Ruminations XXVIII: The Archeology of Knowledge and the Certainty of Law

This is the last of a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

All knowledge comes to us loaded with the baggage of its production. Even the simplest insight is encrusted within a matrix of foundational presumptions, understandings, desire, politics and history that shape it in countless ways. Even the simplest fact is encrusted with structure, assumptions and judgments without which they cannot be understood and communicated. And those assumptions, judgments, values inherent in the description and use of knowledge of any sort is fiercely protected against those who "could not be depended on to preserve privilege; nor to affirm once and for all--and God knows it is needed in the distress of today--that history, at least, is living and continuous, that it is, for the subject in question, a place of rest, certainty, reconciliation, a place of tranquilized sleep." (Michel Foucault, The Archeology of Knowledge and the Discourse on Language 14 (A.M.Sheridan Smith, trans., New York: Panteon Books, 1972).

The object of any regulatory matrix is in part contained withing the framework for the production of knowledge. It presents in simple and historical form a complex of choices--choices about power distribution, values, and necessary organization--that appear so natural that they may remain unstated, and as unstated, veiled. Discourse, then, tends to start from the point of acceptance of the underlying structure upon which knowledge is produced and maintained. To look too carefully beneath that foundation, is to take oneself out of the reality of the conversations in which knowledge is produced, discourse is effected and power is shared.

Thus it is that law, politics and other forms of organization are very much like sausage. A complex of materials smashed within a thin membrane that gives it shape. We tend to battle over the contents of the sausage, but never about the membrane that gives it shape. But it is the quality and shape and variety of the membrane that counts.

So it is, as one considers everything, form the regulatory matrix for multinational organizations to the multi-tiered structure of systems for the generation and contril of global constitutional values, that one ought to think, if only for a moment, about the choices that have been made for one about the shape of the encasement, before one considers in detail the content of that item. And one can decide whether it is sufficient to be permitted the freedom to choose among contents or whether to participate in the determination of the characteristics of the membrane. My sense is that, given a choice, most select the content over the membrane, and thus give up the foundational power over the production of knowledge to those for whom the other path is open.

Ruminations XXVII: On Modernity, the State and the Great Migrations of Peoples

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

Speaking about the idea that large waves of foreign (European, anyway) immigration might be melded together into a new stronger and unique ethno racial people (Zuloaga 1943) that has been a hallmark of strains of Latin American political theory since the time of the great Argentine political theorist Sarmiento (e.g., 1845), Tulio Donghi noted:

Para los inmigrantes menos prósperos, las ventajas de conservar su extranjería son equivilantemente evidentes: su naturalización aumentaría las áreas de conflicto potentcial con autoridades inferiores cuya arbitrariedad las hace temibles, y los privaría de protección consular que es barrera más eficaz contra esa arbitrariedad.

(Donghi 1998, at 214) ("For less prosperous immigrants the advantages of retaining their foreign status is equally evident: their naturalization would have increased the range of potential conflict with the low level authorities whose arbitrariness makes them fearsome, and it would deprive them of the consular protection that serves as the most efficacious barrier against that official arbitrariness").

Donghi nicely points to one of the great tensions of modern migration: the conflict between the need of states to assimilate migrating populations within its own political culture, the need of immigrants to protect themselves against the techniques and price of such assimilationist imperatives, and the incentives for states to protect the rights of their migrating populations (especially as they serve as inbound sources of wealth). That tension is not merely fought on the level fo the social and political--it becomes a matter of law. And that generates another set of conflicts--between municipal law, international law and the power of the international control regime to affect or force changes to national constitutional frameworks.

All of these elements have played out in the recent war between the United States and Mexico. The Americans would prefer an assimilated population of Mexican migrants, whose entry and exit (and consequential legal status in the United States) would be controlled closely by the state. The Mexicans would prefer fair treatment of its nationals, many of whom have not migrated in the sense of leaving on socio-political culture to embrace another, but merely seek work where they can find it across a space within which a border is a figment of the imagination of powerful elites with exploitation high on their respective agendas.

Between them the Americans and Mexicans have each a set of self referential federal legal systems caped off by a constitution. But they also have a number of treaties between them that serve as bridges across that border that many people travel. One of them, the Vienna Convention (1963), provides the sort of consular protection Donghi mentions as a barrier to abuse. Article 36 "ensure[s] that no signatory nation denies consular access and assistance to another country's citizens traveling or residing in a foreign country...."

That provision of the Vienna Convention has proven fertile ground in the border war between Mexico and the United States over the control of the bodies of migrants. At stake was the bodies of a number of Mexican nationals convicted of various offenses, and potentially condemned to execution in accordance with the criminal law of the states in which they were arrested and tried. To protect them against the potential arbitrariness of state officials these nationals eventually sought the protection afforded by theior sgtatus as foreign citizens. What they got was an international judicial conversation that pits the forces of international legal assimilation against both a nation and its semi sovereign parts.

The International Court of Justice has determined that the Vienna Convention trumps municipal law, perhaps even municipal constitutional law. (Case Concerning Avena and Other Mexican Nationals 2004). The American Supreme Court first was willing to see if the American President might have a power to compel states within the American federal system to comply with such treaty obligations as he might deem worthy of direct implementation by such inferior political entities. (Medellín v. Dretke 2005). The Texas Court of Criminal Appeals determined that the president had no power to reach into the affairs of Texas absent a valid Congressionally enacted law through which he might purport to enforce, that the Vienna Convention had no direct effect in Texas, that the International Court of Justice (however lofty its title or judicial ambitions), had no authority in Texas nor were their decisions enforceable as law within Texas standing on its own, and that, in any case state law in this case would trump all determinaitons ot the contrary. (Ex parte José Ernesto Medellín 2006). Lastly, the American Supreme Court relented and agreed that neither the Vienna Convention nor the opinions fo the International Court of Justice were worth the paper they were written on (at least within the United States) absent Congressional assent in the form of statute or other form of legitimate act of acquiescence. (Medallín v. Texas 2008).

Conventional commentary focused on the internationalizing elements of the decisions and the appropriate position of the judicial apparatus of the United States in that context (e.g., McGuinness 2006). But Donghi, I think, has the better perspective: the ability of migrants to retain their nationality might well serve to protect against arbitrariness in ways that assimilation into the host culture might reserve for the second or third generation of migrants. The detritus of this insight, in law, might well reshape the understanding of the relationship of international to constitutional law as it further develops the transnational element of constitutional law.

References

Articles:

Tulio Halperin Donghi, El espejo de la historia: problemas argentinos y perspectivas hispanoamericanos (2d ed., Buenos Aires: Editorial Sudamericana, 1998) (ISBN 950-07-1396-9).

Maragret E. McGuinness, Medellín, Norm Portals, and the Horizontal Integration of International Human Rights, 82 NOTRE DAME L. REV. 755 (2006).

Domingo F. Sarmiento, Facundo (Buenos Aires: Santillana, 1997) (1845).

Manuel A. Zuloaga, Nuestra Raza: y los problemas de posguerra en la Argentina (Buenos Aires: Editorial La Facultad, 1943).

Cases and Treaties

Case Concerning Avena and Other Mexican Nationals (Mexico v. U.S.), 2004 I.C.J. 1 (March 31).

