Rule of Law

Once you settle the issue of who lives where and who does what with who, people start understanding the value of standard rules.
- Hernando de Soto

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  • Michael Fairbanks on Punctuality, Democracy and Development

    Democracy is slightly, positively correlated with economic growth. So democracy’s a good thing. You know what’s more positively correlated with economic growth? Rule of law. Even in dictatorships that had strong rule of law, we see firms working in a predictable environment where there’s recourse to people who have stolen from them. Therefore, they decide to innovate…. You know what is most highly correlated with economic growth? Punctuality! ‘What,’ you say? ‘If a country shows up on time for meetings, they’re more prosperous?’ Yes! … Punctuality is a proxy for a set of values around tolerance for other people, self-discipline, future orientation, and time-management; and all of those things are part of an innovation process.

    More from Michael Fairbanks
  • George Ayittey on Foreign Aid and the Leaking Bowl

    Imagine, Africa has a begging bowl and that into this begging bowl comes… foreign aid. But this bowl has holes in it, so it leaks. There’s a massive hole here through which corruption alone cost Africa $148 billion dollars. That’s a massive leak. What should be done first – plugging the leaks or putting more aid money in? Now this is something which even an elementary school student should be able to answer. I mean, you pouring more and more and more into the bowl and then it leaks. Defining insanity: as doing the same thing over and over and over and again and expecting different results—makes no sense.

    More from George Ayittey
  • Doug Seebeck on the Potential for Corruption in Business

    Do some businesses exploit? Yes… it’s like any institution…. I think the larger and more removed the business or church or government become from the people they claim to serve, that’s when abuse can start happening—because organizations, by their nature, can turn in on themselves. They can lose their original purpose … their reason for being.

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  • Robert Woodson on the Poverty Industrial Complex

    There is a poverty industrial complex.  You’ve got huge numbers of people who profit off our differences.  You see, if you are problem oriented, you can write about the problem, you can lecture about the problem, you can consult on the problem. You can do everything but solve the problem.

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  • Robert Woodson on Accountability

    There will always be a resistance to measuring results as long as the people who are in power to serve poor people have perverse incentives to maintain people in poverty.  To me, corrupt leadership is when you don’t have to suffer the consequences of your own decisions.

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  • Calvin Edwards on Microfinance Circumventing Corruption

    You have several obstacles broken down by the microfinance organization … where there is corruption and sort of essentially a locking out by the elite class of the public class to the systems and the assets that are needed to build a business—private organizations that provide microfinance just practically bypasses the whole system. All of a sudden a person can do that which they were not able to do with the corrupted governmental systems so one of the geniuses of it is it bypasses all those systems.

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  • Samuel Gregg on Rule of Law and Economic Development

    The rule of law, I think, is best understood by considering its opposite, which is the rule of men. The rule of men is when you have the rule of force, the rule of power, the rule of arbitrary, subjective opinion. The rule of law means that there are stable, reasonable laws that apply to everyone, regardless of their station in life.

    Perhaps there’s no other place in the world where the rule of law is more important than in developing countries. Because in many developing countries, you really don’t have rule of law. You don’t have contracts enforced. You don’t have property rights recognized. You don’t even have property deeds recognized. You have corrupt judges, you have people who have judges sitting in on their own court cases who happen to be their brother or their sister.

    In other words, rule of law is essential if you want to have a functioning economy. You cannot have a functioning economy without secure property rights. You cannot have a functioning economy unless contracts are enforced. You cannot have a functioning economy if government officials can act in an arbitrary fashion.

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  • Marcos Hilding Ohlsson on Rule of Law and the Case of La Cava

    La Cava is this shantytown that stays in the center of the city of Buenos Aires. Buenos Aires is one of the richest counties, we call municipalities, of whole Buenos Aires. San Isidro is a district inside of Buenos Aires. So, in the whole suburb area of Buenos Aires and the whole province, San Isidro is one of the richest areas. Inside of one of these richest areas, we’ve got one of the poorest neighborhoods of the province and this is the shantytown where different estimates calculate between fifteen or twenty thousand people live there. It’s an interesting case because it’s a place where there’s no rule of law, where as we’ve seen, policemen don’t go inside of it. There’s no taxes. People don’t even pay for their electricity. And so it’s a place where they live apart from the rule of law.

