An economic imperative
7
ON June 19, 1215, when King John of England signed the great charter — Magna Carta — at Runnymede, he is unlikely to have known that in doing so he was laying the foundations of the story of democracy in the modern world. In fact, history suggests that far from being the realisation of a political ideal, the signing of the Magna Carta was possibly the lowest point of King John’s reign. It was the evidence of his helplessness before the might of English barons who had rebelled against his ever-increasing demand for taxes. The charter they ultimately forced him to sign required him not only to cede some of his powers but also to agree to rule the country in accordance with the law.
I find it interesting, however, that in achieving perhaps history’s first and greatest victory for democracy, the barons acted out of economic self-interest, rather than for the welfare of the common man. The king was depleting the barons of their resources by levying high and arbitrary taxes, and the barons had to do something to stop him. They, therefore, insisted upon a predictable, transparent and accountable system of governance that applied equally to monarch and subject and in which disputes were settled by independent courts. Not only, therefore, was democracy driven by economics, but also such was the strength of this economic imperative, that despite many hiccups, the democratic process it had set in motion could never be reversed.
It is entirely pertinent to challenge the relevance of this anecdote for present-day Pakistan. This is, however, easily addressed by reference to Pakistan’s rule of law and economic status: Pakistan is ranked at 98 (out of 102 countries) in the 2015 Global Rule of Law Rankings published by the World Justice Project and at 138 (out of 189 countries) in the ‘ease of doing business’ rankings published by the World Bank Group. Even more glaring issues are the asymmetries in Pakistan’s governance system that allow and enable systematic differentiation between the elite and the ordinary, and a judicial system which is only now emerging from the shadow of an all-powerful executive. Perhaps the differences between Pakistan and mediaeval England exist only in name?
Businessmen remain largely disinterested in the rule of law debate, considering it perhaps too idealistic.
To be fair, in recent years, Pakistan has made important progress towards greater rule of law. The executive has reined itself in, the superior judiciary has begun to assert itself, and the elected parliament appears to be learning the significance of its role. However, none of these positive developments are reflected in the way business is conducted in the country. Businessmen remain largely disinterested in the rule of law debate, considering it perhaps too idealistic. Unfortunately, in remaining focused on short-term survival and gain, they fail to appreciate that only the institutional framework necessitated by the rule of law, affords the opportunity for sustainable development of the economy and, therefore, the progress and success of their individual businesses.
Apathy of businesses to the rule of law debate is not unusual. In his book, One Economics, Many Recipes Prof Dani Rodrik of Harvard University, admits that even economists have only recently understood that markets need to be supported by non-market institutions — particularly institutions of dispute resolution — order to perform well. He argues that an institution of dispute resolution, which is independent and implements established rules, inspires confidence. It warns ‘winners’ that their gains are limited and assures ‘losers’ that they will not be exploited. This, in turn, encourages entrepreneurs to engage in economically productive activities. In so facilitating economic activity, the dispute resolution institution, traditionally viewed as belonging exclusively to the rule of law domain, becomes pivotal to the functioning of the market economy.
Another rule of law feature, which is possibly even more important for economic development, is an elected and representative legislature. Its significance becomes clearer when we understand that a country acquires institutions either through the ‘blueprint’ or the ‘local knowledge’ approach. Developing countries, because they neither have an understanding of the institutions they need nor the expertise to develop these indigenously, tend to gravitate towards the blueprint approach. Consequently, an external authority, usually a multilateral donor agency unfamiliar and perhaps disinterested in the legal, economic and social context of the country, determines what may be best for it. The country in question ends up with ineffective institutions wholly unsuited to its needs, which mostly exist only on paper.
Whilst it is neither possible nor desirable to do away with blueprints entirely, it is necessary to adapt them to local conditions by appropriate input from local actors. According to Rodrik, an elected legislature, representative of the needs of its constituents, is the most reliable mechanism for obtaining this local input. He presents data, which demonstrate that emerging democracies achieve more meaningful and sustained economic reforms and over time, experience greater economic growth than their authoritarian counterparts. His findings indicate that the seamlessness of decision-making, considered so attractive in authoritarian regimes, is, in fact, detrimental to the long-term growth of developing countries, because it fails to engage the very people most likely to be affected by these decisions.
Georges Clemenceau, a French statesman in the First World War had famously remarked that, ‘War is too important to be left to generals’, and so it is with rule of law reform. Rule of law institutions of an independent judiciary and an elected, accountable parliament are not merely idealistic goals of governance but an economic necessity. And for this reform to have continuity and to survive successive governments, the impetus for it must come from businesses themselves. While its true that well-functioning institutions require time, effort and patience to create, it is equally true that these offer the only safeguard against abuse of power by any single institution of state and the only guarantee for sustained economic growth in the country.
The writer is a barrister and an advocate of the Supreme Court of Pakistan.
Published in Dawn, November 16th, 2015
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