1 KONSEP-KONSEP DASAR BERKAIT DENGAN STUDI NEGARA DAN BISNIS Joyo Winoto Sekolah Bisnis, IPB 2018 1. NEGARA ( STATE ) Regarding the Definitions : a. According to Weber (Weber, 1946:78), State is “ a human community that successfully claims the monopoly of the legitimate use of physical force within a given territor y ” Weber, M. 1946. Essays from Max Weber . London: Routledge & Kegan Paul b. According Weberian (such as Cudworth, 2007 and Salmon, 2008), State is “ a compulsory political organization with a centralized government that maintains a monopoly on the legitimate use of force within a certain geographical territory ”. Cudworth, Erika.2007. The Modern State: Theories and Ideologies . Edinburgh University Press. ISBN 978-0-7486-2176-7 Salmon, Trevor C. 2008. Issues in International Relations. Taylor & Francis US. ISBN 978-0-415-43126-2 c. Another mostly adopted definition of the state is that adopted by the Montevideo Convention on Rights and Duties of States held in Montevidio, Uruguay on December 26, 1933. The treaty of this convention discussed the definition and rights of the statehood. The document was published on December 26, 1933 and signed by the representatives of 20 countries of the American continent. It entered into force on December 26, 1934. There were 16 articles of the treaty, such as articles numbers (see original document): 2 (1) “ The state as a person of international law should possess the following qualifications: a ) a permanent population; b ) a defined territory; c ) government; and d) capacity to enter into relations with the other states. (2) The federal state shall constitute a sole person in the eyes of international law. (3) The political existence of the state is independent of recognition by the other states. Even before recognition the state has the right to defend its integrity and independence, to provide for its conservation and prosperity, and consequently to organize itself as it sees fit, to legislate upon its interests, administer its services, and to define the jurisdiction and competence of its courts. The exercise of these rights has no other limitation than the exercise of the rights of other states according to international law. (4) States are juridically equal, enjoy the same rights, and have equal capacity in their exercise. The rights of each one do not depend upon the power which it possesses to assure its exercise, but upon the simple fact of its existence as a person under international law. (5) The fundamental rights of states are not susceptible of being affected in any manner whatsoever. (6) The recognition of a state merely signifies that the state which recognizes it accepts the personality of the other with all the rights and duties determined by international law. Recognition is unconditional and irrevocable. (7) The recognition of a state may be express or tacit. The latter results from any act which implies the intention of recognizing the new state. (8) No state has the right to intervene in the internal or external affairs of another. (9) The jurisdiction of states within the limits of national territory applies to all the inhabitants.Nationals and foreigners are under the same protection of the law and the national authorities and the foreigners may not claim rights other or more extensive than those of the nationals. (10) The primary interest of states is the conservation of peace. Differences of any nature which arise between them should be settled by recognized pacific methods. 3 (11) The contracting states definitely establish as the rule of their conduct the precise obligation not to recognize territorial acquisitions or special advantages which have been obtained by force whether this consists in the employment of arms, in threatening diplomatic representations, or in any other effective coercive measure. The territory of a state is inviolable and may not be the object of military occupation nor of other measures of force imposed by another state directly or indirectly or for any motive whatever even temporarily. (12) The present Convention shall not affect obligations previously entered into by the High Contracting Parties by virtue of international agreements. (13) The present Convention shall be ratified by the High Contracting Parties in conformity with their respective constitutional procedures. The Minister of Foreign Affairs of the Republic of Uruguay shall transmit authentic certified copies to the governments for the aforementioned purpose of ratification. The instrument of ratification shall be deposited in the archives of the Pan American Union in Washington, which shall notify the signatory governments of said deposit. Such notification shall be considered as an exchange of ratifications. (14) The present Convention will enter into force between the High Contracting Parties in the order in which they deposit their respective ratifications. (15) The present Convention