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  • Marcos Hilding Ohlsson on Absence of Effective Law Enforcement Hindering Development

    A few years ago there’s some really high crime rates in the area, the whole of San Isidro, and many people blamed it, that many of the crimes came from people inside La Cava. So the government decided to put policemen, but they put policemen on the borders of La Cava; they are part of the army that is just outside of La Cava, and they go around the streets but they don’t go inside. And it is a sort of wall that they put, because it’s a way of protecting people that live outside La Cava from people that live inside it, but they won’t protect the people that live inside it. They are the ones that actually suffer the most insecurity of all, because most of the people that live inside of it are people that are hard working and they want to have a better life and they want to develop and they try to get their kids to school and they’re really struggling to have a better life.

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  • Marcos Hilding Ohlsson on Rule of Law and a Successful Economy

    ...to have a good market economy, you need little government intervention, but as well, it’s very important, the enforcement of rule of law, that people can look after their property [and] give proper incentives to the people to work harder.

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The rule of law and its importance in international development

Rule of law is among the most important factors of success in any socioeconomic ecosystem. It is the immaterial foundation upon which we construct all of our formal institutions. It is what allows us to engage with one another in social economic exchange of all kinds with complete strangers - from your working agreement with your new employer to your trade with the strawberry grower at the farmer’s market - because the law acts as a basic framework for our interactions and as an objective third party should any conflict or wrongdoing arise.

The strength and consistency of the rule of law is at once one of the most accurate indicators of economic development and one of the most consistently underappreciated. It is scarcely mentioned at social justice conventions; it is not listed among the eight Millennium Development Goals. We take for granted that if we are wronged, we have recourse for action. We can legally register our livelihoods, whether it be starting a business or joining a payroll, with relative ease and without paying bribes or protection money. Legal status in the formal economy allows us to access a plethora of opportunities and services such as credit for our home loans, insurance for our families, and retirement plans for our futures. If someone steals from us or cheats us, we have an appeal to justice via a legal system that is, however imperfect, highly reliable relative to the legal systems in the Least Developed Countries (LDCs). All of this, and much more, flows from the rule of the law and must be a fundamental for those concerned with development and human flourishing. It is a hard and unglamorous subject, but is one of utmost importance.

Below, Dr. Kevin Schmiesing of the Acton Institute has outlined for you some of the chief concepts central to the issue of rule of law. We treat the subject in-depth in Episode 3 of the PovertyCure DVD Series, along with the closely related issue of property rights. We encourage you to explore this page, to listen to some of the “Key Voices” on the subject, and to give us your comments in the “Conversation” tab.

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"The Rule of Law" by Dr. Kevin Schmiesing

Table of Contents

  • The economic importance of the rule of law
  • The rule of law vs. the rule of men
  • Rule of law, natural justice, and justice for all
  • A higher order: moral philosophy and religion, the foundations for rule of law
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The Economic Importance of the Rule of Law

An indispensable factor in the economic progress of developing nations is rule of law. The key to development is a combination of domestic entrepreneurship and private capital investment, domestic and foreign by foreign corporations. These activities cannot be sustained for long without the rule of law.

Peruvian economist Hernando De Soto has argued that when people are forced to operate outside the legal structure for lack of secure property rights, they are unable to pursue higher yielding long-term strategies for their property, or to use their property to access credit for business enterprise. When political authority fails to enforce just contracts and property rights, incentives to cooperate commercially and to expend effort to acquire wealth evaporate. In such a climate, there is little motivation for people to invest and produce for the long term, since there are so many risks and barriers to successful long-term business ventures.

Similarly, when foreign companies and individual investors are uncertain about the stability of the law in a region, they understandably avoid committing resources to that country. If a company fears that its land or capital goods might be arbitrarily confiscated by politicians, for instance, it will hesitate to invest there. Where international investors discern an unstable rule of law, they conclude that the business climate is unfriendly, and they direct their financial resources to other markets.

In other words, neither foreign direct investment nor a wealth of natural resources is any guarantee in itself that any ensuing economic growth will help the poor of a developing country. Indeed, developing countries rich in natural resources are often marked by extreme poverty amidst abundance. The phenomenon is so common that development economist Paul Collier has given a name to the situation in which abundant oil or mineral wealth corrupts the political system, undermining good governance and the rule of law: the natural resource trap. Only where people are free to participate in government and engage in commerce, and only where the actions of government are transparent and constrained by law is it likely that economic growth will be benefit not only the politically well-connected but people from every social class.

