Literature Review Chapter: Neo-Liberalistic Legal Concepts on Nations

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[. . .] 1 (2002).] [26: Anita Chan, and Jonathan Unger, "A Chinese State Enterprise Under the Reforms: What Model of Capitalism?," The China Journal 62 (2009).] [27: Ross Cranston, "Theorizing Transnational Commercial Law," Texas International Law Journal 42, no. 3 (2007).]

Impact of Neo-Liberalism

The neo-liberalist philosophy described above is sometimes one of political expediency, but it makes government, and the laws that are enacted, more responsible[footnoteRef:28]. In his article about "The Dark Side of International Business"[footnoteRef:29], Madan Batra wrote that; [28: Andrew Kipnis, "Neoliberalism Reified: Suzhi Discourse and Tropes of Neoliberalism in the People's Republic of China," Journal of the Royal Anthropological Institute 13, no. 2 (2007).] [29: Madan M. Batra, "The Dark Side of International Business," Competition Forum 5, no. 1 (2007).]

"The dark side of international business is a harm imposed upon a population through either the action or inaction of a multinational business. Such a harm results in moods or actions that involve selfishness, intolerance, impatience, anger, greed, jealousy, loss or lust of power, and hatred. Overall, dark side activities are undertaken to improve company profitability at the cost of non- owner stakeholders and the community at large."

This "dark side" is what business has become known for in many circles. A disregard for the consequences of actions is in large part what caused the Asian financial collapse[footnoteRef:30]. Because this system was no longer tenable, businesses and countries realize that changes had to be made, and researchers have tried to understand exactly how the turn-around to today's thriving Asian economies has occurred. [30: Abdel M. Agami, "The Role that Foreign Acquisitions of Foreign Companies Played in the Recovery of the Asian Financial Crisis," Multinational Business Review 10, no. 1 (2002).]

Part of the mystery can be explained in the fact that with the realization that such an event could happen, governments began to understand better the power of free markets[footnoteRef:31]. The state run model that China had long used was unsuccessful "To be successfully competitive, state enterprises in China have recast themselves in the image of capitalist companies."[footnoteRef:32] The Indonesian government, which had been saddled with authoritarian rule for more than three decades[footnoteRef:33] remade the government with the help of international partners. Of course, this happened just prior to the collapse of the Asian economies, but the partners were able to work through the crisis to form a new model of democracy. "As elsewhere, the concept of good governance is relatively new in Indonesia, though one that has gained a certain currency, stimulated in particular by the public campaign against KKN, an abbreviation for Korupsi (corruption), Kroniisme (cronyism) and Nepotisme (nepotism)."[footnoteRef:34] This is in reference to the rule of former president Soeharto who used a form of democracy, that was controlled by his political party, to prove that the people trusted him. The China and Indonesia models are two gross examples of how state run enterprises did not prosper. This is also indicative of the Asian model, in many respects copied from the seemingly successful Japanese[footnoteRef:35], which allowed private businesses to be artificially propped up by the government. [31: Anita Chan, and Jonathan Unger, "A Chinese State Enterprise Under the Reforms: What Model of Capitalism?," The China Journal 62 (2009).] [32: Ibid.] [33: Gordon Crawford, and Yulius P. Hermawan, "Whose Agenda? "Partnership" and International Assistance to democratization and Governance Reform in Indonesia," Contemporary Southeast Asia 24, no. 2 (2002).] [34: Ibid.] [35: O. Omre Ergungor, "Legal Systems and Bank Development," Federal Reserve Bank of Cleveland Economic Commentary (2002).]

The goal of the neo-liberalist approach has already been stated, but research has shown that the ideas impact has been global in scope. Schneiderman says that "The determinate rules and structures associated with "economic globalization," the ensemble of legal rules and structures for the promotion and protection of foreign investment. These rules and structures cumulatively attempt to fashion a global vision of economic policy, property rights, and constitutionalism that institutionalizes the political project called "neo-liberalism."[footnoteRef:36] [36: David Schneiderman, "Constitutional Approaches to Privatization: an Inquiry into the Magnitude of Neo-Liberal Constitutionalism," Law & Contemporary Problems 63, no. 4 (2000).]

This idea of allowing business to shape the fortunes of the country was foreign to many of powers around the world[footnoteRef:37] because they had been run with notion that business is there to support the state instead of the other way around. Schneiderman goes on to say; [37: Abdel M. Agami, "The Role that Foreign Acquisitions of Foreign Companies Played in the Recovery of the Asian Financial Crisis," Multinational Business Review 10, no. 1 (2002).]

