Dialogue - Fall 2022 - volume 9

Southern Methodist University Student Forum John G. tower Center

For PubliC PoliCy and international aFFairS

Opinions expressed in issues of dialogue represent only the views of the author; they do not represent the views of Southern Methodist University, the views of the John G. Tower Center for Public Policy and International Affairs, or the views of the members of dialogue.

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U nited s tates P oliti C s

International Partnership to Monitor Space Debris 8 Nathan Ciatti

A Memo on Liberalized Global Trade Order 15 Steven Donaldson

The State of Nature According to Hobbes and Rousseau 21 Aaron Lu

Analysis on U.S. Policy on Globalization 24 Andrew Nguyen

Future of Financial Privacy and Digital Currency Regulation 32 Alexa Vickaryous

Survival of Campaign Finance Reform 49 Izzah Zaheer a sian P oliti C s

Human Rights’ Impact on International Relations Between the U.S. and China 60 Clare Ennis

Creating Opportunity in the Age of Automation 70 George Odwesso

The Question of Legitimacy and Justness in the United Nations Intervention in the Korean War 75 Conner Packebush

The Politics of State-Owned Enterprise Reform 82 Lexie Watson

e U ro P ean P oliti C s

The Failure of the United Nations: An Explanation for the Reoccurence of Genocide 93

India Angelique Luciano Simmons a fri C an P oliti C s

The Impact of Women Parliamentarians’ Advocacy: The Association Between Women Policymakers and Child Marriage 101 Nia Kamau

U nited s tates P oliti C s

i nternational P artnershi P to M onitor

s Pa C e d ebris

Nathan Ciatti

Since the first satellite was placed into space by the Soviet Union in 1957, space debris began to accumulate in the seemingly never-ending final frontier (Weeden 2017). There are now an estimated 500,000 pieces of so-called “space junk” in the Earth’s orbit today, with 21,000 larger than four inches in diameter, many of which carry the potential to strike the 1,500 artificial satellites vital to states’ infrastructure (Mosher and Lee 2018). Space debris colliding with a satellite is comparable to icebergs striking ships, yet with much higher stakes considering a state could lose crucial defense capabilities and possibly fall to Earth, as China’s Tiangong-1 space station recently did (Mosher and Lee 2018). Satellites vary in capability, including for astronomical research, observation of Earth, weather, reconnaissance or missile defense (Weeden 2017). These satellites are not only used for advancing state capacity, but also within the private sector by a plethora of companies such as DirecTV and Globalstar, especially for communications (Mosher and Lee 2018). In addition, prestigious private space pioneers like SpaceX and Boeing are expanding their involvement in the space community and share the sameconcern over space debris (Space.com 2011). As space exploration and satellite development has increased exponentially, with over 80 states now utilizing space, the creation and impact of space debris has also continued to grow (Space.com 2011). Former commander of the United States Strategic Command (USSTRATCOM) Joint Functional Component Command for Space Lt. Gen. Susan Helms notes that it is impossible for a single state to monitor all space debris threats simultaneously from an infrastructure and information perspective, stating, “We must partner with other nations and enterprises to achieve mutually beneficial goals, and at the top of our priorities is the development of comprehensive SSA (Space Situational Awareness)” (Space.com 2011).

The space debris issue is nothing new to the international community, yet has recently moved from the hidden to the systemic agenda for many states as space has become less foreign of an environment. The international regime for space debris monitoring and mitigation can aptly be described by the following three leading institutions. Of course, space debris is also a focus of each state’s individual space agencies. The United Nations Office for Outer Space Affairs (UNOOSA) developed its “Space Debris Mitigation Guidelines of the Committee on the Peaceful Uses of Outer Space,” which details UN protocols for the mitigation of space junk (United Nations 2010). The InterAgency Space Debris Coordination Committee (IADC) includes 13 states’ space agencies and was founded in 1993 as an inter-governmental forum to combat space debris (IADC n.d.). While the IADC does somewhat focus on the coordinated exchange of research information, coordinating mitigation policy is the primary objective (IADCn.d.). It is also notable that the world-leading United States National Aeronautics and Space Administration (NASA) has abstained from joining the IADC (IADC n.d.). As part of PresidentBarack Obama’s 2010 National Space Policy, USSTRATCOM’s Joint Space Operations Center increased its screening system for possible debris collisions to all commercial and foreign satellites and provided warnings for close conjunctions to all involved operators (Weeden 2017).This Space Situational Awareness (SSA) Data Sharing Program involved 285 member organizations and directly contributed to 128 satellite avoidances through 2016 (Weeden 2017). This program has been considered a success, but must be scaled to include more information from all the member organizations to truly ensure exceptional monitoring practices. Currently, only NASA provided intelligence to the other members and the program

included few of the larger state actors in space (Weeden 2017). The current institutions have been quite successful in drawing attention to the issue, but, apart from the SSA Data Sharing Program, have mainly focused on executing mitigation practices and limiting the creation of space junk to decrease the number of harmful objects in orbit, rather than monitoring the threats that are already present (Space.com 2011). Mitigation offers great long-term advantages but does not successfully address the ongoing issue at hand for the satellites already operating in space (McCormick 2013).

It is integral to consider space debris as an environmental issue requiring a response with infrastructure. While the literature generally describes Earth’s environment as within the constraints of the lower atmosphere, as innovative projects and the number of satellites in space continue to grow, the traditional environmental boundaries are constantly being pushed farther away from the planet (McCormick 2013). It is undeniable that humanity’s influence in space will only continue to grow, so promoting clean and preventative practices in the limitless void surrounding Earth is no different than protecting the oceans or forests close to home (Mosher and Lee 2018).

Successful destruction of all hazardous objects in space would inherently solve the problem, but the current state of global space technology and infrastructure consequently makesit absurdly expensive, if not physically impossible (McCormick 2013). Therefore, minimizing the potential of future space debris creation, decreasing the current amount of space debris and monitoring all current space debris are realistic short-term goals by which to measure success. The most important of these objectives is strongly monitoring current space debris, as the present threats are not going anywhere any time soon. If every hazardous space object can be identifiedand further monitored, the international community could celebrate a degree of success.

There is an obvious need for the development of the International Partnership to Monitor Space Debris. This global public-private partnership would integrate state space agencies and private space companies to promote the exchange of information about current space debris and satellites to allow for the greatest possible coordination of monitoring efforts. A “public-private partnership project generally involves the design, construction, financing and maintenance (and in some cases operation) of public infrastructure or a public facility by the private sector under a long-term contract” and therefore would produce an exceptional response to the issue of space debris (Hodge and Greve 2007). A 20 to 30-year contract would be developed and negotiated between the 80-plus countries and corporations operating artificial satellites, followed by bidding between several private space companies. The time frame is essential; the agreed upon length must allow enough time for international mitigation policies to be implemented and executed to begin to rid the orbital environment of the actual problem. These companies may also be involved in the sharing of information too; there is no conflict of interest in creating the database and promoting security of its own satellites. In fact, this would encourage the contracted company to produce a better program for the need of protecting its ownsatellites. The private sector of the space industry will bid on the construction of a database for all member institutions to share their space intelligence and data, as well as the integrated communications pathways required to transmit this sensitive information. Once operational, the private company will continue to maintain the day-to-day operations and security of the databaseto ensure that everything is running smoothly. This effort would initially be spearheaded and managed by NASA, Russia’s Roscosmos State Corporation for Space Activities, the China National Space Administration and the European Space Agency, which consists of 22 states (IADC n.d.). The involvement of these four leading space agencies is critical to the success of the IPMSD; they combine for the management of the clear majority of artificial satellites and have the most established and longstanding space programs (Mosher and Lee 2018). The IPMSD will function solely as a platform

to improve space situational awareness bysharing all data concerning each member’s satellites and information and research regarding each’s knowledge of hazardous space debris. Once obtaining any pertinent information to an individual state’s or company’s satellite, the entity may choose how to proceed. This may include eliminating the threat or altering the satellite’s trajectory to avoid a collision; these actions are made possible by the development of a state’s capacity to increase its space situational awareness. Lt. Gen. Helms manifested that coordination “directs us to collaborate with other nations, the private-sector and intergovernmental organizations to improve our space situational awareness specifically to enhance our shared ability to rapidly detect, warn of, characterize and attribute natural man-made disturbances to space systems” (Space.com 2011).

It is integral to the success of the IPMSD that each space agency and company involved in the space environment participate in the partnership. The more institutions involved, the greater amount of information that can be shared, and with greater information lessens uncertainty surrounding space debris threats and between state interactions within the realm of space (McCormick 2013). Each institution also has access to different specialized data about the artificial and natural objects in space, furthering the need for as much exchange of information as possible to decide the most correct response to each threat. The resources allocated to the IPMSD are minimal, as they primarily consist of the data produced by already established space debris monitoring programs. Outside of states developing the formal processes and paperwork while negotiating and finalizing the partnership, it only becomes the financial burden of the states to finance the contracted private company to develop and maintain the database.Each member institution will financially contribute the costs proportional to the number of satellites they have in space at the time. Traditional public-private partnerships focus on the allocation of project risks among all members (Bagal 2008). Economist Satish Bagal illustrates, “The optimum rule of risk allocation is that the partner who is most suited to assume a particulartype of risk is assigned that risk” (Bagal 2008). The participating members with a greater space presence have more developed space programs that are better funded and equipped to acquire therisk burden.

As a public-private partnership, there is no need for a command structure or voting rules. The IPMSD is purely focused on providing access to information for space actors and nothing more; the IPMSD should complement the existing space debris regime as a specialized partnership and not as a separate actor. The UN Office for Outer Space Affairs would largely deal with other space issues and it would be expected that states would continue bilateral and multilateral space agreements (Weeden 2017). When considering compliance and enforcement procedures, the consequences of free-riding and not providing information are inherent; not sharing information may lead to a state losing access to valuable functions via satellite collision. Even if one state or organization withheld information with the intent of harming another, the possibility arises that the aftermath of a satellite collision means a dangerous object hurtling into Earth’s atmosphere, with little predictability of where it will land, which could include the original problem state (Mosher and Lee 2018). This alone should suffice as discouraging member states from not participating considering that all parties involved stand to gain from theexchange of information.

When considering monitoring space debris as an infrastructural matter, a public-private partnership is the most logical institution to respond with. Economist Mohamed Ismail Sabry promotes, “Infrastructural services are public goods with positive externalities; they are also natural monopolies, not subject to competitive market concerns” (Sabry 2015). This makes government involvement essential to a public-private partnership’s success with the combination of private investment (Sabry 2015). For the IPMSD, the investment from the public and private sectors alike is primarily in the form of information rather than traditional financial investments, but that is

simply because of the nature of the issue (Sabry 2015). Furthermore, as private companies continue to lead the 21st century’s new generation of space exploration, Sabry states, “Private investment in a public-private partnership can encourage investment in other economic activities,” specifically other space exploration projects in the future (Sabry 2015). Research Triangle Institute’s Jennifer and Derick Brinkerhoff summarize public-private partnerships as having “jointly determined goals,” “shared accountability for outcomes and results” and “trust- based and informal as well as formalized relationships” (Brinkerhoff and Brinkerhoff 2011). These objectives to enhance governance effectiveness through a partnership that enhances efficiency and effectiveness, as well as creating win-win situations for all parties, are necessary elements for a successful IPMSD (Brinkerhoff and Brinkerhoff 2011). As space becomes less of the final frontier and more of Earth’s backyard, space services will more often require infrastructure and capacity-building partnerships that decrease project risk but still offer incredible opportunity (Brinkerhoff and Brinkerhoff 2011).

It is also important to consider that the public perception of a “partnership” versus “privatization,” “outsourcing” or “contracting out” is quite influential when states are decidingto join public-private partnerships, and the IPMSD especially (Hodge and Greve 2007). In the beginning of the IPMSD, the public may voice the concern of sharing space intelligence with many other nations, and more importantly, combining state-ran efforts with the private sector. For a successful strategy to be implemented, it is critical that governments take advantage of the “language game” when pursuing policy votes; of course, this is no new process for those already involved in the public-policy making process (Hodge and Greve 2007). The aura surrounding government-business linkages must be clarified; for the IPMSD, the partnership focuses on greater efficiency and ensuring the safety of space satellites rather than an “economic wealth- creating activity” through simple information gathering and sharing (Hodge and Greve 2007). General attitudes towards public-private partnerships often lead to critiquing the government and its contractors as only pursuing political and economic advancement rather than truly focusing on the needs of the public (Hodge and Greves 2007). Yet, the mandate of the IPMSD is so narrow in scope that it is difficult to imagine ways for partnerships to be taken advantage of for external gains unrelated to monitoring space debris. The private sector only has the opportunity to participate in two roles: being contracted to develop and maintain the database and participatein information-sharing with the other space actors. The partnership allows for minimal variation from the primary purpose of coordinating information, alleviating the concerns raised by Hodge and Greves (Hodge and Greves 2007).

A public-private partnership is often the most influential policy option in “successful execution of complex policy projects, such as public services or infrastructures” (Heldeweg and Sanders 2013). Oftentimes, publicprivate partnerships precipitate the shift from government to governance in the name of public interest legitimacy (Heldeweg and Sanders 2013). Secure World Foundation Technical Advisor Brian Weeden classified space debris as a “super wicked problem” with “no central authority providing guidance or support” in 2014 (Lewis 2015). The leadership and central authority that Weeden seeks has not been found in IGOs like the UNOOSA, particularly because most actors lack the resources and technology to sufficiently contribute to the mitigation of space debris (Lewis 2015). It is currently an incredibly expensive and inefficient process, especially for smaller states that may have only several satellites in orbit, and therefore a much smaller interest compared to a space leader in the U.S. or China (Weeden 2017). Therefore, a network public-private partnership is the best possible response as it aims to develop a commission to formulate a joint strategy (Heldeweg and Sanders 2013). Heldeweg and Sanders describes these entities in “Good Legal Governance in Authoritative Public-Private Partnerships”:

In such arrangements, public and private parties retain their own tasks, powers and responsibilities, so that implementation of the strategy by formal decisions to this effect remains a matter for government. It is, however, the intention behind the joint strategy that it serves to reciprocally tune the activities of all partners involved, so as to enhance the chances of realization (Heldeweg and Sanders 2013).

This contrasts with market and authoritative public-private partnerships because of the scope of its goals, as the international space regime is not yet ready to implement placing a space debris project into effect (Heldeweg and Sanders 2013). The focus on “concerted strategic coordination” in network PPPs regarding powers and responsibilities of all members, public andprivate parties alike, differentiates from the other PPP types, which are formed to act immediately upon agreement (Heldeweg and Sanders 2013).

An IGO, especially like the United Nations with its incredible number of state members, could be considered a better response to the space debris issue (McCormick 2013). Indeed, cooperation within an IGO will be pertinent to any long-term successes in many space dilemmas as participation in space becomes more widespread and space development evolves into a paramount part of all states’ agendas (Mosher and Lee 2018). Yet, IGOs will present several critical problems to lessening the problem in the short term. First, IGOs would ignore the private sector and not allow them to have direct input in decision-making. As the private sector continues to increase its market share in the space industry and satellite control moves away from state-run space agencies, the private sector will grow into a major actor that requires considerable input (McCormick 2013). Without their intelligence regarding space debris and satellite location tracking, states are immediately decreasing their space situational awareness (Weeden 2017). Second, as previously stated, the circumstances of the space debris issue requirespace agencies to focus solely on information sharing to avoid space debris; there is little decision-making to be had in the short term when the distribution of intelligence is the only function in IPMSD’s mandate. Utilizing a public-private partnership inherently limits organizational capacity and IGOs seemingly offer more organizational potential, but currently the limited capacity is all that is needed (Walker and Jackman 2006). Third, states may be skeptical of participation in an IGO because multilaterally sharing intelligence directly with otherstates could be performed inefficiently and ineffectively considering the complexities of IGO bureaucracy (Barnett and Finnemore 2004). The application of a contracted private company’s database provides a high- profile, industry leading coordination platform that makes the distribution of information simple. The private sector has greater resources and expert specialization than states’ space agencies and therefore they would promote more trust and participation than an IGO (Greve and Hodge 2007). Regarding concerns about participation within the database, it is in each state’s best interest to share their pertinent information to the database without reservation, as they would want other states to do the same in case there is a discrepancy, leaving an unidentified threat hurtling towards their own satellite.

When considering joining the IPMSD, states and companies alike must consider the partnership as a stepping stone for greater international cooperation in the future. In 2011, the National Research Council classified the “current orbital environment” as having already reached “a tipping point whereby the amount of debris currently in orbit has reached a threshold where it will continuously collide with itself … increasing the amount of debris faster than the rate at which atmospheric drag can remove the debris” (National Research Council 2011). The proliferation of space debris cannot be ignored any longer, as eventually space will once again become as unutilized as it was a century ago, harming an astounding amount of humanity’s technological capabilities and crushing progress as a society (McCormick 2013). The first step is to alleviate the stress that space debris currently has on artificial satellites by coordinating private and domestic monitoring space debris programs. This will ease the issue

for the time being, allowing time for true international mitigation policy to be implemented and executed.

Public-private partnerships offer a simple, efficient and effective coordinating entity to include all actors involved.

The IPMSD platform for intelligence distribution to increase space situational awareness will be the first in creating the opportunity for greater space satellite usage,research and exploration, furthering humanity’s advancement within the solar system and beyond.

REFERENCES

Bagal, Satish. “Managing Public Private Partnerships.” Economic and Political Weekly 43, no. 33 (2008): 23-26. http://www.jstor.org/stable/40277851.

Barnett, Michael, and Martha Finnemore. 2004. Rules for the World: InternationalOrganizations in Global Politics. Ithaca, NY: Cornell University Press.

Brinkerhoff, Derick, and Brinkerhoff, Jennifer. “Public-private Partnerships: Perspectives on Purposes, Publicness, and Good Governance.” Public Administration & Development 31, no. 1 (2011): 2-14.

Heldeweg, Michiel, and Maurits Sanders. “Good Legal Governance in Authoritative Public- Private Partnerships: Conceptualising Legitimate Partnerships with Public Authority.” European Procurement & Public Private Partnership Law Review 8, no. 2 (2013): 175-85.

Hodge, Graeme A., and Carsten Greve. “Public-Private Partnerships: An International Performance Review.” Public Administration Review 67, no. 3 (2007): 545-58. http://www.jstor.org/stable/4624596.

“Inter-Agency Space Debris Coordination Committee (IADC): Homepage.” Inter-Agency Space Debris Coordination Committee (IADC): Homepage. Accessed April 29, 2018. https://www.iadc-online.org/.

Lewis, Hugh. “Trouble in Orbit: The Growing Problem of Space Junk.” BBC News. August 05, 2015. Accessed May 02, 2018. http://www.bbc.com/news/science-environment-33782943.

McCormick, Patricia K. “Space Debris: Conjunction Opportunities and Opportunities for International Cooperation.” Science and Public Policy 40, no. 6 (2013): 801-13.

Mosher, Dave, and Samantha Lee. “More than 14,000 Hunks of Dangerous Space Junk Are Hurtling around Earth - Here’s Who Put It All Up There.” Business Insider. March 29,2018. Accessed April 29, 2018. http://www. businessinsider.com/space- junk-debris- amount-statistics-countries-2018-3.

National Research Council. (2011) Limiting Future Collision Risk to Spacecraft: An Assessment of NASA’s Meteoroid and Orbital Debris Programmes. Washington, DC: National Academic Press.

Sabry, Mohamed Ismail. “Good Governance, Institutions and Performance of Public Private Partnerships.” International Journal of Public Sector Management 28, no. 7 (2015): 566-82.

“Space Debris Threat Needs International Response, Military Official Says.” Space.com. March08, 2016. Accessed April 29, 2018. https://www.space.com/11191-space- debris- international-response.html.

Space Debris Mitigation Guidelines of the Committee on the Peaceful Uses of Outer Space. PDF.Vienna: United Nations Office for Outer Space Affairs, 2010.

Walker, Gloria, and Jackman, Robert W. Connections Matter: The Domestic Impact of Intergovernmental Organization Membership, 2006, ProQuest Dissertations and Theses.

Weeden, Brian. “US Space Policy, Organizational Incentives, and Orbital Debris Removal.” TheSpace Review. October 30, 2017. Accessed April 29, 2018. http://www.thespacereview.com/article/3361/1.

a M e M o on l iberalized G lobal t rade o rder

Steven Donaldson

All analysis conclude that free trade is economically beneficial for the globalized world; however, there has been increasing resistance towards the liberalization of trade. Trade talks aimed at breaking down these trade barriers have fallen apart due to a sharp difference in opinion between rich and developing countries. To make matters worse, hegemonic powers that have to support the liberalized trade orders, like the World Trade Organization (WTO), have sought protectionist policies as of late. This memo will address the need for a liberalized world trade order by first explaining the origins of globalization. More specifically, what the first and second unbundling is in relation to the current state of globalized trade. Next, the memo will explain how comparative advantage and economic analysis has made free trade beneficial to the globalized world. It will then transition to explore why resistance, in the form of trade barriers, is met despite the benefits of free trade. Lastly, this memo will explain the need for improving hegemonic powers through the use of pareto improvement; by bolstering a hegemonic power, an enforcer of trade rules and regulations is created, which is necessary to achieve a liberalized global trade order.

THE ORIGINS AND BENEFITS

To fully comprehend the historical origins of globalization, the reader must understand the two stages or unbundlings of globalization. The steam revolution is what caused the first unbundling of globalization; similar to the Agricultural Revolution before it, the steam revolution triggered a “phase transition” that eventually launched modern globalization (or more precisely, what we have been calling Old Globalization, or the first unbundling)” (Baldwin, p.77). As the 19th century progressed, steam displaced wind and animal power before being displaced by internal combustion and electric engines. Despite this, the development of steam power is what started the domino effect of progression (Baldwin, p. 77). It is important to note that the falling cost increased global trade; however, the benefits were primarily concentrated in a few countries. In fact, “by the late twentieth century, two-thirds of economic activity was clustered in just seven nations—the G7” (Baldwin, p. 78). The steam revolution lowered the costs of transportation which subsequently interconnected the world through global trade. Using Ricardian logic, the clustering or agglomeration of industry in a nation facilitates new inventions. These innovations then have the ability to strengthen a nation’s competitiveness within a sector. The next step, according to the principle of comparative advantage, is that the heightened comparative advantage leads to more exports and more production. “The crank comes around full circle when this extra production generates additional industrial clustering” (Baldwin, p. 128).

The second unbundling is known as the revolution in information and communication technology (ICT). The ICT revolution “lowered the cost of coordinating complex processes across great distances” (Baldwin, p. 102). The newness of the New Globalization stems from two aspects of the second unbundling which are “fragmentation and offshoring in manufacturing and service sectors, and the technology flows that follow the jobs sent offshore” (Baldwin, p. 142). This ironically had the opposite effect on the countries from the first unbundling. Once it was possible to separate manufacturing processes internationally, firms pursued the option to have their plants to more economical locations. They started moving labor-intensive stages of production from high-wage nations to low-wage nations. The Old Globalization produced an industrialization of the North and a deindustrialization of the South. The

New Globalization has turned this situation on its head. “The North—the group of countries called “industrialized nations” twenty years ago—has seen a rapid fall in the number of jobs and value-added shares in the manufacturing sector” (Baldwin, p. 108). Manufacturing output has increased in six developing nations, which are China, Korea, India, Indonesia, Thailand, and Poland. The key difference between the unbundling is transportation cost in the first unbundling and communication in the second unbundling.

Baldwin argues that the ICT revolution lowered the cost of moving ideas inside the boundaries of international production chains. Due to this, G7 firms started “to arbitrage the gigantic imbalance in the planetary distribution of know-how by moving Northern knowledge to the South” (Baldwin, p. 215). Subsequently there was rapid industrialization of the nations involved in these global value chains and a rapid deindustrialization of the G7 firms’ home nations. Furthermore, since industrialization can happen stage by stage in global value chains as opposed to sector by sector in Old Globalization, industrialization policy is now easier and less risky. A prime example of the changing development policy is what happened in Thailand. “Like most ambitious developing nations in the 1960s, Thailand’s auto industry relied on imported kits that were assembled for local sales” (Baldwin, p. 250). The country moved beyond this business model by pursuing a subtle industrial policy. Specifically, “Thailand raised local content requirements. In reaction, U.S. and European makers exited, but Japanese companies decided that Thailand would be a good export platform for Southeast Asia and beyond” (Baldwin, p. 250).

Globalization and free trade among nations have provided numerous benefits to this interdependent world. The concept of comparative advantage explicitly proves the advantages of free trade. Comparative advantage, in an international sense, is “the ability of a country or firm to produce a particular good or service more efficiently than the other goods or services that it can produce, such that its resources are most efficiently employed in this activity” (FLS, p. 348). The comparison is to the efficiency of other economic activities that the actor might undertake; given all the products, it can produce not to the efficiency of other countries or firms just as personal specialization implies that each individual should do what he does best, and not what he does better than all others. For example, Albert Einstein is very good at astrophysics as well as typing. Despite being a good typist, he decided to hire an assistant to do his typing for him. Even though he is better at typing than his assistant, the opportunity cost of spending his time is much higher for him because of his qualified skills in physics. Relating this back to an international realm, the specialization involved in comparative advantage implies that countries should produce what they produce most cost-effectively.

WHY THERE IS RESISTANCE

While international trade is beneficial to the globalized world as a whole, this is not necessarily true on an individual country basis. International trade is only beneficial in terms of aggregation. Inherently, there will be winners and losers on each side. The loser’s losses lead to trade barriers among industries and sectors. These barriers usually reflect domestic concerns, despite the fact that they implicate foreign relations. William McKinley, a leading protectionist member of the U.S. Congress before he became president, “once said of a tariff he was shepherding through the House of Representatives: ‘This is a domestic bill; it is not a foreign bill’” (FLS, p. 306). This is the general sentiment for many citizens in their home countries. Trade policy typically reaches the public consciousness, and the media, when some national producers complain that there is too much or too little trade in the goods they produce. Often, producers are concerned because imported goods cut into their profits or cost them their jobs. Other producers may complain that foreign barriers to their goods keep them out of markets abroad and similarly cut into

profits and cost jobs at home. The theorem that protection benefits the scarce factor of production is known as the Stolper-Samuelson theorem. This view flows from the Heckscher-Ohlin theory, which explains that “if a country imports goods that make intensive use of its scarce factor, then limiting imports will help that factor” (FLS, p. 310). To simplify, in a labor-scarce country, labor benefits from protection and loses from trade liberalization. On the other hand, there is the Ricardo-Viner theory which explains trade relations that emphasizes the sector in which factors of production are employed rather than the nature of the factor itself. This “differentiates it from the Heckscher-Ohlin theory, for which the nature of the factor labor, land, capital is the principal consideration” (FLS, p. 311).

Furthermore, countries with a relatively low level of economic output generally want to develop; however, it is sometimes hard to achieve this goal. Development can hinder the interests of those domestically or abroad. There are three general elements for reaching economic development. An international relations analyst must “consider geography, domestic factors such as a nation’s political economy, and domestic institutions” (FLS, p. 427). An example of how geography hinders economic development is landlocked countries. Landlocked countries, regions with diseases that are difficult to control or cure, and areas that are very far from major markets for their goods are all at a developmental disadvantage. These disadvantages were more than likely exacerbated before the first unbundling when communication and transportation costs were much higher. In regard to the domestic factors, governments can willingly control the pace of how fast a country grows. This power, of course, is not absolute and only works within certain bounds. Governments can provide things like infrastructure that help facilitate the transaction of goods across the country. Examples include roads, railroads, airports, utilities, and ports. Additionally, a crucial function of the “government is to ensure the security of property. After all, economic growth requires everyone from farmers to factory owners to invest in improving their ability to produce, and such improvements are unlikely to be made if property rights are not safe” (FLS, p. 429). These policies can sometimes work and fail, depending on lobbying efforts. As domestic industrial interests grew in size and strength, they were able to push for a complex of policies known as import substitution industrialization (ISI). These policies had the goal of replacing imports with domestically produced goods. It was in this context that “Raúl Prebisch and his followers argued that such enforced self-sufficiency was actually desirable and should be deepened” (FLS, p. 489). These policies were pursued by most developing countries from the 1930s through the 1980s to reduce imports and encourage domestic manufacturing, often through trade barriers, subsidies to manufacturing, and state ownership of basic industries. Sugar subsidies are an example. In contrast to ISI, there is export-oriented industrialization (EOI). This is “a set of policies, originally pursued in the late 1960s by several East Asian countries, to spur manufacturing for export, often through subsidies and incentives for export production” (FLS, p. 489). Some actors have a large collective interest in one policy resolution. In these cases, the individual citizen would lose more fighting the policy than going with the status quo. In terms of domestic institutions, the interests that characterize a society, the interactions among them, and the institutions that develop within the society are all interrelated. Rich countries are rich because they exploit LDCs (Least Developed Countries). For example, “a multinational mining company and an LDC government have a common interest in getting minerals out of the ground and to market, but they are likely to disagree about the division of the profits. Similarly, LDC companies and governments may appreciate being able to borrow from international development banks, but there is likely to be political controversy about making the sacrifices necessary to pay back their debts—especially in hard times” (FLS, p. 439). Rich countries can profit from low wages in the LDCs, which means that they may have little interest in encouraging development that will raise wages. Ultimately, this makes rich companies richer while poor countries remain stagnant. Raúl Prebisch, an

Argentine economist and head of the UN Economic Commission for Latin America, argued that “in principle, trade was good for both rich and poor countries. However, he noted that LDCs produced mostly raw materials and agricultural products, while rich countries produced mostly manufactured goods” (FLS, p. 442). Essentially, trade worked against the interests of the LDCs and in favor of the interests of the developed countries.

Ultimately trade and development complications arise due to a plethora of conflicting ethnic and national interests. However, the hegemonic stability theory may be a possible solution. This theory argues that the existence of a single very powerful nation facilitates the solution of problems of collective action and free riding; the hegemonic power is large and strong enough to be both willing and able to solve these problems for the world as a whole. In economic affairs, this approach argues that when there has been such a hegemonic power over the past two centuries (Great Britain after 1860 and the United States after 1945), trade liberalization was facilitated by the leadership of an overwhelmingly influential world economic power.

Hegemonic powers have used trade organizations to promote free trade in the past. For example, the General Agreement on Tariffs and Trade (GATT) is an international institution created in 1947 in which member countries committed to reduce barriers to trade and to provide similar trading conditions to all other members. The “GATT’s design was heavily influenced by lessons drawn from historical trade liberalization efforts” (Baldwin, p. 3, as cited in Irwin, Mavroidis, and Sykes, 2009). In 1995, the GATT was replaced by the World Trade Organization (WTO). The WTO is an institution created in 1995 to succeed in the GATT and to govern international trade relations. This organization “encourages and polices the multilateral reduction of barriers to trade, and it oversees the resolution of trade disputes” (FLS, p. 325). The GATT was “created in 1947 as one of the original Bretton Woods institutions, and it oversaw a dramatic liberalization of trade relations, in particular among developed countries, for more than 40 years” (FLS, p. 325). The demand for trade liberalization was great “because tariffs were still high from the Smoot–Hawley tariff and retaliation in the 1930s. The supply of trade liberalization was, in general terms, also great as leaders of the largest trading nations wanted to avoid the protectionist mistakes of the 1920s and 1930s” (Baldwin, p. 3). Both the GATT and the WTO have been enormously successful in their stated purpose of reducing barriers to trade among member nations, with world trade growing faster than world output for virtually all the postwar period. The principal achievement of both organizations has been to arrange a series of “rounds” during which member states negotiate multilateral reductions in trade barriers. The negotiations take place under a loose rule of reciprocity that balances the dollar value of concessions, which are then automatically extended to all other member states under the most-favored-nation (MFN) rule. There are also rules about when and how countries can use safeguards to protect domestic industries temporarily.

WHAT SHOULD BE DONE

Edward Alden and Laura Taylor-Kale in The Work Ahead: Machines, Skills, and U.S. Leadership in the Twenty-First Century argue that “the most important challenge facing the United States—given the seismic forces of innovation, automation, and globalization that are changing the nature of work—is to create better pathways for all Americans to adapt and thrive” (Alden & Taylor-Kale, p. 6). If this is not achieved, the United States will fall to political pressure for a retrenchment strategy. This could include things like “trade protection, immigration restrictions, and possibly even restraints on technology and automation” (Alden & Taylor-Kale, p. 7). Unfortunately, with the current administration, we already see some retrenchment policies underway. While the Trump administration points to countries like China for the loss of unskilled jobs in the United States, automation

and technological advancement seems to be the largest disrupter in blue-collar jobs. Alden and Taylor-Kale point out that “advances in computing and robotics have made it increasingly possible for companies to replace human labor with machines” (Alden & Taylor-Kale, p. 6). While these unskilled jobs will be lost, new jobs will be created to help service, program, and maintain these machines. Transitioning a labor force to do such tasks is easier said than done. Acquiring the education and skills needed to prosper in a more automated work environment is a big obstacle, given the current structure of education in the United States. The lack of accessible educational opportunities that are clearly and transparently linked to the changing demands of the job market is the reason behind this challenge (Alden & Taylor-Kale, p. 14). If the labor force is not replenished, then automation and artificial intelligence (AI) is likely to exacerbate inequality and leave more Americans behind. It is evident that for many Americans, the link between work, opportunity, and economic security is in jeopardy. The United States should rebuild these links for all Americans through three actionable steps. First, “the United States should set and meet a goal of bringing postsecondary education within reach of all Americans and linking education more closely to employment outcomes” (Alden & Taylor-Kale, p. 76).

Programs like apprenticeships, work-study programs, and internships need to be a priority for educational institutions. These programs bridge the gap between what is learned in classrooms and the actual skills that are required on the job. Additionally, these programs inevitably lead to the curriculum to become tailored towards applied learning. In addition to the prioritization of these programs, there needs to be “a society-wide effort to increase public respect for and acceptance of work-based training programs” (Alden & Taylor-Kale, p. 76). Many parents believe that a four-year college education is the only path to a sustainable career when, in reality, this is false. Many so-called “middle-skilled” jobs ironically pay better than “high-skilled” jobs that are only attained by acquiring a bachelor’s degree. Baldwin, in addition to Alden and Taylor-Kale, argues that “promoting investment in human capital with policies linked to education, training, and retraining” is the first step to rebuilding these links (Baldwin, p. 227).

Beyond the prioritization of postsecondary school, governments should adopt an explicit goal of creating better jobs and career paths for Americans. Initiatives should aim at attracting investment and revitalizing entrepreneurship (Alden & Taylor-Kale, p. 57). The United States is currently competing with many other nations to host multinational corporations (MNCs). In order to remain competitive, the U.S. government needs to make policies conducive to their business practices. Companies will follow the best investment climates and create jobs within those countries. On the federal level, the government should reassure MNCs of their commitment to maintaining open trade and investment policies (Alden & Taylor-Kale, p. 62).

Additionally, a low corporate tax rate is needed to keep companies in the United States and attract others to creating headquarters in America. Lastly, the federal government needs to revamp the national infrastructure. High-speed transportation and broadband coverage are some specific areas where the government should focus on. Baldwin emphasizes the need for reliable connections between factories, which “often involves time-sensitive shipping, world-class telecoms, and short-term movement of managers and technicians” (Baldwin, p. 239). Assurances on infrastructure services and visas will attract foreign direct investment. On the local government level, “states and cities continue to offer tax and other incentives to encourage companies to site their job-creating activities in those locations” (Alden & Taylor-Kale, p. 60). To ensure the best outcomes for their local community, these municipalities should subsidize training programs instead of offering direct tax cuts. Retraining programs will enable the locals to gain valuable skills that will pay dividends for a lifetime.

Lastly, “governments and employers should work to reduce barriers to labor mobility for Americans, including high housing costs, occupational licensing restrictions, and inflexible hiring practices” (Alden & TaylorKale, p. 92). These actions are quintessential in order to rebuild the link between work, opportunity, and economic security. The mobility of the labor force is directly correlated to how well balanced the country is in terms of skilled workers. In many areas of America, there is a shortage of skills, while in others, there is a shortage of work. By improving mobility, the economy is better able to find an equilibrium between these two ends of the spectrum. In order to do so, states should reduce licensing requirements for certain occupations, or, at the very least, “improve the portability and reciprocity of occupational licensing across state borders” (Alden & Taylor-Kale, p. 93). Additionally, fast-growing cities should pay close attention to the labor market barriers posed by high housing costs. Options for addressing this issue include affordable housing subsidies, lessening of zoning restrictions that discourage high-density development, and improvements in public transit to speed up longer commutes (Alden & Taylor-Kale, p. 93). Mobility can also be improved by the implementation of unemployment insurance. This type of insurance policy will be a stop-gap program that enables citizens to sustain their livelihood while developing new skills for their future employers.

