Category: Law and Economics

What is the impact of international economic law on developing countries?

celinetanf8d07c165bLeave a comment

Just as at the time of Bretton Woods, international economic law is essential to discourage destructive national policies. But it is also vital to understand how law, regulations and institutions are located within a longer historical trajectory of colonialism, inequality and exploitation.

The Covid-19 pandemic and the climate crisis demonstrate how the world today is more connected economically, socially, politically and ecologically than at any other point in history.

Actions in one country have impacts, sometimes very serious ones, on the societies, environment and economies of other countries. The globalisation of economic markets and technological change affect how countries, companies and individuals conduct economic exchange, including trade in goods and services, capital investment and financial transfers.

These developments also accelerate the social and environmental costs of transnational economic activity. For example, while products, such as mobile phones, can be used in one part of the world, their production can criss-cross multiple other geographical regions. Similarly, raw materials can be extracted from one country to be manufactured into consumer products in another.

This means that the social or environmental costs of production 鈥� such as low wages, poor health and safety standards and/or air or water pollution 鈥� are not necessarily borne by the countries or communities where the final product is sold and used by consumers.

These changes underscore the critical importance of global collective action and international economic law 鈥� the set of global rules and institutions that regulate transnational economic transactions.

As discussion turns to how international economic law deals with contemporary global problems 鈥� such as managing global supply chains, settling trade disputes, overcoming sovereign debt crises and financing transitions to low-carbon economies 鈥� it is important to consider how the historical legacies of the current system can affect its capacity to do so effectively.

This will enable us to move beyond the economics discipline鈥檚 approach to international law, which is often limited to narrowly measuring the 鈥榚ffect鈥� of different laws and legal institutions on various economic indicators, such as growth, investment and poverty. Taking this approach will enable us to explore how law is itself developed in a colonial and imperial context, which may serve to reproduce and perpetuate colonial harms and exploitation.

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On recentring women鈥檚 grassroots struggles to decolonise FinTech narratives

serenanatileLeave a comment

Drawing realised by artist Pawel Kuczy艅ski for Serena Natile’s book

I came to the study of fintech as a feminist socio-legal scholar researching the gender dynamics of South-South migration. While doing fieldwork in Kenya for my PhD in 2012, I came across M-Pesa, a mobile money service used by locals as an instrument for transferring money from urban to rural areas. From the start of my research in 2011 to the completion of my PhD in 2016, ongoing studies on M-Pesa were mainly celebratory. It was acclaimed as an innovative instrument for poverty reduction, development, and gender equality and was enthusiastically supported by donors and international financial institutions such as the World Bank and the International Monetary Fund (IMF), as well as by tech entrepreneurs and corporate philanthropy. Its success story was so uncontested that I decided to change my research question to focus on the gender dynamics of digital financial inclusion, rather than on my initial interest, migration.

The key narrative of M-Pesa鈥檚 success in terms of gender equality was, and still is, that it facilitates women鈥檚 access to financial services, providing them with a variety of opportunities to improve their own livelihoods and those of their families, their communities, and ultimately their countries. In the specific case of M-Pesa, a basic-mobile-phone-enabled money transfer service is considered more accessible and available than transferring money via mainstream financial institutions such as banks, and more reliable and secure than informal finance channels such as moneylenders or the handling of cash via rotating credit and savings associations (ROSCAs). This claim is based on three assumptions: first, that women have less access to financial services than men have; second, that women would use their access to finance to support not only themselves but also their families and communities; and third, that digital financial services are better than informal financial channels because they overcome the limits of cash, ensuring traceability and security. These assumptions motivated advocacy and investment in digital financial inclusion projects and the creation of ad hoc programmes and institutions, all strongly focused on the question of how digital technology can be used to facilitate women鈥檚 access to financial services.

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The evolution of mainstream economics in five political-economic questions

Aabid FirdausiLeave a comment

The trajectory of mainstream economics can be understood in terms of how the discipline historically responded to moments of crises by attempting to 鈥渢heoretically fix鈥� the understandings related to five core 鈥渜uestions鈥� of capitalist political economy 鈥� namely land, trade, labour, state, and legal-institutional framework. This involved legitimising improvements in land that led to the dispossession and the destruction of the commons, justifying free trade based on comparative advantage as opposed to mercantilist state intervention, reducing labour to a factor of production that was supposedly rewarded based on its marginal productivity and hence not being exploited, legitimising state intervention to stabilise capitalism and developing a legal-institutional framework to protect markets from popular democratic pressures. These 鈥渢heoretical fixes鈥� served to ideologically legitimise, preserve, and perpetuate the core content of capitalist social relations even as it corresponded with the modification of the surface-level appearances of capitalism.

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A need to re-examine the temporality of anti-trust action

Anushka mLeave a comment

The structure of anti-trust laws is generally and neatly divided into ex-post enforcement and ex-ante regulation of market conduct and its participants. It is a matter of social and economic policy choice as to whether any regulation should precede 鈥榟arm鈥� or follow it, as is the construction of 鈥榟arm鈥� across statutes. For example, the requirement of a means to understand and assess the market impact of a merger. On the other hand, abuse of dominant position is an ex-post assessment once the dominance has set in, which may be in the long run. The determination of abuse is subject to a rule of reason and analysis by the competition authorities. Against this background, the question is what happens in the intervening period when an undertaking is slowly and surely inching towards domination, engaging in conduct which would be punished only once it becomes dominant ? What happens to the process of concentration of markets, along with the practices in concentrated markets? These questions are not borne out of academic interest alone and are not completely answered by a simple focus on anti-competitive agreements, as will be seen below. The analysis will zoom in on the Indian market conditions to make a case for questioning the timing of regulatory intervention and proceed to show that new economic methods may be required in this task.

