Development and the Process of

Constitutionalization

Eric BrousseauEconomiX, Université de Paris X

Yves Schemeil,PACTE, IEP Grenoble & IUF

Jérôme Sgard,CERI/Sciences-Po

Institutional Framework and the Process of Development

North, Wallis, Weingast, 2006– Constitution as pact within the elite or “Specialists in violence”

– Civil peace allows economic activity– Multi-tier Rent sharing pact (Specialist in violence / Technocrats / Masses)•Limits reliance on violence, unless the order collapses

•Meets participation constraints

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Society Limited Access Open Access

StateIndividual rightsCompetitionOrganizationsPolitical Compet.

NaturalPersonalClosedAccessible to eliteWinner takes all

(Liberal)ImpersonalOpenAccessible to allChecks and Balances

The Question of Transition

• ‘Doorstep’ conditions between Limited and Open Access– Permanent risk of drift back to violence and insecurity, due i.a. to winner-take-all pattern;

– vs. progressive rise in the rule of law within the elite and possibly in other social sectors

• Clear analysis of the stability of alternative orders, but:– Process of transition ?– Logic of self-organization of alternative orders ?

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Our (small) addition

• An agent-based analytical framework that emphasizes the interaction between the rulers and the governed

• Delegation as contractual transaction; the opposition between strong (or public) and weak (or private) delegations

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Our (small) addition

• An agent-based analytical framework that emphasizes the interaction between the rulers and the governed

• Delegation as contractual transaction; the opposition between strong (or public) and weak (or private) delegations

=> Strong anchor in the division of labor, social and economic => Easier comparison of trajectories or scenarios

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Development of the presentation

• An analytic framework• Two illustrations, in the very long and very short run

• How the on-going bargain between rulers and governed can account for differentiated development trajectories

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Bounded vs. Constitutional Regulators

• Weak/ Bounded Delegation by Stakeholders– Competitive incentives to build and defend “club goods”

– Enforcement capabilities based on adhesion and easy exit

• Strong/ Constitutional Delegation by Citizens– Comprehensive, complex, costly to exit– Capacity to build/design “collective interest”

– Monopoly of legitimate violence

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Bounded vs. Constitutional Regulators

• Weak/ Bounded Delegation by Stakeholders– Competitive incentives to build and defend “club goods”

– Enforcement capabilities based on adhesion and easy exit

• Strong/ Constitutional Delegation by Citizens– Comprehensive, complex, costly to exit– Capacity to build/design “collective interest”– Monopoly of legitimate violence=> Risk of extortion and coercion

=> Possible demand for reverse-commitments by the rulers

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Two Models of Constitution

•Despotic

–The distribution of rights is unequal=> Inequalities are cumulative and

constestability is low => Weak legitimacy implies that the common interest is narrow

–Local communities provide most public goods => Persistence of traditional solidarities; social fragmentation

=> Limited political and economic integration

=> Bounded growth for both public and private goods

10Two Models of Constitution

• Despotic– The distribution of rights is unequal– Local communities provide most public goods

• Liberal– Equal constitutional rights => Rule of law AND hierarchy of norms (topped by a Supreme court)=> Political participation AND economic integration => Dynamics of rights (legalization) AND Constitutionalization

– Skilled and Neutral State Organizations as ultimate providers of public goods => Increasing provision of public goods : market infrastr. and solidarities=> Optimal federalism and public/private provision=> “Growth-and-legitimacy loop”

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Constitutionalization in Very Long Run

Internalcompetition

External competition

Migrant Tribes

Antique Empires

Feudal Kingdoms

Absolutist/ Mercantilis

t States Early 19th Century,

Liberal States

21st CenturyGlobalisation

Post-WW II Welfare States,

cum trade integration

highWestphalian constitutional

pact

First amendment

Second amendment

Constitution of the world ?

Social contract State model Category of norms Coercers/ producers pact Post-1648 Leviathan Contract & security enforct. Bill of Rights Liberal/ libertarian State Natural rights/ rules of Justice Policy-making State Welfare State Regulations

The Consistency of Social Contracts Regimes

12Constitutionalization in the

very short run: the ‘blue blood reformers’ (1985-2005)

• ‘Hobbesian’ reforms– The state endows agents with hard, limited, “revolutionary” economic (sometimes politic) rights => e.g. : privatization, free enterprise, flexible labor, trade lib°, etc

• The Libertarian state– Market institutions are demanding :

=> e.g. Central banks, banking supervision, anti-trust, non-tariff barriers, etc

• The Policy-making state– New public goods in the post-WashC era

=> Education, Poverty reduction, Health, Environment

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The Constitutional bargain• Citizens :

The dynamics of equal rights & the “growth-and-legitimacy loop”.

• The citizens’ consent to support the state depends on: – Efficiency in producing goods and services => Skills, information, meritocracy, reliability (i.e. the Weberian bureaucracy); valorization of scope and scale effects

- Being the ultimate guarantor of equal rights => Against special interests, corruption, cartels, etc.

=> Against capture by rulers: checks & balances, judicial independence, etc.

=> A counter-example : the Informal sector (De Sotto, Maloney)

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The Constitutional bargain : packages of rights

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The Constitutional bargain : packages of rights

Physical security vs. civil war, rampant violence

Security of property rights vs. large-scale informality vs. illegitimate allocation of prop. rights vs: rent-seeking (energy-exporting)

countries

Physical security vs. civil war, rampant violence

Security of property rights vs. large-scale informality vs. illegitimate allocation of prop. rights vs: rent-seeking (energy-exporting)

countries

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The Constitutional bargain : packages of rights

Market access and competition vs. capture by the prime movers vs. ‘pro-business’ reform

Absorption of market externalities vs. rampant macro-financial instability vs. weak consumer norm enforcement

Market access and competition vs. capture by the prime movers vs. ‘pro-business’ reform

Absorption of market externalities vs. rampant macro-financial instability vs. weak consumer norm enforcement

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The Constitutional bargain : packages of rights

Access to voice and representation vs. capture by insiders (eg old white men) vs. limited access to organizat° & media

Checks and Balances vs. weak enforcemt. of hierarchy of laws vs. limited independence of courts vs. corrupted, incompetent local govts

Access to voice and representation vs. capture by insiders (eg old white men) vs. limited access to organizat° & media

Checks and Balances vs. weak enforcemt. of hierarchy of laws vs. limited independence of courts vs. corrupted, incompetent local govts

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The Constitutional bargain : packages of rights

Support to aggregate demand vs. absence of macroeconomic capacities vs. narrow domestic market Social solidarities vs. large switching cost when leaving

communities vs. Failure to address broader externalities (environmt., etc)

Support to aggregate demand vs. absence of macroeconomic capacities vs. narrow domestic market Social solidarities vs. large switching cost when leaving

communities vs. Failure to address broader externalities (environmt., etc)

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The Constitutional bargain : packages of rights

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The Constitutional Profiles

BBR

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The Constitutional Profiles

BBR Brazil

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The Constitutional Profiles

BBR ChinaBrazil

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The Constitutional Profiles

BBR China RussiaBrazil

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The Constitutional Profiles

BBR China RussiaBrazil Cuba

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The Constitutional Profiles

BBR China RussiaBrazil Cuba Somalia