(Pix (c) Larry Catá Backer 2013)
I have been writing about the rise of polycentricity in governance for several years now. (e.g., Larry Catá Backer, "Dynamic Societal Constitutionalism: Transnational corporations’ outward expression of inward self-constitution: The enforcement of human rights by Apple, Inc.", Indiana Journal of Global Legal Studies 20:-- (forthcoming 2013); "Governance Without Government: An Overview and Application of Interactions Between Law-State and Governance-Corporate Systems", in Beyond Territoriality: Transnational Legal Authority in an Age of Globalization 87-123 (Günther Handl, Joachim Zekoll, Peer Zumbansen, editors, Leiden, Netherlands & Boston, MA: Martinus Nijhoff, 2012); "From Institutional Misalignment to Socially Sustainable Governance: The Guiding Principles for the Implementation of the United Nation’s 'Protect, Respect and Remedy' and the Construction of Inter-Systemic Global Governance," McGeorge; "Inter-Systemic Harmonization and its Challenges for the Legal-State", in The Law of the Future and the Future of Law, (Sam Muller, Stavros Zouridis, Laura Kistemaker and Morly Frishman, eds., Torkel Opsahi Academic Editor, 2011); and a number of posts to this blog.
The focus has been on its emergence as a factor in the way individuals and entities must now adjust their behavior in light of multiple simultaneously applied governance rules and expectations. A subsidiary discussion has been focused on the effects of polycentircity on governance coherence, harmonization and dissonance and the cumulative effect of these new governance frameworks on the traditional effectiveness of domestic legal orders to regulate individuals, entities and activities within their borders.
This post includes the transcript of a conversation with Keren Wang, a PhD candidate at Penn State (Communication Arts and Sciences, School of Liberal Arts) about polycentricity as the framework of global governance structures that are emerging. It is meant to provide a more conversational introduction to issues of polycentricity and its relation to what lawyers know (and love) best, the state and the law system attached to it.
The focus has been on its emergence as a factor in the way individuals and entities must now adjust their behavior in light of multiple simultaneously applied governance rules and expectations. A subsidiary discussion has been focused on the effects of polycentircity on governance coherence, harmonization and dissonance and the cumulative effect of these new governance frameworks on the traditional effectiveness of domestic legal orders to regulate individuals, entities and activities within their borders.
This post includes the transcript of a conversation with Keren Wang, a PhD candidate at Penn State (Communication Arts and Sciences, School of Liberal Arts) about polycentricity as the framework of global governance structures that are emerging. It is meant to provide a more conversational introduction to issues of polycentricity and its relation to what lawyers know (and love) best, the state and the law system attached to it.
A conversation About Polycentricity--Keren Wang (KW) and Larry Catá Backer (LCB)
KW
First of all, what is polycentricity in terms of global governance?
LCB
I think the best way to describe polycentricity is “a new phenomenon.” It’s appeared in a variety of different guises over the centuries. Clearly, this notion isn’t new, but it is new. Traditionally, one understood polycentricity as at least a theoretical possibility, but usually, among unequal systems, and let me define it at its most simple: It is the simultaneous application of multiple governing or governance systems to a particular object or transaction. In the old days, the way one avoided polycentricity, and if you think about it, polycentricity is inherently nihilistic and scary, especially when you’re looking at harmonizing a governance order, because if you have more than one system simultaneously applicable to a particular body or a particular transaction, the possibility of creating simultaneous, equally axdpplicable obligations creates a tension and a contradiction that cannot be resolved. In the old days – by that I mean the medieval period, the pre-modern period in Europe—it was very clear that there were constant sets of multiple governance systems that occurred all the time.
KW
So it’s not entirely new.
LCB
No. It is ancient. But for example, in the medieval period, or the modern period, one could understand a variety of different laws and customs that applied simultaneously. The law of the Roman Catholic church before reformation, the law of the monarchs, the law of the duke, the customs of the country, the customs of the peculiar place, and the customs of particular ethnic groups within the place. So, for example, if you were a Moor or you were a Jew in a place, like the Spanish Kingdoms or Muslim Spain, that would be another layer, because each religion would include a set of governance norms over what modern states would consider within their jurisdiction--marriage, wills and the like. There is an echo of this in the tensions in contemporary law states about the accommodation of religious law codes within modern states.
KW
So, feudal decentralization, basically?
