Constitutional and actual guarantees for basic human rights and property rights

property rights which a government must respect. The 1948 Universal Declaration of Human Rights states that human rights should be protected by the rule of law. This is because, as pointed out by Aristotle, the end of the rule of law is to preserve and enlarge freedom. In other words, people’s actions and possessions are not subject to an arbitrary will of another, but freely follow one’s own intentions. The guarantee of human rights and property rights is also seen as a prerequisite for economic development. That is why Wolfensohn, then-President of the World Bank, in his “Proposal for a comprehensive development framework” (1999) affirms that:

“Without the protection of human and property rights, and a comprehensive framework of laws, no equitable development is possible. A government must ensure that it has an effective system of property, contracts, labor, bankruptcy, commercial codes, personal rights law and other elements of a comprehensive legal system that are effectively, impartially, and cleanly administered by a well-functioning, impartial and honest judicial and legal system"15

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Blume and Voigt (2004) also explicitly discuss the impact of human rights and property rights, which are conceived as an important element of constitutions, on economic performance. They show that high degrees of human rights are conducive to economic growth and welfare in a significant manner. Specifically, (i) basic human rights and property rights are conducive to investment while social or emancipatory rights are not, (ii) property rights, civil rights and social rights have a clearly discernible impact on economic productivity while basic human rights do not have. Especially, they find that none of those rights ever has a significant negative impact on economic performance (p. 3).

It is necessary to precisely define the meaning of the term human rights. There are various definitions and conceptions concerning this term. However, there is no general agreement on the nature of human right and its conceptions have varied from time to time and from place to place (Ghai 2000). According to TutorGig encyclopaedia, human rights (or “natural rights”) are rights which some hold to be "inalienable" and belonging to all human beings; according to natural law. These rights are considered as necessity for freedom and the maintenance of a

“reasonable” quality of life. Commonly, human rights can be divided into two categories:

positive and negative human rights. Every negative human right can be expressed as a positive human right, but not vice versa.

The first category, negative human rights, derives mainly from the Anglo-American legal tradition. These rights create domains which denote actions that a government should not be allowed to trespass. For example, they are codified in the United State bill of rights and the English Bill of rights, including: (i) freedom of speech, (ii) freedom of religion, and (iii) freedom of assembly. According to Blume and Voigt (2004, p. 4), negative rights can further be defined as rights establishing freedom from state or third party interference such as torture, imprisonment without trial and so on. They also argue that negative rights must be understood as a device to protect minorities against current majorities, therefore, limit the possible scope of majority decision-making. In other words, negative rights give their holders the right to behave in a certain way, even if a huge majority would like their holders not to act.

The second category, positive human rights, derives from the Continental legal tradition and consists of things to which every person is entitled and for which every state is obligated.

They can include rights: (i) to education, (ii) to a livelihood, (iii) to private property, (iv) to get a job, and (v) to get legal equality. Hayek (1976) claims that positive rights should not be called rights. Yet, he did consider neither the protection of property rights nor the right to legal equality as a positive right. Hayek believes that positive rights are incompatible with a

free society, in which individuals determine their own position according to their own goals and means. However, there are also arguments emphasizing the importance of positive rights.

For example, the International Congress of Jurists in 1959 pointed out very clearly that the rule of law protects not only civil and political rights but also social, economic and other positive rights of individuals. The Congress stated that:

“The function of the legislature in a free society under the Rule of law is to create and maintain the conditions which will uphold the dignity of man as an individual. This dignity requires not only the recognition of his civil and political rights but also the establishment of the social, economic, educational and cultural conditions which are essential to the full development of his personality”¹⁶

According to Ghai (2000), the different understandings of the conception of human rights have led to a serious conflict on how to implement the Universal Declaration of Human rights. This conflict is only resolved by distinguishing the civil and political rights on the one hand and the economic, cultural and social rights on the other hand. Based on both positive and negative human rights conceptions, Blume and Voigt (2004) suggest that there are four distinguished groups of human rights, namely: (i) basic human rights, which reflect freedom from state interference, and that consist of the absence of torture, the absence of political killings, the absence of people who disappear, (ii) economic rights, which include primarily private property rights broadly defined, (iii) civil and political rights which consist of the unrestricted possibility to participate in political life, to travel, not to be censored by the government etc. and (iv) social or emancipatory rights which endow the individual with positive rights vis-à-vis the state (p. 4).

Property rights, which could be seen as a part of human rights, and the rule of law are inextricably linked. Hoff and Stiglitz (2002) believe that effective property rights are not possible without a strong rule of law. According to them, the rule of law has to ensure well-defined and enforced property rights, broad access to those rights, and predictable rules for resolving property rights disputes. The absence of the rule of law, by contrast, is equivalent to a legal regime that does not protect investors’ returns from arbitrary confiscation, does not protect minority shareholders’ rights from tunnelling, and does not enforce contract rights (p.

4). The rule of law, thus, can protect the property rights by: (i) limiting official discretion to

16 Clause I in the report of the first Committee of the International Congress of Jurists at New Dehli, 1959, cited

impair property rights, (ii) establishing institutions and rules that clearly define property rights, and (iii) predictably and consistently enforcing property rights.

Obviously, without clear, impartial rules and predictable enforcement of those rules, individuals will have little certainty that they will derive the benefits that accrue from their efforts to acquire and improve property, in short: to create wealth. They will therefore have little incentive to accumulate wealth and invest in property. Black et al. (2000) point out that the absence of a rule of law means that even the ownership rights were a dubious value. For instance, when analyzing the impact of the lacking rule of law in Russia, they show that overnight, a Russian shareholder could see his interests diluted and his assets tunnelled away.

Black et al. (2000) also said that in many of the post-communist countries, even majority shareholders encountered such problems (2000, p. 5). This is because, according to Hoff and Stiglitz (2002), in the absence of the rule of law, people have a strong incentive to take measures to protect their property from predation by the state and mafias. They also show that under these seemingly favourable conditions, Big Bang reforms may well not create a constituency for the rule of law (p. 37).

Notably, the requirement that the rule of law should respect and protect property rights does not mean that the rule of law should abolish the system of public ownership and interest. As explained by Hager (2000), even Western doctrines of the Rule of Law do not require governments to subordinate all broad national or social interests to specific private property interests. Each legal system has its own variant, but most provide mechanisms whereby a substantial public interest can override a private property claim (p. 42). Hence, it will be a naïve view to think that in order to obtain the rule of law and to speedily transform to market economy; it must transfer the public sectors to private sector as soon as possible. For instance, through analyzing a dynamic equilibrium model of the rule of law demand, Black et al.

(2000) show that beneficiaries of mass privatization may fail to demand the rule of law even if it is the Pareto efficient “rule of the game”(p. 4). The maintenance of a system of public ownership, however, does constitute a major problem in the transition to the rule of law. For example in Vietnam, the way in which the state deals with its enterprises increased its discretionary power which is inimical to the rule of law. I will explain this problem more detail in the next chapter (chapter 3).