" A number of options to achieve privatization and denationalization are available to states, but two prevailing themes emerge, each corresponding to a different vision of constitutionalism. The first is the "state capitalist" model, designed to enhance the capacity for state control and public participation. The other is the "neo-liberal" model, which places legal limits on the state's regulatory capacity."[footnoteRef:38] [38: David Schneiderman, "Constitutional Approaches to Privatization: an Inquiry into the Magnitude of Neo-Liberal Constitutionalism," Law & Contemporary Problems 63, no. 4 (2000).]

States can modify to one of these two models depending on their comfort level with allowing business to have more control. The different countries in question -- Malaysia, Indonesia, China -- have taken different paths toward this goal. The state-run model is seen as unable to compete in the new global market. Without this ability, these states would be not be able to realize the full potential of their populations and their people's entrepreneurial spirit[footnoteRef:39]. The change was gradual, but it has been accomplished with a mixture of the neo-liberalist and state capitalism models (especially in China). [39: Alvin Y. So, "Post-Socialist State, Transnational Corporations, and the Battle for Labor Rights in China at the Turn of the 21st Century," Development and Society 39, no. 1 (2010).]

The Chinese experience had always been one of governmental control. In ancient times this was through some ruling family which imposed its considerable will on the people[footnoteRef:40]. Although the name of the ruling fraction changed, the facts remained the same. The country was also very closed off from foreign exposure to its goods and services, or any real exchange for many years. The first inroads happened when Richard Nixon made visits to China during his presidency and began forging relations with Mao to except foreign investment into his country. Famously, large companies such as Coca Cola opened large factories in China[footnoteRef:41]. Slowly the dragon came to realize that to compete with the rest of the world that "In an era of pervasive economic globalization, state institutions are expected to subordinate political considerations to economic ones."[footnoteRef:42] The state began to relax its grip on enterprise to the extent that large cities such as Beijing and Shanghai welcomed industry. It first spread through the influx of many multinationals and the large state run concerns (such as steel and coal production[footnoteRef:43]), but then it moved into the cottage industries which were encouraged by the state. Sometimes entire towns would fabricate one item that could be sold on the global market, or a family would manufacture individual parts that may be needed in the manufacture of an automobile[footnoteRef:44]. This model was able to grow the economy in all parts of China[footnoteRef:45], but the collapse of the Asian markets brought a further realization that more was needed[footnoteRef:46]. [40: Jie Lin Dong, and Jie Hu, "Mergers and Acquisitions in China," Economic Review -- Federal Reserve Bank of Atlanta 80, no. 6 (1995).] [41: Ibid.] [42: David Schneiderman, "Constitutional Approaches to Privatization: an Inquiry into the Magnitude of Neo-Liberal Constitutionalism," Law & Contemporary Problems 63, no. 4 (2000).] [43: Alvin Y. So, "Post-Socialist State, Transnational Corporations, and the Battle for Labor Rights in China at the Turn of the 21st Century," Development and Society 39, no. 1 (2010).] [44: Ibid.] [45: Andrew Kipnis, "Neoliberalism Reified: Suzhi Discourse and Tropes of Neoliberalism in the People's Republic of China," Journal of the Royal Anthropological Institute 13, no. 2 (2007).] [46: Alvin Y. So, "Post-Socialist State, Transnational Corporations, and the Battle for Labor Rights in China at the Turn of the 21st Century," Development and Society 39, no. 1 (2010).]

Neo-liberalist thought also says that;

"The movement from the "social state" to "enabling state" requires a restructuring of state institutions, as well as the meta-rules that govern state institutional behavior. This change does not necessarily entail the abstention of the state, but rather activism of another sort: the creation of conditions to facilitate the smooth operation of the market."[footnoteRef:47] [47: David Schneiderman, "Constitutional Approaches to Privatization: an Inquiry into the Magnitude of Neo-Liberal Constitutionalism," Law & Contemporary Problems 63, no. 4 (2000).]

Working on an international scale has forced many nations, including those which have long operated in free market economies to adopt new methods of doing business[footnoteRef:48]. For many this meant that they had to start acting more responsibly or buyers on the global market would not purchase their products. However, this did not mean the same thing to companies from different countries. [48: Ian… [END OF PREVIEW]

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