This memo has addressed the needs for a liberalized world trade order by first explaining the origins of globalization and how free trade is beneficial to the globalized world. It then explored why resistance is met despite the benefits of free trade, and lastly has explained what must be done to achieve a liberalized global trade order. All analysis have concluded that free trade is economically beneficial for the globalized world. Despite this being the case, many nations have adopted protectionist policies. In order to rebuild the confidence in trade talks and restore the powers of free trade organizations, the above suggestions must be heard and considered.

t he s tate of n at U re a CC ordin G to h obbes and r o U ssea U Aaron Lu

TWO PERSPECTIVES ON THE STATE OF NATURE: A STATE OF WAR AND A STATE OF PEACE

Thomas Hobbes lived through the aftermath of the Spanish Armada and witnessed the English Civil War. His experiences with war certainly influenced his view of the natural state of man, which he shared in his pessimistic social contract theory Leviathan. After reviewing the social contract theories of prominent modern philosophers Thomas Hobbes and John Locke, Jean-Jacques Rousseau, an influential contributor to the Enlightenment, offered his insight on the natural state of man in his optimistic social contract theory Discourse on the Origin of Inequality. Hobbes would mostly disagree with Rousseau’s depiction of the state of nature due to their conflicting outlooks on human nature.

For both philosophers, natural man acts in the interest of his self-preservation, and his passions reflect his behaviors in the state of nature. Hobbes defines self-preservation as the “preservation of [one’s] own life” by any means necessary (Hobbes 79). Similarly, Rousseau defines self-preservation as the fulfillment of man’s “physical needs” of “nourishment and woman and rest” (Rousseau 26). Hobbes’s definition encompasses both human needs and desires, while Rousseau’s definition only encompasses physical human needs; however, both thinkers would concur that subsistence motivates man. Hobbes believes that a “perpetual and restless desire of power after power” drives mankind to pursue prosperity (Hobbes 58). Hobbes explains that when “any two men desire the same thing ... they become enemies ... and endeavour to destroy or subdue one another” (Hobbes 75). Men actively attempt to conquer other men because they compete with one another for limited resources to survive. Consequently, a condition of war where “every man [is] against every man” characterizes the Hobbesian state of nature (Hobbes 76). However, Rousseau characterizes the state of nature as a condition of relative peace, the exact opposite of Hobbes’s state of nature. Rousseau reveals that natural man’s “innate repugnance to seeing his fellow men suffer ... tempers the ardor he has for his own well-being” (Rousseau 36). Therefore, the universal natural virtue of pity “contributes to the mutual preservation of the entire species” because men empathize with one another and assist one another during times of hardship (Rousseau 38). Hobbes would concur with Rousseau that man ultimately wishes to achieve and maintain his well-being, but Hobbes would dissent from Rousseau in regard to the medium through which natural man achieves his well-being. For Hobbes, man achieved self-preservation through violence; for Rousseau, man achieved it through peace.

Hobbes and Rousseau find identical drawbacks of the state of nature, albeit for different reasons. First, both philosophers would agree that the state of nature lacks industry. Hobbes attributes the lack of economic progress to the inability of men to protect private property. Since men can easily plunder from one another, they have little incentive to acquire property. Hobbes claims that “the fruit [of industry] ... is uncertain” in a condition of war because keeping goods relies on man’s ability to defend it (Hobbes 76). On the other hand, Rousseau claims that “there [would be] neither education nor progress” because man cannot “communicate [his discoveries] to others” (Rousseau 41). Language only developed as men began exercising reason to cooperate with one another.

Hobbes traces the lack of industry to the absence of private property while Rousseau traces the lack of industry to the absence of a language through which men could communicate their findings. There would also be a lack of art, culture, trade, and innovation because these problems arise from the lack of industry. Both states of nature share these obstacles to progress. Second, both thinkers reject the existence of morality in the state of nature. Hobbes believes that men cannot commit injustice because the law principally dictates morality. The law does not exist in his state of nature, and natural man has no innate morality. Thus, “where [there is] no law, [there is] no injustice” (Hobbes 78). While Rousseau concurs that natural man has no innate morality and that society establishes morality, he disagrees about the effect of its absence. Rousseau criticizes Hobbes because he “wrongly injected into the savage man’s concern for self- preservation the need to satisfy a multitude of passions which are the product of society” (Rousseau 35). Basically, Rousseau criticizes Hobbes for using societal bias to form his supposed conclusion that man “is naturally evil” because he “has no idea of goodness” (Rousseau 35). Instead, Rousseau asserts that man’s “ignorance of vice prevents [him] from doing evil” (Rousseau 36). However, Rousseau’s criticism and assertion contradict each other. Men in the Hobbesian state of nature cannot be evil if they do not have a morality to abide by just as Hobbes contended. If Rousseau were referring to an absolute standard of morality instead, then it would not make sense for men to be unaware of it because Rousseau claimed that natural man’s “heart asks nothing of him” (Rousseau 27). Hobbes would consider the possibility that he formed a distorted opinion, but he would highlight the flaws in Rousseau’s argument. Nevertheless, both thinkers would agree that the state of nature lacks industry and morality.

Both philosophers also acknowledge the effect of unlimited liberty in the state of nature. Hobbes defines liberty as “the absence of external impediments” on what man can do (Hobbes 79). Since the state of nature has no laws, morality does not exist. Furthermore, in a state of war, “every man has a right to everything, even to one another’s body” (Hobbes 80). Therefore, private property cannot exist because men can forcefully steal it. The Hobbesian state of nature does not guarantee private property rights. Rousseau defines liberty as the ability to deviate from freedom. He says that an animal “chooses or rejects by instinct” but natural man “by an act of freedom ... often to his own detriment” (Rousseau 25). Freedom, according to Rousseau, simply means not behaving on instinct but reason. Rousseau defines reason as a response to difficult conditions. For example, Rousseau says that men in cold regions exercise reason by covering themselves “with the skins of animals they had killed” (Rousseau 45). Reason eventually allows men to recognize their physical differences and this realization leads to material inequality because the physically superior men could amass more property. Hence, Rousseau considers the development of private property as a byproduct of reason which does not exist in the state of nature. Because men do not need reason nor private property to satisfy their physical needs, private property does not exist in the Rousseauian state of nature. Additionally, reason causes men to lose their innate pity because men become envious of one another due to their physical and material inequalities. It “engenders egocentrism” and “turns man in upon himself” (Rousseau 37). Hobbes ascribed the lack of private property to unlimited liberty while Rousseau ascribed the lack of private property to the ignorance of reason in the state of nature. Unlike Hobbes, Rousseau concludes that unlimited liberty gives men the opportunity to adopt reason.

Hobbes and Rousseau highlight two distinct types of equality in their opposing states of nature. Hobbes observes an equality of vulnerability because “nature [has] made men so equal in the faculties of body and the mind” to where the strongest can kill the weakest and “the weakest has strength enough to kill the strongest” (Hobbes 74). In other words, men who can overpower others with strength might be outsmarted with cunning. On the other hand, Rousseau recognizes an equality equated to a lack of inequality. He reasons that “inequality is hardly observable

in the state of nature” because “all [men] nourish themselves from the same foods, live in the same manner, and do exactly the same things” (Rousseau 42). Men live the same lifestyles because they do not recognize their physical inequalities, and therefore, do not assert superiority to subjugate others. Additionally, the “law of the strongest” does not apply because natural man does not depend on any other man to live (Rousseau 43). Thus, no inequality between master and slave exists in Rousseau’s state of nature but can in that of Hobbes because men would use their physical advantages to improve their own welfare without the consideration of others’. In their respective states of nature, Hobbes observes an equality of vulnerability that results from constant war while Rousseau observes an equality of rank that results from relative peace.

Hobbes would largely disagree with Rousseau’s depiction of the state of nature because Hobbes considers man as naturally vicious while Rousseau considers man as peaceful. Although both thinkers would acknowledge an absence of industry, morality, and private property, they would do so for different reasons. Both believe that unlimited liberty can lead to violence, and both hold unique perspectives on equality. Since the opposite of the state of nature is political society, Hobbes’s political society would be generally peaceful while Rousseau’s would be generally violent. Hobbes’s assessment of Rousseau’s state of nature would simply be a comparison of the two. Given that bloodshed has decreased in the long run in a world full of political societies, Hobbes’s assessment of Rousseau’s state of nature is persuasive.

WORKS CITED Hobbes, Thomas. Leviathan: With Selected Variants from the Latin Edition of 1688.

EDITED BY Edwin Curley, Hackett Pub., 1994. Rousseau, Jean-Jacques. Discourse on the Origin of Inequality. Translated by Donald A. Cress, Hackett Pub., 1992.

a nalysis on U. s . P oli C y on G lobalization

Andrew Nguyen

The level of discord in international trade negotiations has risen in the past few decades due to a variety of reasons. These reasons include the pushback to globalization as a response to the “underdevelopment of development” of the core-periphery capitalist world system, the international security threats and instability from global terrorism, and the polarization and domestic pressures to protect declining job sectors in the face of the New Globalization. All these factors have led to the stalling of globalization in comparison to the rapid global integration of the 1990s. This has led to an international order that is viewed as increasingly ineffective as shown by major international institutions, such as the World Trade Organization (WTO), breaking down as rule-making international trade authorities. In the interim period, there has been no other international institution that has stepped up to take the place of effective international governance in order to promote the further liberalization of international trade. Furthermore, Western powers that may have previously held hegemonic economic interests in global trade liberalization and freer borders have seen domestic dissent and opposition to trade and migration, the major forces of globalization. Because of the economic and political power that the United States holds, U.S. domestic politics must reorient to promote globalization in order to maximize its comparative advantage benefits from international trade. More importantly, the United States must ensure that these workers are able to equitably share in these benefits in order to stimulate greater economic growth. To do so, U.S. domestic policymaking needs to better train workers to adapt to the realities of the New Globalization by teaching them the necessary communication, creative, and technical skills to establish an automatizing workforce. Internationally, the politics of development must change to be more effective and equitable to redistribute the gains of global trade so that rich and poor countries do not further polarize. Steps must be taken to allow for greater freedom of mobility and opportunity for people, especially via migration, which could help to restart globalization and international trade liberalization.

Comparative advantage refers to a type of gain from international trade due to the division and specialization of labor. Because specialization requires access to large markets and economic growth, the division of labor across national markets results in dynamic international trade. This means that both trading countries can benefit economically by specializing in particular products and services in which they have comparative advantages, and then trading for those products they do not specialize in. “The principle of comparative advantage leads to the conclusion that each country will be best off if it produces what it is best at producing and exchanges its products with other countries in return for imports of things it is not so good at producing” is the core of trade economics that focuses on efficient production in order to maximize gains (FLS, p. 298). One of the ways in which national comparative advantage is determined is by the Heckscher-Ohlin trade theory, which describes how “a country will export goods that make intensive use of the factors of production in which it is well endowed,” such as land, labor, financial, or human capital, and “import goods that make intensive use of the country’s scarce resources” in order to maximize its holistic economic growth potential (FLS, p. 299-300). Economic logic, therefore, makes the argument that free trade is beneficial as imports represent trade gains and exports represent trade losses. If there are open, liberal borders and the removal of trade barriers there will be decreases in the costs of goods to consumers and increases in the efficiency of domestic production so that all countries gain from international trade (FLS, p. 298).

On the other hand, the political economy of trade protectionism refers to the production of relationships and trade-policy interests that “explain who might be in favor of and against trade” (FLS, p. 308). In general, trade protection is harmful to the national economy as a whole. However, it is still a major domestic political issue because, while all countries benefit from international trade, not all groups within countries benefit equally. If losers of trade hold political power, then as producers, they may be concerned about competition from imports and “may complain that foreign barriers to their goods keep them out of markets abroad and also similarly say that imports cut into profits and cost jobs at home” (FLS, p. 307). One explanation for why states may not embrace free trade all the time comes from the Stolper-Samuelson theorem, which “predicts that trade protection benefits the scarce factor of production”— looking at the Heckscher-Ohlin theory, limiting competing imports will help that scarce factor so that in a labor-scarce country, “labor benefits from protection and loses from trade liberalization” (FLS, p. 309). This happens because trade liberalization tends to increase the exports and income of the relatively abundant factor while increasing import competition and decreasing the income of the relatively scarce factor. Under StolperSamuelson, policy preferences and conflict over trade policy are based on class or factor interests, with those factors of production being capital, labor, and skills.

According to Irwin, this is the reason why rising protectionism under President Trump fails to create new manufacturing jobs or narrow the trade deficit. Instead, Trump’s trade policies have risked “a global trade war that would prove damaging to all countries,” as well as an undermining of international institutions in which the U.S. is deeply involved, such as the WTO, which are responsible for making “meaningful contributions to global peace and prosperity” (Irwin, p. 45).On the other hand, the Ricardo-Viner model deals with industry-specific factors or larger sectoral interests, which works under the claim that factors of production are actually very limited in their mobility. Under the Ricardo-Viner approach, “the interests of individuals flow from the sectors of the economy in which they are employed,” so that workers or managers “in an industry that faces stiff import competition will be protectionist [while] a worker or manager in an exporting industry will want free trade” (FLS, p. 311). Because of this, Blinder argues that the “political calculus really is inherently biased against freer trade” due to reasons such as a lack of public understanding of trade principles and the producer perspective in which the interests of producers and the provision of well-paying jobs is just as important as, if not more so than, the provision of cheaper goods and services (p. 128). Under this perspective, Blinder contends that the argument of comparative advantage would have to be reframed as a principle for moving people into jobs where they earn more rather than moving goods and services around in an international trade flow that makes them cost less. Because of these competing interests and priorities, trade restrictions will continue to be at the forefront of the political agenda.

Current and future international trade represents the liberal ideology of bringing “order to contemporary international trade policy” by providing a setting that facilitates international cooperation and establishing rules and standards of behavior for governments that are part of the international institution through monitoring and enforcing members’ compliance to the agreed- upon rules (FLS, p. 324). Because the Heckscher-Ohlin trade theory explains how comparative advantage benefits states due to the more efficient, mutually beneficial division of labor, trade institutions, such as the General Agreement on Tariffs and Trade (GATT) and WTO that work to spread free trade, are important for creating the arenas of engagement for states to develop trade expectations. These types of institutions are successful because of the expectation of reciprocity and repeated interactions, which incentivizes members of the institutions to “play nicely” or resolve disputes diplomatically in accordance with the rule-making bodies since they are politically and economically linked to the negotiations and agreements of countries across multilateral trade relations. These linkages are important for mutually beneficial national development policies

because they “reduce the costs to governments of making joint decisions … and can help governments resolve disputes” in a much more efficient manner, which is critical in an increasingly fragmented, international, and complex trade realm in which comparative advantage principles make countries increasingly interconnected and reliant on each other (FLS, p. 325). Additionally, the WTO monitors regional free trade agreements to ensure that multilateral negotiations and agreements “constitute institutional structures that help mediate or avoid divisive trade-policy conflicts among countries,” which incentivize free trade among member countries because of a stronger commitment to reciprocity and shared economic and political gain (FLS, p. 330). However, the negative aspect to this is that some believe that these regional agreements put limits on trade with non-member countries and that international trade institutions unfairly skew the balance of trade.

According to Baldwin in “The World Trade Organization and the Future of Multilateralism,” while international trade institutions like the WTO and GATT were important for setting up an integrated world economy based on the fragmented international trading of parts, the WTO in particular has fallen into a “deep malaise” characterized by the “failures, flops, and false dawns” of the Doha round’s gridlock on international trade policymaking (p. 95). Having institutions like the GATT was important for pushing the international order into a new phase of international economics and propelling trade liberalization on a brand-new scale as the United States took over as the global hegemon. However, in this time, Baldwin argues that the founding principles of the GATT were still based on pre-World War I globalization theories and unilateral and bilateral world trade integration strategies. Under New Globalization, however, the second component of strategies has created an unsteady international trade environment. This results in goods crossing national borders several times during the production process, meaning that open trade with developing countries is increasingly important. For this reason, the future of trade is trending towards megaregional and multilateral trade agreements, which are more sensitive to offshoring and allow for greater complexity in negotiating global value chains.

Ultimately, Baldwin argues that “world trade governance is heading towards a two-pillar system” of two unbundling (p. 114). The system is balanced out by one pillar, the WTO, that represents traditional trade structures. The second pillar deals with everything else that results from fragmentation or the movement of the stages of production across international borders, such as: “trade in intermediate goods and services, investment and intellectual property protection, capital flows, and the movement of key personnel” (p. 114). Through this twopillar system, poor nations, in particular, hold the potential to take greater part in multilateral trade decision-making processes because they can more effectively leverage their roles in global value chains and international trade. Therefore, these nations are able to fight for more equitable redistributions of the gains from global trade, which could help to restart international trade liberalization and open more countries to free trade again.

Before globalization, the cost of moving goods, ideas, and people was very high, which forced production and consumption to gather in close proximity of each other in order to benefit from economies of scale. Baldwin argues that the “three-cascading constraints” perspective shows how globalization has evolved to unbind these constraints and further open and integrate the global economy, allowing for much greater mobility across these things. Old Globalization refers to the industrial model of national economic development, which focused on domestic growth and manufacturing, and largely revolved around advancements in steam technology. Before this period, Baldwin explains that “goods, ideas, and people all moved by the same means” and traveled very slowly (p. 113). This held back globalization because the costs of transportation became a binding constraint on how fast, and therefore how far, goods, ideas, and people could travel. With the first unbundling, the steam revolution and diesel-

powered ships significantly reduced the cost of water- based transportation, or the cost of moving goods, meaning that one of the three items no longer acted as a binding constraint and goods could effectively move around the globe much faster and more safely. However, the movement of ideas and people were still slow, risky, and expensive as it was difficult for people to find abundant opportunities elsewhere. Furthermore, telecommunication technology had not quite yet mastered long-distance communication, as signal degradation and expensive wiring still kept the cost of knowledge sharing fairly high.

New Globalization is very different because “revolutionary advances in the transmission, storage, and processing of information … drastically lowered communication costs” and made the telecommunication network denser, more reliable, and cheaper (Baldwin, p. 130). This made it so that ideas were no longer a binding constraint, which in turn made the trade of goods even faster and more coordinated, resulting in people moving around at lower total costs, thus making opportunities much more communicable and accessible. In comparison to the Old Globalization, which was more limited by national borders and domestic economies and focused on the flow of goods and manufacturing, the New Globalization can be explained in terms of how the second unbundling reduced the costs of mobility in goods and ideas, and how this has revolutionized fragmented offshoring and technology flows. The evolution of offshoring itself has reimagined global trade relationships and the directions in which information and power flows through international production networks. “Traditionally, manufacturers in the Group of Seven (G7) nations sourced inputs domestically to produce what might be called made-here-sold-theregoods,” whereas the second unbundling shows how goods came to be made everywhere as competitive elements like management and marketing intermingle across international lines (Baldwin, p. 143). As factories cross borders because of the new international organization of production, international competition becomes broken up into factor competition rather than sector competition, which denationalizes comparative advantage “by redrawing the international boundaries of competitiveness” (Baldwin, p. 175). Under Old Globalization, nations may have specialized in particular sectors and developed their national trade policy based on comparative advantage. This allows for new fragmented international production networks that nations now get to specialize differently in each factor of production. Because of this reorganization in which factors hold the comparative advantage, rather than which sectors hold the comparative advantage, Baldwin argues that the second unbundling creates new winners and losers of trade.

With the international relationships built under the New Globalization, the developing world has increasingly turned to or been forced into global markets and the capitalistic system, so that the politics of development play an important role in the evolution of the new international order. Development is difficult to attain because steps that a nation can take to develop can sometimes create conflict with interest groups both domestically and internationally. FLS defines three major approaches to why development is hard to achieve and why some countries are rich and others remain poor: “geography, domestic factors such as a nation’s political economy, and domestic institutions” (p. 427). In terms of geography, certain common characteristics can put nations at a developmental disadvantage. Being landlocked restricts a nation’s access to the global economy via waterways or being located far away from major markets – both make global trade and communication much more expensive and historically difficult. Additionally, regions that are prone to diseases that are hard to control or cure are disadvantaged by high-risk or unstable human resources. Although another reason for this may be that the particular diseases found in these areas are difficult to control because these nations are not seen as developmental priorities, or they lack the infrastructure. The weather, disease, and potential natural resource dependency are all geographic factors that play into national development and prosperity.

Domestically, governments can create stable and reliable conditions for economic growth by “investing in education and public health, [creating] an efficient economic infrastructure, and [ensuring] a stable monetary and financial system,” which can facilitate economic growth and help to secure private property rights to promote individual economic prosperity (FLS, p. 430). Essentially, some development policies work and some fail because of “how politicians, social groups, and the public bargain, fight, cooperate, and negotiate their way toward an outcome,” and each interest group may benefit or experience harm differently from developmental policies. Additionally, “because many LDCs [Least Developed Countries] have boundaries that were determined by colonial powers without regard to preexisting ethnic, religious, and racial features of the population, they can be very diverse, and competition among groups can complicate” domestic economic policy making, as the different interests of different groups may have more or less political power or leverage (FLS, p. 431). But while domestic factors and national government policies are important to understanding national developmental success or failure, the international political environment also constrains or provides opportunities. While poverty rates have fallen worldwide in the past several years, many LDCs also argue “that the current poverty of much of the world is due to the structure of the international system” because of the way global trade is fragmented (FLS, p. 438). The Argentine economist Raúl Prebisch argues that because rich countries produce most manufactured goods while LDCs produce the raw materials and agricultural products (primary products), global trade works in favor of developed countries while forcing the prices of LDCs’ primary products to lower over time; therefore, LDCs “got less for what they sold, and they paid more for what they bought,” demonstrating that international economics and trade purposefully keep poor countries poor and underdeveloped (FLS, p. 442). Finally, development can be hard to achieve because the relationship between resource wealth and underdevelopment has a strong legacy of colonialism, resulting in what some theories call the “resource curse.” This occurs when “the government of a country with a natural resource that can be easily and lucratively exploited may have few reasons to encourage productive activities other than those associated with that resource” due to an incentive to engage in corrupt practices such as bribing governments or private companies, such as with oil wealth, which can keep LDCs from enacting effective national developmental policy (FLS, p. 435).

Trends in development strategies have also impacted different nations’ paths to development. From the 1930s to the 1980s, theorists like Raúl Prebisch argued that import- substituting industrialization (ISI) and enforced self-sufficiency would be a successful response to the dependency theory, which explains that peripheral states were trapped in a cycle of underdevelopment and would never catch up to the core states. This occurred because multinational corporations are fragmented across different states that are primarily extracting cheap, unskilled goods and services from peripheral economies in order to accumulate value and produce profits for core economies. The goods and services would be produced and sold at such low costs that they would crowd out local businesses and destroy local entrepreneurship in less- developed nations that could not compete, creating a permanent divide in labor between the highly skilled core and the extractive periphery similar to the colonial model (Lecture, Nov. 18th). Import- substituting industrialization, which would “reduce imports and encourage domestic manufacturing, often through trade barriers, subsidies to manufacturing, and state ownership of basic industries,” seemingly allowed developing nations to move away from dependency on primary and extractive production to industrialization and broader domestic development instead (FLS, p. 446). Larger developing countries that adopted this model, such as India, Brazil, Mexico, and Argentina, seemed successful at first; however, failures to sustain development under ISI due to issues such as smaller domestic markets and lack of global market expansion left these countries vulnerable to debt and global crises. In its place, the “Asian Tigers” demonstrated how export- oriented industrialization (EOI)

aimed to “spur manufacturing for export, often through subsidies and incentives for export production,” and could push exports for foreign consumers, particularly Americans, in order to fuel longer-term development through integration into a much larger and more stable global market while using the state to protect its domestic markets (FLS, p. 448).

Edward Alden and Laura Taylor-Kale argue that Americans have failed to adequately adjust to the circumstances and conditions of the global and automated economy because government policies have failed to reflect the demands of an increasingly competitive economy, allowing the links between work, opportunity, and economic security to break down. They answer that the U.S. should begin to rebuild these links for all Americans by creating better jobs, maintaining technological leadership, and making postsecondary education universally accessible. Additionally, the task force recommends a better system of unemployment insurance as well as government policies that encourage labor mobility, including an employment benefit structure that is tied to individual employees rather than the jobs themselves (Alden and Taylor-Kale, p. 5). Alden and Taylor-Kale point to “the rapid pace of technological change, heightened global competition, and growing barriers to opportunity” as the major causes of why these links have broken down (p. 8). Unrest and instability have resulted from a generation of the workforce that is unable to adjust to a rapidly changing economy. The United States has failed to react to steadily rising competition from other countries, and our trade policies have reflected that complacency as the U.S rides on its years of unmatched global prowess. Over the past half century, the United States has had a “history of economic leadership,” having been the creator of the modern global rules of economic competition and creating benefits such as increased trade flows and lower cost of goods (Alden and Taylor-Kale, p. 3). Additionally, U.S. economic and political leadership has historically, particularly within the past century, discouraged protectionist measures in developing countries and opened more countries to trade liberalization through a mix of force and international goodwill, such as engaging in foreign aid and development programs to help raise the standards of living in developing countries. However, Alden and Taylor-Kale also recognize that technology sees no borders and “in the absence of a workforce with the right skills and opportunities, without a regulatory regime that favors innovation, without access to global markets, and without state and local policies that favor the development of successful clusters,” the United States will begin to lose its global economic power and potential as the 21st century progresses through innovation and automation (p. 19-20). This loss in technological leadership could have disastrous consequences on the U.S.’s national security as well as further decreasing economic opportunities for all American workers.

Already, “the fastest growth in the country has taken place in the big cities, often those with strong technology economies, such as Boston, Denver, New York, San Francisco, and Seattle, and in energy-strong regions including the Dakotas and Texas,” widening the gap between big and small cities— cities that already have abundant high-skilled job concentrations are further creating new high-skilled jobs, while small cities are still struggling to recover from declining manufacturing industries (Alden and Taylor-Kale, p. 44). The failure to create an economy in which the American workforce can more fully share the overall success will result in an “economically weaker, less confident, more divided, and more vulnerable United States, one that will retreat from global leadership” (p. 7).

Building America’s capacity to invest in and include more people in the workforce and implementing policies to ease the adjustment period for those who will certainly lose jobs in the transition is critical for keeping up with the work ahead. In a rapidly changing, high-tech global environment, education programs that target the skillsets necessary in the new competitive economy will help to strengthen the link between education and

employment outcomes (Alden and Taylor-Kale, p. 76). Also, through worker retraining programs to reintegrate workers into skilled jobs, the United States can make sure that fewer people are suffering from the shocks of a transitioning economy and create more opportunities for prosperity. To implement these changes, the U.S. will also need to invest in domestic support structures such as universal access to high- quality experiential skills training and public infrastructure reform. Without the job mobility and adaptable skills to thrive in a highly integrated global system, the U.S. cannot hope to maintain the levels of security and prosperity that it has historically enjoyed. As the “first country to offer public high school education to all its citizens and the first to open the door widely to postsecondary education,” Alden and Taylor-Kale argue that one of the answers to rebuilding the links among work, opportunity, and economic opportunity must lie in education policies implemented in all sectors, from private to all levels of the government (p. 3). By pushing private employers to develop better talent pipelines and focusing on increasing work-study initiatives that give students real, applied workforce experience, American students can be more confident in the value of their education and more secure in their economic prospects after graduation.

At the government level, Alden and Taylor-Kale explain that state and local governments need to be involved in the process of developing skills-pipeline initiatives in the private sector for them to be successful. This is particularly important in regard to helping small- and medium-sized companies stay competitive in attracting skilled workers and starting skilled worker training and workplace readiness as early as public middle and high school. At the federal level, governments also need to finance mid-career retraining and plan for more flexible forms of financing to allow for greater economic mobility, making use of labor market data to more effectively and transparently plan for the technological future (Alden and Taylor-Kale, p. 87). Finally, Alden and Taylor-Kale focus on the importance of bringing workforce issues into the forefront of forward- thinking public policymaking. The Work Ahead makes a concluding argument that “the president and the nation’s governors should create a National Commission on the U.S. Workforce to carry out research, share best practices, and conduct public outreach on workforce challenges” as part of creating national floors for workforce regulation standards and forcing private and governmental organizations to collaborate on a combined workforce effort to rebuild the links among work, opportunity, and economic security (Alden and Taylor-Kale, p. 99).

Though Baldwin agrees with Alden and Taylor-Kale that investments in knowledge capital (supporting government-sponsored research, private-sector R&D subsidies, and research-oriented universities) and human capital (education, training, and retraining) are necessary for increasing a nation’s global competitiveness, Baldwin also sees a need for rethinking policies addressing national competitiveness in the more complex, fragmented, and footloose world of the second unbundling. Baldwin looks beyond the domestic sphere to how processes of globalization impact the links among work, opportunity, and economic security, since skills training and education is not only necessary for Americans to keep up with a rapidly changing American economy, but also a rapidly changing global economy. When governments focus on developing human capital training that is flexible, “skills that produce excellence are often transferable across sectors and stages, which allows workers to adapt to changing demands,” especially since high-skilled labor is so central to the input-output structure that Baldwin describes in the global economy (p. 231). Because skill-intensive services are an input in many different stages of production and many types of products and services, there is a much more stable demand for high-skilled labor. Additionally, as the manufacturing value chain fractionalizes internationally and is increasingly offshored, G7 governments will need to rethink their manufacturing-centered policies that are remnants of the industrial first unbundling, where productivity growth was largely driven by factory jobs in 1960 like General Motors and U.S. Steel. Instead, the shift in value to a highly flexible, rapidly technologizing service economy means that G7 governments must “protect workers, not

jobs,” ensuring labor flexibility and economic security by helping workers to adapt to change and providing the necessary time and resources to support labor mobility (Baldwin, p. 237). While Alden and Taylor-Kale make the same argument that workers themselves need to be prioritized in “the work ahead,” focusing on employee benefits that stick to employees rather than jobs and encouraging education and retraining, Baldwin adds an international aspect. Where he further argues that cities “should be crafted with an eye on international competitiveness” and that social policies should focus on helping workers to adjust to globalization rather than resist the complex changes (p. 241). In order to keep America’s edge in the international order, the private sector and all levels of the government need to nurture leadership in innovation as a competitive advantage for the United States. This can be done through economic development policy as well as the prioritization of productivity growth policies such as flexible unemployment insurance, job training, and healthcare that allow workers to more securely share in the benefits of corporate success (Alden and Taylor-Kale, p 59). All these policy recommendations together can help to rebuild the links between work and economic opportunity, creating a more economically and socially mobile workforce that is able to maximize America’s growth potential in the future of smart machines, artificial intelligence, new technologies, and global competition.

As the world moves more firmly into New Globalization and increasingly fragmented, international, and interconnected global relationships, the U.S. must use its hegemonic power to push for greater international, multilateral trade liberalization that ensures that workers in both rich and poor nations can more equitably take part in the processes of globalization. Even as globalization seems to stall, due to the breakdowns in global trade institutions such as the World Trade Organization and the domestic opposition to globalization in Western countries such as the U.S., multinational corporations continue to hold the power to increasingly globalize businesses. The problem lies in different governments’ responses to making sure that their citizens are prepared for adapting into the global and automated economy, and governments’ abilities to secure freedom of mobility and job opportunities for their people, which will not be solved with protectionism.

f U t U re of f inan C ial P riva C y and d i G ital C U rren C y r e GU lation

Alexa Vickaryous

ABSTRACT

Digital currency is an emerging payment system that utilizes blockchain technology and cryptography to cut out third-party intermediaries. Financial privacy builds on third-party doctrine: after information is willingly provided to a third party an individual has no reasonable expectation of privacy. Digital currency’s potential to remove third parties threatens anti- money laundering regulation. Currently, the Commodity Futures Trading Commission (CFTC), Securities and Exchange Commission (SEC), and Financial Crimes Enforcement Network (FinCEN) have applied past definitions of financial instruments based on digital currency’s economic function, rather than its technology.

FUTURE OF FINANCIAL PRIVACY AND DIGITAL CURRENCY REGULATION

In 1996, internet theorist Michael Hauben coined the term “netizen” or a citizen of the network as a prediction for the future of internet users. Hauben explained that netizens exist “as a citizen of the world thanks to the global connectivity that the Net makes possible.”1 Hauben envisioned netizens as citizens of a new virtual state that occupied a virtual space rather than a physical one.2While his definition of netizenship may seem extreme, it is not unreasonable.

In January 2019, there were 4.39 billion internet users, and on average, those internet users spent approximately six and a half hours on the internet per day.3 The internet’s omnipresence in the twenty-first century has caused the use of the internet as an intermediary essential to fully participate in society and has required an unprecedented amount of personal information to be shared through online third parties.4 Not only has the internet anchored itself in society, but it has empowered people to circumvent traditional, physical institutions endorsed by the government.5

In 2008, netizens received their first currency when Satoshi Nakamoto introduced the first public-use digital currency (virtual currency or cryptocurrency) called Bitcoin. Upon Bitcoin’s announcement, Nakamoto released a paper called, “Bitcoin: A Peer-to-Peer Electronic Cash System.”6 He emphasized that the government and corporations have had a monopoly over commerce on the internet.7 All online transactions had to be processed by traditional financial institutions. Nakamoto created Bitcoin because he believed that the internet needed a currency

1 Micheal Hauben & Rhonda Hauben, Netizen: On The History And Impact Of Usenet And The Internet (1997).

2 Id.

3 Simon Kemp, Digital 2019: Global Internet use Accelerates, WE ARE SOCIAL, Jan. 13, 2019, https://wearesocial.com/blog/2019/01/digital2019-global-internet-use-accelerates.

4 W. F. McElroy, Closing the Financial Privacy Loophole: Defining “Access” in the Right to Financial Privacy Act, 94 WASH. U. L. REV. (2017).

5 Oliver Barrett, Institutions and New World “Netizens”: Act 1, FOREIGN POLICY ASSOCIATION, Jan. 12, 2012, https://foreignpolicyblogs. com/2012/01/12/institutions-and-new-world-netizens-act- 1/.

6 Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System, BIT COIN, 2008, https://bitcoin.org/bitcoin.pdf.

7 Id.

that reflected its same decentralized nature and could foster peer-to-peer connections.8 While digital currencies were initially created to cut the third party out of financial transactions, there is much debate about how secure these transactions actually are from third parties.9 Digital currency technology raises many legal questions: (1) Should digital currencies be treated like regular currency? (2) Are digital currency companies considered third-party intermediaries? (3) Do digital currency users have a reasonable expectation of financial privacy? Within one decade, the number of digital currencies has increased to about 2,500.10 Despite the rise in the number of digital currencies, the United States has yet to pass significant regulation for this new form of currency and technology.11Some countries, like Vietnam, have outright banned certain digital currencies.12 While Vietnam’s approach unequivocally solves the issue of digital currency, some scholars argue that this approach inhibits innovation.13

Digital currency functions by using blockchain technology and cryptography.14 An oversimplified explanation of how these systems work is that each transaction is recorded on a decentralized, public ledger called blockchain, and each transaction has a digital signature or public-key cryptography to prevent double-spending on the public ledger.15 Blockchain provides many of the unique strengths of digital currency; however, it also poses some serious risks and concerns for regulators. This dichotomy is important for regulators to keep at the forefront of their minds when shaping law. Regulating digital currency means striking a balance between maintaining its intent to increase privacy through its innovative payment technology, but also, justifying legitimate concerns that this technology could foster illicit activity. Blockchain and cryptography often make it difficult to monitor and identify the senders and receivers of transactions.16 These features cause digital currencies to be susceptible to illicit activity.17 This paper addresses the problems of regulating digital currency’s privacy and potential solutions using current privacy law as a guide.

In the past, the role of cash diminished in favor of electronic payments.18 With those changes policy makers had to re-evaluate how past regulation would apply to the new innovation. Likewise, digital currencies pose this same problem that causes reflection on former definitions of financial instruments. Comparing and contrasting digital currency’s qualities and characteristics to existing financial tools will allow us to determine if digital currency fits within the parameters of current regulation. Specific to this paper, this will help determine if the legal theory called “third-party doctrine” will apply to digital currencies and their companies. Third- party doctrine is the theory that after information is willingly provided to a third party the individual has no reasonable expectation of privacy.19 Financial privacy is important because it protects an individual’s safety from exploitation, future price negotiations, and tracking of payments by companies.20

This paper is organized in four parts to understand how financial privacy law should apply to digital currencies and their companies. Part I provides a comprehensive explanation of how digital currency functions; it also addresses the strengths and weaknesses of digital currency to not only understand the potential benefits and innovation that can be reaped, but also how its shortcomings make it difficult to regulate. Part II discusses financial 8 Id.

