Introduction to the theory of Law and Development

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Introduction to the theory of Law and Development

• by
• Chen Lei
• University of Stellenbosch
• Presentation for Land Law Forum
• 20 September 2005

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Introduction

• Law and development, as an academic field in the
  US, began in the 1940s, thrived in the middle to
  late 1960s, and was declared dead by its
  advocates in late 1970s.
• This study can be said to have been a short-lived
  movement.
• However, quite recently, this field of study has
  experienced a resurgence as signaled by some
  far-reaching academic writings by legal scholars,
  economists and NGOs.

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Main Arguments

• How to restructure the economy to create economic
  growth.
• How to institute a legal infrastructure that
  maximizes the rule of law while sustainable
  economic development are promoted.

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Hypothesis

• Neo-classical
• Formal property institutions with clearly defined
  property rights is essential to the functioning
  of a market economy and sustained economic
  growth,
• on the other hand recent commentary suggests that
  a causal link between the clarity of property
  rights and market efficiency is also necessary.
• Development should also include economic and
  political factors.
• See Carty, Kennedy and De Soto

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Background

• Law and development theory are inherently related
  to international political and economic events.
• It began in the late 1940s with the design of a
  postwar order and the independence of former
  colonies.
• The objective of this theory is to promote the
  adoption of western-like institutions and
  western-oriented legal infrastructures.
• This theory has recently gained new impetus with
  the collapse of the Soviet Union and the
  reassessment of the value of centralized
  planning.

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Main Representatives

• Origin Webers thesis The relationship between
  rational law and economic development.
• Rational, formal and logical law
• Founders David Trubek, Douglas North.
• Revivalists Anthony Carty 1992, Hernando De Soto
  and David Kennedy.

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Evaluation

• Advantages (Institutionalist view)
• Law and development theory provides a very
  reliable theory for sustainable development in
  developing countries.
• Especially because quite a few developing
  countries in Africa, Latin America and Asia lack
  a unified and all-encompassing property system to
  capitalize on marketable assets in especially
  land.

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Evaluation

• To achieve a sustainable market economy with a
  unified, impartial, and efficient legal
  framework, law and development theory contributes
  a logical framework.
• Some developing countries achieved positive
  results by using this theory.
• E.g. South Korea, Singapore, Thailand and
  Malaysia.

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• As a theoretical tool, Law and development theory
  contributes significantly to the accelaration of
  globalization of international markets.
• The Law and development theory is itself still in
  a process of self-development and introspection.
• This allows for the adaptation of new social,
  political and economic transformations.

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Evaluation

• Disadvantages (Cultural view)
• Motivation Legal transplantation legal
  imperialism
• A real assistance for developing countries?
• Some political purpose behind this study----to
  bring those developing countries within the orbit
  of the West instead of the Soviet bloc.

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Evaluation

• Every jurisdiction is politically, culturally,
  economically, and socially contingent.
• Legal denationalization - Legal liberalism
• Direct transplantation without corresponding
  adjustments

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Evaluation

• A flawed and rather inept attempt to offer
  American legal assistance and implicit American
  models were themselves flawed, vulnerable to
  executive ordering and authoritarian
  abuse.----James Gardner
• Example Ethiopia Civil Code of 1966

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• 3 Convergence v. divergence
• The study of law and development which is based
  on so-called rational law will lead to legal
  globalization.
• It was and will never be the case for
  globalization of all kinds of jurisdictions in
  the world due to the diversity of pluralism and
  different backgrounds.

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Evaluation

• The right and indispensable way to promote
  sustainable economic growth in different
  countries is to formalize a corresponding legal
  framework, which is compatible with its
  political, economic and cultural situation.
• Different countries has different unique
  historical background and current problems. Those
  divergent problems, which are existed in
  different countries, cannot be resolved in one
  formula.
• No elixir Culture matters.

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Evaluation

• Independence v dependency
• Political independence v. economic and legal
  dependency right of development.

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Law Development Theorys impact on the South
African Land Reform Programme

• Application the relationship between property
  institutions (land) and economic development
  through a survey of the institutional changes of
  property rights in post-apartheid South Africa.

