Discuss the rule of law and why it is important. Contrast life in a country where the rule of law is enforced with life in a country where it is not and explain how this impacts economic growth.

Question

What will be an ideal response?

Answer 1

The rule of law is a government’s willingness and ability to protect private property rights and enforce contracts. Economic growth is hindered in countries where the rule of law is not enforced. For instance, in a country where the rule of law is enforced, a store can allow its customers to make purchases on credit and feel confident that it can pursue legal remedies if those customers do not pay their bills. In a country where the rule of law is not enforced, stores may not want to extend credit to their customers because they will have a difficult time forcing them to pay it back. Furthermore, citizens of a country without the rule of law may fear that the government may take away their land or businesses and will therefore have greater reluctant to invest than citizens of a country with strong property rights.