9 N. Kshetri, Cryptocurrencies: Transparency Versus Privacy [Cybertrust], 51 Institute Of Electrical And Electronics Engineers 99 (2018).

10 Coin Lore, Cryptocurrency List, (October 3, 2019), https://www.coinlore.com/all_coins.

11 Pete Rizzo, CFTC Ruling Defines Bitcoin and Digital Currencies as Commodities, COIN DESK http://www.coindesk.com/cftc-rulingdefines-bitcoin-and- digital-currencies-as-commodities/.

12 Library of Congress, Regulation of Cryptocurrency Around the World, (Oct. 16, 2019), https://www.loc.gov/law/help/cryptocurrency/worldsurvey.php

13 Peter DeVries, An Analysis of Cryptocurrency, Bitcoin, and the Future, 1 International Journal Of Business Management And Commerce 1 (2016).

14 David Lee, Handbook Of Digital Currency: Bitcoin, Innovation, Financial Instruments, And Big Data 15 (2015).

15 Id.

16 William Magnuson, Regulating Fintech, 71 VAND. L. REV. (2018).

17 Jeffrey E. Glass, What Is a Digital Currency, 57 IDEA 455, 492 (2017).

18 Trevor I. Kiviat, Beyond Bitcoin: Issues in Regulating Blockchain Transactions, 65 DUKE L.J. 569, 588 (2015).

19 W. F. McElroy, supra note 3, at 1057.

20 N. Kshetri, supra note 7, at 100.

privacy law up to this point. Specifically, Part II will analyze current privacy laws, and it will highlight why and how these laws were enacted. Part III addresses how digital currencies have been defined using federal guidance, as well as at a state level. It will explore some case law and the discrepancies in how the law has been applied. Ultimately, this paper will conclude that instead of applying broad definitions of current financial instruments, federal regulators need to prioritize blockchain when defining digital currencies to ensure that the narrow differences between digital currency and current financial instruments are not overlooked.

PART I: WHAT IS DIGITAL CURRENCY?

Although each digital currency uses a slightly different system, this paper will use Bitcoin as a base example for understanding how digital currencies function. A digital currency is a peer-to-peer electronic cash system that operates using blockchain technology.1 Peer-to- peer means that digital currencies attempt to cut out the middleman or third party that is required for exchanges.2 Peer-to-peer transactions are meant to reduce transaction costs and decrease the amount of time a transaction takes. Unlike regular fiat money, digital currencies have no intrinsic value or derivation from law.3 In other words, the money is not backed by assets or the government. Digital currencies determine their value solely on supply and demand. For instance, Bitcoin’s programming has predetermined that there will only ever be 21 million bitcoins to prevent inflation.4

Instead of having a centralized bank run by the government to monitor the exchanges, digital currencies are regulated like an open source project. Open source means that the source of the software is public, so innovation can occur in a collaborative way.5 Every transaction is recorded by decentralized individuals or organizations known as “miners.”6 Anyone can become a miner; however, the individual or company would need to have purchased the hardware and software necessary to confirming transactions.7 Bitcoin incentivizes miners to check the transactions or complete a block by awarding a predetermined quantity of bitcoins to the miners.8 In February 2019, the rewards for completing a block was 12.5 bitcoins, which translates to earning $42,000 USD.9 Also, Bitcoin users can give miners a “tip” to encourage a faster transaction checking process.10 After a miner confirms a transaction, the cryptographically secured representation is recorded on a ledger through blockchain.11

Blockchain is a back-end database that maintains a distributed ledger that can be inspected openly.12 Digital currency coins are computer files that must be logged on to a ledger, which is a decentralized network operated and maintained by thousands of computers.13 While digital currencies have the reputation of anonymity, all transactions are publicly and permanently available on the ledger.14 However, public-key encryption technology allows the sender or receiver of the exchanges to remain pseudo-anonymous or completely anonymous.15 There are two mathematically-related keys: a private and public key. The sender uses the private key like a private password, and the public key is like the name of the bank or where the money resides.16

1 Mark Edwin Burge, Apple Pay, Bitcoin, and Consumers: The ABCs of Future Public Payments Law, 67 HASTINGS L.J. 1493, 1528 (2016).

2 Nikolei Kaplanov, Nerdy Money: Bitcoin, the Private Digital Currency, and the Case against its Regulation, 25 LOY. CONSUMER L. REV. 111, 116 (2012).

3 Id.

4 Jeffrey E. Glass, supra note 15, at 487.

5 WILLIAM MOUGAYER, THE BUSINESS OF BLOCKCHAIN (2016).

6 Jeffrey E. Glass, supra note 15, at 489.

7 Jeffrey E. Glass, supra note 15, at 489.

8 Id.

9 Adam Hayes, How Does Bitcoin Mining Work?, INVESTOPEDIA, https://www.investopedia.com/tech/how-does-bitcoin-mining-work/.

10 Id.

11 Id.

12 Trevor I. Kiviat, supra note 15, at 578.

13 Nikolei Kaplanov, supra note 22, at 116.

14 Sumit Agarwal, Bitcoin Transactions: A Bit of Financial Privacy, 35 CARDOZO ARTS & ENT. L.J. 153, 160 (2016).

15 Id.

16 Id.

A person can obtain bitcoins through mining, purchase, or online exchange.17 After obtaining the bitcoin, it can be stored through an online wallet or on a personal computer.18 An online wallet functions as an online account by a third party.19 However, a user can also store their bitcoin in a personal digital wallet on their computer.20 Different digital currencies have varying levels of privacy.21 For instance, Bitcoin uses transparent addresses where the public-key address is not fully anonymous because it can be tracked to the user; therefore, making Bitcoin transactions pseudo-anonymous, since the pseudonym or address can be tracked to the user’s identity.22 However, some digital currency companies like Zcash and Monero focus on privacy by using shielded addresses and mixing their coins with other forms of payments; this strategy makes their senders and receivers anonymous and almost impossible to trace.23

Intertwined: Strengths and Weaknesses

Two of the biggest advantages of digital currency over fiat currency, gold, or electronic payments is the speed of transactions and lack of transaction costs.24 Although electronic transfers greatly reduce transportation and time of moving value, it is still very costly relative to the cost of moving value through digital currencies.25 There are several different types of electronic payments including Automated Clearing House (ACH), wire transfers, card services, mobile payments, etc.26 To illustrate how transaction costs in electronic payment systems are greater than digital currency transactions, this paper will use card service payments as an example.

In a credit card transaction or open network purchase transaction, one bank serves as the card issuer and another bank serves as the acquirer, which processes the payments.27 Visa and MasterCard are examples of open network purchase transactions.28 The most obvious fee for users of credit cards includes the interest fee that accrues on a carried balance; eventually, this fee becomes profit for the card-issuing bank.29 However, the acquirer also receives a small percentage of the purchase price called the merchant discount.30 Typically in the United States, this percentage is approximately 1.5 percent to 3 percent of the purchase price.31 Closed network purchase transactions work in the same manner, but the card-issuing bank would receive the interest and merchant discount.32 The top five acquirers in 2018 reached $95 billion USD of card transactions for purchases of goods and services.33 Additionally, it takes time for these payments to be processed. For instance, Santander Bank will take about one day to process if it is paid using a Santander account, and it will take three to five business days if it is paid with a non-Santander account.34 Blockchain technology is uniquely developed to solve both the issue of high transaction costs and faster 17 Nikolei Kaplanov, supra note 22, at 124. 18 Id. 19 Id. 20 Id. 21 N. Kshetri, supra note 7, at 100. 22 Protect your Privacy BITCOIN, https://bitcoin.org/en/protect-your-privacy. 23 N. Kshetri, supra note 7, at 100. 24 Trevor I. Kiviat supra note 15, at 585. 25 Id. 26 Types of Electronic Payment Systems, NATIONAL CREDIT UNION PUBLISHED GUIDES, https://publishedguides.ncua.gov/examiner/ Pages/Content/ExaminersGuide/ElectronicPaymen tSystems/EPS_Types.htm. 27 Andrew P. Morriss & Jason Korosec, Private Dispute Resolution in the Card Context: Structure, Reputation, and Incentives, 1 J.L. ECON & POL’Y 393, 424 (2005). 28 Id. 29 Id. 30 Id. 31 Id. at 421. 32 Mark Edwin Burge, supra note 19, at 1507. 33 Top U.S. Merchant Acquirers, THE NILSON REPORT, https://nilsonreport.com/mention/317/1link/.

34 Customer FAQ, SANTANDER BANK, https://customerservice.santanderbank.com/app/answers/detail/a_id/9508/~/how-long-does- it-take-for-credit-card-payments-to-be-applied-tomy-account%3F.

transaction time. Since digital currencies are not operated by companies, but instead as an open source project, they do not have to pay overhead or administrative costs. This allows digital currencies to charge very low transaction fees with only optional fees to speed up the process.35 Consequently, its peer-to-peer technology eliminates the need for card issuers or acquirers. Merchants have the potential to benefit by using digital currencies instead of credit card payments during routine purchases because they would not have to pay a percentage of their price to acquirers.36 Digital currencies can facilitate fast cross-border transfers without having to pay expensive fees for remittance.37 Unlike fiat money that can be fiscally manipulated by the government, digital currencies have a fixed supply to control for inflation.38 For instance, the mathematic rules to creating Bitcoin are designed to mimic the act of mining gold.39 Gold is governed by the laws of nature, but digital currency is governed by the law of mathematics.40 This feature is seen as a strength in countries that have extremely high inflation. In Argentina, there has been a growing use of digital currency due to the country’s high inflation rate.41 Digital currency meets the demand of Argentinians who seek to safeguard their currency from losing value due to hyperinflation.42 Moreover, there has been expansion in countries in economic crisis like Greece.43 And immediately after United Kingdom’s vote for “Brexit,” there were spikes in Bitcoin’s value which reflected the uncertainty of the pound.44

Digital currency’s safeguards on inflation are beneficial to countries with high inflation rates. However, this feature also causes digital currencies to be extremely volatile since there is no government regulating any risks.45 Governments use Central Banks to control monetary policy and to exert influence.46 If non-governmental digital currencies became more popular than fiat currency the government would not be able to control systematic risk. Bitcoin’s exchange rate against the U.S. dollar has jumped or crashed over 20 percent in a single day; whereas the USD to Euro exchange rate varies less than 2.5 percent in one day.47 Digital currency users are faced with an exchange-rate risk that rises and falls sharply with little stability.48 In cases in the past, digital currencies have been hacked and gone completely bankrupt, too.49 Digital currencies are susceptible to hacks. In 2016, a hacker made $50 million in Ethereum currency from a fund called the Decentralized Autonomous Organization.50 The value of Ethereum dropped from $355 to $0.10 in a matter of minutes.51 Hacking ranges from stealing information to causing complete system failure.52

Digital currencies offer increased privacy with their ability to have semi-anonymous and completely anonymous transactions. In a society that only uses cash, if a person were to go buy pizza at the store, there would be no way of tracking that cash payment to the individual unless someone witnessed the purchase.53 Digital currencies provide the same level of financial privacy that paying in cash provides.

35 David Lee, supra note 12, at 23.

36 Id.

37 Id.

38 Devries, supra note 11, at 3.

39 Trevor I. Kiviat, supra note 15, at 583.

40 Id.

41 Devries, supra note 11 page 3.

42 Id.

43 Mark Edwin Burge, supra note 19, at 1532.

44 Id.

45 Trevor I. Kiviat, supra note 15, at 584.

46 Orla Ward & Sabrina Rochemont, Understanding Central Bank Digital Currencies, INSTITUTE AND FACULTY OF ACTUARIES, https://www.actuaries.org.uk/system/files/field/document/Understanding%20CBDCs%20Final%20-%20disc.pdf.

47 Id.

48 Tyler Moore, The Promise and Perils of Digital Currencies, INTERNATIONAL JOURNAL OF CRITICAL INFRASTRUCTURE PROTECTION, 147 (2013).

49 Peter DeVries, supra note 11, at 4.

50 William Magnason, supra note 14, at 1201.

51 Id.

52 Id.

53 William Magnason, supra note 14, at 1201.

On the other hand, digital currency’s pseudo anonymity or complete anonymity attracts the facilitation of criminal activity.54 From 2011 to 2013, Bitcoin was used by thousands of drug dealers for illegal activity because it was not being monitored by the government.55 In conjunction with a black market website called the Silk Road, criminals were able to trade drugs and counterfeit passports.56 In 2016, Arthur Budovsky, the founder of the digital currency called the Liberty Reserve, was sentenced to 20 years in prison for laundering hundreds of millions of dollars.57

PART II: FINANCIAL PRIVACY UP TO THIS POINT

In Griswold v. Connecticut, Justice Douglas explained how “the First Amendment has a penumbra where privacy is protected from governmental intrusion.”58 In other words, although the First Amendment does not explicitly grant a right to privacy, Douglas argued that it was implied. This idea of the right to privacy was further elaborated on in Katz v. United States, which was a search and seizure case involving a phone booth. In the Court’s opinion, Justice Stewart illustrated the idea of a “reasonable expectation of privacy;” he explained that when “a person knowingly exposes to the public, even in his own home or office, [it] is not a subject of Fourth Amendment protection.”59 Through Katz, the courts created the Katz test to decide whether information would be considered private: (1) did the individual have a subjective expectation of privacy? (2) is this expectation one that society recognizes as reasonable?60 As society and technology evolve, perhaps society subjectively expects less privacy.61 In Raynor v. State, the Court of Appeals defined how “common experience and social norms bear upon our assessment of whether one has an objectively reasonable expectation of privacy in a particular item or place.”62 Moreover, “it is necessary to look to the customs and values of the past and present … the structure of society, the patterns of interaction, [and] the web of norms and values.”63 In a Pew Research survey, most Americans were willing to trade their privacy for services provided by a third-party intermediary.64 The tangible benefits from a service outweighs the loss of privacy.65 However, many Americans noted they were more cautious in giving their information to untrustworthy companies and would be less likely to share their information if they believed it would be made available for a long period of time and to third- party companies.66

However, the tides changed nine years later in United States v. Miller, when the Court decided that when an individual hands their information over to third-party intermediaries like a bank, the person has no reasonable expectation of privacy.67 This case dealt with Mitch Miller, who was suspected of carrying alcohol distilling equipment and whiskey on which liquor tax had not been paid.68 The Bureau of Alcohol, Tobacco, and Firearms subpoenaed and requested that his banks hand over his financial records to use as evidence against him.69

Justice Powell stated in the Court’s opinion that “the depositor takes the risk, in revealing his affairs to another, that the information will be conveyed by that person to the Government.”70 Consequently, in Smith v. Maryland, this

54 David Lee, supra note 12, at 22. 55 Peter Devries, supra note 11, at 4. 56 David Lee, supra note 12, at 22.

57 Liberty Reserve Founder Sentenced to 20 Years For Laundering Hundreds of Millions of Dollars, THE UNITED STATES DEPARTMENT OF JUSTICE, https://www.justice.gov/opa/pr/liberty-reserve- founder-sentenced-20-years-laundering-hundreds-millions-dollars.

58 381 U.S. 479, 483 (1965).

59 389 U.S. 347, 351 (1967).

60 Lucas Issacharoff; Kyle Wirsha, Restoring Reason to the Third Party Doctrine, 100 MINN. L. REV. 985, 988 (2016). 61 Id. at 993.

62 440 Md. 71, 84 (2014). 63 Id. 64 Lee Rainie & Maeve Duggan, Privacy and Information Sharing, PEW RESEARCH CENTER, https://www.pewresearch.org/ internet/2016/01/14/privacy-and-information-sharing/.

65 Id. 66 Id. 67 425 U.S. 435, (1976) 68 Id. 69 Id. 70 Id. at 444

idea about financial privacy and third-party intermediaries was extended to communication information.71 In Smith, the Court concluded that data from a pen register (a device that keeps track of dialed numbers) would be allowed as evidence in a trial and as support to obtain a search warrant.72 This decision parallels Miller because it emphasizes that there is “no constitutionally protected reasonable expectation of privacy in the numbers dialed into a telephone system.”73 When a person “voluntarily conveyed numerical information to the telephone company and exposed that information to its equipment,” the person “assumed the risk that the company would reveal to police the numbers he dialed.”74

Both Miller and Smith support the legal theory called the third-party doctrine.75 With the invention of the internet and the rise of the information age, more information than ever falls outside the scope of the First and Fourth Amendment’s protection.76 The rule of reasonable expectation of privacy has evolved over time to emphasize whether the individual gave consent to have his or her information collected. Hoffa v. United States illustrates this idea in a physical space, where a wire-taped conversation is not considered an invasion of privacy if the person invited the conversation.77 In a physical space, an individual can pick and choose with whom they share confidential information; however, when communicating through a virtual forum or exchanging money through a bank, it makes it almost impossible to do so without the provided intermediaries.78 Consequently, although it is possible to revert back to carrier pigeons or using gold coins, it is not practical in modern society.79

Despite being more educated about the lack of privacy online, American adults have not made significant changes to how they utilize the internet.80 Fifty-four percent believe that it is “somewhat” or “very” difficult to find the tools and strategies to protect their privacy online and when using their phones.81 In Smith’s dissent, Justice Marshall expressed many of the subsequent concerns.82 He emphasized that “unless a person is prepared to forgo use of what for many has become a personal or professional necessity, he cannot help but accept the risk of surveillance,” and that “as a practical matter, individuals have no realistic alternative.”83 Blockchain technology challenges these current intermediaries that we use for communication and transactions.84 Consequently, blockchain will potentially create new intermediaries, too, that will disrupt the traditional intermediary-driven way of the internet.85

After Miller, Congress was concerned that the Internal Revenue Service (IRS) would have the power to ask for any citizen’s financial records.86 In order to address this, Congress passed the Right to Financial Privacy Act (RFPA) in 1978. It was motivated to “strike a balance between customer’s right to privacy and the need for law enforcement agencies to obtain financial records pursuant to legitimate investigations.”87 The RFPA narrowly defines a financial institution by listing existing institutions like a bank, card issuer, trust company, industrial loan company,

71 442 U.S. 735, (1979)

72 Id.

73 442 U.S. 735, 738.

74 Id. at 744.

75 W. F. McElroy, supra note 3, at 1057.

76 W. F. McElroy, supra note 3, at 1058.

77 385 U.S. 293, (1966)

78 Michael W. Price, Rethinking Privacy: Fourth Amendment Papers and the Third-Party Doctrine, 8 J. NAT’L SEC. & POL’Y 247, 267 (2016).

79 Id.

80 Mary Madden, Why some Americans have not changed their privacy and security behaviors, PEW RESEARCH CENTER, https://www. pewresearch.org/fact-tank/2015/04/14/why-some- americans-have-not-changed-their-privacy-and-security-behaviors/.

81 Id.

82 Smith, 442 U.S. at 750.

83 Id.

84 WILLIAM MOUGAYER, supra note 23, at 37.

85 Id.

86 W. F. McElroy, supra note 3, at 1061.

87 Right to Financial Privacy Act, 12 U.S.C. § 3401 (1978).

etc.88 It is important to note that a company that creates digital currency is not a company or financial institution, it is an open source project.89 For instance, Bitcoin would not fall under the RFPA since it is an open source project; however, digital currency businesses or other actors that exchange digital currency more likely than not will have to follow RFPA. The RFPA outlines five scenarios where a government departmental unit would be authorized to request financial information: (1) departmental unit must subpoena the information, (2) reasonable belief that the records are relevant to a law enforcement inquiry, (3) request is issued by correctly ranked official, (4) must be written in a formal request, (5) all notice requirements are satisfied.90 The RFPA prevents a customer’s information from being obtained from the government, but also prevents their financial information from being released by financial institutions.91 If a government agent or financial institution fails to adhere to the RFPA, there are fines for $100, actual and punitive damages (if applicable), and attorney fees.92

Also, in 1978, Congress passed the Electronic Funds Transfer Act (EFTA). The EFTA’s purpose is to “protect individual consumers engaging in electronic fund transfers ... and remittance transfers.”93 The EFTA is implemented through Regulation E.94 The EFTA outlines the rights and liabilities of a consumer and the requirements for financial institutions to identify under which circumstances their customer’s financial information may be disclosed to third parties.95 The EFTA has had several amendments since its enactments; however, in 2010, the EFTA was amended again to account for changes due to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).96 Dodd-Frank was created out of the financial crisis of 2008. It requires new regulatory requirements such as restrictions on investments, mandatory stress tests of a bank’s ability to withstand various crises, and much stricter financial reporting.97 Dodd-Frank focuses on larger financial institutions.98 For instance, the Dodd-Frank reform focuses on preventing traditional banks from becoming “too big to fail.”99 The idea of “too big to fail” refers to the idea that once banks reach a certain the government must intervene and bail them out in a financial crisis because the bank’s failure would impose significant costs on other sectors of the economy.100 Certain financial institutions were labeled “systematically important” and required to provide more financial reporting and structural requirements.101 While this reform seeks to diminish systematic risk and immoral behavior, it also erodes more of our financial privacy. The EFTA originally sought to protect the consumer; however, Dodd-Frank shifted the EFTA as a means to protect against excessive risk-taking by large financial institutions.102 Although Dodd-Frank indirectly protects consumers from risk and financial crisis, the trade-off is the consumer’s financial privacy.103 Consequently, it allows the government to bypass the strict regulations from the RFPA to easily access consumer financial data.104 In 2017, Dodd-Frank was revised with the Financial CHOICE Act.105 The Financial CHOICE Act made it so only fewer than 10 banks have to deal with the strictest regulations of Dodd- Frank.106 Digital currency will challenge the widespread assumption that systematic risk in the financial sector dominantly comes from large 88 Right to Financial Privacy Act, § 3401. 89 Id. 90 Id. 91 W. F. McElroy, supra note 3, at 1062. 92 Id. 93 Regulation E Electronic Fund Transfer Act, FEDERAL RESERVE CONSUMER COMPLIANCE HANDBOOK, https://www. federalreserve.gov/boarddocs/supmanual/cch/efta.pdf. 94 Id. 95 Sumit Agarwal, supra note 32, at 167. 96 Electronic Fund Transfer Act, 15 U.S.C. §1693 (1978). 97 William Magnuson, supra note 14, at 1168. 98 Id. at 1169. 99 Id. 100 Id. at 1194. 101 Id. at 1169.

102 Sumit Agarwal, supra note 32, at 167. 103 Id. 104 Id.

105 Financial Choice Act of 2017, CONGRESS.GOV, https://www.congress.gov/bill/115th- congress/house-bill/10. 106 Id.

banks and other financial institutions if it gains mainstream popularity.107 The U.S. government requires large banks and other financial institutions to report in detail their earnings to prevent financial downturns like 2008.108 Digital currencies would be able to circumvent this regulation currently and have the potential to be a huge liability for the government and economy as a whole.

In 1999, The Gramm-Leach-Bliley Act (GLBA) was created with a similar purpose to the EFTA. The GLBA establishes that “financial institutions—companies that offer consumers financial products or services like loans, financial or investment advice, or insurance to explain their information-sharing practices to their customers and to safeguard sensitive data.”109 Financial institutions include all businesses regardless of size and businesses that may not necessarily define themselves as a financial institution.110 For instance, real estate appraisers, credit reporting agencies, mortgage brokers, etc.111 The Safeguards Rule requires that all companies have a written information security plan that assesses the risks to customer information in all areas of their operation.112Consequently, information security emphasizes an individual’s right to decide whether to reveal personal information; whereas, data security is an institution’s strategy to ensure only authorized people may have access to the personal information.113The GLBA focuses on protecting consumer’s financial information, especially non-public information (NPI).114 NPI includes personally identifiable information like a customer’s name, income, Social Security number, etc.115 Information that would not be considered NPI would be phone numbers and other information that has already been distributed online or through paper.116 This aligns with the Smith decision because it did not consider phone numbers as private information once an individual chose to use a telephone company.117 In combination with the Banking Secrecy Act (BSA), the government wields great power over our financial information and has the tools necessary to procure the evidence to convict someone of nefarious, criminal activities.118

The Bank Secrecy Act was created in 1970 to prevent money laundering of illicit funds and terrorist financing.119 It requires financial institutions to cooperate with federal regulators by maintaining records and making reports to enforce various criminal and tax regulations.120 Sixteen years later, the Money Laundering Control Act of 1986 enhanced the BSA by imposing criminal liability on the financial institutions for knowingly assisting in the laundering of money or not creating sufficient enough structures to prevent money laundering.121

In April 1996, a Suspicious Activity Report (SAR) was developed for use of all banks.122 Banks are required to file a Suspicious Activity Report (SAR) when they detect possible violations or suspicious activity.123 Also, banks must file a Currency Transaction Report (CTR) for each non-exempt deposit, withdrawal, exchange of currency or other payment that involves currency more than $10,000.124 Failure to adhere to the BSA can result in civil money penalties or even criminal charges.125 For instance, criminal penalties for money laundering or terrorist

107 William Magnuson, supra 14, at 1170.

108 Sumit Agarwal, supra note 32, at 167.

109 Gramm-Leach Bliley Act, 15 U.S.C. § 6801 (1999).

110 Financial Institutions and Customer Information: Complying with the Safeguards Rule, FEDERAL TRADE COMMISSION, https://www. ftc.gov/tips-advice/business-center/guidance/financial- institutions-customer-information-complying.

111 Id.

112 Id.

113 Lauren Henry, Information Privacy and Data Security, 2015 CARDOZO L. REV. 107, 115 (2015).

114 Sumit Agarwal supra note 32, at 166.

115 Id.

116 Id.

117 Smith, 422 U.S.

118 Sumit Agarwal, supra note 32, at 168.

119 Robert S. Pasley, Recent Developments in Bank Secrecy Act Enforcement, N. C. BANKING INST. 61, 61 (2005).

120 Id.

121 Bank Secrecy Act/ Anti Money Laundering Examination Manuel, FFIEC, https://bsaaml.ffiec.gov/docs/manual/01_Introduction/01.pdf.

122 Id.

123 Id. at 62

124 Id. 125 Id. at 63

financing includes penalties of up to $500,000 and up to 20 years in prison.126 After the September 11, 2001 terrorist attack, Congress responded by creating the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act).127 Title III of the USA Patriot Act specifically relates to anti-money laundering and the BSA.128 Title III criminalized the financing of terrorism, strengthened customer identification services, prohibited business with foreign shell banks, and enhanced due diligence procedures for foreign correspondent and private banking accounts.129Although years of legislation aimed at establishing some privacy protections had been in work, the circumstances of 9/11 fueled the creation of the USA Patriot Act.130 The USA Patriot Act allows the government to circumvent many of the regulations put in place by the RFPA, GLBA, and EFTA.131 Especially in times where the government needs to actively fight terrorism and investigations, the USA Patriot Act allows the government to conduct investigations on individuals without notifying them that they are being monitored.132

This paper is not attempting to analyze or criticize these legislative decisions; however, it is looking to see how financial privacy up to this point will fall into place with digital currencies. Smith and Miller solidified third-party doctrine. Individuals do not have a reasonable expectation of privacy if they give information to a third party.133 In response, RFPA, EFTA, and GLBA attempt to give greater protections to financial privacy. However, Dodd-Frank, the BSA, and USA Patriot Act allow for circumvention of financial privacy to ensure other protections against criminal activity, terrorist funding, and economic downturns. More specifically, this paper seeks to find if the safeguards from the subsequent legislation will apply to digital currencies and if any actors in digital currencies will act as third-party intermediaries.

PART III: HOW DO WE LEGALLY DEFINE DIGITAL CURRENCIES?

Although digital currency has the word currency in its name, there is much debate about how digital currencies should be labeled legally.134 This paper will focus on the financial privacy effects and consequences of legally defining digital currencies; however, definitively labeling digital currencies will also cause a range of other effects regarding regulation of tax reporting and laundering illicit funds. Most of the regulation so far has been created with an eye toward preventing abuse of digital currency through facilitating black market transactions, money laundering, terrorist financing, and tax evasion.135 Across the board, the United States has not been consistent in its legal approach to defining digital currencies. There is no comprehensive federal regulation for digital currencies, and different government bodies have provided differing definitions and limited action in enforcing these definitions.136 The Federal Trade Commission has warned users about the risk of owning digital currency. For instance, there is no Federal Deposit Insurance Corporation securing any cash deposits into digital currency. The IRS has defined digital currency with the term “virtual currency.”137 Its definition highlights that virtual currency is a “digital representation” of value that functions as a medium for exchange with no legal tender status in any country. The IRS distinguishes how digital currencies are different from online payment systems like PayPal or Apple Pay because they facilitate transactions with a national currency.138 Likewise, digital currency transactions differ from 126 Id. 127 Id. 128 Id. 129 Id. 130 Sumit Agarwal, supra note 32, at 169. 131 Sumit Agarwal, supra note 32, at 169. 132 Id. 133 W. F. McElroy, supra note 3, at 1057. 134 W. F. McElroy, supra note 3. 135 Trevor I. Kiviat, supra note 15, at 589. 136 Trevor I. Kiviat, supra note 15, at 589. 137 Id. 138 Id.

credit card transactions in the same way.139 The IRS has instructed for digital currencies to be treated as noncurrency property.140 Whereas, the European Court of Justice decided that bitcoins should be subject to value-added tax in the EU.141

In December 2014, the Commodity Futures Trading Committee (CFTC) defined digital currencies as commodities.142 It emphasized that they are using a broad application of the definition of commodity that includes both traditional agricultural commodities and derivative contracts.143 Digital currencies would fall under derivative contracts.144 The Commodity Exchange Act defines commodities as “all services, rights, and interests” that “contracts for future delivery.”145 And defines derivatives as “a financial instrument, traded on or off an exchange,” where the price is derived from “the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments.”146 Each digital currency exchange must be registered with the CFTC. For instance, in 2016, the CFTC found Bitfinex operated for approximately three years as an online platform for trading and exchanging digital currencies (mostly Bitcoin) without the proper registration with the Commission.147 Since Bitfinex “held the purchased bitcoins in bitcoin deposit wallets that it owned and controlled,” it therefore “engaged in illegal, off-exchange commodity transactions and failed to register as a futures commission merchant.”148 The CFTC charged a civil monetary penalty of $75,000 to Bitfinex for illegal, off-exchange transactions and failing to register as a Futures Commission Merchant.149

By defining virtual currencies as commodities, the CFTC has oversight over virtual currencies when in pursuit of anti-manipulation rules of spot market transactions.150 The CFTC in certain instances has the ability to enforce authority because spot market transactions can affect derivative market prices.151 This power was augmented after Dodd-Frank because it gave them jurisdiction over cover swaps and redefined manipulation as both actual and attempted manipulation.152 The CFTC exercised this power in the case of TeraExchange, LLC.153 Although Tera was registered as a swap execution facility (SEP), they arranged two traders to participate in “a fully offsetting transaction in the Bitcoin swap for the same price and notional amount.”154 According to the CFTC, not only is wash trading and prearranged trading prohibited, but companies must have infrastructure to discourage that activity. Since Tera both prearranged a trade and had no infrastructure set in place, it was decided that it had violated CFTC’s regulation. There were no monetary penalties involved.

Defining digital currency as commodities puts to rest the argument that digital currencies should be considered securities and, therefore, should be regulated by the Securities and Exchange Committee (SEC).155 139 Id.

140 Jeffrey E. Glass, supra note 15, at 482.

141 Mark Edwin Burge, supra note 19, at 1533.

142 Timothy Massad, Testimony of Chairman Timothy Massad before the U.S. Senate Committee on Agriculture, Nutrition & Forestry, COMMODITY FUTURES TRADING COMMISSION, https://www.cftc.gov/PressRoom/SpeechesTestimony/opamassad-6.

143 Id.

144 Id.

145 Legal Definition of Commodity, COMMODITY FUTURES TRADING COMMISSION https://www.cftc.gov/ConsumerProtection/ EducationCenter/CFTCGlossary/index.htm#_comm odity

146 Legal Definition of Derivative, COMMODITY FUTURES TRADING COMMISSION https://www.cftc.gov/ConsumerProtection/ EducationCenter/CFTCGlossary/index.htm#D.

147 BFXNA INC. d/b/a BITFINEX, COMMODITY FUTURES TRADING COMMISSION, https://www.cftc.gov/sites/default/files/idc/groups/public/@lrenforcementactions/documents /legalpleading/enfbfxnaorder060216.pdf.

148 Id.

149 Id.

150 Trevor I. Kiviat, supra note 15, at 594.

151 Id.

152 Trevor I. Kiviat, supra note 15, at 594.

153 TeraExchange LLC, COMMODITY FUTURES TRADING COMMISSION, https://www.cftc.gov/sites/default/files/idc/groups/public/@lrenforcementactions/documents /legalpleading/enfteraexchangeorder92415.pdf.

154 Id. 155 Id. at 163

In 2018, the Chairman of the SEC Jay Clayton addressed the role of the SEC and CFTC in digital currency exchanges.156 He emphasized that while an Initial Coin Offering (ICO) may appear to look like an Initial Public Offering (IPO), ICOs are not protected under the same regulation and safeties of an IPO.157 Consequently, the SEC has not approved any electronic-traded products like an exchange traded fund (ETF) holding digital currencies.158

He warns that digital currencies do not have the same market protections from broker dealers on registered exchanges or alternative trading systems.159 Clayton highlighted that “U.S.-based cryptocurrency trading platforms have elected to be regulated as money transmission services,” and how traditionally, money transmission services have predominantly been state regulated, and the SEC and CFTC have not had direct oversight.160 In 2017, the SEC’s Division of Enforcement established a new Cyber Unit to combat misinformation and misconduct involving “distributed ledger technology and ICOs.”161 However, Clayton’s statement contradicts a press release from a year earlier in 2017 that claimed a SEC’s investigative report found that tokens offered or sold by a Decentralized Autonomous Organization (DAO) are securities and are subject to the federal securities laws.162 Despite these findings, the SEC decided to not charge the DAOs for violation, but instead heavily cautioned against participating.163

In March 2013, the Financial Crimes Enforcement Network (FinCEN) identified administrators and exchangers of “convertible virtual currencies” as money service businesses.164 They defined convertible virtual currencies as a medium of exchange that “operates like a currency in some environments” and “has an equivalent value in real currency,” but does not have “legal tender status in any jurisdiction.”165 The FinCen’s assertion that digital currency’s administrators are considered money service businesses causes several contradictions on the application of money service businesses’ definition of digital currencies. Originally, money transmitter licensing laws were created to “combat the growing use of money transmitting businesses to transfer large amounts of the monetary proceeds of unlawful enterprises.”166 Some examples of money service businesses include PayPal, American Express, and Barclays. Specifically, digital currencies are most similar to a money transmitter business, which is a specific type of money service business.167

Under federal law, money transmitters are normally considered a business or service that transfers money between parties for a fee.168 This aligns with digital currencies because the miners who double-check transactions provide a service and receive compensation in the form of digital currency. However, under U.S. Code, a money transmitter business is considered a business that is either formally or informally outside of the conventional financial depository institution.169 While virtual currency companies like Bitcoin would most likely not be considered a business due to its highly decentralized nature, there is strong argument that mining pools, which are groups of miners, could be considered money transmitter businesses.170 One of the largest mining pools is BTC. com.171 Mining pools are a joint group of digital currency miners who combine their computations resources over 156 Jay Clayton, The Roles of the SEC and CFTC, SECURITIES AND EXCHANGE COMMISSION, https://www.sec.gov/news/testimony/ testimony-virtual-currencies-oversight-role-us- securities-and-exchange-commission. 157 Id. 158 Id. 159 Jay Clayton, supra note 166. 160 Id. 161 Id.

162 SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities, SECURITIES AND EXCHANGE COMMISSION, https://www.sec.gov/news/press-release/2017-131. 163 Id. 164 Trevor I. Kiviat, supra note 15, at 590. 165 Id. 166 U.S. v. Velastegui, 199 F.3d 590, 592 (1999).