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Land redistribution or restitution is extremely
necessary and urgent

• Without land redistribution, democracy would not
  be a real democracy.
• The current situation of land occupancy is a
  colonial and apartheid legacy which is starkly
  contrast with democracy and social justice.

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Utilization of land use rights (land tenure)

• The apartheid land distribution vested 87 percent
  of South Africa's land area in the hands of the
  white minority. Hence, a legal framework for the
  states acquisition of land for resettlement
  purposes and enforcement mechanism are very
  necessary.
• Three ways

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Utilization of land use rights

• State compensation for land expropriation
  according to market value, or at least justified
  value.
• This method is appealed to those land which is
  not fully utilized and wisely developed in order
  to increase the land productivity. Also, it is
  suitable for those land which influences the
  public construction for public interests.
• Comment a direct way but must be applied very
  carefully. It is only appealed to a smidgen of
  land. However, it is still worthwhile and cannot
  be discarded.

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Utilization of land use rights

• The policy of fair State buy-out on the basis of
  willing seller and willing buyer principle.
• This method is appealed for those landowners who
  are willing to sell their commercial farms and
  accept price offer from state.
• Comments it is also a direct way and easy to be
  managed by the state. However, such both-win
  success can be only achieved under a special
  circumstance, namely a willing sell. Also, land
  willing sellers are not the majority of white
  landowners therefore the ensuing method is
  introduced.

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Utilization of land use rights

• Introduction of land use right
• separation of land ownership and land use right
  is a suitable and reliable way at this stage to
  carry out land reform in South Africa.
• The reasons first of all, the psychological
  adherence to land by white landowners---generation
  s by generations--succession
• secondly, the purpose of land reform is to keep
  country stable and peaceful

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Utilization of land use rights

• thirdly to comfort white landowners by
  maintaining or balancing their economic status in
  a progressive way
• fourthly, it is a double-win if white landowners
  retain the land titles while simultaneously vast
  majority of black people use and enjoy the land.

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• 3 ABS (asset-backed securities)
• It is kind of co-op to make farm workers become
  shareholders. This form can be compared with
  shareblock ownership to make sense.

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Main theories of land reform

• Productivity theory (economic analysis of law)
• State stability and prosperity theory
• Social justice theory---democracy---crimes
• Balance theory---must take both sides interests
  into consideration
• Transaction cost theory

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Suggestions

• 1 Land reform and tax reform. Reduce land tax
  and other kinds of agricultural tax to comfort
  white landowners.
• 2 Strengthen NGOs role many staff of the
  department of land affairs had come from the
  NGO sector, which has been a tremendously
  important source of knowledge and skills, and
  the Department intended to rely heavily on NGOs
  for implementation of its programs.

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Suggestions

• 3 Effectiveness of local government
• 4 Department of Agriculture staff remain
  committed to agricultural development scenarios
  based on an expansion to the black community of
  older models of large-scale mechanized
  commercial farming.

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Suggestions

• The Department of Land Affairs staff and the Land
  NGOs are more aware of the success in other
  African countries in modernizing smallholder
  agriculture, but are perhaps insufficiently
  concerned about productivity and how increases
  can be achieved in the reform sector.
• Joint training exercises for staff of the two
  departments, which would focus on reconciling
  theclaims of equity and productivity, was
  recommended as a partial solution.

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Suggestions

• 5 Haste makes waste. Land reform is a
  progressive project, which cannot be applied in
  a very ruthless and forceful manner

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International Examples China

• China - from 1949 to 1956
• Pay money and interests to former private owners
  by the state
• Differences
• a. The same race in China (Racial homogeneity)
• b. The land convergence is not as serious as in
  SA
• c. Different political system, i.e. ideology
• d. Result of civil war (from the political
  economic perspective, is a consequence of
  a violent revolution)

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International Examples USA

• US - 17 and 18 centuries
• Land is not scarce
• The population of native groups was small
• USs government has a political motive to expand
  its territory