Law and Development
I am expanding work done on the history of corporations and in particular on the history of financial institutions and placing it within the discourse on “law-and-development”.
I think that one place where important questions for legal regimes and broader economic (even social) systems meet is in the literature of law-and-development. Aside from foundational debates about the meaning of “law”, “development” and hybrid disciplines, the framework questions include: is capitalism mutually constitutive with law? Can law “correct” vagaries of capitalism, by degree or type? Is some law more appropriate for some forms of development than others? The side-questions are equally fascinating: how has the history of development economics created normative rules for development? Is this history accurate? After a while, things get epistemological. How is can it all be measured? Can it be measured?
This literature has fascinating precursors and filiations. Perhaps the best introduction is right in the middle, assuming we’re at one end. I 1974 two academics who had mis-spent their youth asking related questions stabbed the then nascent law-and-development movement through the heart in their paper, “Scholars in Self-Estrangement” (see bibliography below) which rent asunder the rationale and program of then-contemporary law-and-development debates. This, it turns out was critically necessary but a sad event, because it ceded the field.
Since that time, the practice and theory of law-and-development has been dominated by a particular school whose work revolves around the institutions of the Washington Concensus (like feudalism, a term given it after its time), and drawing heavily on research in law-and-economics. The primary concern of law-and-economics has been to trace the operation of the “efficiency criterion” in law and law application, so you can imagine what it would have to say about law-and-development. Since perhaps the mid-1990s, with a crisis I call the “lack of outcomes” firmly in mind, other commentators have turned once again to the questions raised by law-and-development, primarily, I suggest, through an examination of trade law in particular. As regional trade bodies proliferated and these regimes became the object of study, so too did underlying rationales get re-examined, and before long, voila, people were quoting Trubeck and Galanter again, and asking why law-and-development had lay dormant for so long.
There is so much more to say. However, the current work may provide one example of possible interventions. I wish to extend and develop existing work on the role of international financial institutions (IFIs) in law-and-development theory and practice. Specifically, I wish to develop an analytical framework for problematizing IFI-defined “Rule of Law”, sometimes called or reduced to legal institutions of a market economy, in dominant and alternative development theory and emerging literature of law-and-development. Second, I wish to discuss and develop a theoretical framework to analyze the transnational (South-North) alternative legal strategies, and alternatives to legal strategies, being employed against IFIs and related development institutions.
The current project extends prior published work on the accountability of international financial institutions (IFIs) and the connection of accountability to the dominant development model (Archer & Piper, 2005). My original work involved fieldwork and legal research on the liability of IFIs to third parties. It developed three models of accountability that are related to decision-making by cause lawyers and activists: (i) accountability by strong legal liability, such as enforcement of rights of counter-parties to contracts in binding arbitration or ICSID; (ii) accountability by soft legal liability, such as voluntary compliance with declarative statements, such as corporate codes or the World Bank Inspection Panel; (iii) accountability through quasi- and non-legal methods, including transnational legal processes, political and economic literacy, and legal activists functioning as an epistemic community supporting political action. This work identified the lack of strong legal accountability applicable to IFIs, and outlined some implications for the role of the “Rule of Law” in the larger development model.
More specifically, the development model that guided the institutions of the Washington Consensus originally favoured prioritization of development objectives and decision-making based on economic-as-opposed-to-political criteria. Legal systems were of secondary or tertiary concern. These institutions themselves immunized their operations from the application of domestic or municipal law, and limited their ability to be subject to legal proceedings to counter-parties (e.g., bondholders) and states.
Diagnoses of the lack of development outcomes in the 1980s and 1990s (and of the abuses made in the name of large development projects) emphasized the lack of legal and political accountability of donee states, and to some extent, lack of proper governance of donor institutions: but not, however, the legal and economic assumptions of the development model. The prescriptions were therefore to improve “governance” of the donor institutions and the Rule of Law in the donee countries, with an emphasis on “legal institutions of the market economy” and a notable lack of emphasis on broader economic, social and cultural rights. This has lead to questions about “sequencing” of both economic reforms (Stigliz, 2003) and associated sequencing analyses of the rile of the Rule of Law in economic development and the newly-rejuvenated field of law-and-development. This analysis has now shifted again to justify interventions (which include development programs) by a diagnosis of “failed states”, emphasizing normative concerns of security and freedom over other concerns, including sovereignty.
