Does Rule of Law matter? (Myanmar/Burma)

On the pages of the Democratic Voice of Burma website, Elliott-Prasse Freeman and Ellen Wiles have been debating the importance of the rule of law for Myanmar’s political transition. This of course is a significant debate and political scientists have debated it for years. I won’t try to summarize the literature comprehensively, but I thought I’d provide some examples.

A traditional view of the relationship between the “rule of law” and economic growth is that independent courts provide businessmen and investors with a “credible commitment”that the government will respect contracts and private property . Rafael LaPorta, Florencio Lopez-de-Silanes, and Andrei Shleifer, have written several articles arguing that judicial independence, common law legal systems, and “rule of law” tend to increase economic growth. Stefan Voigt likewise finds that judicial independence and accountability tend to improve growth.

By contrast, the relationship is much murkier when looking at human rights. Sandholtz finds that human rights treaties are more effective in countries with independent courts. However, Volcansek and Lockhart find no relationship between judicial independence and human rights conditions more broadly. Law and Veerstag are also generally skeptical about the effect of constitutional provisions protecting rights to have an effect in practice.

However, three problems plague this literature. First, there is what political scientists call “reverse causality” whereby the dependent variable (economic growth) also impacts levels of “rule of law.” Second, there is an “omitted variable bias” whereby there might be some third variable that influences both levels of “rule of law” and the economy. Finally, as Ellen Wiles noted in her DVB piece, measuring judicial independence and the “rule of law” are frustratingly difficult.

By contrast, in the literature considering the origins of judicial independence, many scholars argue that political elites only create independent courts when they are politically constrained. Independent courts protect elites if and when they fall from power (Tom Ginsburg’s Judicial Review in New Democracies is probably the best known work in this field). A paper by several of my co-authors at the University of Michigan finds that the distinction between authoritarian and democracy isn’t so relevant for promoting economic growth and public goods. Rather, the key difference is political constraints on rulers.

Indeed, what we’re currently seeing in Myanmar now is the development of very real political constrains on the government. Gone are the days of one-general rule. Neither President Thein Sein nor Speaker Shwe Mann (nor Commander in Chief Min Aung Hlaing for that matter) can make policy unilaterally on most subjects. It’s probably not a coincidence that constitutional reform and judicial reform are now on the table (although it’s too early to tell how far they will go).

While the debate in the literature is far from settled, my sense is that the “rule of law” and independent courts might provide Myanmar with a more hospitable economic climate, but most businesses (especially foreign investors) will be more concerned about the basics, such as real estate, internet, infrastructure, etc. However, broader “rule of law” and judicial reforms do seem to stem from political changes at the top, so it might be a mistake to hope that the “rule of law” could lead to democracy or human rights.

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