Development and the Process of Constitutionalization

1. Development and the Process of Constitutionalization Eric BrousseauEconomiX, Université de Paris X Yves Schemeil,PACTE, IEP Grenoble & IUF Jérôme Sgard,CERI/Sciences-Po

2. Institutional Framework and the Process of DevelopmentNorth, 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

3. 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 ?

4. 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

5. 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

6. 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

7. 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 7

8. 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

9. 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 9

10. Two 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”

11. Constitutionalization in Very Long Run Antique Empires 21st Century Globalisation Migrant Tribes External competition Feudal Kingdoms Post-WW II Welfare States, cum trade integration Absolutist/ Mercantilist States Early 19th Century, Liberal States Internal competition high Westphalian constitutional pact First amendment Second amendment Constitution of the world ? The Consistency of Social Contracts Regimes

12. Constitutionalization 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 12

13. 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) 13

14. The Constitutional bargain : packages of rights 14 Security of persons & propertyrigths Marketaccess & fair competition Politicalaccess Social rights

15. The Constitutional bargain : packages of rights 15 Security of persons & propertyrigths 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 Marketaccess & fair competition Politicalaccess Social rights

16. The Constitutional bargain : packages of rights 16 Security of persons & propertyrigths 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 Marketaccess & fair competition Politicalaccess Social rights

17. The Constitutional bargain : packages of rights 17 Security of persons & propertyrigths 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 Marketaccess & fair competition Politicalaccess Social rights

18. The Constitutional bargain : packages of rights 18 Security of persons & propertyrigths 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) Marketaccess & fair competition Politicalaccess Social rights

19. The Constitutional bargain : packages of rights 19 Security of persons & propertyrigths Failed states Rent-seeking states Marketaccess & fair competition Oligarchicsocieties Politicalaccess Authoritarianmodernisers Social rights Libertarian or strong social endogeneizers

20. The Constitutional Profiles 20 BBR Security of persons & propertyrigths Marketaccess & fair competition Politicalaccess Social rights

21. The Constitutional Profiles 21 BBR Brazil Security of persons & propertyrigths Marketaccess & fair competition Politicalaccess Social rights

22. The Constitutional Profiles 22 BBR Brazil China Security of persons & propertyrigths Marketaccess & fair competition Politicalaccess Social rights

23. The Constitutional Profiles 23 BBR Brazil China Russia Security of persons & propertyrigths Marketaccess & fair competition Politicalaccess Social rights

24. The Constitutional Profiles 24 BBR Brazil China Russia Cuba Security of persons & propertyrigths Marketaccess & fair competition Politicalaccess Social rights

25. The Constitutional Profiles 25 BBR Brazil China Russia Cuba Somalia Security of persons & propertyrigths Marketaccess & fair competition Politicalaccess Social rights