shall remain in force indefinitely but may be denounced by means of one year's notice given to the Pan American Union, which shall transmit it to the other signatory governments. After the expiration of this period the Convention shall cease in its effects as regards the party which denounces but shall remain in effect for the remaining High Contracting Parties. (16) The present Convention shall be open for the adherence and accession of the States which are not signatories. The corresponding instruments shall be deposited in the archives of the Pan American Union which shall communicate them to the other High Contracting Parties ” d. Weber and Weberians have been investing the energy to study and to exercise two developed concepts of the state, namely state 4 legitimacy and state force , but “ neglecting state territory as an object of serious intellectual inquiry” (Brenner, Jessop, Jones, and MacLeod, 2003:2). They believe that much of postwar state theory, international relations, and political sociology are “ geographically unconscious ”. “It comprises three core assumptions : (1) The state is said to possess sovereign control over its territorial borders. This implies that mutually exclusive, territorially self- enclosed, and unitary state actors constitute the basic units of the global political system. (2) And consequently, the binary opposition between the domestic and the foreign is regarded as a fixed feature of the modern interstate system. This establishes the national scale as the ontologically necessary foundation for modern political life. (3) The state is conceived as a static, timeless territorial container that encloses economic and political processes. This conception shapes analyses of the geographies of all other social relations — this is especially evident in the assumption that state, society, and economy are contained by congruent, more or less perfectly overlapping geographical b orders.” (Brenner, et al , 2003:2) “As if in confirmation of Hegel’s remark that owl of Minerva takes flight at the dusk, social scientists since the mid- to late 1980s have began to develop new and creative approaches to the study of state space that offer diverse escape routes from the Westphalian territorial trap. .... Such concerns have prompted many scholars to study the historical origins and eventual consolidation of the Westphalian geopolitical systems, with its apparently self-enclosed, directly contiguous, mutually exclusive, and sovereign territorial units.... This in turn has prompted increasing critical attention to the changing spatialities of state power and political life .... ” (Brenner, et al , 2003:2- 3). Brenner, Neil; Jessop Bob; Jones Martin; and MacLeod. 2003. Introduction: State Space in Question. In Brenner, Neil; Jessop Bob; Jones Martin; and MacLeod. 2003. State/Space. Oxford, UK : Blackwell Publishing. Pp 1-26. Notes : The Westphalian system, based on the Treaty of Westphalia in 1648, was premised on the bundling of sovereignty [the notion that that each state commands a monopoly of the legitimate power within its own domain and is entitled to exercise it without external 5 interference) and the territoriality (the delineation of that domain aound self-enclosed, mutually exclusive borders. Ruggie, J.G. 1993. Territoriality and beyond: problematizing modernity in international relations. International Organization , 47(1):139-74 Osiander, A. 2001. Sovereignty. International relations. And the Westphalian myth. International Organization , 55(2):251-87 e. The conception of Spatial System and Live Space will be elaborated in the class. f. Alternative definitions of the state are presented by critical theories of state. Base on such critical theories, we may define state based on several approaches, namely instrumentalist approach, structuralist approach, deviationist approach, system-analytic approach, and organizational realist approach. The following ideas are summarized from Barrow, Clyde W. 1993. Critical Theories of the State: Marxist, Neo-Marxist, Post Marxist . Madison, Wisconsin: The U iversity of Wisconsin Press. Pp. 3-195. (1) The basic thesis of the instrumentalist approach is that modern capitalist are able to formulate public policies which represent their long-term class interests and to secure the adoption, implementation, and enforcement of those policies through state institutions. According to the instrumentalist theorist such as Paul Sweezy, State is an instrument in the hands of the ruling class for enforcing and guaranteeing the stability of the class structure itself” According to David Gold, Clarence Lo, and Olin Wright defining state must be incorporating the following hypothesis: (a) There is capitalist classdefined by its ownership and control of the means of production (b) The capitalist class uses the state to dominate the rest of society (c) State policies further the general interests of the capitalist class in maintaining their domination of society. 