Back in 2012, the financier George Soros and the head of one of the world’s largest anti-poverty NGOs, Fazle Hasan Abed, pointed out in the Financial Times that, despite the Great Recession, the number of people living in extreme poverty had dropped in every region of the world for the first time since record-keeping had begun. That story—and many others concerning measurable declines in poverty and economic inequality as more people participate in global markets—is often given short shrift these days. Such developments don’t fit the populist narratives that sometimes obfuscate discussion of such matters.
Soros and Abed, however, then argued that the road out of poverty was fundamentally compromised by the absence of the rule of law in many developing countries. “Poverty,” they claimed, “will only be defeated when the law works for everyone.” If that’s true, then countries like China and India, which have taken hundreds of millions out of poverty in recent decades but rank relatively low on virtually every rule of law index, still face significant challenges.
The wider background to this growing attentiveness to the rule of law’s significance in diminishing poverty is a realization that (1) widening access to economic growth’s benefits and (2) maintaining prosperity have less to do with wealth redistribution than with a country’s institutional settings. To illustrate this point, consider Australia and Argentina’s respective economic trajectories during the twentieth century.
Institutions, Poverty, and Values
In 1900, Australia and Argentina—two countries with steady political and legal structures, similarly sized and overwhelmingly European populations, rich in natural resources, and enjoying large foreign capital inflows—ranked in the world’s ten wealthiest nations in terms of income-per-capita. Today, one of these nations remains prosperous, politically and legally stable, and, according to the 2014 Index of Economic Freedom, has the world’s third freest economy. The other is a synonym for economic degeneration, corporatism, populism, and corruption. As the Nobel economist Douglass North writes, Argentina epitomizes “stop-and-go development, fragile democratic institutions, questionable foundations of citizen rights, personal exchange, and monopolized markets.” In short, unlike Australia, Argentina’s institutional framework is in bad shape. Not coincidentally, Argentina ranks very low on the Index of Economic Freedom’s rule of law scale: 159th out of 178 countries.
Neither Australia's institutional path in the twentieth century, nor Argentina’s, was inevitable. At different points their political leaders—and their electorates—made choices. More work, however, is needed to understand the ways in which value choices affect the type of institutions that emerge, how they function, and their impact on problems such as poverty. Particular schools of economic thought, such as new institutional economics and constitutional economics, have made considerable advances in this area. Drawing on thinkers such as Max Weber and works such as Alan Macfarlane’s The Origins of English Individualism, scholars in these fields have demonstrated how beliefs have their own saliency for economic life.
In social sciences such as economics, positivism’s ongoing influence encourages the tendency to see values as irrelevant, hopelessly subjective, and hard to measure (which, for some people, means they don’t exist). Thus, making the argument that values matter economically still involves challenging more mainstream positions. But if establishing strong rule of law protocols is essential for long-term poverty alleviation, this connection may illustrate how widespread commitment to particular moral goods helps promote and sustain one institution that helps lessen poverty.
Moral Capital and the Rule of Law
Legal philosophers have long been divided about how much moral capital is invested in the idea of the rule of law. In the 1960s, for example, Harvard’s Lon Fuller argued in The Morality of Law that the desiderata he associated with the rule of law—i.e., legal rules are prospective not retroactive; rules are promulgated and are clear and coherent with respect to each other; rules are not impossible to comply with; rules are sufficiently general and stable through time that people can be guided by their knowledge of the rules’ content; there is a congruence between the declared rules and official action—reflected a type of inner morality and made it harder for tyrants to get their way.
Fuller’s position was criticized by, among others, Oxford’s H.L.A. Hart. He claimed that such processes, as valuable as they are, hadn’t significantly inhibited unjust regimes such as National Socialist Germany from pursuing diabolical ends.
Fuller’s response was to insist that no tyranny had ever developed where rule of law was truly maintained. To this, we could add Plato’s observation in his Politicus: if a society widely perceives the rule of law to be desirable (as may well be happening in some developing nations that live under unjust regimes, such as Communist China), the regime often finds it convienent to pay more than lip service to the formal legal framework.
