You can’t reform any institution from inside because people don’t act against their own interest. The only way you reform institutions is by competition from the outside—Milton Friedman
A society can possess elaborate laws and still deny justice to most of its people. Contracts may be enforced, property recorded and courts kept busy, while the rules governing access to land, credit and public authority favour those already established. Order survives. The opportunity to question its terms becomes narrower.
The previous three parts examined failures of institutional learning, the distribution of wealth and environmental pressures. Each brought us to the same practical difficulty: knowledge of a problem does not ensure that anyone with authority will correct it.
We must now examine how privilege becomes embedded in rules, and why arrangements harmful to society can remain lawful, durable and fiercely defended.
Law enables cooperation among people who cannot rely on personal acquaintance. It protects expectations, establishes responsibilities and offers remedies against abuse. These functions are indispensable. But their existence does not settle whose expectations receive protection, whose responsibilities are enforced, or whose injuries obtain a remedy.
Also Read: Why Civilisations Collapse—III
A worker seeking unpaid wages and a powerful employer resisting payment may possess formally equal access to a court. Their ability to bear delay is unlikely to be equal. For one, proceedings are an expense; for the other, delay may threaten food, rent and continued employment. A right that cannot be exercised within a reasonable time can lose much of its practical value.
We should distinguish the existence of legal institutions from their accessibility and purpose. An administration may enforce restrictions efficiently while failing to restrain those who designed them. Institutional strength is not necessarily evidence of public benefit. We must ask what the institution is strong enough to accomplish, and for whom.
The World Bank’s World Development Report 2017: Governance and the Law examined why sensible policies fail and damaging ones persist. Its analysis placed unequal power, exclusion and institutional capture at the centre of the problem.
Policy outcomes depend partly on who participates in decisions and who is prevented from influencing them. Administrative expertise cannot by itself resolve a conflict over whose interests government serves.1
Medieval Venice provides a useful historical example. Research by Diego Puga and Daniel Trefler traces how expanding trade initially supported institutional changes that constrained executive power and widened commercial opportunities. Over time, exceptionally wealthy merchants acquired sufficient influence to restrict political and economic competition. In the decades following 1297, access to the Great Council became hereditary and barriers were erected around lucrative trading opportunities.2
The significance lies in the sequence. People who benefited from opportunities created under one arrangement subsequently helped restrict those opportunities for others. Their position could then be defended through recognised institutions. Exclusion did not require the abandonment of law; changes in the rules helped organise it.
This was not an immediate collapse of Venice. Its political order endured for centuries. The case cannot establish that institutional closure inevitably destroys a state. It illustrates a mechanism by which economic success can strengthen interests capable of limiting further participation. Persistence of an established order and openness to new entrants are different measures of institutional performance.
That distinction protects our wider argument from exaggeration. Privilege can be stable. It may coexist with technical achievement, profitable commerce and considerable administrative capacity. Its danger becomes clearer when changing circumstances require reforms that threaten established advantages.
An economy may need new competitors, different infrastructure or a fairer allocation of resources. Those benefiting from the existing arrangement may instead seek protection against adjustment. The resulting failure need not arise from ignorance. People can understand the collective benefit of reform and oppose it because they expect to lose income, influence or control.
Research on institutions and prosperity, recognised by the 2024 economics Nobel Prize, examines how arrangements that concentrate benefits can persist despite their broader costs.
One difficulty is that promises of reform may lack credibility when the same interests retain the power to reverse them.3
These findings help explain institutional persistence. They should not be stretched into a universal account of every civilisation’s decline.
The connection with collapse requires further evidence. Did protected interests prevent a necessary response to an emerging danger? Did selective enforcement weaken revenue, investment or cooperation? Did citizens lose effective ways to obtain redress?
We must establish these relationships in particular cases, including the possibility that war, disease or environmental change overwhelmed institutions that were otherwise functioning reasonably well.