167 Am I a MSB?, FINANCIAL CRIMES ENFORCEMENT NETWORK, https://www.fincen.gov/am-i-msb.

168 Nikolei Kaplanov, supra note 22, at 153.

169 Id.

170 Nikolei Kaplanov, supra note 22, at 154.

171 About Us, BITMAIN TECHNOLOGY HOLDING COMPANY, https://btc.com.

a network in order to make greater profits to split with the pool.172 On BTC.com’s About page, it explains how “the team and brand” of BTC.com is growing, and how they offer multi-node deployment through the nearest regional node.173

While mining pools would be considered money service businesses, individual miners would not be defined as money transmitters when purchasing goods and services with virtual currency.174 The conversion of virtual currencies to fiat currencies would also not fall under the money transmitter category.175 However, if a miner is selling a virtual currency as a business, then the person would be defined as a money transmitter.176 On May 5, 2015, the FinCEN charged a $700,000 fine and simultaneous settlement agreement to Ripple, a company that mines and sells a digital currency called XRP.177 In their settlement agreement with the U.S. Attorney’s Office in the Northern District of California, Ripple recognized that although it registered its subsidiary as a money service business due to FinCEN’s regulation, it started selling XRP without setting up a proper anti-money laundering program.178

In May 2019, FinCEN issued its most recent guidance on digital currency.179 It emphasizes how “this guidance does not establish any new regulatory expectations or requirements.”180 However, this interpretive guidance is meant to remind money service businesses, specifically convertible virtual currencies, about their obligation to follow the BSA regulations.181 In the “money transmission services” definition, FinCEN emphasizes that the portion “other value that substitutes for currency” specifically pertains to digital currencies. FinCEN does not limit or qualify the scope of the definition. In any case, individuals who create or distribute value may be subjected to regulatory frameworks like the BSA. It reiterates that money service businesses do not include banks, persons registered with the SEC or CFTC, or a natural person who engages in money service business activities, but on an infrequent basis with little profit.182

State Regulation

Forty-nine states have their own version of a Money Transmitter Act to regulate digital currencies.183 While many states are using FinCEN’s guidance as a general approach to regulate digital currencies, some states are taking vastly different approaches. There have been three main approaches by states: incorporating digital currencies into existing money service business regulation, exempting digital currencies from money service business regulation, and requiring separate digital currency licenses. Although state-level regulation varies, these highly contrasting approaches will hopefully pressure for more definitive Federal regulation.

The state of Washington’s Uniform Money Service Act includes virtual currency in its definition of “Money Transmission.”184 It defines money as “a medium of exchange that is authorized or adopted by the United States or a foreign government or other recognized medium of exchange.”185 The Act specifically addresses money transmission

172 Jake Frankenfield, Mining Pool, INVESTOPEDIA, https://www.investopedia.com/terms/m/mining-pool.asp.

173 Multi-node Deployment, BITMAIN TECHNOLOGY HOLDING COMPANY,https://help.pool.btc.com/hc/en-us/articles/360020547292Multi-node-Deployment.

174 Trevor I. Kiviat, supra note 15, at 591.

175 Id.

176 Id.

177 Id. at 594

178 Id.

179 Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies, FINANCIAL CRIMES ENFORCEMENT NETWORK, https://www.fincen.gov/sites/default/files/2019- 05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf.

180 Id.

181 Id.

182 Id. at 4.

183 Jennifer Moffitt, The Fifty U.S. States and Cryptocurrency Regulations, COIN ATM RADAR, https://coinatmradar.com/blog/the-fifty-u-sstates-and-cryptocurrency-regulations/.

184 About Virtual Currency Regulation In Washington State, WASHINGTON STATE DEPARTMENT OF FINANCIAL INSTITUTIONS, https://dfi.wa.gov/bitcoin.

185 Legal Definition of Money Transmission, WASHINGTON STATE LEGISLATURE, https://app.leg.wa.gov/RCW/default.

as “receiving money or its equivalent value (equivalent value includes virtual currency) to transmit, deliver, or instruct to be delivered to another location, inside or outside the United States.”ˆ186 By incorporating virtual currency into the definition of money transmission, Washington asserts that virtual currency should be regulated under the already existing money transmission regulations.

Whereas, in Wyoming’s House Bill 70 or “Utility Token Bill,” it has exempted virtual currency from money transmission laws as long as they are exchangeable for goods or services and are not marketed as securities.187 Wyoming defines an “open blockchain token” as recorded on a “digital ledger or database … mathematically verified in nature, especially relating to the supply” and “capable of being traded or transferred between persons without an intermediary.”188 Wyoming is one of the first states to squarely attempt to define digital currency. It emphasizes that “a person who facilitates the exchange of an open blockchain token shall not be deemed a broker-dealer or a person who otherwise deals in securities.”189 In comparison to Washington’s treatment of digital currency, Wyoming has been much more lenient and has made less barriers to participation in digital currency exchanges.

In addition to money transmitter laws, several states have enacted separate laws aimed at requiring virtual currency businesses to acquire separate licenses. In 2015, The New York State Department of Financial Services (NYSDFS) established its own comprehensive framework for regulation of digital currencies.190 It requires licensing to digital currency businesses operating in New York State.191 A digital currency company must obtain a “BitLicense” when engaging in any “Virtual Currency Business Activity,” which includes receiving or transmitting virtual currency, storing, holding, or maintaining control of virtual currency, buying and selling virtual currency, performing exchange services, or controlling, administrating or issuing a virtual currency.192Additionally, any companies involved with a large amount of virtual currency transactions must also be licensed. The purpose of these licenses is to give New York the authority to establish specific requirements.193 Since its enaction, the NYDFS has the application of 19 different digital currency companies.194

Case Law and Digital Currencies

Current case law addressing digital currency attempts to use the federal guidelines outlined above as a guide. However, there is a lot of inconsistency due to the fact that these decisions focus on the nature of digital currency.195

While the SEC has emphasized that digital currencies are not considered securities, in SEC v. Shaver, the SEC found that Bitcoins Savings & Trust, owned by Trendon Shavers, was “violating anti-fraud and registration provisions of security law.”196 Shavers advertised that he was selling bitcoins and offered investors up to 1 percent interest daily. He collected approximated 700,467 bitcoins or $4,592,806 USD; however, his investors suffered net losses collectively of 263,104 bitcoins or $1,834,303 USD. In the Court’s opinion, the Texas judge asserted that “it aspx?cite=19.230.010.

186 Id. 187 House Bill No. HB0070, STATE OF WYOMING, https://www.wyoleg.gov/2018/Introduced/HB0070.pdf. 188 Id. 189 Id.

190 Virtual Currency Business Activity (BitLicense), NEW YORK DEPARTMENT FINANCIAL SERVICES, https://www.dfs.ny.gov/apps_ and_licensing/virtual_currency_businesses.

191 Id. 192 Id. 193 Id.

194 DFS GRANTS VIRTUAL CURRENCY LICENSE TO BITSTAMP USA, INC., NEW YORK DEPARTMENT FINANCIAL SERVICES, https://www.dfs.ny.gov/reports_and_publications/press_releases/pr1904092.

195 Sumit Agarwal, supra note 32, at 162. 196 SEC v. Shavers, 2014 U.S. Dist. (2013).

is clear that Bitcoin can be used as money” and there was a clear expectation that profits would be “derived from efforts of the promoter or third party.”197 Shavers and Bitcoin Savings & Trust were ordered to pay $40 million in disgorged profits.198 The SECemphasized how this was a sham and Ponzi scheme and that “fraudsters are not beyond the reach of the SEC.”199 Immediately after the SEC v. Shaver’s decision, the SEC issued an investors alert.200

There have been several cases where the CFTC has pursued digital currencies in court. In CFTC v. McDonnell, the Commission charged Patrick McDonnell’s company CabbageTech, which is New York-based, with operating a “deceptive and fraudulent virtual currency scheme,” where he gave alleged virtual currency trading advice and misappropriated investor’s funds.201 In its opinion, it emphasizes while traditionally the CFTC’s jurisdiction is limited to future contracts for commodities, the CFTC’s powers have expanded to spot trade commodity fraud. Moreover, they conclude that CFTC’s regulatory authority over “manipulative schemes, fraud, and misleading statements” applies to McDonnell.202 In other words, the CFTC’s anti-fraud authority applies broadly to any manipulative device in relation to the contract of sale of any type of commodity.203 CabbageTech was charged with over $1.1 million in civil monetary penalties.204

Later in the same year, in CFTC v. My Big Coin Pay, Inc., the CFTC claimed a fraudulent “virtual currency scheme” in violation of the Commodity Exchange Act due to manipulation in connection with the sale of a commodity.205 Randall Crater, the owner of My Big Coin, made various false and misleading claims that My Big Coin was “backed by gold,” could be used wherever Mastercard is accepted, and was being “actively traded” on several currency exchanges.206 In its opinion, it describes how “the court is construing the term ‘commodity’ not in a vacuum, but rather as it functions within the CEA’s anti-fraud enforcement provision.”207 While the definition of commodities includes “future delivery” and technically future deliveries of virtual currencies are immediately “dealt in,” the court utilizes case law from United States v. Brooks,208 to support the irrelevance of “future delivery.”

In United States, the defendant attempted to argue that a specific type of natural gas was not a commodity because it was not subjected to future contract, but the court decided that defining a commodity is not solely based on the characteristic of “future delivery.”209

In State of Florida v. Espinoza, an undercover detective bought Bitcoin from Reid Espinoza and implied that he was going to use the Bitcoin to fund illicit activity like purchasing stolen credit cards.210 After the fourth transaction, Espinoza was arrested on two counts of money laundering and one count of engaging in money transmitter business without a license.211 Since their transactions involved conversions of $30,000 of cash into Bitcoin, which exceeds the maximum amount threshold in Florida, Espinoza was charged with anti-money laundering law violations.212 However, the trial court’s decision dismissed charging him with three counts using the 197 Id. at 6.

198 Id.

199 SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme, SECURITIES AND EXCHANGE COMMISSION, https:// www.sec.gov/news/press-release/2013-132.

200 Id.

201 CFTC v. McDonnell, 287 F. Supp. 3d 213 (2018).

202 CFTC 287 at 229.

203 CFTC Wins Trial against Virtual Currency Fraudster, COMMODITY FUTURES TRADING COMMISSION, https://www.cftc.gov/ PressRoom/PressReleases/7774-18.

204 Id.

205 CFTC v. My Big Coin Pay, Inc., 334 F. Supp. 3d 492, (2018).

206 Id.

207 Id.

208 United States v. Brooks, 681 F.3d 678, (2012).

209 Id.

210 State v. Espinoza, 264 So. 3d 1055 (2019).

211 Id.

212 Sumit Agarwal, supra note 32, at 163.

Internal Revenue Service (IRS) notice that Bitcoin is not considered money.213 In 2019, the state of Florida appealed, and the Third District Court reversed the trial court’s decision.214 In its opinion, it states that while Bitcoin is not considered a currency, Bitcoin “does fall under the definition of payment instrument” and, therefore, has “monetary value” or “a medium of exchange, whether or not redeemable in currency.”215 The Florida judge compares and contrasts the definition of a money services businesses on a state level and federal level. Florida’s definition contains no third-party transmission requirement in the definition; however, the federal definition does include a third-party transmission requirement. Although the federal definition includes a third-party transmission requirement, the appellate court emphasizes that Legislature purposefully does not include the unambiguous language to have a broader definition than “third-party.”216

CONCLUSION

In a 2019 joint public statement by leaders of the CFTC, SEC, and FinCEN, they reiterated that digital currency or digital assets must adhere to the BSA’s obligation to prevent anti-money laundering and countering the financing of terrorism.ˆ217 Digital currencies potentially can qualify as “securities, commodities, and security- or commodity-based instruments such as futures or swaps.”218 These regulatory bodies apply definitions broadly and emphasize that the underlying technology used is irrelevant when deciding which category digital currency use falls under.219 Instead, definitions of digital currency will focus on the currency’s activity and service, including its economic reality and use.220

This distinction is important because it asserts that despite the blockchain technology used for digital currency transactions, digital currencies will have to follow the same enforcements and regulations as other financial institutions. Although digital currencies were originally created to cut out intermediaries, it inversely created new intermediaries. For instance, mining pools or digital currency businesses that function as money transmitter services. Or how in certain circumstances, digital currency can act as a commodity. By broadly applying these definitions, regulatory agencies have the ability to categorize digital currencies loosely off its main economic function. Digital currency businesses that do not comply with RFPA, GLBA, EFTA, and BSA will be subject to potentially both civil and monetary penalties.

Additionally, this broad application of definitions implies that a person does not have a reasonable expectation of privacy when using digital currencies. Although digital currencies promised to be a libertarian’s dream,221 if digital currencies are used in the United States and broadly fall under any financial category, then due to third-party doctrine, the user really had no expectation of privacy. That being said, digital currencies will also gain the same financial privacy protections from RFPA, EFTA, and GLBA.

While their approach allows digital currency to encompass many existing financial instrument definitions, regulators should seek to learn and understand the mechanics of blockchain, and why it makes digital currency unique. Likewise, digital currency companies, businesses, and mining pools should be transparent about their

213 Id.

214 State v. Espinoza, 264 So. 3d 1055 (2019).

215 Id. 216 Id.

217 Leaders of CFTC, FinCEN, and SEC Issue Joint Statement on Activities Involving Digital Assets, SECURITIES AND EXCHANGE COMMISSION, https://www.sec.gov/news/public-statement/cftc-fincen- secjointstatementdigitalassets. 218 Id. 219 Id. 220 Id.

221 Jeffrey E. Glass, supra note 15, at 490.

systems and work collaboratively with government agencies. Focusing solely on digital currency’s economic function will admittedly provide regulation for the weaknesses of digital currency; however, it will also neglect its strengths. Digital currency functions vastly differently from any electronic transfer technology, and its blockchain technology provides strengths such as faster transaction time, lower transaction costs, and higher level of privacy.222

It would be a grave mistake to not consider technology when defining a new payment system. After Miller v. United States, the Supreme Court and legislators failed to understand how physical and virtual spaces differentiate from each other; consequently, that decision has caused an erosion of financial and communication privacy protection in all virtual spaces. The government’s choice to apply definitions broadly will have even larger implications on future blockchain technology like smart contracts.223 Regulators have an obligation to protect consumers by mitigating potential risks of fraud, money laundering, and terrorist funding facilitated by digital currency. Likewise, regulators also have an obligation to protect digital currency users’ privacy. In the future as regulators seek to make a categorical federal definition of digital currencies, they should closely follow state regulation’s three main approaches. Regulators should also consider that perhaps blockchain technology makes digital currencies so different from past financial instruments that it needs its own definition and framework for regulation. By reflecting on the effects of current regulation and the structure of blockchain, regulators will hopefully strike a balance between maintaining digital currency’s original intent to foster greater financial privacy and the government’s need to obtain financial records to protect consumers.

s U rvival of C a MPai G n f inan C e r efor M

Izzah Zaheer

ABSTRACT

In this research paper, I analyze various viewpoints concerning Buckley v. Valeo’s survival past the current Court. I analyze the paths of campaign finance reform jurisprudence that stem from Buckley and how the Roberts Court interprets campaign finance reform. This analysis is important in determining whether the Roberts Court is simply placing limits on campaign finance reform or whether their interpretation has virtually eliminated any future for campaign finance regulation. Kang, Gaughan and Strause and Tokaji highlight that the changes on the Court concerning the coalitions have created an extremely narrow doctrine, which marks the virtual end of campaign finance reform. However, Gaughan also contends that the Court is attempting to create a cohesive campaign finance jurisprudence and therefore disregards precedents often seen as unorganized or contradictory. Weaver, Smith and Youn contend that the Roberts Court is not trying to stifle campaign finance reform, but rather expanding what is considered protected speech, thus limiting the scope of campaign finance regulation. Considering these viewpoints, I conclude that because of the Roberts Court’s interpretation of campaign finance regulation, Buckley and campaign finance as a whole is unlikely to survive the current Court. Because of shifts in coalition and doctrine, the scope that campaign finance reform can operate has become extremely limited, leaving virtually no room for activists to push for further reform.

INTRODUCTION

When looking at campaign finance reform, various interpretations of the First Amendment by different Courts created scattered jurisprudence on this issue. The first significant case for campaign finance reform, Buckley v. Valeo, consisted of confusing reasoning that led to the later jurisprudence splitting into several strands. By examining this jurisprudence through the lens of various coalitions on the Court, there are various strands of logic that emerge in regard to this issue. Therefore, understanding the survival of Buckley through the current Court is crucial in order to determine whether there is a future to campaign finance reform or if free speech protections will eventually include any campaign finance regulation. Furthermore, there are varying opinions on this issue with those who believe that limiting campaign contributions is the equivalent to limiting speech, while others believe that equating money to speech is detrimental to the democratic system. These opinions are evident through the coalitions on the earlier Roberts Court considering the divided opinion in Citizens United with Justices such as Kennedy, Scalia, Thomas, Alito and Roberts ruling to limit regulation on campaign finance reform, while Justices such as Sotomayor, Ginsburg, Breyer, and Stevens prefer to uphold campaign finance reform. Evaluating the changes or lack thereof in these coalitions, while also considering the changes to the Court, provides clarity about the impact on campaign finance reform in the future. When arriving at the Roberts Court, Citizens United illustrates a change of a large part of campaign finance reform jurisprudence. The Roberts Court continues to change this jurisprudence with McCutcheon v. FEC, leaving Buckley to hang by a thread. Through evaluating the Supreme Court’s past campaign finance reform, the coalitions, and changes on the Court, to a greater extent, it is unlikely that Buckley will survive through this current Court.

222 Nikolei Kaplanov, supra note 22, at 125.

223 Trevor I. Kiviat, supra note 16, at 605.

Buckley v. Valeo and Extensions

Buckley v. Valeo was the first campaign finance reform case the Supreme Court reviewed. Therefore, its ruling set the baseline from which the Court evaluates issues concerning campaign finance law. In Buckley, the Court ruled on the constitutionality of the Federal Election Campaign Act of 1974 concerning contribution limits, expenditure limits, and disclosure requirements. Through the Court’s discussion regarding the constitutionality of these issues, “the Court persisted in treating the regulation of campaign monies as tantamount to regulation of political expression.”1 Essentially, the Court equated money with speech and looked at this case through the lens of the First Amendment because this money facilitates “the effective exercise of the right to participate in political debate.”2 Nevertheless, the ruling that came from Buckley presented a splintered Court.

Through Buckley, the Court upheld the contribution limits in the FECA since the primary governmental interest of preventing corruption is compelling enough to restrict political speech. In subsequent cases, such as California Medical Association v. FEC and Nixon v. Shrink Missouri, the Court upheld the contribution limits established in Buckley. However, in Nixon, Scalia, Thomas, and Kennedy all dissent claiming that a limit on contributions is a restriction on fundamental rights and democracy, similar to Burger’s dissent in Buckley. With a significant number of justices that are later on the Roberts Court disagreeing with a crucial element of the Buckley decision, there is more doubt in Buckley surviving the current Court (Briffault, 2011, 898).

Although the Court upheld contribution limits in Buckley, it applies a higher level of scrutiny to expenditure limits, thus protecting corporate speech. Although the Court protected corporate speech in First National Bank v. Belotti, there are inconsistencies in later cases, specifically with the definition of “corruption.” Because “corruption” is not clearly defined in Buckley, justices can choose a narrow or broad definition. In FEC v. Massachusetts Citizens for Life, the Court struck down expenditure limits, while in Austin v. Michigan Chamber of Commerce, the majority upheld expenditure limits to prevent “undue influence” over the political process.3 The dissonance between these two cases illustrates the splintered foundation for campaign finance reform jurisprudence. The Court also upheld disclosure requirements under strict scrutiny, but in Brown v. Socialist Workers, the Court affirmed Buckley’s exception for organizations that could have an increased amount of threats or harassment due to disclosure laws.4

A Turning Point: McConnell v. FEC

Buckley v. Valeo laid an unstable foundation for campaign finance reform jurisprudence. McConnell v. FEC sought to reinforce and clarify aspects of Buckley, which seemed vague. The Court upheld large components of the Bipartisan Campaign Reform Act, including prohibitions on parties using soft money and electioneering, both which were met with strong dissents from Justice Kennedy, Thomas, and Scalia. The McConnell Court based their definition of corruption on legitimate and illegitimate influences on an officeholder’s judgement besides quid pro quo corruption. The Court considered whether an officeholder would be beholden to the “wishes of those who have made large financial contributions.”5 This analysis is an extension to the rulings in Buckley in regard to contribution limits and corruption. The Court in terms of electioneering tries to distinguish between “public and electoral

1 Frederick Slabach, The Constitution and Campaign Finance Reform, (Durham, Carolina Academic Press, 1985), 57.

2 Ibid.,59.

3 Lori Ringhand, Defining Democracy: The Supreme Court’s Campaign Finance Dilemma, (San Francisco: Hastings Law Journal, 2004), 101.

4 L. Paige Whittaker, Constitutionality of Campaign Finance Regulation: Buckley v. Valeo and Its Supreme Court Progeny, (American Law Division, 2008), 25.

5 Nathaniel Persily and Kelli Lammie, The Law of Democracy: Campaign Finance After McCain-Feingold: Perceptions of Corruption And Campaign Finance: When Public Opinion Determines Constitutional Law, (Pennsylvania Law Review, 2004), 126-127.

speech.”6 McConnell overturns lower court rulings, which only interpreted advocacy for candidates in express terms; the Court holds that neither the First Amendment nor Buckley prohibits regulation of electioneering communications that may or may not contain advocacy terms.7

The Roberts Court: Citizens United McConnell tried to provide a stable ground for campaign finance reform jurisprudence, but many on the Court were still divided over this contentious issue. However, with changes on the Court, there is a substantial shift on campaign finance reform. In Wisconsin Right to Life, Inc. v. FEC, the Roberts Court finds that prohibiting treasury funds being spent in a primary or general election is unconstitutional, but the Court distinguishes from McConnell. Additionally, in Davis v. FEC, the Court struck down contribution limits as a violation of the First Amendment. Both these cases are essentially warning shots in regard to what the Roberts Court intends to do with campaign finance reform jurisprudence. In Citizens United, the Court overturns significant portions of McConnell, which specifically includes the prohibition of independent expenditures for corporations, placing corporate speech under First Amendment protection. The Roberts Court in Citizens United overhauls campaign finance reform, significantly altering how this area of law will be viewed in the future.

The Roberts Court continues to limit campaign finance reform by expanding the definition of speech in terms of money and campaigns. In subsequent cases, such as Arizona Free Enterprise and American Tradition Partnership, the effects of Citizens United on campaign finance reform is evident as the Court strikes down contribution parity limits and corporate expenditure limits. Recently, in McCutcheon v. FEC, the Roberts Court struck down a federal contribution limit for the first time, allowing individuals to make unlimited donations in elections. Furthermore, the Court indicating that it will not shy away from striking down federal statutes illustrates their willingness to further undo federal regulation on campaign finance reform.

Literature Review: Roberts Court and Campaign Finance Reform

The Roberts Court drastically changed the landscape of campaign finance reform from its genesis in Buckley. The Roberts Court’s rulings in Citizens United and McCutcheon v. FEC have significantly altered the jurisprudence of campaign finance reform since Buckley. However, there are varying opinions concerning the extent of change to campaign finance reform jurisprudence. Furthermore, there is debate on whether the Roberts Court’s rulings are an advancement of First Amendment rights or detrimental to the democratic process.

Campaign Finance Reform Is Over

Narrow Doctrine

The Roberts Court has operated on a limited definition of corruption with a broader interpretation of the First Amendment in terms of money and corporate speech. Part of the Roberts Court’s willingness to largely overturn campaign finance reform originates from the “law’s failure to track contemporary campaign finance,” which “is the ironic result” of earlier Court’s “sympathy for the government’s in regulating campaign finance.”8

Michael S. Kang and Renata E.B. Strause and Daniel Tokaji discuss how the Rehnquist Court’s broad interpretation of corruption in terms of campaign finance without looking at a quid pro quo corruption specifically allowed the Roberts Court to reject any expansions to corruption and rely on an underdeveloped notion of a quid pro quo corruption. Therefore, the Roberts Court is on track to consider corruption only in terms of the quid pro quo

6 Monica Youn, Money, Politics, and the Constitution: Beyond Citizens United, (New York: Century Foundation Press, 2011), 46. 7 L. Paige Whitaker, Constitutionality of Campaign Finance Reform, 32.

8 Michael S. Kang, The Brave New World of Party Campaign Finance Law, (Cornell Law Review, 2016), 534.

narrative, which “does not track contemporary concerns about modern campaign finance.”9 Considering this, Kang argues that the Roberts Court is on a path to completely change the jurisprudence in terms of campaign finance law, which will remain hostile towards any regulation on corporate speech. He determines that the only path forward for campaign finance reform is if a “future Court less hostile” is “willing to build on intellectual groundwork set forth now only in dissent.” Kang paints the picture of the Roberts Court as one completely averse to any type of campaign finance reform due to their narrow interpretation of corruption and essentially “any policy question about campaign finance law has been thoroughly deregulated.”10

This difference in interpretations concerning campaign finance reform is due to the “Rehnquist Court’s approach in splintering off into alternative theories of corruption,” thus making it easier for the Roberts Court to disregard past precedent and focus on a quid pro quo corruption.11 Furthermore, Strause and Tokaji agree with Kang’s argument as the Roberts Court has severely constricted the anti-corruption rationale.12 Similar to Kang’s argument, Strause and Tokaji contend that “the anti-corruption rationale will remain narrow,” while the concept of equality in terms of campaign finance is pushed out of view.13 Because of this, advocates for reform will have limited options regarding changing the structure of campaign finance laws.

Changes on the Court

Until the Roberts Court, “judicial deference to the government in campaign finance law” has been a constant.14 However, Kang anticipates that the Roberts Court will dismantle Buckley since now it is under more pressure specifically with identifying “anti-corruption” as a legitimate governmental interest. Kang attributes this shift specifically to the changes on the Court with Chief Justice John Roberts and Justice Samuel Alito replacing Chief Justice William Rehnquist and Justice Sandra Day O’Connor respectively, thus leading to “the Court abruptly switch[ing] course on campaign finance law.”15 This change was significant since from this point the Court switched from judicial deference to governmental interest to judicial activism in striking down campaign finance laws. Additionally, Strause and Tokaji highlight how “five justices adhere to a narrow conception of corruption” seen in both Citizens United and McCutcheon.16 Because of this, Strause and Tokaji concur with Kang regarding the current Court: there will be no drastic change concerning campaign finance reform since the majority maintains a narrow conception of corruption.

The same justices who are in the majority in Citizens United are in the majority later in McCutcheon when the Court ruled against campaign finance regulation. Therefore, this represents another time in recent years in which “all the Republican-nominated justices” and “all the Democratic-nominated justices” voted along distinct blocs to strike down or uphold campaign finance regulation respectively.17 Considering these specific blocs, Gaughan’s perspective aligns with both Strause and Tokaji and Kang since all magnify the composition of the Court as a major reason for the drastic changes the Roberts Court has made to campaign finance jurisprudence.

Limitations on Reform

Although many view the Roberts Court as completely averse to campaign finance, others view the limitations the Roberts Court has placed on campaign finance reform as part of their interpretation of the First Amendment.

9 Ibid, 534.

10 Ibid, 535.

11 Ibid, 548.

12 Renata E. B. Strause & Daniel P. Tokaji, Between Access and Influence: Building a Record for the Next Court, (Duke Journal of Constitutional Law & Public Policy, 2014), 188.

13 Ibid, 185.

14 Kang, The Brave New World, 538.

15 Ibid, 546.

16 Strause & Tokaji, Between Access and Influence, 180.

17 Anthony J. Gaughan, In Defense of McCutcheon v. Federal Election Commission, (The Kansas Journal of Law & Public Policy), 235.

Campaign Finance and Protected Speech

Buckley v. Valeo represents the genesis of campaign finance reform jurisprudence and the Court at the time found that the FECA’s contribution and expenditure limitations “operate in an area of the most fundamental First Amendment Activities,” which offers “the broadest protection to such political expression.”18 Slabach discusses how the Buckley Court treated “the regulation of campaign monies as tantamount to regulation of political expression” stating “in effect, that money is speech.”19 Therefore, this analysis places campaign funding at the same level as protected speech. Because Buckley essentially determined that “money is speech,” this interpretation influenced later analysis concerning campaign finance reform.

The Roberts Court largely functions on the same principle by warranting campaign finance the same protection as protected speech. Weaver contends that it would be “unfair to characterize the Roberts Court’s” decisions as “probusiness.”20 In fact, justices who joined the majority in the Roberts Court’s campaign finance decisions were more consistently concerned about “free speech principles” as a whole. Because past decisions such as Austin and McConnell have indecisive opinions in which a substantial number of justices find campaign finance regulations to be in violation of freedom of expression. Therefore, because of “indecisive precedent,” the decision in Citizens United and McCutcheon is just an example of the Roberts Court applying its interpretation of the freedom of expression clause based on the dissents in past cases.21

Furthermore, McCutcheon v. FEC itself “was of relatively little practical importance” since there was already a limit on expenditures.22 In McCutcheon, the Roberts Court applied the same logic that it has applied in past campaign finance cases. The Court held that contribution or expenditure restrictions “to equalize voices” do not serve a “compelling government interest to justify the restraints on First Amendment rights.”23 Therefore, the argument the Roberts Court applies in McCutcheon is a similar argument seen in Citizens United and has the same undertones as seen in Buckley.24 Therefore, Smith contends that the only reason McCutcheon appeared to be a “blockbuster” decision is because of the dissent, which argues that the “aggregate caps” struck down in the case help the compelling governmental interest of curbing corruption. However, those who join the decision argue that aggregate caps are not “narrowly tailored.”25 Essentially, the Roberts Court strikes down these limits not as a part of a “probusiness” agenda, but rather as an effort to maintain the protections of free speech and expression. Considering this, the Roberts Court limits on campaign finance reform are not tailored to making campaign finance reform impossible, but rather employing a wide definition of protected speech.

Creating a Cohesive Doctrine

The jurisprudence surrounding campaign finance reform had already taken several sharp turns in terms of doctrine through the years. Buckley v. Valeo itself was a confusing decision with seemingly contradictory interpretations. Therefore, the Roberts Court’s interpretation that placed limits on campaign finance reform was the Court’s way of creating a more cohesive doctrine. In fact, Citizens United was not a shocking decision, rather “the product of a decades-long legal drive to rethink doctrine and, ultimately, strike down the edifice of campaign finance law.”26

According to Monica Youn, the Roberts Court is only shaping campaign finance laws to where they are “stable and

18 Buckley v. Valeo, 424 US 1 (1976).

19 Slabach, The Constitution, 57

20 Russell Weaver, The Roberts Court and Campaign Finance: “Umpire” or “Pro-Business Activism?”(StetsonLaw Review, 2011), 858.

21 Ibid, 859.

22 Bradley A. Smith, McCutcheon v. Federal Election Commission: An Unlikely Blockbuster, (New York University Journal of Law & Liberty, 2015), 57. 23 Ibid, 50.

24 Ibid, 52.

25 Smith, McCutcheon, 58.

26 Youn, Money, Politics and the Constitution, 15.

coherent” and reflect “the text and values of the Constitution.”27 Past Courts have failed “to develop a consistent and workable body of doctrine” and the Roberts Court in Citizens United attempts to define “the scope of campaignrelated speech” and “corruption.”28 Although Citizens United seemed like the Court was turning its back on past precedent, in reality the Roberts Court was trying to create a feasible doctrine to rule on for campaign finance.

In McCutcheon v. FEC, the Court applied strict scrutiny review to the aggregate limits, thus finding that they were “invalid under the First Amendment.”29 Furthermore, Gaughan highlights how McCutcheon provides a solid and objective definition of corruption since the Court rejects “the notion that the Constitution permits the government to criminalize” contributors’ access and influence with members of Congress.30 The definition of corruption varies through the Court’s jurisprudence as Buckley and McConnell both adopt a wider view of corruption. However, the Roberts Court, wanting to provide a more cohesive doctrine on campaign finance laws, limits corruption to only refer to quid pro quo transactions.

Although the dissenters emphasized that a narrow definition of corruption provides too many loopholes, Chief Justice Roberts holds that their definition is based on the one provided in Buckley. This reasoning by Roberts supports both Youn and Gaughan’s arguments: the Roberts Court seeks to create a cohesive doctrine concerning campaign finance reform that avoids the confusion and variance of past precedent.

ANALYSIS

The Roberts Courts’ rulings on campaign finance reform leave Buckley hanging by a thread and thus indicate that the Roberts Court is willing to narrow the scope of campaign finance reform into oblivion. Therefore, to a greater extent, campaign finance reform will be difficult to establish in the future due to the makeup and the interpretation of the Court.

Originally in Dissent

Buckley is the first case on campaign finance laws and the disagreement between the majority and dissent is based on which level of scrutiny to apply to contribution and expenditure limits. Justice Burger, in dissent, argues that both limits implicate First Amendment rights and thus should be evaluated under strict scrutiny.31 The same sentiment in Burger’s dissent is later reflected in Nixon v. Shrink Missouri’s dissent where Justice Scalia, Thomas, and Kennedy all admonish the decision in Buckley and argue that contribution limits should be evaluated under strict scrutiny because they concern limits on speech.32 The same three justices dissent in McConnell v. FEC, which upholds significant portions of the BCRA and broadens the definition of corruption to anything giving the “appearance of undue influence.”33 Kennedy specifically emphasizes that corruption should be limited to quid pro quo transactions. Despite these cases taking place before the Roberts Court, Scalia, Thomas, and Kennedy are all members of the Roberts Court later, and their views on campaign finance reform begin in dissent, but later become important parts of the majority following shifts on the Supreme Court. At the time, Scalia, Thomas, and Kennedy are all in dissent, but the sentiment they highlight is later echoed in the majority opinion of both Citizens United and McCutcheon. Kennedy’s dissent in McConell is significant since he is considered a swing vote on the Court, but in terms of campaign finance reform, he shows his consistent advocacy for free speech rights as opposed to the state’s interest. However, his advocacy remains in dissent.

27 Ibid, 35.

28 Ibid, 38.

29 Gaughan, In Defense, 242. 30 Ibid, 236.

31 Slabach, The Constitution, 87.

32 Richard Briffault, On Dejudicializing American Campaign Finance Law, (Georgia State University Law Review, 2011), 898.

33 Robert C. Post, Campaign Finance Reform and the Constitution, (Massachusetts, Harvard University Press, 2014), 58.

Shifts in Coalitions

John Roberts’ appointment to the Supreme Court as Chief Justice and Samuel Alito’s appointment to the Supreme Court both represent turning points concerning campaign finance reform jurisprudence. After both their appointments, the dissenting argument transformed into the majority opinion. Scalia, Thomas, and Kennedy, all originally found in dissent in campaign finance cases were now key players in the majority. For example, in Wisconsin Right to Life, Inc. v. FEC, the Supreme Court did not expressly overturn McConnell, but the Court struck down a provision of the BCRA that prohibited treasury funds from being spent on broadcasts before an election. This case illustrates how changes on the Court illustrate a shift in coalition, which moves the Court towards upholding a free speech interest rather than a state interest (Youn, 2011, 52).34 Furthermore, Davis v. FEC illustrates an instance in which the Court strikes down contribution limits as a violation of the First amendment. Both Davis and Wisconsin Right to Life, Inc. serve as the Roberts Court’s warning shots regarding what the Court intends to do to campaign finance reform.

Considering the coalitions on the Court, the Roberts Court’s ruling in Citizens United is less shocking as the Court was simply applying their interpretation of campaign finance law. The Roberts Court did turn its back on years of campaign finance reform precedents, but the sentiment highlighted through the majority in Citizens United was a vital part of the dissents in those precedents. Nevertheless, Citizens United manages to stay attached to Buckley and essentially clarifies the corruption principle first introduced at that point. However, the Buckley compromise has proven to be unstable, and Citizens United is further indication that the Roberts Court intends to shift from the genesis of campaign finance reform jurisprudence and begin on a track of its own that once used to be only found in dissent. Therefore, the changes on the Court are what led to a turn in campaign finance jurisprudence and what will inevitably prevent future campaign finance reform.

Citizens United was the Court’s signal concerning the path the Roberts Court will follow in terms of campaign finance reform and McCutcheon v. FEC was a confirmation about the Court’s direction on campaign finance reform. The Roberts Court coalition, which ruled against campaign finance reform under the free speech right, remained consistent as they emphasized that corruption only concerns quid pro quo transactions and thus strikes down federal contribution limits. The dissent in McCutcheon relies upon the same principles once in the majority in past cases, but because of the shifts on the Court, a wider definition of corruption as well as equalizing influence are dissenting arguments. Therefore, McCutcheon represents the Court pointing in a different direction than from past campaign finance precedent. This direction is the Court’s intent to narrow the space in which campaign finance reform can operate. However, the Roberts Court sets a base in which campaign finance reform has little room to grow since any limitations on contributions would be struck down under this Court’s interpretation of the First Amendment, essentially, extinguishing any hope for future campaign finance reform laws.

