Neoliberal Law: unintended consequences of market-friendly law reforms

Abstract

This paper offers a critical evaluation of the interrelation of law and economics in the context of development. The paper describes the current promotion of law reform by international institutions like the World Bank as the product of neoliberal economic theory. The analysis examines the role of law historically as an expression of economic orthodoxy, arguing that the Washington Consensus has determined the shape of law reforms, pointing them to the definition and protection of private property rights, aiming to separate politics from economics. The relative failure of these policies in their application to countries emerging from communism led to the expansion of the reform agenda to include market-supporting institutions, among them the rule of law. The paper assesses the extent to which this expansion means that the role of the law and the relationship of regulation to market have changed sufficiently to denote a Post-Washington Consensus. It concludes that the use of law reform to impose what neoliberalism considers ‘rational’ solutions undermines the legitimacy of democratic institutions in developing and transitional countries.