favor of. But there's maybe a more subtle point here. I would say if you ask the typical person what country they live in on the street, they would say, I live in America. They would say, I'm an American. And that has almost a cultural connotation that is a little bit coarse in some respects, but it's also very genuine. And I think we are trying to tell a story about how the country hangs together for regular people and not just, you know, the story of it as a set of institutions and legal doctrines.
Margaret Levi: Barry, maybe you could pick it up from here. A lot of what we are doing really builds on your work.
Barry Weingast: Sure. Part of what we do is think about development as a process rather than an end goal. As if it's a state like nirvana that one achieves. One never achieves that. There are always new challenges that take apart the success of the past. And in particular, we're looking at the 1930s and World War II, which presented two very different challenges that the United States had never faced before. And it's very useful, I think, to think of the United States as a developing country because We're not used to thinking about the regularity of new problems that come up that have to be solved, such as the COVID virus. We're not really— we're not prepared for that at all. So the question is, how did— with the great growth of the government and especially economic regulation in the 1930s, in the beginning, 1930, nobody knew how to create regulatory agencies that would do two things. One, implement goals of the— that the elected officials had passed in legislation, and to honor citizens' rights, due rights of due process. And across the 1930s, there was a series of inventions that solved this problem, or at least provided one solution to that. And that's the story we tell here. How did they learn how to do what they were doing? We single out the NLRA, the National Labor Relations Act of 1935, as being really critical, much more important than people give it credit for, because if we turn to the problem of labor, the first thing we have to do is discard the economist view of this, that it's simply a game about sharing rents among customers, ordinary people that is, and firms. And labor, and surely it is that, but it's not only that because we have to look at the problem of violence. The NLRA is preceded with nearly a century of violence, a problem that they were unable to solve very easily, and one of the things that the NLRA does is it provides a solution. Um, so this is about state capacity, the ability of the state to pursue particular ends such as winning World War II. We just take that for granted, but in the beginning of World War II, they had no idea how to do what they were doing. And I say the same thing's true with regulation. If you look at the NLRA's predecessor, the NIRA, the National Industrial Relations Act, uh, it was an utter failure both in practice and constitutionally. I think nobody can read that act and say that it was— it created an acceptable framework for regulation. And I think the model of regulation was created in the NLRA. So let's talk about its success. That is, state capacity is usually used as a label for particular things rather than an explanation. It's— so for example, the idea of being able to collect taxes. Well, you need agencies. You need oversight of the agencies, etc., but those are part of the solution, but they're not the causal explanation. So, what is it about the NLRA that solved the problem of labor violence? I should say, I should have said that the data on strikes suggests a lot of deaths per year prior, in the century prior to 1935, but in 1935, after the acceptance by the Supreme Court of the NLRA as constitutional, violence abated. We should— you should know that as of 1939, Ford Motor Company still retained an army, private armies, with which to deal with labor, organized labor. So how did it do this? Well, it did so in two ways, one for firms and one for labor. For firms, it was pretty much command and control, and the Democrats representing labor wanted that, so that was incentive compatible. The agencies wanted to do that. But what about labor? What happened with labor? The idea is very simple, I think, is that in order to be a labor union, an official labor union that could exercise collective bargaining with a firm, was a business, they had to be certified by the NLRA—NLRB, the National Labor Relations Board, created by the NLRA. And in order to certify, the NLRB said that you have to show that you won't be violent. And so in order to get the benefits of organized labor, they had to issue violence, which meant that the extremists, that a small percentage of labor were extremists and started and used violence and created, triggered the police to be violent against organized labor. The union had an incentive to police those guys. Otherwise, the vast majority of union members who wanted nothing more than higher wages and better working conditions, uh, they wouldn't get what they wanted. And so it was a very clever scheme. So this is really not recognized, that the NLRA created this really creative structure that made it— that made it work, meaning it implemented the goals of the elected officials.
