Non-PC, but feasible, reasons for rich-poor divide

Economists can be highly non-PC - not politically correct. For instance, Harvard University economist Florencio Lopez-de-Silanes says, "The worst thing that a nation can have done is to have copied the Napoleonic code 200 years ago. Napoleon's legacy to the world is bad government."

Some 43 percent of the world's 212 nations have adopted French civil or commercial law. These include Spain, Portugal, Italy, Belgium, most nations of Latin America, and former French colonies in Africa and elsewhere.

Citizens of these countries may not like Mr. Lopez-de-Silanes's words.

Regardless, with three other economists, he has looked at 152 countries and found that common-law nations have better governments. Legal systems in some 35 percent of countries are based on English common law. Most of them once belonged to the British Empire, and they include the United States.

The four economists have further non-PC findings.

Nations with a high proportion of Protestants tend to have "good" governments. Largely Roman Catholic and Muslim countries exhibit "inferior government performance."

Economists and historians have made comparisons of nations for many decades. But nowadays, there is far more economic, social, and political data available on countries. Comparing nations has become something of a growth industry among economists.

For example, the rich-countries club, the Organization for Economic Cooperation and Development (OECD) in Paris, has just ranked its 28 members and a few other nations in terms of "purchasing power parities" - comparing how much the income of people in these countries will buy in goods and services.

Tiny Luxembourg, with a lucrative international banking business, emerges on top with a score of 160, compared with an average 100. The US is second at 140. Also in the high-income group are Switzerland, Japan, and Norway.

A high-middle-income group - between 105 and 119 - includes Canada, Australia, Austria, Belgium, Denmark, Germany, Iceland, and the Netherlands. The next group - between 80 and 104 - includes New Zealand, Finland, France, Ireland, Italy, Sweden, and Britain. Israel, not an OECD member, fits in this category.

Russia, a nonmember, ranks at the bottom at 34 - slightly below Mexico.

Making use of the flood of new data is Lopez-de-Silanes, a Mexican of Spanish heritage, Rafael La Porta, an Argentine also teaching at Harvard in Cambridge, Mass., Andrei Shleifer, Russian-born, a third Harvard economist, and Robert Vishny, at the University of Chicago. Their study is published by the National Bureau of Economic Research, Cambridge, Mass.

Good government, by their definition, means "good-for-capitalist-development." Good government protects property rights. It keeps regulation and taxes light. It is relatively non-interventionist in the economy and society. Good government is also efficient. The bureaucracy makes decisions quickly without bad distortions, such as those caused by corruption. The government provides quality schooling, with little illiteracy. Infant mortality is low, indicating sound health services. It builds relatively fine roads, airports, and other infrastructure.

Further, good governments are usually more democratic. "Government is good when people can say what they think," says Lopez-de-Silanes. "There is political freedom."

With their capitalist definition in mind, the four economists rank 152 nations in terms of government quality.

Common-law regimes do well, says Lopez-de-Silanes, because their legal system developed in England to some extent as a defense of Parliament and property owners against the attempts by the sovereign to regulate and expropriate their assets. In these countries, people and business have fewer restrictions on creating wealth. Government is more limited and bureaucracies more efficient.

By contrast, Napoleon developed civil law as an instrument to build and maintain state power and control economic life. It tends to protect state over individual rights, damaging good government and thence the economy.

In the case of religion, the authors cite a new book by David Landes, "The Wealth and Poverty of Nations" (W.W. Norton), which argues that Catholic and Muslim countries long suffered from cultures of intolerance, xenophobia, and closed-mindedness that retarded development. Church and state cooperated to keep out new ideas.

Protestant countries, in general, allow a freer interpretation of ideas. Their churches are less hierarchical, and this influences the state.

The four economists note that the Catholic church became more liberal in the 1960s. Since then, 30 Catholic countries have democratized.

Another finding of the four may bother some conservatives: Larger governments tend to be better performing ones. That doesn't say bad government should grow to get better, says Lopez-de-Silanes. Nor that big government should stay big.

All it says is that big governments often are providing efficiently the services that their peoples want.

* David R. Francis is the Monitor's senior economics correspondent.

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