Yang on Richman, “Stateless Commerce”

On February 23, 2018, the second guest speaker session of the spring semester of the Sawyer Seminar on Corporation and International Law welcomed Professor Barak Richman, the Edgar P. and Elizabeth C. Bartlett Professor of Law and Professor of Business Administration at Duke University. During the session, he discussed his book, Stateless Commerce, and answered questions regarding how the system diamond industry worked and the larger implications of his book.

While presenting his book, Professor Richman focused on the general themes of the book and stated that the two chapters that he had students read prior to the seminar session were, perhaps, the most speculative chapters of his book. Questions that he tried to answer in writing his book revolved around why we still see a pre-modern form of economization in the heart of downtown Manhattan. In particular, he questions why the diamond industry has a form that has become obsolete in other industries. While examining this, he pays particular attention to the role of the state, how the state is being undermined, and what that means for the state in transnational commerce if they do not have control over where manufacturing takes place. Professor Richman went on to discuss how, while researching and writing Stateless Commerce, he realized that there is a nexus of common interest between what was happening in Manhattan, what happened hundreds of years ago, and what is happening in East Asia.

Professor Richman fielded many questions during the speaker session, many of which focused on the issue of trust. In particular, he discussed how trust was one of the main reasons why the industry was allowed to thrive as it did. People trusted the system and the people involved in it because they knew the people working in the industry and their families. This also allowed for private enforcement because the trust allows for coordinated enforcement upon which everyone agrees. In essence, trust in the diamond industry is synonymous with credibility. Promises are kept because people know what the consequences will be if those promises are broken. However, Professor Richman also admitted that trust in the colloquial sense might not be necessary with new technology, such as blockchain. Here, the blockchain is providing the same sense of credibility that trust is providing in the diamond industry. As such, it is possible that other industries will also be able to become stateless even if there is not the same level of trust inherent in the communities of those industries.

At the same time, however, Professor Richman also acknowledged that the type of trust displayed in the diamond industry could be seen as being problematic because of the formation of classic cartels. This prevents outsiders from coming in and results in resistance to change, among other issues. Interestingly enough, this did not turn out to be the case in the diamond industry. In the diamond industry, it was shown that the power of cartelization could not withstand economic efficiency since the entrance of the Jains proved that the Jews alone could not maintain a monopoly on the industry. Thus, one of the reasons that the diamond industry has continued to function as it has can also be explained as a result of economic efficiency. It was able to survive the forces of the market until now because it was operating in the most efficient way.

Professor Richman’s presentation was able to provide a case study by which we could examine how certain industries have thrived without utilizing the state. He provided a clear connection into how industries functioned historically, how some continue to function today, and how they may function in the future. By looking at the diamond industry, we were given an example of how a business organization that we would not typically think of when discussing corporations operates outside of a state. This is something that should definitely be kept in mind as we move forward in the semester.

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