THE INTERNATIONAL RULE OF LAW AND ECONOMIC DEVELOPMENT.

• Published date: 22 March 2018
• Author: Nedzel, Nadia E.
• Date: 22 March 2018

 Introduction 449
                 The Rule of Law 450
                 The Association between Common Law and Economic
                Development 456
                 Capitalism, Business, and Employment 462
                 The Common Law and Brexit 465
                 The Civilian Tradition and Rechtsstaat 470
                 The Rule of Law & Economic Success 477
                 The Rule of Law differs from Rechtsstaat 478
                 Rule of Law and the Lockean Narrative 480
                 English Property Ownership, Transfers, Inheritance, and
                Individualism 481
                 From Status to Contract and the Royal Courts 485
                 Law and Capitalism 491
                 Conclusion 498
                

INTRODUCTION

While "international" is included in the title, it is something of a misnomer. "International" definitions of the Rule of Law, such as that developed by the World Justice Project, are inaccurate. They may be good descriptions of a functioning legal system, but do not describe the concept of the Rule of Law. The World Bank has recognized a connection between the Rule of Law and economic development, noting that countries remain undeveloped because they lack efficient legal systems. In the 1990's, the World Bank insisted that countries who wanted to receive its financial support were required to implement Rule of Law programs, by which it meant independent judicial systems. With expenditures of $850 million and a success rate of 63%, by 2012, the Bank recognized that its program was underperforming and revised it. Its new direction in justice reform is as follows:

The Bank's Updated GAC Strategy points out that one of the functions of
                a capable state is to dispense justice, and recognizes that justice
                institutions (i) assist in countering corruption, (ii) support
                oversight and monitoring of the executive's actions, (iii) help ensure
                that the government is accountable to citizens, and (iv) facilitate
                constructive engagement between state and non-state actors. The
                Strategy also notes that the judiciary is among those institutions that
                not only respond to, but also help create, change, and sustain the
                'rules of the game,' that is, the institutional environment in which
                development takes place. (1)
                

In turning its focus from independent judiciaries to justice institutions, corruption, and accountability, the World Bank is acknowledging that its 1990's conception of the Rule of Law was insufficient, and that while an independent judiciary is important, governments must be held accountable to their citizens by means of some "institutional environment." (2)

Similarly, since 2014, the World Justice Project, which measures its conception of the Rule of Law in approximately 111 countries around the world, now provides seed money to support practical "on-the-ground programs addressing discrimination, corruption, violence, and more." (3) The World Justice Project describes the Rule of Law as being comprised of four universal principles:

1. The government as well as private actors arc accountable under the law.

2. The laws are clear, publicized, stable, and just; are applied evenly; and protect fundamental rights, including the security of persons and property and certain core human rights.

3. The process by which the laws are enacted, administered, and enforced is accessible, fair, and efficient.

4. Justice is delivered timely by competent, ethical, and independent representatives and neutrals who are accessible, have adequate resources, and reflect the makeup of the communities they serve. (4)

At best, this is a description of an effective legal system, largely described initially by Lon Fuller's King Rex (5) (with the addition of positive rights language). Lon Fuller lists eight characteristics of an effective legal system, (6) but his list is not a definition of the Rule of Law. Terms like "fair" and "ethical" are normative and hence render the World Justice Project's definition somewhat circular. Nevertheless, the World Justice Project's new focus on practicality and effectiveness shows more of a common-law spontaneous order 'do what works' approach, rather than a cookie-cutter 'do it our way' approach. While both NGO's support the Rule of Law and sec a connection between it and economic development (or the lack thereof), neither has ever effectively defined the concept nor fully explained it.

THE RULE OF LAW

In his beautiful parable about King Rex, Lon Fuller postulated that the law should consist of (1) general rules that are (2) publicly promulgated; (3) prospective; (4) understandable; (5) non-contradictory; (6) possible to comply with; (7) stable; and (8) administered as announced. (7) In addition to listing characteristics of an effective legal system, his explanation, however, relates primarily to legislated law, which has become regarded as primary law in most modern legal systems (particularly those with a civilian heritage) and is incorporated into the World Justice Project's definition previously discussed. The Rule of Law, however, goes beyond those eight principles, beyond the mechanics of government set forth in a Constitution, and it also goes beyond legislative law.