Medellín v. Dretke, 544 U.S. 660125 S.Ct. 2088 (2005).

Ex parte José Ernesto Medellín, Court of Criminal Appeals of Texas, 223 S.W.3d 315, 2006 WL 3302639 (Tex.Crim.App., Nov. 15, 2006).

Medellín v. Texas, 128 S.Ct. 1346 (2008).

Vienna Convention on Consular Relations, 596 U.N.T.S. 261 (ratified by the United States on Nov. 24, 1969).

Ruminations XXVI: On the Media, Manipulation, Work and Dementia

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

One of the great essential tools of the state in the current financial downturn has been the media--especially the television media. This sector has been a most useful vehicle for instructing the masses in the appropriate responses to both the crisis and the heroic efforts of both democratic and republican administrations in overcoming any number of complex problems by borrowing lots of money and threatening to spend it on a host of well deserving members of the political, financial and industrial elites, who together will make everything all right for their charges.

Yet the media itself can sometimes trip over itself in the charge to appropriately season the masses with right thinking attitudes. Prominent among these universities of manipulation was a series of back to back segments produced by the Columbia Braodcasting Network (CBS) for its behavior and attitude training problem: The Early Show.

The initial segment had a suitably authoritative figure report on the difficulties of employment during the current economic downturn. The focus was on the ways in which employers have been seeking to reduce real aggregate wages through a variety of mechanisms, from furloughs, to reductions of working hours. The advice for th emasses affected was to work harder without complaint . . . or better yet, become indispensible to the employer. See CBS, Early Show, Pay Cuts Spreading as Economy Worsens (Feb. 26, 2009) ("You could also try to make yourself indispensable to your employer. "It may feel like you're not indispensable when they're cutting your pay," Rosato acknowledges, "but this is also an opportunity, when times are tough, it's better than being laid off. And because they have fewer people, this is the time you want to take on more responsibility at work. And because there are fewer people on the job, you can make yourself more indispensable.").

This segment was immediately followed by a segment featuring Neurologist Caroline Brockington, who discussed a study suggesting that working too hard contributes to dementia. See CBS, The Early Show, Working Overtime Bad for the Brain? (Feb. 26, 2009) ("New research from The Journal of American Epidemiology says that long hours on the job are weakening your mental abilities and could put you at risk for developing dementia. . . . According to Brockington, the people tested in the study had problems with memory, problems with functioning appropriately and problems with reading and comprehension.").

Now this is entertainment! And also insightful. It provides a useful way into a fundamental contradiction of the current global situation, an impossible and irresistible momentum to reconcile the impossible--rhetoric and reality, crisis and mismanagement, symptom and cure. Dementia appears to be the fundamental character of an overworked state and its private corporate elites. Perhaps the money copntributed by those whose real wages have been reduced will help.

Ruminations XXV: The Other Rule of Law

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

Rule of Law has assumed the role of sacred fetish in the writings of great and small personages throughout the world. It appears to have a singular and fixed meaning--the protection of a polity against the assertion of personal power by tyrants through the construction of a hierarchy of authority in which law, and the process created to create it, assumes the superior position in the elaboration of political society.

But Giambattista Vico reminds us that law, and its rule, can be as easily viewed from other perspectives, even as it serves as the basis for ordering assertions of power:

You can see how the world of law, which was inflexible during the growth of the [Roman] Republic, became mild and slack during the decline of the Empire. At the beginning of the Empire, the study and practice of law was a deliberate scheme for strengthening the power of the princeps; later it became a remedy for averting its breadown, and finally an evil by which that rule was wrecked.

Giambattista Vico, On the Study Methods of Our Times 69 (Elio Gianturco, trans., Ithaca, NY: Cornell University Press, 1990) (original 1709).

It is to be remembered that the rule of law is not meant to substitute for the values that law represents. Law can do no more than express the will of the lawgiver in a legitimating form. The quality of that law--its purpose, method, utility, and so on--is beyond the power of rule of law. Indeed, the rule of law principles ensure that even the worst sort of law will be ferociously implemented, at least until the legal process through which law is legitimately empowered is again invoked. It is a mistake, then, to assume that a rule of law society is necessarily a good, just, well ordered or welfare maximizing one.

Ruminations XXIV: AIG and the New Face of Controlled Economies

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

With the fall of the Soviet Union and its Empire in the late 1980s, the freedom loving West hailed the event as the final discrediting of state intermeddling in economic affairs. The Soviet era stood as a symbol of the bankruptcy of state entanglement with business and a warning about the inevitable futility of state policy grounded in micro management of enterprises form centralized ministries. As the People's Republic of China adapted to the new system, even important Marxist Leninist states appeared to embrace at least the notion of devolution and indirect control. Only small and sadly poor states remained as an anachronistic reminder of the fallacies of a century's worth of centralized mass mercantilism.

But, of course, these panegyrics in the form of policy were all sadly premature. As many African and Latin American states have taught, the state and its apparatus remains a rich prize for capture (at least for the capture of its ability to direct wealth as those in control of its ministries direct) and a central nexus point for control. Thus the new face of control is not Marxist Leninist, it is fascist--understood not in its demonized Italian post 1937 form--but in the form of a kinder and gentler oozing of control in which state and private power are blended for the specific benefit of its leaders and the general benefit of the masses.

The new face of controlled economic activity is not a Soviet or Cuban nomenklatura, but the state-private bureaucratized management of AIG. Hugh Son, AIG May Restructure Rescue Package for Second Time (Update4), Bloomberg.com (Feb. 24, 2009).

AIG had to seek an $85 billion federal loan in September after credit-rating downgrades left the company facing the possibility of more than $10 billion in collateral calls from debt investors who bought credit-default swaps from the insurer. The bailout, which includes handing the government an 80 percent stake in AIG, expanded to about $150 billion in November, partly to fund an entity designed to retire the swap contracts by purchasing the underlying assets from banks.
AIG may convert the government’s preferred shares into common stock to reduce pressure on the company’s cash flow, a person familiar with the situation said yesterday. New York- based AIG pays a 10 percent dividend on preferred stock, and none on common shares. AIG fell in New York trading.
AIG, led by Chief Executive Officer Edward Liddy, may try to repay as much as $60 billion of U.S. loans with a combination of cash, debt and equity, and by selling stakes in subsidiaries such as life-insurance units in Asia, the Wall Street Journal reported, citing unidentified people familiar with the plans.
“We continue to work with the Federal Reserve Bank of New York to evaluate potential new alternatives for addressing AIG’s financial challenges,” said AIG spokeswoman Christina Pretto, declining to be more specific.

Id.

Ruminations XXIII: An Ancient Basis for Creating Modern Non-State Regulatory Systems

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

One of the most refreshing section's of Blaise Pascal's Pensée's (1670), is Section V (Justice and the Reason of Effects)(Nos. 291-338). Two are worth considerable thought in any successful operationalization of soft law systems for the global regulation of multinational corporations. The first, No. 303:

Might is the sovereign of the world, and not opinion. But opinion makes use of might. It is might that makes opinion. Gentleness is beautiful in our opinion. Why? Because he who will dance on a rope will be alone, and I will gather a stronger mob of people who will say that it is unbecoming.

