Articles Markets, Democracy, and Ethnicity: Toward a New Paradigm for Law and Development Amy L. Chuat CONTENTS I. INTRODUCTION ................................................................................. 4 II. LAW AND DEVELOPMENT: THE CURRENT PARADIGM ....................... 8 A . Terminology ................................................................................ 9 B. The Early Law and Development Movement ............................ 11 C. Law and Development Today ................................................... 13 1. The CurrentLiterature ....................................................... 14 2. Policy and Practice............................................................. 17 D. The Problem in the CurrentParadigm ..................................... 19 Im. UNDERDEvELOPMENT AND OVERACHIEVEMENT ............................ 21 A. Ethnoeconomics in the Developing World ................................. 21 B. Ethnoeconomics in the Developed World ................................. 27 C. Economic Dominance and Market Dominance......................... 29 t Associate Professor, Duke University School of Law. I would like to thank Bruce Ackerman, Ash Bfli, Kate Bartlett, Lan Cao, Walter Dellinger, Tatiana Doran, Hermann Giliomee, Henry Hansmann, Donald Horowitz, Benedict Kingsbury, Askar Moukhitdinov, Jonathan Ocko, Jeff Powell, Susan Rose-Ackerman, Ed Rubin, Chris Schroeder, Laura Underkuffler-Freund, Andre van der Walt, Johan van der Walt, and the participants in faculty workshops at American University, Boston University, University of Capetown, Duke University, University of Michigan, University of Toronto, and Rand Afrikaans University. I am especially grateful to Jed Rubenfeld. Outstanding research assistance was provided by Julie Bentley, Mark Bernstein, Janeen Denson, Melanie Dunshee, Wes Lovy, Kevin Marr, Tim McCarthy, Amanda McMillian, Mike Minor, John O'Leary, Brian Rohal, Janet Sinder, Cathy Surles, Bethany Thomas, and Katherine Topulos. HeinOnline -- 108 Yale L.J. 1 1998-1999 2 The Yale Law Journal [Vol. 108: 1 IV. MARKETIZATION, DEMOCRATIZATION, AND ETHNONATIONALISM: A MODEL .......................................................................................... 33 A. Overview ................................................................................... 33 B. Definition and Prevalence of Model Conditions....................... 35 C. Model Hypotheses ..................................................................... 37 1. Hypothesis : Ethnoeconomic Resentment Against Market- DominantM inorities ........................................................... 37 2. Hypothesis 11: Ethnonationalismand Democratization.......... 42 3. Hypothesis III: Model Outcomes ........................................ 47 a. Antimarket Backlash ................................................... 48 b. Eliminationistor Final "Solutions" ......................51 c. Retreatfrom Democracy............................................. 54 D. PotentialExceptions and Complications ................................... 57 1. Possible Negative Cases................................................... 57 a. Thailand........................................................................ 57 b. The Philippines............................................................. 59 2. ComplicatingFactors ........................................................ 61 E. GeneralPolicy Implications of the Model ................................ 62 V. APPLICATIONS .................................................................................. 63 A. South Africa ............................................................................... 63 1. Background........................................................................ 63 2. Satisfaction of Model Conditions......................................... 65 3. Analysis .............................................................................. 67 a. Antiwhite, Antimarket Backlash .................................... 68 b. EliminationistStrategies ............................................ 72 c. Antidemocracy Backlash............................................. 74 4. Directions.......................................................................... 75 B. Kazakhstan............................................................................... 78 1. Background........................................................................ 78 2. Satisfaction of Model Conditions......................................... 83 3. Analysis ............................................................................... 84 a. Retreatfrom Democracy ............................................... 84 b. Russians and Market Dominance.................................. 