6 (2) Franz Oppenheimer argues that "the State may be defined as an organisation of one class dominating over the other classes. Such a class organisation can come about in one way only, namely, through conquest and the subjection of ethnic groups by the dominating group." Franz Oppenheimer argues that the state is a "vehicle of capitalism" and "the bastard offspring of slavery and freedom. He states that "the great task before us is to get rid of the remaining traces of slavery and bring full freedom into being." (3) The next topics such as the view of instrumentalist approach, structuralist approach, deviationist approach, system-analytic approach, and organizational-realist approach should be consulted with the books related to topics including Barrow mentioned previously g. What is your definiton of state? 1 LECTURE NOTE THEORETICAL FRAMEWORK ON STATE AND BUSINESS Joyo Winoto, Ph.D. Negara dan Bisnis (SB327) Sekolah Bisnis (SB) Institut Pertanian Bogor (IPB) Ethical Statement 1. This lecture note is mostly partial copies, citations, and elaborations of two important books, one is contemporary and the other is classical, namely: (a) Coen, D., Grant, W., Wilson, G.K. (Eds.). 2010. The Oxford Handbook of Business and Government. P. v. and Pp. 1-5. Oxford: Oxford University Press; and, (b) Lairson, Thomas D. and Skidmore, David. International Political Economy: the Struggle for Power and Wealth. Pp. 1-12 and Pp. 63-94. Fort Worth, TX: Hartcourt Brace College Publishers. 2. This note should be treated strictly as a lecture note. Not for citation, copy, or replications. Any citation should be addressed to the original books, original authors, and original publishers. No one is allowed to make copy of this lecture note fully or partially. 3. This lecture note is used solely for internal use of Class SB327. 4. The aim of this lecture note is to give guidance to the students of SB327 in understanding the relation between state and business from well research books and respected scholars. Some elaboration of the concepts and frameworks are given in the class by the lecturer. “ Ideas matter . What we think, the values we embrace, and the principles we affirms all help to shape and reshape the contours of life within the human community, in ways that can either illuminate and ennoble the human spirit or drive us toward unspeakable and soulless inhumanity. .... To understand what principles and values are important and why one may be good and the other bad usually comes with greater effort and may never be fully resolved even by the most penetrating of intellects. Perhaps this is why philosophers ‘love’ wisdom , for under the spell of such a love, it might be possible to stumble upon the secret of what it really means to love the best thing and the right way. .... Ideology tend towards the prideful, distorting a virtue into a vice and corrupting the rightful love of wisdom through lower orientation that now directs one’s love toward power. Whereas theory always remain aloof to power, as Plato observed long ago, ideology even when reasonable, seek power, and typically finds it through the compromise of the very certainty that it claims. .... Because ideology deals with ideas, it does not always steer us toward the wrong kind of life, but the element of pride and the closing of inquiry adds that risk, which in turn causes the theoretical approach to become even more vital in our times” (Scott John Hammond, 2009. Pp. xi-xii) 2 SOME IDEAS : FOR THE START 1. The relationship between state and business is undeniably important Both are major forces in our lives. They are locked inextricably in a relationship with each other, but the nature of the relationship varies over time and between countries, firms, and sector of the economy. 2. Their relationships are important to be understood. If it does not work well, desired economic goals (such as welfare of the society [in terms of progress/”growth”, employment, income, and happiness ] as well as wealth of the nation ) will not be secured. It also makes it difficult to tackle public bads (such as pollution and waste) and global public bads (such as climate change, drug trafficking, and child trafficking). If business is constrained too much by poorly designed state laws and by poorly executed government policies, the tax base that funds merit goods such as public health services and education will be undermined. 3. Market are not naturally occurring phenomena . They need to be embedded in a structure of laws and rules . Institutionalizing markets within the structure of laws, regulation, and rules is domain of the state. Without such a framework, markets cannot function and deliver net welfare gains. Government representing the state is therefore impelled to make involvement (interventions?) in market, although their extent and nature varies over time in response to prevalent ideological frameworks and the state of the economy . The quality of policies and legal frameworks of the markets conditions their long-term success in developing social welfare and wealth of nation. 