LCB
Yes, but it’s medieval decentralization. The feudal period is one aspect of one form of this multiple, very complex mosaic of governance at the time. The way one dealt with it in the old days, was the way which then became very well defined when the state system arose after the 17th century, and that is, you do one of two things. You either create harmony so that all of the rules will say the same thing with respect to a particular object of regulation (and that’s very difficult to do), but you can get to substantially the same thing with the level of tolerance for local deviation. That sometimes happened. What was more likely to happen, especially when you’re dealing with similar kinds of governance, was that you develop hierarchies. The difficulty came when you were dealing with different systems. So what happens when you are dealing with the system of secular law, the law of the state, and then church law, the law of the divine. There were huge conflicts about which took precedent over which and how to harmonize them, so one would spend a lot of time worrying about that. All of this disappears at least for a little while during the great period of state building, when we first decide that religion is now taken out of the matrix explicitly, and then we develop a system grounded in a hierarchy of law that implicitly takes in a bunch of social norms, but is grounded in that it is a formalist, singular, vertically arranged system that clusters around the state as the highest form of political organization, cognizant of its responsibility to protect social norms, including religious norms, but carving out an area that we’ll call law, which is given its own peculiar majesty in the background of political power, and then ordered and organized through the state system, starting from the highest element of state organization apparatus all the way down to the bottom. This reaches its finest flowering in the 1930s. All of this is then redone and reorganized and the world starts changing rapidly after that, although it’s got antecedents before it really starts changing rapidly after 1945, first, by the addition of the supranational between 1945 and the 1980s. We don’t change so much as add to this vertically ordered construct which is limited to this thing called law, which is a privilege over everything else -- which is a very big change from the mosaic of the medieval period – this big, ordered thing around law. We then, after 1945, add the supranational level, which, in a way, doesn’t do a whole lot of harm to the system because all that is is a representation of the community of states creating a set of law through conventional treaty law and international law.
KW
The U.N. Structure?
LCB
Right. That structure assumed its modern form through the construction of the United Nations system in the decades from 1945. What the U.N. structure and the structure of public and international organizations, some of which also had legislative authority as well, added was a verticality to the structures of polycentricity. That represented an effort to transpose notions of strict hierarchy of law developed for the management of complex domestic legal orders into the supra-national sphere. Yet because public and international law were so strictly tied to and derived from the state system, it was also clear that such structures would still be obsessed and grounded in the system of law as a distinctive privilege, as a governance mode superior to everything else. As a consequence even in the international arena, the state was acknowledged as the progenitor of law, however it produces law, and governance other than law was viewed as subordinate to or flowing from or less authoritative than the regulatory products of states. In effect the international system constructed after 1945 was an effort to extend the ideal of the organization of the state to laws that can be created by the community of states for the organization of the body of the community so everything from human rights to the protection of international embassies, all of that. It just added a couple of forks above the existing state structure.
KW
It just added a couple of forks above the existing state structure?
LCB
That’s right.
All of this then goes crazy. It goes upside-down with the unforeseen consequences of one aspect of internationalization, and that is globalization. That is the willingness of the community of states to unmoor, or to dissolve a couple of the key characteristics that protected the integrity of the state system itself. The first is borders, and the second is movement of goods, capital, and investments across borders without permission.
KW
The “softening” of borders.
LCB
Not softening, and I had previously written (
KW
A societal constitutionalism.
LCB
Right. One has been confronted in the age of globalization with a significant consequence of the fracture of state power in the rise of what Gunther Teubner has called societal constitutionalism. This can be understood as the coming together of a group of people bounded by a set of distinct interests that set themselves apart from others, and who then band together, that is they constitute themselves, for the protection of those interests. To that end, they do not merely join together under an agreed upon set of rules, but also institute a government among them for the purpose of further developing those rules and applying them to the community. It is in this sense that the community constitutes itself the way a political community does the same through a political constitution creating a government for their mutual welfare under the overall substantive rules provided in the constitution from which further rules may be created by reference to the constitutional document itself. Like a state as well, societally constituted groups have borders—but the borders have become less tangible and more spatial. No longer merely demarcations in physical space (land border), societally constituted groups are bounded by the interests that join them and that separate them from others. Thus, for example, an MNC can exist in its global operations as a societally constituted group, as may the cyber community and others.
KW
Is that what you call “Lex Mercatoria” ?
LCB
In part. A number of scholars have pointed to the modern transformation of that ancient form of self-constituted governance among merchants, the Lex Mercatoria as an example of modern societal constitutionalism. It is characterized by the consensual union of merchants who have sought to order the relationships among them in their mutual transactions irrespective of the states in which they operate. It is a societally constituted group not merely because they have developed a sort of common law for merchants, but rather because they have sought to institutionalize that law within an apparatus in which the rules themselves are legitimated in and of themselves (the law merchant refers to itself rather than to the law of any state) and form which further law and the interpretation and application thereof may be articulated. Further that societally constituted group achieves autonomy to the extent that it sets up its own apparatus for the enforcement and further elaboration of its own rules applied to its own members. It is in this sense that lex mercatoria would be understood as the construction of something that almost looks like a state in everything but borders, including having a government. Yet it also has borders—it is a community of merchants whose borders are delimited by the activities of merchants that come within its rules, that is that come within the interests that bind the community of merchants together. And its autonomy does not suggest isolation—societally constituted groups, like states within the global system, both interact with and are closely tied to other governance communities with which they come into contact.
KW
So it is a kind of societal constitutionalism.