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The return of the visible hand: How struggles for economic and political dominance turn state capitalism into authoritarian capitalism

gschnydr2 Comments

budapest-parliament-hungarian-parliament-building-hungary-people-politicians-viktor-orban-hungarianBy and

The state has made a return with a vengeance in economic matters in the past decade or so. Mainly due to the success of the Chinese model and the 鈥� less permanent 鈥� strong economic performance of countries like Brazil and Russia, the erstwhile Washington Consensus of the superiority of markets over states as mechanisms of economic coordination has been put in serious doubt.

Scholars have picked up on this trend by increasingly referring to the term (new) 鈥榮tate capitalism鈥�. consider it an undesirable threat to the existing economic world order, while others show how states can effectively promote development and economic growth.

While the term state capitalism has been useful to into debates in political economy, the term itself is not unproblematic. Indeed, there is a risk that it perpetuates, rather than surpasses, the sterile debate about the state versus the market. Put bluntly: If there is such a thing as state capitalism, what does non-state capitalism look like?Read More »

Property rights and transaction costs in developing countries: A political settlement perspective

abdulrasheednile2 Comments

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Photo by Dennis Jarvis. .

Transaction costs due to distributional conflicts, political settlements, and weak enforcement capacity have important implications for the implementation of property rights in developing countries. While critical analysis of these factors is missing in the mainstream economics approach to property rights, it is obvious that incorporating such analysis will be crucial in designing policies to minimize transaction costs that hinder an efficient functioning of property rights. Specifically, there is a need for an alignment of interests among powerful political and economic interests if property rights are to be more efficient at reducing transaction costs.聽

A fundamental limitation of contemporary property rights theory is its inability to incorporate factors that might reduce property rights from solving transaction costs, particularly in developing countries. This piece reviews the mainstream explanation of the relationship between property rights and transaction costs and then evaluates factors that can inhibit property rights from reducing relevant transaction costs, which include distributional conflicts, costly enforcement capacity, political settlement, and measurement problems. Major emphasis is placed on social conflicts and organization of power which are missing from the conventional analysis of property rights.

In this respect, the political settlements framework developed by SOAS economist Mushtaq Khan can enrich our understanding of the operations of property rights in developing countries. Khan () defines political settlements as 鈥渟ocial orders characterised by distributions of organizational power that together with specific formal and informal institutions effectively achieve at least the minimum requirements of political and economic sustainability for that society鈥�. In short, political settlement means the distribution of power among different groups.Read More »

鈥淧rivate Property鈥� and the Dakota Access Pipeline

Chloe SariegoLeave a comment

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Since the announcement of the Dakota Access Pipeline (DAPL) in 2014, which was planned by Energy Transfer Partners for the transport and access of the Bakken oil fields, it has gained traction as a controversial initiative because of its environmental impact, the threat it poses to water supply and its effect on Native American sacred lands. Since August 2016, a group of protestors have been organizing on the Standing Rock Indian Reservation petitioning against the U.S. Army Corps of Engineers and protesting at the actual site of the pipeline (). While the violence surrounding the pipeline is within itself shocking, the media coverage has been extremely polarized on the issue. Often falling along partisan lines, 鈥渓iberal鈥� news sources oppose the pipeline on humanitarian grounds and 鈥渃onservative鈥� sources support it, but both forms of media glean their conclusions about the pipeline from uncritical understandings of the conflict. Both sources ignore that, at the heart of the issue, are issues surrounding what private property is and the consequences of our chosen definition. Instead of taking for granted colloquial definitions of property we can see the underlying distributional inequality inherent to the pipeline by critically assessing how property and law interact.Read More »

Beyond the Third Moment in Law and Development: New Insights from Legal Political Economy

jmoudud5 Comments

This blog post provides insights from what I have come to call the legal political economy perspective to critique the World Bank and neoclassical economics more generally. At the heart of what has been called the World Bank鈥檚 Third Moment in Law and Development is the claim that government involvement is necessary to eliminate 鈥渕arket failures鈥� and promote both business development and social justice.

In contrast to the mainstream Law and Economics (L & E) approach, which informs the Third Moment, my position, derived from the Critical Legal Studies (CLS) tradition (and its historical ancestor, Legal Realism), is:

  • Property is fundamentally a bundle of rights and thus property ownership at its core entails coercive power struggles between rivals and between owners and non-owners; coercion at its core.
  • The interrelatedness of law and power relations (鈥淚f the program of Realists was to lift the veil of legal Form to reveal living essences of power and need, the program of the Critics is to lift the veil of power and need to expose the legal elements in their composition鈥� (, 109)). These power struggles over economic outcomes occur within the context of background laws that determine property, contracts, and torts.
  • The notion of an economic seesaw in with potential for instability in property and contractual relations.
  • If the goal is to understand how legal structures shape power struggles then the question becomes how are the laws themselves to be determined? Following the CLS perspective, I would emphasize the role of ideational factors determining the intellectual underpinnings of neoliberal policies鈥攆actors that have consciously been created by the financiers of the L & E tradition.

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