In the area of human rights, the problem of violations usually isn’t about inadequacy of current laws. Many developing countries with relatively new constitutions have laws that are even more protective of our own in the US, but they are not enforced. This can happen for a number of reasons, whether lack of institutional / agency capacity, political forces, corruption, etc.
In other fields that touch upon non-constitutional / basic “rights” issues, regulatory structures and laws conducive to economic development simply are not in place. In a McKinsey study cited by C.K. Prahalad, the cost of microregulations in the areas of import-export, labor laws, and transactions involving land can be as high as 2 to 3% of GDP growth. “Microregulations” are not the laws themselves, but are the often arbitrary bureaucratic interpretation of the laws and how they should be implemented. “Arbitrary” is a signal for unfairness. In the U.S., it invokes an Equal Protection question of unequal application of a law, and in the developing world, arbitrariness often is a precursor to corruption. Additionally, as Prahalad explains, “The consequence of proliferation of microregulations can be the same as not having laws in the first place. An informal sector emerges outside of the law of the land. The private-sector businesses remain small and local. For large firms, corruption becomes the cost of doing business.”
In discussing the importance of building transaction governance capacity (TGC), Prahalad outlines four essential criteria in eliminating systemic arbitrariness. (Government capacity is essential for legal economies to function):
- Access to information and transparency for all transactions
- Clear process so that selective interpretation by bureaucrats is reduced, if not eliminated
- Speed with which the processes can be completed by citizens
- Trust in the system (with its faults). Trust is a result of the first three criteria, and is a crucial component of TGC. (See my other writing on the importance of trust)
One exciting project in the Andhra Pradesh region of India integrated these principles in creating an e-Government system around property rights. As government records, and processes were brought online, the property registration system (the same laws remained on the books) was dramatically streamlined. Again, Prahalad chronicles the key changes:
- All the steps that are required are now transparent and easy to access. The sequence of steps to be followed is also clear. All interdependent steps are completed automatically.
- In the old system, the officials calculated the value of the land and the associated fees for registration. There were opportunities for selective vale assessment. Now the entire process of calculation is automated with market value assessment algorithms built in. The documents are scanned and stored digitally, reducing the opportunities for them to be lost or displaced.
- The entire process of registration of land now takes one hour (from initiation to completion), compared to 7 to 15 days in the old system. Title searches over the past 20 years from 50 different offices can be done in 15 minutes versus 3 days. Certified copies of documents can be obtained in 30 minutes against the three days of the conventional system.
The key question this example brings to mind is what are the mechanisms that can be scaled to other regions? How can we share these best practices and figure out what project aspects can be applied to different areas were land formalization procedures can literally take years?