Does Law Matter for Economic Development? Evidence From East Asia

Katharina Pistor and Philip A. Wellons, The Role of Law and Legal Institutions in Asian Economic Development, 1960-1995. New York: Oxford University Press, 1999. Pp. xi + 294 pages. $39.95 cloth. Kanishka jayasuriya, ed., Law, Capitalism, and Power in Asia: The Rule of Law and Legal Institutions. New York: Routledge, 1999. Pp. xiii + 345 pages. $99.99 cloth; $32.99 paper. Robert S. Brown and Alan Gutterman, Asian Economic and Legal Development. Uncertainty, Risk, and Legal Efficiency. Boston: Kluwer Law International, 1998. Pp. xv + 477 pages. $148.00 cloth. The relationship between law and economic development has been a central concern of modern social theory, providing a focal point for the analyses of Marx, Durkheim, and Weber. In the 1970s, law and society scholars drew on these traditions to inform international development policy in what was then called the "Law and Development Movement." These scholars, who focused primarily on Latin America and who were informed by an activist vision of law as a tool for social change, sought to export U.S. models of law and legal education, suggesting the possibility of a theoretically informed development policy focused on law (Tamanaha 1995). The Law and Development Movement ultimately fizzled (Gardner 1980; Trubek and Galanter 1974), and with it went the budgets for legal policy reform in developing countries. Donors turned their attention elsewhere. However, new theoretical developments, as well as the lingering importance of the underlying questions, have given momentum to a new wave of law and development activities on a far larger scale than ever before (deLisle 1999). Today, the relationship of law and economic development is again at the very forefront of development policymaking, as government agencies, international organizations, and the non-profit sector advocate the need for strengthening the rule of law in developing countries. Although it is probably a mischaracterization to assert that the new activity is institutionally and intellectually cohesive enough to form a "movement," it is clear that legal institutions occupy a central place in development assistance again (deLisle 1999:212-15). The resurgence of law and development corresponds with renewed interest in the rapid postwar growth of economies in East and Southeast Asia. By most accounts, law has not played a major role in Asian economic growth. Scholars have placed more emphasis on particular policies, institutions, and cultural underpinnings rather than on law per se (Upham 1994). For example, in its monumental study, The East Asian Miracle, the World Bank (1993) does not discuss the legal system. Preliminary evidence from Chinese economic reforms indicates that, for the most part, increased reliance on legal ordering has not displaced a system of economic organization based on connections, or guanxi (Lubman 1996; Jones 1994). Having drawn on evidence from Asia, some have claimed that the rule of law is dispensable in the pursuit of economic growth (see Davis 1998:304). There is clearly a tension between the centrality of law in theories of development and existing evidence from Asia. There are at least two possible resolutions of this tension, one empirical and the other theoretical. One possibility is that existing evidence is insufficient and that a more detailed study of Asian legal institutions would elucidate their central importance in Asian growth. The other possibility is that theoretical assumptions of donors and scholars about the universal importance of legal institutions are mistaken and that there is a need to adjust conceptual frameworks accordingly. At the broadest level, then, the questions of whether and how law matters for economic growth in Asia are of great importance for both theory and practice. Three recent studies address these questions in different ways. Together, they expand the empirical base for the study of Asian economic law and suggest new directions for policymakers concerned with the role of law in development. …