Trust and The Rule of Law: An Interdisciplinary Analysis of the Relationship between the Rule of Law and Economic Development

Abstract

This thesis broadly addresses the question: is promoting the rule of law in lower and middle income countries in order to increase economic development a meaningful project? The answer to this question is consequential as significant human and financial resources are allocated to rule of law promotion every year. The standard defence of rule of law promotion is that the rule of law promotes economic growth. However, there are a number of issues with this standard account. For instance, it is not clear whether empirical studies that are invoked to sustain the claim of a causal connection between the rule of law and economic development employ a defensible account of what the rule of law is. Relatedly, it is not clear what precisely these empirical studies are measuring due to issues with conceptualisation and measurement techniques. Of particular interest is that a number of studies commonly invoked to support rule of law promotion appear to postulate an affinity between the rule of law and private property rights and contractual enforcement, either by using these economic freedoms as measures of the quality of rule of law compliance, or by tracing the impact of the rule of law on economic outcomes through the rule of law’s effect on the security of private property rights and the enforcement of contracts. This thesis examines the oft assumed relationship between the rule of law, private property rights and contractual enforcement, and economic growth. More specifically this thesis asks the question: does the rule of law only impact economic development through its effect on these factors, or does the rule of law have some independent value that makes it worth promoting in lower and middle income countries in its own right? To tackle this question this thesis conducts an interdisciplinary conceptual analysis of the rule of law, drawing on insights from legal theory, sociology, and development economics. It argues that the empirical studies commonly invoked in support of rule of law promotion may be capturing levels of social capital. Social capital is understood, in this thesis, as a combination of trust and cooperative norms. This thesis suggests that the rule of law may be understood as concerned with cultivating a trustworthy government. In addition, private property rights and contractual enforcement may be categorised as types of cooperative norms. It is proposed that what really drives growth is generalized trust alongside stable institutions that facilitate cooperation. These cooperative institutions may be manifested in the protection of liberal economic and political values. However, equally, the rule of law may support economic growth by fostering generalized trust in non-libertarian institutions, so long as those institutions are stable and support cooperation. Understanding the rule of law as concerned with fostering trust is a novel way to conceptualize the rule of law, and, it is hoped, provides new insights into (i) the nature of the rule of law, (ii) the relationship between the rule of law and economic development, and (iii) the possibilities and pitfalls of promoting the rule of law in lower and middle income countries.