Transnational Law Blog

Global Internet Rights and Censorship

The Internet has changed the way information is spread around the world. Internet usage has become ubiquitous in developed countries and it is still growing in less developed countries. The ability of populations to get information through the Internet is treated differently by various countries.

Some countries have codified the right to Internet access in law. Witness, for instance, Estonia’s 2000 law declaring Internet access to be a fundamental human right. Internet censorship is a big issue for freedom of information and civil right's groups. Human Rights Watch told the U.S. Congress last year that

Human Rights Watch believes that the Internet is a transformative force that can help open closed societies and provide the near-instantaneous flow of information to inform the public, mobilize for change, and ultimately hold institutions accountable. We have warned, however, that there is a real danger of a Virtual Curtain dividing the Internet, much as the Iron Curtain did during the Cold War, because some governments fear the potential of the Internet, want to control it and the companies that provide the services and products tied to it; and users fear the consequences of using it as a medium for openness and accountability.

This warning was timely because there are some worrying signs that governmental censorship is on the rise around the world. Australian lawmakers have recently proposed a controversial law that would institute a mandatory Internet filtering scheme. This is following a 2007 law that gave Federal police power to block access to any website.

Designed for the laudable goal of blocking access to pornography for children, the plan also has the potential to block websites discussing controversial topics such as euthanasia and anorexia. Citizens would not be allowed to opt out of the filtering (the original version of the bill would have let people contact their Internet service providers to opt out of the filtering.) Not surprisingly, advocates for freedom of information and rights groups have been extremely critical of the plan. One commentator even noted that a list of websites that would be blocked by the Australian law has been leaked, and it "has, in effect, given every 15-year-old in Australia a guide to porn online."

For a discussion of the proposed Australian law, including a defense of the law from a member of the Parliament, click here.

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The country that gets the most attention of Internet censorship is China. China already had the most sophisticated Internet censorship system in the world before last week's news that China has again blocked YouTube because of a video purporting to show Chinese police fatally beating a Tibetan protester. This is not the first time China has blocked access to YouTube; they do so from time to time when there are videos criticizing the Chinese Government.

Other recent Internet censorship acts by China include restricting access to international reporters covering the Beijing Olympics and China pushing the United Nations to curb Internet anonymity by drawing up surveillance and monitoring technical standards. Regarding the anonymity issue, a U.N. document leaked to Columbia computer engineering professor Steve Bollovin stated justifications for the China-drafted Internet standards:

A political opponent to a government publishes articles putting the government in an unfavorable light. The government, having a law against any opposition, tries to identify the source of the negative articles but the articles having been published via a proxy server, is unable to do so protecting the anonymity of the author.

According to a new study by the OpenNet Initiative, state-sponsored Internet censorship is on the rise. Other recent offenders include Burma, Bangladesh, and Turkey. According to Harvard Law Professor John Palfrey, "In five years we have gone from a couple of states doing state-mandated net filtering to 25."

If you are interested in combating the rise in censorship of the Internet, there are a number of groups you could join, including Human Rights Watch, Reporters Without Borders, and the OpenNet Initiative.

Federal and California State Tax: One Step Forward, Two Steps Back

 

If you would like to find out the tax aspects of Obama's stimulus package which seizes about 36% of the stimulus, as well as how the State of California mends its budget crisis through various tax increases, there was a recent discussion on federal and state tax issues given by professor Heather Field and professor Darien Shanske, two respected tax professors at UC Hastings. The discussion was recorded in mp3 format and is now posted here.[mp3]

Other than the applicable nature of the subject discussed, the discussion offered some insights of how CA tax increases will negate many parts of our federal tax credits and how our state’s constitutional setting makes it difficult to avoid similar budget crisis in the future.