4. Sometimes the state has to intervene to save markets from themselves and to guarantee their existence, as in the crisis of 1998 and 2008. Besides, the states may intervene to try to restructure their national economies . Within these two contexts of the state involvement in the economy and business, ideological debates and political processes will take major roles in determining new structure of economy and roles of business. 5. Business is one of the major power centers in modern society . The state seeks to check and channel that powers so as to serve broader 3 public policy objectives. However, if the way in which business is governed is ineffective or over burdensome, it may become more difficult to achieve desired social and national goals. 6. Business is a key political actor . It dwarfs other interest groups in terms of resources and political displacement. It touches most areas of public policy. Business helps to shape policy agendas, formulation, and implementation. It may result in legislation or regulation that has substantial intended or unintended consequences for business and competitiveness. 7. The government has to become involved with business because left unchecked it can inflict substantial costs on society in terms of various of market failure, for example the practice of monopoly and oligopoly or negative externalities such as pollution. The government needs also to develop a framework of employment protection for workers and provision for healt h and safety at work. This last involvement is based on Polanyi’s assertion that labor cannot be treated as a commodity without having a dehumanizing effect 8. A much broader issue than making the market work effectively is the use of state taxation and spending to redistribute income. The existence of a much skewed redistribution can affect a nation’s ability to function effectively economically, socially, and even politically. There is also moral consideration for the needs of redistribution. It is virtuous to have just social-economic system 9. The study of state-business relation has grown from a low base point. The subject area is still undersupplied with theory . The relation should be smoothly fit with the framework of political science and economics. It is difficult or even impossible to understand such relation without clear sense of how politics and economics are related. It is not easy to comprehend considering political science is taught in one department and economics in another. One looks at power and privilege and the other looks at money and products. 10. Study of political economics expected to be able comprehend such a relation, lately, trapped mostly to the study of electoral and costs of voting. However, political economic framework such as its intention of forefathers of this study who see economics as public matter is expected 4 to be the best framework to study state-business relation. Economic and political interests are deeply engaged by how people think about the state and business. Consequently, several strongly held ideologies have grown up around political economy such as liberalism, mercantilism, and radicalism will be incorporated with the analysis. 11. In terms of the current state of the art, a number of disciplines have contributed to the study of state-business relations. Political science has been interested in how business organizes to operate politically and the opportunity structures it encounters. Historical institutionalism and its emphasis on path dependency has been a substantial influence, notably through the varieties of capitalism debate which seeks to identify distinctive national patterns of interaction that are shaped by the historical form that the state had adopted. Another contribution of politics is the study of the historical development of ideal typical state forms in which one form supplants another while retaining elements of the earlier of the earlier form. Thus the regulatory state (driven by the pertinent of natural monopolies) has become the increasing predominant state form in developed countries, but substantial elements of the preceding form, the “Keynesian welfare state”, remain in place. 12. The state has understandably played a central role in political science analysis, particularly after it was “brought back in”, but this has arguably produced an imbalance in analysis that has led to an insufficient focus on the firms as political actor with the political side of the equation often been conceived in terms of the intermediaries privileged by the neo- corporatist tradition. The state sets the rules of the game for business, but the game can be played in different ways both strategically and tactically. 