According to Voigt and Kiwit (1999), because an institution contains two elements - a rule and an enforcement mechanism - the failure of formal institutions might be a result of the failure of one of its elements. There are some reasons for the failure of formal institutions.
First, it might be due to: (i) a rule which could be used to secure the interaction striven for, might not exist, (ii) those rules might exist, but contradict each other, (iii) those rules might be uniform but not be known to the participants, and (iv) the contents of those rules might be changed so frequently, and therefore not conducive for building stable expectations. Second, this is due to the failure of enforcement mechanism, which means that such mechanism does not work effectively and efficiently (e.g. inaction or delayed action of the judiciary) so that the non-compliance behaviours are not sanctioned adequately (Voigt and Kiwit 1999, p. 11).
V.2. The failure of the rule of law
From analyzing the failure of formal institutions, the failure of the rule of law might be a result due to the following reasons.
First, the failure of the rule of law can be due to the absence of many core components of the rule of law. For example, the Asian financial crisis of 1997 and 1998 was a result of the lack of transparent and accountable legal and judicial institutions, which indicate the failure of the rule of law reform in East Asian countries (Matsuo, 2003). Therefore, Carothers (1998) said that the Asian countries, in which the so-called miracles occurred are unstable because they lack the rule of law.
Second, the failure of the rule of law is due to contradictions in the legal system. It may be an inconsistency in laws and under law regulations or between the content of laws and that of informal institutions (e.g. social norms, ethical rules, customs, etc) rooting in a country where the rule of law is applied. Remarkably, the compatibility between the content of formal laws and informal institutions influences the way in which the rule of law comes into force.
Comparing the “rule of state law” with “rule of law state”, Cooter (1996, p. 191) shows that formal laws in the “rule of law state” are compatible with social norms so that the people obey the laws and even supplement official enforcement of the laws. By contrast, people disobey the laws in the “rule of state law” as they are incompatible with the social norms. Therefore, if the rule of law is only built by the will of some political thinkers or foreign sponsors regardless of the common interest and values in society, it will not lead to the constructive, but the destructive rule of law. Making this point, Walker (1988) warns that:
“The political-intellectual elite will need to stop thinking of the nation’s population as a kind of vegetation that can be pruned, hacked about or uprooted at the will of the reformer…although ordinary people can be just as myopic as any other group, for the legislator to proceed without any regard for their customs, traditions and desires is likely to be both self-defeating and ultimately destructive of the rule of law, even in its basic sense of the state of law and order as opposed to anarchy” (p. 388)
Third, the failure of the rule of law results from the ineffectiveness of legal enforcement mechanisms. The rule of law only brings about benefits if it comes into force efficiently. For instance, Rawls (1971; p. 237) emphasizes that laws and commands are accepted as laws and commands only if it is generally believed that they can be obeyed and executed. In similar line, by comparing laws with a good knife, which has the ability to cut, the laws must be capable of guiding behavior, Raz (1983) points out that conformity to the rule of law is an inherent value of laws, and indeed it is their most important inherent value (p. 225-226). It is evident that, as the millions of dollars spent in Cambodia, Russia and elsewhere show, that the mere enactment of laws is ineffective without changing the conditions for implementation and enforcement. There is also an increasing consensus that the effective and efficient legal system plays a significant role in economic development. For example, the World Bank states that legal and judicial systems that work effectively, efficiently, and fairly are the backbone of national economic and social development. This is because national and international investors need to know that the rules under which they operate will be expeditiously and fairly enforced. Moreover, ordinary citizens need to know that they have the surety and protection that only a competent judicial system can offer17.
The effectiveness of the legal enforcement mechanism thus depends heavily on the performance of the judiciary system. As Salzberger and Voigt (2003) pointed out, this is because the judiciary is the main enforcer who imposes sanctions on actors who do not comply with the laws. There are two main functions of the judiciary: (i) to decide whether actions carried out by members of the other two branches are within the legal frame or the rule of law, and (ii) to adjudicate disputes between individuals and to decide whether individuals ought to be sanctioned because they violated the law. From analysing the supply constraints for the rule of law, many other authors such as Johnson, Kaufmann, and Shleifer (1997), Roland and Verdier (1999), and Glaeser, Johnson, and Shleifer (2001) also recognize that ineffective judicial enforcement of legal rules may create an obstacle in the reform
17The World Bank statement, cited in Upham (2002)
process to the rule of law. Yet, the judicial enforcement is part of the reform process and cannot be assumed to be given at the beginning. Thus, in my judgment, making judicial system independent and effective is a significant step in the transition to the rule of law.
In summary, the failure of the rule of law occurs when the institutional arrangements which are necessary to the rule of law are often corrupt, ineffective, unavailable, or do not correspond to the social reality and/or contemporary needs. Consequently, constitutionally established rights are not implemented in reality, inequitable treatment before the laws is normal, and actions and decisions of government are not based on general rules, but on arbitrary discretion. In such a situation, instead of believing in the formal legal system based on the rule of law, people tend to rely on social norms and informal practice to secure their rights. There is a fact that human factor still plays a major role on the success or failure of the rule of law. The rule of law will be widespread only if it can overcome the situation that leaders refuse to abide by the law. For example, Hoff and Stiglitz (2002, p. 36) recognize the huge cost associated with the transition to the rule of law in many countries, where there are some individuals who may “invest” a great deal in the maintenance of no rule of law, including killing those who work to establish the rule of law. Some other studies of Dewatripont and Roland (1992, 1995) or Hellman (1998) focus on the problem of sustaining the demand for reform over time in order to explain the obstacle to the rule of law reform.
They found that voters who suffer short-term losses may turn against reform, or the early winners from partial reform may block continuation of reforms in order to earn rents.
Consequently, as Voigt (2003c, p. 8) pointed out, a "perfect" or "complete" rule of law has probably never been realized empirically. It is evident that men and women still have been treated differently just as members of different races have been. Successful rent seeking that leads to tax exemptions or the payment of subsidies is not in conformity with a perfect rule of law either because it is equivalent to treating people differently. He added that the rule of law, therefore, should be understood as an ideal type in the sense of Max Weber (1922/1947), a type that abstracts from many characteristics found in reality.
In addition, respect for the rule of law will not occur in countries rife with corruption because corrupt government officials and leadership have no reason to give up their huge interests under no rule of law. This explains why Carothers (1998) claims that corruption is likely to lead to the failure of the reform to the rule of law. In his judgment, the rule of law reform will never succeed except it can get rid of the fundamental problem of leaders who refuse to be
ruled by the law. However, it is the fact that even the new generation of politicians arising out of the political transitions of recent years is reluctant to support those reforms.