The Economic Importance of the Rule of Law
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.
The Rule of Law vs. The Rule of Man
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.
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.
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.