Voloshin on Richman, “Stateless Commerce”

Barak Richman, the Edgar P. and Elizabeth C. Bartlett Professor of Law, and Professor of Business Administration at Duke University, presented his recent work, Stateless Commerce: The Diamond Network and the Persistence of Relational Exchange at the February 23, 2018 session of Corporations and International Law. Richman’s presentation explained how ethnic trading networks operate and why they have persisted in certain markets such as the diamond industry. Moreover, Richman not only explored why ethnic trading networks dominate this industry, but also why in the age of globalization the diamond industry still operates in a pre-modern form of transaction-based bargaining in major cities such as New York. Additionally, Richman tried to address what role, if any, states and government actors have in regulating the market for diamonds and the ethnic trading networks at the heart of the industry.

Richman admitted that his work is written from the perspective of an economist, rather than the perspective of a lawyer or legal scholar. As a result, Stateless Commerce attempts to explain the economic efficiency of the diamond industry rather than uncover all the legal or social implications present in the global exchange of diamonds. Additionally, Richman explained that the assigned reading for the seminar, Chapters 6 and 7 were the most speculative and weakest chapters of his work. Richman acknowledged that Chapters 3 and 4 are the most important and substantive chapters as they explain how credit agreements operate in this industry and how this form of contracting is enforced. In particular, Richman clarified that trust, creditability, and transactions based on credit are the foundation of the diamond industry. The diamond industry essentially operates as a large credit market that relies on absolute credibility between merchants. The reputation of merchants is vital to this this market and enforcement mechanisms are only possible because of the interconnectedness of the players in this industry. Richman, asserted that when there is breach of contract, for example in the hypothetical case of theft, diamond merchants have private means of enforcement and would most likely resort to those mechanisms within the community rather than public or state-run institutions.

Reinforcing his assertion that Stateless Commerce is written from a perspective focused on economic efficiency, Richman also acknowledged that his work does not argue that the diamond industry and the way it operates is either good or bad. Furthermore, his work is largely silent as to whether the dominance or emergence of ethnic networks is a good or bad thing either. From the perspective of an economist, Richman illustrated that the emergence of the Jain community in the diamond trade could be viewed as efficient and beneficial to the market. Richman explained that the Jain example proves that the powers of cartelization are not as strong as the efficiency of markets. In this example, the Jain community was able to provide competitive market advantage and as a result were allowed to enter the industry due to economic efficiency.

Lastly, Richman alluded to the idea that global politics and treaty making may not be able to do much in the current situation. The attempts to regulate the diamond industry have largely been left to private international governance which is market-based rather than law-based. Although issues such as tax-evasion, money laundering, cartelization, and human rights violations may be pervasive in this industry it is unclear what role states have in rectifying these problems and whether they would even be effective.

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