Margaret Levi: So one of the things we're trying to argue in this paper— and we've just gotten a question from an old friend, we've got a couple of people here who have read the paper carefully. One of the things that we're trying to argue here is— really has to do with the development of state capacity and of modern institutions, or institutions that are able to deal with these problems of violence and conflict and find new ways to solve them. So the labor issue, as Barry's been describing, was one that had gone on for a very long time. It was hardly the only issue in which there was deep-seated conflict in the United States. One of the obviously other important ones has to do with race. Part of the reason we started down this track was a different project that Barry and I were involved with that came— that was really building on a book that he did with Doug North and John Wallace on violence and social order. And their claim, in that book at least, was by the end of the 19th century, a lot of the violence problems had been solved in countries like the United States and Britain, that there was the capacity to build agencies and organizations that were fair, relatively, that could be created not only by the elite, but from the bottom up. And I felt that some of the organizational problems had not been solved, particularly the problems of labor and race. And so we decided to push the argument a little further with Tino's help, because he and Barry were also working on things that were addressing the issue of how the US became a global power, how it used administrative law, to support the institutional arrangements. So we've gotten a couple of questions here that are related to that. So let me throw them out. One came early on by email and really had to do with what we mean by institutional stability, since we're talking about creating institutional stability here. And the question was, was there any institutional stability before some of these institutions and agencies got built. I would say there was some, but there wasn't enough for the kind of capacity that the government needed to fight World War II or to become the global power that it did, or to solve certain kinds of problems. But I'm going to throw that back to you guys in a second. I just want to add the second question that came in that's related, in a sense, to that. And I'll just read it. Your paper has a functionalist logic of causality. The structures were created when needed. That's what functionalism means. This begs why the pressure then to do it and not earlier? Why were these not created earlier as the Europe workers involved in running their pension plans already before the 19th century? What was it about the New Deal that made it feel that business needed this innovation? I have an answer to that, but I'm going to throw it out to you too. And then I'll come back in if you don't say what I think you should.
Mariano-Florentino Cuéallar: These are great. Oh, these are terrific. You know, I just— I have to note that it's great to get these terrific questions. What's strange about this relative to the typical seminar is that in a seminar, I could kind of in real time see I'm giving an answer, and does the person who asked the question feel like this is totally ridiculous based on their nonverbal communication? Here, I don't have that feedback. But that said, I think it would be useful in kind of setting up a framework to answer the questions for me to just go through very briefly the 5 major things I think we're trying to say in the paper. And Barry and Margaret might say this a little bit differently, but I think we generally agree on this. I'd say point number 1, for us, violence was a real risk in the United States in the late 19th century and well into the 20th century. And largely on that basis, we reject American exceptionalism and geographic determinism that doesn't, like, confront the question of how do we deal with that risk and reality of violence. The West Virginia Coal Wars, etc. Two, there were new institutional arrangements that were built from learning and in response to shocks and risks. The NLRA, war mobilization, the APA. Three, though, it's not just the New Deal. This didn't just happen at the time of the New Deal, but it began 20, 30 years earlier with the events that led up to the NLRA and then continued afterward with World War II mobilization and the APA. And then 4, it took not only boldness à la Roosevelt, but also restraint. And then last, it worked well enough to enable the rise of the administrative state and the rise of America as a geopolitical power, but deferred a lot of conflict to the future and kind of swept it under the rug. So, so let me just take that and focus on one other piece of the question, which is why then I think we, we talk around this in the paper a little, but, but to my mind, there are basically 3 important factors. The first one is on the, uh, the US is sort of at a geopolitical moment where it is going to have to, in all likelihood, assume a degree of regional and ultimately global influence that takes greater domestic capacity to execute on. So there's that. There is a set of technological upheaval that Barry has really emphasized in some of his work around railroads and around related problems involving antitrust and how the existing set of understandings we have about state versus federal power begins to break down. And then we see a kind of opportunity that arises from federalism and the decline of corruption of the sort of crass kind. That is so predictably capable of undermining institutions that there's no real way to use them in a different way. And that declines for a number of reasons. It never abates completely, but it opens up a set of political possibilities. But the combination of all that combined with greater and greater labor unrest creates just new incentives and opportunities for actors that don't exactly know what to do but they know it's probably worth doing something differently.
