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Economists tend to define economic development in quantitative terms (e.g. increase in GNP and national income). The contribution of human rights to the correction of market failures (such as inadequate "voice" and "exit" opportunities in markets, "external effects", socially "unjust" distribution of income), to the reduction of transaction costs, the promotion of market competition (e.g. through freedom of association and mobility of persons), and to the protection of "substantive freedom" of consumers and of the poor have been rarely examined by economists. While the contribution of law to economic welfare has been emphasized since Adam Smith's Inquiry into the Nature and Causes of the Wealth of Nations (1776), the various economic theories on "law and economics", "institutional economics" and "constitutional economics" have not systematically analyzed the contribution of human rights to economic welfare. Only recently have economists suggested to define economic development in terms of real substantive freedom and "capability" of citizens to self-development.103 A few recent economic studies offer empirical evidence that "rights make human beings better economic actors", and that economic underdevelopment (e.g. famines, lack of investments, inefficient capital markets) seems to be closely related to lack of effective protection of human rights, democracy and accountability of governments.104
Most lawyers likewise disregard the contribution of human rights to economic welfare. In constitutional democracies with longstanding constitutional guarantees of a common market and liberal trade (like the USA), the concept and necessity of economic and social human rights often remain controversial. Where competition is effectively protected through antitrust law (as in the USA), competition rules are often applied on the basis of economic efficiency criteria (such as absence of price and output restrictions) rather than on the basis of equal freedoms of competitors and consumers.105 Human rights lawyers are often averse to taking into account economics in the consideration of human rights problems, or assume that the "laws of the market" are anarchic and offer no legitimate criteria for the solution of human rights problems.
Yet, billions of individuals have to face "scarcity of resources" as their most urgent human problem (e.g. for satisfying consumer demand for food, medicines, housing, education, health services and job opportunities) and freedom of exchange as their most important "instrumental liberty" for human survival and self-development. Since the exercise of human rights depends on scarce economic resources, human beings inevitably compete for access to and allocation of such resources. Consumer-driven market prices are the only spontaneous information, allocation and coordination mechanism respecting the freedom and divergent preferences of investors, producers, traders and consumers. Division of labor, based on private property rights and equal freedoms (e.g. freedom of contract to transfer property rights), has proven to be an indispensable complement of human rights, necessary for promoting savings and investments, productive uses of scarce resources, satisfaction of consumer demand, and inducing citizens to increase the supply of goods, services and income for the enjoyment of human rights.
Economic history confirms the central insight of Adam Smith's Inquiry into the Nature and Causes of the Wealth of Nations (1776) that economic welfare is essentially a function of legal guarantees for economic liberty, property rights, legal security and open markets as decentralized incentives for savings, investments and division of labor. Even though many less-developed countries are rich in economic, biological and human resources, their lack of legal security and inadequate protection of property rights impede investments, savings, efficient use of resources and economic development.106 The sad reality of unnecessary poverty and gross violations of human rights in many countries is viewed by "constitutional economics" as proof of "constitutional failures" that are due to inadequate constitutional protection of civil, political, economic and social human rights, including economic liberties, property rights, monetary and competition safeguards necessary for a mutually beneficial division of labor.107
The 1966 UN Covenant on Economic, Social and Cultural Rights does not protect the economic freedoms, property rights, non-discriminatory conditions of competition and rule of law necessary for a welfare-increasing division of labor satisfying consumer demand through private investments and efficient supply of goods, services and job opportunities.108 The UN Covenant's social rights are therefore often criticized as a one-sided attempt at redistribution without adequate attention for wealth-creation and without proper balance among rights and obligations.
The EC's "treaty constitution", by contrast, protects welfare-enhancing market competition in a much more comprehensive manner in the economy no less than in the polity. Free movements of goods, services, persons, capital and related payments, non-discriminatory conditions of competition, as well as social rights are constitutionally protected in EC law as "fundamental rights".109 The single European market could never have been realized without private enforcement of these economic liberties by EC citizens and without their judicial protection by national courts and by the EC Court vis-à-vis governmental and private restrictions and discrimination. EC competition law and the ever more comprehensive EC guarantees of social rights and of regional adjustment assistance are indivisible components of the EC's "economic constitution" and "social market economy" without which political acceptance of the "acquis communautaire" by many less-developed, newly acceding European countries would not have been democratically feasible.110 Indivisibility of political as well as economic freedom and responsibility, constitutional safeguards against abuses of economic power no less than against abuses of political power, and social rights promoting a "social market economy" have become hallmarks of European integration law that should serve as models for worldwide integration law.
Just as European economic integration law has become reinforced by integrating human rights, the increasing calls for "mainstreaming human rights" into worldwide economic integration law (e.g. of the WTO, IMF, ILO and World Bank) offer important synergies for strengthening both human rights law and global integration law.111 The indivisibility of civil, political, economic, social and cultural human rights requires more effective legal protection also of individual economic liberties as necessary precondition for personal and political liberties, stronger social rights, and a mutually welfare-increasing division of labor in which the social adjustment costs to global integration are jointly shared (e.g. through integrated IMF and World Bank assistance programs for newly acceeding WTO member countries). European integraton law offers important lessons for the necessary reforms of UN human rights law and of global integration law: The need for constitutional, legislative and judicial safeguards against freedom's inherent tendencies of destroying itself is a constitutional task in all areas of civil, political, economic, social and cultural life.
103 Cf. A.Sen, Development as Freedom, 1999.
104 See the Human Development Report 2000 (above note 13) and the World Development Report 2000/2001 on "Attacking Poverty" (World Bank 2001) which defines "poverty as encompassing not only low income and consumption but also low achievement in education, health, nutrition, and other areas of human development", including "powerlessness and voicelessness" of poor people; the report emphasizes the importance of protection of property rights (e.g. p.34) and "empowerment" of poor people through democratic processes and accountability of governments (see p.39).
105 See e.g. the book by Bork above note 79.
106 See e.g. de Soto (note 31), who points out that many developing countries are rich in resources which, due to inadequate protection of private property rights, remain "dead capital" that cannot be economically used.
107 On "constitutional economics" and the need for an "economic constitution" see E.U.Petersmann (note 44), e.g. chapters III-VII, as well as D.Gerber, Constitutionalizing the Economy: German Neo-Liberalism, Competition Law and the "New" Europe, in: American Journal of Comparative Law 42 (1994), 25-84. Numerous recent economic studies suggest "that almost all of the countries that have enjoyed good economic performance across generations are countries that have stable democratic governments" ( M.Olson, note 15, at 43, 192: "The countries with the highest per-capita incomes - the developed democracies - are also the countries where individual rights are best protected.").
108 "Economic freedoms" are mentioned only in Article 6 of the ICESCR on the right to work. Property rights were not mentioned in the Covenant due to disagreement on how to delimit private property and public interest legislation.
109 See above at notes 20 and 80.
110 Cf. e.g. M.Poiares Maduro, Striking the Elusive Balance between Economic Freedom and Social Rights in the EU, in: Alston et alii (note 4), 449-472. On the constitutional impact of EU constitutional law on the national constitutional laws of EC members and acceeding countries see: A.E.Kellermann/J.W. de Zwaan/J.Czuczai (eds.), EU Enlargement. The Constitutional Impact at EU and National Level, 2001.
111 See E.U.Petersmann, Human Rights, Cosmopolitan Democracy and the Law of the World Trade Organization, in: Fletcher/Mistelis/Cremona (eds.), Foundations and Perspectives of International Trade Law, 2001, at 79-96; S.I.Skogly, The Human Rights Obligations of the World Bank and the International Monetary Fund, 2001.