This talk will argue that the foundations of institutions that protect individual liberty and create an environment conducive to economic growth are not in clever institutional designs or top-down development of state institutions. Rather, they emerge from the involvement of society in politics in a way that balances the power of state institutions and elites. This precarious balance, when it is achieved, unleashes a powerful process of building of state capacity and development of society's capability to institutionalize its involvement in politics. The corridor leading to such institutions is narrow because of the difficulty of creating this balance and staying the course despite myriad conflicts and gridlocks.