The other, from No. 309: "Justice--As custom determines what is agreeable, so also does it determine justice."

The absence of a prince--the governemntal apparatus of a state and its institutional legitimacy within the constraints of its constitution--does not necessarily impede te cnstruction of a n effective regulatory system. What is required is a community of stakeholders willing to participate, an institutional framework within which their interests are preserved (or challenged), and a demonstrated power to generate custom. Merchants have understood this for centuries and have managed to use multiple systems simultaneously for the construction of a strong culture of behavior among merchants who deal within their community across the often changeable borders of states. It is clear that such a system can be created without a state (or beyond the state) for the regulation of economic entities as well. What are needed are a set of critical actors that can function within a self contained and self-referencing system for the development and enforcement of custom.

Consider the U.N. Global Compact project. It is a system that is partially complete and therefore powerless. The project contains the body of opinion necessary to provide the basis for regulating conduct, but it does not yet have the structure for molding opinion among key actors that serves as the source of regulation and deploying that opinion as a force for a targeted effect. As such, it lacks the popular basis for the construction of custom that itself can serve as the metric of justice. And yet it has the ingredients to move from opinion to power and from power to justice. Critical are those actors who can mold opinion--economic actors, civil society, and media elements. But also critical are the population of consumers and investors whose choices serve as the incorporation of custom into the behavior of those whose customs are of greatest interest to both economic actors and elements of civil society. It is one thing for the United Nations to elaborate ideals. It is quite another to incorporate those ideals as the customs of consumers and investors, and thus of the economic entities subject to the power of those customs.

The key, then, is the incitement of Pascal's mob to an internalization of belief and then to action on the basis of that belief. And this is simple enough. Convince economic actors that the value of conforming, and appearing to conform, produces positive economic effects--positive media coverage, positive government incentives, increases in consumer and investor activities. Create a system in which such entities can brand themselves as conforming to those principles by adhering to the system. Provide wide outlets for the dissemination of the standards of such system through media outlets and the state (as well as the other system participants). Institutionalize the values production within elaborate structures in which all who might profit from the production and enforcement of such values participate. Bureaucratize the elaboration of such values in legitimating institutions of appropriately pedigreed individuals and organizations that reinforces, to the individuals who are the object of all of this activity, that the work of these entities produces great good (who ever defined). Build a rule of law based system for the monitoring and enforcement of the values in which all stakeholders participate, but where judgment is rendered by "neutral" elements. And ensure that penalties work to further internalize values rather than to merely to punish. The object is to reinforce behavior that then becomes custom adopted by economic entities within a values structure embraced by the people and publicized (as good) by media outlets. Systems can be constructed where there is advantage for everyone. And networked advantage becomes a proxy for the just.

Opinion makes use of might to create custom. And from custom proceeds justice that eventually serves as the basis for law. Underlying all is the great insight from No. 294:

Custom creates the whole of equity, for the simple reason that it is accepted. It is the mystical foundation of its authority; whoever carries it back to first principles destroys it. Nothing is so faulty as those laws which correct faults. He who obeys them because they are just, obeys a justice which is imaginary, and not the essence of law; it is quite self contained, it is law and nothing more.

It is within this context that the power of soft law regulatory systems can be understood, and the key to their successful implementation discerned fashioned.

Ruminations XXII: Business Power, State Power and the Enforced Infantilization of the Individual

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

One of the great markers of modern governance has been the rise of institutions of public and private power, and the evisceration of power in individuals to protect themselves against these institutions. Nowhere is this more evident than in the ways in which great institutional actors--public, private and civil society--have moved to monopolize both public and private power. This monopolization has been bureaucratized through a complex web of laws and regulations that have essentially stripped individuals of power over their own affairs, and their own economic interests, in favor of oversight by business, state and civil society institutional actors. In effect, the early part of this century is witnessing the continued infantilization of the individual. Increasingly, the individuals is deemed incapable of protecting their own interests, or are viewed as too unruly for that purpose, and too dangerous for uncontrolled participation in the regulaiton of large and bureaucratized aggregate public and private actors (in the form of gopvernment, business and civil society organizations). Individuals are the new political infants who must be increasingly controlled and on whose behalf institutions must be empowered to act.

Nowhere is this more evident than in the construction of the the monitoring and enforcement apparatus ostensibly erected to protect investors from the misbehavior of corporate agents. In the United States, this has resulted in a curious usurpation of power to institutionalized public and private actors and the division of power among them at the expense of individual rights to participate in their respective governance. On the one hand, the political institutions (and principally the federal government) has claimed a virtual monopoly of authority to act for and in lieu of shareholders and other investors in protecting shareholder and investor rights. On the other hand, business actors have been increasingly charged with their own self enforcement, through regimes of monioring and reporting on the activities of its agents--to the gvernment. Shareholders essentially become passive, less and less capable in law, of protecting their own interests, and relying on business to report themselves and the state to enforce. See Larry Catá Backer, Surveillance and Control: Privatizing and Nationalizing Corporate Monitoring after Sarbanes-Oxley. Law Review of Michigan State University-Detroit College of Law, (2004); Larry Catá Backer, The Duty to Monitor: Emerging Obligations of Outside Lawyers and Auditors to Detect and Report Corporate Wrongdoing Beyond the Securities Laws. St. John's Law Review, Vol. 77, No. 4, p. 919, 2003.

In the transnational realm, corporate social responsibility regimes, like those of the Organization for Economic Cooperation and Development, have begun to elaborate a regulatory framework in which civil society actors, large non-governmental organizations, play a key role in the monitoring and enforcement of soft law codes of conduct. See, for example, the regulatory regimes under the OECD's Guidelines for Multinational Enterprises (2000). There, increasingly, important non-givernmental actors have been using the enforcement mechanisms to bring actions against multinational corporations before OECD National Contact Point panels. A NCP is "a government office responsible for encouraging observance of the Guidelines in a national context and for ensuring that the Guidelines are well known and understood by the national business community and by other interested parties." (OECD, National Contact Points). In some cases, those decisions are then published by the home government, that may choose to act on the determination in the context of their own municipal law.

A recent article by Jayne Bryant Quinn (Madoff's Investors Face Dim Prospects in Court, The Washington Post, Feb. 22, 2009) nicely illustrates the consequences of these trends.

Investors are suing the feeder funds that channeled their money to Bernard Madoff, accusing the feeders of fraud, negligence or breach of fiduciary duty. On the surface, the cases sound like slam dunks.They're not. Congress and the courts have spent more than a decade writing and affirming laws that protect companies from irate investors. Those laws may turn out to be feeder fund protection acts.

Quinn, supra. The Private Securities Litigation Reform Act of 1995, (a Clinton era milestone) raised significant barriers to private suits seeking recovery for violation of the American (federal) securities laws. The the Sarbanes Oxley Act of 2002 created a regime of reporting and enforcement that imposed surveillance obligations on entities and enforcement power on the instrumentalities of the federal government. Backer, supra. Then the power of investors to sue under state law was significantly curtailed, first by the power of defendant entities to remove cases to the federal courts and then by rules that make it easier for entities to have such investor actions dismissed if disinterested elements of the organization can show commercially sound reasons for that action. And then by rules that transferred power to enforce rules of behavior that affected an investor's interest in their property from the investor to the state. Quinn describes, for example, the situation in New York:

A state law called the Martin Act prevents individuals from filing claims under New York securities laws. Only the attorney general can pursue an action. You can't even pursue a breach-of-fiduciary-duty claim in New York's courts if the breach involves a securities case. It has to go to the federal courts -- a finding affirmed as recently as July 2007.