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The rule of law vs. the rule of men

The rule of law is not to be confused with the rule of men. The rule of men refers to the arbitrary use of political authority for the betterment of individuals at the expense of others. In contrast, the rule of law means there are clear, reasonable and stable laws consistently applied across society. Where the rule of law is lacking, there is an inevitable decline into a regime of “might makes right.” In such a situation, the rights of the weak are those most in jeopardy.

Because laws naturally reflect the history, culture, and geography of particular peoples and regions, legal systems may look somewhat different from nation to nation. There are, nonetheless, certain features of just legal systems that are common through time and across space. Practicing the rule of law entails the presence and proper functioning of certain institutions: a legitimate lawmaker (preferably a democratically elected legislature but, at the least, a ruler who is responsive to the people and not tyrannical), a judiciary to consistently interpret laws and resolve disputes; and an enforcement system that consistently enforces the law without discriminating.

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Rule of law, natural justice, and justice for all

A rich understanding of the rule of law includes the principles of natural justice, with several elements characterizing a just system of laws and their application. The following are normally included among the characteristics of natural justice:

  • Rules are promulgated, and are clear and coherent with respect to each other.
  • Rules are prospective rather than retroactive, and not impossible to comply with.
  • Rules are sufficiently stable to allow people to be guided by their knowledge of the rules.
  • Those charged with the authority to make and administer rules are accountable for their own compliance with the rules, and administer the law consistently.
  • There is a recognized division of responsibility in administering the law. No one can, for example, be simultaneously judge, witness, public prosecutor and public defender.

Rule of law is a necessary but not a sufficient condition for achieving the goal of natural justice for all, since it is possible that a society possesses the rule of law to a high degree, but for particular laws themselves to unjustly discriminate against some particular group. “Justice for all” is most closely approached, then, when society is characterized by the rule of law, and the legal code does not unjustly discriminate against some particular group within society.

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A higher order: moral philosophy and the foundations for rule of law

The concept of the rule of law derives from human reflection about what is good and evil. It assumes that people are reasonable creatures, responsible for ordering and channeling their wants in the most productive ways possible. The “rule of men,” in contrast, assumes that people must relate to each other by acting without regard to the welfare of others (the common good). Promotion of the rule of law, therefore, is a means of protecting the equality in dignity of all human beings.

It is difficult to sustain the rule of law when the moral culture of a nation is weak. For example, it is difficult to maintain the rule of law where there is a widespread commitment to moral relativism—the concept that absolute truth is nonexistent, impossible to know, or variable depending on circumstances. Traditional legal prohibitions against acts such as murder, theft, and perjury are based on the belief that there are standards of behavior to which all people must adhere and that it is possible for people to know these standards. In many nations, such standards are deeply rooted in religious traditions.

Where those religious traditions weaken and are replaced by secular relativism, the foundation of the rule of law has only customary habit and efficiency arguments to sustain it. Unfortunately, experience shows that customs tend to wither when shorn of their original animating purpose.  Thus, an efficiency argument made in regard to a whole society may have little effect on a moral relativist who sees some distant and hard-to-quantify damage to the whole culture as a small price to pay for an immediate and concrete personal gain achieved by violating the rule of law.
Finally, an important measure of a good citizen is the individual’s sense of moral obligation to observe the law. Where disrespect for law is widespread, legislation becomes irrelevant and enforcement of the law impossible. The rule of law and the moral culture informed by religious tradition are thus complementary. A robust rule of law embedded within a strong moral culture is the surest foundation for economic development that is just and long-lived.

Christian theologians regard the cultural pursuit of widespread natural justice and rule of law as compatible with natural reason, even as many of them also emphasize the role of common grace in strengthening natural reason, and even as they emphasize that no culture composed of fallen humans—Christian or otherwise—will ever achieve a perfectly just system of government.

No religious tradition can guarantee that a citizenry will adhere widely to the rule of law, much less that justice will be effectively extended to all. People are quite capable of ignoring the precepts of their professed religion, and even of perverting the religion’s name to actively support unjust practices.

But a strong moral framework undergirded by faith in a Creator of absolute goodness can and has encouraged political leaders to understand that they are not above the higher law and therefore should not govern arbitrarily or as if they were a law unto themselves. Conversely, some of those 20th century societies governed by men who rejected the idea of a transcendent moral order descended into the worst horrors of that century (e.g., Nazi Germany, Soviet Russia, the Khmer Rouge of Cambodia, the Maoist Revolution in China). As 19th century Russian novelist Fyodor Dostoyevsky’s character Ivan Karamazov presciently explained, without God, everything is permitted.

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