International Rule of Law and the Market Economy - An Outline01 Jan 2006
Law matters in economic development. The Rule of Law is an indispensable foundation for a market economy, which provides an essential environment for the creation and preservation of wealth, economic security, and well-being, and the improvement of the quality of life. The Rule of Law is part of the "software" of governmental regulation that is needed to operate the "hardware" of free markets. Its promotion can make a major contribution to economic growth, and an infrastructure that creates and promites legal rights is an essential platform for economic development. The cumulative costs of doing without the Rule of Law in a modern economy are enormous.
Establishing a firmly rooted system of the Rule of Law is unfinished business in the countries participating in the Central American Free Trade Agreement ("CAFTA"). Building an effective Rule of Law is essencial to the promotion of a free market economic system that fosters transparency in business transactions and operations. The Rule of Law in the commercial sector promotes economic stability and growth, encourages investors to make investments, creates jobs, increases the standard of living, and promotes prosperity.
The Rule of Law requirements for a market economy differ rather substantially from the Rule of Law requirements for other types of social needs. The purpose of this comment is to outline those Rule of Law features that are essential to the proper functioning of a free market economy and to call attention to the unique characteristics of these legal features. Part I introduces the role of the Rule of Law in a free market economy. Part II describes the major legal systems that the Rule of Law requires to support such an economy. Part III of this Comment concludes that the Rule of Law is an indispensable basis for a free market economy.