The fact that strong rule of law generally correlates with greater material prosperity for all seems hard to deny. Such conditions are more conducive for attracting, for instance, foreign investment than environments in which significant uncertainty about the meaning and applicability of legal rules prevails.
But if the only moral grounding for the rule of law is its wealth-enhancing potential, it could theorectically be nullified by governments that insist that different arrangements would facilitate more rapid economic development. This isn’t as unlikely a scenario as some imagine. Many twentieth-century Communist regimes and Marxist legal philosophers such as Evgeny Paschukanis derided rule of law as a “bourgeois device” designed to keep the proletariat in their place. As an alternative, they proposed legal systems built on “socialist justice”: a construct that, in the name of seeking to create better economic conditions for those in need, legitimized the inflicting of vast systematic injustices upon millions.
What Grounds the Rule of Law? Freedom and Reason
What then might be deeper moral foundations for the rule of law that support but go beyond the benefits of economic growth? Two seem especially pertinent.
Adam Smith observed long ago that the economic well-being of “an industrious and frugal peasant” in eighteenth-century Western Europe was probably less than that of a “European prince” but would certainly exceed “that of many an African king, the absolute master of the lives and liberties of ten thousand naked savages.” Here, Smith is making a point about relative poverty.
But it’s not simply the material differences to which Smith is alluding. Smith’s European peasant isn’t just better off than the African potentate and his subjects because he’s wealthier than they are. He is also a free man, thanks partly to the rule of law. Unlike those under the African king, the state cannot do whatever it likes to him. Rule of law is thus rooted in the liberty it provides each person through the substantive equality it accords everyone before the law. Not coincidentally, Smith made these arguments at the time when important cases in Scotland (Knight v. Wedderburn, 1778) and England (Somerset v. Stewart, 1772) formally eliminated slaveholding within the British Isles (though not the Empire) and solidified equality before the law.
A second principle upon which rule of law is grounded becomes apparent when we realize that all of Fuller’s conditions underscore a commitment to non-arbitariness: that there are reasonable and therefore just ways of acting. It’s unreasonable, for instance, to pass laws with which no one can comply. In short, a good from which the rule of law derives its inner coherence is reason itself—and not the instrumental reason that serves us well in the empirical and social sciences. Rather, it is the type of reason that allows us to say that this head of state is acting unjustly when he acts “extra-constitutionally” while that judge is acting reasonably because he recuses himself from a court case in which he is seen to have a conflict of interest.
Economies and Laws Worthy of Man
At the core of the rule of law’s reliance upon preceding commitments to goods such as freedom and reason is another key revelation: we expect the law’s internal workings to be underpinned by reason and to facilitate human freedom because we think there is something distinct about all human beings that makes them worthy (dignus) of such treatment. That should also remind us why we want as many people as possible to escape the material poverty that attracts our sympathy.
It shouldn’t be simply because we don’t want people to suffer. Though that’s important, our commitment to fighting poverty should also reflect a conviction that human beings are free, do possess reason, and are therefore capable of flourishing, including in the economy. Neither the rule of law nor economic prosperity will solve every social problem. But just as a commitment to the rule of law in the sense outlined by Fuller reflects a moral investment in legal systems that “fit” the truth that humans are rational and free people, so too should any effort to reduce material poverty flow from that same truth.
Therein lies a message for anyone who’s concerned about poverty. If we want to be coherent when addressing poverty, rather than sentimentalist do-gooders, our concerns can’t be rooted in emotivist or relativistic accounts of who human beings are. If people become subject to arbitary rule or backbreaking material poverty, that should be seen as a slight to their reason and freedom and therefore an infringement of their dignity. The very same dignity also provides direction to the ways in which we seek to realize conditions that provide some minimal economic certainty while preserving the space people need to use their reason and freedom to flourish in the economy.
This should turn anyone concerned about poverty away from focusing almost exclusively upon redistribution, and towards realizing that, as the economist Julian Simon put it, man is indeed man’s greatest resource. For this is true not just economically, but also in terms of humanity’s unique capacity to know the deeper moral goods upon which our most effective poverty-reducing institutions rely for their very rationality.
Samuel Gregg is Research Director at the Acton Institute.