This report seeks to provide a brief overview of how donors
have traditionally approached the rule of law, what the problem is from an
investment climate perspective, an overview of U.S. support for rule of law,
and, finally, recommendations going forward. [Note:
contains copyrighted material].
Across Western economies, the future of capitalism is
suddenly up for debate. Driven in part by the twin shocks of Brexit and the
election of Donald Trump, the prevailing neoliberal economic model—which
prioritized a light touch regulatory regime, minimal barriers to trade and
foreign investment, and overall a small role for the state in managing the
economy—is under attack from both the left and the right. Will neoliberalism be
displaced? And what will come next?
Around the world, meanwhile, emerging markets have been
grappling with similar questions for decades. Neoliberalism spread unevenly
across emerging markets, and likewise many of them have been moving beyond
neoliberalism for decades. These varied experiences provide valuable insights
into the strengths and weaknesses of neoliberalism and the future of economic
and political policymaking in a post-neoliberal world. If the Washington
Consensus mantra of “stabilize, privatize, and liberalize” has lost relevance
today, what—if anything—has taken its place? How are different countries reevaluating
the relative roles of states and markets in delivering economic development?
Are there new “models” that are generalizable and applicable across countries
and contexts? [Note: contains copyrighted material].
Report introduces a new index, the TRACE Matrix, for
business bribery risk assessment. The index provides a quick and useful guide
for businesses operating overseas based on a conceptual model of bribery risk
and supported by data specific to firms. [Note: contains copyrighted
Over the next 15 years, more hard infrastructure is
projected to be built around the world than currently exists. This global
build-out is already underway, and the changes it brings will only accelerate.
Infrastructure projects, especially in the transport, energy, information and
communications technology (ICT), and water sectors, have long been recognized
as the backbone of modern economies. Going forward, emerging digital
infrastructure, including fifth-generation (5G) networks, remote sensing, and
other advanced technologies, will be especially critical. As our infrastructure
is transformed, so will be the economies it fuels, the regions it connects, and
the global commons it underpins. These trends are too powerful and potentially
beneficial for the United States to stop, and too consequential to ignore. [Note: contains copyrighted material].
Artificial intelligence (AI) has the potential to transform
economic growth, commerce, and trade, affecting the types of jobs that are
available and skills that are needed. The United States, China, Japan, Germany,
the United Kingdom, France, and others have recognized the opportunity and are
supporting AI research and development as well as preparing their workforce.
For AI to develop also requires an enabling environment that
includes new regulation in areas such as AI ethics and data access and revisiting
existing laws and regulation in areas such as privacy and intellectual property
(IP) rights to ensure that they work for AI. In addition, AI development
requires an international agenda to avoid unnecessary regulatory heterogeneity
that creates barriers to data access and use and impedes the global diffusion
of AI products. [Note: contains copyrighted material].
Place-based revitalization initiatives seek to make every
neighborhood safe and healthy and to connect them to high-quality services.
These initiatives share a few common characteristics. They concentrate
resources in a specific geography; combine physical revitalization with the
provision of services (e.g., health, education, and job training programs);
leverage existing institutions, networks, and capital; and engage local leaders
and residents. However, they have a mixed track record on whether and how much
current residents benefit from such redevelopment. To address these and other
limitations, more place-based initiatives are starting to marry physical
revitalization with intentional efforts to build civic infrastructure. Civic
infrastructure incorporates a broad view of community assets and therefore
seeks to improve physical and civic assets as well as the processes, practices,
and interactions those assets enable. By strengthening civic infrastructure,
revitalizing physical assets can help create equitable outcomes for residents
and increase community benefits. [Note: contains copyrighted
Given that offshore tax havens are largely located in small,
independent states or self-governing territories, it could be assumed that they
have little connection to OECD states and major financial centers such as
London and New York. This is not the case. The so-called tax havens are in fact
part of a much larger network of financial and corporate services that depends
on lawyers, accountants, and bankers located in major Western cities. Only one
part of the havens’ business actually involves providing lower tax rates to
individual foreign account holders.
These techniques originally developed to assist American
executives and Belgian dentists, and later multinational corporations, to limit
their exposure— sometimes lawfully, sometimes unlawfully—to their respective
tax authorities. Today, they’re increasingly deployed to flows of tainted
capital from developing countries, helping those funds transit from their home
jurisdictions and ultimately to the West.
There are more capital flows into the offshore world from
OECD states than from developing countries. The argument of this paper,
however, is that while OECD origin capital flows erode the tax base and some of
the flows amount to illegal tax evasion, the overall effect of the money coming
from developing countries, especially the tainted flows, is more damaging from
both an economic and a security perspective.
In other words, the West, with its rule of law and creation
of the Western-governed offshore economy, has given corrupt elites in
developing countries the tools and capacity to avoid ever establishing the rule
of law in their own countries. They are the beneficiaries of the West’s
firmly-established rule of law and can leverage that advantage against their
own people to ensure that they never benefit from the rule of law themselves.
This is the rule of law paradox. [Note: contains copyrighted