The Economist ran a story on the impact government can have on a country's general wealth. According to a recent research, a country is generally wealthier if the State enforces the rule-of-law. The research tends to prove that countries who enforce the rule-of-law are generally wealthier.

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=7933596&story_id=10835590

http://www.worldbank.org/

In my eyes, this research is essentially flawed: it does not define what test was applied to define the "rule-of-law" and compare its enforcement between the countries. It is not clear how the enforcement of the rule-of-law was quantifiable.

However, even though the resarch did not provide evidence of anything in my opinion, it had the merit of raising the question of the Legislator's role in providing a realiable and prosperous economy. Civil law countries, who often choose to enact restrictions on businesses (labor and other protective measures), are deemed to provide a poor structure for businesses and have been criticized by the World Bank. Countries who have a tradition of common law, on the other hand, are considered to provide a better context for businesses. Though we should avoid generalizing, civil law countries tend to allow the creation of businesses so long as the activity is run in a way that complies with rules enacted to protect classes of people considered to be in a weak position. Common law countries have been known for favoring contractual relationships, which is considered to be good for evolving businesses.

In the US, citizens are suspicious of governments and want the government to get involved in what it has to get involved in, leaving the market and the parties to a contract solve the rest of the issues. In Europe - with the important exception of the UK (common law country) - citizens expect the governement to participate in the development of the country's welfare. Not surprisingly therefore, France has been very criticized by the World Bank, because of high taxes and strict labor laws and Italy and Greece in this study constitute an exception to the finding that rich countries have good enforcement of the rule-of-law. In light of the this conception of the role of government, China appears as another exemple. Though the country is opening up to free trade and the Western world, the State is still very involved in what used to be a totally nationalized and planned economy. Obviously, France, Italy and Greece are developped countries that have been able to maintain decently wealthy economies. China has incredibly increased its wealth in recent years and now poses a threat to Western economies, while being a of major attraction for these same Western countries. Therefore, is the position according to which a government should get the least involved to enjoy a prosperous economy simply wrong?

Note that the World Bank's website has numerous articles about the subject, some old, some more recent. The Economist's source was actually the World Bank.