Margaret Levi: Well, I think it's important to add that the other thing that was going on in the 1930s was also on the business side, that business had not been willing to concede to labor in the U.S. It is a way in which the U.S. is a bit exceptional from some of the European countries, for example. And what happened in the New Deal was that it was an existential crisis for business. The Russian Revolution had not been that long before, There was a very strong communist movement in the US and socialist movement in the US of a very different sort than the way we term those things now. And there was a very vibrant labor movement that was fed up with not having its rights and its privilege— and its rights recognized, and particularly its voice, its benefits, its hours, the things that it was demanding. And so, the threat to business became very great. The fear of revolution was great. The elections were showing that the population had turned. The FDR votes were very strong. So, it really changed the calculation for business. So, I think that does distinguish it from Europe, but also explains why now and not earlier. Yes. Barry, do you want to add to that?
Barry Weingast: Yes, I want to say, address the fundamental question about institutions and why, what do we mean by stability. The answer is, is that let's step away from the current context and think of another context. The idea is democracy. Most new constitutions, democratic constitutions, fail and they fail quickly within a decade around the world and we have a democracy that's lasted, say, 250 years. Not full, obviously, and not meeting the ideals, especially with respect to incorporation and race, but nonetheless, the institutions, at least until recently, have been pretty, uh, solid. And so that's what we mean by institutional stability, that it lasts— the institutions last more than a generation. And so the Founding Fathers, for example, considered this Roman Republic a failure because it lasted 300 years but then fell to the Roman, uh, Imperium. Uh, and I, I find that hard to take that because there are 15 generations that lived under the Roman Republic, uh, as being relatively stable. So the world changes all the time, and so no country is fully stable in the sense of forever, that is perpetually stable, but nonetheless They are stable in a weaker sense.
Mariano-Florentino Cuéallar: And I want to play up, if I could, just how Barry's answer and even the question are— they evoke a depth and sophistication that often eludes my fellow legal scholars and lawyers who I think in some cases think of institutions a little bit too much through the lens of the formal continuity of them, right? We like to talk about the Constitution, for example, as having endured and sort of survived the test of time. But in some ways, you could say our paper is very much about institutional change and evolution, almost more so than about institutional continuity. In a way, there's a degree of continuity that can be overemphasized at the formal level that is secondary to a story of dramatic change in adaptation that we're telling. And to go back to the point of it's not just the New Deal, like the sort of very conventional story of the New Deal being a kind of rupture is one that I think we're trying to nuance a lot more. We're trying to say at the very outset of the 20th century, there were already clear indications that came to be more pronounced during the New Deal that the existing institutional arrangements were kind of failing. And that process of change begins before the New Deal with state-level arrangements around labor with efforts by governors to accommodate both business and labor. It continues through the New Deal, but well into the New Deal, it's very imperfect and flawed. There's still a lot of conflict with business. There's nothing like the capacity to mobilize on a national scale. That doesn't come until World War II and then continues through the Administrative Procedure Act. And crucially, a lot of these things are deeply enshrined in our norms and institutional structures, but they are not the Constitution. They're actually built around the Constitution.
Margaret Levi: So part of your answer there, Tino, actually responded to a question we just got. Wasn't Pearl Harbor an external shock that helped to mobilize support for expanded subsequent federal responsibility? So the combination of what was going on in the New Deal and then the World War II clearly mobilized support for expanded government capacity. Yeah, for sure.
Mariano-Florentino Cuéallar: But it takes trust, right? Like, it feels to me like part of what we try to get across is that mobilization could have been awfully messy and more rickety had there not been some degree of understanding that expanded federal power under substantial executive control would actually be used in a way that was very accommodational and corporatist. And that was not the only kind of advice that Roosevelt was getting.
Margaret Levi: Right. And I do think an important part of the paper is that one of the things that was almost a discovery in World War during the, uh, during the Great Depression, um, and during the New Deal was the way in which administrative law was used to prop up the larger sort of institution or set of organizations that were created. So it was a layering of rules and processes that began to create the kind of strength that we think of as the institutions and the institutional stability that lasted —until quite recently.
Mariano-Florentino Cuéallar: Yeah, like take the Youngstown case, which is a classic case from not the World War II era but the era right after the period during which we're writing, we're trying to understand. So we're talking the Korean War. Classic case: Truman tries to take over the steel mills to try to deal with labor conflict, and the Supreme Court effectively says no, although in a very nuanced and intriguing way that continues to haunt the law to this day. But going back to World War II, it was a very common tactic for countries mobilizing for war to just take over industry, to effectively assert national ownership of the means of production, or such tight control that you're effectively blurring the distinction between who owns what. We really didn't do that for the most part. And that suggests to me a kind of effort to elaborate an American style of state building, which is a lot about regulation and contracting to try to preserve as much as possible a sphere of economic control that is not going to be directly steered or commanded by the government.