Quinn, supra. Moreover, in the case of multi-tiered financial instruments structures, other judicial decisions also tend to restrict avenues for private actions. On the one hand, aiders and abettors are not directly liable to investors ("In 1994, the Supreme Court ruled that investors can't sue advisers -- investment banks, lawyers, accountants -- that aid and abet a securities fraud (the case was Central Bank of Denver v. First Interstate Bank of Denver. Quinn, supra.). Abettors have get-out-of-jail-free cards."). On the other hand, to the extent that loss occurs on acvcount of the misbehavior of custodians, liability would be grounded in a failure to monitor effectively a claim that is hard to substantiate, and in some cases can only be made by the federal government. Quinn offers only the ope of private arbitration--an abandoment of the state system of protection for one grounded in private arrangements. And that is telling.

The point, though, isn't that these entities are safe from suit, just that enforcement will not come form individuals, but rather the state. The basis premise--the growing scope of the incapacity of citizens to participate in the enforcement of rules to the extent those rules affect their direct welbeing, is likely to permeate conceptions of lawmaking and te construction of regulatory states and other regulatory communities well into this century. For the individual, the answer might be a greater willingness to wrk through aggregations, whether public, private or economic. Even in the land of the "rugged individual" the era of mass politics and mass activities has arrived.

Ruminations XXI: Empathy

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

With the start of the Obama Administration commences yet another round of the struggle to manage the problem of Israel and Palestine to some sort of conclusion acceptable to the Europeans, Russians, Muslims and Americans. See, Hillary Clinton in the Middle East: All Charm, and Smiles, Withj Just that Faint Hint of Menace, The Economist, March 5, 2009 ("As the emissary of a new president ostensibly still in “listening mode”, Hillary Clinton was politesse personified during her first swing as secretary of state through the Middle East this week."). After over half a century the issue of the legitimacy of a state controlled by Jews is still in doubt. Much is written about the intransigence of the Jews before the logic of this or that plan put before them to which they must, it seems, accede, to win even a grudging acceptance of the possibility of legitimate assertion of sovereign rights over a fixed territory. One might wonder--in the face of this apparently universal decision on the framework for fixing the problem of Israel--why Israel remains unconvinced.

The issue, I suspect, is one of legitimacy--not of Israel by the world community, as is commonly assumed, but rather of the world community by Israel. To understand the nature of this lack of legitimacy in the eyes of Israel offered by generations of well meaning Europeans, Americans, Muslims, and Russians, one needs to acquire a bit of empathy for their long view perspective of their new found global helpmates. How Israel views the world might well be a key to how it judges the legitimacy of any solution proffered. The problem, though, is that the West may not quite understand the filters (of the West's own making) through which Israel might judge especially European and Russian sincerity. And there is no better source for understanding this than one of the great representatives of modern progressive rational Western thought--Voltaire.

It is surprising that there should remain any Jews. . . . The Jews never ad any country to themselves since the time of Vespasian, except some hamlets of Arabia Felix towards the Red Sea. Mahomet was at first obliged to keep terms with them. But he at length destroyed the little dominion which they had established north of Mecca. It is from the time of Mahomet that they have actually ceased to exist as a body of people.

Voltaire, The Philosophy of History, Of the Jews After Saul reprinted in The Works of Voltaire 368, 429 (Roslyn, NY: Walter J. Black, Inc., 1927) (1735) (the work was dedicated ironically enough to Catherine II, Czarina of all the Russias and a great fan). Whether liberal or conservative, religious or progressive, there appears to be a cultural sense of the anachronism that is Jewry (I prefer to use the ancient term for the ancient sentiment) from out of Europe and the Middle East. Sadly, these ideas continue to thrive within certain influential circles in Europe and the dar al-Islam. And, of course, at the forefront of these efforts at exploitation, assimilation or destruction have been the states that now make up the so called Quartet who have taken on the task of manging a solution to the problem of Israel in the Middle East (United Nations, Russian Federaltion, European Union and United States).

Thus the problem. It is not clear, from the perpsective of Israel, that the Quartet represents anything other than a continuation of the old Euro-Islamic efforts at containment, assimilation, exploitaiton and annihilation. And there is little to suggest that, beyond the United States, much has changed in the attitudes of the States now seeking to intervene in the management of the Israeli-Palestinian ethno-religious wars. Where these great nations speak the language of modern management of conflict, the Israelis may hear the voice of Voltaire., or that of the great tradiutional religious leaders whose views on the necessity of a subaltern stratus for Jews as a religious necessity for a people superceded by others, is essential. Where the well meaning speak of even handedness, Israel might hear subterfuge.

Yet this is an age of empathy. While there is much, and well deserved, empathy, for the peoples of that territory that will eventually emerge as Palestine, there remains the usual consternation with the Jews. Only recently publicly abandoning centuries of efforts to exploit or destroy the Jews, it is hardly surprising that the voices of Europe, Russia and the dar al-Islam is viewed with suspicion and little legitimacy. Thus, it is no wonder that what sounds well meaning to the West, has the ring of annihilation in Jerusalem. But the expectation of acceptance of this situation by the Jews

To interpret this perception as mere Holocaust exceptionalism, a common enough stance, is to expect legitimacy constructed out of whole cloth--or the payment of compensation for the latest round of the management fo the Jewish problem. Yet Voltaire is lurking there as well in the efforts that may appear to be a false and presumptuous legitimacy. While somewhat disconcerting when applied in this manner, these ideas are banal and well accepted enough when clothed in the 20th century discourse of post colonialism, not merely deployed in the service of Palestinian identity, but also in the service of Jewish identity within Israel. See, e.g., Ann Laura Stoler, Carnal Knowledge and imperial Power: Race and the Intimate in Colonial Rule (Berkeley: University of California Press, 2002); Boaventura de Sousa Santos Toward a New Legal Common Sense (2nd ed.; London: LexisNexis Butterworths, 2002). Indeed, both Jewish Israel and Palestinian, in their own ways, appear to be the ultimate post colonial subaltern, each within its own sphere and against different sets of actors that might seek to control them. See, e.g., Systematic discrimination faces Palestinian refugees in Lebanon, World Socialist Web Site, May 15, 2008; Lebanon: End Illegal Discrimination Against Palestinians Says Amnesty, IRIN, October 17, 2007.

History in this sense continues to breed perversity. Until the problem of legitimacy is solved, the management of the situation in the Middle East will remain fluid, and mere legalities will provide no basis for solution. But legitimacy is now something substantially more complex--the legitimacy if Israel as a state, the legitimacy of historically and institutionally pathologically Jew hating states that now constitute the European Union and the Russian Federation to serve as honest brokers, the legitimacy of political action grounded solely in fears of Christianity (the Crusades redux) or the re-establishment of a people superseded in accordance with acertain interpretation of divine command, and so on.