Pakistan offers a contemporary question worth mentioning here. A supplied report, titled Pakistan’s 35 Dollar-Billionaires, brings together 15 listed conglomerates and 20 prospective billionaire business groups. It is not an audited register of 35 individual billionaires. Company market capitalisation, group holdings, family wealth and personal net worth are different measures.4
The useful inquiry concerns how ownership across banking, industry, land and media affects access to opportunity. Business scale alone establishes neither misconduct nor public benefit. We need evidence about competition, credit allocation, wages, productivity and influence over policy. The fuller investigation belongs elsewhere; for this series, the relevant question is whether public rules permit productive newcomers to compete and ordinary citizens to challenge unequal treatment.
An economy requires successful enterprises. Investment and innovation involve risks that deserve legitimate returns. The difficulty arises when established interests can transfer costs to the public, secure preferential access or obstruct competitors without corresponding public benefit. Each allegation requires proof. Criticism becomes weaker when suspicion substitutes for examination of accounts, decisions and ownership.
Institutional capture can also occur without an obvious illegal payment. A decision-making process may repeatedly consult those with money and organisation while hearing little from dispersed consumers, informal workers or small producers. Their exclusion can shape policy even where every procedural requirement has been met.
This is why transparency, though necessary, is insufficient. Publishing a decision after its beneficiaries have settled the terms does not provide meaningful participation. Effective scrutiny requires timely information, disclosure of conflicts, reasons that can be examined and remedies capable of changing an outcome.
A similar problem arises when public accountability becomes selective. If enforcement depends on political convenience, citizens cannot reliably distinguish a legitimate investigation from an instrument of pressure. The answer is neither immunity for influential people nor punishment by accusation. It is consistent procedure, credible evidence and an independent opportunity to contest the state’s case.
Also Read: Why Civilisations Collapse—II
Reform must change how authority is exercised. Public concessions should have stated purposes and measurable conditions. Regulatory decisions should be open to challenge. The costs of litigation should not make remedies inaccessible. Representative bodies need information and capacity to scrutinise public commitments before resources are exhausted.
These arrangements also improve society’s ability to learn. A worker challenging unsafe conditions, a community questioning a development scheme and a competitor contesting discriminatory treatment can reveal failures that official reporting misses. Their claims may be disputed, but they need institutions capable of examining them without treating challenge itself as disloyalty.
The recurring danger is that law becomes more effective at preserving advantages than at resolving the grievances they produce. Formal order can continue while confidence in its fairness diminishes. When a serious shock arrives, cooperation may already be weakened and the means of peaceful correction obstructed.
Civilisations need rules that make common life possible. They also need the capacity to revise those rules when experience exposes their harm. That capacity contracts when privilege acquires the authority to define every challenge as a threat to order.
The next stage of the inquiry concerns how such arrangements are defended in public: how information is controlled, success manufactured and those reporting failure made to appear responsible for it.
Endnotes
- World Bank. World Development Report 2017: Governance and the Law. Examines how unequal power, exclusion, capture and clientelism affect policy selection and implementation.
- Diego Puga and Daniel Trefler. International Trade and Institutional Change: Medieval Venice’s Response to Globalization. NBER Working Paper 18288 (2012); published in The Quarterly Journal of Economics, 129(2), 753–821 (2014).
- Royal Swedish Academy of Sciences. The Prize in Economic Sciences 2024. Recognising Daron Acemoglu, Simon Johnson and James A. Robinson for research on the formation of institutions and their effects on prosperity.
- Sabir Shah, research for Economic Policy & Business Development Think Tank. Pakistan’s 35 Dollar-Billionaires, supplied report. The accompanying source note records tables dated August 2025 and a perception-based methodology combining listed conglomerates and prospective billionaire groups. Used here solely to identify a research question; no personal-wealth estimate or allegation of wrongdoing is adopted. The linked copy requires authorised access.
[To be continued]