In the first section, professor Field opened  by explaining the need for a stimulus package and why the tax system plays an important role in stimulating economic activities. Professor Field then discussed the various implementations of the tax aspect which include non-repayment credit for first time homebuyers, educational tax credit for students, and sales tax reduction for new vehicle. The lecture ended with a thought provoking discussion as to weather the stimulus will work as well as the short term and long term nature of these tax provisions. It is appeared that President Obama is seeking to keep some of these tax provisions permanent despite growing concern over our budget deficit. Here, professor Field nicely instigated the debate over the role of our tax system as a tool for income redistribution.

I thoroughly enjoy the professor's subjective approach toward controversial issues such as the role of our tax system and whether Obama’s tax cuts will sufficiently motivate economic activities in the short run. Field posited the question as to why the tax credits only applies for a “limited window,” and what would be the consequence of extending these provisions permanently.

Other than issues related to fairness and wealth distribution, economists have been concerned over inflation and potential negative impact on monetary system through tax instrument. We are injecting a huge amount of capital inflow to the economy, in the long run, it will take some painful interest hike to restrain these capital surplus, tame down inflation and pay off the budget deficit. Furthermore, at some point, consumers may stop responding to tax cuts as an effort to stimulate economic activities. Behavioral economics tells us that consumer behaviors are often altered by short term and long term expectations of the consumer’s future income.

The discussion quickly moved on to Darien Shanke discussion on California budget crisis and how California state has used tax system to mitigate budget problem in the time of overall global crisis. If California were an independent state, it would have been the tenth largest economy in the world. Here, professor Shanske introduced the not-so-obvious paradox: if California hasn’t overspent, why does a State which arguably has  the highest income and sale tax in the country constantly finds ways to bail itself out of budget crisis over the past couple decades?

The key problems rest in property tax and the fact that California doesn’t have a standard sale tax system. At ¼ of the country’s average property tax, the State imposes the lowest property tax rate in the nation. Because income tax is less sufficient and stable than property tax, our State budget has always been much more vulnerable in the time of crisis as it is now. For these reasons, our state is now seeing itself going through massive lay offs (10.5% unemployment rates in February), budget cuts on education, double fee on car registration and general income tax increases.

Professor Shanske then questioned how did end up here? Why can’t we simply increase property tax to balance the budget?  California is the only State in the country that requires 2/3 majority to pass the budget. Shanske reasoned that having super majority requirement is not too "insane", but if the State were to make it very difficult to change the budget and tax structure, it should have had a good initial arrangement. Here, our State legislators happened to choose the worse possible arrangement by adopting a highly unstable tax system, and making it very strenuous to change it. Given the State's distressing institutional constrains, professor Shanske left his audience empty of any probable solution. He is not to blame.

The lectures are immensely informative and thought provoking. Nevertheless, they do not require any tax background from its listeners to appreciate the on going changes and debates in the federal and state tax system. "The Tax Aspect of the Stimulus Package"[mp3] is a highly recommended tune.

Economic Advice From Jim Rogers

Rethinking the Washington Consensus on Trade Liberalization

"‘Stabilize, privatize, and liberalize’ became the mantra of a generation of technocrats who cut their teeth in the developing world and of the political leaders they counseled"- Dani Rodrik, Professor of International Political Economy, Harvard University

Across legal and economic disciplines, there have been many arguments regarding the benefits of free trade on developing countries. At the heart of such discussion is the controversial result of the Washington Consensus “describe[ed] a set of ten specific economic policy prescriptions that … constitute a "standard" reform package promoted for crisis-wracked developing countries by Washington D.C based institutions such as the International Monetary Fund (IMF), World Bank and the U.S. Treasury Department.” (Wikipedia).  According to Dani Rodrik (2006) the ten commandments of Washington consensus were:

1. Fiscal discipline
2. Reorientation of public expenditures
3. Tax reform
4. Financial liberalization
5. Unified and competitive exchange rates
6. Trade liberalization
7. Openness to FDI
8. Privatization
9. Deregulation
10.Secure Property Rights

In an assessment of the literature on the theory and empirical research relating to the benefits of trade liberalization, Deraniyagala and Fine (2001) found that much of the works were flawed, and concluded that the extent to which free trade benefits economic development is unknown. As the result, the past three decades since 1980s found many political economists arguing for a better approach toward trade liberalization in order to minimize its negative impacts of economic backwardness as in the case of Latin American or income distribution and regional polarization as the case of China.

