Book By Milhaupt, Pistor on Role of Law In Successful Economies

Book By Milhaupt, Pistor on Role of Law In Successful Economies
Press contact:
James O’Neill 212-854-1584 Cell: 646-596-2935
August 1, 2008 (NEW YORK) – Columbia Law School Professors Curtis J. Milhaupt and Katharina Pistor, in a new book, seek to unsettle the prevailing assumption that a U.S.-style “rule of law” is vital to a successful economy. To bolster their argument, they analyze recent high-profile corporate scandals around the world – from Enron in the United States to Yukos in Russia and Livedoor in Japan.
“Does the prevailing view of the relationship between law and capitalism hold up under sustained scrutiny?” Milhaupt (at left) and Pistor write in the introduction to Law & Capitalism: What Corporate Crises Reveal About Legal Systems and Economic Development Around the World(The University of Chicago Press, 2008). “Why have some of the most dramatic economic success stories in history – China is only the latest example – occurred in the absence of a ‘rule of law’ as that term is commonly understood in Western economics and legal scholarship?”
Using case studies from the United States, China, Germany, Japan, Korea and Russia, Milhaupt and Pistor argue in Law and Capitalism that a wide variety of mechanisms – both legal and nonlegal – have supported economic growth.
“The standard approach assumes there is a single optimum model, but there are many systems out there and each has its own strengths and vulnerabilities,” said Pistor (at left). “Our case study methodology – or ‘institutional autopsy’ – places each corporate governance crisis into the context of a country’s governance regime and thereby helps reveal its systemic weaknesses.”
Milhaupt said that the book’s core argument has potentially far-reaching ramifications for such global economic policy players as The World Bank, which often benchmarks the potential success of other countries’ systems on reforms that bring them closer to the U.S. legal and regulatory system.
“We’ve lost the perspective that the U.S. legal system has evolved tremendously over time in response to specific events and crises,” Milhaupt said. “Why should we assume that countries at a different stage of development and with a different institutional starting point should require the same set of laws to support economic growth?”
Recent events – that a scandal such as Enron (and even more recently, the credit crisis) occurred despite the United States’ touted regulatory system, for instance, or the economic success of China despite its authoritarian (but quite flexible and experimental) governance system – argue for a more expansive view of what can boost economies, Milhaupt said.
Milhaupt and Pistor are available to discuss the book with journalists. Milhaupt can be reached at 212-854-4926 or [email protected]. Pistor can be reached at 212-854-0068 or [email protected]. Interviews can also be arranged through Columbia Law School’s Public Affairs office at 212-854-2650. Public Affairs can arrange for TV and radio interviews using the Law School’s studio equipped with IFB and ISDN lines.
Journalists interested in obtaining review copies of Law and Capitalism can contact Lindsay Dawson, Promotions Manager, The University of Chicago Press at [email protected].
In the book, Milhaupt and Pistor say the prevailing view assumes that law fosters economic activity exclusively by protecting property rights, so a legal system that clearly allocates and protects property rights is a precondition to economic success. “It is,” they write, “clean and straightforward” and “treats law as a kind of technology which can be inserted where necessary.”
But this view does not bear up to scrutiny, they argue. “Law is not an endowment like a fixed capital investment which, once in place, provides a firm foundation for capitalist activity,” they write. “The vibrancy of a capitalist system hinges on creative destruction  in the governance sphere as well as the economic sphere. Governance structures of all types, including law, must adapt and respond to changes in the economy.”
The book argues that policy makers, business leaders and scholars should not think so rigidly. Law and markets evolve together in a “rolling relationship” based on events on the ground, and that calls for a more dynamic model of what promotes healthy economies.
Milhaupt is Columbia Law School’s Fuyo Professor of Japanese Law and Professor of Comparative Corporate Law. He is also Director of the Law School’s Center for Japanese Legal Studies. He was a mergers and acquisitions lawyer at Shearman & Sterling in New York and Tokyo from 1989 to 1994 and served on a high-level project team charged with creating an “institutional blueprint” for a reunified Korean Peninsula from 1997 to 2000.
Milhaupt has published on corporate governance, organized crime, and the market for legal talent, and is the co-author or editor of six books, including The Japanese Legal System: Cases, Codes and Commentary (Foundation Press, 2006); Economic Organizations and Corporate Governance in Japan: The Impact of Formal and Informal Rules (Oxford University Press, 2004); and Global Markets, Domestic Institutions: Corporate Law and Governance in a New Era of Cross-Border Deals (Columbia University Press, 2003).
Pistor, a Professor of Law, joined the Columbia Law School faculty in 2001. Her fields of interest are comparative law; comparative corporate law and corporate governance, legal development in emerging markets, and European law. She has published widely on such topics as legal transplants and the comparative evolution of law. Pistor is co-author of The Role of Law and Legal Institutions in Asian Economic Development (Oxford University Press, 1999) and has co-edited Rule of Law and Economic Reform in Russia (Boulder Press, 1997) with Jeffrey D. Sachs, and Law and Governance in an Enlarged European Union (Hart, 2004) with Columbia Law School Professor George Bermann. .
Columbia Law School, founded in 1858, stands at the forefront of legal education and of the law in a global society. Columbia Law School joins traditional strengths in international and comparative law, constitutional law, administrative law, business law and human rights law with pioneering work in the areas of intellectual property, digital technology, sexuality and gender, and criminal law.