LCB
Yes. But it’s not just like the construction of a common law for merchants. It can be the construction of something that almost looks like a state in everything but borders, including having a government. So it is the aggregation…
KW
Aggregation?
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LCB
It is in this modern form, not as inchoate groupings, but as institutionally coherent communities of consent-united actors that one can understand the solidity and power of societally constituted groups. Religious institutions are a classic example which, in modern form, have adopted the institutional architecture of government (in some cases) and which exist beside or astride the states in which their members live. Within the economic spheres, these aggregations of actors may take on as simple a form as that of the MNC. Consider Walmart an enterprise which I examined in earlier work. Wal-Mart can have an operation in which it has several thousand suppliers for goods that then transports to dozens of different countries, all of which goes across a variety of states. Wal-Mart must governs its relations with its suppliers, customers, and investors across multiple territorial lines and among states whose own domestic law may be different and to some extent irrelevant to the problems Wal-Mart faces in running its operations and managing its supply and value chains. If it is to create internal coherence in its own global operations it will find the variety of domestic laws an impediment rather than a facilitator of its operations. To overcome that, Wal-Mart would constitute itself, as the sum of its operations, along a single set of operating rules, with it at the center, developing these within its constituencies and enforcing them through agreement with its critical stakeholders. So one day they wake up and they say, “Oh my God, look! We’re a group and we’ve got to figure out how to organize ourselves.” And they doing it in a way that may nod in recognition of the laws of the states in which they operate but which are, in their specific application primarily referencing the policies, needs and goals of the community within which Wal-Mart finds itself at the center, and for which Wal-Mart will depend on the consent of all stakeholders, including investors and consumers, to succeed.
KW
Like the Roman Catholic Church?
LCB
…perhaps as it is coming back, but now in modern form.
This is the aggregation of actors but it can be something as simple as a multinational corporation like Wal-Mart. Wal-Mart can have an operation in which it has seven thousand suppliers for goods that then transports to 40 different countries, all of which goes across a variety of states, how does Wal-Mart govern its relations with its suppliers, customers, and investors if it is dealing with classes of people that are not characterized as different depending on the state, then they have to develop their own set of rules, so one day they wake up and they say, “oh my god, look! We’re a group and we’ve got to figure out how to organize ourselves.”
Banks provide another classic example. In the absence of global rules relating to letters of credit, banks had to figure out how to organize themselves to create a set of uniform practices, rules and norms relating to this financial device that would be embraced by global banks that sought to work with each other. And they did. The result was eventually taken up as international public law and transposed to the domestic legal orders of most states, but it started as a societally constitutive act by a community of consenting actors first. n for the recognition of letters of credit. There are no rules. Everyone’s rules are different, but that’s not going to help you. We’re now moving above the state to try and deal with these issues. First there is this recognition of the “group-ness,” a sense of autonomy, and then construction of rules that are not necessarily tied to any state, and self-referencing because the rules are built on the consent and autonomy of this group that is self-constructed, and derives from the consent and the continued use of the rules by people who want to stay in the group. Suddenly, there are a bunch of rules coming into effect, done by private people through markets, by groups, and then by state organizations as well, and hybrid groups-- everything from the standardization of products to the standardization of safety standards to the way in which business is conducted across borders.
The problem with all of this is that from the perspective of the state, none of this self-constituting is of any legitimacy. This is especially the case when viewed from the structural premises that support the state system, in which states are given primary place as the principal legitimate organization for the assertion of power, territory is privileged as the most important organizing principle of governance communities and law is understood as the most significant and legitimate expression of binding popular will among consenting stakeholders. Having constructed this edifice which law is the primary and privileged product of governance when you see everything else being built by contract, by agreement, by custom and practice, which is enforced among groups freely, but without a state or territory, states have tended to view these societally constituted groupings as subordinate and their governance structures as something “less”, that is, as is as “not law.”
KW
Not law?