Mexico is an example of a failed economy that followed the conventional wisdom of trade liberalization rigidly. Here, we find that more than one lesson could be learned. The country started its economic reform in 1985. Under tremendous pressure from the U.S. and the IMF, Mexico radically opened up its economy to the world market without sufficient institutional reform to accommodate the economic adjustment. “Import penetration increase from an average of 11.3 percent in 1080-85 to 14.5 in 1986-90. By 1990, import penetration had already reached 17 percent.” (Dornbusch, 1992). The sharp rise in imports, which was not accompanied by immediate gain in exports and foreign direct investments damaged Mexico’s domestic market and defy many infant industries. (Dornbusch, 1992). It is argued that Mexico, as well as Latin America as a whole, did worse than its pre-1980s period, when import substitution, protectionism and macroeconomics populism were enforced. (Rodrik 2007). As Rodrik asserts: “That the region did better with these discredited policies than it has been under open-market policies is a fact that is quite hard to digest within the conventional paradigm.” Such paradox reinforces the importance of a new approach to trade liberalization where country’s institutional and historical background are all too significant to be ignored and total trade liberalization alone may not generate the growth that its creator promised. Here, the role of the government and some forms of targeted protectionism at the beginning of the reform may be useful. South Korea and China offered excellent case studies for its usage of the new trade theory to their economic benefits.

Korea did not play by the orthodox wisdom (nor it has ever accepted the Washington Consensus to be therapeutic during the Asian crisis) when it started to integrate into the world economy. In contrast, the country successful economic reform involves two major key strategies- market orientation coupled with central planning in developing and protecting infant industries while strategically opened up other industries to the world market. During the reform, Korean government, indeed, acted as an entrepreneur to induce desirable private investments toward targeted industries. Korean trade liberalization, therefore, was a selective process instead of being driven solely by global marketization. Many major sectors were deliberately protected and excluded from trade. By using selective export strategy and heavy government intervention, Korea was able to develop many highly competitive manufacturing industries such as automobile, electrical appliances and shipping which respectively hold their own names in the world market.

China started its reform by first rejecting the conventional wisdom of global liberalization and calling its reform “Socialism with Chinese Characteristic.”  Unlike Latin America, Chinese government moved cautiously from central planning to gradual adoption of institutional and mechanism of market economy. Rodrik (2004) argues that China reformed its incentives in a “two-track manner” by grafting a market system on top of a central-planned system, rather than abandoning the latter altogether. The country also underplayed private property rights and relied instead on township-and-village enterprises owned by local governments as well as opened up to the world partially by establishing special economic zones. (Rodrik, 2004). Without following the Washington consensus blindly, the result of Chinese economic progress has been impressive. China’s GDP performance has been consistently stayed at 8-10% growth rate in the past 20 years. Here, China’s success challenged the conventional wisdom total trade liberalization and market orientation.

Despite how countries have been benefiting from trade, there exist multiple issues created by export growth strategy itself such as income inequality and regional polarization. According to Ocampo and Taylor (1998), globalization has intensified the income gap and income distribution especially in countries with comparative advantage in skill-intensive products. The authors offer examples of African economies whose comparative advantage in peasant production has worsened income distribution. Similarly, despite China’s conservative approach toward trade liberalization in accordance with government intervention, the country has been facing serious issues regarding income inequality and regional polarization. Prior to the eruption of the global financial crisis, labor migration had moved rapidly to export processing zone set up mostly along the West coast region of the countries. As the result, wage labor and prosperity appeared to increase drastically faster than the interior regions in which agriculture remained to be the dominant means of production and income creation. Here trade liberalization on its own cannot effectively solve social problems created by export-oriented strategy.