13. Economics , and in particular the microeconomic tradition of rational choice that is concerned with understanding the behavior of utility maximizing agents, has drawn our attention to rent-seeking behavior by interest groups . While economics has been able to provide testable models of micro-level behavior of the firms (as profit maximizing entity), political science has not been able to match it with solid political theory of the firm. 14. Economics identifies cases of market failure that may justify state intervention but also reminds us that attempt to remedy market failure 5 may simply lead to government failure . From economic history we learn that abstention of state intervention, or wrong state interventions, may worsen an economic slump as in the 1930s. 15. Business studies have led the analysis of the growing phenomenon of Social Business Enterprises, Mission-centric Social Enterprise, Mission- related Social Enterprise, Socially Responsible Business, Mission- unrelated Social enterprise, and Corporate Social Responsibility. The studies has been able to identify motives and consequences of such types of business. It has also drawn our attention to the distinctive characteristics, agenda, and needs of small firms . It has also brought out the complexity and dynamic nature of the challenge facing individual firm . A longer term perspective on these challenges has been provided by the work of business historians which has helped us to understand the importance and consequences of changes in the management structures of firms over time as ownership and control became separated 16. Legal studies focus on what it means to be corporation in terms of rights, responsibilities, and liabilities. What are political consequences of the legal personalities of corporations? How are corporate executives constrained by law? Corporations are not naturally occurring phenomena but are created and structured by laws. 17. Understanding state-business relation based on one specific discipline will only capture a bit of reality . Knowing one piece without having any sense of the whole will give incomplete, even misleading results. Therefore, we need to understand the state-business relation based on the broader and deeper perspectives. Broader perspectives will be provided by political economic framework that will be explained by lecturer in the next following class meeting; and, deeper perspectives will be taken from disciplinary field such as politics, economics, business studies, and legal studies. 18. While there are considerable continuities in state-business relations in particular countries which have not been swept away by globalization there is also substantial instability. Some of this is evident in short-term fluctuations. The nature of exchange between state and business can change over quite a short time period, shorter than might be implied by some of the propositions of the varieties of capitalism literature. 6 19. Fluctuations in the policy cycle and policy outputs will influence the nature of state-business exchange . In periods of high legislative activity, the emphasis is on speedily available informational outputs. In periods of low legislative output, the focus is more on building downstream relationships and consultation. This could involve deepening relationships with one set of interests or it could lead to a process of broadening out other interests. However, state-government interactions can also shift in longer term in response to the changes in market structure and the political system 20. In the post-war period, the dominant economic model was that of the mixed economy, a market economy with substantial government involvement. Government often owned public utilities or at least regulated them tightly. Many governments engaged in indicative planning, although such efforts often foundered on the autonomy of the firm when it came to key investment decisions. This was succeeded by a period in which the market was seen as the preferred logic of economic activity. 21. Neoliberalism began a long march through the institutions. It should be emphasized that neo-liberalism was about redesigning markets and restructuring them, rather than simply relying on market to deliver desired outcomes . The role of the state did not diminish as much as was sometimes claimed, but it was seen more as the servant of the market and business than its controller Thus, while regulatory frameworks generally remained in place, they were often interpreted in a looser way or enforced less strictly, although there was considerable variation by country and in terms of forms of regulation. 7 FURTHER READINGS 1. Adams, Walter and James W. Brock. 1986. The Bigness Complex: Industry, Labor, and Government in the American Economy. New York: Pantheon Books. 2. Aidi, Hishaam D. 2009. Redeploying the State. New York: Palgrave Macmillan. 3. Aronowitz, Stanley and Bratsis, Peter (Eds.). 