Commentary on the Panel “Redistribution Through Institutional Design”

By Dimitri Van Den Meerssche

While primarily aimed at exploring the myriad relationships between transnational legal ordering and the (re)distribution of wealth, knowledge or power from a theoretical perspective, the Transregional Academy also provided a forum to discuss pragmatic questions regarding the (re)distributive potential of strategic litigation and institutional design. To shed light on the latter topic, the Academy welcomed presentations by Brigitte Young (Prof. em. for Political Sciences and Comparative Economics, Universität Münster) and Yuefen Li (Special Advisor, Economics and Development Finance, The South Centre, Geneva). The panel session departed from a reconceptualization of money and debt as legally constituted relationships and elucidated how both the ‘law of money’ and the ‘law of sovereign debt restructuring’ (or lack thereof) produce problematic distributive outcomes.

Prof. em. Brigitte Young and Yuefen Li

In her presentation, Prof. em. Brigitte Young proposed a set of amendments to the constitutional architecture of central banks – primarily the US Federal Reserve System, the Bank of England and the European Central Bank – that would render these institutions more responsive to widening inequality by extending their constitutional mandates to issues of social solidarity and sustainable fiscal policy. Since the start of the financial crisis, Young argued, socio-economic inequality has been exacerbated by the asset bias that underlies the unconventional yet prevailing monetary policy of quantitative easing. In line with the call for epistemic demystification that was voiced in several of the Academy’s research papers, Young’s analysis rejects the purported neutrality and objective rationality of dominant technocratic paradigms, and urges to repoliticize monetary policy through institutional (or constitutional) reform. Through Young’s prism, we understand how law – in the form of the constitutional mandate of monetary institutions – both entrenches the current problematique of technocratic rule, while simultaneously providing a productive space for contestation, politicization and reform.

Yuefen Li, Special Advisor for the South Centre and former Manager of the Sovereign Debt Restructuring Mechanism of UNCTAD, shared insights from her involvement in several sovereign debt negotiations. Departing from this experience, Li underlined the need for an international legal architecture that could facilitate, regulate and enforce balanced programs of sovereign debt restructuring. The current regulatory void, she lamented, leaves space for politically motivated austerity programs; ‘too little, too late’ debt restructurings and abusive holdout litigations (commonly initiated by vulture funds), all of which entail a heavy socio-economic burden that is carried by the most vulnerable groups in society. Resisting the current political paralysis, Li has been involved in the development of UNCTAD’s Roadmap and Guide for Sovereign Debt Workouts, which articulates both a list of normative ‘Sovereign Debt Workout Principles’, as well as a set of proposals for their gradual institutional realization. These proposals for institutional reform unfold along an incremental teleological trajectory – ranging from the decentralized and informal promotion of normative principles, over a (potentially private) ‘Sovereign Debt Workout Institution’, to a multilateral treaty-based ‘Sovereign Debt Restructuring Tribunal’.

Both presentations aligned with the central aim of this Academy to explore the ambivalent nexus between law – in all its phenomenological manifestations: from interstate treaties to private contracts and from esoteric normative principles to the fluid performative presence of legal expertise – and the structures of politics and power implicated in shaping contemporary patterns of distribution. On the one hand, as critical legal theory informs us, the political economy that shapes distributive patterns is not extra- or pre-legal, but codified, facilitated and normalized through legal form. Indeed, as Young implied, law both constitutes and conceals the socio-political relationships that define how money operates and which distributive choices are implied in its production. On an institutional level, the constitutional independence and limited mandate of central banks, Young further argued, legally entrenches technocratic rule and the depolitization of monetary affairs. Turning to the issue of sovereign debt, Li’s example of abusive holdout litigations illustrates how certain anti-democratic pathologies of sovereign debt restructuring are legally constituted. On a more general level, the legal or constitutional coding of austerity politics was addressed in several research papers presented at the Academy. In sum, and as both presentations underline, the ‘mess we are in’ is not an extra- or pre-legal reality in need of legal intervention, but a social space that is constituted by law.

On the other hand, international law and legal institutionalism are hailed as modes of rectification or – more pompously – salvation. As the aforementioned reform proposals illustrate, despite decades of deconstruction, there is still a lingering appeal to international legalization, judicialization and formal multilateralism as modes of progressive politics. This is exemplified by both Young’s proposal to repoliticize monetary affairs through processes of constitutional and legal reform, as well as Li’s recourse to international treaty-making and adjudication as ways to rectify the pathologies of sovereign debt restructuring. If law is indeed implicated in allocating power and shaping political economy, this necessarily implies a real potential for legal imaginaries and institutions to reverse existing inequalities and asymmetries.

This structural ambivalence, I believe, should not be seen as an intractable paradox, but embraced as an inevitable corollary to any legal methodology that is informed by critical sociology and wary of (liberal or other) essentialisms. One of the key propositions underlying the readings and presentations of the Academy was precisely that there is nothing ontologically immanent in (international) law that defines it as an instrument of either empire or emancipation. And while a critical wariness of its politics and purported liberal universalism remains vital, both Young and Li convincingly reclaim international law (and its associated institutions) as a political space where heterodox projects of redistribution can be articulated. Consequently, in its purely positivist manifestation, law is neither panacea nor pathology. This ambivalence is perhaps what the rationalist renaissance of global constitutionalism and the principle-based blueprints of GAL or IPA (to a lesser extent) are missing. What emerged from the Academy for me is an image of law without ontological or normative essence; a realization that legality, as a salient socio-political phenomenon, can only operate through concrete performative presences or dialectic encounters with material forces and institutional rationalities (whatever side of the Kennedy-Knox divide you find yourself on). This perspective, I believe, invites for both a sociologically informed and politically conscious legal scholarship.

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