Despite the Roberts Court’s hardline approach against campaign finance reform, in Williams-Yulee v. Florida Bar, Chief Justice John Roberts joins the usual dissenters who become the majority in this case, which upholds a contribution solicitation limit in judicial elections. Although Roberts leaves his usual coalition to uphold this campaign finance regulation, this does not necessarily indicate that the Roberts Court will become less aggressive towards campaign finance regulation. Williams-Yulee concerns judicial elections specifically; therefore, this case simply highlights that Roberts believes campaign finance regulation should apply to judicial elections as judges are elected to be impartial interpreters rather than politicians.

34 Youn, Money, Politics, and the Constitution, 52.

The Roberts Court’s Interpretation

The Roberts Court’s broad interpretation of the First Amendment’s free speech right and the narrow interpretation of corruption contributes to their rulings that inevitably prevent the expansion of campaign finance reform.

Initially, Buckley adopts a lower standard of review for contribution limits and establishes a quid pro quo definition and appearance of corruption. However, Buckley applied strict scrutiny to expenditure limits, thus creating dissonance within the decision. In subsequent cases, such as Austin and McConnell, the Supreme Court begins to expand on the definition of corruption as anything, which gives the appearance of “undue influence.” Therefore, precedent on campaign finance reform favored a wider definition of corruption that restricted free speech due to the state interest of preventing corruption.

However, the Roberts Court adopted a narrow definition of corruption, limiting it specifically to quid pro quo deals, thus favoring a wider free speech right and ruling against the government’s ability to regulate campaign finance. Therefore, the Roberts Court’s interpretation on campaign finance laws limits the scope of which campaign finance reform can operate. In both Citizens United and McCutcheon the Court employs their interpretation by creating a new path for campaign finance jurisprudence since it disregards past precedent and relies on the Court’s own narrow interpretation of corruption. This narrow interpretation through Citizens United and McCutcheon significantly limits the government’s ability to regulate campaign finance to the point that any new campaign finance reform laws have become virtually impossible.

Buckley v. Valeo’s Survival Through the Current Court McCutcheon in 2014 illustrated that the Roberts Court was set on an interpretation of campaign finance that favored the individual free speech interest over the state interest in preventing corruption. However, since 2014, there have been changes on the Court with the appointment of Neil Gorsuch and Bret Kavanaugh replacing Justice Scalia and Justice Kennedy, respectively. Strause and Tokaji both discuss how campaign finance laws have become extremely limited, but a future Court could potentially reverse this course.

Gorsuch and Kavanaugh both apply an originalist interpretation to the Constitution similar to that of Justice Scalia; Scalia was consistently in support of striking down campaign finance regulation as a violation of the First Amendment. Furthermore, campaign finance decisions generally split along ideological lines with the exception of Williams-Yulee. Justices appointed by Republican presidents support striking down campaign finance regulation, while justices appointed by Democratic presidents support the state interest of preventing corruption. Therefore, both Kavanaugh and Gorsuch were appointed by a Republican president and thus will most likely rule in favor of striking down campaign finance form.

The Current Court’s trajectory in terms of campaign finance reform can be seen in Thompson v. Hebdon, which concerns a $500 dollar contribution limit to PACs in Alaska. In the per curiam opinion granting certiorari, the Court highlights Citizens United and McCutcheon as precedents. The Court also cites Randall v. Sorell, a decision in 2006 by the Roberts Court, which struck down similar contribution limits in Vermont. Thompson v. Hebdon is not an extremely consequential case, but the per curiam opinion illustrates that the Court has made up its mind on the issue of campaign finance reform and that the current Court will follow in the direction set forth by Citizens United.

CONCLUSION

Buckley represents the genesis of campaign finance jurisprudence, which has split into various strands over the years due to different interpretations on the Court. The Roberts Court has consistently ruled on striking down campaign finance regulation, citing the First Amendment, leaving Buckley to hang by a thread. Therefore, the limitations that the Roberts Court has placed on campaign finance reform has narrowed the room for any regulation to oblivion. Additionally, the current Court with the replacements of Gorsuch and Kavanaugh is likely to follow the path the Roberts Court has already paved.

The Roberts Court relies on free speech principles when ruling against campaign finance reform laws. The argument centers around the concept that “money is speech” and limiting the ability to influence policymakers with donations is inherently restricting speech. However, by lifting almost all barriers between monetary influence and lawmakers, the Court permits more influence to wealthier donors. The dissent in recent campaign finance cases admonishes this unequal influence and argues that campaign finance reform equalizes influence through the electorate.

The argument between the majority and the dissent illustrates the paradox of campaign finance reform. Both the dissent and majority argue that their interpretation protects democracy and the democratic process. The current majority would argue that striking down campaign finance regulation is necessary to maintain free speech, a crucial part of democracy. However, the dissenters would argue that striking down campaign finance regulation hurts democracy by giving more political influence to the wealthy.

These two viewpoints are completely diametrically opposed. The current Court is setting a precedent mainly focused on the free speech interest rather than corruption. Given that the Court generally splits along ideological lines, it is highly unlikely that a Court in the near future is going to dramatically alter this jurisprudence. Therefore, the space for activists to institute campaign finance reform is considerably limited. Whether that is beneficial for the future of the democratic process is something only time and observation will tell.

a sian P oliti C s

h UM an r i G hts ’ i MPa C t on i nternational r elations b

etween the U. s . and C hina

Clare Ennis

Today, in the midst of a massive trade war, it is natural to think of the Chinese- American relationship in a financial and political context. With the world’s two largest economies, the implications of their interactions can have great impacts on the rest of the globe. While the two countries have clashed over these issues and more, one cannot discount the consequence of human rights in their interactions. With a lengthy history of abuse, China has created tensions with all of the Western world, but with the United States in particular. Even President Trump, who has shown little interest in the subject as a whole, has admonished China by signing a bill supporting prodemocracy groups in Hong Kong. China’s recent interactions with Hong Kong only underscore the importance of this issue within the countries’ relations. While human rights may not be the focal point as frequently as economic or military issues, human rights are an important part of international relations, especially when the two nations have a contentious relationship. Human rights violations are added to the list of grievances between the countries, coloring all of their relationship and their interactions.

China has shown a disregard for human rights since the Communist victory of 1949. Chairman Mao persecuted his own people via the scare tactics of the Cultural Revolution, the genocide of the Great Leap Forward, and the omnipresent fear of party purges. Since this ignominious beginning, China has continued to infringe on the rights of workers, religious and ethnic minorities, journalists, human rights lawyers, and anyone that dare disagree with the Communist party. In the simplest of terms, China is an authoritarian state where rules must be followed, so one may argue that this behavior is expected. Why then, does China make considerations for human rights and become angered when the rest of the world denigrates their human rights record? It would appear that outside pressure has caused the current commitment to human rights rather than any altruistic desire from within the country. The United States is inarguably China’s most important trade relationship, as we represent 19.2% of China’s exports (Workman 2019). Logically, one would then sumise that the United States, a leader in human rights and international institutions, is the primary reason China cares at all about the topic. I argue in this paper that this fact is true – that the integral economic relationship between the two is the primary reason we see any commitment to protecting and promoting human rights in the authoritarian nation.

However, there are always different opinions on any issue. One could claim that China came to this commitment from internal pressures from their people. While Chinese actions show the contrary, one cannot simply discount this view without investigation. Others may opine that China has indeed created legislation focused on human rights because of outside pressures, but from international institutions, not the United States. Others may conclude that China has simply arrived at this focus naturally as a side effect of their continuing economic democratization. I will inspect all of these contrary arguments as I seek to understand China’s changing focus on human rights in the context of its relationship with the United States.

AND ITS HISTORY OF HUMAN RIGHTS

I argue that the source of China’s new emphasis on human rights stems from the pressure from the United States. To understand why this situation is so, one must first know the history of the disagreement between the countries on this topic. From the beginning, the two nations have differed in how they view human rights and their importance to a government. The idea of “human rights” is a Western concept, beginning with Greek and Christian philosophy (Zhou 2005, 112). While in the West, human rights are meant to protect infringement of the individual by the government and others, Chinese see these rights as something the government should provide. The government is entrusted with the care of its citizens; the authority is not considered something from which the people should be protected (Zhou 2005, 113). Therefore, the state decides what rights can and cannot be given. Because of this background, China has decried U.S. demands for rights as something that does not apply to them or hold worth. Their history clearly shows this lack of care. Beginning with Mao, China has long ignored the rights of its people. Mao’s Cultural Revolution and Great Leap Forward caused millions of deaths and widespread devastation for his people. Overall, Cheng Li, a senior fellow at the Brookings Institution in Washington, D.C. from Shanghai, called the China of the 1960s and 70s a “prison” (Billitteri 2008). However, improvement was slow going following Mao’s death.

By 1989, China still viewed the concept of human rights as “propaganda or Western hypocrisy” (Billitteri 2008). This view is clear when one recalls the atrocity of Tiananmen Square, where pro-democracy protestors were violently quashed by the military when the government declared martial law (Seymour 1980, 67). Troops with assault rifles and tanks fired on protestors, killing around several hundred to several thousand. Defining the end of the decade, China proved its unwillingness to allow any dissent of any kind. Entering into the 1990s, China began its ‘Strike Hard’ Campaign against the Uyghur people in the Xinjiang region. Having tired of unrest beginning with the Baren riot in 1990, China began striking against the ethnic and religious minority groups with mass roundups, quick trials and executions, and the seizure of weapons (Hastings 2011). Since that initial crackdown, China has continued to repress the group to this day. This past March, accounts claimed that over a million Uyghurs were interned in “reeducation” camps with no trials or end date to suppress their clamoring for greater autonomy (Castets 2019). While years have progressed, the treatment of this problem has not. Despite China opening up economically in the new decade, human rights would barely improve.

China joined the World Trade Organization (WTO) in 2001, leading many to believe that greater democratization would follow. However, this failed to occur. Instead, China ushered in a period of further human rights abuses, such as imposing the death penalty on a high number of non-violent crimes, repressing religious freedom, and imprisoning those who spoke out against the government (Billitteri 2008). Prior to the Olympic Games, a time where soft power and international respect should grow, the government forcefully removed people from Beijing it viewed as “undesirable,” such as sex workers, migrants, and beggars. Those who protested against this action were frequently intimidated, imprisoned, and put on house arrest (Human Rights Watch 2008). In 2009, China unveiled the National Human Rights Action Plan, appearing to finally show a true internal commitment to human rights. However, its achievements were moderate and mixed. The greatest progress from this report was its simple recognition of human rights as something worthy of attention (Human Rights Watch 2011). Despite enmeshing itself further in international organizations, China continued to violate the rights of its people up until the modern day. Xi himself has pushed China into an even greater state of repression as he has focused his leadership on suppression and centralization of the Party-state.

CHINA

Xi has proved indifferent to the rights of his people, seen by his crackdown on human rights lawyers, journalists, and further actions against the Uyghur minority (Economy 2018, 46-47). In June 2015, over 300 lawyers were imprisoned, undergoing trials behind closed doors (Economy 2018, 47). Xi has begun to use legal reform to allow his administration to provide the opportunity for “‘torture and terror’ of public interest lawyers, women’s rights activists, labor activists, and journalists” (Economy 2018, 47). Even for those Chinese showing no political subversion or minority status, general rights, such as privacy, have been all but eradicated. The internet, once a bastion of free thought and a way to criticize the government, has been highly censored and controlled by the government. Many activists have been removed from websites, and social media platforms such as Facebook have agreed to censor themselves to please the government.

Even more concerning has been the development of a social credit system, which ultimately allows the government to monitor, rate, and shape the behavior of participants in a way that advances ethical behavior (Economy 2018, 79). By collecting data on the internet and developing a rating system, the government hopes to reward good behavior and penalize bad. People labeled bad or “trustbreakers” could ultimately be punished by failing to receive a job promotion or being unable to purchase a house (Economy 2018, 79). In 2016, the government released a law that allowed censors to delete and block content that violated Chinese laws and regulations and even cut off internet access in certain areas during times of unrest (Economy 2018, 74). Overall, a U.S. Congressional study concluded in 2018 that China’s human rights protections have been on a “downward trajectory by virtually every measure” (Asia News Monitor 2018). Xi has continued to focus on strengthening his party and appears to hold little regard for the rights of those who disagree with him. Concluding a storied history of horrific rights violations, one can see how unwilling China is to honor the rights of its people. However, despite apparent internal disregard, China still has signed more international rights conventions than the United States, created the National Human Rights Action Plan (NHRAP), and takes part in the United Nations Human Rights Council (UNHRC). Why does it seek to do any of the above when the country clearly cares little for the rights of its people and desires the supremacy of the state overall? The answer is clear – international pressure.

U.S.-CHINA RELATIONS

While China and the United States have feuded for decades, the two understand the necessity of their partnership. As Wendy Dobson asserts in her book Partners and Rivals, “the relationship between China and the United States is central to any strategic view of the world of the twenty-first century” (2013, 3). Possessing the world’s two largest economies, the nations hold great sway over one another’s actions and dealings. Understanding the importance of this relationship will shine light upon why the United States is able to impact human rights in China to such a high degree.

Economics has always been at the core of the Sino-American relationship. For China, nearly all interactions abroad serve to strengthen the domestic economy and maintain authoritarian rule (Dobson 2013, 4). While the two previously cooperated closely against the Soviet Union under the Nixon administration, the relationship has grown contentious (Dobson 2013, 3). For the two, economic ties force the nations into constantly searching for compromise. However, with disparate worldviews and goals, tension often develops, as one can see today with the ongoing trade wars and the strained Hong Kong situation. However, despite growing tension, the economies of the two countries have become more intertwined, making each other integral to the wellbeing and future of the other.

After the 2008 global financial crisis, China continued its accelerated growth as other nations, including the United States, faltered. Today, China still continues to far outpace the growth of the United States, although it has begun to slow from the rapid 10 percent it once had (Dobson 2013, 21). With China potentially catching up to the United States in economic influence by 2026, the U.S. and the rest of the globe have begun to wonder what China may do with its increasing power (Dobson 2013, 22). The U.S. currently holds a large amount of power over international institutions. Will China bend to these established mandates and behaviors or try to alter the current standing of the world? China has prompted worry across the globe by creating the Asian Infrastructure Investment Bank (AIIB), which some view as a Chinese-created competitor to established institutions such as the World Bank. While China has claimed that the AIIB and other Chinese-proposed institutions are meant not to “challenge the existing international order but rather to complement it,” the U.S. and others still hold doubt over the validity of these statements. With aggressive behavior and opaque governance, China does not bring trust, but rather worry to other powers, especially the United States. Questions like these create discord between the two as the U.S. worries about its international primacy.

Amid this worry is the co-dependence between the countries. While the two certainly feel a sense of competition, most clearly seen by the ongoing trade war under Trump, they also require each other for the prosperity of their respective economies. The U.S. is China’s largest national market by far. Further showing their interdependence, the Asian nation also possesses a significant percent of U.S. Treasury Security holdings, peaking at 25 percent in 2011 (Dobson 2013, 30). As Dobson asserts, China requires “a stable environment if the country is to continue to rise. To that end, the relationship with the United States is key” (2013, 6). While China may be climbing, the United States remains the largest economy in the world and an immensely important global community member. China has, does, and will continue to require the United States to succeed. However, as stated before, the two differ in many ways. While they now cooperate frequently in international institutions and economic matters, they still hold vastly disparate world views. Although this tension causes continuous strife, their interdependence requires both nations to consider one another in domestic matters.

HUMAN RIGHTS IN U.S.-CHINA RELATIONS

Human rights have frequently arisen as a source of contention between the two nations. However unwilling, China must at least consider the viewpoint of the United States and its criticisms or fear swift economic backlash. I argue the reason we see any attention to human rights in China is solely due to international pressure led by the United States. While China has primarily undergone policy change of a form rather than substance, these policy changes at all show the impact of outside pressure (Foot 2000, 4). As a democratic nation and the undisputed global leader, the United States has frequently involved itself in world affairs, from the Iraq War to the Ebola Virus. The United States has continued this practice of involvement to include China, whether that be in the South China Sea with territorial disputes or the issue of human rights violations.

1989, the year of Tiananmen Square, proved to be the first year where the two nations substantively clashed over the subject of human rights (Zhou 2005, 107). To show its displeasure with the abuse of protestors, the United States imposed sanctions on China and tied the most-favored-nation status, which offers the best trade terms from a country, to its human rights record in 1990 (Zhou 2005, 107). As a result, some of the most advantageous economic conditions would be bound to their ability to demonstrate proper treatment of its citizens. For China, Tiananmen

Square showed the “significance of human rights as a legitimate subject for both domestic and international policies” (Hun Joon Kim 2018, 14). The subject became a source of “structural weakness” that China would have to diplomatically solve to maintain its relationships abroad (Hun Joon Kim 2018, 15). Having undergone sanctions by the U.S. and American requests to halt all new loans from the World Bank and International Monetary Fund, China began to study and issue papers on human rights in 1991 (Hun Joon Kim 2018, 15). While the matter did not become important through any merit of its own to the Chinese government, the American economic relationship forced the issue upon the Asian nation.

Following this disaster, the U.S. government has frequently called on China to improve in the field. In 1995, Hillary Clinton criticized China’s abuses at the Fourth World Conference on Women held in Beijing; President Bill Clinton presented Chinese President Jiang Zemin a list of political prisoners and demanded their release (Zhou 2005, 109). The administration also organized international opposition to China holding the Olympic Games due to their lackluster human rights record (Zhou 2005, 109). However, Clinton also removed the connection between most-favored-nation status and the Chinese human rights record, showing a desire to link the subject to other issues in dispute between the nations, such as military buildup, intellectual property rights, and Taiwan (Hun Joon Kim 2018, 15). While this decision may appear to show a lack of interest in the subject, human rights have continued to be an important part of the U.S.- China relationship. George Bush continued this emphasis, focusing on religious freedom, while Barack Obama concerned himself primarily with political dissidents such as Liu Xiaobo, human rights activists, ‘draconian’ foreign NGO laws, and the Dalai Lama (Hun Joon Kim 2018, 15). Trump has continued this emphasis on human rights, but through a focus on internet freedom.

Both the president and Congress have maintained public hearings on China and openly called on the authoritarian state to perform better. In 2015, Obama’s ambassador to China, Max Baucus, told the world in his address on International Human Rights Day, “We call on China to dedicate itself to upholding its international human rights commitments and the promotion of universal respect for and observance of human rights and fundamental freedoms, as called for in the Universal Declaration” (Asia News Monitor 2015). The State Department has criticized Chinese internet control and released a joint statement with European countries on the Asian nation’s declining human rights record (Hun Joon Kim 2018, 15). China has responded to some of these calls, as seen by its creation of the National Human Rights Action Plan in 2009 (Hun Joon Kim 2018, 15). Clearly, the American emphasis is powerful and impactful on China.

The United States continues to pressure China in this field. Following reports of mass incarceration and high-technology surveillance of Uyghurs, Kazakhs, and other minorities in Xinjiang, the United States recently added 28 Chinese companies and public security bureaus to a list of entities barred from making purchases from U.S. companies without approval and refused to issue visas to Chinese government and party officials “believed to be responsible or complicit in the detentions and surveillance of Muslims in Xinjiang” (Su 2019). Public hearings have also been held in Congress regarding the autonomy and democracy of Hong Kong, religious freedom, and China’s effect on the spread of authoritarianism (Hun Joon Kim 2018, 16). These actions show a steady American commitment to enforce and pressure China to consider human rights to maintain its trade relationships.

REFUTATIONS AND ALTERNATE EXPLANATIONS

I will consider three other potential answers to why China has begun to consider human rights in its policies. One alternate explanation I will entertain is that China has simply begun to consider these rights as it has moved further towards a more open society with its market reforms.

Many nations have believed this theory to be true; under the radical leadership of Deng Xiaoping, many outsiders had expected an eventual turn to democracy (Wang 2018). However, this transition has yet to occur. China has revealed itself to be quite reluctant in true substantive democratization, and recently has shown a desire to regress. Tiananmen Square shows this fact quite well; while economic policies may have become liberal, the party still demands full obedience from its people and primacy over all. President Xi Jinping has shown an even greater dedication than past administrations to strengthen the party and ignore the globe through a variety of measures.

State-owned enterprises (SOEs), which grant the Chinese government greater control over businesses, have long been a source of contention for China. Despite having promised reform that would eradicate many of these and allow for more foreign competition, China has either failed to bring substantive change or in some cases, regressed.

The Twelfth Five-Year Plan, created in 2011- 2015 under Xi, “almost exclusively focused on strengthening SOEs to become national champions, capable of competing internationally” (Economy 2018, 104). While these SOEs are not as economically profitable as private companies, they allow the government to maintain high levels of control over the economy. For Xi, any kind of liberalization is the enemy if it harms the power of the central authority.

Even past sources of liberalization have been closed, such as the internet. Previously, firewalls were easy to circumvent and the internet acted as a place of activism where people could criticize their government and see true action (Economy 2018, 62-63). However, Xi has painted this Western style of the internet, focused on the free spread of information, as “anathema to the values of the Chinese government” (Economy 2018, 59). Xi has limited the internet to such a degree that it has morphed into the “Chinanet” he desires, where the government will maintain strict control over the discourse and goings-on of its users. Xi appears to have no interest in democratizing China. Clearly, this idea of further liberalization has yet to materialize and cannot be cited as a reason for China’s involvement in the protection of human rights.

The second idea I will entertain is the concept that the Chinese people themselves have created a strong enough force within the country to spur change. As they have received greater rights, one might expect the citizenry to demand greater freedoms and liberties. However, as we have seen before, this idea is initially flawed simply from how the Chinese historically view human rights a privilege provided by the government (Zhou 2005, 112). While Westerners see these rights as inalienable, imbued within one’s humanity, the Chinese feel differently. Even when people have demanded freedom, the government has refused to listen. Instead, it has harshly quashed any domestic movements against the government.

Since the bloody crackdown in Tiananmen Square in 1989, China has consistently jailed and killed those who spoke out against the government. Xi has only expanded this practice by jailing lawyers, journalists, bloggers, women’s advocates, minority rights campaigners, and religious believers (Puddington 2018). Nobel Peace Prize winner Liu Xiaobo serves as a notable example; after serving eight years in prison for his writings against the Communist leadership, he died behind bars (Puddington 2018). However, Liu is simply one of many. Stories like

his, of prison sentences without due process, of familial persecution as retribution, and other horrors are common in Xi’s China.

Due to frequent persecution and surveillance, a mass movement is extremely difficult to create. The closest thing we have seen are the ongoing protests in Hong Kong, which lies off the mainland and has escalated into chaotic violence. However, China has been steadfast in its refusal to grant the democratization demands the tiny island has called for. The outside world has been waiting for the moment when China decides to finally repress the movement. The clashes between protestors and police have continued to only grow more violent and more worrisome. With Xi at the helm in Beijing, one would guess that he will refuse political freedom to the island; he would rather Hong Kong lose its position as a liberal financial hub than cede any control (Ze Yu 2019). Xi has demanded obedience, making this idea of the Chinese people as the cause of developing human rights in the nation incorrect. Deng Xiaoping himself, the liberalizing force behind the electric economic reforms, also harshly repressed the Tiananmen protests. Since the beginning of its reforms, China has never shown any desire to yield power to its people; they have always been forced into submission. They simply do not have the power to cause the substantive change that we see in China.

With these two positions appearing impossible as the source for China’s growing attention to human rights, the only other remaining option would be the pressures of international institutions, such as the United Nations. This objection to my argument has the most support, as it ties into the United States. However, I would claim that many of these institutions are led by the U.S. The American government has had a hand in creating many of these institutions, often holds great influence, and financially sustains them. In many cases, the United States has been the initiator of disputes with China within these very institutions and has been the one who called for their involvement with the Asian nation, granting these institutions power (Hun Joon Kim 2018, 13).

However, one cannot deny the usefulness of these international institutions, namely the United Nations. It serves as a strong deterrent to outright disobedience, and as Hun Joon Kim writes, “for authoritarian states, their participation in international institutions has ‘the most significant causal influence on future compliance” (2018, 15). Additionally, Rosemary Foot, Professor of International Relations at Oxford, asserts that these international institutions encourage China to support human rights by “rais[ing] the profile of the issue area and the level of active diplomacy engaged in by those who suspect their records might come under scrutiny, whether or not their practices actually lead to the formulation of draft condemnatory resolutions” (2000, 9). The power and global support of these institutions add only more weight to their demands of China in the field of human rights. One can clearly see this influence in how China has attempted to substitute private debate over the U.N. public condemnatory route and active efforts after 1995 to preclude resolutions being passed by the U.N. against its human rights record (Foot 2000, 9 and Hun Joon Kim 2018, 14).

Additionally, international institutions receive support from non-governmental organizations (NGOs), which can provide “alternative points of authority in the global system because of their economic, informational, and intellectual resources, which have given them enough clout to assume authority over matters usually within a state’s area of responsibility” (Foot 2000, 8). They provide information on whether states are adhering to compliance directives and in stimulating governments, organizations, and domestic audiences to act against violators, like China (Foot 2000, 8). The two can cooperate in ways that a single nation cannot hope to, and NGOs can often receive greater access than a single competing nation like the United States. Additionally, these NGOs and

institutions come from a place of neutrality, making these nations more likely to conform.

Despite all of these positive attributes, these two groups face many problems in regard to China. The former United Nations Commission on Human Rights (now Council) cannot dedicate itself solely to resolutions on China; human rights abuses occur all throughout the world. Also, as a committee, the organization has a lack of funding to “engage in thorough fact-finding missions” (Foot 2000, 38). Therefore, it relies almost exclusively on NGOs to find information in China. While the U.N. can drum up support for measures like these, it does not truly wield the power; the nations who take part have all the control. Because of this inherent lack of true punitive power, the U.N. must rely on a system of “public exposure to try to tame offenders” (Foot 2000, 39). This fact alone is troubling, as China could simply ignore the directives and face no true punishment. Only states that directly interact with China in matters of economics and politics can truly affect change, giving these institutions their power.

Rosemary Foot emphasizes the fact that these institutions have come to see NGOs as indispensable partners (2000, 39). This reliance becomes problematic when one observes how China has begun decreasing the power and involvement of NGOs within the country. In his tenure, Xi has worked to reduce the influence of NGOs within China, seen most clearly by the adoption of the Law on the Management of Foreign Non-Governmental Organizations in 2017 (Economy 2018, 41). The law forces all foreign NGOs to register with the Ministry of Public Security, formally affiliate with a Chinese government entity to hold oversight responsibility over the NGO’s projects, and stop raising money within China (Economy 2018, 41). Due to these harsh strictures, the registration process has reportedly broken down. According to Elizabeth Economy, fewer than one hundred foreign NGOs out of several thousand had been accepted for registration within the first six months of the law’s implementation (2018, 41). This makes it far more difficult for these NGOs to enter into China and gain information that can be given to the U.N. and other institutions. Domestic NGOs also became disallowed from receiving funding outside the country. As one activist said, “The real purpose of the foreign NGO law is to restrict foreign NGOs’ activities in China and to restrict domestic NGOs’ rights in China” (Economy 2018, 178). Xi dislikes NGOs and their ability to help these institutions publicly shame China. While they have previously filled a gap, Xi is closing access, making both NGOs and international institutions less important in the international conversation on human rights. While I certainly concede that international institutions play a role in China’s relationship with human rights, I still assert that the United States possesses the greatest force to pressure China on this topic it wishes to disregard entirely.

CONCLUSION

While other institutions and countries certainly support movements against China, the United States is inarguably the leader. With both the greatest amount of power and the deepest interest, the American pushback against China has made the greatest impact on the Asian nation. The U.S. has frequently been the source driving these international institutions, such as when the “United States played a ‘leading role’ in sponsoring and lobbying U.N. resolutions criticizing the practices of China and requesting political change in 1995” (Hun Joon Kim 2018, 14). The United States continues to write reports on China each year, showing its dedication to the issue.

Additionally, the United States possesses two items of great influence economic and political power. As the world’s greatest super power and China’s largest trading partner, the United States holds such great influence that China cannot refuse to listen or undergo consequences in areas they hold great interest. The evidence shows long running and consistent disregard from the Chinese government for human rights; without some kind of check, the

nation would make no efforts to emphasize or create any sense of human rights in the nation. However, China cares deeply about economic and strategic matters, to which the United States frequently ties its human rights-related problems, forcing interest in a disinterested nation. While China still commits atrocities each year, it has been forced to consider human rights within its overall goals, as seen by the 2009 National Human Rights Action Plan and its participation in organizations like the U.N. Human Rights Council. The American efforts against China have led the rest of the world to shame the nation for its problems. This global attention now forces China to consider outside opinions in its internal affairs, such as with Hong Kong, where China has shown uncharacteristic restraint. China has been pushed into a position where the government must consider human rights and outside appearances as it works to grow in the world due to American guidance. The opinion of its greatest trading partner and the globe’s leader matters, forcing the authoritarian nation to begrudgingly consider the West’s appreciation of human rights in its decisions and actions. While we may consider these nations’ connection primarily through the lens of economy or military, we must not forget the issue of human rights and how it impacts this tense, powerful relationship.

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C reatin G o PP ort U nity in the a G e of a U to M ation

George Odwesso

BALDWIN’S APPROACH

In the wake of an anti-free trade era hostile to liberalization policies and accentuated by events like the USChina trade war, countries, especially developed ones, are ever more expediently looking for ways to attain progress through other mechanisms than the established “competitiveness” paradigm proffered during the 1990s (Baldwin, p. 225). Baldwin offers various potential approaches to solving the problems facing industrialized nations that take into account new conceptual evaluations and place the emphasis of reformed trade policy on human capital and protecting American workers.

The first of the propositions aimed at tackling the existing industrial doctrine looks at the uptick in the prevalence and potential for service-based jobs in the 21st century as a source of continued growth. With manufacturing, since its efficacy and output will depend largely on “excellent and diverse service sectors,” the emphasis in the 21st century should shift less from actual industry and more on the service-oriented jobs to which manufacturing will be connected, acting as what Baldwin calls “twenty-first century industrial bases” (Baldwin, p. 232-233). This shift is demonstrable in Japan where many manufacturing-related jobs are “increasingly” service jobs (Baldwin, p. 233). The benefit in facilitating viable service-related jobs, due to the dependency of industry on these occupations, is the increased growth and competitiveness of the manufacturing sector. I personally would advocate for more policies placing significant emphasis on service-based jobs due to what seems to be their ever-increasing availability and significance in the market. The underscore of potential with the augmentation of the service industry will provide a relatively untapped sector of jobs for Americans domestically, and in some ways combat the trend of offshoring to markets with lower wages abroad.

Another shift in emphasis in 21st century trade policy relating to human capital is concerned with the consideration of cities as 21st century factories. Because cities are where large concentrations of people gather to exchange ideas, communicate, and develop technologies, among other things, they should be recognized as the foundation for work and productivity moving into the twenty-first century (Baldwin, p. 234). Cities have the ability, as Baldwin notes, to act as “skill-clusters” where high concentrations of highly educated individuals increasingly interact face to face; as a result, productivity in these highly concentrated areas tends to be high (Baldwin, p. 235). The evidence of this policy in action is exhibited by a report issued by the Netherlands Bureau for Economic Policy Analysis which found that the advances of the information age have led to “spikier work landscapes” where “start-ups flourish and face-to-face interactions increase productivity” (Baldwin, p. 235). The implications on policy are quite clear for governments looking to optimize the inherently productive nature of cities for increased economic output. Governments can start viewing their cities as “complex workplaces” involving not only industrial production but the dissemination of knowledge and generation of “new ideas” (Baldwin, p. 235). With an emphasis on both service jobs and the creative potential of clusters of people in cities, jobs once solely associated with manufacturing and the fabrication stage specifically can be dispersed in pre- and post-fabrication stages (also known as fragmentation of manufacturing). In these stages, which will largely take part in urban areas, we can see the

increased significance of the service industry on total output and overall efficiency.

REDISTRIBUTION SCHEMES

Academics Scheve and Slaughter offer redistribution schemes as a viable proposal to restoring the ladder of opportunity so easily attainable in the past (Scheve & Slaughter, p. 105). Such redistribution can be implemented in one decisive way that both authors find a worthy investment: human capital and education. In restoring opportunity for the future generations of Americans, they propose investment in early childhood education programs, federal funding for community college students pursuing an associate degree, full tuition coupled with limited income support for the 2.9 million high school graduates not attending college to attend a two- year community college, and a lifetime training scholarship available to all who do not have a four-year degree (Scheve & Slaughter, p. 105-106). The gains to be realized from enacting these policies, according to the authors, are “well-documented cognitive benefits” for children, the mitigation of crippling figures of student debt incurred, boosted graduation rates, and increased projected income rates (Scheve & Slaughter, p. 106). This presents a particularly compelling argument for investing in America’s youth, as access to education in an increasingly cognitively stratified world and job market is perhaps more important now than ever before.

THE WORK AHEAD

With the incorporation of machines and automation in the 21st century economy becoming more prevalent, many workers have found that these technological innovations could pose a grave detriment to them, potentially “exacerbat[ing] inequality” and “leav[ing] more Americans behind (Alden & Taylor-Kale, p. 3). The capabilities of automation’s rapid adoption could serve to displace as much as a third of American workers in merely a decade (Alden & Taylor-Kale, p. 9). These negative implications are compounded by the unfortunate co- occurrence of increased demand for skilled labor and lack of accessible education, painting a bleak picture of the economic opportunities available for current and future members of the labor force (Alden & Taylor-Kale, p. 4). However, despite these fundamental transformations to the global economy, there are a variety of solutions proffered by authors Alden and Taylor-Kale for remedying these issues and restoring economic opportunity that can both accelerate growth and increase wages. These policy prescriptions range from attracting investment, increasing access to postsecondary education, eliminating barriers of labor mobility, boosting wages and employment, and heightening focus on research and development to cultivate new economic opportunities (Alden & Taylor-Kale, p. 5).

As Alden and Taylor-Kale have identified, automation has become the “biggest cause of job disruption in recent decades,” a trend that only appears to accelerate, endangering thousands of low-wage jobs (Alden & Taylor-Kale, p. 11). Although these innovations could mean the creation of new jobs not before conceived, the potential displacement and loss of jobs could be calamitous in an already tumultuous economy, with estimates of job replacement via machine reaching as high as half of all jobs (Alden & Taylor-Kale, p. 12). On top of job loss purely to automation, higher level jobs that remain will require an increased abundance in the skills that machines are incapable of forming such as empathy, creativity, and critical thinking; these jobs will also require higher levels of training and education not before expected (Alden & Taylor- Kale, p. 14). One of the solutions proffered on the federal level to combat the adverse impacts of these sweeping technological advancements is a new infrastructure package, which the authors think could address urgent needs such as the maintenance of roads and transportation services, as well as the construction of new “smart cities” and high-speed transport (Alden & Taylor-Kale, p. 58). These developments under an infrastructure package would put a great number of Americans to work in a variety

of sectors and industries and could also increase access of those in disadvantaged communities to participation in the economy with the expansion of broadband coverage being included (Alden & Taylor-Kale, p. 58). At the state and local level, government officials could support the increase in investment of local businesses and entrepreneurs while also encouraging exports and attracting foreign companies; these developments would likely lead to bigger payoffs for those local existing companies through nurture and expansion (Alden & Taylor-Kale, p. 60).

Ameliorating stagnating technological innovation conditions could prove significantly helpful in both maintaining the United States’ status as a world leader while remaining competitive in the face of increased investments from key rivals like China (Alden & Taylor-Kale, p. 16). In addition to improvements in investment in research and development, access to foreign markets and ease of immigration for workers can also play significant roles in achieving growth and prosperity for American businesses and workers (Alden & Taylor-Kale, p. 18). As such, federal policies like loosening of immigration restrictions for students and highly skilled workers and encouragement of free trade agreements like NAFTA and TPP will greatly aid the development of future entrepreneurs and skilled workers (Alden & Taylor-Kale, p. 18). Immigrants in particular are especially imperative in maintaining the United States’ role as lead innovator and are consistently “significant” contributors to that innovation (Alden & Taylor- Kale, 65). The increase in support for basic research in turn can work to spur those companies in the private sector in conducting research and developing marketable products that will benefit everyone (Alden & Taylor-Kale, p. 65). At the state and local level, governments can emphasize and incentivize investment in cities or regions where a comparative advantage is present to further capitalize in the areas where they enjoy local advantages (Alden & Taylor-Kale, p. 66). Success for this approach can be seen with the Global Cities Initiative, which has aided local governments in building on strengths by identifying best practices regarding economic planning (Alden & Taylor-Kale, p. 66).