Legions of diplomats seek to develop confidence building measures between Israelis and Palestinians. For them this is enough to foster a manegeablke solution to the political problems between them. And perhaps it will be sufficient, for that limited purpose. But the geater problem of legitimacies, in the context of political, religious, cultural and social intervenors may continue to make even that limited solution elusive. Voltaire, it seems, perhaps describes the conundrum best.

Ruminations XX: Liberty, The Will and Act

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

The recent debates in the United States and elsewhere about religious liberty, and the appropriate method for its protection, suggests a number of inversions. And indeed, the great lengths to which states appear to preserve a sphere of liberty of conscience, and constrain liberty of action, especially in theocratic states, reminds me of one of Voltaire's Dialogues (Voltaire, Liberty, A Dialogue Between a Philosopher and His Friend, Philosophic Dialogues, Chapter IV, Works of Voltaire, Vol. VIII, 485-486 (Roslyn, NY: Black's Readers Service, 1927) (Dialogues Philosophiques).

The dialogue touches on the nature of liberty. The argument posited: liberty is grounded on the power to act ("Liberty, then, is nothing but the power of doing what I will" Id., at 485). Yet it is unconnected to any power to will the action ("How! am I not at liberty to will what I will?" Id.). The answer is no. Liberty is essentially the power and freedom to act:

At this rate, my greyhound is as free as I am. He has necessarily a will to run at the sight of a hare, and likewise the power of running, if not lame: so that, in nothing am I superior to my dog. This is leveling me with the beasts. Id., at 485

As to the liberty to will what to will--that does not exist. Their is no liberty to will--for the will is is not free. It is bound by a framework within which it can be formed. The will is a creature of those who have created the reality within which will can be formed. For Voltaire, of course, that framework--the chains that bind the will--are bounded in what he called reason.

Friend: I mean that I have the liberty of willing as I please.
Philosopher: By your leave, there is no sense in that. Do you not perceive, that it is ridiculous to say, I will will. You will necessarily in consequence of the ideas occurring to you. Id., at 486

And he considers the basis for grounding will in the choice of a wife or the act of making a choice in a gambling game. "In your willing to be married, you evidently perceive the determining reason; and in playing at even and odd, you do not perceive it; and yet one there must be." Id.

And thus, the Philosopher ends, "Your will is not free, but your actions are. You are free to act, when you have the power of acting." Id., at 486.

And yet the law is based on the inverse premise. People are accorded a liberty to will, but are absolutely constrained to act. The law of religious tolerance in the United States, for example, is grounded on this inversion. See Reynolds v. U.S., 98 U.S. 145 (1878) (the state may not interfere with belief but may regulate conduct). Yet, if the will is constrained, and the only liberty is that of action, then, the law effects a double bind--suggesting a liberty where none exists and positing a range of constraint in the only sphere in which liberty may be effectively asserted. The Iraqi Constitution provides a similar constraint, protecting a sphere of belief and a limited tolerance fo religious rites ("This Constitution guarantees the Islamic identity of the majority of the Iraqi people and guarantees the full religious rights of all individuals to freedom of religious belief and practice such as Christians, Yazedis, and Mandi Sabeans." Iraqi Constitution Art. 2).

And yet, this inversion may serve the project of law well, when understood as the most visible manifestation of communal power over individual liberty For might it not be logical for a state to seek to control only those aspects of the human experience where an individual may assert some liberty, and protect an individual in the preservation of a will over which there is no control. In this sense, law can be understood principally as a mechanism for constraining, not preserving, liberty.

Ruminations XIX: Monkey Shines

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

It appears that monkeys have joined the Prophet Mohammad among the pantheon of prohibited images in political, social cultural and other discourse. That seems to be the pulse from both the "people who count in society" and "important media" segments of our political culture as a consequence of the publication of a political cartoon depicting police officers shooting a monkey dead "while remarking 'they'll have to find someone else to write the stimulus bill.'" "Racist" U.S: Cartoon Causes Stir, BBC News Online, Feb. 19, 2009.

Irony abounds today. While everyone is chasing the ghouls of racism (and a merry chase it will be, as they tend to be now) all parties seem to have missed an essential point--a key assumption that is more astonishing for our Republic than the effects of the naughty cartoon and its tasteless author: the assumption is that the monkey is a representation of President Obama. But if that is the case then something remarkable has become something considerable less so--the power of the President to legislate.

"The New York Post denied the cartoon chimp represented President Obama. The cartoon "is a clear parody of a current news event, to wit the shooting of a violent chimp in Connecticut. It broadly mocks Washington's efforts to revive the economy," said editor-in-chief Col Allen. "

Id. And, indeed, even at the time of the early first Roosevelt Administration in the 1930s, it might have been possible to say that . . . and mean it. But that sort of assertion, an assertion that ought to be true, no longer is. The cartoon is thus much more a commentary on the apparent permanent shift of effective legislative power from the legislature to the executive.

More plausible now, therefore, is the rejoinder.

That was rejected by Andrew Rojecki, co-author of the book The Black Image in the White Mind."The cops are saying, 'Someone's going to have to write the next stimulus bill.' Well, who wrote the last stimulus bill? It's Obama and the Democratic Party, but really it's associated with one person - and that's Obama," Mr Rojecki told the Chicago Tribune.

Id., and that is sad indeed for those who might lament the evisceration of legislative power and its reduction to its form rather than its affectation as an autonomous power in fact.

Ruminations XVIII: Ideology and Science in the Education of Children

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

For years there has been a large battle over the issue of the value of exposure to television programs for children and minors. The battle has enlisted science and its "neutrality" to serve the interests of all sides. And this science has been used by civil society elements, churches and the state to control the content and focus of children's programming, to lend an air of scientific fact to social proclivities to judge badly parents who allow their children to watch too much or the wrong things, and communal beliefs that children placed in front of the television are less socially useful, stupider or more socially disruptive than the model child. At its extreme, science might even provide a basis for the assertion of a power in the state to deprive parents of their children for neglect by over exposing children to this evil.

But children see everything that comes within their sight. Children hear everything that comes within their range of hearing. The quality of cognitive inputs is determined by social and physical proximity. And so a new science suggests this banal reality. Children see and hear everything. Rethinking T.V. Time for Toddlers, The Early Show, CBS News March 3, 2009 (""Television had no independent effect on their brain development," says the hospital's Dr. Michael Rich. "So it did not help them, but it also did not seem to hurt them, either." ").

So what is the fuss about? It is a battle for control of what children see, hear, touch, taste, and smell. The controversy over the science of childhood learning and the effects of exposure to television is really a fight for battle of the ideological content of the cognitive stimulus that shape a child's understanding of her physical. moral, ethical, social and political world. Everyone wants children to learn about the world--but only in ways that reinforce the worldview of the social group into which the child is born. It is not what they see or hear, but how that is critical.

When science speaks of television and children, judgments about their qualitative effects and consequential need to control, they are speaking to all cognitive inputs. They are providing the vehicle for control, on a seemingly neutral, but ideologically charged, basis, for the passage of control over that content from child, to parent, to church-state-community. Science masks more than it reveals in these endeavors.