LCB
That is not part of the governance system of states. The problem is that sort of analysis is no longer relevant, because the rules that they are referencing are rules that they cannot substitute law for. There is no substitute of law by any one state for the organizing priniciples of a multinational global supply chain, because it would require every country within that supply chain to regulate in a consistent way through the creation of some kind of convention, which is just not going to happen. Now, all of a sudden, you have apples and oranges and you have the possibility of polycentricity. So when Wal-Mart operates in China, or when Wal-Mart operates through a Chinese manufacturer of t-shirts in Guangzhou, all sorts of laws and rules apply vertically and horizontally. The laws of the U.S. can apply, and can apply extraterritorially, with respect to, for example, bribery. The laws of China apply to the manufacturer of the t-shirts operating in Guangzhou. The international norms for markets may apply, Wal-Mart’s own supplier code of conduct may apply, and for that purpose it may create its own normative standards, or it may apply the guidance of international organizations that have written everything from the guiding principles of business and human rights to the ISO corporate social responsibility standards, to the GRI reporting standards. The question, then, becomes, what happens when something happens at a plant. One of the best examples of this is when, in the case of Apple and FoxConn, when FoxConn – which is also another multinational corporation with its own supply chain code of conduct -- when its employees in Shenzhen start throwing themselves off of buildings. What law applies? Chinese law applies, but it’s irrelevant, because FoxConn is complying with all the laws of China. Since FoxConn is not throwing its employees off the buildings and is complying with the law with respect to pay and everything else, then Chinese law doesn’t apply. American law doesn’t apply directly to FoxConn because FoxConn is operating in Shenzhen. It may apply to Wal-Mart in shaping its relationship with FoxConn, but no laws have been violated because the American law may say “if the workers are in a particular locality, then you must abide by the law, and that’s it.” Wal-Mart’s regulation of the expectations of the corporate social responsibility of its downstream suppliers may apply through regulatory contracts which are, for example, the supply chain code, or things that govern the relationship between FoxConn and Apple, and they have the effect of law. They’re governance, as between them. Those may apply with respect to standards that Apple may create, and at the same time, international norms may apply, like the international bill of rights, and because Apple is part of the United States and the United States is an OECD country, then the soft rules and the guiding principles of the OECD apply as well. So, you have any number of laws that may apply, but they may have no effect, and they may apply simultaneously. That is polycentricity here.
What happens to the family of the worker who jumped off the building? On the one hand, they may sue in Chinese courts, or they may complain to Chinese administrative officials because they’ll say even though FoxConn appears to have followed the law, they didn’t. They may sue in American courts saying that somehow Wal-Mart had the obligation because of the nature of its relationship with FoxConn to insure that FoxConn followed Chinese law, or because FoxConn was dominated by Apple for this predaction(?) that maybe American law ought to apply, and they can maybe sue in American court. So this is “maybe Chinese law, maybe American law.” The person may also argue that FoxConn breached its agreement with Wal-Mart, and as a third-party beneficiary of the agreement, they are liable for breaching the code of supplier responsibility. That touches on the law between Wal-Mart and FoxConn. Or, they may say that FoxConn and/or Apple may have breached their international norm, or duty under the guiding principles of business and human rights, or under the guidelines for multinational enterprises for which there is a remedy which is filing of a complaint with the national contact point.
Now, what happens, and you’ve been looking at the case in India, what happens when these rules are inconsistent?
KW
That lends itself to the question, “Given the polycentricity, how would social actors navigate and utilize these polycentric norm structures?”
LCB
I would use it in the way I’ve been arguing, which is that you have to be able to use them all simultaneously to push each of these governance units in a direction you want. I would suggest a more functional response, one that embraces the reality of the limitations of state power beyond the borders of states with respect to activity that crosses borders. That approach suggests harmonization is possible only as a consequence of the prolonged interactions of overlapping regulatory systems which may, over time, and by changes in social norms and stakeholder expectations, move toward harmony or produce significant barriers to interactions among communities of stakeholders with fundamentally incompatible rule systems. To that end, I would argue that the inherent nature of polycentricity embraces the absence of ordering principle, though not the absence of order. Order without hierarchy in a more complicated governance space in which states serve as one actor, and an important one, among many and not all of the same sort. One ought to be able to invoke all relevant rule systems simultaneously to push each of these governance units in a direction you want.
KW
Are there examples?
LCB
. . . . . The best cases, of course, are the Unilever cases in India and Pakistan where, and this is a case in which Indian workers thought that Unilever’s subsidiaries or downstream supply chain partners were violating either Indian or Pakistani law in the way in which they fired employees in their plants and then hired part-time or contract workers. They sought to sue under both Indian and Pakistani law, but then they also filed a complaint, not for violation of Indian and Pakistani law, but for violation of the guidelines for multinational enterprises, OECD, against Unilever in Europe. By doing that, they asserted enough pressure on Unilever for Unilever to settle. The reason there’s pressure is, here you go back and say, “why does this make any difference?” if we still live in a world in which officially, law is privilege and everything else is not, then why should Unilever care about the filing of an OECD complaint where there’s no remedy? The problem is that because polycentric governance falls completely outside of the state, the remedies are different as well. When you’re dealing with a system, for example, grounded in supply chain governance in regulatory contracts, or when you’re dealing with the guiding principles and the like, the enforcement will generally be non-state. The enforcement will come from the reaction of the key stakeholders of the participants in this regulatory system to the conduct that is being complained of. In this case, as in the Vedanta(?) case, Unilever had to worry about the reaction of customers, banks, and the investment community to a report that it has violated “soft-law principles,’ even though they can say that there is no legal liability to the extent that it paints them in a bad light under international soft-law norms. That is, if they violated the provisions of this non-state governance rules, then customers and investors could vote, react, and punish them by no longer buying from them by increasing the cost of capital or by selling their investment. That is one of the reasons that sovereign wealth funds’ use of their investment universe and their active shareholding becomes so important. So it’s a strange world, but it’s a world that is still rapidly developing. We’re not sure what the contours are yet, but it’s become very clear that with the porousness or opening up of the state, we’re coming back to a world that looks more like the medieval world where you have a mosaic of rules, some more extensive, some easier to enforce than others, some directly more enforceable than others, but a world in which you have multiple sources that act on a person and now strategically the ability to see them and play these rule systems against each other can become a very useful weapon.