EDUCATION

To understand the necessity of investment in education, it is essential to look at how education has changed over the decades from how many people are going to college to the value of a college degree. In the first half of the 20th century the United States saw high school participation and graduation rates rise exponentially, outcompeting all other industrialized nations at the time for decades to come (Alden & Taylor-Kale, p. 25). However, unlike today, many of these high school graduates did not go on to college but matriculated into the workforce directly after graduating, signifying high school degrees with the same value to the labor market as a college degree holds today. This would eventually change following World War II where more emphasis was being placed on postsecondary education with policies like the GI Bill, which ensured veterans a right to free public education and, as a result, rates of postsecondary participation and graduation soared (Alden & Taylor-Kale, p. 26). The existing model of education today, however, inadequately prepares today’s youth for the changing conditions and needs prevalent among employers in the labor market and therefore needs repurposing. While not necessarily the primary focus in the past, workforce preparation should be front and center when discussing education outcomes according to Alden and Taylor-Kale. One of the distinct measures that can be taken to achieve this outcome is emphasis on real world skills that are valuable to a wide range of employers; these skills can include graphic design, data analysis, and even computer programming irrespective of major, each of which can “roughly double” the job opportunities available to young graduates and provide a marked increase in initial salaries by as much as $6,000 (Alden & Taylor-Kale, p. 28). Companies should also work to improve their direct relations with local learning institutions like community colleges, which can provide a reliable pipeline for employment following graduation; in doing so, companies can

make known the skills required for employment and thus have a robust pool of potential employees with the specific skill sets for which they are looking (Alden & Taylor-Kale, p. 30). Evidence for success related to this approach can be seen across the board with companies like Google and Pixar establishing relationships and comprehensive programs with schools to best equip students majoring in certain industries with skills that are advantageous to their hiring immediately following graduation; as a result, salaries for graduates of these programs far exceed the averages for community college students (Alden & Taylor-Kale, p. 30). Similarly, companies like Toyota have worked to provide clear pathways for employment for students by coordinating with NGOs to encourage students to acquire the technical skills necessary for employment. They have even gone so far as to set up workexperience programs in conjunction with community colleges, where students will acquire a paid internship on top of a two-year degree that is “effectively paid for by the company (Alden & Taylor-Kale, p. 31). While work-study and apprenticeship programs such as these have proved to be successful in granting opportunity to students, the availability of these kinds of programs is far from widespread (amounting to only 20 percent) and thus requires expansion to ensure opportunities for both four-year and two-year degree holders (Alden & Taylor-Kale, p. 31-32). One significant feature to note of today’s labor market related to education is the increasing demand for workers to be able to continually learn on the job. This translates to both acquiring new skills and cultivating those already formed which is “critical to success.”

WAGES

In the effort to achieve widespread prosperity and growth for the country, the raising of wages for common workers and disadvantaged communities can be one of the more reliable and successful approaches (Alden & Taylor-Kale, p. 21). Since wages have not only been stagnant but have exhibited a steady decline since the 1970s, it is imperative to counterbalance this with measures ensuring steady and robust wage growth to come such as those incentivizing full employment (Alden & Taylor-Kale, p. 22-23). One policy promoting wage growth would target sectors of the economy where productivity has slowed or tapered; service-oriented sectors like healthcare and retail for instance would be good targets for this measure (Alden & Taylor-Kale, p. 23). Additionally, a popular measure which has already taken place in multiple states across the country would be an increase in the minimum wage which would significantly benefit poor and working-class people in particular (Alden & Taylor-Kale, p. 23). Although the policy is somewhat controversial on the federal level due to the unique conditions of each state’s economies, when left to state governments and localities the policy has been shown to increase earnings for the lowest-paid workers while having little detrimental impact on employment (Alden & Taylor-Kale, p. 70). Measures to enhance workers’ buying power similarly implemented by the federal government in the past like the Earned Income Tax Credit and Child Tax Credit, both policies which disproportionately benefit low-wage earners, have also been shown to be extremely effective at mitigating poverty; Alden and Taylor-Kale have gone so far as to deem the former policy “one of the most effective anti-poverty programs in the country” and as such have called for its expansion (Alden & Taylor-Kale, p. 68-69). The private sector can also be instrumental in boosting growth and income. One initiative that has shown promise is the “high-road workforce strategy” which ensures employees decent wages, ample benefits, and training opportunities (Alden & Taylor-Kale, p. 71). As a result of this policy, companies have found that their workplaces are more attractive to potential employees, productivity has increased, and workers are more loyal than they would have been without the policy (Alden & Taylor-Kale, p. 71). State governments across the country have taken this initiative in stride and have actually encouraged companies to register as “benefit corporations” or companies whose goals are not only profit and return but general societal benefits as well as community growth and environmental responsibility (Alden & Taylor-Kale, p. 72). In securing

widespread economic opportunity, it is also important to focus on geographically disadvantaged communities who already face fundamental setbacks relative to big cities like lack of access to reliable telecommunication and internet services (Alden & Taylor-Kale, p. 73). Alden and Taylor-Kale thus propose the construction of new enterprise zones done at the federal level which have been effective in yielding “higher employment,” “stable house prices,” and increased investment, which are especially pertinent factors to the progression of distressed communities (Alden & Taylor-Kale, p. 73).

w ar

Conner Packebush

ABSTRACT

The intervention of the United Nations in the Korean War set an important precedent for the role of international organizations in political matters. However, this precedent was based on a faulty foundation, for the intervention was unjust in both the theoretical and realistic sense. The unrepresentative nature of the United Nations meant it lacked the legitimacy required by an international organization to intervene in a conflict. The lack of institutional legitimacy faced by the United Nations necessarily cast the legitimacy of its actions into doubt. This legitimacy is crucial in the case of a military intervention, especially into one so complex as Korea. The war was inherently a civil war, which requires an extremely high standard for a just intervention, one which the United Nations did not meet. In intervening in Korea, the United Nations greatly upset the balance of self-determination for the Korean people, making it an unjust intervention, as well as an illegitimate one.

Today the United Nations (U.N.) faces numerous detractors on every facet of its existence: questions on when and where to intervene, how limited interventions should be, even its very structure is not free from question.

Despite this criticism, it is generally accepted that today’s United Nations has the authority to maintain and promote global peace. This was not always the case. In the years after World War II it was uncertain if the United Nations would truly become an international organization, or meet the same fate of its predecessor, the League of Nations. Immediately after its creation, the United Nations faced a massive legitimacy crisis. Its membership consisted almost entirely of Western powers, particularly those aligned with the United States. Additionally, its principal legislative body, the U.N. Security Council, was in shambles: one member, the Republic of China, was losing a civil war; while another, the Soviet Union, would soon begin a boycott.

During this legitimacy crisis, the Democratic People’s Republic of North Korea (DPRK), a government recognized only by the Soviet Union and the People’s Republic of China, invaded the U.S.-backed Republic of Korea (ROK). Immediately the United States pressured for intervention by the United Nations, and on June 25, 1950, the United Nations Security Council (UNSC) passed Resolution 82 calling on the DPRK to cease all hostilities. After this resolution was ignored, the UNSC passed Resolution 83 officially calling upon U.N. members to assist the ROK. I argue that this intervention was a mistake, taking a two-pronged approach. First, I argue that the United Nations was at the time not a representative international body and lacked the appropriate level of sociological legitimacy to claim the mantle of an international body promoting collective security. Its actions calling on the international community to intervene in the Korean War lacked authority and should never have been undertaken. Second, the Korean War was at its start a civil war. Michael Walzer’s idea of communitarian liberalism places a premium on state sovereignty, and to uphold this value intervention must be a limited affair. This reaffirms

t he Q U estion of l e G iti M a C y and J U stness in the U nited n ations i ntervention in the K orean

the need to measure the U.N.’s legitimacy at the time of its intervention, as only a true international organization should intervene in a civil war. This was not the case, making the U.N.’s intervention not only illegitimate, but also unjust as it did not intervene to rebalance the scales but to tilt them in favor of one side. The U.N. intervention in Korea was illegitimate as the organization itself lacked the authority to intervene, and unjust as it intervened first in a civil war, the antithesis to Walzer’s ideal of state and individual sovereignty.

The United Nations was founded in the aftermath of World War II and the destruction of the old balance of power. Two new superpowers, the United States and the Soviet Union, would come to dominate international politics for the foreseeable future. In this new world order the United Nations was intended to keep the peace between superpowers: an impartial international body whose primary task, per the U.N. mission statement, is “the maintenance of international peace and security” (United Nations, 1945). The claim to international legitimacy is derived from the idea of collective security, intended to be undertaken primarily through Article 43 of the U.N. Charter. The regulation and control of military force through the idea of collective security “became the great project of international institution-building in the twentieth century,” and Article 43 became the penultimate expression of this concentration of force (Coicaud & Heiskanen, 2001). However, from its inception, Article 43 proved to be contentious, and the lack of cooperation between West and East proved representative of the wider power struggles. This established system of collective security revealed the conflict between the members of the United Nations, and “[the great powers] chose not to use the newly established system and never gave it control over the means or resources necessary to effectively exercise its formal authority” (Coicaud & Heiskanen, 2001). This lack of force regulation served to greatly harm the international legitimacy of the United Nations by depriving it of independent operations, forcing it to rely on the assistance of other regional organizations or states to undertake interventions. Additionally, this decreased cooperation among East and West by not requiring a joint international force to solve international disputes, and so the United Nations lost its claim to impartialness. This is emblematic of early United Nations interventions, specifically the Korean War, where the United Nations intervened at the behest of the United States, a founding member and diametrically opposed to the DPRK and its supporter, the Soviet Union. From the beginning of its intervention, the United Nations lacked legitimacy regarding collective security; thus raising concerning questions on impartiality, which is crucial to an international organization.

The issue of impartiality was not relegated to just the topic of collective security. At the time when the UNSC passed Resolution 83 there existed a general lack of global representation, and thus sociological legitimacy. For an international organization to attain legitimacy, it must be accepted as a legitimate body by the larger international community. In 1950, the United Nations consisted of 60 member nations, yet this number should not be viewed as a representative body. The majority of Africa had yet to undergo decolonization, as it was still ruled by the United Kingdom and France. Both India and the People’s Republic of China were not yet members of the United Nations yet made up a huge percentage of the global population. Crucially, to be viewed as a sociologically legitimate international organization, the United Nations must meet both input legitimacy and output legitimacy standards. However, “output legitimacy depends on input legitimacy,” as an organization’s actions cannot be deemed legitimate if the process to undertake those actions was illegitimate (Keohane, 2006). The question thus turns to the level of input legitimacy possessed by the United Nations, and it is apparent that it failed at reaching such a level to justify intervention in the Korean War.

While the United Nations did comply with the widely accepted principles, rules, and procedures of the Western world at its inception, it did not do so globally. As the lack of membership by India and China suggests,

the United Nations was, in the 1950s, a fundamentally Western organization. This divide existed on the ideological scale too, as while the Soviet Union was a member of the United Nations Security Council, it began a boycott once the UNSC denied Council membership to the PRC after its victory in the Chinese Civil War. This led to a division between capitalist and communist ideologies in the U.N., where the U.N. favored the capitalists. This “failure to reflect the changing power realities directly affects the perception of the legitimacy of Council decisions and actions,” namely the refusal to appoint the PRC to the Security Council in the aftermath of the Chinese Civil War (Hassler, 2013). Not only did the UNSC refuse to adapt to changing conditions, in 1950 “the Council’s permanent members represented the victors of World War II and are enshrined in Article 23(1)” (Hassler, 2013). Of these states, all but one was allied to the United States, and three constituted members of NATO, leading to a lack of impartiality, especially regarding the United Nations Commission on Korea that “had been created … by the U.S.-dominated General Assembly” (Stueck, 1995). What is crucial in this analysis is that the United Nations claim to input legitimacy existed only on a national level, not an international level. Its lack of representation on a global scale means its claims as a truly international organization in the 1950s is a circumspect one.

It is important to focus not only on the empirical questions of legitimacy, but also on the theoretical. While the United Nations was a deeply biased organization, it is possible that the foundations of the international organization could be based on the idea of real input legitimacy. The United Nations was created as the ultimate expression of a collective body; it was intended as an organization that could represent the entire world. However, the constituent parts of the United Nations are made up of states, and not peoples. This statist theory that underlies the United Nations actions ensure that the U.N. “will respond slowly and often partially to rapidly changing events” (Keohane, 2006). Thus, bias is an integral part of the existing structure of the U.N., and despite the apparent equality of states within the United Nations, it is all too often that power-political considerations infringe on their apparent independence. Weaker states within the general assembly “may be unable to analyze complex issues or make their voices heard,” as stronger states either buy them off or silence them (Keohane, 2006). Additionally, the domination of the U.N. by statesmen, and not people, have contributed to the politicization of the U.N. “Statesmen exhibit a definite preference for a political rather than a legal process of legitimization,” to pass agendas and garner support within the United Nations (Claude, 1966). This has contributed to an “intrusion of power politics” within the operations of the United Nations, underwriting any legitimacy it may claim on collective or multilateral grounds (Keohane, 2006).

Overall, the United Nations at the time it passed Resolution 83 lacked several key components enabling it to claim the mantle of a legitimate international organization. Crucially, the United Nations could not uphold its ideal of collective security in an unbiased manner. The failure of Article 43 to have real significance on overall U.N. operations proved that, from its creation, the U.N. would remain partial to one side in some way. The reliance on national governments and regional organizations to enforce collective security compromised the regulation on force the U.N. sought to have, leading to legitimacy questions in a time the organization could ill afford to be doubted. Additionally, the U.N. was founded within a Western capitalist framework, a factor of the divide between global superpowers at its conception. This led to a general lack of input legitimacy, as its input consisted of Western, and U.S. aligned nations and a general refusal by Eastern ones. This lack extended beyond the practical representation of the United Nations and into its founding theory. The domination of a few powerful states that used the U.N. as a political tool vastly weakened any claims to legitimacy it may make on the international scale. Thus, at the time of its intervention in the Korean War, the United Nations did not have enough legitimacy to be considered a true international organization.

It is not enough to simply outline why the U.N. lacked the appropriate legitimacy to act as an international organization. One must also analyze if any organization—regional, state, or otherwise—could and should act as the U.N. did by intervening in the Korean War. To that end, I take Michael Walzer’s definition of a state as “a people governed in accordance with its own traditions” (Walzer, 1980). Walzer places a heavy emphasis on the right of all peoples to self-determination, and a consequent opposition to most forms of intervention by foreign powers in domestic matters. This narrow set of rules regarding intervention leaves little room for doubt on when other nations can interfere with a state’s sovereignty, and the one most relevant to this case is that of states locked in a civil war. To maintain a just intervention, states and organizations can only intervene after “one foreign power intervenes in support of this or that party, other powers can rightfully intervene in support of the other party” (Walzer, 1980). This argument for counter-intervention thus assumes that the first side to intervene, intervenes inherently for an unjust reason. Any intervention to aid one side in a civil war by its very action challenges the right of individual sovereignty. Not only does the intervening nation challenge the idea of a people’s self-determination, but “the request for foreign help is an admission of domestic weakness” (Walzer, 1980). This domestic weakness may be a sign that whatever side that requests foreign intervention may be the unjust party, as the support of the people most likely falls on the winning side.

To apply Walzer’s limited views of intervention into civil wars, one must first determine that the Korean War was, in fact, a civil war. The modern perception of this conflict was one of East versus West, with both Koreas being little more than pawns in a wider ideological struggle. While it is true that both governments received massive aid from their respective sponsors, at the outbreak of the conflict it was decidedly not an international war. To understand this, one must first understand the situation in which the DPRK and the ROK found themselves in 1950. Prior to World War II, Korea had been annexed by Imperial Japan in 1910. This annexation was an unwilling one and throughout the 1920s and beyond a war of resistance was waged against both the Japanese occupiers and Korean collaborators. In this resistance, the seeds of post-independence strife were sown, for “the bitter rivalry of the Christian-capitalist modernizers and Marxist-Leninists in Korea dates from the 1920s” (Millet, 2001). These two groups broadly became the dominant independence factions in Korea and were opposed to each other on an ideological scale. Their animosity grew to such an extent that “a conflict [between the two] would have occurred whether the United States and Soviet Union had divided Korea into occupation zones or not” (Millet, 2001). After the defeat of Japan, this animosity turned into outright civil war. This war became a “‘people’s war of national liberation’” and was divided into three phases (Millet, 2001). In 1945 both movements secured territory roughly following the 38th parallel and began to entrench themselves. This led to the second phase of the war: “the use of unconventional warfare to erode a central government’s ability to defend itself,” mainly by communist partisans in South Korea (Millet, 2001). Finally, in 1950, Kim II-Sung escalated to the third phase of this war, that of conventional warfare. It is apparent from this summary that the Korean War began not in 1950, but in 1945. Additionally, this war was, through the first five years, a fundamentally civil war. Two governments claiming the same mantle of statehood, fighting through partisan and conventional warfare, from a domestic sense the Korean War was, for all intents and purposes, a civil war. Thus, the broad overview of the Korean War is one of an everescalating civil war, not unlike the Chinese Civil War that occurred throughout the 1930s and 1940s. As noted earlier, the similarities are apparent, with both sides experiencing hostility, yet uniting against the common enemy of Japan. After that threat was removed, both the PRC and DPRK waged an aggressive partisan war that soon culminated into conventional conflict. The Korean War, just like the Chinese Civil War, was a drawn-out civil war with a conflict that at times simmered below the surface; the invasion of South Korea by North Korea was a continuation of a war that had been ongoing since at least 1945, if not earlier.

However, the Korean War was not just a domestic war, and as Walzer wrote, only the first state to intervene in a civil war is the unjust one. Thus, it must also be proved that the U.N. intervened first, and the Soviets and Chinese after. This assertation becomes even more difficult to prove due to the internationalized nature of Korea during the period of 1945-1950. The U.N.’s involvement in Korea begins in 1946, where it essentially “served as the instrument both for a U.S. military withdrawal from Korea and for one last effort to prevent a U.S. debacle there” (Stueck, 1995). Immediately after World War II, the U.S. sought to bring as many of its troops home as possible, however the substantial territory liberated from Japan prevented this. Thus, the U.S. turned to the U.N. as a means of delegating authority, and in the case of Korea the United Nations Commission on Korea, or UNCOK, was created. This joint commission “was far from nonpartisan in outlook,” specifically regarding the unification of Korea, and was considered to be more an appendage of U.S. foreign policy, made as it had “by the U.S.-dominated General Assembly” (Stueck, 1995). UNCOK would prove crucial in convincing the U.N. to provide aid after 1950. After the invasion of North Korea and before the passage of Resolution 83, “the United States now used the UNCOK report to persuade six other Security Council members to support the resolution” (Stueck, 1995). All this to say the background of U.N. involvement in Korea was far from the unbiased stance one would expect of an international organization such as the U.N.

The bias exhibited by the U.N. in its operations in Korea before the DPRK assault would be even more visible in its conduct of the war. After DPRK forces crossed the 38th parallel, the conflict “aimed at eradicating the division of [Korea] soon became a struggle of broad international proportions” (Stueck, 1995). This international struggle would be one that grew because of U.N. and U.S. actions, not those of the North Koreans. That the Soviet Union supplied material to the North Korean army is undoubtable, yet this was before the aggression flared into full-blown war. Additionally, in South Korea, U.S. troops had been stationed as garrison units since the end of the Japanese occupation. This was compounded by additional U.S. service members taking on roles as advisors to the army of the ROK. Despite these military aids, there was no direct intervention by either side until after the war broke out. Thus, while both sides received significant material and training experience, “the war began with Koreans fighting Koreans” (Stueck, 1995).

The Soviet Union would limit itself to only air operations in support of North Korean forces, sending the 64th Fighter Aviation Corp in November of 1950. The PRC, however, only “began to push for large scale military intervention in Korea” after “the failure of Chinese efforts to deter U.N. forces from advancing beyond the 38th parallel” (Kim, 2016). This restraint by the Communist powers to intervene casts even more doubt on the justness of the U.N. intervention. The first party to intervene in the war, and by Walzer’s standards the unjust one, would be the United States of America. After the commencement of the invasion, “Four days later, [29 June] the president committed U.S. ground units to combat on the peninsula” (Stueck, 1995). This came at a time when the ROK had been pushed back to the coastal city of Pusan at the Southern tip of South Korea, and the U.S. drastically increased their efforts at provoking further U.N. intervention. After Resolution 82 passed and international aid began to pour into South Korea, the “U.S. domination of the Security Council had become sufficiently disconcerting to Stalin to warrant ending the USSR’s self-imposed exile from the international body” (Stueck, 1995). Increasing U.S. involvement in Korea and U.S. pressuring in the UNSC directly caused greater participation in the U.N. by the Soviets, if only to halt further intervention. By then it was too late, as Australian and U.S. forces began to arrive en-masse in South Korea. Soon a naval landing by General MacArthur at Inchon would dash Sino-Soviet hopes for a return to the 38th parallel and directly lead to intervention by the Chinese government. Thus, there is conclusive evidence that the United States was the first intervener in the Korean War, and the U.N.’s decision to legalize and

support this intervention compounded unjust act on unjust act. The Korean War was, inherently, a civil war, and the intervention by the U.N. failed to right the scales of self-determination, rather it skewed them permanently.

At the time Resolution 83 was passed by the UNSC, it is apparent that the U.N. lacked the international legitimacy and force regulation to be considered a true international organization. The inherent weakness in the U.N., and any international organizations, is the need for sociological legitimacy. An organization cannot truly claim to be an international one unless it represents and is acknowledged across the globe, and in 1950 the U.N. was not.

The Soviet boycott, the lack of representation from the Peoples Republic of China, and the missing membership of most of the developed world created an unrepresentative and Western-biased organization. Additionally, the refusal to provide a true international force to the U.N. by the ignorance of Article 43 led to an organization that relied entirely on external support for legitimacy. Thus, the U.N. was not a legitimate international organization, and crucially was denied many of the perks of an international organization, such as making peace between two warring governments like North and South Korea. However, Walzer’s theory of intervention in civil wars does not necessarily hinge on the legitimacy of the intervener, but the justness of the intervention. In this too, the U.N. proved to fall short. The Korean War was a civil war, between two competing governments, both claiming the mantle of one unified state of Korea. It was only after the ceasefire in 1953 that both nations gained international recognition as sovereign. Before, they competed for the popular support of the same citizens, and at the time it seemed the DPRK had that support. Thus, when the U.N. voted to intervene, it would do so with an unjust intervention. By supporting the Americans, who acted unjustly in deploying troops to South Korea, the U.N. denied the Korean people’s right to individual sovereignty and popular representation. Thus, the U.N. intervention was unquestionably illegitimate and unjust.

BIBLIOGRAPHY

Claude, I. L. (1966). Collective Legitimization as a Political Function of the United Nations. International Organization, 20(3), 367–379. http://www.jstor.org/stable/2705629

Coicaud, Jean-Marc, and Heiskanen, Veijo. Legitimacy of International Organizations. Geneva: United Nations University Press, 2001. Accessed December 1, 2021. ProQuest Ebook Central. https://smu.primo.exlibrisgroup. com/permalink/01SMU_INST/6ctoa/alma9952885123303716

Donggil, Kim (2016). China’s Intervention in the Korean War Revisited, Diplomatic History, Volume 40, Issue 5, November 2016, Pages 1002–1026. https://doi.org/10.1093/dh/dhv051

Hassler, Sabine. 2012. Reforming the UN Security Council Membership: The Illusion of Representativeness. London: Taylor & Francis Group. Accessed November 29, 2021. ProQuest Ebook Central. https://smu.primo. exlibrisgroup.com/permalink/01SMU_INST/6ctoa/alma9952889177303716

Keohane, Robert (2006). The Contingent Legitimacy of Multilateralism, GARNET. https://warwick.ac.uk/fac/soc/ pais/research/csgr/garnet/workingpapers/0906.pdf

Millett, A. R. (2001). Introduction to the Korean War. The Journal of Military History, 65(4), 921-935. Retrieved from http://proxy.libraries.smu.edu/login?url=https://www.proquest.com/scholarly-journals/introduction-korean-war/

docview/195621134/se-2?accountid=6667

Stueck, William, The Korean War, an International History. Princeton, New Jersey: Princeton University Press, 1995.

United Nations, Charter of the United Nations, 24 October 1945, 1 UNTS XVI, available at: https://www.refworld. org/docid/3ae6b3930.html Accessed 1 December 2021.

Walzer, Michael. The Moral Standing of States: A Response to Four Critics. Princeton, New Jersey: Princeton University Press, 1980.

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Lexie Watson

INTRODUCTION

How has the state-owned enterprise (SOE) reform in China developed and what is the system of state capitalism’s effect on the Chinese political economy? SOEs were critical to the central planning period when the Chinese Communist Party (CCP) gained control of China. After the opening of China, market reforms targeted SOEs and their numbers decreased. Yet, SOEs still have a large influence on the Chinese economy. The difficulty with state-owned firms is that the approach that the government uses to incentivize them can greatly affect their productivity. For example, if the government is too hands-off, then SOEs may become corrupt and neglect their duties. On the other hand, too much government intervention will lead to interference and prioritizing certain sectors regardless of their success in the market (Naughton 2018, 342). Additionally, the appropriate number of SOEs has remained a question on CCP leaders’ minds since the market reforms.

How have SOEs affected the Chinese economy? Some Chinese officials argue that they aided in China’s rapid economic growth. Through the use of SOEs, China was able to target specific sectors of the economy such as infrastructure and push for their development. This view suggests that SOEs can be useful in the sense that they allow the Chinese government to choose which sectors they believe should be expanded and maintain stability in economic crises. In contrast, others argue that SOEs are less efficient than private businesses and corporations. They also claim that SOEs are large sources of government debt, contribute to overcapacity, and are subject to misappropriation of funds (Economy 2018, 107). Additionally, the vested interests created within SOEs and so-called “private businesses” run by former government employees and SOE managers lead to collusion and corruption. In this perspective, SOEs are ultimately detrimental to the Chinese economy as well as to the sustainability of the CCP.

In this paper, I explain the developments in Chinese history through specific eras since Deng Xiaoping’s economic reforms, which encouraged SOE reform, and outline the effects of these reforms. I explain how SOE reform was, and still is, necessary for market-oriented reform. I outline the original hope that many people had for reform when Xi Jinping took office, and what reforms have actually been implemented. I explain how obstacles to implementing economic reform are often political by mentioning some of the impediments to reform that Xi and previous leaders have encountered. Then, I argue that while SOEs previously had a place in the Chinese economy, they are no longer useful and are actually significant sources of problems both economically and politically. Finally, I give some policy recommendations on how SOE reform can be implemented within the political economic system that China is in right now.

HISTORY OF SOE REFORM

Changes in the SOE system began after 1979 when Deng Xiaoping started to liberalize the Chinese

economy. Before 1979, China experienced a command economy in which the government had control over nearly every aspect of the economy and had a large focus of rapid industrialization (Naughton 2018, 66). Essentially, all companies before 1979 were state-owned and operated. Due to the inefficiencies that China experienced in this type of economy, Deng Xiaoping launched economic reforms in 1979 which changed China’s economic landscape. While many aspects of the Chinese economy became liberalized and privatized, a large SOE system still persisted through the 1980s.

Perhaps the first significant reforms to occur to the SOE system was through Deng Xiaoping’s reforms from 1979 to 1992. During this time, Deng introduced the dual-track system. This system tied together aspects of the traditional command economy and the market economy (Naughton 2018, 104). Within the dual-track system, SOEs still had a “compulsory plan for output” but were given the opportunity to use their extra capacity for market goods that were outside of their plan (Naughton 2018, 105). These incentives encouraged SOEs to become somewhat more efficient than they were previously because they had to learn essential market information in order to reduce costs and make profits (Naughton 2018, 105). Essentially, the CCP’s strategy for increasing SOE efficiency was introducing them to some incentives from the market. However, the CCP did not allow for any privatization of SOEs, which allowed the government to retain a large degree of control over the Chinese economy.

The political implications of the SOE system through the 1980s were huge. First, the reforms initiated throughout the 1980s did little to actually improve the performance of SOEs. Competition increased due to the entrance of new, private firms, and SOEs found it difficult to adjust (Lardy 2014, 44). Additionally, while output declined for SOEs, employment increased, resulting in surplus labor (Lardy 2014, 44). SOEs had serious difficulties covering their costs, resulting in many to rely on loans from state banks in order to keep them afloat (Lardy 2014, 45). A large problem still remained in the state enterprise system in that the 1980 reforms did nothing to curb vested interests and corruption. The government was not actually allowing inefficient SOEs to fail and local officials could still use state ownership as a means for financial support.

SOE reforms changed drastically from 1992 to 2002 under Jiang Zemin’s leadership. The CCP made huge efforts to downsize the SOE sector and increase privatization. The CCP launched a policy called “grasping the large, releasing the small” in which small, inefficient SOEs were merged or privatized and large firms were subject to corporatization (Lardy 2014, 45). Public firms faced increased product-market competition and pressure on the one hand, and reduced access to funding from government banks on the other (Naughton 2018, 115). The government implemented reform on SOEs that gave businesses clearer lines in defining businesses as private or public (Naughton 2018, 116). Privatization had taken off after the reforms in 1979, legitimizing private businesses. As the private sector boomed in China, the necessity of the public sector and its market share decreased. As privatization increased, SOE employment also decreased. SOE employment declined by 43% over the next ten years after 1993 (Naughton 2018, 116). SOE reforms during this period resulted in many new phenomena in the Chinese political economy.

The growth of privatization and downsizing of SOEs resulted in political implications. Through the 1990s, profits that local governments could receive from SOE ownership decreased, resulting in a decline in local state ownership of SOEs from which they could draw money (Naughton 2018, 117). Devaluation on SOEs took a step in the direction of decreasing vested interests in the CCP, which could help curb corruption. Additionally, the decline in SOE employment through the 1990s resulted in losses for previous SOE workers. For the first time, the SOE

workers’ loss of job stability and the lack of a solid social safety net became a legitimate concern for the Chinese people (Naughton 2018, 117). However, the SOE reforms that took place in the 1990s were largely seen as a positive for the Chinese economy as inefficient SOEs were able to be dropped.

HU JINTAO’S PROGRESS

When Hu Jintao assumed the role of president in 2003, he focused on improving social reforms but, in fact, further progressed SOE reform. Under Hu, SASAC—the State-owned Assets Supervision and Administration Commission—was formed. SASAC centralized control over 200 of the most important SOEs, which included large networks of subsidiaries and factories (Lardy 2014, 50). However, people questioned the effectiveness of SOEs controlled by SASAC as many CCP leaders were appointed as the heads of the largest SOEs (Lardy 2014, 52). Chairman Li also claimed that the government should maintain control over “manufacture of equipment, automobiles, information technology, construction, iron and steel, nonferrous metals, chemical industry, prospecting and design, and technology” (Lardy 54). These events seem to suggest that Hu was promoting a more oligopolistic and state-controlled economy.

Under the direction of Hu Jintao, large SOEs were expected to perform similar to private enterprises which sought profitability (Li and Brodsgaard 2013, 57). Although the total number of SOEs were decreasing through Hu’s presidency, the performance of SOEs increased so much that they experienced 21% profit growth annually from 2003 to 2009 (Li and Brosgaard 2013, 58). However, when taking a closer look at the profitability of SOEs, specifically SASAC firms, their performance had fallen since 2007 (Lardy 2014, 55). It seems that the growth in profitability of these firms rose immediately following the implementation of SASAC policy but failed to continue such a high share of growth past 2007 (Lardy 2014, 55). In reality, the driver of growth during the Hu Jintao period was the increased national investment and efficiency of private firms (Lardy 58).

Still, meaningful steps were taken by the Hu Jintao administration which many hoped would carry over into Xi Jinping’s presidency. One reason why Hu was committed to SOE reform was the external environment created by China’s entrance into the World Trade Organization (WTO). SOE reform was needed in order for economic reforms necessary for WTO membership to be attained. In order for China to be considered fairly open to foreign investors under the standards of the WTO, they had to meet conditions such as “the permission of foreign firms to sell directly in the Chinese domestic markets and the opening of the telecommunications and finance sectors to more foreign competition (Chow 2003, 106). SOEs were often the reason why foreign companies were excluded from certain sectors of the economy as they sometimes held monopolies or closed off competition to domestic firms. Therefore, SOE reform was essential in order to allow for the necessary changes to be made. Hu Jintao was committed to creating an economic environment that was compatible with the global economy, yet political obstacles hindered Hu’s ability to fully reform the state capitalist system.

HOPE FOR XI JINPING’S REFORMS

When Xi Jinping became the president in 2012, many around the world had hoped that China would continue to liberalize its economy. He began his presidency by replicating Deng Xiaoping’s “southern tour,” signaling the intent to focus on renewed opening of markets in China (Economy 2018, 97). Premier Li Keqiang further pushed this picture as he outlined the reform objectives of “dramatically reducing the role of government stimulus to boost the Chinese economy, deleveraging the financial system, and undertaking structural reform”

(Economy 2018, 97). Xi’s promises made people hopeful that China would continue down the path of economic opening, and hopefully, SOE reform. The input of Premier Li was also promising as he is a distinguished scholar in the field of economics.

More economic reforms were promised during the Third Plenum of the 18th Chinese Communist Party Congress in 2013. Many within the CCP saw this as a huge reform plan comparable to that of Deng Xiaoping in 1978 (Economy 2018, 98). The plenum introduced reforms pertaining to the tax system, land reform, interest rates, and demographic problems caused by the one-child policy and the hukou system (Economy 2018, 98). The plenum also resulted in the establishment of the Central Leading Group for Comprehensively Deepening Reforms and a new National Security Commission, both of which aimed “to streamline and rationalize coordination of economic and security decision-making (Economy 2018, 98).

However, many were weary of Xi’s big promises of reform. Systemic factors within the Chinese political economy would likely impede complete implementation of these reforms. For example, the SOE system has created a network of vested interests which makes reform difficult. All of those who have a stake in the SOE system, such as party officials and heads of SOEs, have an interest to resist restructuring of the system because it would hurt them (Economy 2018, 99). Additionally, Xi made many contradictory remarks which made it difficult to tell the real direction he was heading. One statement that came from the plenum was: “We must unswervingly consolidate and develop the public economy, persist in the dominant position of public ownership, give full play to the leading role of the state-owned sector, and continuously increase its vitality, controlling force, and influence” (Economy 2018, 99). This statement gives no indication that Xi hopes to expand market reforms though openness and privatization; on the contrary, it seems as if Xi was reversing the trends seen since 1979 and reverting back to a more statecontrolled economy.

THE REALITY OF XI’S PRESIDENCY FOR SOES

In reality, since Xi Jinping took office, he has been reversing the trends toward greater economic and political openness started by Deng Xiaoping. SOE reform has always been a problem for CCP leadership; however, Xi Jinping seems to be moving in the direction of increasing the role of SOEs instead of privatization like Hu Jintao. Xi originally began his time in office by promising reform by pledging to reduce the government role in the economy and implement reforms. However, his statements are full of contradictions. Although he promised more liberalization, Xi also stated his intent to promote public ownership and the SOE sector (Economy 2018, 99).

As Xi Jinping’s presidency has progressed, the reality of his failure to reform the SOE system has come to light. Xi’s strategy of reforms includes “six key dimensions: corporatization of traditional state firms, mergers to reduce the number of state firms, mixed ownership, debt-to-equity swaps, governance reforms, and financial reforms” (Lardy 2019, 81). Corporatization, which converts firms into joint stock or limited liability companies, has been an ongoing process since Jiang Zemin implemented SOE reforms in the 1990s (Lardy 2019, 81). While it is true that the performance of SOEs have improved, it likely has not been a result of corporatization and actually resulted from privatization of underperforming SOEs and incentives resulting from the WTO negotiations (Lardy 2019, 83). Additionally, the mergers strategy implemented during Hu Jintao’s presidency has been continued by Xi. However, as already discussed, this strategy slowed down by 2007 and has not done much to increase the profitability of SOEs (Lardy 2019, 88). Similarly, Xi has promoted mixed ownership with private firms and

SOEs—a strategy that was also implemented in the 1990s—yet this aspect has shown no evidence to increase firm performance (Lardy 2019, 91). In fact, mixed-ownership firms often have major conflicts of interest as the goal of public and private corporations are extremely different (Leutert 2016, 96)

Xi’s strategy for SOE reform also includes debt-to-equity swaps, governance reforms, and financial reforms. Debt-to-equity swaps aim to increase firm profitability by converting its debt to equity (Lardy 2019, 93). However, this method is difficult to implement, and guidelines are very strict, limiting the functionality of these swaps (Lardy 2019, 93). Next, governance reforms in practice should clearly delineate private and public firms and the rules that go along with them. However, corruption has allowed large SOEs to be able to “fend off the attempt to make their firms responsible for their own profits and losses” (Lardy 2019, 95). Many heads of SOEs are both executives and bureaucrats, and they have different incentives than their counterparts in the private sector. They may make risky decisions since their promotions are based off of economic performance, or they may neglect to improve company performance as they already have job stability through the government (Leutert 2016, 94) Additionally, Xi has institutionalized the CCP’s role in SOEs by expanding party leadership roles in these corporations and adding party-building requirements for SOEs (Leutert 2018, 31). Finally, Xi has implemented financial reforms which were meant to obtain better information regarding SOE performance and loans and increase the share of the banking market taken by private and foreign banks (Lardy 2019, 96). However, at this time there does not seem to be any visible evidence of improvement on either of these fronts.