Ruminations XVII: The Separation of Ownership and Control in the Public and Private Sectors

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

It has long been a standard criticism of large economic enterprises organized as separate and autonomous legal persons, usually corporations, that their autonomy is at the root of their dysfunction. "When important decision agents do not bear a substantial share of the wealth effects of their decisions, incentive conflicts exist between residual claimants (owners) and decision agents (managers)." (Hay & Summer 2006; Berle & Means 1932; Jenson and Meckling 1976). This separation implies both a necessary bureaucratization and a functional differentiaiton among actors within a large communal enterprise in which increasingly complex decisions might be developed by ever larger groups of agents with decreasingly direct connection with ultimate decision makers. The result is the creation of loosely functioning empires rather than tightlyy organized entitioes.

But this problem of separation and control applies in equal measure to the state. And like the large enterprise from the 1930s, the state has increasingly developed complex systems of effectively autonomous organs for the implementation of directives from more and more remote centers of ultimate control. Even within the most directly responsible organs of control--the executive and legislature--control activities have become largely residual and symbolic. Large and complex directions are generated by staffs of officials incapable of reading through much less understanding its implications and with little chance of great oversight. The spectacle of the passage of the recent stimulus package bill by Congress, a measure over 1000 pages long, by elected officials many of whom neither read nor were capable of understanding its provisions is a case in point. But that is to say nothing more than that they mimic the behavior of the executive of large corporations that come begging for assistance from the state.

The crisis of the corporation, then, is also the crisis of the state. Yet the solution is not simple. Return to the days of simple organization and simple systems is impossible is a world bent on development and the maximization of the welfare of the individual (at least in the aggregate). The crisis of corporation and state, then, is also a crisis of values, and of the conformity of those values to the institutions that have arisen despite them.

References

Berle, A. and G. C. Means (1932). "The modern corporation and private property." New York: Macmillan Publishing Co.

He, Enya He and David W. Sommer (2006) Separation of Ownership From Control: Implications for Board Composition, ARIA Annual Meeting Papers 1-43.

Jensen, M. C. and W. H. Meckling (1976). "Theory of the firm: Managerial behavior, agency costs and ownership structure." Journal of Financial Economics 3(4): 305-360.

Ruminations XVI: Fundamentalisms

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

In the course of the religious wars of the late 20th and early 21st centuries it has become commonplace for the combatants to point to authentic and inauthentic forms of the religions of their adversaries. Thus, for example, there is a distinction made by the non-Muslim West, between extremist fundamentalist Islam and what are described as its legitimate variants. Likewise, Muslims and their friends in the West enjoy distinguishing between Zionism and more acceptable forms of Judaism. Global leaders also make a point of painting as illegitimate forms of Christianity Christian "fundamentalism" as expressed in any of the many variations of Christianity.

But all such expressions are completely illegitimate. It is only for the faith communities themselves to make those determinations, It may indeed be true, from a Muslim perspective, that the religious values of the Muslim Brotherhood and the Iranian Mullahs are legitimate forms of Islam. It may as well be legitimate for the Christian and Jewish faith communities to view particular manifestations of belief and belief-in-action as exceptionally legitimate. But outside the faith community, such judgments are expressions of prejudice, or opportunity.

In the face of this truth, other faith communities (and non-faith communities) must show both respect for the beliefs of others, and an equal measure of respect for their own. That requires both refraining from opining on the theological disputes within other faith communities, and drawing on their own to determine the extent to which the legitimate expressions of others are threatening to their own, or to a global community in which certain values are privileged and others despised. It is never appropriate to suggest that a particular expression of a religion, even an established one, is wrong. It is always right to suggest that such an expression presents a danger to the values and dignity of others.

Ruminations XV: Exposure Draft Chinese Overseas Investments Rules

This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.

Every great power is eventually confronted with the issues of the bureaucratization of its interventions into the affairs of other states. This cannot be helped. This regularization of intervention becomes more complex when combined with the emerging systems of global movements of capital. In that context a state must balance its public policy goals, and the protection of its political interests, against the commercial imperatives of financial investment in a sector in which states and private interests compete more or less equally within the territories of host states. This is particularly important in a global context in which overseas investments, whether by public or private entities has come to be regulated by an increasingly complex web of hard and soft law. But such regulation can generate complexities of its own that affect both the internal and external legal regimes of a state.

The Chinese state apparatus has been wrestling with these issues recently. Its outbound investment is relatively small. "The stock of China’s outward FDI is even more geographically concentrated. According to the annual statistics from the Ministry of Commerce, as of the end of 2005, Asia, Latin America and Africa account for 71%, 20% and 3% of the FDI stock, respectively, and the shares for North American and Europe are each below 3%." (Morck, Yeung & Zhao 2007, 6). However it is growing quickly, and especially into developing states. Unregulated investment has produced a number of embarrassments for the Chinese state in recent years. (Backer, October 30, 2008; Backer December 15, 2006; Backer, November 22, 2006; Backer, November 19, 2006). Still, as of the end of 2007, "nearly 7,000 domestic investment entities had established more than 10,000 overseas enterprises, spreading in 173 countries (regions) globally." (Ministry of Commerce, 2007 Statistical Bulletin of China's Outward Foreign Direct Investment, 57)

As China more aggressively projects its power in foreign states, the political dimensions of economic interventions become more pronounced. (Wei He and Marjorie A. Lyles 2008). The Chinese state, as the ultimate stakeholder in Chinese economic activity might determine that its welfare maximization (as stakeholder) requires regulation that might produce investment decisions different from those that might have produced welfare maximization for other, private, actors. Or, put a different way, that the political principles on which the Chinese state is founded includes that understanding that the foreign economic activities of either private or publicly owned enterprises necessarily have a political dimension that makes outbound private investment different in quality from other sorts of investment. (Backer 2008a, 1833-1863).

As such, "the structural transition in China mandates that any sensible economic analysis of firm strategies will have to take institutional, political and social aspects into consideration. Given the visible hands of the Chinese State and the Party in the economy, any micro-level analysis will not be complete without a macro level background. " (Morck, Yeung & Zhao 2007, 26). Early on as Chinese outward investments grew, the Chinese state implemented a system of surveillance of such activity through Statistical System of Direct Overseas Investment in effect as of January 2003 (Ministry of Commerce Circular Shang He Han [2006] No. 66). Paragraphs 1 and 2 provide:

1. Each entity shall seriously and actively implement the Statistical System of Direct Overseas Investment, attach great importance to the statistical work of the outward foreign direct investment, intensify the publicity of the statistical system, continuously improve the quality of the statistical data and strengthen the timeliness and accuracy of data report.
2.The commerce departments at the provincial level shall communicate with the local foreign exchange departments in an initiative and active manner and establish the information exchange and contact mechanism therewith so as to guarantee that the outward foreign direct investment be more comprehensive and complete.