Barry Weingast: Now, there's a concept that's not in our paper but is useful, and it's the idea of adaptive efficiency. And this is a term used by Douglas North, the Nobel Prize winner in economics, and, um, Friedrich Hayek Hayek, mid-century economist, also a Nobel Prize winner. And the idea is that some countries are better at adapting to changing circumstances than others. And this is an issue of dynamics, which is only dimly understood in terms of how we understand why dynamics work in some ways at some times and other ways other times. But the idea is Doug North for 30 years was bugging me about the issue of why is it that the Great Depression caused coups in Latin America and not in the United States. Is this just an accident? We think not, but, you know, it could have gone that way, but it didn't go that way. And so the question is, what is it about— this is an element of state capacity— what is it about some countries that allow them to do this?
Margaret Levi: So one of the questions that we got was, are we telling a story that's parallel to other developing countries? Where's the context in here? How do we nuance this in a comparison? And then I want to come back to the post-World War II period and our story of labor. But let's first get this question out.
Mariano-Florentino Cuéallar: So I have an answer to that, how similar do we think the US story is to other developing countries? But I want to pick your brain and have you go first on this one.
Margaret Levi: Well, I would refer here to the book that Barry and John wrote with Doug North to some extent, that there are certain kinds of parallels between the US and many other countries. Every country has to figure out how to, how to balance rule of law, how to balance, create an administrative apparatus that works for it, that balances the interests of labor and business and other groups within the society. And everyone has to figure out how to produce some kind of growth or flourishing for its population. But the solutions to that will vary from place to place. And they'll have different kinds of resources to draw on. And those resources are economic resources, but they're also previously existing institutions from whatever you're trying to emerge from and to. And there are also— because some countries come out of colonialism, some countries don't. Some countries have been conquered, some have not. That creates different kinds of circumstances and conditions for change. Some countries are very poor. They're poor in resources. I mean, we end the paper with a comparison with Argentina, which in, you know, 1911, it was hard to tell the United States from Argentina in terms of resources, population. Capacities. By the 1980s, it's very easy to tell the difference between Argentina and the US. So these aren't things that automatically happen. And I think underlying all that is— are deep-seated conflicts that keep reappearing in different ways. And if they're not solved, create new kinds of pressures and new kinds of problems that have to be accommodated.
Mariano-Florentino Cuéallar: That sounds right to me. I would say that the paper aims to be a little humble about this, and in fact, I think we— that there's sort of the underlying tone, and a lot of our conclusion is to try to be a little measured and careful about how much we think the story of development can be easily narrated and imposed on different countries. And in some ways, actually, we haven't talked a lot about this, but as I reread the paper, one implication of it to me is also a kind of a humility about the Washington consensus and a reminder that much of what the US sort of has tutored other countries to try to avoid, it faced itself, like degrees of instability, moments of great corruption at one point. You know, we could talk about macroeconomics, but that said, I think to go back to a point you made, at a high enough level of generality, we We do think that virtually all countries have to solve the problem of channeling conflict into formal institutions, except in the US context, what's being attempted is actually, you know, imperfect and in some ways breathtaking in its audacity. US has 60 million more people than Indonesia, 110 million people more than Brazil. And the combination of that scale, diversity, high expectations of government and market performance, that we're not an authoritarian regime makes the place really, really difficult. To govern.
Margaret Levi: We have a few more questions here, and we're beginning to get low on time, so I want to get them out. One we've actually heard from several people, which is that— and I think we accept this as a criticism— is that we have failed to adequately address the politics of the moment in terms of normal politics like elections, and that the effect of the elections in the 1930s the 1934 midterms and especially the 1936 election clearly had big effects on the capacity of FDR and his administration to carry forward some of the reforms. And I think we should simply concede that, that this paper does not address that. Other work that we have does. Did either of you want to add something to that?