2002. Paradigm Lost: State Theory Reconsidered. Minneapolis-London: University of Minnesota Press. 4. Asher, M.G., Newman, D., and Snyder, T.P. (Eds.). 2002. Public Policy in Asia: Implications for Business and Government. US: Greenwood Publishing Group, Inc. 5. Barrow, Clyde W. 1993. Critical Theories of the State: Marxist, Neo- Marxist, Post Marxist. Madison, Wisconsin: The University of Wisconsin Press. 6. Bell, Stephen and Hindmoor, Andrew. 2009. Rethinking Governance: the Centrality of the State in Modern Society. Cambridge-New York- Melbourne-Madrid-Cape Town-Singapore-Sao Paulo-Delhi-Tokyo: Cambridge University Press. 7. Berberoglu, Berch. 2003. Globalization of Capital and the Nation-State: Imperialism, Class Struggle, and the State in the Age of Global capitalism. USA: Rowman & Littlefield Publishers, Inc. 8. Brenner, N., Jessop, B., Jones, M., and MacLeod, G. (Eds.). 2003. State/Space: A Reader. Oxford, UK: Blackwell Publishing. 9. Coffey, Dan and Thornley, Carole. 2009. Globalization and Varieties of Capitalism: New Labour, Economic Policy and the Abject State. New York: Palgrave Macmillan. 10. Da Fonseca, Eduardo Giannetti. 1991. Belief in Action: Economic Philosophy and Social Change. Cambridge-New York-Port Chester- Melbourne-Sydney: Cambridge University Press. 8 11. Drysdale, Peter (Ed.). 2000. Reform and Recovery in East Asia: The Role of the State and Economic Enterprises. London-New York: Routledge. 12. Dryzek, John S., Honig, Bonnie, and Phillips, Anne (Eds.). 2006. The Oxford Handbook of Political Theory. Oxford: Oxford University Press. 13. Dunning, John H. and Lundan, Sarianna M. 2008. Multinational Enterprises and the Global Economy. 2 nd Ed. Cheltenham, UK and Northampton, MA, USA: Edward Elgar. 14. Free, Rhona C. 2010. 21 st Century Economics: A Reference Handbook. Thousand Oaks, California: Sage Publications, Inc. 15. Gaus, Gerald F. and Kukathas, Chandran (Eds.). 2004. Handbook of Political Theory. London-California-Delhi: Sage Publication Ltd. 16. Hammond, Scott John. 2009. Political Theory: An Encyclopedia of Contemporary and Classic Terms. Connecticut-London: Greenwood Press. 17. Hanaga, Michael and Tilly, Chris (Eds.). 2011. Contention and Trust in Cities and States. New York-London: Springer Science+Business Media B.V. 18. Handlet, Antoinette. 2008. Business and the State in Africa: Economic Policy-Making in the Neo-Liberal Era. Cambridge-New York- Melbourne-Madrid-cape Town-Singapore, Sao Paulo: Cambridge University Press. 19. Hodgson, G.M., Itoh. M., and Yokokawa, N. (Eds.). 2001. Capitalism in Evolution: Global Contentions – East and West. Glos, UK – Masschusetts, USA: Edward Elgar Publishing, Inc. 20. Ichimura, S., Sato, T., and James. W. (Eds.). 2009. Transition from Socialist to Market Economies: Comparison of European and Asian Experiences. London-New York: Palgrave Macmillan. 9 21. Jilberto, Alex E. Fernandez and Hogenboom, Barbara (Eds.). 2007. Big Business and Economic Development: Conglomerates and Economic Groups in Developing Countries and Transition Economies under Globalization. London-New York: Routledge, Taylor and Francis Group. 22. Lane, David and Myant, Martin (Eds.). 2007. Varieties of Capitalism in Posy-Communist Countries. Studies in Economic Transition. New York: Palgrave and Macmillan. 23. Leibfried, Stephen and Zurn, Michael (Eds.). 2005. Transformations of the State? Cambridge-New York-Melbourne-Madrid-Cape Town- Singapore-Sa Paulo: Cambridge University Press. 24. Leicht, Kevin T. and Jenkins, J. Craig (Eds.). 2010. Handbook of Politics: State and Society in Global Perspective. New York-London: Springer Science + Business Media, LLC. 25. Lipschutz, Ronnie D. and Rowe, James K. 2005. Globalization, Governmentality and Global Politics: Regulation for the Rest of Us? New York: Taylor & Francis Group, LLC. 26. Marques, Jose Carlos and Utting, Peter, 2010. Business, Politics and Public Policy: Implications for Inclusive Development. UK: Palgrave Macmillan. 27. Martin, Cathie Jo. 2000. Stuck in Neutral: Business and the Politics of Human Capital Investment Policy. Princeton, New Jersey: Princeton University Press. 28. McNabb, David. 2009. The New face of Government: How Public Managers are Forging a New Approach to Governance. Florida: Taylor & Francis Group, LLC. 29. Mjoset, Lars and Clausen, Tommy H. (Eds.). 2007. Capitalism Compared. Comparative Social Research 30:21-69. Elsevier Ltd. 30. Moon, Bruce E. 1991. The Political Economy of Basic Human Needs. Ithaca-London: Cornell University Press. 10 31. Mullineux, A.W. 1984. The Business Cycle after Keynes: A Contemporary Analysis. New Jersey: Barnes & Noble Books. 32. Overbeek, Henk (Ed.). 1993. Restructuring Hegemony in the Global Political Economy: The Rise of Transnational Neo-Liberalism in the 1980s. London-New York: Rouledge Taylor & Francis Group. 33. Payne, Anthony (Ed.). 2006. Key Debates in New Political Economy. London-New York: Rouledge Taylor & Francis Group. 