Laws and development : An economic approach

Dr L Krishnamangol Singh *

High Court Complex at Chingmeirong Imphal in April 07 2012 :: Pix - Bullu Raj

There is a view that an economic system can function without laws. In this view, there is no role of the government and the economic system works efficiently without intervention of the government or with least intervention of the government. The classical theory of economics is based on this model of development. Whether this view is relevant today is a critical question. In trying to answer this question, I shall examine the relevance of a sound legal system for the effective functioning of an economy. And this aspect will be taken up in the later part of this brief article.

Next, I shall proceed to draw our attention to the need for new laws for the society and economy. Historically, it is found that there were laws or principles of the society in the Old Testament in Hebrew society about 2500 years B.C. And the laws or the principles for the society and economy were also found in the New Testament. And these laws were followed in many ancient civilizations. And Rome was also famous for developing knowledge on jurisprudence. Parallel other ancient civilizations were also found in different parts of the world, where different laws prevailed for administration of the country.

Credit for developing laws for the state were also given to Plato and Aristotle in Greece in ancient times. In fact, knowledge traveled across national boundaries in the real world, and several countries had also followed different laws for the management of the society, economy and the whole polity. But many systems of administration and power of the states broke down due to the absence of proper laws, and poor implementation of the laws and public policies. And, in the history of human civilisation, “ideas never die” as “tomorrow never dies”. In fact, the old ideas are essential for developing new ideas. And, the best ideas will be necessary for a better tomorrow.

Therefore, the political leaders, economists and all experts think of long-term development for a better future while paying attention to the short-term problems also. And, several laws and economic policies are thus formulated to bring about social and economic justice for the well-being of the people. In fact, the old ideas and laws cannot bring about change in the society and economy. And, new laws and public policies will also be required for bringing about rapid change and development in the society and economy.

Here, it is interesting to note that the entire Marxian doctrines is intended to bring about change (i.e. social and economic changes) from the obsolete or outdated system to a new form of change. As Marx had stated: “We suffer not only from living but also from death.” Marx’s philosophy is that the old ideas need to be replaced by new ideas. In fact, people will continue to suffer if there is no change in the obsolete “modes of production” (i.e. the social and economic relationship among classes). If the outdated modes of production, which prevailed in the past still continues to exist, people will continue to suffer even if they live in a new generation. Therefore, instead of going to the path of extreme cases or courses, it would be rational to frame suitable laws, rules and regulations, and public policies or economic policies for promoting rapid socio-economic transformation of the country including the states.

In analysing the problems of feudalism and capitalism, many thinkers also believe in the path to reforms for rapid socio-economic changes. Therefore, it is the responsibility of the Governments, particularly the central and state governments of India to enact and adopt new laws and public policies to address the emerging issues in various fields or aspects in the country and also in the states.

And, the new laws need to protect the human rights and general interests of the people within the country and also in the respective states. Thus, various types of laws have been prevailing or following since the evolution or emergence of the nation states or countries in different parts of the world. And the existence of judiciary or court is a clear testimony to the need for a sound legal system for the enforcement of the various types of laws for the administration of justice in the society of any country.

While the view for a sound or effective legal system is already accepted, what is more necessary is to develop new laws, and rules and regulations and appropriate public or economic policies in order to deliver appropriate social and economic justice in the country and in states. Therefore, it is worthwhile to consider the following issues. First, what would happen when there is no law?

Secondly, whether the existing laws are sufficient for the administration of justice? Thirdly, why new laws are being developed, enacted and passed and implemented? And why there is poor implementation of the laws?, etc. I cannot claim originality for these questions as these are already known.

Again, these questions are put not to provoke the experts, authorities and the people but to examine the linkages between or among the best legal system, rules and regulations, public policies, political and economic system and overall development of the society and economy. We may now concentrate on some of the critical issues in order to formulate effective policy decisions based on the best ideas or choices. Thus, the following points deserve careful consideration in the economics of laws, choice and development.

1. Here, it can be pointed out that in a lawless society, many are in the game to extract benefits. Again, in an organisation, where there is lack of authority and proper rules and regulations, many are again in the game to play as free riders (the theory of free riders seeks to get benefits without paying taxes or incurring any cost). This (the game of free riders) has developed the attitude of non-cooperation among the members or people in the community, which results in zero-sum game.

A typical example is the use of "common property resources (CPRs), which are overexploited or misused in the absence of competent authority and proper rules and regulations. And the absence of competent authority, usually the state (i.e. the absence of government, which can enforce proper rules and regulations) seriously affects community resources, or the organisations.