Don’t get me wrong. I am not against free trade or market liberalization. I am wholeheartedly against the IMF’s “one size fit all” formula and see the importance of a thorough understanding of country’s historical and political background before any economic policy is prescribed. Market failures are deeply embedded in economic system, which can’t plainly and ignorantly be corrected by Washington’s 10 commandments.

One may then ask: “So, what is the IMF doing these days given our ongoing financial crisis? Has there been a “new” Washington Consensus?” My next entry on this topic will follow.

*Bibliography with attached pdf files on hyperlinks

Deraniyagala, Sonali, and Fine, Ben, “New Trade Theory Versus Old Trade Policy: a Continuing Enigma,” Cambridge Journal of Economics, Vol. 25, pp. 809-825, November 2001.

Dornbusch, Rudiger, “The Case for Trade Liberalization in Developing Countries,” Journal of Economic Perspectives, Vol. 6, issue 1, pp. 69-85, 1992.

Ocampo, Jose and Taylor, Lance, “Trade Liberalization in Developing Economies: Modest Benefits but Problems with Productivity Growth, Macro Prices, and Income Distribution,” Economic Journal, Vol. 108, pp.1523-46, September 1998.

Rodrik, Dani, “How to Save Globalization From Its Cheerleaders,” KSG Working Paper No. RWP07-38, September 2007.

Rodrik, Dani, “Rethinking Economic Growth in Developing Countries,” John F. Kennedy School of Government, Harvard University, October 2004.

Rodrik, Dani, "Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank's Economic Growth in the 1990s: Learning from a Decade of Reform," Journal of Economic Literature, 44(4): 973–987, December 2006.

Saving the Dragon

In the process of learning about China’s economic development, I often wonder if it was the right policy for China to cut its domestic spending on public services to suppress its currency while exporting most of its capital surplus to the West. Even in pure economic term, shouldn't economic growth equivalent with improvement of social welfare and income distribution? The answer is obvious- there is no promise of such upgrading even in an economy that has been growing at a rapid rate like China. After the Asian financial crisis in the late 90s, the Chinese government together with the rest of the Asia Pacific decided to protect its economy by maintaining a huge amount of reserves in foreign currency and bonds which ended up injecting an enormous capital inflows toward the US and Europe market causing an unprecedented equity bubbles. Ironically, together they became the partial cause of the current global financial crisis.

Last Thursday, Premier Wen Jiabao announced that China expects to meet it goal of 8% growth rate this year despite their declining economic performance. What did he have in mind to secure such ambitious growth rate?

To supplement for the fast decline in exports, the government has allocated $585bn (almost equivalent to 3% GDP) toward domestic spending and investment for the next 2 years. A big portion of this stimulus package will be spent on improving China deteriorating infrastructure especially on the national railway network. “Many economists believe such heavy infrastructure investment will delay the much-needed shift in China’s growth model towards domestic consumption and services, which would be more sustainable in both economic and environmental terms,” said Geoff Dyer of the Financial Times. I have some disagreements with this opinion.

While improving infrastructure will not give Chinese economy a quick boost in domestic consumption, it is of crucial advantage for China long-term growth. On one hand, the plan will enhance long-term development and improvement in the public service by providing transporting access to the remote regions of the country. Investment in heavy infrastructure will also lay a firm foundation to boost domestic consumption in the long term once local economy picks up. Next, improved infrastructure could further attract more foreign direct investment into the interior regions of the country where labor is still abundantly cheap. This will in turn further help to bridge the gap of regional and social differentiation rooted deeply in China's experimenting economic strategy.

Besides, the stimulus bill doesn’t disregard the need to stimulate domestic consumption all together. Some parts of the $585bn are expected to add an additional 24% to education, 38% to health care and 171% in investment for low-income housing this year.