34. Pedersen, Jorgen Dige. 2008. Globalization, Development and the State: Performance of India and Brazil since 1990. UK: Palgrave Macmillan. 35. Robison, Richard. 2008. Indonesia: the Rise of Capital. Singapore: Equinox Publishing (Asia) Pte Ltd. 36. Rockwell, Jr., Llewellyn H. 2008. The Left, The Right, & The State. Aubern, Alabama: Ludwig von Mises Institute. 37. Soederberg, S., Menz, G., Cerny, P.G. (Eds.). 2005. Internalizing globalization: The Rise of Neoliberalism and the Decline of National Varieties of Capitalism. International Political Economy Series. New York: Palgrave Macmillan. 38. Stenning, A., Smith. A., Rochovska, A., and Swiatek, D. 2010. Domesticating Ne-Liberalism: Spaces of Economic Practice and Social Reproduction in Post-Socialist Cities. UK: Wiley-Blackwell. 39. Vietor, Richard H.K. 1984. Energy Policy in America Since 1945: A Study of Business-Government Relations. Cambridge-London-New York- New Rochele-Melbourne-Sydney: Cambridge University Press. 40. Wetherly, P., Barrow, C., and Burnham, P. (Eds.). 2008. Class, Power and the State in Capitalist Society. New York: Palgrave Macmillan. 41. Wood, Donna J., Logsdon, Jeanne M., Lewellyn, Patsy G., and Davenport, Kim. 2006. Global Business Citizenship: A Transformative Framework for Ethics and Sustainable Capitalism. Armonk, New York – London, England: M.E. Sharpe. 1 LECTURE NOTE THEORETICAL FRAMEWORK: CONCEPTUAL FRAMEWORK OF STATE, LAW AND BUSINESS Joyo Winoto, Ph.D. Negara dan Bisnis (SB327) Sekolah Bisnis (SB) Institut Pertanian Bogor (IPB) Ethical Statement 1. This lecture note is solely excerption of Gregory C. Shaffer. Law and Business. In Coen, D., Grant, W., and Wilson, G. (Eds.). 2010 The Oxford Handbook of Business and Government . Oxford: Oxford University Press. Pp. 63-88. 2. This note should be treated strictly as a lecture note. Not for citation, copy, or replications. Any citation should be addressed to the original book, original author, and original publisher. No one is allowed to make copy of this lecture note, fully or partially. 3. This lecture note is used solely for internal use of Class SB327. 4. The aim of this lecture note is to give guidance to the students of SB327 in understanding the relation between state and business from well research book and respected scholars with some elaborations from the lecturer. “ It is possible for right and duty to have reality independently as something particular apart from individuals, and for individuals to have reality apart from right and duty; but is also possible that both are linked together. And it is absolutely necessary for both possibilities to be separate and to be kept distinct [...], and the possibility that the pure concept and the subject of right and duty are not one must be posited unalterably and without qualification” (G.W.F. Hege l. 1975. Natural Law, The Scientific Ways of Treating Natural Law, Its Place in Moral Philosophy, and Its Relation to the Positive Sciences of Law . Translated by T.M. Knox with Introduction by H.B. Acton. Philadelphia: University of Pennsylvania Press. 1975. NL 84:442) “Even if without the emotion we could somehow see ethical salience, the way we see would still be defective and imperfect. That is, we might have the right (ethical) views, but lack the right modes of seeing and appreciating. We would see with an inferior kind of awareness. The point is that, without the emotions, 2 we do not fully register the facts or record them with the sort of resonance or importance that only emotional involvement can sustain” (N. Sherman . 1989. The Fabric of Character: Aristotle ’s Theory of Virtue. Oxford: Clarendon Press. P. 47) “We have ... a duty, an inescapable duty, to do our best to awaken ... some appreciation of the law as a whole in relation to society. .... The relation of a man’s life -work to his society and to himself is the duty-job for himself to wrestle with, and a duty- job for us to see that he wrestle with it” (K. N . Llewellyn . 1986. A Required Course in Jurisprudence. In Jurisprudence. Chicago: University of Chicago Press. P. 255) “ We need a philosophic awakening that will put law in its proper place in the human struggle to achieve order and justice ... a part of the eternal quest for those principles that will enable us to live and work together in harmony” (L.L. Fulle r. 2001. Philosophy for the Practicing Lawyer. In K.I. Winston (Ed.). The principles of Social Order: Selected Essays of Lon L. Fuller. Oxford: Hart Publishing. P. 305) “Bourgeois international law in principle recognizes that states have equal rights yet in reality they are unequal in their significance and their power. For instance, each state is formally free to select the means which it deems necessary to apply in the case of infringements of its right; ‘however, when a major state lets it be known that it will meet injury with the threat of, or the direct use of force, a small state merely offers passive resistance or is compelled to concede’. These dubious benefits of formal equality are not enjoyed by those nations which have not developed capitalist civilization and which engage in international intercourse not as subjects, but as objects of the imperialist states’ colonial policy” (E. Pashukanis . 