Cooter, Robert; Schäfer, Hans-Bernd --- "Growth-oriented Legal Reforms" [2011] ELECD 1080; in Parisi, Francesco (ed), "Production of Legal Rules" (Edward Elgar Publishing, 2011)

Book Title: Production of Legal Rules

Editor(s): Parisi, Francesco

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848440326

Section: Chapter 22

Section Title: Growth-oriented Legal Reforms

Author(s): Cooter, Robert; Schäfer, Hans-Bernd

Number of pages: 19

Extract:

22 Growth-oriented legal reforms
Robert Cooter and Hans-Bernd Schäfer



1. Introduction
This chapter deals with the obstacles pertaining to growth-oriented institutional
reforms and policies in developing countries and with methods to overcome
them.
Economic growth is crucially dependent on institutions, which protect private
investors, their property, their contracts and their firms. This is now a widely
held consensus among economists (Rodrick, Easterly, Hall, Bardhan), even
though the institutional forms which cause this protection may differ from
country to country.1
Makers of wealth must be given chances and should keep most of their profits.
Otherwise growth cannot occur. The maker of wealth must be protected against
private and public predators. This protection can be achieved by the rule of law
but some countries such as China and Vietnam have successfully used other
means of credibly protecting private investors.
At first sight, the implications of this insight for modernizing institutions and
the law seem to be clear: since the 1990s Western countries and development
agencies have poured hundreds of millions of dollars into rule of law projects.2
Are they likely to succeed? If one sees the problems of legal and institutional
reform exclusively at the implementation level, failure is likely to be around
the corner. This view implicitly assumes that poor countries have a weak legal
and institutional system because they do not know better and that legal reforms
just bridge a know-how gap between rich and poor countries. Or it implicitly
assumes that legal ...