Thus, the new laws, rules and organisations need to be formulated and enforced for the effective management of CPRs and participatory development organisations. This system of development fits within the framework of socialism or non-capitalist path to development. In fact, participatory development i.e. participation of the people in the management of community resources and development in group form or approach can help in promoting economic development of any country or state.

Participatory development has also been extended to other sectors or fields of development. And coming to the case of utilisation of resources, it can be emphasised that proper preservation, utilisation and management of CPRs like land, water, forests, etc. are essential for sustainable development and protection of environment. Thus, there should be proper legal framework or system, proper rules and regulations and appropriate public policy or economic policy for implementing the various programmes of participatory development and general development of the State.

2. There is another view which favours privatisation of resources, institutions, enterprises, etc. This view explains or supports that privatisation provides incentives to the individual owners or to the people. There is now a large body of standard literature and policy documents, which explain and lend support to the programmes of privatisation and their linkages or relationships with development in the context of the country's economic reforms. And, it is essential to note that the programmes of privatisation at different levels can provide property rights to the people. Thus, in such a model, there is freedom in the use of resources, which further provides incentives to the people.

3. Finally, some other critical issues may further be noted in order to get an insight into the best system of development which requires suitable development policies, enforcement of effective rules and regulations and the existence of a best legal system for the country (India) and the states. It is already known that there are various laws in the country. There are civil laws, criminal and other laws in the country. In fact, it can be remembered or emphasised that the need for laws arise in a country or state when there is complete dysfunction of human behaviour in the society. Again, the need for laws and relevant policy decisions or the provisions of the constitution arise when there is failure of the country or states in many respects such as (i.e. internal security, general administration or overall governance, etc.).

Also, the need for effective laws arise in the society where there is lack of laws or lawlessness. In this context, new laws need to be formulated in order to deal with or address the issues for administration of justice and management of the social and economic development of the country and states. It may further be pointed out that mere existence of the outdated or obsolete Jaws cannot bring about socio-economic justice or changes. Therefore, new policy initiatives, new laws and appropriate rules and regulations, etc. will be required for effectively promoting modern governance and development of the country and the states.

4. And, in the context of Manipur, the following policy choices may be considered for promoting socio-economic development of the state with a sound legal, politipal and economic system. First in the hill areas of Manipur, it is essential to provide property rights in land. In fact, there has been large documentations on this issue and the government is also aware of the significance of land records in the hill areas. What is essential is that the process of maintaining land records need to proceed with the preservation and management of CPRs where necessary with the Government taking active role in order to protect environment and promote sustainable development in the State.

Secondly, the question of providing property rights to the individuals fall within the field of institutional economics. It is. therefore, high time to concentrate on public policies for providing rights in land and other occupation for vulnerable sections of the society and other categories of labour force who are within the informal sector of the economy. I am aware that it is not possible to provide or distribute properties i.e. private properties freely in any economic system. However, there is economic theory and policy for providing food, subsidies and other public goods free of cost for the society and the welfare of the poor.

And the government also takes a major role for the welfare of the poor and the public. Therefore, it is highly essential that there should be wide scope for providing private provision of property rights for the poor within the institutional framework of public goods or the public infrastructures. Such a policy will also help in the policy of economic reforms of the country and also ameliorate the lot of the poor or the poorer section of the society.

Thus, the whole programmes of urbanisation, development of marketing facilities, transport and communication and a host of other institutions need to provide large scope for private and people's sector participation in development, and extend support to the poor in the process of development of the State.

Thus, there is the need for creation and development of institutional and physical infrastructures for promoting modern governance and development in order to provide private property rights (i.e. both tangible and intangible properties) particularly to those who are left out of the springs of development in the State. It is in this context that new laws and public policies or development policies should be mutually reinforcing and the two powerful instruments of democracy need to go hand in hand. And, this is a new area or frontier of development, which requires further research and careful thinking of the political leaders, economists and other social scientists, policy makers and all those who are still concentrating on the development issues of Manipur.

And finally, it can be emphasised that the outdated and obsolete laws and Acts need be replaced by new ones (i.e. new laws and Acts) in order to subserve the general interest of the people or the public interest and promote peaceful socio-economic development in Manipur. In fact, an efficient socio-economic and political system requires the backing of a best legal system.

Thus, all public policies or public actions and the long term development programmes can be effectively implemented within the framework of a best legal system.