Chapter 12: International Economic Law and Economic Growth
Linda Yueh INTRODUCTION There are numerous ways in which the system of international economic law affects models of economic growth and the course of economic development, particularly for developing countries which have under-developed legal systems and less influence than the developed countries which largely formulate those rules. The focus in the economics literature on the role of law and institutions in fostering economic growth presage the importance of international laws for economic growth (see for example, Acemoglu et al. 2005). In some ways, the global legal structure has come to the fore with the greater integration of the world economy since the early 1990s with the re-emergence of China and India and the fall of Communism in Eastern Europe and the former Soviet Union. In 1992, China’s ‘open door’ policy – whereby it opened its borders to international trade and investment – took off; a year after India experienced a balance of payments crisis in 1991 which triggered a change from inwardly-focused to externally-oriented growth. The early 1990s also marked the disintegration of the former Soviet Union and the re-engagement of particularly Eastern Europe with its European neighbours. The re-integration of these countries roughly doubled the global labour force, raising it to some three billion people, and thereby halving the world’s capital-to-labour ratio.1 The implications are manifold, including fuelling offshoring as multinational corporations move operations to developing countries to take advantage of lower costs and the higher returns to capital. Figure 12.1 shows the surge in foreign direct investment (FDI) during the...
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