KW
It appears to me that polycentric systems, as a whole, is not merely a passive system like the legal system in that a case arises and then it gets resolved through those kind of structures. It seems like this polycentric system in itself is somewhat like an organism or apparatus in that it works even if each individual actor does not have the capacity or a vision of how the larger system works.
LCB
Yes, but don’t speak of this in the singular. It is in the plural. It is an infinite number of systems. This is very active in ferocity and this systemicity tends to fracture all kinds of ways. A lot of these are not permanent. People can be unconscious about what they are doing, but as long as they feel the effects and participate, a lot of them are quite conscious. It’s not just globalization giving rise to a set of formally constituted societal constitutions, there is that, but it can go down to very short lived but very intensely coercive rule systems as well. We just don’t know. But we do know that in the aggregate, we can begin to sense its character, but it is still very fluid, and we haven’t yet reached a new equilibrium point.
KW
The fluidity is the interesting aspect. For example, the Dongriakondah people. They’re a very small group who speaks a very obscure language, but somehow it’s as if the civil society element of this is just able to sniff them out, and their narrative, their struggle, is articulated into the various norm structures, but after it’s been sent off, it takes on a very unpredictable turn but yet turns back into the international discipline of the…
LCB
Yes, but depending on your perspective, the analysis changes. So if you’re looking at the people who are worshipping the mountain, you’re absolutely right. If I instead start from the perspective of Vedanta, then the perspective is very different, because then you’ve got the object of polycentricity, which is a global player crossing borders and taking advantage of that who is now bound up in massive, multiple governance systems as it seeks to act on a bunch of people who are part of the mosaic who are much smaller, and whose reach may be much different. Depending on how you are looking at this, and this is one of the interesting things about looking at polycentricity, is that the perspective will matter to the analysis. You’re no longer looking at a group of equal states who are functioning with each other, and then the analysis is more simple. The analysis is made more complicated by issues of spatiality. All of these systems do not occupy the same amount of space, governance space. They do not share identical characteristics and construction, and so the analysis becomes far more complicated within a system in which you are looking at 100 or 200, how many states there are, 220 apples. Some may be bigger, some may be smaller, but they’re all apples. Now you’re looking at a world where you have figs and apples and oranges and snails, and yet they’re all working on something, each other, or working on something where they all affect each other, so the analysis becomes much, more complicated.
KW
And the rule structures themselves, they self-reference themselves and reference each other.
LCB
In what Niklas Luhmann would call “structural coupling.” It’s the way in which self-reference and autonomous organisms, governance organisms that communicate to others. They do so constantly.
KW
Then I would suspect that this struggle, this problem, whether it’s the FoxConn factory or this Indian village’s tribe getting their mountain mined, it exits, then is being articulated and re-articulated through various structures. These kind of cross-articulation processes and transactions themselves in some ways each mirror the knowledge management spiral。
LCB
Right, and they’re very different. The indigenous people, all they are thinking about is worshipping their mountain. For the civil society group, they’re thinking about the articulation and harmonization of norms respecting indigenous groups gently. For Vedanta, we are looking at the issue of global commerce in the extractive industry, with repercussions that are very different for the state of India. We’re looking at the political tinderbox of dealing with hundreds of minority groups that are keeping the state together. Each of their perspectives, each of their dialogues, each of the parts of the mosaic of multiple governance, is going to be very different from each of the players who come together--
KW
Spiral clusters.
LCB
That’s it. It’s 3-dimensional spiral clustering.
KW
That, I think, is a very good re-articulation of problems, but in their own language, and it can be shared and then reconfigured.
LCB
But when they’re shared, they change their character depending on who they’re sharing because the mosaic doesn’t include “like.” It includes all kinds of different things, and that is why the analysis becomes complicated. You have to do a multi-perspective, 3-dimensional analysis and actually get all of it together.
KW
Because of its sheer complexity, it’s as if until some ascertainable results emerge from these seemingly chaotic clustered interaction… which , really, that’s exactly how the rhizome works. It’s impossible to know. You might be able to predict it, perhaps, but it’s impossible to know what will end up emerging.
LCB
With any specificity, no, but in general sense, yes. You know it’s going to be something that’s going to shoot up. You know it’s going to shoot up from a rhizome, and you know it’s got to have some connection with the soil. At a very general level, you know exactly what is going to happen. The specifics, you don’t know.
KW
Lastly, it seems like this kind of community, how it functions, is through effectively making other communities adhere to sets of mechanistic, strict rules, but like Wikipedia have this organic articulation within a civil society structure.
LCB
But a civil society structure whose only structural limits and constraints are also fluid.
