There is strong synergy between economic and political institutions. Extractive political institutions concentrate power in the hands of a narrow elite and place few constraints on the exercise of this power. Economic institutions are then often structured by this elite to extract resources from the rest of the society. Extractive economic institutions thus naturally accompany extractive political institutions. In fact, they must inherently depend on extractive political institutions for their survival. Inclusive political institutions, vesting power broadly, would tend to uproot economic institutions that expropriate the resources of the many, erect entry barriers, and suppress the functioning of markets so that only a few benefit.

The essence of the iron law of oligarchy, this particular facet of the vicious circle, is that new leaders overthrowing old ones with promises of radical change bring nothing but more of the same.At some level, the iron law of oligarchy is harder to understand than other forms of the vicious circle. There is a clear logic to the persistence of the extractive institutions in the U.S. South and in Guatemala. The same groups continued to dominate the economy and the politics for centuries. Even when challenged, as the U.S. southern planters were after the Civil War, their power remained intact and they were able to keep and re-create a similar set of extractive institutions from which they would again benefit. But how can we understand those who come to power in the name of radical change re-creating the same system?