Introduction to the theory of
Law and Development
by
Chen Lei
University of Stellenbosch
Presentation for Land Law Forum
20 September 2005
Introduction
 Law and development, as an academic field in the
US, began in the 1940s, thrived in the middle to
late 1960s, and was declared dead by its
advocates in late 1970s.
 This study can be said to have been a short-lived
movement.
 However, quite recently, this field of study has
experienced a resurgence as signaled by some
far-reaching academic writings by legal scholars,
economists and NGO’s.
Main Arguments
 How to restructure the economy to create
economic growth.
 How to institute a legal infrastructure that
maximizes the rule of law while sustainable
economic development are promoted.
Hypothesis
 Neo-classical
 Formal property institutions with clearly defined
property rights is essential to the functioning of a
market economy and sustained economic growth,
 on the other hand recent commentary suggests
that a causal link between the clarity of property
rights and market efficiency is also necessary.
 Development should also include economic and
political factors.
 See Carty, Kennedy and De Soto
Background
 Law and development theory are inherently related to
international political and economic events.
 It began in the late 1940s with the design of a postwar
order and the independence of former colonies.
 The objective of this theory is to promote the adoption of
western-like institutions and western-oriented legal
infrastructures.
 This theory has recently gained new impetus with the
collapse of the Soviet Union and the reassessment of the
value of centralized planning.
Main Representatives:
 Origin: Weber’s thesis: The relationship
between “rational law” and economic
development.
 “Rational”, ‘formal” and “logical” law
 Founders: David Trubek, Douglas North.
 Revivalists: Anthony Carty 1992, Hernando
De Soto and David Kennedy.
Evaluation
Advantages (Institutionalist view)
 Law and development theory provides a
very reliable theory for sustainable
development in developing countries.
 Especially because quite a few developing
countries in Africa, Latin America and Asia
lack a unified and all-encompassing
property system to capitalize on
marketable assets in especially land.
Evaluation
 To achieve a sustainable market economy
with a unified, impartial, and efficient legal
framework, law and development theory
contributes a logical framework.
 Some developing countries achieved
positive results by using this theory.
 E.g. South Korea, Singapore, Thailand and
Malaysia.
 As a theoretical tool, Law and
development theory contributes
significantly to the accelaration of
globalization of international markets.
 The Law and development theory is itself
still in a process of self-development and
introspection.
 This allows for the adaptation of new
social, political and economic
transformations.
Evaluation
Disadvantages (Cultural view)
Motivation: “Legal transplantation” & “legal
imperialism”
 A real assistance for developing countries?
 Some political purpose behind this study----to
bring those developing countries within the orbit
of the West instead of the Soviet bloc.
Evaluation
Every jurisdiction is politically, culturally,
economically, and socially contingent.
 Legal denationalization - Legal liberalism
 Direct transplantation without corresponding
adjustments
Evaluation
 “A flawed and rather inept attempt to offer
American legal assistance and implicit
American models …were themselves flawed,
vulnerable to executive ordering and
authoritarian abuse.”----James Gardner
 Example: Ethiopia Civil Code of 1966
3 Convergence v. divergence
– The study of law and development which is
based on so-called “rational law” will lead to
legal globalization.
– It was and will never be the case for
globalization of all kinds of jurisdictions in the
world due to the diversity of pluralism and
different backgrounds.
Evaluation
 The right and indispensable way to promote sustainable
economic growth in different countries is to formalize a
corresponding legal framework, which is compatible with its
political, economic and cultural situation.
 Different countries has different unique historical
background and current problems. Those divergent
problems, which are existed in different countries, cannot
be resolved in one formula.
 No elixir : Culture matters.
Evaluation
Independence v dependency
 Political independence v. economic and
legal dependency = right of development.
Law & Development Theory’s
impact on the South African Land
Reform Programme
 Application: the relationship between
property institutions (land) and economic
development through a survey of the
institutional changes of property rights in
post-apartheid South Africa.
Land redistribution or restitution is
extremely necessary and urgent
 Without land redistribution, democracy
would not be a real democracy.
 The current situation of land occupancy is a
colonial and apartheid legacy which is
starkly contrast with democracy and social
justice.
Utilization of land use rights (land
tenure)
 The apartheid land distribution vested 87
percent of South Africa's land area in the
hands of the white minority. Hence, a legal
framework for the state’s acquisition of land
for resettlement purposes and enforcement
mechanism are very necessary.
 Three ways:
Utilization of land use rights



State compensation for land expropriation
according to market value, or at least justified
value.
This method is appealed to those land which is
not fully utilized and wisely developed in order to
increase the land productivity. Also, it is suitable
for those land which influences the public
construction for public interests.
Comment: a direct way but must be applied very
carefully. It is only appealed to a smidgen of land.
However, it is still worthwhile and cannot be
discarded.
Utilization of land use rights


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The policy of fair State buy-out on the basis of
“willing seller and willing buyer” principle.
This method is appealed for those landowners
who are willing to sell their commercial farms
and accept price offer from state.
Comments: it is also a direct way and easy to be
managed by the state. However, such “both-win”
success can be only achieved under a special
circumstance, namely a willing sell. Also, land
willing sellers are not the majority of white
landowners therefore the ensuing method is
introduced.
Utilization of land use rights




Introduction of land use right
separation of land ownership and land use right
is a suitable and reliable way at this stage to
carry out land reform in South Africa.
The reasons: first of all, the psychological
adherence to land by white landowners--generations by generations--succession;
secondly, the purpose of land reform is to keep
country stable and peaceful;
Utilization of land use rights
 thirdly to comfort white landowners by
maintaining or balancing their economic
status in a progressive way;
 fourthly, it is a double-win if white
landowners retain the land titles while
simultaneously vast majority of black people
use and enjoy the land.
 3 ABS (asset-backed securities)
 It is kind of co-op to make farm workers
become shareholders. This form can be
compared with shareblock ownership to
make sense.
Main theories of land reform
 Productivity theory (economic analysis of
law):
 State stability and prosperity theory:
 Social justice theory---democracy---crimes
 Balance theory---must take both sides’
interests into consideration
 Transaction cost theory
Suggestions
 1
 2
Land reform and tax reform. Reduce land tax
and other kinds of agricultural tax to comfort
white landowners.
Strengthen NGO’s role: many staff of the
department of land affairs had come from the
NGO sector, which has been a tremendously
important source of knowledge and skills, and
the Department intended to rely heavily on
NGOs for implementation of its programs.
Suggestions
 3 Effectiveness of local government
 4 Department of Agriculture staff remain
committed to agricultural development
scenarios based on an expansion to the
black community of older models of
largescale mechanized commercial farming.
Suggestions
 The Department of Land Affairs staff and the Land
NGOs are more aware of the success in other
African countries in modernizing smallholder
agriculture, but are perhaps insufficiently
concerned about productivity and how increases
can be achieved in the reform sector.
 Joint training exercises for staff of the two
departments, which would focus on reconciling
theclaims of equity and productivity, was
recommended as a partial solution.
Suggestions
 5 “Haste makes waste”. Land reform is a
progressive project, which cannot be
applied in a very ruthless and forceful
manner
International Examples: China
 China - from 1949 to 1956
 Pay money and interests to former private owners
by the state
 Differences:
 a. The same race in China (Racial homogeneity)
 b. The land convergence is not as serious as in
SA
 c. Different political system, i.e. ideology
 d. Result of civil war (from the political
economic perspective, is a consequence of a
violent revolution)
International Examples: USA


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
US - 17 and 18 centuries
Land is not scarce
The population of native groups was small
US’s government has a political motive to
expand its territory