Barry Weingast: Well, I think one of the key factors is Democrats versus Republicans. This is an abidingly— the prior years is an abidingly Republican-dominated era. If you look from 1860 to 1930, the Republicans have either divided government or united government, united government being that they hold the House, the Senate, and the presidency at the same time. And divided government means that it's mixed with the parties. Parties govern best, of course, when they have united government. The Democrats have united government in only 4 of the 72 years, 36 Congresses, whereas the Republicans have united government in 16 of the 32, plus divided government in another 8, another 12, which means that the These are Republican policies being implemented and being able to defend through veto by the divided government because they hold one house of Congress. Roosevelt is an immense change, and especially the 1934 and 1936 elections, which bring huge numbers of new Democrats, record numbers by 1936. This is really popular and not going away. And, you know, we didn't say that, and we should have said that.
Margaret Levi: So we have two questions here that I think we should address that really take us past the 1930s and even past World War II. One really has to do— they're both related in a way— one has to do with the decline of the labor movement. So the question is, what did these institutions that were established in the 19— '30s and weakened a bit in the 1940s during the war when unions had to agree to a no-strike clause and weakened further with the Taft-Hartley Act. So how successful were these institutional reforms? And given the decline of the labor movement now, they've only been weakened further. And the related question is really, The fact that we have so many institutional mismatches in the US between the Electoral College and Senate voting, urban-rural divides, all kinds of things. Can the US manage to— you know, we're in another tumultuous period as we started the conversation with. So one is, you know, we've seen a decline in some of the institutions that were created during the Depression, and we're seeing a continuing mismatch of institutions and a decline in their authority and the trust of them going forward. So are our institutions really too brittle to face the kinds of challenges that we're confronting now? I will— we'll end with that question, if that's OK with you two. It's a great question.
Barry Weingast: And this, again, gets to the issue I mentioned a minute ago. Of adaptive efficiency. Clearly, we're facing challenges that we haven't faced before. And we need to worry about, you know, how it is that we extend the existing kind of rules into the new circumstances. This was part of what was going on in the constitutional fight between the Supreme Court and the elected branches during the New Deal. And we're facing another challenge much like that, only the specifics are totally different. And the solutions for one period are not the solutions for the next. Labor obviously has a— with the changing nature of the workforce, labor has had problems, organized labor has had tremendous problems, but that doesn't mean that it was a failure in the beginning. I mean, the success is really being able to adapt. We think of the United States as being a stable democracy, but that view has been challenged in recent weeks. Or in the last 10 days. And if you look at the 19th century, there are these periods where there were these major compromises, and democracy almost failed 4 times and failed 1 time in 1861. And so what you see in those compromises of 1820, 1833, 1850, and 1877 is each successive generation confronting new problems and having to solve them and they're solved with constitutional moments without the, the capital C constitutional mechanisms. That is, neither the Supreme Court nor the amendment process, but rather congressional legislation that passed laws that were only laws, but in Fairjohn and, um, Ellie Eskridge and Fairjohn sense, they're super statutes, meaning that they're statutes that are set some of the rules of the game not through constitutional means, but through legislation. Examples are the Social Security Act and the Civil Rights Act. So part of the—
Margaret Levi: part of it is the adaptation process, but the adaptation process seems to only happen when some other conditions exist, one being, as we saw in the 1930s and as we're seeing right now, and as we saw as the precursor to the Civil Rights Act, a huge amount of popular mobilization. And the other factor that seems to matter is what's the political alignment in Congress and with the president at a particular moment in time. So— Absolutely. Those things are, you know, really up for grabs at the moment. And we have not only the mismatch of our institutional arrangements, we've just had another question here, which is that not only do we have the institutional mismatches and brittleness perhaps, But we also have two countries within the United States. So that there is, you know, the southern United States and the institutions that have copied it as well, and then the northern United States and the whole distributional conflict and institutional conflict that that creates. So I just wanted to layer that onto here.
