Hughes on Richman, “Stateless Commerce”

 

On Friday, February 23rd, 2018, Professor Barak Richman presented his book, Stateless Commerce, as the most recent Guest Lecturer in the Mellon Sawyer Seminar Series. The book examines the self-regulating mechanisms of the diamond industry which uses relational networks based on ethnic communities in order to enforce and guarantee diamond transactions in lieu of traditional state enforcement mechanisms. While the presentation centered on Chapters 6 and 7 of his book, Professor Richman began by framing these chapters within the origins of his research that ultimately lead to the publication of his book. As covered in Chapter 3 of the book, Professor Richman’s research into the diamond industry began by asking how credit agreements are enforced in the diamond industry given the difficulty of tracing diamonds which leads to ineffective court enforcement of diamond transactions. The answer to this question are the pre-modern relational networks formed around ethnic communities, which are based on group cooperation producing extra-legal credibility.

Next, Professor Richman turned to Chapters 6 and 7 which address the inherently global nature the transnational diamond trade. While Professor Richman called these the weakest chapters of his book, these chapters can also be seen as the most illuminating to answering the question of how the diamond trade differs and converges with other industries. These chapters address the mobility of the diamond trade, interactions between various ethnic groups in the diamond industry, and how the diamond industry is responding to problems associated with globalization.

The discussion around Professor Richman’s book largely centered on the interactions and external impacts of the diamond industry on the rest of the world, despite Professor Richman’s repeated attempts to draw the discussion towards a look inside the insulated diamond industry itself. Many times, the conversation came back to questions about how the diamond industry’s self-regulation model impacts those who are outside this system, for example in the human rights impacts of diamond industry. Additional issues, such as tax evasion, money laundering, and the role of religious communities as exclusionary to the diamond trade, were also identified as externalities to the insular diamond industry. Particularly, the ineffective nature of the Kimberley Process as a solution to conflict diamonds, described in Chapter 7 of Stateless Commerce, was a repeated topic of discussion in terms of the drawbacks of a purely privately ordered industry.

Professor Richman’s general response to these issues was to answer with the reality of the diamond industry itself. Professor Richman repeatedly emphasized the positive, rather than normative nature, of his research and presentation on the diamond industry. These questions can be answered, in Professor Richman’s view, with the overarching unique nature of the diamond industry, particularly its mobile nature and the inability of Courts to effectively enforce diamond transactions. This means that the diamond industry is able to operate outside of state regulation in any area regardless of those impacts to others. Because the diamond industry can and does survive without the State (or so claims Professor Richman), the diamond industry will by its nature resist any formal state-based attempts at regulation, including in the area of regulating conflict diamonds.

Two interesting counter-points to this idea emerged from the discussion. The first was that if there could be an enforcement mechanism facilitating or sensitive to the reputational mechanism of contract enforcement, then that could provide a potential centralized body of regulation for the diamond industry. Second, the move away from exclusively diamond mining towards vertical integration by De Beers has the ability to change the nature of the diamond industry away from the relational networks of trader intermediaries which could lead to increased State regulation of the industry as a whole.