Comment on Professor Stephen D. Krasner\u27s The Hole in the Whole: Sovereignty, Shared Sovereignty, and International La

Kurtz, Jürgen

English

University of Michigan School of Law

Michigan Journal of International Law Volume 25 Issue 4 2004 Commentary to Professor Stephen D. Krasner Jürgen Kurtz University of Michigan Law School Follow this and additional works at: https://repository.law.umich.edu/mjil  Part of the International Law Commons, and the Rule of Law Commons Recommended Citation Jürgen Kurtz, Commentary to Professor Stephen D. Krasner, 25 MICH. J. INT'L L. 1103 (2004). Available at: https://repository.law.umich.edu/mjil/vol25/iss4/16  This Symposium is brought to you for free and open access by the Michigan Journal of International Law at University of Michigan Law School Scholarship Repository. It has been accepted for inclusion in Michigan Journal of International Law by an authorized editor of University of Michigan Law School Scholarship Repository. For more information, please contact mlaw.repository@umich.edu. COMMENTCOMMENTARY TO PROFESSORSTEPHEN D. KRASNERProfessor Krasner identifies the problem of badly-governed states asone that exists today without a historical comparator. These are states suchas Haiti and those in sub-Saharan Africa that are effectively empty shellswithout a functioning form of legal governance. Professor Krasner arguesthat existing policy tools of governance assistance and transitional ad-ministration have proven inadequate to address the enormous range ofproblems generated by poor levels of governance. He posits an alternateapproach of "shared sovereignty" to allow the engagement of externalactors in specific aspects of domestic governance.Although Professor Krasner's opening analysis was relatively broad,his preferred model of shared sovereignty was largely put forward in thecontext of resource-rich countries, and especially the contemporary is-sues facing Iraq. In this regard, Professor Krasner's approach implicitlyacknowledges the idea that an abundance of natural resources can be acurse for developing countries. An over-dependence on a single re-source can encourage corruption and push the value of a domesticcurrency uncompetitively high, leading to poor economic growth andenormous distributional inequities evident in countries such as Nigeriaand Venezuela. Professor Krasner's model of "shared sovereignty"would see the revenues from exploitation of natural resources such asoil and gas paid to trusts, whose purpose would be to introduce betterlevels of governance in those countries. Those trusts, in turn, would en-gage external actors to assist in developing specific aspects of domesticgovernance. He argues that having a state "sign off" on such an ar-rangement would legitimize this arrangement and act as an adequateresponse to the idea of loss of domestic sovereignty.Professor Krasner's model is a useful and promising starting point,in that it engages contemporary theories of economic development thatemphasize the need for a given level of institutional investment and ca-pacity.' In this regard, some resource-rich Latin American nations, likeChile, Peru and Brazil, have managed to avoid the so-called resourcecurse through concerted efforts at investment and institutional develop-ment. Yet, Professor Krasner's model raises a number of intriguing1. But see Jeff Madrick, Far from a 'Curse,' Natural Resources Can Form the Basisfor Economic Growth, N.Y. TIMES, Feb. 19, 2004, at C2 (contesting the argument that poorinstitutional development is intrinsic to nations with oil and other minerals).2. See, e.g., Dani Rodrik, Why Do More Open Economies Have Bigger Govern-ments?, 106 J. POL. ECON. 997 (1998); Dani Rodrik, Institutions for High-Quality Growth:What They Are and How to Acquire Them, STUD. COMP. INT'L. DEv. 3 (Fall 2000).1103Michigan Journal of International Lawquestions. An initial fundamental issue is the types of external actorsthat would be involved in the shared sovereignty model. Are these to bemultinational corporate entities, developmental bodies such as UnitedNations Development Program, or members of the broad universe ofNGOs, to name but a few?At a minimum, the role of the external actors that were to partici-pate in such a model would need to be carefully circumscribed. In thisregard, it is worth considering the important lessons to emerge from theprogram of structural adjustment loans negotiated by the InternationalMonetary Fund (IMF) in the 1970s and 1980s.' The doctrine of struc-tural adjustment meant that a debtor country applying for financialassistance from the IMF had to commit itself to a number of stringenteconomic and legal reforms. The neo-liberal "Washington Consensus"advocated by the IMF emphasized trade liberalization and a greatly re-duced role for the state in the economy, through deregulation andprivatization programs. A common idea behind this program was thatsupplied laws on corporate and financial frameworks-once incorpo-rated into the domestic legal system-would improve the existing legalframework and further economic development. It is now understood thatthis process of supplying laws from the outside is problematic on anumber of fronts. Law and legal frameworks are in a sense cognitive,and