With increasing lay offs from the country’s export processing zones, slumping economy and the tradition of holding high saving rate, it is challenging for the Chinese government to boost domestic consumption in a short term. By allocating money to infrastructure, the government will at least mitigate a portion of workers to construction industry and offset some parts of the growing unemployed labor force. More importantly, improvements of infrastructure and public services are particularly vital for China’s sustainable and long-term development. With much criticism, a part of this stimulus plan appears to hold credible value.

*Image from the Financial Times

On Law and Facebook

With the rise of web-based social networking services such as Facebook and Myspace, the massive collection of personal information collected by these sites has brought up some interesting legal issues around the world. The most common legal issues surrounding sites like Facebook involve questions about 1) privacy issues, and 2) what is the role of a person's personal pages in legal proceedings?

Is the information actually private?

While much has been made about Facebook trying to change its terms of service, and then backing down in the face of a large grass-roots opposition by its users, there have been legal and media challenges as well. Back in May, 2008, for instance, The Canadian Law Clinic filed a complaint alleging that Facebook's terms of service violated Canada's privacy laws. Similarly, news outlets have been warning people about the lack of privacy on sites like Facebook and Myspace for a while now.

On a more personal level, the lack of privacy of the information on personal Facebook pages has affected a few of my friends. When I was still in law school, the school's career office sent out warnings to the students that employers had been looking at Facebook and Myspace pages:

Dear Students:

We know that blogs and social networking websites such as Friendster,
MySpace.com, and Facebook are getting to be a fact of life, but
employers have become quite savvy in their research of potential
candidates. You should operate under the assumption that anything on
the web written by or about you will be discovered by a potential
employer. All of this is information that can be factored into an
employer's hiring decision. Quite a number of employers have told us
that they are now using these sources as a device to screen
candidates.

A student who uses a racy picture or a byline of "Party with your
pants off!"* or who describes him/herself as a "semi-stoner"* might
face questions from a more traditional employer. Even comments from
friends posted to your site can factor into the equation. If you are
going to post, we encourage you to keep your material as "clean" as
possible and consider using any privacy protection that the site
offers.

*We found this material in a very quick search on MySpace.

It turned out that a few students had even had their employment offers from firms rescinded due to inappropriate information on their social networking pages.  Always looking out for its student, my law school proceeded to actually review every student's pages and then gave specific warnings to anybody who posted anything "objectionable."

It appears that feelings about privacy are still in the process of adapting to the enormous increase in relatively available personal information posted on the web, and it will be interesting to see how this all shakes out in the future.

How can the information on social networking sites be used in legal proceedings?

A less "sexy" issue, but one that is increasingly relevant in today's world, are questions about the role of the information contained on social networking sites. There have recently been a number of cases testing the limits of using personal information as evidence and whether the contents of social networking pages are discoverable.

For example, in TV v. Union Township Board of Education, the defendant in the emotional distress case tried to get the court to order the plaintiff to give the defendant access to the plaintiff's Myspace and Facebook pages, with the expectation that comments posted on the pages would show that the plaintiff was not emotionally distressed. The Union County, New Jersey Superior Court Judge made a preliminary ruling that personal social networking pages are only discoverable if there is a particularized showing that the information is relevant, due to privacy concerns.

On the other hand, the Ontario, Canada case Leduc v. Roman, goes the other way and finds the contents of Facebook pages discoverable. This is because:

a court can infer from the social networking purpose of Facebook, and the applications it offers to users such as the posting of photographs, that users intend to take advantage of Facebook’s applications to make personal information available to others.  From the general evidence about Facebook filed on this motion it is clear that Facebook is not used as a means by which account holders carry on monologues with themselves; it is a device by which users share with others information about who they are, what they like, what they do, and where they go, in varying degrees of detail.  Facebook profiles are not designed to function as diaries; they enable users to construct personal networks or communities of “friends” with whom they can share information about themselves, and on which “friends” can post information about the user.

These first few cases are serving as test cases for the inevitable adaptation of the law to the times, and the law WILL adapt. Witness that lawyers in Canberra, Australia can now serve process on defendants via Facebook. I guess the steady march of progress continues on.