by Shailaja Fennell. New York: Routledge, 2010. 232pp. Paper $56.95. ISBN: 9780415420358.
Reviewed by Scott Nicholas Siegel, Department of National Security Affairs, Naval Postgraduate School. Email: snsiegel [at] nps.edu.
In the wake of the recent international financial crisis, governments and citizens are re-evaluating the relationship between free markets and the rule of law. Governments are re-considering the proper balance between unfettered capitalism and state regulation. But while doing so, we need to know how the law transforms social relations to enable capitalism to operate. In this sense, Fennell’s book could not be timelier. The author shows how a neoliberal economic rubric that specifies the proper relationship between law and the free market challenges existing social practices and reshapes them so that they conform to universalized notions of efficiency and wealth maximization, favoring the uniform over the particular and generating new forms of inequality as a result.
The book is a rapid flight across a variety of important social institutions, from gender relations to the role of international financial institutions. While giving us a basic lay-of-the-land, the book would benefit more from a few longer stopovers to soak up the empirical complexity the author herself suggests greater attention should be paid towards. In so doing, the mechanisms by which the free market is mediated in practice can be discovered and better explained.
Fennell’s central argument is that the law and economics school of thought, by focusing solely on how capitalism can operate more effectively and maximize wealth, is performing essentially two tasks. The law and economics school serves as a rubric by which to remove every obstacle that inhibits successful and efficient market transactions. In so doing, the rubric wipes away the particular and the local, unleashing powerful disruptive forces in favor of a universal paradigm that ignores social reality on the ground. Unfettered capitalism also creates new forms of gender, group and international inequality. Consequently, this universalistic conception of the proper role between law and markets ignores how the local and specific can actually enhance the prospects for development, and a more socially equitable development as well.
The law and economics school, emerging out of the active collaboration between economists and legal scholars at the University of Chicago, perceives law’s role chiefly as to enhance the likelihood that market transactions take place. In the world of positive transaction costs, the law helps clarify property rights, contractual rights and responsibilities, and then constrains the state by limiting which regulatory activities are considered legally legitimate. Thus, while the government may not regulate pollution, it may assign a right to pollute (or to be free from [*363] pollution), which could be traded in the market place, such as in proposed carbon-trading schemes. A clear distinction is made between the private and public spheres under this rubric. Yet, the boundaries between the two are not always clear among traditional societies. Moreover, this legal rubric uproots people from their traditional social contexts by privileging individualism over other group-based forms of identity.
Fennell traces the impact of this legal rubric across several fundamental and broad social and political institutions, including gender relations, social inequality between groups, relationships between federal and sub-national governments and within international economic relations. For example, in the case of marriage, the law and economics school perceives it as nothing more than a contract between (presumably) a man and a woman, while ignoring the power relations between the two that inhibit women to enter or exit a supposedly contractual relationship. Furthermore, the author powerfully explains how if the marital relationship does become monetized, then other, non-tangible elements of marriage must also be renegotiated.
In the economic realm Fennell emphasizes the irrelevancy of Western-based conceptions of rights and practices for undeveloped societies. In these social contexts individuals express themselves through the communities to which they belong. As a result, persons constantly experiencing discrimination do not repeatedly re-contract with state institutions or firms to address unequal treatment. Instead, they organize collectively and through traditional communal arrangements when seeking redress for their grievances. Fennell’s key claim, which is prevalent throughout the text, is that the legal rubric associated with a free market doctrine is not sufficient to take into account the economic inequality generated by the free market itself. Protecting individuals themselves from powerful economic groups, who can also capture the state itself, is rarely included within this ideological framework.
Fennell succeeds in surveying various institutions and how the free market legal rubric has transformed traditional societies. She shows how powerful this rubric is in stifling opposition, and in her concluding sections, she offers some pathways that challenge this free market rhetoric and rubric. Fennell calls for strengthening the role of the oral over the written form of law and favoring the informal over the formal. The law needs to take into account the historical and social context in which everyday transactions occur and the social norms that limit what types of market transactions are perceived as legitimate. Rather than a tool that exacerbates inequality and hierarchy, the state can redistribute wealth, address group rights and grievances, and undertake social policies that ameliorate these issues.
While Fennell provides a broad critique of how the law and economics school across a variety of settings, the text’s wide scope inhibits the ability to see how existing cultural norms interacted with this rubric to produce hybrid institutions that mitigate the effects of a free market ideology. The author provides examples of how this rubric operates and comes into conflict with traditional norms in a variety of geographic settings, including Malaysia, [*364] China and India. But the analysis would have benefited from careful case-study analysis to demonstrate the mechanisms by which different development paths are established. How does this legal rubric transplant itself into these societies? Which actors are carrying these ideas? In some cases, native leaders themselves implement these legal programs in an effort to make their societies more “Western,” such as in Turkey in the early 20th century and continuing to today. In what circumstances is the traditional retained? These questions still need answering.
The absence of rigorous empirical analysis shows Fennell’s decision to favor the role of ideas over actors carrying those ideas, governments, powerful economic actors, or intellectuals. Fennell suggests that this legal rubric is so ubiquitous and entrenched that it infects all areas of practice and scholarship. She indicts almost all forms of “Western” thinking for imposing its rubric on other societies. This is painting with far too broad of a brush. First, what “Western” values are is insufficiently discussed. The law and economics school is only one variant among many how the law and the market should interact. Her extensive survey of the literature bypasses the alternative conceptions of the relationship between law and development that exist or that were applied in the past, such as the mercantilism of Friedrich List and Alexander Hamilton or the import-substitution industrialization theories of Raul Prebisch. These ideas were dominant in both the academy and in practice among governments of their time. Second, in some cases, “Western” conceptions of rights actually increase levels of freedom for women or minority groups.
For example, if the law and economics rubric became dominant in the regions Fennell studies, there is little explanation for why this may be so. She seems to argue that these ideas and rubric are so powerful that alternative understandings cannot emerge, which belies much of the existing scholarship on the variety of paths governments chose to pursue economic development. Furthermore, contrary to some of the claims made by scholars she surveys, Western or developed economies experienced the same pressures of new intellectual and legal rubrics that transformed normative frameworks by which communities functioned. The social upheaval that capitalism unleashed, where the antecedents to the law and economics school are located, also clashed with traditions in the developed world. New arrangements simply were constructed and re-constructed over time, which took on Christian democratic or social democratic forms. Finally, Fennell briefly discusses how violent movements, such as terrorism and jihadism, can be linked to growing inequality in developing societies, but provides little empirical evidence to justify this claim and is a view that not is widely shared among experts who study terrorists and related movements (e.g., Allan Krueger, “What Makes a Terrorist.” (2008)).
In conclusion, Fennell provides the reader with a broad survey of how a powerful intellectual rubric imposes its view of the proper relationship between the state and market as well as between groups in different parts of the developing world. But in pursuing such [*365] breadth, Fennell sacrifices empirical depth. The categories used to locate sources of authority and control and how they interact at various levels are vaguely explicated. Fennell sheds a significant amount of light on how the law and economics literature has shaped development strategies in some countries. And her call for inclusion of the particular social and economic contexts in which economic transactions take place is convincing. But we still do not know how exactly that happens and nor does the author provide a persuasive new intellectual trajectory by which we can investigate it.
© Copyright 2010 by the author, Scott Nicholas Siegel.