Tuesday, May 5, 2015

M. Sornarajah's Resistance and Change in the International Law on Foreign Investment -- and its relevance to law and development (and New Development Economics in particular)

My colleague here in Singapore, M. Sornarajah has a new book just published by Cambridge University Press entitled Resistance and Change in the International Law on Foreign Investment.  The book has (surprising?) relevance to law and development.  In a nutshell, what Sornarajah presents is an intellectual history of the development of international investment arbitration as both a distinct profession and distinct academic discipline.  What makes this relevant to law and development is that for the most part, the same intellectual forces that propelled the emergence of international investment arbitration as a distinct field of law also propelled the second emergence of law and development as legal discipline.  One can see many parallels between the intellectual dynamics described by Sornarajah and those that have shaped law and development.

But . . . Sornarajah's book is a sobering read.  His is not a story where they end up living happily ever after.  It's more a story where they end up escaping into the wilderness pursued by large dogs.  And as some of you could probably guess, I think it thereby ultimately provides a much needed cautionary tale about law and development. 

Simply put, Sornarajah's story is ultimately one of the emergence, transcendence of, and of emerging resistance to, what we might call the 'global neo-liberal order'.  The present-day regime of international investment arbitration is very much a product and reflection of this order.  And, as well displayed by Sornarajah, it is not a pleasant sight, particularly for the countries of the global south (and also increasingly for developed countries as well).  The neo-liberal pursuit of the 'perfect' market -- a market that is said to only exist outside the reach of regulatory intervention -- has caused or at least allowed international investment law to transcend domestic law.  National efforts to regulate national economies, for example efforts to inhibit tobacco sales, are now being classified as 'takings' requiring compensation because they interfere with ideal market dynamics (or more precisely, investor expectations of ideal market dynamic).

Of course, all this is well observed in the area of law and development as well.  The intellectual symbiosis between neo-liberalism and law and development IFIs is well rehearsed.  But that is not what I found most striking in Sornarajah's account.  In fact, what I found most sobering is a particular interpretation one could give his story -- one, ironically, that I think he may well disagree with.

Sornarajah's story is one that he sees as being driven by human intentionality.  Neo-liberalism, by his account, is in the context of international investment arbitration seems very much a strategy and product of the investor class (and associated professionals).  But my own suspicion is that in fact, neo-liberalism is a spontaneous phenomenon -- one whose drive is not fueled by human intentionality or class / professional / economic interests but by dynamics that operate outside the reach of such intentionality.  And if this is the case, it is a much more troublesome beast than even Sornarajah would suggest.

My suspicion along these lines comes from a particular aspect of his story.  As portrayed by Sornarajah, neo-liberalism has a chameleon-like quality to it.  It changes its intellectual shape in response to intellectual challenge:  it starts out being simply about economic fairness; then it morphs into a trope about economic development; then it morphs again into a trope about the natural order of the economic universe.  In a book I recently co-edited about the globalization of competition regulation, one of the chapters -- by Ngai-Ling Sum of Lancaster University -- articulated a very similar story in the context of competition law.

I think we can also detect this evolution in the context of law and development.  But the thing about competition law and law and development (particularly competition regulation) is that in contrast to investment arbitration, they are not driven by the interests of international investors.  The interests that drive them are very different.  And yet, they have very similar intellectual trajectories.  This suggests to me a spontaneous rather than a designed order.

In The Blank Slate, Steven Pinker tells a story about an experiment that was undertaken using people with split-brain syndrome.  Split-brain syndrome is a condition in which the two hemispheres of the brain are not able to communication with one another.  What the experiment did was introduce stimulus to the left hemisphere, which provoked some response from the subject.  The subject was then asked to explain why she did what she just did.  Verbal explanation is a right-hemisphere activity, and because of the split-brain condition, the right-hemisphere could not actually know / perceive what the subject's action was actually in response to.  Nevertheless, the subjects, when asked, always provided an explanation.  The explanation was completely unconnected with the actual reality, but the subjects nevertheless honestly believed it.

So, here's my hypothesis.  Neo-liberalism is not a phenomenon, much less a project or a strategy.  It is simply an explanation we give for a phenomenon that operates outside our intentionality, but which we nevertheless want to believe we have capacity to control.

I think this is very relevant to law and development because much of law and development, at least for the present, projects itself as an effort to harness or control or resist neo-liberal economic dynamics.  I am thinking specifically here of New Development Economics (or 'experimentalism').  NDE sells itself as a means for escaping the neo-liberal orthodoxy that has dominated developmentalism for the past 25 year or so.  But if I'm right, then NDE will not give us such escape, it will simply end up reproducing neo-liberalism under some new intellectual guise.

And it may be even worse than that (assuming you, like Sornarajah and myself, think the 'neo-liberal global order' has its problems), because experimentalism seems to be like a distinctly un-self-aware developmental agenda (see also here; for Mariana Prado's disagreement with this claim, see here) .  By wrapping itself up in the language and metaphors of the natural sciences -- namely, the 'experimental method', NDE would seem to be particularly prone to naturalize its developmental effects, and thus to remove them from the reach of normative-critical inquiry.  At least the Washington Consensus was up front about what it claimed to to.  At least, it presented its particular vision of neo-liberalism in the form of a disprovable hypothesis.  Experimentalism, as a methodology, by contrast cannot be disproved (even while particular experiments can).  And if I'm right about the actual dynamics of neo-liberalism, NDE may thereby end up pushing neo-liberalism even farther outside the reach of human intentionality.