1980. International Law . In Beirne, P. and R. Sharlet. Pashukanis: Selected Writings on Marxism and Law. London: Academic Press. P. 178) “A dependent and dominated social formation and state is one whose specific economic, political and ideological structures is constituted by asymmetrical relationships with the dominant social formations and states which enjoy a position of power over it” (N. Poulantzas . 1978. Classes in Contemporary Capitalism. London: Verso. P. 43-44) 3 “Legal relations as well as forms of state are to be grasped neither from themselves nor from the so-called general development of the human mind, but rather have their roots in the material conditions of life” (D. McLellan (Ed.). Reprinted. 2000. Karl Marx: Selected Writings. Second Edition . Oxford: Oxford University Press. P. 424) “The sum total of these relations of production constitutes the economic structure of society, the real foundation, on which rises legal and political superstructure and to which correspond definite forms of social conscio usness” ( Ibid , p. 425) “The one [policy] is expressly intended to create and maintain a community of equal, cooperating nations; and the other is intended, presumably, to create and maintain an empire. The two policies, the course of action, lead in different directions. In which of the se directions does the [country] ... move? It cannot move in both at one and at the same time. It cannot serve two masters” (J. Lockley . 1938. Pan-Americanism and Imperialism. American Journal of International Law 32, p. 233) “Having established the ideological nature of particular concepts in no way exempts us from the obligation of seeking objective reality, in other words the reality which exists in the outside world, that is external. And not merely subjective reality” (E. Pashukanis . 1978. Law and Marxism: A General Theory. London: Ink Links. P. 75) “The essential precondition for the effectiveness of law, in its function as ideology, is that it shall display an independence from gross manipulation and shall seem to be just. It cannot be seen to be so without upholding its own logic and criteria of equity; indeed, on occasion by actually being just” (E.P. Thompson . 1985. Whigs and Hunters In Lloyd’s Introduction to Jurisprudence . Stevens Publishing. P. 1056) 4 This part of lecture note describes the state, law, and business relations by emphasizing the dynamics relations between law and business. This lecture note is solely excerption of Gregory C. Shaffer. Law and Business. In Coen, D., Grant, W., and Wilson, G. (Eds.). 2010 The Oxford Handbook of Business and Government . Oxford: Oxford University Press. Pp. 63-88. Elaboration and explanation of this lecture note will be given by lecturer in the scheduled class meeting in such a way that students understand the concepts, the theories, the contexts, and the implications of the developed framework of state and business adopted by the class of SB 327, School of Business, IPB University. I. GENERAL FRAMEWORK OF STATE, LAW, AND BUSINESS 1. “ Law consists of system of rules, standards, and procedures that social institutions create and apply. These social institutions may be public or private. The rules, standards, and procedures that they create provide a framework in which business strategizes and operates. Business, in turn, uses law as resource to advance and defend business aims. Law help constitute business by recognizing business organizational forms, and business helps constitute laws. 2. Business interests may be united or divided vis-à-vis state and the laws state creates. Regulations provides some business with competitive advantages over others, dividing business and creating incentives for different public-private alliances (Vogel, 1995). 3. Business is divided on account of economic competition, and public actors are divided on account of political and ideological competition. Different factions within business thus ally with different factions within government. Business interests, however, may also converge to oppose government measures, as when government sides with consumer or environmental groups at the national level, and business believes it will be disadvantaged vis-à-vis foreign competition. 4. With the rise of transnational institutions, business can also look to public actors at different levels of social organization to promote their interests. 5. What shapes law, and, more particularly, what are the mechanisms through which business shapes law? To understand the relationship of business and law, we must look at the following three sets of institutional interactions: