The State of Law and Development: Challenges After the Second Generation Reforms

Abstract

At least since the appearance of the Comprehensive Development Framework (CDF) in 1999, international financial institutions have incorporated a range of social and democratic objectives into their development projects and elevated the rule of law and legal institutions to the status of independently valuable ends. The incorporation of social concerns was a response to criticism concerning the singular focus on rates of economic growth; inadequate local or national consultation and input into the design of development policies; constraints upon sovereign and democratic political priorities; and profound problems or perverse collateral effects from development initiatives, ranging from the displacement of large numbers of people and the destruction of livelihoods to increasing economic and social costs for particular groups such as workers, small businesses, and women. Yet while social issues now register on the list of concerns, the longstanding problem with legal rules and state interventions that do not address market failures remains intact, and the institutional infrastructure oriented to facilitating efficient transactions remains unmodified. In practice, second-generation reforms are proving to be a means to disseminate further the basic market-building project while transforming the concept of social progress and channeling the means to achieve it. And if international law and institutions are built through a process of resistance and response, then the CDF is a classic example: expanding the objectives and instruments of development to human rights, gender equality, and participation by civil society has been a way for the IFIs to expand their zone of operation and exercise surveillance over new areas. The new model is replete with new socially rooted explanations of old objectives and market-centered routes to solving social justice deficits. For example, property rights and land reforms, originally defended for their role in attracting foreign investment are now, following de Soto, described in the language of social justice too; indeed, they are sometimes described as the most important anti-poverty device. Intensifying women's participation in markets and exerting market forces on entrenched cultural norms is now touted as the route to gender equality. And progress for workers, as well, is promised by labor markets increasingly unfettered by constraints on employer action. Whatever their promise, all of these strategies have distinct risks and downsides. They are at best only selectively responsive to the problems which gave rise to the revised approach to development in the first place; in particular, they avoid rather than join the debate about the extent to which bad social outcomes might be at least partly attributable to enduring elements of the development model itself. For example, indigenous peoples or those engaged in subsistence agriculture may become landless and impoverished as property rights are altered to create new markets in land and land is sold, leased or pledged as security for higher-value uses. Those whose livelihoods are eliminated by such reforms, or as trade barriers are dismantled, may face formidable roadblocks to engagement in new productive activity that matches in security or compensation what is displaced. In addition, responses to social deficits that were speculative to begin with are becoming increasingly difficult to sustain, even in states with advanced economies. For example, despite the current propensity to address labor market problems by focusing on worker flexibility and training, it is becoming clear that supply doesn't produce its own demand, and that workers face sustained pressure on the terms and conditions of work notwithstanding their efforts to adapt to the new economy. Markets may transmit and reinforce as well as undermine gender norms: without sustained attention to the mechanisms underlying such universal phenomena as gender stratification in job opportunities and compensation, they can be expected to do so. …