Building the Legal and Regulatory Framework: Discussion
نویسندگان
چکیده
Any uncertainty about the value of sound legal systems to the development of healthy and stable market economies was removed by the financial crisis that began in 1997 in East Asia. The impact of that crisis on transition and emerging market economies related in part to the strength in each nation of the legal system components that John Walker has so aptly described. The Asian crisis underscored the fact that stable economic growth depends on the private sector’s ability to attract investment and innovate in the production of goods and services, and this requires a transparent, equitable, accountable, and enforceable system of law designed to support efficient asset allocation by relatively free markets. From a free-market standpoint, effective legal systems must encompass respect for property and creditor rights; an exit mechanism (rules for defaults and restructurings); contract enforcement; and a stable banking system. Market systems also require protections for equity investors; transparency as to corporate performance, ownership and governance (with related audit and accounting rules); and protections against corruption, collusion, and monopoly. Law is a necessary but not sufficient condition, however. Healthy market economies also require the parallel development of a business culture that values arrangements based on economic efficiency and performance rather than on relationships, the evolution of related private
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