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Professor Flora Sapio

A Question From Douglas Elmauer

This post has been written in response to a question Douglas Elmauer (Escola de Direito de São Paulo, Brazil) asked following the Rountable on The Implications of the 19th Communist Party Congress.

To what extent does Chinese openness to the global capitalist market help in the process of democratization and in strengthening the “rule of law” that provides legal security for foreign investors and companies? Perhaps the progressive economic opening may one day irritate politics to the point of a constitutional rupture in the future.

Dear Douglas,

thanks for this very thought-provoking question. A conventional response would rely on either of three contrasting approaches to the free market as an agent of democratization:

A first approach would confirm this nexus, and then proceed to look for the most appropriate locus of irritation in China’s political system, in the hope a constitutional rupture may lead to democratization and to stronger guarantees for multinational corporations.

A second approach would invoke the existence of regional variants of democracy, and of the rule of law. Under this approach, the question of democratization is simply not relevant to China: given the country already practices its own variant of democracy, multinational corporations already enjoy a significant level of legal security.

A third approach would solve the conundrum by denying the existence of a causal relationship among the mechanisms used to coordinate the production, distribution, and consumption of commodities (economic planning, markets hovewer qualified), the mechanisms used to coordinate the lives and behaviors of all those who live within the same national state, and the guarantees provided to multinational corporations.

Arguments have be constructed, and relevant data and analyses – qualitative and quantitative – have been produced in support of either approach. So there is an element of truth to each one of these approaches. At the same time, I feel a conventional response to your question cannot be given.

Irritants are what drives the development of political systems. The lack of legal security for multinational corporations and investors on the Chinese markets has been perhaps the most powerful of these irritants, and its effects are becoming visible at the moment of writing.

A fundamental shift is taking place in Chinese governance. A more stable and predictable risk environment for multinational corporations, as well as small and medium sized enteprises is being created by monitoring the behavior of all market players and assessing their compliance with:

– domestic and transnational legal norms;

– quality and safety standards (among others);

– their contractual obligations.

Multinational enterprises – but also SMEs – are governance units: they are autonomous actors, making their decisions based on their own goals, priorities, and values. Within themselves, enterprises adopt various governance systems. The creation of a stable and predictable risk environment, by a state, must acknowledge the importance of each one of these governance systems. A mere reliance on the state law, and a neglect of the function standards, certifications, and contracts play in corporate governance, and on the transnational and domestic market could create uncertainties for enterprises.

This process calls for opening up governance to participation by more diverse actors. I am of the opinion that such a democratization is being achieved by allowing citizens, consumers, professional associations, administrative organs, and enterprises to monitor the behavior of all market players, and assess the extent of their compliance with legal, and contractual obligations.

This mechanism may be bringing China’s market closer to the ideal construct of a Smithian free market. On this market, the state is voluntarily limiting its role to providing the mechanisms and the ‘venues’ where compliance is monitored, and assessed, and to making these mechanisms known to everyone.

Enterprises are then free to compete both on the transnational and domestic market – their survival depending on their profitability, but also on their ability to understand evolving compliance regimes, and adapt to them.

A Question From Professor Donald Clarke of George Washington University

In this post, I answer a question I received from  Donald Clarke (George Washington University) on a translation of a Chinese article I published on the website of the Coalition for Peace and Ethics research project on Social Credit in China.

For the convenience of my two readers, I am posting Professor Clarke’s question below.

Flora, you haven’t included a link to the paper that explains your view that official policy interpretations should prevail over any others. Not sure what you mean by “prevail.” If you mean, “should be considered more truthful as an account of the real reasons behind a policy,” I don’t see why we should automatically believe everything a government says. For example, Trump just announced a policy of barring transgender people from the military. His official explanation: it hurts military readiness. But an administration official revealed a more plausible reason: it will force the Democrats to oppose the policy in the next election, thus helping him with cultural conservatives. Why should we always believe the official explanation, no matter how dubious? We know that governments lie all the time.

Dear Don,

there is really no need to bother reading that 20-pages article, here’s an explanation of what I meant in the introductory note to my translation.

What do I mean when I use the word ‘prevail’?  I will try to explain what I mean by an example. But, I will have to talk about Cuba.

I know of many Italian academics, intellectuals,  and professionals, who somehow ended up believing the Chinese government always lies, so they never took Chinese policy and/or legal documents at face value. I have seen them miss innumerable opportunities for intellectual, personal, and professional growth, and there are so many stories I could tell but…hey! The Damoclean sword of a potential defamation lawsuit hangs on my head…so let’s talk about Cuba instead.
The Cuban government recently enacted a “Conceptualization of the Cuban socio-economic socialist development model” (Conceptualización del modelo económico y social Cubano de desarrollo socialista), [see here]. This document states the Cuban government’s intention to gradually move towards a form of market economy.

Based on the content of this document, and on commonsense (please see the picture above) I think that, when it states it intention to allow for a greater role of a form of market economy, the Cuban government makes a plausible statement. Therefore, if a Cuban commentator publishes an article on the official organ of the PCC, in which he says the Cuban government wants to promote economic growth, the words of that individual commentator are plausible too.

The “Conceptualization” means what the Cuban government says it means. Likewise, an individual commentator’s words mean what the commentator says they mean. I might have my own individual opinion about the respective effectiveness of various mechanisms of economic coordination. However, I believe that my individual opinion should not color the way in which I explain the significance of those documents to my students and to my readers. I hope this answers your question.

Professor Sapio is the holder of a research position at the University “Orientale” in Naples, Italy. The views and opinions expressed on this website are her personal views only.

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