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Monday, September 26, 2011

Are We More Progressive Than We Think We Are?

I have argued in my previous posts this month that anti-corruption law has the ironic effect of exacerbating corruption and other forms of socially destructive corporate behavior in developing countries.  This occurs because of the FCPA's  sanctioning effect -- the withdrawal of capital from developing countries.  The resulting void is filled by companies from countries that do not enforce anti-corruption and similar laws -- the so-called "Black Knights," particularly China.  (For my longer discussion of the topic, see Unwitting Sanctions, at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1429207).  In my remaining time on the Blawg, I want to flesh out that problem a bit and propose a few remedies.

The sanctioning effect of anti-corruption law is but a dramatic example of a much broader dynamic in international business.    Although we tend to think of the U.S. as promoting a laissez-faire model of business regulation to the rest of the world, I want to argue that in international business law specifically, quite the opposite is true.  Think of various federal laws governing extraterritorial business conduct -- the FCPA, the Alien Tort Statute, economic sanctions for human rights abuses, subpart F of the tax code, or the extraterritorial application of employment discrimination laws.  In these and other ways, we promote social and political goals through extraterritorial corporate conduct.  And the goals of which I speak are not narrowly tailored to free-market economics -- in fact, these laws generally represent the knowing curtailment of short-term profit to promote liberal-democratic values related to anti-corruption and human rights broadly.  Moreover, the notion that federal authority should be marshaled to advance these goals traces its origin to an era of U.S. history that was a reaction against laissez-faire -- the Progressive Era.

A year of Fulbright research across Asia left me a big fan of our commitment to promoting these values through business conduct.  But to be effective, we need to more accurately understand how our international business law regime compares to other models.  More on that next post.

Posted by Andy Spalding on September 26, 2011 at 04:07 PM | Permalink


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