Mariano-Florentino Cuéallar: Yes, I think some version of that is true, but I just feel like one of the challenges in writing about this subject for us has been and continues to be where to set the baseline of what level of institutional performance, excellence, competence, adaptation, equity, and decency we expect from a country as diverse, as complicated, and as messy as the United States, particularly given its sort of original sins. And there are many. They're about slavery. They're about Native Americans. They're about territory. They're about lands. They're about dozen other things, but it feels to me like it is an important part of our perspective, I think, that while we ought to be sort of dispassionate and thoughtful about diagnosing failures in history as well as in the present, we also ought to be candid that this is a country that has achieved a great deal in some ways, given what it has had to deal with. And That makes it really hard to know, and here to maybe just say a little about the question of the labor and where it is today relative to where it was in the 1940s and '30s when its position was much more pivotal. Obviously not everything that's happened to labor is just policy, it's also secular change in the economy, technology, and so on. But honestly, I think, you know, from the perspective of stakeholders who are facing the possibility of the kinds of bargains and understandings that we diagnose in this paper, it's a real dilemma. The very act of effectively channeling your grievances away from the streets and towards institutions already disempowers you. And then run that forward a generation or two and you're never going to be the same risk source you were before. Now you get something in return, obviously, like no— not as much violence, some goodies, some legal understandings. But I think we have to be honest about how difficult those bargains and decisions really are. And then for society, I think we are both ambitious and humble about what institutions can really accomplish. They can help prevent violence, but at the same time, there is a limit to how much they can achieve without some kind of cultural change and accommodation that in many ways was just sort of deferred until later in some ways in our account. And you can see that around civil rights, you can see it around immigration. You can see that around policing and order. And now we face a series of stubborn challenges in some ways that were not very carefully and artfully dealt with by institutions and required other sorts of things that go beyond institutions, compensating people who are the losers in the political process to some degree, some kind of cross-ideological political discourse that might coax greater acceptance and less cultural conflict I think that's a little hard to come by these days.
Barry Weingast: Let me address one of the things Tino just mentioned because I think it's essential here and it has to do with people that feel left out. I think one of the key things about democracy is that democracy holds the prospect for the great masses of poor people to form majority against the rich people. And one of the things about incorporation of increasing incorporation has to do with people that are— feel that they're not part of the system and may use violence, whereas the ability to compromise and include more and more has something to do with the stability of the market economy we have and that we can't take that for granted. We live in an era where rich people, many rich people feel that they earn their wealth and of course there's there's an aspect in which that's true, but they also earn their wealth in a system that provides, that allows for corporations to do that. And that's what you can't take for granted. That's what's missing in the rest of the world. And that's the part of development that, you know, we've managed to— development problem we've managed to overcome that developing countries don't. We overcome by generation by generation, and there are new challenges. Right now, the have-nots are feeling left out, and if that continues, that trend continues, we're going to see real, real, real problems. Indeed.
Mariano-Florentino Cuéallar: Any last words? Well, I mean, one thing that we've tried to navigate in both this conversation and the paper is the kind of the tone and position that scholars ought to take relative to some very live and frankly very emotional issues. And I think this is not unfamiliar to me from, uh, my life as a scholar, but to some extent my life as a judge. I would say we are mostly about trying to reinterpret some of the story that has brought us the current contours of the United States and its powers, its structure, its political logic, its economic logic. But I got to say that, you know, it's not without some intensity that one approaches a topic like this, and particularly a moment of such, you know, divergent futures for the country. It's just striking to me how much of the process of figuring out where we're going is about institutional change as well as stability. But how much of it should maybe also honestly be about how that concept of institution, however capacious we want to make it, doesn't fully encompass everything that goes into political conflict or cultural outlooks and values. And some of that is going to have to get worked out with a set of norms that maybe are— some are in short supply, but others will have to be fashioned and reinvigorated at a very fragile moment.
Margaret Levi: I think the other thing I take away from the writing of this paper, and it came up in several questions that were presented to us, is the importance of understanding history. It's not just that it's history. It's also telling us about how we got into the circumstances we are in, what the kinds of constraints are that we're currently facing that come from the past. But also the conditions under which institutional change is possible and how difficult it sometimes is to achieve, but not impossible. So I take from history not that it's going to go in one direction or another, or not that it's totally informative, um, to look at the past that tells us exactly what will happen in the future, but that then enables us to really think about the future in a much more nuanced way that leads us to practices and to changes that are actually possible and can be very big. And that's part of the lesson of the Great Depression and the New Deal. Those can— it can be really fundamental changes brought about even though they are incomplete and not everything we always wanted.
