Durand on Richman, “Stateless Commerce”

On February 23rd, 2018, Barak Richman, the Edgar P. and Elizabeth C. Bartlett Professor of Law at Duke University joined students in the Sawyer Seminar on Corporations and International Law to discuss his most recent book entitled Stateless Commerce: The Diamond Network and the Persistence of Relational Exchange. For the purposes of the seminar, students were asked to read Chapters six and seven, which focused on state regulation. Professor Richman was quick to introduce these chapters as the most speculative chapters, and took a few moments to contextualize his work.

Professor Richman explains that the book grew from an original question: how are credit agreements enforced in the diamond industry? More specifically, why does this industry look so different from other industries, and how has it been able to maintain a form that has become obsolete in other industries? Indeed, as normal credit sales in modern day are secured by courts, the same cannot be said of the diamond industry, in part because of the difficulty in tracing back diamonds. The diamond industry therefore has had to rely on pre-legal mechanisms and pre-modern economic organizations.

Professor Richman goes on to give an overview of Chapters three and four, which focus on this question of enforceability. He mentioned that this work attracted the interest of people who wanted to explore the role of the state and the traditional instruments the state used to create polities. Through these questions, a nexus of common interest emerged between what was happening in Manhattan and what had happened hundreds of years ago in Europe.

 As Professor Richman fielded questions from the crowd, two main themes emerged: the debate between “formal” and “informal” systems, and the place of human rights in the diamond industry. As hinted in Professor Richman’s work, there is a major debate which pits informal systems against formal systems. The author explains that in a way, the diamond industry is very formal, as the industry thrives on adherence to bylaws and arbitration, for example. But as illustrated in Chapter four, Professor Richman presented a nuanced enthusiasm for what the diamond sector is doing. Indeed, when relying on coordinated enforcement (meaning private enforcement), competitors make an agreement, and this necessarily mobilizes a cartel. He suggests that institutional economics will highlight the trade-offs of this system: when choosing a private enforcement mechanism, we create a system that can efficiently share information, but that will present the classic drawbacks present in a cartel. These drawbacks include a resistance to change, outsiders or innovation. If we were to apply this to a country where state enforcement is not very effective, we would see the same trade-offs appear. Indeed, the cartels will manage to be very efficient and would serve an important institutional feature, but at the cost of the drawbacks mentioned above.

A second theme focused on human rights, and more specifically, the kinds of human rights challenges that are unique to the diamond industry, and what states can do to address these issues. Several human rights-focused questions were asked, and Professor Richman prefaced his answer by reminding the crowd that the book was written by an economist. He also noted that his book focused on understanding market forces and institutional arrangements through the lens of efficiency, and he was not driven by whether the industry was inherently good or not. After fielding more questions and reading the final two paragraphs of his book, Professor Richman returned to the question of human rights. He stressed that the issue raised by the human rights questions is one of the hallmarks of the global economy: a person does not necessarily have a connection to the person picking his produce, or his diamonds, and thus only cares as much as he chooses to. He explored possible solutions, including a United Nations Convention addressing the human rights implications of this industry, but warned that such a Convention would be difficult to enforce, since this is the type of issue often solved by private international governance. He pointed to the Kimberly Process as such a private mechanism, but warned that such a mechanism would essentially constitute a cartel, and therefore presents the same benefits and drawbacks a classic cartel would.

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