If nothing constrains the powerful, no commitment they make is credible

The argument

A second argument for this explanation turns on commitment rather than on fairness. Advocates observe that the valuable thing a state can offer an economy is not generosity but reliability: an assurance that the terms on which people act today will still hold tomorrow. Proponents argue that such an assurance is only worth anything if the state is unable to withdraw it, and that this requires something outside the state capable of holding it to its word, whether courts with independent standing, legislatures that cannot be dismissed, or organised interests able to impose a cost for breaking faith. Supporters hold that pluralism is the name for that arrangement. Where no group can constrain the most powerful, every commitment the state makes is revocable at its convenience, and advocates argue that people adjust accordingly: they discount promises, demand faster returns, keep assets liquid and treat favourable rules as temporary. On this account the problem is not that the state necessarily breaks its word, but that it cannot bind itself, so its word carries no weight even when it is sincerely meant. Proponents draw out why this is so damaging over time. Long-lived investments, deep financial markets and public borrowing at reasonable cost all depend on commitments that outlast the people who made them, and advocates argue that a non-pluralistic state is structurally unable to make them. Supporters conclude that nations fail less from bad decisions than from the inability to make any decision durable, and that the rule of law is best understood as the mechanism by which a state becomes able to be believed.

Premises

Counter-arguments

Critics argue that reputation can substitute for external constraint, since a ruler who expects to remain in power has reason to keep promises in order to be believed later. They also note that constrained, pluralistic states break commitments too, through inflation, default and reversal by successor governments. A further reply is that the argument identifies a cost of weak commitment without showing it is larger than the costs of the fragmentation and delay that strong constraints introduce.

Rejecting the premises

[Rejecting P1] States supply more than reliability, and rapid growth has sometimes followed from a state willing to change terms decisively. [Rejecting P2] Reputation and the expectation of a long tenure can make commitments credible without any external constraint. [Rejecting P3] People do not uniformly discount such commitments, as continued investment under unconstrained rule shows. [Rejecting C] Pluralistic states also break commitments, so the inability to bind cannot be what distinguishes failure from success.