Another way in which Xi hopes to combat the problems that come with the state enterprise system is through the Belt and Road Initiative (BRI). The Belt and Road Initiative is “an infrastructure plan to connect China to other parts of the world through ports, railroads, highways, and energy infrastructure” (Economy 2018, 191). The plan’s purpose is not only to extend China’s influence around the world, but also to help reduce China’s huge overcapacity problem in its industrial sectors such as steel and coal (Economy 2018, 191). SOEs have shown to be major contributors to overcapacity. Instead of reforming the problem with SOE overcapacity, Xi chose to expand the market to sell some of this overcapacity. Additionally, the BRI—which is supposed to focus on foreign infrastructure projects—has been used to fund domestic projects to save local economies and loss-making SOEs (Ye 2019, 709-710). This continues the cycle of saving failing SOEs, which has been a thorn in the Chinese economy for years. Furthermore, SOEs are fundamental to the BRI because the CCP can use these companies for economic and political goals without having to worry about private interests. This only makes SOE reform more difficult to implement since they have such a central role in the CCP’s overall international strategic goals. Moreover, it seems as though Xi values political strengthening over market strengthening through liberalizing the economy. SOE reform is necessary for market reform, which is often thought to lead to political liberalization. Political liberalization is not on the CCP’s agenda; therefore, Xi will not be committed to SOE reform.

Very little of Xi Jinping’s state enterprise reform strategy seems to be new or even functional. He simply has continued many of the strategies used by Jiang Zemin and Hu Jintao that may no longer be helpful in actually increasing the performance of SOEs. Even the newer ideas, such as financial reform, face barriers to real progress and therefore have not taken off. In reality, Xi has done little to liberalize the economy. Stimulus packages have allowed SOEs greater access to loans and monopolies that were previously disbanded have emerged again (Economy 2018, 104-105). Despite the solid data that shows the underperformance, overcapacity, misappropriations, and so on that characterize SOEs, Xi continues to support SOEs over privatization (Economy 2018, 107). Xi’s interest in maintaining party control of the economy combined with the vested interests created by the SOE system

take precedent over the economic deficiencies created by the SOEs. Through anti-corruption campaigns, regulation of the internet, and promotion of SOEs, Xi has shown leadership that somewhat reverts back to the Maoist period and reverses the positive reforms implemented since Deng Xiaoping.

OBSTACLES TO SOE REFORM

CCP leaders have been trying to implement SOE reform since markets began to privatize in 1979. While successes have been accomplished, such as the rise of privatization and the reduced numbers of SOEs, CCP leaders have found it extremely difficult to change the structure of SOEs which allows for vested interests and corruption. One large obstacle to implementing reform is “the top leadership’s view that, while state-owned firms may be a drag on economic growth, they are essential to maintaining the position and control of the Chinese Communist Party and achieving the party’s strategic objectives” (Lardy 2019, 122). Since Deng Xiaoping introduced economic reforms in China, most CCP leaders still found control over the market as fundamental to the sustainability of the party. Deng’s dual-track system showed this idea as many SOEs were considered a fundamental part of the growing economy that would include both planned and market mechanisms (Naughton 2018, 105). As SOE reform progressed through the 1990s and early 2000s, the overall number of SOEs declined. Still, CCP leaders wanted SOEs to spearhead important sectors of the economy such as telecommunications (Lardy 2014, 50). This mindset has continued with Xi Jinping’s leadership through objectives like the Belt and Road Initiative.

Another large obstacle to reform is the CCP’s real concern that downsizing SOEs will result in social instability. During Jiang Zemin’s reforms in the 1990s, many SOEs downsized and released many employees from their jobs. This caused severe unrest because people lost job security and their social safety net (Naughton 2018, 117). If the CCP were to encourage even more downsizing in SOEs, more employees would lose their jobs and would likely cause a lot of outrage. Moreover, cutting state firms would also cause short-run slow economic growth (Lardy 2019, 122). “Private firms will not be able to immediately expand to offset the loss of employment and output of state firms, and they will not seek to take over state firms that they judge would remain unprofitable even better management and reduced interference from the state” (Lardy 2019, 122). The slowing of economic growth would affect more than just SOE workers; it would affect citizens and businesses across China, stemming more unrest. Since the ultimate goal of the CCP is to remain in power, it is unlikely that leaders will take the risky step of downsizing SOEs for fear of social instability.

The vested interests created by the state enterprise system create a major obstacle to reform. The main actors in this situation are SOE leaders, local officials who profit from SOEs, and government bureaucrats (Lardy 2019, 125). Those who have vested interests through SOEs usually have some influence in the CCP. This makes it extremely difficult to get real reform implemented because those with vested interests have the ability to undermine the reform programs. China still has a “cadre culture” in which those who serve the longest and are most loyal to the party get the best benefits. Layoffs are extremely difficult to implement, and personal and party connections remain important in career development (Leutert 2016, 98). Additionally, the system of incentives to encourage economic growth and evaluate local officials only exacerbates the problem of vested interests. Local officials are evaluated on their ability to promote growth in GDP and “expanding fiscal revenues with cash rewards and increased chance of promotion” (Lardy 2019, 126). SOEs are integrated into many local economies and bring in the revenue and employment opportunities that local officials need in order to receive positive evaluations. Therefore, it is extremely

unlikely that local officials will support or put effort into the implementation of SOE reform initiatives.

Even outside the SOE system itself, the CCP faces a barrier in reforming the economy due to the abundance of “red capitalists” in China. Red capitalists are entrepreneurs in the private sector who have ties with the CCP or more generally, support the status quo due to the benefits they receive. Red capitalists are also overwhelmingly male and are more likely to hold college degrees than regular entrepreneurs (Chen and Dickson 2010, 42). Many red capitalists were involved in the party before they went into business, which give them better access to inside information and overall influences them to support the status quo (Chen and Dickson 2010, 41). Furthermore, “red capitalists are the economic elites of the private sector” and “tend to operate larger and more lucrative firms than do non-party members” (Chen and Dickson 2010, 42). Red capitalists make up an extremely large share of the economy, although this varies by sector and region. This makes them an influential consideration in regard to economic reform. Any reform directed at the state-enterprise system would likely result in evening the playing field for private and foreign firms and reducing corruption, which may not bode well for the red capitalists. Red capitalists support the status quo because they believe their businesses benefit from their connection to the party.

IMPLICATIONS ON THE CHINESE POLITICAL ECONOMY

Leaders in the CCP think that the SOE system is necessary for them to maintain control and stability over the economy and society. However, the continued lack of reform within the state enterprise system likely poses long-term problems for China. Edward Steinfeld even claims that “the situation surrounding the state industrial sector today … is economically unsustainable” and that China “stands at an economic crossroads at the edge of a monumental economic crisis” (Steinfeld 1998, 3). In the early years of reform, SOEs were important for the growth in the industrial sector; however, in the past 30 years output from the private sector has thrived while the public sector fails to perform (Steinfeld 1998, 14). Yet, inefficient state sectors still hold monopolies over certain industries such as heavy industry and telecommunications. The government also still relies on SOEs for the majority of their tax revenues (Steinfeld 1998, 17).

If SOE reform does not progress and SOE performance remains unsuccessful in comparison to private businesses, SOEs will become a drag on the Chinese economy in the future. In one aspect, SOE growth is completely driven by the state, and they have no “independent development capability” (Yu 1996, 175). Since SOEs have such a fundamental role in important sectors of the economy, their inability to innovate and develop may pose problems for China’s future. Also, the unequal treatment of SOEs versus private companies does not incentivize private companies—the main drivers of the economy—to innovate and expand their businesses (Yu 1996, 176). SOEs enjoy “favorable state policies on market access, bank loans at below-market interest rates, favorable tax treatment, land use rights, and technological development funds (Yu 1996, 176). Private companies are not as favored in the eyes of the CCP, yet they contribute more to the country’s GDP. The continuation of such policies may lead to private companies and foreign firms directing their businesses to other regions where they can receive fair treatment.

The SOE sector also allows for the sustainability of corruption in the government. Since “the failure to contain widespread corruption is among the most serious threats to China’s future economic and political stability,” the spread of corruption through SOEs poses a huge problem for the CCP (Vark 2015, 139). Corruption through SOEs comes in the form of vested interests. People with connections to SOEs and the government gain benefits

such as better access to loans and funding that is often used illegally (Huang 2017, 108). Additionally, some of Xi’s attempts to curb corruption in SOEs through lowering SOE managers’ salaries only encouraged more corruption (Huang 2017, 109). The CCP should be concernedabout how this kind of corruption hurts the economy and has the potential to upset the public. For example, experts estimate “that bribery, kickbacks, theft, and misspending of public funds cost at least three percent of GDP” (Vark 2015, 139). Although reforming the SOE system might be costly in the short run, it will be even more costly in the long run.

The importance of the state sector for the functionality of the government only exacerbates the problem of SOE reform. The SOE system, functioning as it is right now, is not sustainable. Failure to reform these firms will result not only in the failure of these companies, but also may lead to social unrest due to the political and economic implications of such a failure.

HOW TO IMPLEMENT REAL REFORM

The continuation of the SOE system poses long-term problems for China in the realms of political, economic, and social stability. So, what strategies can CCP leaders use to implement reform? History has shown that the Chinese economy prospers as increased privatization and openness occur. However, the CCP may not necessarily need to privatize all existing state- owned firms; instead, the CCP should make efforts to incentivize those in charge of SOEs to increase their profitability and allow those that are underperforming to be absorbed by private firms. In order to have the ability to actually assess when firms are succeeding or failing, the CCP needs to try to implement reform in the banking system which gives SOEs privileged access to loans. Xi should encourage banks to “allocate bank loans and bond and equity issuance more efficiently and reduce political interference in the management of enterprises” (Lardy 2019, 99).

Aside from reform within the SOE system, President Xi should encourage increased competition through the reduction of barriers to entry by private firms (Lardy 2019, 99). An increase in privatization could also alleviate some of the concerns of local officials because private firms are actually much better generators of new jobs than SOEs (Economy 2018, 106). The increased competition, especially in sectors that are traditionally limited to the state, should result in the increase in pressure on SOEs (Lardy 2019, 100). Increased competition should give SOEs the incentive to perform better. Combined with better monitoring of the performance of SOEs, management should be incentivized to improve their performance or face bankruptcy or privatization.

CONCLUSION

Since the opening up of China’s economy in 1979, major changes have occurred to the SOE system. The increased competition caused by privatization changed the way SOEs operate. The CCP has pushed SOE reform in attempts to make SOEs more profitable but has lacked to make the changes needed to make a difference. Reform strategies such as incentivizing managers, corporatization, or mixed ownership has some successes. However, the overall performance of SOEs in comparison to private corporations has been decreasing. Implementing SOE reform poses a challenge to CCP leaders due to the political factors, such as vested interests and social stability, which hinder efforts to make reforms. Nonetheless, if the CCP continues down the same path with SOEs, they will face long-term problems which will be much more severe than the short consequences of implementing the needed SOE reforms. The continuation of corruption through SOEs threatens to cause instability within Chinese society. Moreover, the economic hinderance of SOEs and the lack of reform they promote will not allow China to achieve the future

economic growth it wants. This political and economic instability has the potential to bring the current system of government to its end.

WORKS CITED

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Economy, Elizabeth C. The Third Revolution: Xi Jinping and the New Chinese State. New York: Oxford University Press, 2018.

Lardy, Nicholas R. Markets Over Mao: The Rise of Private Business in China. Peterson Institute for International Economics, 2014.

Lardy Nicholas R. The State Strike Back: The End of Economic Reform in China? Washington DC: Peterson Institute for International Economics, 2019.

Leutern, Wendy. “Challenges Ahead in China’s Reform of State-Owned Enterprises.” Asia Policy. 21, 2016.

Leutert, Wendy. “Firm Control: Governing the State-owned Economy Under Xi Jinping.” China Perspectives. 1.2, 2018.

Li, Xin and Brodsgaard, Kjeld Erik. “SOE Reform in China: Past, Present and Future.” The Copenhagen Journal of Asian Studies. 31.2, 2013.

Naughton, Barry. The Chinese Economy: Adaptation and Growth, second edition. Cambridge, MA: MIT Press, 2018.

Steinfeld, Edward S. Forging Reform in China: The Fate of State-Owned Industry. Cambridge, U.K.: Cambridge University Press, 1998.

Vark, Juhan. “China’s Dilemmas in the Road to Reforms Under Xi Jinping.” Baltic Journal of European Studies. 5.1, 2015.

Ye, Min. “Fragmentation and Mobilization: Domestic Politics of the Belt and Road in China.” Journal of Contemporary China. 28.119, 2019.

Yu, Hong. “The Ascendency of State-Owned Enterprises in China: Development, Controversy, and Problems.” Journal of Contemporary China. 23.85, 2014.

e U ro P ean P oliti C s

t he f ail U re of the U nited n ations : a n e

x P lanation for the r eo CCU ren C e of G eno C ide

India Angelique Luciano Simmons

In considering the massive plight of millions in the wake of the monumental and manufactured atrocity known as genocide, this research paper seeks to investigate and scrutinize the actions (or lack thereof) of the United Nations, particularly the Security Council. Ranging from cases of immense violence in Asia, Africa, Europe, Latin America and the Middle East, the question begs to be asked why has the United Nations, which was formed to maintain peace and security and uphold the deliverance of human rights following World War II, repeatedly failed to stop what it was acutely chartered to do? Undoubtedly, if such a predicament continues to be left unchecked or unexplored, this phenomenon will only continue to persist through the many decades to come. Within this paper the examination of the political processes which influence the United Nations and its core members will be undertaken, along with the implications such has on extreme cases of ethnic violence and genocide.

Keywords: United Nations, genocide, ethnic violence, Security Council, Genocide Convention

This paper can be considered a thorough consideration of the primary factors accounting for the failure, or lack of proper and necessary action, of the United Nations in regards to the reoccurrence of genocides across the continents. Through careful analysis, several reoccurring themes and patterns can be found across the regions ranging from the cases of Iraq, Rwanda, former Yugoslavia, Myanmar and more. Special attention will be given to the United Nations Convention on the Prevention and Punishment of the Crime of Genocide (the UN Genocide Convention) and the United Nations Security Council (UNSC), primarily revolving around its responsibilities and given mechanisms, as well as its failure to invoke such protective mechanisms. Through historical political research there is an overwhelming consensus that the problem – and solution – to the issue at hand revolves around the political will of the Security Council and the capacity building of UN institutions and practices. I therefore argue that the failure of the international organization stems from one or a combination of three predominant factors: political interests of the Security Council, limited internal capacity, and/or racial bias. At its core, it can be argued that the action, or lack thereof, in each case of genocide boils down to the interests of the Western states involved, rather than the rapidly deteriorating nature of the crime against humanity itself.

Building on that theory, since the late twentieth century the United Nations has been recognized as an organization that “is not a humanitarian, but a political, organization, and its humanitarian goals are at the play of political forces, pressure groups and blocs, in an arena where delegates pursue the divisive interests of the states they represent” (Kuper 1981). Such becomes particularly problematic when considering the original mandate of the organization – as declared under the Convention of Genocide, as well as under Chapter VII of the UN Charter – is to “prevent and/or intervene in the case of genocide, threats to the peace, breaches of the peace and acts of aggression” (Totten and Bartrop 2004). Quite literally, the United Nations has been tasked with the expressed authority to take physical measures to provide backing to the mandate; this ranges from the imposing of sanctions, embargoes, and even the authorization of military force. One would imagine that the combination of such rigorous details of action

within the charter would imply immediate action in nearly every case of genocide, if not all. Yet the historical memories of Bangladesh, Iran, Vietnam, and Cambodia demonstrate otherwise. The consistent rhetoric employed by the UN and other international figures has repeatedly failed to follow through into meaningful action, with the cost consisting of the brutal, unnecessary loss of millions of lives.

The period of the most blatant inaction on the part of the UN can be traced back to the Cold War; the previously mentioned genocides which took place during this period were intertwined with realpolitik, or the political strategies and manipulation of the UN undertaken by the United States and the Soviet Union (Torren and Bartrop 2004). What researchers have discovered over the years is the antagonizing displays of political opposition and careless use of the veto within the Security Council by both parties in order to further their political objectives during this period. While such behavior ran rampant during this duration of time, this strategy of manipulation amongst the Council persists through modern times as Chapter VII is rarely invoked, and the profound explanation of such warrants further discussion about the Council.

The core predicament of the Security Council lies at its foundation, one which conflicts with true democratic values. In order for any decision to be carried out within the United Nations Security Council, at least nine out of fifteen votes must be achieved and no veto by any of the permanent members be utilized (Yenigun 2016). This conveys several implications; firstly, at any given situation or time, nine voices can come to represent all 193 members within the organization. More principle is the assumption that a single veto from one permanent member on the Council is more important, elitist, and stronger than the other 192 members. This boils down to the simple reality: the preference of a single permanent member has all the potential to halt or enable a genocide in action. Interestingly enough, the founders of the United Nations foresaw such a problematic decision-making process. As specified in the article under UN Charter 27.3, “UNSC members not being able to vote in the conflict and problems directly involving themselves” was advocated, yet such has clearly never been reinforced (Yenigun 2016). Instead, economic and political competition between enemies and allies is abundantly transparent and reflected within UN voting. One of the prolonged causes of the killing of more than two hundred thousand individuals by the Bosnian Serbs were the political differences between the U.S. and Europe, particularly with France not desiring a Muslim neighboring state (Yenigun 2016). Throughout the years, many decisions to be made against Israel for violating international law in Palestine have been vetoed by the United States, and such a repetitive veto has had the lasting impact on the rest of the world and 193 nations.

The dilemma of the permanent five (P5) members is not limited to the voting system; it spills over to the second variable explaining the failure on the part of the United Nations, which is limited capacity. In multiple cases the Security Council has approved peacekeeping mandates, but without the legitimate resources or proper finances to do so. In 2005, this “Responsibility to Protect” (or RtoP) was unanimously endorsed by the international community at the World Summit meeting, which reaffirmed their responsibility to prevent genocide and crimes against humanity, but moreover highlighted the central role of the UN within such (Mayerson 2011). This was viewed as an enormous step towards the prevention of mass atrocity, especially given the recent failures in Rwanda and Srebrenica, yet it has failed to be addressed that the internal capacity of the UN is limited with too many gaps between its key organs.

Specifically, the Office of the Special Adviser for the Prevention of Genocide (OSAPG) serves as the main focal point for active work against genocide; within this office existing information is gained on genocide-like

developments through the world, and the staff serves as an early warning mechanism to the Security Council while providing recommendations (Mayerson 2011). This office, however, is still developing its own limited capacity and institutionalization. Furthermore, the considerations and objectives of the RtoP have yet to be incorporated into regular operating procedures of similar UN bodies, programs, and offices; incorporating such could include “utilizing UN agencies and field staff to provide information relevant for an early warning system or extending the conflict-sensitive development capabilities of the World Bank to include explicit consideration of RtoP risk factors” (Mayerson 2011). Beyond this, there exists a range of long-term structural measures to be implemented, internal capacity reviews to be undertaken, and the identification of various yet telling risk factors for later genocidal acts to be integrated within other relevant offices.

Yet on the contrary, within the body of the Security Council, capacity is far from insubstantial. The Council perhaps has the most to offer within the universe of UN offices and bodies; through the passing of mere resolutions, the Council can give the authority of peacekeeping operations, military force, sanctions, and embargoes. The United Nations has often been criticized as reactive rather than proactive; yet even the former is quite limited. Should the P5 members fail to reach an agreement, or a single member employ their veto power, then a single incident of genocide is enabled to continue for an untold time. Such is currently being witnessed in Myanmar; for years the UN has been continuously warned about the massive ethnic cleansing being committed against the Rohingyas. Yet hope remains dismal seeing how the potential for impact is exceedingly little due to the “enduring politics” of the Security Council (Ibrahim 2016). Once again, the dilemma is bound up with the political will, rather than with the Council. And during the times in which progress beats political will, it is often met with a limited capacity of the internal offices, resources, and finances.

Perhaps the most well-known case to exemplify what has been discussed thus far is the Rwandan genocide of 1994. In a matter of one hundred days, roughly one million Tutsis and Hutu moderates were brutally murdered before the eyes of the international community, and the extraordinary failure of the UN to act is what marked it as immensely infamous. As Force Commander of the United Nations Mission for Rwanda, Lieutenant General Romeo Dallaire made it publicly known in the years afterwards how – during the entire duration of the genocide – he continuously fought and begged for the resources to easily put an end to the violence. Instead, he was given untrained troops who came without any food or combat supplies, was repeatedly denied his requests for additional forces, supplies, and support and his communications consistently went unanswered (Devonshire 2012). As Dallaire was forced to bear witness to the horrific displays of gruesome violence that plagued the state for over three months, members of the Council debated and the United States led the call to draw back troops numbering from 2,500 to merely 270 (Willard 2018).

Simply put, despite a “strong movement among non-aligned countries on the UNSC to extend the mandate and send reinforcements,” it was demonstrated the expressed preference of the United States (a P5 member) held more credential and importance than did the others (Willard 2018). The consequences of this move are clear. Though the U.S. was motivated by the “Somalia syndrome” (or its failure in Somalia several months earlier which ended with the gruesome killing of U.S. troops), since it bore the rank of a permanent member, it fulfilled the earlier established theory that the preference or interests of a single P5 member has the power to impact – or forsake –the rest of the world. Entering now the realm of biopolitics, it can be read that if putting a halt to the slaughter of thousands does not lie within the political interests of a UNSC member, then the lives being lost simply do not matter and do not warrant intervention.

These politics of indifference – in their centrality – amount to the modern making of international regimes which enact selective human rights and decide which lives are worthy and which are expendable. If one is to take a step back and view the matter at hand largely – the UN simply serves as a vessel for all of its member states and any action which is or is not taken is the expressed wishes of the Security Council. Thus, it reasons that the indifference demonstrated by the UN for any given case of genocide is representative of the indifference held by the Council members, particularly the permanent five. Barnett (1996) contributes to this with the harm of the bureaucratization of peacekeeping; revolving debates surrounding the needs of the organization – rather than the people – have proven to be the center piece. In many cases, particularly in Rwanda, the needs and concerns of the UN’s reputation were far more influential than the one million Tutsis being brutally murdered with machetes. When the chances of success prove to be higher, it is more likely the international organization will fully step in; but for the rest of cases, individual states are all able to easily mask their indifference by hiding behind the flag of the UN (Barnett 1996).

A broader, theoretical framework which arches over all of this is expressed within The Politics of Genocide; crimes of genocide today can be traced back for hundreds of years in considering the “centrality of racism to the imperial project” (Hernan and Peterson 2011). One assesses the great crimes against humanity of slavery, the extermination of indigenous peoples across the Western Hemisphere, and the regional structures set up in the centuries following such, and a pathway can be conceptualized to the international institutions today which are responsible for atrocity management. The concept of the “path from the ‘White Man’s Burden’ to the regimes of selective ‘human rights’ and ‘international justice’” provides the running theme of the indifference and repetitive failure of the UNSC in conjunction with its internal capacity limitations and lack of political intent.

While the original question has been poised towards the negligence of the UN to act, there also exists problematic actions towards perpetuating injustice to be accounted for by the UNSC. Following Iraq’s campaign of extermination towards the Kurds from 1987 to 1989, the country’s invasion of Kuwait in 1990 was met with the imposition of economic sanctions by the UNSC (Human Rights Watch 1995). These “sanctions of mass destruction” prevented Iraq from rebuilding its sanitation, electrical and water systems and directly contributed to the deaths of over half a million Iraqi children (Hernan and Peterson 2011). Approved by the UNSC meaning no P5 member utilized the veto the incident was so severe that Denis Halliday, UN Coordinator for Humanitarian Affairs in Iraq, had to resign, naming it as another “genocide” (Hernan and Peterson 2011). The takeaway from this is that not only does the SC fail to prevent genocide, in certain cases they also perpetuate it as well. There was no mistaking the actions taking place as the Sanctions Committee of the SC repeatedly denied Iraqi requests for infrastructure repairs resources. This normalization of what was considered to be “murderous economic warfare” was unveiled by a CBS interview with UN Ambassador Madeline Albright. Upon being asked whether or not the cost of half a million Iraqi children deaths was “worth it,” Albright responded, “I think this is a very hard choice, but the price – we think the price is worth it” (60 Minutes, 1996). When the price is worth more than the cost, the underlying assumption is that the citizens, even children, comprising the cost are unworthy of official notice, attention, and even life.

At the table of the UNSC, decisions of who is worthy of life and who is not are made, and these decisions are all representative of the states composing the table, not just the flag that decorates the room. In considering the issue of selective human rights, the racial and ethnic bias which exists within the UN warrants further discussion. In terms of bare activity and notice, the decimation of indigenous populations is almost entirely excluded; in his treatise Genocide in International Law: The Crime of Crimes, William Schabas discovered that despite Bosnia being mentioned over 61 times within UN articles, there exists nothing over the genocides of the indigenous peoples of

Argentina, Colombia, Nigeria, Rwanda, Democratic Republic of the Congo, Sudan, or Uganda, inter alia (Schabas 2009). Hardly any attention has been devoted to Guatemala, East Timor, Darfur, or Indonesia. Putting the failure to merely recognize numerous genocides in Latin America, Africa, and Asia aside, there exists a wide range of material and sources to suggest that UN genocide prevention may be inhibited by racial, ethnic, and even religious bias.

Despite the worldwide promise of “never again” after 1945, in 1971 U.S. State Department Official Archer Blood notified Washington about an apparent genocide of Hindus and darker-skinned Pakistani Bengalis; yet President Nixon himself commented that he did not “give a damn about the Indians,” and that the extermination of 600 million “treacherous Indians” was not a loss (Bass 2013). Until Iraq invaded Kuwait, the U.S. State Department wished to deepen their relationship with Iraq. Thus, even when Senator Pell sponsored the “Prevention of Genocide Act” in reaction to Saddam Hussein’s use of poison gas attacks, which would have prevented U.S. trade to condemn the deaths of thousands of Kurdish citizens, Britain, the U.S., and France all tried to persuade Hussein that none of his actions would be met with opposition (Travis 2014). And from 1968 to 1970, several political figures, including Ted Kennedy, all gave warning of the massive genocide being committed against the Ibo people of Nigeria, yet the Nixon administration refused to lead the SC to investigation or peacekeeping; ultimately 4 million Ibos quietly perished (Travis 2014).

Whether the description is selective human rights, politics of indifference or lack of political inclination, the characterization of the UN vis-à-vis genocide prevention is one that is a disgraceful offense to its original mandate. 20 different instances of genocides (including those against indigenous peoples of Latin America and Africa) have been mentioned in this paper; for only ten of those cases, the death toll numbers over roughly 12 million lives. This translates to that had it not been for the political whims of the Security Council, the blood of over 12 million lives could have potentially been saved. But as prompted by biopolitical thought, at the end of the day, these 12 million lives simply did not constitute enough to warrant action by the UNSC. This political, not humanitarian, organization possesses the authority to deliver any action ranging from peacekeeping to sanctions to military force; yet for each case of grave injustice, the action expressed comes down to the economic and political preferences of the nations comprising the SC. The unbalanced and skewed voting system enables a small elite handful to decide the courses of actions to be taken which, for all intents and purposes, impact the rest of the world. Limited capacity, inherent need for standardized operating procedures incorporating RtoP, and sheer political intent also contribute to deficient mass atrocity management and avoidance. The racial and ethnic bias present makes its way onto the table of the UNSC and, given the coverage of the UN flag, it becomes all too easy to prioritize reputation over certain lives. Given the examination of these influential political processes and factors, it is not reasonable to assert that there is optimism for change within the international organization. Undoubtedly, unless radical thought or compelling forces of reconstruction immerse the members encompassing the Security Council, then it can be expected for the continuation of such failure on the part of the United Nations with regards to the indisputable cases of genocide to materialize.

REFERENCES

ʻĀnī, ʻAbd al-Ḥaqq., and Tarik. al-Ani. Genocide in Iraq: The Case Against the UN Security Council and Member States / by Abdul Haq Al-Ani & Tarik Al-Ani; Foreword by Joshua Castellino. Atlanta, GA: Clarity Press, Inc., 2012.

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Barnett, Michael N. Eyewitness to a Genocide: The United Nations and Rwanda. Ithaca: Cornell University Press, 2002.

Barnett, Michael N. “The Politics of Indifference at the United Nations and Genocide in Rwanda and Bosnia.” This Time We Knew: Western Responses to Genocide in Bosnia. New York; London: NYU Press, 1996.

Devonshire, Sarah. “The True Measure of Success: The Leadership of Roméo Dallaire in the United Nations Assistance Mission for Rwanda.” Genocide Studies and Prevention 7, no. 2-3 (August 2012): 184–203.

Herman, Edward S., and David Peterson. The Politics of Genocide. NYU Press, 2010.

Ibrahim, Azeem. The Rohingyas: Inside Myanmar’s Hidden Genocide / Azeem Ibrahim; Foreword by Nobel Peace Prize Winner Muhammad Yunus. London: Hurst & Company, 2016.

Iraq’s Crime of Genocide: the Anfal Campaign Against the Kurds / Human Rights Watch/Middle East. New Haven: Yale University Press, 1995.

Kuper, Leo. Genocide: Its Political Use in the Twentieth Century. New Haven: Yale University Press, 1981.

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LeBor, Adam. “Complicity with Evil”: The United Nations in the Age of Modern Genocide. New Haven: Yale University Press, 2006.

Luck, Edward C. UN Security Council: Practice and Promise. London; Routledge, 2006. Luck, Edward C. “Why the United Nations Underperforms at Preventing Mass Atrocities.”

Genocide Studies and Prevention: An International Journal 11, no. 3 (March 1, 2018): 32–47.

Mayersen, Deborah. “Current and Potential Capacity for the Prevention of Genocide and Mass Atrocities Within the United Nations System.” Global Responsibility to Protect 3, no. 2 (2011): 197–222.

Sanford, Victoria. Buried Secrets: Truth and Human Rights in Guatemala. 1st ed. New York: Palgrave Macmillan, 2003.

Schabas, William. “Preventing the ‘Odious Scourge’: The United Nations and the Prevention of Genocide.” International Journal on Minority and Group Rights 14, no. 2-3 (2007): 379–397.

Schweigman, David. The Authority of the Security Council Under Chapter VII of the UN Charter: Legal Limits and the Role of the International Court of Justice. Hague: Kluwer Law International, 2001.

Totten, Samuel, and Paul Bartrop. “The United Nations and Genocide: Prevention, Intervention, and Prosecution.” Human Rights Review 5, no. 4 (July 2004): 8–31.

Travis, Hannibal. “The United Nations and Genocide Prevention: The Problem of Racial and Religious Bias.” Genocide Studies International 8, no. 2 (September 2014): 122–152.

Weiss-Wendt, Anton. A Rhetorical Crime: Genocide in the Geopolitical Discourse of the Cold War. New Brunswick: Rutgers University Press, 2018.

Willard, Emily A. “New Documents Shed Light: Why Did Peacekeepers Withdraw During Rwanda’s 1994 Genocide?” Genocide Studies and Prevention: An International Journal 12, no. 3 (December 1, 2018): 143–162.

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Kamau

ABSTRACT

a fri C an P oliti C s

This study explores the following questions: “Is there any association between rates of women in office and rates of child marriage? If so, why does this association exist?” This project tested the above question utilizing a cross-national study and a Ugandan case study. The cross-national study of 47 African countries demonstrated that there is a statistically significant negative relationship between rates of women parliamentarians and rates of girls married under 18. The results of the Ugandan case study show that women are making a unique impact on child marriage specifically through community advocacy. In addition to arguing that women policymakers impact child marriage rates through advocacy, this article also offers a reflection on how acknowledging this type of advocacy as an important legislator role can expand how scholars think about constituency service, specifically of African legislators. This article contributes to a growing global conversation by exploring preventatives to child marriage, the role of women Members of Parliament, and legislator roles.

INTRODUCTION

In 2020, UNICEF predicted that 150 million girls would be forced into marriage by 2030 (Child Marriage, 2021). When the impact of COVID-19 is considered, this number is expected to shoot up by 13 million children. 650 million women today currently “suffer the direct consequences of child marriage,” some having been married younger than fifteen and wed to men older than them by several years if not decades (About Child Marriage). Countries and international institutions across the world have agreed that this reality is unacceptable and are taking action through various policies and initiatives.

This article seeks to add to the global conversation on how children can be protected from early marriage by exploring if having more women in office can lower child marriage rates. It will do so by assessing whether there is an association between rates of women policymakers and rates of child marriage and, if so, what causes this association. This research answers the above question by using a cross-national study to demonstrate a statistically significant negative relationship between the two variables and then presenting explanations for this relationship utilizing a Ugandan case study. The article will first address relevant research on child marriage and on the substantive impact of women policymakers, then outline the cross-national study and case study used, and assess the results of each. This study concludes that women policymakers are making a unique impact on child marriage specifically through community advocacy. Based on the case study findings, this article also offers a reflection on the importance of advocacy as a legislative role orientation and how scholars can expand their understanding of the legislative behavior of African politicians.

By tackling this question, this study hopes to contribute valuable knowledge to the literatures on

t he i MPa C t of w o M en P arlia M entarians ’ a dvo C a C y : t he a sso C iation b etween w o M en P oli C y M a K ers and C hild M arria G e Nia

combatting child marriage and on the link between women’s descriptive and substantive representation. First and foremost, it seeks to offer practical solutions for combatting child marriage. It also seeks to provide research on how women policymakers make real-world impacts on issues facing other women. The findings from the Ugandan case study additionally encourage scholars to reflect on advocacy as a legislative role orientation, specifically in an African context.

CHILD MARRIAGE

As concerns about gender equality and child welfare gain global attention, the issue of child marriage remains a serious concern. Child marriage refers to the marriage or cohabitation of a person under 18. Across the globe, one of four girls are married as children (Child Marriage: A Mapping, 2017). If child marriage trends continue as they are currently headed, more than 150 million girls will be married in the next ten years, resulting in 41,000 new child brides a day (Child Marriage, 2022). Child marriage rates in Sub-Saharan Africa are particularly high compared to other regions internationally (Maswikwa et al., 2015). While child marriage is a popular custom globally, it is a result of and producer of human rights violations, typically putting children under the control of an adult spouse and breaching the right to bodily integrity (Lazreg, 2013).

While child marriage has become a pressing issue in the fields of international affairs and human rights, it lacks sufficient research, particularly on practical solutions to ending child marriage (Svanemyr et al., 2015). Research that does offer solutions primarily urges practitioners to combat the issue by tackling its root causes and social determinants (Karam, 2015). Several factors contribute to the supply and demand of child brides, from poverty to patriarchal structures to lack of educational opportunities (Walker, 2012; Maswikwa et al., 2015). Addressing these problems through anti-poverty initiatives, girls’ education initiatives, and community education on gender equality are popular strategies for prevention.

Policy and policymakers also play a critical role. Sub-Saharan African countries with consistent child marriage laws have 40% less child marriage than countries without them (Maswikwa et al., 2015). A “consistent law” means that the minimum age for marrying and sexual consent is 18 and that there are no exemptions for marriages under 18 with parental consent. However, policies against child marriage vary. Some countries criminalize child marriage or ban or invalidate any union with an adolescent. Other countries simply set an age minimum. Consequences also vary, with some countries using punishments such as fines or jail time. In addition to these complexities, many governments struggle to get law enforcement to regulate and punish offenders (Cloward, 2017). This paper will contribute to this topic by exploring how national policymakers are able to advance the international fight against child marriage.

WOMEN AND POLICYMAKING

What roles do women policymakers play in tackling issues of gender equality like child marriage? Across the globe, rates of women in office are increasing, but do numbers equal impact? Many researchers have assessed the relationship between women’s descriptive representation in legislatures and their substantive impact on “women’s issues.” In her seminal work The Politics of Presence, Philips (1995) argues that, while there should be a connection between descriptive and substantive representation, it can still be a “shot in the dark.”

