Hi there!
In the previous video,
we analyzed the parts by which democracy could be expected to influence growth.
But we saw that the statistical verification was weak.
In this video, we'll do the same for the rule of law,
and we'll see how the rule of law fits into our expectations on economic growth.
The very first point to note, however, is the world bank indicator for
the rule of law is not actually about the rule of law as most of us would define it.
It does not measure human rights.
It says nothing about the independence of the judiciary, or
the principal of equality before the law.
It says nothing about the right to a fair trial, and fair punishment.
And it does not imply that all citizens are treated equally.
It's all about economic rights.
About contract and property rights.
And the World Bank makes no secret about this.
And all the sources and all the question are biased in that direction.
And as we saw in the last video,
the World Bank is committed to promoting market led economic growth.
And it's constructed an index that answers this particular need.
My complaint's not about the construction of the indicator, but about the labeling,
we would have avoided a lot of confusion if the label, if the index had
been labeled differently, call it the rule of economic law for example.
So if we want an index for
the rule of law as we understand it, we have to look elsewhere.
Now this gap can be filled by the World Justice Project,
an independent group of lawyers founded in the United States in 2006.
And it publishes its own annual rule of law index.
The index again is a composite one, based on eight separate elements,
weighted equally.
To be honest, just as the World Bank voice and accountability indicator we reviewed
in the last video, this index is a little too comprehensive for its own good.
Half of the index includes what we'd happily understand under the rule of law.
Limitations on government powers, fundamental rights,
access to civic justice, and an effective criminal justice system.
But the other half of the index lumps together items considered separately by
the World Bank Governments indicators.
Order and security, open government, the absence of corruption, and
effective regulation.
The index mixes results from its own opinion polls with expert polling,
both of which are conducted on an impressively large scale.
But the results are only available for 99 countries.
Well the final results of both indicators, are available then,
in a separate visualization you can look at after this video.
So why should the good observation of the rule of law promote economic growth?
Well the logic starts with what is often the most difficult point,
an independent judiciary.
The appointment of judges should be transparent, and at least,
not too biased by political preference.
If the judiciary's not independent or neutral, the rest quickly becomes a sham.
Now in turn, the independent judiciary ensures that
legal institutions function efficiently and effectively.
This also applies to the economic sector.
So it expects all the benefits to flow, that arise from the protection of
property rights and contract, that we reviewed in the last video.
And there's a third link that's been suggested.
And that runs directly through foreign investment.
Foreigners especially like transparent and predictable judicial systems.
It removes one source of uncertainty in their projections into the future, and it
encourages them to invest more and earlier than they would otherwise have done.
And finally there's a feedback link, through levels of trust.
Especially if you believe that constantly observing the efficient management of
judicial affairs socializes people,
into more trusting modes of thought and behavior.
Question now arises, does any of this work?
Can social scientists demonstrate any relationship between the rule of law and
economic growth?
And the answer is, well, yes and no.
One study did suggest there seemed to be a link between a narrow business
interpretation of the rule of law, and economic performance in poorer countries,
and the link between economic performance and
a wider interpretation of law in more developed countries.
But the authors themselves warned that the results were extremely sensitive to
the pri, time periods and the countries included.
Well, no surprise in that.
For the most part, however, the weak links are weak, or nonexistent.
As usual, we could look for
the faults firstly in the immediate rule of law indicator.
Do they capture everything?
Are they too amorphous?
Do they ignore the local level?
Well they do.
We can also ask is economic growth too complex?
And we can also look at the data they use, the data that they're focusing their
attention on, the poorest countries on the planet, social scientists tend to
ignore the fact that the data is suspect, economic growth data.
And that's the poor current data with the even more suspect earlier data,
is even more suspect than the rest.
So let's sum up then, in this video we have seen how the world bank looked at
the indicators for the rule of law, and we have looked at alternative indicators, and
we have seen how the rule of law could be expected to influence growth.
While not surprisingly, we saw that the statistical link was weak.
In the next video, we're going to do the same sort of control of corruption.
In the meantime we'd like you to have a look at the visualization of
the world map of the rule of law that we've prepared for you.