Doug North

Doug North is a Nobel-prize winning economist who looks at the International Political Economy primarily on a domestic level. Closely paralleling the classical political thinker John Locke, North is a firm believer in the power of domestic institutions in IPE. Locke cited a perceived lack of currency in his explanation of the absence of intricate political structure in Native American societies.North defines institutions as "rules, enforcement characteristics of rules, and norms of behavior that structure repeated human interaction." (50) Just as Locke asserted a direct link between institutions such as currency and elaborate political forms, North argues that institutions are essential to promoting and facilitating advanced economies, emphasizing their role in providing third-party enforcement for the critical next step in developing economies: impersonal interchange. Impersonal trading is a fundamental foundation in any efficient economy because it opens up for producers a much broader base of consumers, particularly in the international market. Indeed, for North, one of the main "functions of institutions is to provide certainty in human interaction." (53) To support his case empirically, North uses the contrasting development of political institutions in Spain and Britain and the effects that he believes these developments had on North and South America. Spain saw an increase in the power of the King and decline in the power of the Cortes (or parliament), meanwhile Britain saw the inverse; an increase in the power of parliament and a decline in the power of the crown. The stability of property rights in Britain increased as they escaped from the Crown's control while that of Spain decreased as property rights could easily be redefined by the King. Creditors, merchants and manufacturers perceived this instability in Spain and were hesitant to both lend the empire money and operate within its borders. Britain experienced the opposite trajectory. Corresponding institutions established themselves in North and South America, leading to the economic prosperity of the North and an overwhelming, inefficient bureaucratic machine in South America.