Sunday, May 07, 2017

theoretical approaches to law and development

modernization theory of the 1950s and 1960s
modernization theory counted on the nation state to play the necessary, interventionist role of fostering industrialization

The critics of modernization theory did not succeed in providing an alternative law and development orthodoxy, but they did produce two influential bodies of work: dependency theory and the world systems approach.

the dependency theories that followed modernization theory doubted that the international forces which consign nations to the periphery will allow Third World states to play such a constructive role. These forces, which include international commodity markets, the interests of multinational corporations, as well as the interests of Third World comprador elites, will instead conspire to maintain and enforce the international division of labor captured in the core–periphery image.

The next real orthodoxy that arose following the demise of the modernization movement was the Rule of Law orthodoxy associated with the Washington Consensus and the energetic neoliberalism of the 1990s. This was the orthodoxy developed to frame and justify the massive law and development agenda that grew out of the collapse of the Soviet Union, and which accompanied the economic
globalization of the 1990s, and was also the heir to the Right’s critique of the modernization orthodoxy. Reference to economist Douglass North’s designation of law as an “institution” with important economic implications helped justify legal reform initiatives that went far beyond the scope of prior IFI initiatives, and the Rule of Law became the umbrella concept used to rhetorically
unify a wide range of legal development initiatives.

Prior to the rise of “new institutional economics” (NIE), mainstream economics tended not to think much about private law, essentially assuming smoothly functioning legal systems as the background for theorizing about markets.

NIE refers to the branch of economics that concerns itself with the ways that economic behavior, whether by individuals or by firms, is affected by the institutional setting in which actors find themselves. As neoclassical economics came to dominate development thinking, attention naturally enough shifted away from the “process” or “systemic” concerns important to the modernization era, such as building modern government institutions and ensuring that legal systems could effectively transmit government policies, to a substantive concern with free markets and limited government.

By the 1970s, neoclassical economists interested in development issues argued that state intervention
was inefficient and an excuse for rent-seeking by government functionaries, while the economic attack on regulation being developed by conservative, free-market economists in the United States

Two separate currents seem to have converged in the late 1980s to bring law and legal institutions back into the development picture. One was the increasing influence of NIE, which brings institutional structures and processes, explicitly including law, back into economic theorizing. The second was the fall of the Berlin Wall and the collapse of the socialist world, which had two effects. First, it quite suddenly presented the development community with the problem of how to nurture market economies in Eastern and Central Europe, the Baltics and Central Asia, where legal systems were geared to socialist rather than capitalist economics, and second, it left developing countries with nowhere to turn for assistance except the United States-dominated West, in which views on economics and the role of the state in society had taken a strong turn towards the
market.

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