86 c. Anti-Russian, Antimarket Backlash? ............................ 88 4. Directions.......................................................................... 89 C. Vietnam ..................................................................................... 92 1. Background........................................................................ 92 2. Satisfaction of Model Conditions......................................... 97 3. Analysis ............................................................................... 98 a. The Significance of the Vietnamese Chinese................ 98 HeinOnline -- 108 Yale L.J. 2 1998-1999 1998] Markets, Democracy, and Ethnicity 3 b. PoliticalFavoritism, Corruption, and the Question of Market Dominance.......................................................... 101 c. The Possibility of Vietnamese Exceptionalism................ 102 4. Directions.............................................................................. 103 VI. CONCLUSION ....................................................................................... 105 HeinOnline -- 108 Yale L.J. 3 1998-1999 The Yale Law Journal [Vol. 108: 1 I. INTRODUCTION It is by now a commonplace that we are living in a period of radical global transformation Particularly in the developing world, this transformation has had two watchwords: markets and democracy.2 Indeed, the reascendant teleology of free-market democracy has redefined the very concept of underdevelopment-a term that has shed its exclusively Third World trappings and today joins in a single embrace countries from Algeria to Azerbaijan, from Pakistan to Poland.' Marketization and democratization each have been the site of massive Western legal intervention in the developing world. Legal work on marketization ranges from structuring international project finance4 to drafting market-oriented laws5 to developing legal regimes that facilitate the transition from command to market economies.6 Work on democratization includes not only writing constitutions7 but also grappling with formidable 1. See, e.g., GEORGE SOROS, UNDERWRITING DEMOCRACY at x (1990) (noting the "radical transformation" of the international political landscape); Bruce Ackerman, The Rise of World Constitutionalism, 83 VA. L. REV. 771, 774 (1997) (decrying the indifference of American constitutional thought to "world-historical transformation"); George E. Condon, Jr., Pope Urges U.S. Not To Shut Door to Immigrants, SAN DIEGO UNIoN-TRIB., Oct. 5, 1995, at Al (quoting Pope John Paul II describing the "profound transformation" of the international system); Jim Hoagland, Bibi's Choice, WASH. POST, June 6, 1996, at A29 (referring to a "dizzying global transformation"). 2. See, e.g., JOSEPH E. STIGLITZ, WHITHER SOCIALISM? 1-3 (1995); LESTER C. THUROW, THE FUTURE OF CAPITALISM 1-5 (1996); ROBERTO MANGABEIRA UNGER, DEMOCRACY REALIZED (forthcoming Oct. 1998) (manuscript at 5, on file with The Yale Law Journal); THE WORLD BANK GROUP, LEARNING FROM THE PAST, EMBRACING THE FUTURE 10-13 (1994); Samuel P. Huntington, Challenges Facing Democracy: What Cost Freedom?, CURRENT, June 1993, at 22, 22. 3. See, e.g., STEPHAN HAGGARD & ROBERT R. KAUFMAN, THE POLITICAL ECONOMY OF DEMOCRATIC TRANSITIONS 3, 15-17 (1995); Claus Offe, Cultural Aspects of Consolidation:A Note on the Peculiaritiesof Postcommunist Transformations,E. EUR. CONST. REV., Fall 1997, at 64, 64-65 (1997); cf. Michael Mann, Nation-States in Europe and Other Continents:Diversifying, Developing, Not Dying, DAEDALUS, Summer 1993, at 115, 136 (describing the multitude of "semieffective states" that are "coping with uneven modernity-unevenly developed or enclave capitalisms [and] bulging state administrations sponsoring development and dispensing corruption"). 4. See, e.g., John E. Morris, Project Finance: New Telecom and Oil and Gas Deals, Plus Newly Opened Economies in the Developing World, Brought a Surge of ProjectFinancings, AM. LAw., Apr. 1997, at 23, 24, 27; Jones Day Poaches Skadden Arps Project Finance Lawyer, LAWYER, Feb. 11, 1997, at 5. 5. See, e.g., Linda Himelstein, Big Oil Plays a Big Role Shaping Russia's Energy Laws, LEGAL TIMES, Jan. 13, 1992, at 1; Ken Myers, East-West Scholar Cooperation Becoming a Booming Business, NAT'L L.J., Oct. 5, 1992, at 4; Tina Rosenberg, In Albania, Justice Is Now at Least a Possibility: Building Law in the Nation That Defined Communist Lawlessness, LEGAL TIMES, Jan. 2, 1995, at 1. 6. See, e.g., ABA CENT. & E. EUR. LAW INITIATIVE (CEELI), ANALYSIS OF THE DRAFT LAW ON FOREIGN INVESTMENT ACTIVITIES IN NIZHNY NOVGOROD OBLAST (1996) [hereinafter ANALYSIS OF NIzHNY NOVGOROD INVESTMENT LAW]; see also infra text accompanying notes 38-39. 7. See, e.g., RETT R. LUDWIKOWSKI, CONSTITUTION-MAKING IN THE REGION OF FORMER SOVIET DOMINANCE 1-3 (1996); Jon