Relational Practices and the Marginalization of Law: Informal Financial Practices of Small Businesses in Taiwan

Abstract

This article looks at one component of Taiwan's development experience, the informal financing techniques used by small businesses, to clarify the interaction between the formal Republic of China (ROC) legal system and the network structure of Taiwanese society. The ROC legal system has supported the economic development process direcdy by regulating economic activity, and indirectly by facilitating the networks of relationships that also regulate economic activity. The relational structure of traditional, rural Chinese society has survived in a modified form in modern Taiwan, and this modern form selectively blends elements of the modern legal system, networks of relationships, and the enforcement services of organized crime. Ideas such as “legal centralism” and “legal pluralism” fail to capture the dynamic of the relationship between the ROC legal system and Taiwanese society, so the idea of “marginalization of law” is offered as a better description.

Accountability in the East Asian Economic Miracle, Crisis and Recovery

“…Outside those frontline states, both Japanese and Chinese legal systems still differed (Mattei 1997), while Offshore Chinese family business networks right across the region had customarily preferred Type 3 accountability (Winn 1994). With its much cited 'shame culture', Japan had seen more Type 4 'name and shame' accountability exacted over its aberrant bank and finance officials following the 'bubble' before.…”

Judicial Reform and Economic Development: A Survey of the Issues

“…Where such incentives are missing, alternative ways of fostering the growth of credit reporting agencies should be considered. In Taiwan (China), the government's check clearinghouse serves as a substitute for a private credit bureau, charging a small fee for information about individuals who have bounced checks (Winn 1994).…”

Legal Institutions and Informal Networks

“…Nonetheless, in societies without welldeveloped governmental institutions for the enforcement of contracts, cooperative economic interactions still take place; informal networks make such cooperation possible (Granovetter, 1973;Moore, 1978;Landa, 1981;Weiss, 1987;Benson, 1990;Ellickson, 1991;Bernstein, 1992;Greif, 1993;Winn, 1994). Examples of such networks include the club-like relationship among Chinese rubber merchants in Malaysia (Landa, 1981), the informal economy of Peruvian street vendors (De Soto, 1989), and the reputationbased management of agency relationships established by medieval Jewish merchants in the Mediterranean (Greif, 1993).…”

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