Barry Weingast: One of the values of history, following up on your comment, Margaret, one of the values of history is that it It gives you insight into the kinds of problems, the category of problems that you need to solve in certain— in crises. By looking at the crisis as something where the solution is not obvious, that's one of the characteristics of it, and so the question is how do people figure out a way of confronting the problem that in some sense succeeded, succeeded in the sense of being a large number of the population feel that the solution was adequate. And let me give you an example from economics. The railroads were the first mass business, the first businesses to have systematic middle managers, and nobody knew how to structure their compensation in a way to give them incentives. So the railroads, for example, immediately— this is in the early days gave managers incentives— compensation was a function of the value of the traffic along your line. So, the middle managers never stopped the trains to fix the tracks, leading to these huge disasters. And people only realized that what the problem was when they saw the problem happen. And so, that's when the railroads invented what is now known as capital accounting in order to use depreciation as part of the compensation. And it's the same thing with regulation. You know, we now take it for granted that regulatory agencies can accomplish political goals, not necessarily economic goals, but political goals. And it wasn't always so. And part of what the New Deal— looking at the New Deal tells us is that the government faced new problems that had not been seen before, and the history was inadequate to answer that. There were only 5 or 7 real regulatory agencies in 1930, and so this was a real problem that nobody knew how to solve. And part of it is interesting to me is how so quickly it was solved after the first New Deal sort of collapsed and, and the second New Deal approaches with the NLRA and all the other legislation.
Mariano-Florentino Cuéallar: In, in what Barry says, there's a really crucial point, which is One way to understand some of what we're trying to narrate is the story of how the United States takes a set of conflicts that are playing out in so many different spaces and places, different areas of geography, on the streets, inside the factory floor, you know, from neighbor to neighbor and so on, and channels them into a set of institutions that are quite familiar and in many ways are kind of anodyne and more boring. Sort of the curriculum from a curriculum perspective, it sort of moved from political science to law, right? And in some ways the progression continues. And here, I don't wanna ascribe this idea to Barry and Margaret, they may disagree with me, but I would say it then moves from law to like economics almost, as you get these sort of like policy experts and classical microeconomists and whatnot, trying to just make sense of policy problems in cost-benefit terms. And I guess what I would observe is there is an argument to be made that if you look at the period of history we're writing about, leadership, like thoughtful political leadership, how do you approach elections and all that, is heavily about being all Federal Reserve about the amount of political conflict in the country. And what I mean by that is titrating to make sure you don't get too little and you don't get too much. If you get too little and you tell too much of a story that this is all worked out, there's very little— there's a lot of risk to that. There's very little for the general public to sort of to chew on and argue about. And it's hard not to begin to believe that sort of a set of elites have taken over the political process too much. Obviously, if you get too much and of a certain kind, then there's little hope that you can come up with semi-neutral principles and institutions to work things out. But that level of titration of political conflict takes a degree of trust and creativity and imagination, as well as restraints. And I return again to the notion that that is a very special and sometimes rare quality in a polity. Perfect.
Margaret Levi: Well, I want to thank, uh, the two of you again. This was a great discussion. I really enjoyed it, and I think if we do end up writing a book, it'll be much better for the questions we got in the discussion we had today. I also want to thank this event's co-sponsor, the Freeman Spogli Institute for International Studies at Stanford. And a heads up to all of you who are listening, we are lining up a number of great episodes for our Social Science for World in Crisis series. Future events will focus on such themes as polarization, why racism is so persistent, and the breakdown of social cohesion and social infrastructure. All the sessions will consider solutions and prescriptions as well as diagnoses. And all will include highly respected scholars from the outstanding CASBS network, drawing on the best social science knowledge and understanding we have. So again, if you're not on our notification list, go to the CASBS website homepage, CASBS.stanford.edu, and scroll to the bottom to sign up for event notifications and to look for postings of our webcasts there as well. So thank you all.
Narrator: That was Mariano Florentino Cuéllar, Margaret Levi, and Barry Weingast discussing their paper, "20th Century America as a Developing Country: Conflict, Institutions, and the Evolution of Public Law." To learn more about this event and others in the CASBS series on Social Science for a World in Crisis, check out the link in this episode's notes. There you can find summaries of past and future events, participant bios, and access to relevant papers discussed. Human Center is a show from the Center for Advanced Study in the Behavioral Sciences at Stanford University. You can visit us online at casbs.stanford.edu or Twitter @casbsstanford. From everyone at CASBS, thanks for listening.