And so, anticipating a growing projection of economic power abroad, and especially into the developing world, the Chinese government has produced an exposure draft of rules treating its administration of overseas investment. The exposure draft is provided in part below (translated from the Chinese by my research assistant Siyu Zai) to illustrate the point:

Procedures for the Administration of Overseas Investment
(Exposure Draft)
Ministry of Commerce, The People’s Republic of China
境外投资管理办法
（征求意见稿）Original

Chapter 1 Profile
……
Provision 2
The term “overseas investment” referred to in this Procedure means the establishment, acquisition of ownership, holding power or business management power by enterprises registered in China, through the ways of establishment, merger and acquisition and other means.
……
Provision 4
The Ministry of Commerce is responsible for the administration and supervision of the overseas investment. Concerning departments on the provincial level are responsible for the administration and supervision of the overseas investment within their administrative regions.

Chapter 2 Approval
Provision 5
The Ministry of Commerce and concerning provincial departments exercise the authority of approval over enterprises’ overseas investments. The Ministry of Commerce sets up “Overseas Investment Administrative System” to apply electronic application. Enterprises which are approved will be granted Chinese Enterprises Overseas Investment Certificate. …
Provision 6
Enterprises which invest under circumstances listed below ought to submit application according to the Provision 11 under this Procedure, and to apply for approval to the Ministry of Commerce according to the Provision 12 under this Procedure:
i. Investment in a country that does not have diplomatic ties with China;
ii. Investment in a country or region where the level of risk is high;
iii. Investment in which the Chinese parties’ amount of investment is over a hundred million U.S. Dollars;
iv. Investment in the field of cross-border infrastructure construction;
v. Establishment of overseas companies with special objectives

Provision 8
… Enterprises are responsible for their own economic technical feasibility. The Ministry of Commerce and the concerning provincial departments will not approve the investment if it fits into one of the following circumstances:
i. Jeopardize China and the host country’s sovereignty, security and public interest;
ii. Violate either domestic or overseas law and regulation;
iii. May cause China to violate international treaties that China has signed;
iv. Involve the technology and goods that are prohibited from import or export.
Provision 9
…
In respect to the approval of energy and mineral investment provided in Provision 7, the concerning provincial departments should seek opinions from entities of overseas trade; In respect to other investments, the concerning provincial department may seek opinions from entities of overseas trade.

Chapter 4 Overseas Investment Activity
……
Provision 25
Before obtaining approval from the Ministry of Commerce or concerning provincial department, enterprises must not sign any legally binding documents with parties abroad.

Chapter 5 Administration and Service
Provision 26
The Ministry of Commerce is responsible to execute inspection and instruction upon concerning provincial department and the administration of the overseas investment conducted by central enterprises’ headquarters.
Provision 27
The Ministry of Commerce, together with relevant departments, establishes and improve the guidance for overseas investments, promoting and service system, and reinforces public service.
The Ministry of Commerce publishes the Overseas Investment Countries (Regions) Manual to help enterprises be familiar with the investment environment of host countries.
The Ministry of Commerce, together with relevant departments, publishes the Overseas Investment Country and Industry Guide Index to guide enterprises to appropriately tailor their investment to host countries.
The Ministry of Commerce assists enterprises to overcome difficulties and solve problems through the intergovernmental bilateral and multi-lateral trade or the investment cooperation system.
Provision 28
Overseas business organizations provide service for enterprises’ overseas investment, and (these organizations also) assists the Ministry of Commerce and concerning provincial departments with the administration of overseas investment.
Provision 29
The state encourage relevant industry chambers and associations located within China to bring their professional advantages in rendering service for enterprises’ overseas investment, (while also) play a coordinative and self-disciplinary role. Enterprises ought to support the work of industry chambers or associations.
Provision 30
After obtaining the approval of overseas investment, enterprises process relevant procedures in foreign exchange, banks, Customs, or foreign affairs while holding this certificate. These enterprises also enjoy relevant national policy support.
Provision 31
Where enterprises have not completed legal procedure or the domestic procedure listed in the Provision 30 of this Procedure within two years since the day the certificate was issued, the original approval document and the certificate will be lapsed / void automatically. If the enterprises need to further execute overseas investment, they must turn to the original department where the certificate was issued.
Provision 32
The Certificate must not be counterfeited, altered, traded, leased, borrowed or transferred in any other forms. The modified, void, or revoked Certificate ought to be returned to the department issuing the Certificate.

Chapter 6 Sanction
Provision 33
As to enterprises who provide false application materials or who misrepresent themselves in filling the application forms, the Ministry of Commerce and concerning provincial departments (will) dismiss (their application) and (will) not grant acceptance to any overseas investment application from these enterprises within one year; Where enterprises obtain approval of their overseas investment by providing false materials or other illicit means, the Ministry of Commerce and concerning provincial departments may revoke relevant documents.
Provision 34
Enterprises violating this Procedure may not enjoy relevant national policy support.
Provision 35
Concerning provincial departments, which fail to execute approval and to execute supervisory and administrative functions according to this Procedure, may be criticized, reprimanded publicly or suspended approval authority by the Ministry of Commerce.
Provision 36
Relevant personnel at the Ministry of Commerce, who fail to perform duty or who abuse their power, will receive administrative sanction.

The draft reveals both an encouragement and control of overseas investment that is worth careful study. The Chinese state clearly intends to encourage investment overseas but also means to control that character and scope of that investment--giving itself broad powers to intervene in the development of those investment relationships when it determines that intervention in the best interests of the state. While this approach is not possible under Western constructions of the division of public and private power under Western constitutions, it accords with the fundamental conception of the role of the state under the present Chinese constitution. Two provisions are particularly relevant:

Article 11. The non-public sectors of the economy such as the individual and private sectors of the economy, operating within the limits prescribed by law, constitute an important component of the socialist market economy.
The State protects the lawful rights and interests of the non-public sectors of the economy such as the individual and private sectors of the economy. The State encourages, supports and guides the development of the non-public sectors of the economy and, in accordance with law, exercises supervision and control over the non-public sectors of the economy.


Article 17. Collective economic organizations have decision-making power in conducting independent economic activities, on condition that they accept the guidance of the state plan and abide by the relevant laws. Collective economic organizations practise democratic management in accordance with the law, with the entire body of their workers electing or removing their managerial personnel and deciding on major issues concerning operation and management.

The provisions are meant to provide state oversight to the overseas investment of Chinese enterprises in businesses abroad, including the acquisition of equity interests in foreign enterprises. From a number of perspectives this makes sense for the Chinese state: (1) the need to ensure that overseas ventures do not become a means by which Chinese citizens siphon wealth out of the country, (2) the effort to control the allocation of resources among the various parts of a multinational enterprise based in China to ensure that Chinese resources are not transferred out of the country, (3) the need to ensure that Chinese private economic policy is coordinated with Chinese state policy (this is particularly relevant with respect to economic transactions between Chinese enterprises and states with which China has no relations), and (4) make it easier for China to monitor compliance with international obligations by its private enterprises.

However there are a number of areas where the proposed rules might require further review. First, Provision 2 might be over broad. It appears to apply to all registered companies in China. But to the extent that this may reach foreign enterprises which registered interests in China the provision would seem to interfere with the sovereign rights of other states to manage their own enterprises. It is clear that China ought to have the power to manage the operation of (and register) foreign companies with respect to their business in China and with their utilization of Chinese assets and property. But it is quite another thing to seek to control these enterprises' activities outside of China. At a minimum that might appear to violate Chinese principles of non-interference.

