The Rule of Law, Economic Transformation and Corruption After the Fall of the Berlin Wall

Abstract

According to the famous argument of Max Weber, there is a strong and direct connection between the rule of law and economic success: the establishment of the rule of law facilitates the functioning of an efficient economy. Indeed, as Weber argued, the emergence and establishment of a rational legal order and formation of law-based political authority were important factors which explain rapid economic growth. These theses of Max Weber reflect long lasting and deeply embedded European legal cultures and legal mentalities. Recent developments in Eastern and Central Europe, especially privatization of state-owned property, challenge a simplistic understanding of the Weberian argument. The sheer amount of property to be privatized, and the strong interests involved make the rule of law toothless, especially if the state is weak. Moreover, the very principle of the rule of law becomes questionable if the law represents a product of dominating interests, in the context of political capitalism. Thus, instead of the law-controlled privatization of national property, one observes growing corruption, nepotism and clientelism as important mechanisms of law making. Additionally, the weakness of government, above all the weakness of the law-applying and law enforcing agencies, and the traditional, formalistic understanding of the rule of law principle, additionally contribute to pathologies of economic transformation in Eastern and Central Europe, after the fall of the Berlin Wall.