To many, it makes sense that having women policymakers would be an effective strategy for producing policies that advance women’s issues. Women themselves are expected to have distinctive policy interests based on their similar life experiences, and female policymakers are expected to bring these same experiences and interests into office (Carroll, 2002; Diaz, 2005). Additionally, Esaiasson and Heidar (2000) demonstrate that women see themselves as the representatives of the female population and their concerns, thereby motivating them to pass policies that reflect women’s interests. Mansbridge (1999) argues that women policymakers have a unique ability to significantly impact women’s issues, laying out the following theoretical framework in five points: 1. Female policymakers help policies gain legitimacy with a female audience with historical reasons to distrust governmental systems, 2. Female policymakers are more likely to represent the views of women during decision-making, 3. They present new issues formerly overlooked by the male majority, 4. They are likely to advocate for women’s concerns with passion and energy as if they were their own, and 5. Because they identify with the group in question, they are assumed to have more authority over relating policies.

Several researchers have studied the diverse mechanisms women in office use to create policy change. In addition to putting women’s issues higher on their agendas, female policymakers bring up different issues than their male counterparts in discussions and legislation, making other legislators think more critically about how their bills affect women (Dolan, Deckman, & Swers, 2022; Carroll, 2002). Many female politicians also unify by actively cultivating a sense of female solidarity and forming informal caucuses that give them more independent and influential voices (Devlin & Elgie, 2008; Connell, 1998). Another mechanism women use to create change is partnering with grassroots organizations, which keeps them in touch with the changing needs of women and helps them build bases within civil society (Ndlovu & Mutale, 2013; Devlin & Elgie, 2008).

Many researchers have also explored whether the actual number of women in office affects their legislative impact. Carroll (2002) argues that fewer numbers of women can cause female policymakers to feel like mere tokens in office and face limitations in making significant impacts. Scholars such as Dolan, Deckman, and Swers (2022) argue that it takes a critical mass for women to feel empowered to actively pursue women’s interests. The representative bureaucracy theory also emphasizes the importance of increasing the numbers of underrepresented groups in government, saying that the more the government looks like its population, the better it will do at representing a diverse society (Naff, 2019). However, these numbers arguments face complexities. The representative bureaucracy theory acknowledges that underrepresented groups can only represent a diverse society when they are in an inclusive governing environment, which is not always the case for female policymakers (Naff, 2019). Regarding critical mass, Celis et al. (2008) counter that representation is not as static and straightforward as other researchers present it to be. Representation is fluid, and Celis et al. argue that there cannot be a particular percentage consistently signaling the effectiveness of women policymakers.

Certain scholars add that the posited causal relationship between descriptive representation and substantive representation relies on too many assumptions. Celis et al. (2008), for example, argue that there should not be any assumptions on numbers mattering as there are diverse actors in politics, including men with feminist agendas. Not all women will be advocates for what are widely viewed as women’s interests while some men will be. Others, particularly normative theorists, argue that descriptive representation should not be a tool to achieve substantive representation and should not even be a political goal (Mansbridge, 1999). Countering the idea that someone should be in office to represent their social group, Penneck (1979) argued, “No one would argue that morons should be represented by morons”.

As seen above, most empirical research on substantive representation focuses on the proximate end of the spectrum of women’s impact, such as understanding women’s agendas and priorities and how they affect political culture (Carroll, 2002; Goetz, 1998; Devlin & Elgie, 2008). Others discuss their actions in politics, such as approaching cabinet members in support of women’s issues and introducing bills in Parliament (Esaiasson & Heidar, 2000; Vega & Firestone, 1995; Carroll, 2002). For example, Chattopadhyay and Duflo’s (2004) research on rural councils in India showed that women holding reserved seats consistently acted on issues related to their female constituents’ concerns. While various scholars explore how women advocate for and effectively pass policies for women, more empirical research is needed to explore how women’s descriptive representation affects citizens’ everyday lives.

This paper will help fill the gap by exploring if there is a statistically significant relationship between rates of women parliamentarians and child marriage and why such a relationship might exist. Instead of dealing with the more common questions of obstacles female policymakers face and whether their presence matters, this study will assess how women in office are causing a real-world impact. Additionally, this research will extend past the traditional assessment of women’s impact based on studies in developed countries by using a Ugandan case study (Devlin & Elgie, 2008). This type of case study is significant as the research on African female policymakers typically focuses on their journeys getting into office and not what they get done once there (Devlin & Elgie, 2008). This study will also contribute much needed empirical evidence to a literature dominated by theoretical research while also exploring how women policymakers create substantive change outside of lawmaking.

CONSTITUENCY SERVICE

In addition to discussing descriptive and substantive representation more generally, this study will also look at the issue of women parliamentarians’ constituency service, specifically in Africa. Mattes and Mozaffar (2016) define constituency service as “the specific provision of material benefits to localized constituencies or to specific groups or constituents.” One of the four key functions of a legislature, including lawmaking, oversight of the executive, and representation, constituency service is widely recognized as just as important to a legislator’s job as lawmaking (Lazarus & Steigerwalt, 2018). Indeed, many studies have shown that constituency service plays a significant role in a legislator’s reelection (Heitshusen, Young, & Wood, 2005). By directly serving constituents, legislators emphasize their commitment to their district, which can increase their support base (Lazarus & Steigerwalt, 2018). Studies have also demonstrated that while constituency services produce high electoral gains, they often come at low costs to the legislator (Scholl, 1986).

Several scholars have explored how constituency service overlaps with gender. Lazarus and Steigerwalt argue that women legislators, who often face unique challenges to reelection, focus on constituency service over lawmaking to overcome gender-based vulnerabilities (2018). Benstead (2016), looking specifically at an African case study, argues that female Members of Parliament (MPs) are more likely to give constituency service that benefits women, who are often excluded from male MPs’ clientelist efforts. Acknowledging that women are more likely to address the needs of other women, Benstead concludes that having gender quotas and more women in office increases women’s access to the benefits of constituency service.

Constituency service and how it is studied can vary based on the region. In the West, constituency service often looks like helping constituents with their VA benefits or mortgages and hosting job fairs (Lazarus

& Steigerwalt, 2018). It is seen as an important, although not the most important, part of a legislator’s job. In African contexts, Barkan (1976) argues that there is a greater focus on constituency service, and that it is in fact valued over more institutional work. African parliamentarians have been shown to focus on representation and constituency service at the expense of legislation and oversight, leading to weaker legislatures and more corrupt executives (Mattes & Mozaffer, 2016). This focus on constituency service is often caused by other factors outside of reelection. Barkan et al. (2010) argue that African MPs in weaker or authoritarian governments focus their energy on constituency service because it is less fruitful to try and shape policy or actively provide oversight. They also demonstrate that higher demand for goods often comes from more rural districts, in which African nations are not lacking.

Scholarship on constituency service in the West largely frames it as “casework and district visits” and focuses on its benefits for legislators (Heitshusen, Young, & Wood, 2005). However, in Africa, constituency service is often narrowed to clientelism. Mueller (2018) defines clientelism as “personal contact between citizens and politicians in which citizens request selective rather than public goods in exchange for political loyalty,” and it is often assumed to be corrupt. Mueller identifies how some scholars of African nations view all personal contact between legislators and constituents as “clientelistic and hence bad for governance and economic development.” Benstead (2016) hints at the same assumption when she offers this broad definition: “Briefly, parliamentary clientelism refers to help with personal problems, including medical treatment, judicial or bureaucratic corruption, jobs, money or grants, or electricity”. In a study of Ghana, Lindberg (2010) argues that constituency service often looks like clientelistic goods such as electricity and permits. While not every scholar identifies all African parliamentarians’ personal contact with citizens as clientelism, some still classify only formal constituency service as legitimate (Opalo, 2022). Informal constituency service is classified as clientelism (Opalo, 2022). This conflation of clientelism and constituency service can overshadow positive, informal forms of constituency service. While the primary focus of this study is on preventative strategies for child marriage, its analysis will also address how African Members of Parliaments’ constituency service is not limited to clientelism, which is what the majority of the literature focuses on. The literature on constituency service also largely defines constituency service as material exchanges only. This article will explore how constituency service extends beyond provision based on citizens’ expressed needs and includes efforts to serve one’s district by changing public opinion on socially detrimental practices. ◦◦◦

To explore how having higher rates of women in office may impact the socially detrimental practice of child marriage in particular, this study utilized a cross-national study and a Ugandan case study.

CROSS-NATIONAL STUDY

This project began with a cross-national study to determine if there is a relationship between child marriage rates and women in office across the continent. Data were collected from 47 out of 54 African countries, excluding Botswana, Cabo Verde, Libya, Mauritius, Seychelles, Eritrea, and Sudan, which did not have available data. The rates of girls married before 18 were gathered from the Girl Not Brides database. This information was then compared to the percentages of women in unicameral Parliaments and the lower houses in African Parliaments from UN Women and the Interparliamentary Union. Figure 1 shows that African countries with higher rates of women in office tend to have lower rates of child marriage, and Table 1 presents the results of a bivariate regression analysis, showing that the proportion of female MPs is negatively and significantly associated with child marriage prevalence

at the 0.05 level, with a p-value of 0.045.

Figure 1: Women in Office and Child Marriage Rates

Table 1: Child Marriage Prevalence

These results reveal that there is a negative association between child marriage and women policymakers to explore, begging the question: what explains this association? One possibility is that the relationship is not causal. The association could be spurred by international and national pushes for gender equality simultaneously but independently reducing child marriage rates and increasing women’s legislative representation. However, if women’s greater presence in legislatures is driving down child marriage rates, then a number of different causal mechanisms could be at work. Is the relationship caused by (1) women in Parliament passing policies that lead to reductions in child marriage, (2) women in Parliament acting as role models, thereby inspiring parents not to marry off their daughters, or (3) women in Parliament taking non-legislative steps to address child marriage? The Ugandan case study was used to adjudicate among these alternatives.

UGANDA CASE STUDY

Background

To further examine the pattern demonstrated in the cross-national study, a single case study was selected to explore why this association exists and the mechanisms driving it. The country of Uganda was chosen for this case study for a number of reasons.

Firstly, Uganda has seen a gradual decline in child marriage like many other African nations. While rates across the continent are still higher than in other regions of the world, child marriage is becoming less prevalent across Africa, including in Uganda (Koski, Clark, & Nandi, 2017). The oldest data collected on child marriage shows that there has been a steady decline in Ugandan rates over time. Data collected in 2016 show that the percentages of women married under 18 was 44.5% for women aged 45-49, 48.3% for women aged 40-44, 46.4% for ages 35-39, 42.3% for ages 30-34, 36.9% for ages 25-29, and 34% for ages 20-24 (Uganda: Final Survey, 2016).

Secondly, the rates of female parliamentarians and child marriage in Uganda are representative of the broader relationship across the continent demonstrating a negative correlation between rates of women parliamentarians and child marriage rates. While the cross-national study demonstrates a pattern among multiple countries at one point in time, Uganda shows an increase in rates of women policymakers around the same time that rates of child marriage decrease. The percentages discussed above show a relatively smooth decline starting in the late 1990s for the age group that was between 35-39 in 2016. On the other hand, the oldest data available on Ugandan women in office show that they went from holding 18% of the seats in Parliament in 1997 to holding 34% of the seats in 2020 (Proportion of Seats). Unfortunately, the data are not detailed enough to show whether the increase in women in office came before the decline in child marriage rates, but the simultaneous movement of both variables still makes Uganda an interesting case for exploring our question.

Thirdly, data regarding Uganda are also more accessible, particularly compared to other authoritarian governments. Uganda’s legislative documents and Hansards were available to the public online. English is also one of the official languages of Uganda, making it easier for the researcher to conduct interviews and review internal documents.

Fourthly, regarding child marriage practices in Uganda, they have very similar patterns as those in other African countries. For example, the age of marriage in rural regions is lower than in urban regions, with Kampala having the lowest rate of child marriage (Male & Wodon, 2016). Particularly in rural areas of Uganda, daughters are seen as a source of wealth and are raised in preparation for young marriage (Wodon & Tsimpo, 2016). The top quintile of wealth also has fewer child marriages and there is an association between working Ugandan women and lower child marriage rates as well as females with higher education marrying at older ages compared to those with little to no education (Wodon & Tsimpo, 2016).

Ugandan law sets the minimum age of marriage and sexual consent at 18 through the 2016 Amendment to the 1997 Children’s Act and does not allow any loopholes for parents to legally give consent for their daughter to marry before turning 18. The changes in Ugandan child marriage law and some of the most significant policies from the past 40 years are shown in Table 2.

Table 2: Ugandan Child Marriage Policies

This table shows that the primary Ugandan child marriage policy before the 1990s was the “Customary Marriages Act,” which allowed girls to be married at 16 or older. Between then and the 2000s, the primary policy actions the country took were in relation to international initiatives; national policy initiatives picked up around 2008. While laws like the 1995 Uganda Constitution had implied that marriage was only for adults, it was the 2016 “Children’s Act” amendment that stated most directly that the marrying of children under 18 was an offense. These

policies show how Uganda’s policies around child marriage have changed over time by becoming more specific and more domesticated within the past 15 years.

The 2016 Amendment to the Children’s Act, 2019 “Sexual Offenses Bill,” and “Teen Pregnancy and Child Marriage during COVID-19 Resolution” are three policy efforts to address child marriage that will be referred to later in this article. The Children’s Act was passed in 2000 as a revision of the Children Statute, which was a result of Uganda’s ratification of the Convention of the Rights of the Child (The Children Act Amendment 2016, 2016).

In 2010, the Ministry of Justice and Constitutional Affairs began writing an amendment to the Children’s Act. This amendment was passed in 2016 with wide support from both male and female MPs. The amendment included several issues regarding children, including clearly stating that marriage for children under 18 is prohibited.

The “Sexual Offenses Bill” was first introduced into Parliament by the Women’s Parliamentarian Association in 2016. The bill addresses various forms of sexual violence, including child marriage, and seeks to summarize in one place the consequences for Ugandan sexual offenders. It also sought to fill in gaps left by the “1950 Ugandan Penal Code,” which was a policy intended to address Ugandan sexual violence, but which has been deemed as outdated and does not address child marriage at all (Uganda Parliament, 2021b). The “Sexual Offenses Bill” outlines what is seen as a nonconsensual activity under Ugandan law. The bill was withdrawn in February 2019 for amendments and was then resubmitted to Parliament in November 2019. While the issue of child marriage was not deemed a controversial component of the bill, there was significant debate over what was defined as “consensual activity” based on standards outside of age as well as parts of the bill that seemed to unfairly target the LGBTQ+ community. The bill was passed in May 2021.

The “Teen Pregnancy and Child Marriage during COVID-19 Resolution” was introduced and passed on April 9, 2021. It was introduced by an individual parliamentarian, female MP Jovah Kamateeka (Uganda Parliament, 2021a). The motion was a push from parliamentarians for the government to expand its services for child marriage and teen pregnancy in light of the COVID-19 pandemic. The resolution increased funding for the Ministry of Gender, Labour, and Social Development and urged for actions such as the renewal of the “2015 National Strategy to End Child Marriage and Teenage Pregnancy” and improved enforcement of child marriage laws.

Assessing the actions of Ugandan parliamentarians also requires an understanding of the country’s political system and culture. In the 2021 elections, President Yoweri Museveni was reelected for his sixth term, and 336 of the 529 parliamentary seats were won by his party, the National Resistance Movement (NRM) (Freedom House). Of these 529 seats, 353 are for single-member constituencies, 146 are seats specifically held for women, and 30 are special interest seats for communities like youth and the elderly; however, all of the election processes for the seats are the same. Gender quotas were added to the Ugandan electoral system in 1989 and formally established in the 1995 Constitution (Josefsson, 2014).

While Uganda formally holds regular elections, there have been various international concerns regarding the credibility of these elections. The same ruling party, the NRM, and president, Yoweri Museveni, have been in power since the 1980s. Freedom House reports that opposition leaders have consistently faced oppression during the NRM’s tenancy and that it is very challenging for parties outside of the NRM to push for their issues. The executive branch holds much of the power, earning Uganda a rating of 34, “Not Free,” under the Global Freedom Index. Policymakers “have little practical ability to influence legislation in which the government has a particular interest,

though there is more consultation on ordinary policy matters” (Freedom House).

Uganda’s status as an authoritarian government makes it a particularly hard case for evaluating my question. The executive branch in Uganda has a clear influence on the legislative branch, which could prevent this study from identifying relevant policy actions that would otherwise be used in freer countries. However, if women can make change in a system where MPs have such limited power, the chances of them being able to do so in a less restrictive setting are even more likely. Therefore, Uganda’s authoritarian government might make this research an even more enlightening study on the power of women leaders.

Research Methods

For the Ugandan case study, the research methods utilized were semi-structured interviews and Hansard reviews. The semi-structured interviews offer the opportunity to get a more holistic and complex understanding of child marriage and the leadership of parliamentarians. Issues of children and child marriage specifically can be very sensitive and personal; therefore, being able to hold conversations with participants allowed for the researcher to build trust in order to get honest responses and tease out nuances surrounding different answers. Rather than just comparing responses, this research project sought to dive into the whys and hows of female parliamentarians’ leadership and synthesize different views. This goal requires the use of person-to-person conversations and followup questions.

The participants chosen for these interviews were Ugandan leaders on child marriage and gender equality, including current and former parliamentarians, government workers, and NGO leaders. By gathering responses from those inside and outside of the legislature, this research sought to review both political insider and outsider responses to actions related to Parliament. Both men and women were interviewed to specifically contribute information on how men and women parliamentarians lead differently and see each other as leaders. All of the participants were aligned in some way with anti-child marriage work, based on legislation they had produced, committees they sat on, or organizations or departments they worked in. Participants were identified by reviewing Hansards and news sources and selecting those active in discussions regarding child marriage. Participants were also identified through online research and references from other interviewees through snowball sampling. Sixteen participants were interviewed overall.

Interviewees were asked at least nine questions each that were tailored to help the respondent discuss what the drivers of child marriage are, how female MPs in particular are countering these drivers, why these mechanisms are being used, and how effective these mechanisms are. Interviews were conducted either over Zoom video calls or Whatsapp video or audio calls or recordings. They lasted 30-60 minutes each and were audio recorded.

While interviews were the primary approach for collecting data, information was also gathered from Ugandan Hansards provided on the official website for the Parliament of Uganda. The purpose of studying the Hansards was to analyze discussions around the passing of different child marriage policies. Specific note was taken over who was speaking and advocating for child marriage policies and how different parliamentarians were approaching the issues. Therefore, Hansards were selected for review based on their relevance to child marriage policies and were primarily studied after interviews. If an interviewee mentioned a relevant child marriage policy, the date of the passing of this policy was researched through Ugandan news articles and then a Hansard matching

that day was selected and reviewed. A few Hansards were selected for review if they were around the time a relevant child marriage policy was passed and some were pulled randomly from the archives, primarily to explore topics being brought up in Parliament over the years. Over 40 Hansards were reviewed.

Results

Causes of Child Marriage

While child marriage in Uganda has been on a steady decline since the late 1990s, respondents made it clear that it is still a significant national issue. Participants highlighted several causes of child marriage and how parliamentarians are responding to these causes. Understanding what drives child marriage will be used in this article as an important part of understanding how to effectively strategize against it. Participants specifically listed the COVID-19 pandemic, poverty, and parental negligence as significant drivers of child marriage in Uganda.

Participants remarked that the COVID-19 pandemic has significantly increased child marriage since its rise in 2020. One explanation for this increase was that, due to COVID-19, more girls are out of school with less ways to spend their time, making them more vulnerable to manipulation (Ugandan Government Worker, 7/24/2021). COVID-19 has forced everyone, adults and children, into the home, creating space for problems of incest and abuse from relatives which has resulted in the marrying of children (Ugandan NGO Leader, 4/7/ 2021). One respondent reported that girls are seeking to get married younger because they are afraid of passing from COVID-19 before they have a child (Female MP, 4/7/2021).

In addition to COVID-19, participants also discussed the impact of poverty, a well-known driver of child marriage. Many reported that girls from impoverished backgrounds are more likely to be attracted to gifts from men or to leave home because their parents are not able to provide for them (Female MP, 4/7/2021; Government Worker, 7/24/2021).

One of the causes most mentioned by interviewees was the actions of parents. Many interviewees noted that parental negligence and ignorance resulted in families encouraging or tolerating underage marriages, despite regulations against it. Some respondents were harsher with their criticisms of parents, accusing them of negligence and intentionally disregarding their children’s needs. Others blamed a lack of education, with one nonprofit leader elaborating that the problem was parents’ lack of knowledge on how to train their daughters to ward off perpetrators (Government Worker, 7/24/2021). Another issue highlighted was the tendency among parents to value their sons over their daughters and assume that a girl’s primary role was to marry and move away from the family, which motivates parents to marry off their daughters sooner rather than later (NGO Leader, 7/9/2021). Overall, respondents generally agreed that there was a significant need to educate and mobilize parents against child marriage.

Who are more active? Men or women?

All of the interviewees themselves were adamantly against child marriage and, in some way or another, had taken actions to prevent it within Uganda. Almost all participants confirmed that Ugandan parliamentarians are generally very active in the fight against this issue. Several specifically highlighted the efforts of women. One seasoned female parliamentarian reported that women championed the issue first and that the government

initially responded to child marriage concerns because of women’s leadership (Female MP, 6/17/2021). Women parliamentarians were noted for actively creating discourse and passing legislation (Female MP, 6/17/2021). One participant brought up as an example a policy that was passed in April 2021 and referred to early in this article as the “Teen Pregnancy and Child Marriage during COVID-19 Resolution” (NGO Leader 7/16/2021). This bill was presented by Woman Representative Jovah Kamateeka. During discussion, seven women vocally advocated for the bill, in comparison to only three men (Hansard April 9, 2021). Another participant referred to the “Sexual Offenses Bill,” which was passed in May 2021 and was introduced and advocated for by the Women Parliamentarian Association. The purpose of this policy was to strengthen the government’s stance against child marriage, as well as other sexual violations (Female MP, 4/7/2021). One female parliamentarian said that the government ended up passing policies like these because of pushes from women’s leadership (Female MP, 6/17/2021).

Many female respondents shared that their gender identity fueled their passion for combatting child marriage. A female nonprofit leader said that it is the “mother nature” of women to care about children (NGO Leader, 4/7/2021). Other participants remarked that women MPs have a special connection to children because of their personal gender identity, which makes them passionate about fighting against child marriage. One male parliamentarian when asked about why women are active against child marriage, responded: “First of all, women are mothers” (Male MP, 7/29/2021). Another parliamentarian noted that some women MPs “have experienced (child marriage) themselves in their childhoods it’s kind of life experiences that makes them to be committed to the cause of fighting child marriage” (Male MP, 7/29/2021). These responses align with various studies discussed above on why female parliamentarians are usually involved with issues affecting female constituents.

However, when looking at the issue of child marriage in particular, are men less inclined to take action? Are the actions taken by women more substantial than actions taken by men? Both men and women MPs noted that men are also involved in anti-child marriage leadership. They identified many male MPs who are at the forefront of the issue, holding key leadership positions in the Children’s Forum, the Committee of Gender, and even the Women Parliamentary Association (Male MP, 7/29/2021a; Male MP, 7/29/2021b). While some participants expressed that women are a little more involved than men, some said that the engagement is equal (Government Worker, 7/28/2021; Female MP, 7/24/2021; NGO Leader, 7/16/2021). There were various reasons given for men’s involvement. Some men were genuinely invested in the advancement of women and therefore the girl child (Male MP, 7/29/2021a; Male MP, 7/29/2021b). Respondents noted that other men who were not usually inclined towards gender issues are still involved in anti-child marriage work because of a universal concern for children (NGO Leader, 7/9/2021). In a discussion over the passing of an amendment to the Children’s Act in 2016, one male parliamentarian said, “First of all, for the record, children are a very sentimental issue and the protection of children is the responsibility of every country and every citizen, more so representatives of the people like we are” (Uganda Parliament, 3/2/2016). Another male parliamentarian in the discussion noted that, even though he was not a woman, he had a personal connection to children’s issues as a teacher, saying “Madam Chairperson, you know that I love children and it is very difficult to challenge me on the love of children. This is because even after Parliament, I will go back and teach children. I am always proud to say that I am a primary school teacher” (Uganda Parliament, 3/2/2016). Another explanation offered was that even men MPs with less of a human rights interest overall are still motivated by self-interest because of the popularity of the issue within Parliament (Government Worker, 7/17/2021). For whatever reason, participants largely agreed that both men and women MPs are involved in anti-child marriage work.

Women Uniquely Lead

If both male and female Members of Parliament are involved in anti-child marriage work, does having female Members in Parliament in particular impact the issue? While both genders are involved in the work, the participant interviews revealed that women parliamentarians contribute in unique ways. Participants noted three specific mechanisms, two related to policy formulation and the passing of policies and the last mechanism related to community engagement, which was the most emphasized point among respondents.

The first mechanism related to policy formulation was the leadership role that women MPs took within Parliament to advocate for and create pieces of legislation. Several of the authors of child marriage bills discussed, such as the “Sexual Offenses Bill,” were proposed by women. One female MP described how women consistently bring the issue up on the Parliament floor:

“...largely members of Parliament who are women have championed this cause from the beginning to the end. One, we have been raising this matter on the floor ... an issue becomes an issue of attention, of focus, because of the engagement around it. So, we created public discourse around this matter as Youth MPs (in past Parliaments) and also continue to do this work in this Parliament. So, women MPs have been at the forefront of raising this matter ... and ensuring it stays on the public agenda, public discourse and engagement throughout these last ten years, I can say. So Parliament has responded in terms of making more laws ...” (Female MP, 6/17/2021).

An NGO leader also said, “Oftentimes, it’s the female members of Parliament who are at the forefront of such gender-sensitive legislation and some male MPs who are very focused on children are usually at the forefront of having such legislation passed and implemented” (NGO Leader, 7/9/2021).

Interviewees also discussed the agenda-setting leadership of Rebecca Kadaga, who was the first female Speaker in Uganda from 2011 to 2021 and leveraged her high-level position to advance child marriage policies. One male MP recalled:

“(Rebecca Kadaga) gave space whenever there were issues regarding children and particularly the girl child so she has been one of the champions ... because she has allowed us to use Parliament as a platform to raise motions ... (and) present private members’ bills ... If it was not the Speaker having the will and zeal to support members of Parliament to present such bills, then it would not have carried the day” (Male MP, 7/29/2021b).

The first woman to hold such a high political position in Uganda, Rebecca Kadaga used her power to create an environment that others before her had not, one that allowed parliamentarians to make progress on child marriage bills that the government had let sit for years.

While noting these policy advancements, interviewees also discussed how some policy initiatives prove ineffective due to enforcement challenges. They argued that, even though the appropriate laws are in place, those who are responsible for punishing violators of child marriage laws often fail to do so. One participant noted that the larger problem was insufficient funds for law enforcement (Government Worker, 7/28/2021). Others pointed to

corruption, saying that police authorities look past the issues (Government Worker, 7/20/2021). Several expressed frustrations that, even though parliamentarians were passing anti-child marriage legislation, it was not effective because of these enforcement failures (Government Worker, 7/20/2021; Government Worker, 7/28/2021).

The most emphasized example interviewees provided as to how women uniquely address child marriage relates to their advocacy and community engagement. Through community education, families, the ones who often make the decision regarding a marriage, learn about the detrimental impacts on child brides, why girls are assets in their families, and the importance of other opportunities like education. For this reason, sensitization work was noted by one respondent as the most important part of addressing child marriage (Government Worker, 7/24/2021). Interviewees consistently voiced that it is female parliamentarians who are the most active politicians in anti-child marriage advocacy work. Only one respondent responded that men occasionally engage with anti-child marriage work outside of the governmental halls (Female MP, 7/24/2021). Others noted that only women MPs get into communities, engage with children, work with nonprofits, and educate parents around issues of early marriage (Male MP, 7/29/2021a; NGO Leader, 4/7/2021; Government Worker, 7/20/2021; Government Worker, 7/17/2021). One government worker noted that women are more likely to contribute to anti-child marriage work through sensitizing parents and children, stating:

“Some members of Parliament go down into their constituencies within the country, so some of them take the extra mile ... to do sensitization ... to talk to families, to talk to communities about child marriage ... female MPs do much more, they go into their constituencies and talk about it. A lot of them do a great job of going back to check on what goes around with children in their constituencies or their districts. I think that female MPs do much more than the male MPs” (Government Worker, 7/24/2021).

One male parliamentarian noted that women are particularly active in community education and specifically teaching other women (Male MP, 7/29/2021a). An NGO leader shared that female MPs interact often with girls, practically advising them on how to stay safe from child marriage (NGO Leader, 4/7/2021). One government worker detailed how they had seen women MPs engage directly in their communities by going above and beyond to respond to situations of child marriage:

“On many times, I have seen for example some girl ... exploited sexually or issues of child marriage at the local level. Most times, mothers will run to these women MPs ... and these MPs ... have run to the police ... and following up on the process and sometimes putting them in their own money to make sure these girls get justice ... and sometimes they get pro-bono lawyers who come in to offer service for these young girls ... whenever (female MPs) come to lead, they aggressively engage with it” (Government Worker, 7/20/2021).

While they are active in Parliament, female MPs are also trying to make change on the ground. Women MPs are more likely to get on media platforms and go to parent and school meetings to educate the community on child marriage. One government worker stated:

“(MPs) meet communities, meet women ... I can testify, a good number of (women MPs) do that ... using media, media like radio programs. Sometimes they do it by meeting parents ... and they really do that. In Uganda, they speak up, the women Members of Parliament” (Government Worker, 8/2/2021).

In the discussion for Jovah Kamateeka’s “Teen Pregnancy and Child Marriage during COVID-19 Resolution” where seven women and three men vocally advocated for the policy, the Hansard demonstrates that the women parliamentarians were speaking from direct engagement with their communities (Uganda Parliament, 2021b). Of the ten speakers, only five of the speakers (all female) brought up personal examples of interacting with child mothers and brides within their communities. One speaker brought up how she was funding the education of two girls in her community and that her interactions with these students taught her the vulnerability to abuse faced by teen girls. Another speaker mentioned inviting teen mothers and their parents to events to speak and advocate alongside her for better policies for girls and the insight that she also received from these teen mothers. While all of the ten speakers were knowledgeable about the issues of child marriage in their community, the men demonstrated their knowledge by providing formal facts and statistics while the majority of women paired statistics with evidence from experiences in their own communities. These women demonstrated intimate involvement in their communities, which mirrors what many interviewees expressed about women MPs’ political engagement.

Several interviewees remarked that this sensitization work is some of the most important work that can be done to prevent child marriage. One government worker stated “… the biggest contribution is sensitization, to make the children aware and not just the children but even their parents aware ... From my own observation, I think the female MPs are more engaged in this. They take an extra mile in this area” (Government Worker, 7/24/2021 ). Another government worker discussed how parents often help arrange the marriages of the children and emphasized the importance of sensitization of entire families. “Sensitization of the young people, sensitization of the parents, and actually guiding the parents in life skills, that is very, very important so that they can avoid the areas that lead to child marriage” (Government Worker, 8/2/2021). Ultimately, while many interviewees highlighted women’s policy impacts, the more resounding response was that women make tangible change through their community advocacy.

CONCLUSION AND IMPLICATIONS

Ultimately, the interviewees argued that women MPs take a stand against child marriage through the policy formulation process and through community engagement. While both men and women care about ending child marriage and back their conviction with action, it is women who are going the extra mile. Various interviews suggest that ending child marriage is not only an issue position for women but an issue priority. However, just because the women are taking more action does not necessarily mean that these actions are impactful. Do their actions actually translate into reduced rates of child marriage?

Various studies discussed above have demonstrated how essential women MPs’ agenda-setting and initiative-taking is to policy formulation around issues important to women. However, both male and female MPs noted that, while policies are important, their effect on child marriage in the Ugandan context is limited because of poor enforcement and implementation. The frustrations expressed by several interviewees regarding enforcement is supported by various studies within and outside of Uganda regarding child marriage. Addaney and Azubike in their study of Ugandan child marriage support this sentiment in their research, demonstrating that child marriage laws have been passed in Uganda but not widely enforced (2017). This example aligns with a larger trend in Africa, where child marriage laws are often poorly enforced, so much so that there is no evidence demonstrating that the enforcement of child marriage policies has been making an impact on child marriage rates (Malhotra et al., 2011). Continental studies have shown that some reasons why child marriage laws are often poorly implemented and enforced is because of issues such as a lack of official birth or marriage registration, legally informal marriages, and

ill-equipped law enforcement teams. A case study in the Ugandan district of Naksongola delves further into why these enforcement issues exist and demonstrates that part of the problem is police officers (Sempungu, 2019). Police officers were often found to be “accomplices” with child marriage violations. While child marriage was a significant issue in the district, police arrests of perpetrators made up only 18.9% of anti-child marriage efforts. While this issue could be caused by corrupt or ill-equipped police officers, corrupt judicial systems, or problems with proving situations of child marriage, the larger issue is that enforcing child marriage laws is very challenging and often falls short.

Indeed, while some studies have shown a correlation between child marriage laws and lower rates, other studies show that it is not the actual laws that cause the decline. Cloward (2022) argues that Maswikwa and colleagues’ (2015) research, which states that Sub-Saharan African countries with consistent child marriage laws have 40% less child marriage than countries without them, does not actually demonstrate causation as it utilized a cross-sectional rather than time series study. Rather, Cloward suggests that countries with lower rates might just be more inclined to pass stricter laws. There are various examples of countries, from Asia to South America, that have put strict policies in place but have not seen significant declines. Therefore, policies, while important, are not able to consistently impact child marriage on their own.

The Ugandan interviewees mirrored this understanding that policy is not everything and noted that it is really women’s extensive community advocacy work that does the most to stop child marriage. Interview responses and Hansard content show that women MPs are leveraging their role as policymakers to not just lead in Kampala but to be more involved in anti-child marriage community work, where they are on the ground interacting with girls, educating parents, and speaking against child marriage through various platforms. This response is also considered highly effective as one of the most significant causes of child marriage identified by the interviewees is parental ignorance and negligence. Interviewees noted that, due to the limitations of policy implementation and the problems with unaware or apathetic parents, this sensitization work is one of the most impactful strategies for preventing child marriage.

The interviewees made it clear that advocacy is an essential way that female parliamentarians impact an important policy issue. But what does this conclusion also say about the role of an African legislator? Community engagement is not foreign to African parliamentarians, who make constituency service a regular part of their responsibilities in addition to producing legislation, oversight, and representation. This emphasis on constituency service stems from African leaders’ connection to their communities and translates into a level of community engagement and service responsiveness that exceeds their Western counterparts. However, constituency service is often framed in the literature on African legislative behavior as primarily involving the clientelistic, and sometimes corrupt, provision of private and local public goods and services. While clientelism and corruption are certainly common features of African politics, the overemphasis on patronage-based relationships between legislators and their constituents limits our ability to see the full picture of what constituency service is in Africa, specifically African women parliamentarians’ constituency service.

The responses given by interviewees show that the constituency service female Members of Parliament provided was more similar to the casework constituency service written about for Western regions rather than clientelism. For example, their informal actions providing private goods such as recruiting a pro bono lawyer for a child bride or paying a student’s school fees are a form of constituency service that do not fit into the negative

clientelism focused on in African studies. While the actions communicate a commitment to one’s district, it would not make sense for a parliamentarian to expect reciprocal support in return from a child who cannot vote or even the parents seeking financial support for their child. These interview responses challenge scholars to address constituency service as more than self-serving clientelist practices and study it as a neutral category. Otherwise, we risk not only encouraging overly pessimistic perspectives of African policymakers but also missing the informal service provided by women.

The results from this study also suggest a need to expand our understanding of constituency service. Current understandings are limited to material provision. However, the female MPs discussed were not just giving out goods based on the citizens’ expressed needs. They were serving their constituents through advocacy, by seeking to change citizens’ minds on a prominent practice harmful to their society. They were meeting immaterial needs their constituents did not even recognize that they had. Seeing how these women MPs contribute to their communities and express their investment in their district by taking these sometimes radical actions shows how constituency service is more than advocating for and garnering funding for a school project; it is also advocating for healthier community practices, particularly those that protect the more vulnerable, in this case, children.

This study ultimately suggests that women MPs in Uganda are making an impact on child marriage, although not always as one might expect. While they are utilizing their legislative roles to pass policies, their actual impact comes from their community advocacy. While laws require enforcement, an area where Uganda struggles like several other countries, community education and on-the-ground leadership change the minds of girls and parents. Interviewees said that this education decreases the number of people interested in child marriage. This advocacy is an impactful component of women MPs’ work and also implies that we should expand our understanding of African constituency service beyond clientelism and even beyond material goods. Advocacy is not only an important tool for change, but a prominent form of service by African women policymakers.

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