KW
So instead of having violent revolutions, a society becomes its own salvation. It saves itself from itself through that self-referencing process. It’s not a circle, but a spiral.
LCB
Right. By fracturing it effectively, that provides a way of avoiding the fatality of unmovable contradiction.
KW
Which makes this new social movement in the sense that it’s becoming more targeted at problem-solving rather than a Marxist, systematic overthrow of superstructure, because the superstructure is no longer a superstructure, but an ecosystem of…
LCB
It is an ecosystem, so while Marx may have something to say about the way it works, the old notions, in order to understand this better, one has to understand the limits of the 19th and 20th century Marxist literature has itself contextualized within the state system which no longer functions. So in order to scientifically develop Marxism within a globalized world, one has to take its insights out of the state system, which is always been a problem, and then recontextualize it within this mosaic of globalization.
KW
Like the Roman Catholic Church?
LCB
…perhaps as it is coming back, but now in modern form.
This is the aggregation of actors but it can be something as simple as a multinational corporation like Wal-Mart. Wal-Mart can have an operation in which it has seven thousand suppliers for goods that then transports to 40 different countries, all of which goes across a variety of states, how does Wal-Mart govern its relations with its suppliers, customers, and investors if it is dealing with classes of people that are not characterized as different depending on the state, then they have to develop their own set of rules, so one day they wake up and they say, “oh my god, look! We’re a group and we’ve got to figure out how to organize ourselves.”
Banks provide another classic example. In the absence of global rules relating to letters of credit, banks had to figure out how to organize themselves to create a set of uniform practices, rules and norms relating to this financial device that would be embraced by global banks that sought to work with each other. And they did. The result was eventually taken up as international public law and transposed to the domestic legal orders of most states, but it started as a societally constitutive act by a community of consenting actors first. n for the recognition of letters of credit. There are no rules. Everyone’s rules are different, but that’s not going to help you. We’re now moving above the state to try and deal with these issues. First there is this recognition of the “group-ness,” a sense of autonomy, and then construction of rules that are not necessarily tied to any state, and self-referencing because the rules are built on the consent and autonomy of this group that is self-constructed, and derives from the consent and the continued use of the rules by people who want to stay in the group. Suddenly, there are a bunch of rules coming into effect, done by private people through markets, by groups, and then by state organizations as well, and hybrid groups-- everything from the standardization of products to the standardization of safety standards to the way in which business is conducted across borders.
The problem with all of this is that from the perspective of the state, none of this self-constituting is of any legitimacy. This is especially the case when viewed from the structural premises that support the state system, in which states are given primary place as the principal legitimate organization for the assertion of power, territory is privileged as the most important organizing principle of governance communities and law is understood as the most significant and legitimate expression of binding popular will among consenting stakeholders. Having constructed this edifice which law is the primary and privileged product of governance when you see everything else being built by contract, by agreement, by custom and practice, which is enforced among groups freely, but without a state or territory, states have tended to view these societally constituted groupings as subordinate and their governance structures as something “less”, that is, as is as “not law.”
KW
Not law?
LCB
That is not part of the governance system of states. The problem is that sort of analysis is no longer relevant, because the rules that they are referencing are rules that they cannot substitute law for. There is no substitute of law by any one state for the organizing priniciples of a multinational global supply chain, because it would require every country within that supply chain to regulate in a consistent way through the creation of some kind of convention, which is just not going to happen. Now, all of a sudden, you have apples and oranges and you have the possibility of polycentricity. So when Wal-Mart operates in China, or when Wal-Mart operates through a Chinese manufacturer of t-shirts in Guangzhou, all sorts of laws and rules apply vertically and horizontally. The laws of the U.S. can apply, and can apply extraterritorially, with respect to, for example, bribery. The laws of China apply to the manufacturer of the t-shirts operating in Guangzhou. The international norms for markets may apply, Wal-Mart’s own supplier code of conduct may apply, and for that purpose it may create its own normative standards, or it may apply the guidance of international organizations that have written everything from the guiding principles of business and human rights to the ISO corporate social responsibility standards, to the GRI reporting standards. The question, then, becomes, what happens when something happens at a plant. One of the best examples of this is when, in the case of Apple and FoxConn, when FoxConn – which is also another multinational corporation with its own supply chain code of conduct -- when its employees in Shenzhen start throwing themselves off of buildings. What law applies? Chinese law applies, but it’s irrelevant, because FoxConn is complying with all the laws of China. Since FoxConn is not throwing its employees off the buildings and is complying with the law with respect to pay and everything else, then Chinese law doesn’t apply. American law doesn’t apply directly to FoxConn because FoxConn is operating in Shenzhen. It may apply to Wal-Mart in shaping its relationship with FoxConn, but no laws have been violated because the American law may say “if the workers are in a particular locality, then you must abide by the law, and that’s it.” Wal-Mart’s regulation of the expectations of the corporate social responsibility of its downstream suppliers may apply through regulatory contracts which are, for example, the supply chain code, or things that govern the relationship between FoxConn and Apple, and they have the effect of law. They’re governance, as between them. Those may apply with respect to standards that Apple may create, and at the same time, international norms may apply, like the international bill of rights, and because Apple is part of the United States and the United States is an OECD country, then the soft rules and the guiding principles of the OECD apply as well. So, you have any number of laws that may apply, but they may have no effect, and they may apply simultaneously. That is polycentricity here.
