This essay challenges the ubiquitous and rarely questioned assertion that legal property rights are necessary for economic growth and argues that this view of development is incomplete, misleading, and dangerous. The faith in legal property rights emerged from neo-institutional economics, particularly from the work of Ronald Coase, Harold Demsetz, and Douglass North, who recognized that economic assets depended on informal social norms as well as formal legal ones. To date, however, development assistance policies have been narrowly focused on formal legal institutions and have resulted in limited success and often destabilized existing property regimes, leaving societies worse off than before. Through a comparative and historical analysis, this essay preliminarily addresses these theoretical and policy failures and aims to deepen and complicate our understanding of the role of formal legal property rights in changing societies. Examples from the 16th century English enclosure movement, postwar Japanese land reform, late 20th century Chinese economic growth, and 21st century Cambodia demonstrate that the role of formal property rights in economic growth is complex and contradictory. Law and property rights have sometimes slowed the process of change, sometimes legitimated it, sometimes become the very agent of change, and sometimes played no role at all. This essay contributes to the literature of law and development as well as contemporary policy debates by deconstructing the conventional paradigm of property rights and suggesting a more nuanced and contingent view.
©2015 Law and Development Review