In Stateless Commerce, Barak Richman uses the colorful case study of the diamond industry to explore how ethnic trading networks operate and why they persist in the twenty-first century. How, for example, does the 47th Street diamond district in midtown Manhattan"'surrounded by skyscrapers and sophisticated financial institutions" continue to thrive as an ethnic marketplace that operates like a traditional bazaar? Conventional models of economic and technological progress suggest that such primitive commercial networks would be displaced by new trading paradigms, yet in the heart of New York City the old world persists. Richman’s explanation is deceptively simple. Far from being an anachronism, 47th Street’s ethnic enclave is an adaptive response to the unique pressures of the diamond industry. Ethnic trading networks survive because they better fulfill many functions usually performed by state institutions. While the modern world rests heavily on lawyers, courts, and state coercion, ethnic merchants regularly sell goods and services by relying solely on familiarity, trust, and community enforcement" what economists call “relational exchange.” These commercial networks insulate themselves from the outside world because the outside world cannot provide those assurances. Extending the framework of transactional cost and organizational economics, Stateless Commerce draws on rare insider interviews to explain why personal exchange succeeds, even as most global trade succumbs to the forces of modernization, and what it reveals about the limitations of the modern state in governing the economy.
Most industries have evolved from the reliance on ethnic trading networks that once dominated, including grain, cotton and gold marketplaces. However, in the diamond and gem industries these networks continue to dominate and thrive to date.
Once the domain of a handful of Jewish families in Tel Aviv, New York City, Antwerp and London, diamond trading is increasingly challenged by two communities based in Gujarat, India. Palanpuri and Kathiawadi communities have taken the lion share of these industries, and virtually every diamond sold in the U.S. has passed through Surat or Mumbai in India.
In Stateless Commerce, author and professor Barak D. Richman explores how ethnic trading networks function as well as why they still persist in the diamond industry. Professor Richman reviews the evolution of diamond trading networks in the last three decades, offering insights based on field work on three continents. The book sheds light on how these networks fulfil the role that traditional contracts and court system have failed to play when it comes to governance and enforcing the terms of deals.
Barak Richman is the Edgar P. and Elizabeth C. Bartlett Professor of Law
Professor of Business Administration at Duke University. A native of Philadelphia, PA, he has taught at Duke University since 2003. He has studied the diamond industry for over two decades and has written nearly a dozen articles on the wildly fascinating world of the diamantaires on 47th Street in New York and across the world.
"Through the eternally fascinating lens of the diamond trade, Richman explores the potential, and the shortcomings, of stateless commerce. A solid synthesis and weighty contribution."