As stated, I wish to develop a series of two related papers that meet this objectives while considering the following developments:
Discursive and conceptual influence: Since at least the early 1970s, the language and concepts of development and law-and-development have been heavily influenced by the epistemology and ideology of business management. The diagnosis of problems with the state has shifted from a diagnosis of a regulatory tri-lemma that emphasized economic efficiency as and over normative outcomes, to an analysis of failed states that re-conceptualized the motive and program of development as one of ensuring “security”, “stability” and even “freedom” among others norms. There are corresponding shifts in form, content and emphasis given key discursive terms, including “development”, “accountability”, “Rule of Law” and “regulation”.
Models of management: The management of development through market-based policy and in particular, large project-based financing, has become the dominant approach to administration within and by state departments and agencies. One of the main one of its consequences is to emphasize financial orthodoxy over normative concerns. A second is to use an analytical framework of finance, measures of efficiency and forms of risk (including political, economics, project-based, systemic, insurance, litigation) as de-facto regulatory tools.
Development models: The discursive influence and management models have been combined to create a particular role and function for the “Rule of Law” in development theory and practice. On the whole there has been an uncritical re-assertion of the liberal democratic market model. There is a tendency to emphasize the problems of the sequence, phasing or execution of projects or individual country concerns, but not to examine the broader systemic elements of the development model.
Modalities of delivery: As the role of the state is reduced or de-centred, it becomes more and more reliant on bilateral contractual arrangements whereby IFIs and development institutions require state actors to use private and quasi-private corporations to stand proxy for the state in the delivery of public goods and services. These corporations have passed through crises of legitimacy and criticism in their ability to deliver outcomes, particularly “public purpose” outcomes, initially in their management of privatized public services, but highlighted by recent public scandals involving corporate fraud and spectacular mismanagement, anxiety of the role of transnational corporations in human rights abuses; and the misbehaviour of corporations in “rebuilding” efforts in response to natural disasters and invasions. This crisis has engendered governance-oriented responses from the local to the international level, focused in particular on “governance” (a term which lacks legal definition). Evidence of the effect on outcomes is mixed.
Development institutions as objects of public concern: Diagnosis of the failure of development institutions, most particularly the IFIs which form the core of the
“Washington Consensus”, and their projects to deliver substantive and systematic development outcomes have not produced convincing analysis or improved outcomes.
PARTIAL BIBLIOGRAPHY
Chang, H.J Globalization, Economic Development and the Role of the State (New York: Third World Network and Zed Books, 2003).
Clarke, D., “The World Bank and Human Rights: the Need for Greater Accountability” (2002) Harvard Human Rights Jour. 205.
Damn, K. “Institutions, History and Economic Development”, JOHN M. OLIN LAW & ECONOMICS WORKING PAPER NO. 271 (2D SERIES) (Brookings Institution, 2006).
Galanter and Trubeck, “Scholars in Self Estrangement” 1974: 4 Wisconsin Law Review 1062.
Nelken, D. “The Meaning of Success in Transnational Legal Transfers” (2001) 19 University of Windsor Windsor Yearbook of Access to Justice 349.
Pistor, K., Berkowitz D. “Of Legal Transplants, Legal Irritants, and Economic Development” in Corporate Governance and Capital Flows in a Global Economy (Bruce Kogut & Peter Cornelius eds., (New York: OUP, 2003).
Pistor, K. “The Standardization of Law and its Effect on Developing Economies” (2002) 50 Am. J. Comp. L. 97.
Posner, R. “Creating a Legal Framework for Economic Development” (1998) 13 The World Bank Research Observer 1.
Rittich, K., “The Future of Law and Development: Second Generation Reforms and the Incorporation of the Social” (2004) 26 Michigan J. Int’l L. 199.
Rubin, P., Legal Systems as Frameworks for Market Exchanges in Handbook of New Institutional Economics C. Menard & M. Shirley, eds. (New York: Kluwer Academic Press, 2003).
Shihata, I.F.I., “Role of Law in Economic Development: the Legal Problems of International Public Ventures” (1969) 25 Revue Égyptienne de Droit International 119.
Stiglitz, J., Globalization and its Discontents (New York: Norton, 2003).