chapter  11
22 Pages

Rule of law or Washington Consensus: the evolution of the World Bank’s approach to legal and judicial reform

ByJULIO FAUNDEZ

Since the 1980s, the World Bank has played a major role in promoting and implementing legal and judicial reform. Its innovative work in this area has contributed to bringing about a major shift in the way development specialists regard law and judicial institutions. The Bank’s work in this area is also widely respected because, unlike other international agencies, it has made a serious effort to offer intellectual justification for its involvement in legal reform. Thus, today, any serious intellectual discussions on the role of legal systems in promoting markets, the link between institutions and economic growth, the concept of legal empowerment or the relationship between equity and development cannot afford to ignore the voluminous literature produced by the World Bank on these topics. But as well as being influential and highly respected for its role in the promotion of legal and judicial reform, the work of the Bank in this area has also been the target of severe and often well-deserved criticism. Some critics question the legitimacy of the Bank’s involvement in this area of policy, as it is an area that is often regarded as highly political (Nader 2006, Ngugi 2006, Tshuma 2000). Others point out that the conceptualization and the means employed by the Bank to implement legal and judicial reform projects are inadequate as they fail to take into account the specific features of the countries in which the reforms are implemented (Alford 2000, Faundez 2001 and 2005, Dezalay and Garth 2002, Upham 2002). There are still other critics who claim that the reform process, though desirable, is a long and difficult process, since neither legal behaviour nor social practices can be changed overnight (Carrothers 2003, Davis 2004, Davis and Trebilcock 2001, Hammergren 2003). Thus, in different ways and from different perspectives, most critics raise questions about the legitimacy, methodology and efficacy of the Bank’s involvement in legal and judicial reform. Bank critics raise issues that deserve serious consideration. Their criticism,

however, is often overly general and, as such, ignores the evolution of the Bank’s approach to legal and judicial reform. Indeed, the Bank’s approach has not been static. It has undergone an interesting evolution that is worth recounting because it shows the overriding influence of the Washington Consensus on the reform process. Indeed, although over the years there has been enormous pressure to

shift the reform process towards a comprehensive approach that takes into account social and political dimensions of the law, the Bank has, in the end, resolutely stuck to the principles of economic deregulation and liberalization embodied in the Washington Consensus (Williams 1999). This outcome, however, was not inevitable. Indeed, as the materials in this chapter show, although initially the reform process was aimed solely at creating rules and institutions to further the process of economic liberalization, the Bank soon came to the realization that it was unrealistic to expect that legal reform could be successfully carried out without also taking into account the institutional framework within which law is embedded. It was thus that the governance agenda became part of the process of legal reform. The linkage between law and governance brought about an extraordinary expansion of the scope of legal reform. Indeed, after the Bank linked governance with legal reform there was virtually no area of the law that could reasonably be excluded from the reform process. This development naturally diluted the Bank’s original intention to circumscribe legal reform exclusively to the economic sphere. It also provided the Bank with an excellent opportunity to re-conceptualize the nature of the reform process and to place it within a broader framework of development. Although the Legal Department made some efforts in this direction – and even invited Amartya Sen (Sen 2006) to provide intellectual backing – in the event, the governance and legal reform agendas were placed firmly in the hands of Bank economists, who, espousing novel theories about the relationship between institutions and economic growth, restored the original link between legal reform and the Washington Consensus. Some would probably argue that, given the trends prevailing in the global economy and the central role that the Bank has played in peddling the Washington Consensus, this outcome is not surprising. Yet those who are genuinely interested in ensuring that law and legal institutions make a positive contribution not only to economic but also to social and political development will probably find it difficult to celebrate an outcome that circumscribes legal and judicial reform within such narrow limits. Moreover, those interested in the promotion of a democratic rule of law also have reasons to be concerned. Indeed, although law is today correctly seen as part of governance, the governance agenda, as currently conceived by the Bank, pays scant attention to the complexity of legal and institutional reform and neglects basic aspects of the legal system without which a democratic rule of law is not feasible. Within this framework, the place assigned to law is largely restricted to restraining governments and facilitating commercial intercourse. Under these circumstances, it is unlikely that the Bank’s much-flaunted objective of strengthening the rule of law to empower citizens and ensure their effective participation in development has a serious chance of success (World Bank 2004). The Bank’s failure, probably welcomed by its critics, will have dire consequences for international efforts to promote the rule of law and democratization. This chapter is divided into five sections. The first describes how the legal-

reform process became part of the Bank’s development agenda and why its

original objectives were relatively modest. The second section examines some of the persistent difficulties encountered by the Bank in the implementation of its judicial-reform projects. The third section assesses the Bank’s response to these difficulties and, in particular, highlights the Bank’s failure to take seriously Amartya Sen’s suggestion that it should carry out an in-depth study of the link between law and development. The fourth section explains how Bank economists have successfully managed to tame the unruly governance agenda, placing it firmly at the service of the Washington Consensus. This process has had the effect of reinvigorating the demands for deregulation, as exemplified by the prescriptions and rankings found in Doing Business, the Bank’s most successful publication. The fifth section explores the link between Doing Business and legal reform.