Regarding law as primarily emanating from legislation and administration is deleterious to economic development. Economist Friedrich Hayek, philosopher Bruno Leoni, and law professor Philip Hamburger all warned that excessive legislation and administrative law are deleterious to the Rule of Law and economic development. Max Weber was concerned that bureaucracy would come to control modern life. (8) Hayek warned that an ever-increasing bureaucracy is dangerous to liberty. (9) Leoni cautioned that while many regard legislation as a "quick, rational, and far-reaching remedy against every kind of evil as compared with, say, judicial decisions" and alternative dispute resolution, people fail to notice that legislative remedies can be "too quick to be efficacious," too unpredictable, and too directly connected with the views and interests of a handful of people such as legislators and lobbyists to provide effective remedies for society's ills. (10) Hamburger reiterates that out-of-control administrative law, i.e. the "deep state," while initially most burdensome on economic development, also intrudes on the full range of American life including political participation and personal decisions. (11) This administrative power was created by a combination of Congress's repeated authorization and acquiescence combined with judicial deference. (12)

The positivist's attempt to reduce law to legislation (13) and the administrative state are products of the desire to base government on a social technology that would control all institutions in society, including the market economy. Hernando de Soto's empirical research shows that Weber and Hayek's concerns were apt--that an overgrowth of top-down bureaucracy and legislation leads inexorably to decreased economic liberty and corruption in government. (14)

Despite its unacknowledged emphasis on legislation as the source of law, the World Bank's new direction implicitly acknowledges that judicial guarantees form a significant part of the Rule of Law. In fact, however, it was judicial guarantees that in large part created the Rule of Law in England. Parliament originally used legislation only rarely, and only to limit the Crown's power or pass new taxes, as with the Magna Carta or the Statement of Liberties. (15) In contrast, individuals traditionally had recourse only to the courts, and it was the English King's courts and traditional customs that enforced contract, property, and succession law, and created such mechanisms as habeas corpus (among other things) to limit the King's power. (16) Legislation was not used to limit an individual's freedom of action, and in fact the English sense of individualism has been embedded in the culture and English common law since at least the fifteenth century. (17)

In contrast with what constitutes an effective legal system, however, the Rule of Law can properly be more viewed as a meta-norm, a cultural understanding about the legal system and man's relationship to it. Properly construed, it has two components: 1) law and order and 2) limited government. (18) The law and order component predicates that individuals have impliedly consented to obey the rules because it is to their benefit to do so and because they will otherwise be punished. In doing so, it puts individuals first, not a collectivity. Limited government means both equal application of the law and that the government's powers are limited.

While A.V. Dicey popularized the term "Rule of Law," (19) the distinctive relationship between the English and their law and government developed spontaneously centuries earlier. Hayek and Oakeshott more fully captured a definition of the concept and the kind of legal culture that developed and supports it. Hayek described the Rule of Law as meaning that "government in all its actions is bound by rules fixed and announced beforehand--rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one's individual affairs on the basis of this knowledge." (20) Hayek further posited that law, like the free market, developed spontaneously. (21) Oakeshott's insights were consistent with this. He posited that the Rule of Law presupposes a civil association, where the law does not favor any individual or group over any other individual or group. (22) In a secular world of moral pluralism, where people's views of morality differ, this approach allows for the greatest tolerance and freedom. In other words, the Rule of Law is a-political and non-instrumental, and the law applies equally to all, including those in the government.

Common law rights arc 'negative.' (23) In other words, individuals have a general right to be free from governmental interference, unless they are intruding on another individual's freedom. These rights are indefeasible, or inalienable, and include only "life, liberty, and the pursuit of happiness," and precede any governmental power. (24) As listed in the U.S...