Where Property and Contract Rights are Not Respected Cronyism Rules

Respect for the rule of law and respect for property rights is vital to a robust economy. People need to know the rules of the game, know that the rules will be enforced evenly when they are enforced, and have a reasonable expectation of what the rules will be in the medium to long term.  If there is some certainty in this area then plans can be made. If people know their capital will not be stolen by the state or private actors which use the state to steal, they can make plans. They can invest. Innovation is rewarded. The economy grows.

This was one of the most important observations made by the Peruvian economist Hernando de Soto. Poor countries remain poor not because the people in those countries aren’t hard working, but because often the rule of law in poor countries is suspect and property rights and contract law are not respected. Think Venezuela, which has been tumbling economically despite it’s vast reserves of oil.

Sadly the Wall Street Journal reports that Cambodia, a country which has seen far more than it’s fair share of tragedy,  is deeply enmeshed in the “poor country problem.”

Apparently logging interests have colluded with the Cambodian government to clear cut forests in the country’s north.  There is easy money to be made in old growth rain forests so long as there are no claims to the land.

There likely are actually claims to the land which is being logged in Cambodia, just as there are claims in Ecuador, Indonesia, and Brazil. But as in these countries the powers that be in Cambodia just choose to ignore the claims. As there is no rule of law, which protects property owners from the government and partnering interests from swooping in and appropriating land and other property, it is the crony who rules.

In Cambodia, shining a light on this state of affairs can be deadly.