What happens to the family of the worker who jumped off the building? On the one hand, they may sue in Chinese courts, or they may complain to Chinese administrative officials because they’ll say even though FoxConn appears to have followed the law, they didn’t. They may sue in American courts saying that somehow Wal-Mart had the obligation because of the nature of its relationship with FoxConn to insure that FoxConn followed Chinese law, or because FoxConn was dominated by Apple for this predaction(?) that maybe American law ought to apply, and they can maybe sue in American court. So this is “maybe Chinese law, maybe American law.” The person may also argue that FoxConn breached its agreement with Wal-Mart, and as a third-party beneficiary of the agreement, they are liable for breaching the code of supplier responsibility. That touches on the law between Wal-Mart and FoxConn. Or, they may say that FoxConn and/or Apple may have breached their international norm, or duty under the guiding principles of business and human rights, or under the guidelines for multinational enterprises for which there is a remedy which is filing of a complaint with the national contact point.
Now, what happens, and you’ve been looking at the case in India, what happens when these rules are inconsistent?
KW
That lends itself to the question, “Given the polycentricity, how would social actors navigate and utilize these polycentric norm structures?”
LCB
I would use it in the way I’ve been arguing, which is that you have to be able to use them all simultaneously to push each of these governance units in a direction you want. I would suggest a more functional response, one that embraces the reality of the limitations of state power beyond the borders of states with respect to activity that crosses borders. That approach suggests harmonization is possible only as a consequence of the prolonged interactions of overlapping regulatory systems which may, over time, and by changes in social norms and stakeholder expectations, move toward harmony or produce significant barriers to interactions among communities of stakeholders with fundamentally incompatible rule systems. To that end, I would argue that the inherent nature of polycentricity embraces the absence of ordering principle, though not the absence of order. Order without hierarchy in a more complicated governance space in which states serve as one actor, and an important one, among many and not all of the same sort. One ought to be able to invoke all relevant rule systems simultaneously to push each of these governance units in a direction you want.
KW
Are there examples?
LCB
. . . . . The best cases, of course, are the Unilever cases in India and Pakistan where, and this is a case in which Indian workers thought that Unilever’s subsidiaries or downstream supply chain partners were violating either Indian or Pakistani law in the way in which they fired employees in their plants and then hired part-time or contract workers. They sought to sue under both Indian and Pakistani law, but then they also filed a complaint, not for violation of Indian and Pakistani law, but for violation of the guidelines for multinational enterprises, OECD, against Unilever in Europe. By doing that, they asserted enough pressure on Unilever for Unilever to settle. The reason there’s pressure is, here you go back and say, “why does this make any difference?” if we still live in a world in which officially, law is privilege and everything else is not, then why should Unilever care about the filing of an OECD complaint where there’s no remedy? The problem is that because polycentric governance falls completely outside of the state, the remedies are different as well. When you’re dealing with a system, for example, grounded in supply chain governance in regulatory contracts, or when you’re dealing with the guiding principles and the like, the enforcement will generally be non-state. The enforcement will come from the reaction of the key stakeholders of the participants in this regulatory system to the conduct that is being complained of. In this case, as in the Vedanta(?) case, Unilever had to worry about the reaction of customers, banks, and the investment community to a report that it has violated “soft-law principles,’ even though they can say that there is no legal liability to the extent that it paints them in a bad light under international soft-law norms. That is, if they violated the provisions of this non-state governance rules, then customers and investors could vote, react, and punish them by no longer buying from them by increasing the cost of capital or by selling their investment. That is one of the reasons that sovereign wealth funds’ use of their investment universe and their active shareholding becomes so important. So it’s a strange world, but it’s a world that is still rapidly developing. We’re not sure what the contours are yet, but it’s become very clear that with the porousness or opening up of the state, we’re coming back to a world that looks more like the medieval world where you have a mosaic of rules, some more extensive, some easier to enforce than others, some directly more enforceable than others, but a world in which you have multiple sources that act on a person and now strategically the ability to see them and play these rule systems against each other can become a very useful weapon.
KW
It appears to me that polycentric systems, as a whole, is not merely a passive system like the legal system in that a case arises and then it gets resolved through those kind of structures. It seems like this polycentric system in itself is somewhat like an organism or apparatus in that it works even if each individual actor does not have the capacity or a vision of how the larger system works.
