Transcript Law & Economic Development: Why many developing countries

Law & Economic Development:
Why many developing countries could not
realize necessary legal conditions for
economic growth?
Iraj Babaei
Law & Economic Institute of Erasmus
University Rotterdam
June 2009
Introduction
• Attention to the role of law in the growth in developing
countries
• Transplantation of legal rules & systems for the realization
of development
• Interest of western intellectuals in the cause & obstacles of
development in developed and developing countries
• Creation of funds and institutions for study and help of
developing countries and advising them the proper
measures
• Failure of efforts in the majority of cases
• Principal question : why efforts have failed?
• Subject of lecture : why have legal measures failed to
realize the necessary legal conditions of eco development?
I – Theories about how law could
affect economic development
• The Law and Development Movement:
Law reform could lead social change, and itself could be an engine
of change. Transplantation of new law according to law in
developed society is a good way to perceive need for rapid and
direct change and could be realized by a top-down act of States.
• New Institutional Economics
It emphasizes on the role of institutions, defined as the rules of
game in a society. Good institutions provoke eco development.
Institutions are the patterns of interaction that govern and
constrain the relationships of individuals and include formal and
informal rules. Protection of property by proper institutions is
motor of eco development.
Necessary legal conditions for
economic development
• Investment is the key of economic growth.
• Necessary legal conditions for investment:
1. Protection of Property rights
2. Enforcement of Contracts
• Rule of law
• Explanation of role of Law by combination of
investment & innovation (Cooter & Schaeffer)
Institutional obstacles for the
realization of conditions
• Institutional obstacles in developing countries:
Limited Access Order
– Structure of these societies rejects establishment
of rule of law and so equal legal protection
– Non Competitive climate rejects protection of
property rights & enforcement of contract for non
elites and so minimize incentive for investment
and innovation
– Absence of political will for creating institutional
conditions for eco development
My Observation
• Leaders of developing countries are aware of the
general conditions for the realization of eco
growth
• Realization of these conditions needs detailed
knowledge about proper measures conforming to
the institutions and conditions of each society
• Eco growth as a process & not an event
• The Knowledge is the affaire of intellectuals of
the same society
• Problems of the existence & transfer of
Knowledge to policy makers
…
• Conditions for the production & transfer of Knowledge to
policy makers:
– Existence of a competent body of intellectuals & social scientists
in the society
– Involvement of intellectuals in the problems of society, as the
research & scientific activities devoted to problem finding &
resolving
– Close relation between policy makers & intellectuals, as they
refer in their decision to ideas & advices prepaid by intellectuals
• Other problem: implementation of necessary measure
needs competent administration & policy makers
Conclusion
• Fundamental obstacle: Limited access order structures
which restrict competition & systems of better choice
in administration of society & economic activities
• Vital practical condition: Know conform measures for
eco development need the existence of intellectual
capacity in the society & instructive exchange between
policy makers
• Absence of actual knowledge & relation
• Instructive relation between intellectuals (scholars,
researches, thinkers) & policy making enhances
intellectual capacity & makes profit for policy makers
to Know proper measures for development