the application and success of those rules is a function of their per-ception by users and enforcers in the receiving country.4 ProfessorKrasner's model is clearly different, given its emphasis on creating insti-tutions within countries such as Iraq, as opposed to the implicit hostilityto state involvement evident in the IMF's structural adjustment program.However, both approaches seem at some level to involve the transport offorms of legal governance to the receiving country. While this may bepractically necessary, the shared sovereignty model should not in itsemphasis on the involvement of external actors, ignore the vital need fordomestic involvement in law and institutional creation.A related issue is that of the legitimacy of such a proposal from theperspective of citizens within the state concerned. Professor Krasnerargues that having a state "sign off' on such a model would be an ade-quate response to the idea of loss of sovereignty. Yet, it is worthrecalling the instructive lessons of the messy process of decolonizationinstituted in the aftermath of the Second World War. The countries thatemerged from this process demanded not only political, but also eco-3. For an insightful account of the doctrine of structural adjustment, see ROBERTGILPIN, GLOBAL POLITICAL ECONOMY: UNDERSTANDING THE INTERNATIONAL ECONOMICORDER 313-17 (2001).4. Katharina Pistor, The Standardization of Law and Its Effect on Developing Coun-tries, 4 G-24 DISCUSSION PAPER SERIES 8 (2000).1104 [Vol. 25:1103Comment to Krasnernomic independence. Indeed, foreign investment in particular came tobe seen as a proxy for colonialism, leading to waves of expropriation offoreign-owned assets throughout much of the developing world. Therehas, of course, been a pendulum shift in developing country attitudestoward foreign investment in the last decade. Nonetheless, there remainsa certain sensitivity, especially in resource-rich countries, of undue in-fluence of foreign interests on their economic affairs. Of course,Professor Krasner's model itself offers a response to these concerns, inthat its entire purpose is to use revenues from resource exploitation inthe creation of a domestic legal framework. As such, the goals of hismodel are diametrically opposed to the profit maximization goals ofmost foreign investors. Yet, it would be a mistake to assume that givenits laudable goals, the "shared sovereignty" model would be automati-cally accepted and understood by the ordinary citizenry of Iraq. At anabsolute minimum, the architects of such a model should invest heavilyin communicating its goals as part of an overall bottom-up approach tolegitimization.The importance of building a sense of legitimacy for the project isalso bolstered by the lessons of the structural adjustment loans negoti-ated by the IMF. At a superficial level, the countries involved in thoseloans clearly "signed off' on the program of law reform as a precondi-tion to receiving needed financial assistance. Yet, this consent wasprovided under duress, given the large balance of payment deficits runby many developing countries at the time. The enormous human suffer-ing to result from the Asian financial crisis in 1997 has been blamed bymany countries in East Asia on the overly strong liberalization programmandated by the IMF. This has led to a sense that--despite the "signoff"-the conditionality program was an entirely inappropriate interfer-ence in domestic regulatory sovereignty.Thus, a final question might be to consider how to build such asense of local ownership in the "shared sovereignty" model. A promis-ing starting point might be to consider the use of the Internet in thisendeavor. This, of course, raises the preliminary issue of existing levelsof telecommunications infrastructure and Internet access in a countrysuch as Iraq. To the extent, however, that the occupying authority estab-lishes a certain level of access within Iraq, the Internet would seem tooffer a two-fold advantage as a tool in the process of bottom-up legiti-mization of the "shared sovereignty" model. Firstly, it is anextraordinarily successful tool for communication of the goals of theproject. Even more crucially, however, the Internet offers the possibilityof direct engagement by a host of individual actors in the law-makingprocess of the "shared sovereignty" model itself. The relative anonymitySummer 2004] 11051106 Michigan Journal of International Law [Vol. 25:1103of exchange of ideas through the Internet offers a particularly usefulpsychological tool for encouraging participation in a country, such asIraq, where there is no real public culture of engagement, given its re-cent history of totalitarian oppression. The possibilities of the Internetare not intended as a simple answer to the likely challenges of legitimi-zation of the "shared sovereignty" model. They are, however, a usefulstarting point to address these challenges in all their complexities.JURGEN KURTZGrotius Fellow, University of Michigan Law School, U.S.A.Lecturer, University of Melbourne Law School, Australia

Commentary to Professor Stephen D. Krasner

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Commentary to Professor Stephen D. Krasner

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