LCB
Yes, but don’t speak of this in the singular. It is in the plural. It is an infinite number of systems. This is very active in ferocity and this systemicity tends to fracture all kinds of ways. A lot of these are not permanent. People can be unconscious about what they are doing, but as long as they feel the effects and participate, a lot of them are quite conscious. It’s not just globalization giving rise to a set of formally constituted societal constitutions, there is that, but it can go down to very short lived but very intensely coercive rule systems as well. We just don’t know. But we do know that in the aggregate, we can begin to sense its character, but it is still very fluid, and we haven’t yet reached a new equilibrium point.
KW
The fluidity is the interesting aspect. For example, the Dongriakondah people. They’re a very small group who speaks a very obscure language, but somehow it’s as if the civil society element of this is just able to sniff them out, and their narrative, their struggle, is articulated into the various norm structures, but after it’s been sent off, it takes on a very unpredictable turn but yet turns back into the international discipline of the…
LCB
Yes, but depending on your perspective, the analysis changes. So if you’re looking at the people who are worshipping the mountain, you’re absolutely right. If I instead start from the perspective of Vedanta, then the perspective is very different, because then you’ve got the object of polycentricity, which is a global player crossing borders and taking advantage of that who is now bound up in massive, multiple governance systems as it seeks to act on a bunch of people who are part of the mosaic who are much smaller, and whose reach may be much different. Depending on how you are looking at this, and this is one of the interesting things about looking at polycentricity, is that the perspective will matter to the analysis. You’re no longer looking at a group of equal states who are functioning with each other, and then the analysis is more simple. The analysis is made more complicated by issues of spatiality. All of these systems do not occupy the same amount of space, governance space. They do not share identical characteristics and construction, and so the analysis becomes far more complicated within a system in which you are looking at 100 or 200, how many states there are, 220 apples. Some may be bigger, some may be smaller, but they’re all apples. Now you’re looking at a world where you have figs and apples and oranges and snails, and yet they’re all working on something, each other, or working on something where they all affect each other, so the analysis becomes much, more complicated.
KW
And the rule structures themselves, they self-reference themselves and reference each other.
LCB
In what Niklas Luhmann would call “structural coupling.” It’s the way in which self-reference and autonomous organisms, governance organisms that communicate to others. They do so constantly.
KW
Then I would suspect that this struggle, this problem, whether it’s the FoxConn factory or this Indian village’s tribe getting their mountain mined, it exits, then is being articulated and re-articulated through various structures. These kind of cross-articulation processes and transactions themselves in some ways each mirror the knowledge management spiral。
LCB
Right, and they’re very different. The indigenous people, all they are thinking about is worshipping their mountain. For the civil society group, they’re thinking about the articulation and harmonization of norms respecting indigenous groups gently. For Vedanta, we are looking at the issue of global commerce in the extractive industry, with repercussions that are very different for the state of India. We’re looking at the political tinderbox of dealing with hundreds of minority groups that are keeping the state together. Each of their perspectives, each of their dialogues, each of the parts of the mosaic of multiple governance, is going to be very different from each of the players who come together--
KW
Spiral clusters.
LCB
That’s it. It’s 3-dimensional spiral clustering.
KW
That, I think, is a very good re-articulation of problems, but in their own language, and it can be shared and then reconfigured.
LCB
But when they’re shared, they change their character depending on who they’re sharing because the mosaic doesn’t include “like.” It includes all kinds of different things, and that is why the analysis becomes complicated. You have to do a multi-perspective, 3-dimensional analysis and actually get all of it together.
KW
Because of its sheer complexity, it’s as if until some ascertainable results emerge from these seemingly chaotic clustered interaction… which , really, that’s exactly how the rhizome works. It’s impossible to know. You might be able to predict it, perhaps, but it’s impossible to know what will end up emerging.
LCB
With any specificity, no, but in general sense, yes. You know it’s going to be something that’s going to shoot up. You know it’s going to shoot up from a rhizome, and you know it’s got to have some connection with the soil. At a very general level, you know exactly what is going to happen. The specifics, you don’t know.
KW
Lastly, it seems like this kind of community, how it functions, is through effectively making other communities adhere to sets of mechanistic, strict rules, but like Wikipedia have this organic articulation within a civil society structure.
LCB
But a civil society structure whose only structural limits and constraints are also fluid.
KW
So instead of having violent revolutions, a society becomes its own salvation. It saves itself from itself through that self-referencing process. It’s not a circle, but a spiral.
LCB
Right. By fracturing it effectively, that provides a way of avoiding the fatality of unmovable contradiction.
KW
Which makes this new social movement in the sense that it’s becoming more targeted at problem-solving rather than a Marxist, systematic overthrow of superstructure, because the superstructure is no longer a superstructure, but an ecosystem of…
LCB
It is an ecosystem, so while Marx may have something to say about the way it works, the old notions, in order to understand this better, one has to understand the limits of the 19th and 20th century Marxist literature has itself contextualized within the state system which no longer functions. So in order to scientifically develop Marxism within a globalized world, one has to take its insights out of the state system, which is always been a problem, and then recontextualize it within this mosaic of globalization.
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