Guest Post: Criminal Law Pays – Penal Law’s Contribution to China’s Economic Development

[Margaret K. Lewis is Associate Professor of Law at Seton Hall Law School]

The current trial of former high-ranking official Bo Xilai has shined the international spotlight on China’s criminal justice system. Headlines are simultaneously emphasizing the Chinese leadership’s concern that its rule is “vulnerable to an economic slowdown” after China’s meteoric rise to become the world’s second largest economy in terms of nominal GDP. What is lacking in both the media and academic literature is an in-depth discussion of the role criminal law has played in China’s stunning economic growth to date as well as the role it might play in the future. This inquiry is particularly timely on the heels of a once-a-decade leadership transition and as China’s ability to maintain a robust growth rate is facing rising skepticism.

As explained in more detail in my article here, not only has the PRC leadership historically used criminal law in service of economic ends but also, going forward, criminal law will likely play a multifaceted role in the leadership’s strategy to sustain growth during what promise to be turbulent times. The debate about the role of law in China’s development has thus far largely focused on the Washington Consensus’s support for a market economy’s need for clear and enforceable contract and property rights, often referred to as the “rights hypothesis.”

The law and development literature’s emphasis on empowering private actors by creating a neutral bureaucracy subject to objective judicial review has shifted the debate from the most basic function of law: creating order. And creating order starts with the coercive power of the state exercised through criminal law. Not only is criminal law a direct way for the government to deprive people of money, liberty, and life, it is cheaper and faster than building the civil and administrative law systems on which the rights hypothesis relies. If a these systems are not credible enough to deter activities that are detrimental to economic growth, the government can invoke the heavy hand of criminal law.

In other words, when the legal system for resolving disputes between private parties is weak, criminal law can act as an alternative mechanism, albeit partial and imperfect, to foster development. That is certainly the case with China. Indeed, recent events indicate that the Chinese government is increasingly leaning on criminal law to address a range of areas that affect economic growth, including pollution, food safety, and financial fraud.

Looking beyond China, the law and development literature more generally has not seriously discussed criminal law. At a time that many are rethinking the role of law in economic development, it is worth broadening the type of law being considered to include criminal law. A 2012 legal note by the World Bank indicates that perhaps the conversation may be widening to address criminal law in a direct manner:

“Bank interventions in the criminal justice sector are permitted under the Bank’s mandate, provided the Bank is satisfied that: (a) the proposed intervention is grounded in an appropriate and objective economic rationale showing that the intervention is relevant to the overall economic development of the country in which it is to be carried out . . . .”

Having now recognized that the World Bank can take a more active role in issues involving criminal law, the more exciting question is whether it will indeed take on this role. China is an instructive test case to begin the conversation.