Second, Provision 4 might produce ambiguity. At a minimum it might generate conflict between the Ministry of Commerce and Provencal administration. Unless there is a certain discipline in the division of authority, it is possible that contests for control could result and the rule of law weakened. That, of course, would tend to produce a result contrary to the Chinese Constitution ("All state organs, the armed forces, all political parties and public organizations and all enterprises and undertakings must abide by the Constitution and the law. " Constitution, art. 5) and should be avoided to minimize the possibility of arbitrary (and thus lawless) action by officials who may not understand the limits of the law with respect to their power. It might be useful to revise the Provision 4 so that all applications must be made to the Ministry of Commerce, using the system described in Provision 5, but giving the Ministry the power to delegate decisions to provisional officials in its discretion. Alternatively, a division of authority between the Ministry Commerce and provincial offices might be made on a sector basis (for example requiring all outbound investment targeting natural resources to be made at the Ministry and outbound investment for the purpose of establishing a garment factory might be directed to the provinces). Another alternative might be to divide approval authority on the basis of the amount of outbound investment contemplated. Thus, for example, all proposed outbound investment greater than 8,000,000 RMB might be required to be made at the Ministry while smaller investment requires could be processed in the provincial offices. Whatever division is made, all officials should be made aware and the rules distributed among the industrial and commercial sectors.

Provision 6 lists a number of common sense triggers to registration. All of them tend to touch on sensitive matters of Chinese foreign policy. It might be prudent, though, to create exceptions for activities conducted under approved bilateral investment treaties. This is implied in the text of Provision 27, but it may be useful to make the connection more direct. In a sense, though treaties would qualify as a blanket approval for investment to the extent provided in each treaty. Also, because it is not clear what a high level of risk is (a condition that triggers application obligations), it might be useful for the Ministry of Commerce to be obligated to publish a list a countries presumed to entail such risk so that enterprises would be better able to gauge the need to apply and to make it easier to comply with the law.

Provision 8 sensibly limits the obligations of the state with respect to the economic viability of any investment project. The only role of the state is to determine whether the outbound investment interferes with Chinese foreign policy goals. It is not clear, though, whether the reasons for disapproval listed in Provision 8 are the only legitimate bases for rejection of an application or if the Ministry may base its negative decision on other grounds. If the later is the case, that ought to be made clear. Business operates more efficiently if it understands the rules under which it must operate. Secondly, it is not clear that the Ministry is required to report its reasons in writing and to explain its decision. For rule of law purposes and to ensure that business might more efficiently comply with the policy of the state, it might be prudent to require the Ministry to both state the specific reasons for its reject and to make those available for study.

Provision 9 speaks to an aspect of natural resource exploitation. While the provision usefully requires consultation with overseas trade entities by the provincial departments, it might be wise to require all such approvals to obtain a review from officials in the Ministry of Commerce. The international community has become active in the regulation of natural resource exploitation. There is particular sensitivity to such activities in conflict zones. In that respect, the United Nations and other Organs have sometimes declared embargoes or other measures., for example in the Democratic Republic of the Congo (See, e.g., U.N. Resolution 1807, 31 March 2008). Western governments adhering to the Organization for Economic Cooperation and Development Guidelines for Multinational Corporations (2000) have put in place voluntary requirements that mandate direct compliance by their companies with those acts and require those companies to also require their business partners to adhere. (Backer 2009). It is unlikely that provincial administrators would have the necessary information to avoid compliance issues relating to these measures.

Provision 25 is a key measure. It might be useful to include a provision giving the Ministry the authority to void any such agreement make in violation of the provision and also requiring that the company bear the costs of any liability that results from such breach. This would be in addition to the sanctions described in Provision 33 and 34.

Provision 26 is quite useful. But it may aid both the advancement of rule of law principles and the ability of the Ministry of Commerce to effectively oversee the provincial ministries if the instructions to the provincial departments were in writing and publicly available. Likewise, it might make governing the provincial establishments more effective if the Ministry published a list of measures necessary to comply with the requirements of inspection. For this purpose, it would be useful to ensure that the Ministry and the appropriate level Chinese Communist Party personnel coordinate on the principles and inspections.

Provision 27 sets out an important activity of the Ministry of Commerce. To increase the volume of acceptable investment abroad in ways that might better project state and private economic power abroad, it might be useful for the Ministry to begin to publish periodic simple manuals to help guide business in the proper form and direction of activities abroad. In this work, coordination with the measures and practices of the industry chambers and associations described in Provision 29 would also be useful. This is a function in which the Ministry and the organs of the CCP might usefully work together to reach a unified and harmonious program of instruction.

Provision 30 provides a useful statement of the value of the process of enterprise state coordination. It might be useful, though to ensure that once the certificate is obtained, no further regulatory obligations originating in provincial administration is possible. In this regard the effect of national policy support might be usefully more detailed with the object of increasing the value of economic activity abroad to the state. The importance of the Certificate (see Provision 32) makes this an important consideration. In that connection it might also be useful to specify the legal effect of the certificate so that foreign entities with which the Chinese entity deals may rely on the validity of the certificate in engaging in economic activity or transaction with Chinese companies.

Provision 33 sets forth a reasonable penalty. It is not clear, however, whether the penalty applies only to the enterprise that violated the rules, or whether it applies to all related companies (subsidiaries, parent companies, and other companies owned by the same shareholders). It seems that the sanction ought to apply only to the company at fault. Otherwise the concept of corporate personalty and specific limited liability as specified in the Company law (2005) would be weakened.

Provision 34. It might be useful to specify a time limit during which enterprises cease to enjoy relevant national policy support. It seems that in keeping with Provision 31, the period ought to be two years.

Provision 35 provides a fair sanction for provincial authorities. But enterprises ought to be able to determine when a provincial authority has been suspended from its authority or otherwise reprimanded or disciplined. It would be useful for the Ministry of Commerce to publish a summary list of such provincial offices and the length and type of discipline, so that enterprises seeking approval for overseas investment may apply to the proper authorities. Coordination with the appropriate Party officials would also be useful and made more effective if specified in the form of a rule.

The outbound investment control rules provide a reasonable framework for the coordination of economic policy within China. It represents potentially a salutary division of authority between the Ministry of Commerce and provincial bodies. It suggests that at this stage in its development, the state and commercial interests ought to work cooperatively to ensure that they do not work against each other by accident. It also provides a means of helping the state ensure that it is meeting its treaty obligations. Most importantly, perhaps, it provides a method through which officials could ensure that outbound investment is made by people and entities who are well schooled in the rules of behavior and cultures of the places to which investment is directed.

For other states organized along the same principles as China, particularly Viet-Nam, Cuba, and perhaps Nicaragua, Bolivia and Venezuela, this approach to international engagement abroad is worth study as an alternative to the usual rhetoric based and anachronistically Stalinist vision of world trade (sadly still the preferred vision in some of those states) and the relationship of public and private power projected from within such states. The suggestion that fiscal and policy discipline is as important for outbound as it is for inbound investment is a useful step in the management of economic activity across borders in the spirit of global values of free investment that benefits both the home and host state.

References

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