Illegal markets have been around forever. While businesses in the legal market can rely on the state to provide protection, actors in illegal markets have to develop other strategies to maintain order, as they cannot rely on the state when their business transactions go wrong. These strategies have often been regarded as extra-legal governance. Scholars have long examined this phenomenon in illegal markets, and various mechanisms have been identified that ensure order in illegal markets. Some may rely on the actors’ good reputation to reduce risks, while others try to make transactions repeatable to reduce the temptation of predatory behaviour. Violence has often been adopted to deter and punish those who break the order in illegal markets; purchasing protection from a third party, such as the mafia and thugs-for-hire, is also a common practice.
However, the nature of illegal markets varies drastically across different social, economic, political and cultural contexts, and so do extra-legal governance mechanisms. The rapid social change in China over the past decades has provided a fertile ground to study the extra-legal governance of illegal markets. A solid grasp of the issue may not only provide a better understanding of the status quo of illegal markets in China, but it also contributes to a comparative perspective on extra-legal governance globally. Peng Wang and Wanlin Lin’s book, Extralegal Governance: The Social Order of Illegal Markets in China, is a timely contribution to the field.
By studying four types of illegal business – street vending, small-property-rights housing (SPRH, xiaochanquan fang), corrupt exchanges and online loan sharking – Wang and Lin provide a rich description of the rise of these illegal markets in China and of how these activities are regulated to reduce risks either from predatory partners or from state intervention. The book has many strengths, but two should be highlighted. First, the data are very rich and highly important. The authors made tremendous efforts to collect hundreds of first-hand interviews across four different cases. Conducting interviews on sensitive topics in China is challenging, especially over the past decade. At some point, the authors were even warned by national security officials about their research and advised to “focus on topics that contribute to society and safeguard the government’s image” (p. 55). The authors’ dedication in conducting research and seeking knowledge in this environment should be acknowledged.
Second, the diversity of cases provides a rare opportunity to understand the complexity of extra-legal governance. Street vendors may follow well-recognized, unwritten rules for using public spaces, form mutual-help teams to share resources and information, and even purchase protection from the authorities. SPRH buyers may rely on codified documents, contract-signing rituals, online WeChat groups and village committees to fence off dishonest sellers, while SPRH owners may seek political patronage and use collective resistance to prevent government intervention. Participants in buying and selling government positions may use past reputation and intermediaries to select reliable partners. Online loan sharks may use compromised information (such as nude photos and pornographic videos of female clients) and relational repression to send harassment messages to borrowers’ social contacts (particularly family members). Studying the techniques of extra-legal governance not only enriches our knowledge about the nature of illegal markets but is also a prerequisite for any possible effective policy intervention.
The book provides an opportunity to explore several important questions in extra-legal governance. First, illegal markets cover a wide spectrum. Some are socially accepted, such as street vending and SPRH, while others are morally unacceptable, such as online loan sharks or corruption involving the buying and selling of government positions. The former, socially accepted markets, could be regarded as a grey market, and the latter, morally unacceptable markets, as the “ideal” type of illegal market. The level of illegality differs between these markets, and so do the governance mechanisms. For instance, in grey markets, participants enjoy moral and social legitimacy when dealing with government intervention, as they serve important social functions. Backed by this moral capital, they may sometimes even resort to collective resistance. A comparative examination of extra-legal governance mechanisms between grey markets and “ideal” illegal markets would enhance our understanding of the conditions under which extra-legal governance is employed.
Second, an important area to explore is how legal governance is misappropriated as extra-legal governance by participants in illegal markets. In the case of SPRH, lawyers and notary officers were often invited to witness and facilitate transactions. In the case of online loan sharks, lawyers were employed as crime facilitators to manipulate contracts and exploit victims (p. 158). Existing literature on extra-legal governance has often touched on this phenomenon but has yet to formally theorize it as an equivalent to traditional mechanisms such as reputation, repeated interaction, collateral, violence and third-party protection.
Third, how social media has transformed and reinvented traditional extra-legal governance can be further explored. For instance, in the case of online loan sharks, victims often fell prey to scams via social media. They were required to provide compromised information via social media, and cyber-violence against victims was also carried out through social media. In China, while street crimes have been declining, cyber-fraud has become the most serious concern. The book touches on an important topic and can serve as an opportunity to invite future studies to examine the continuity, transformation and invention of mechanisms of extra-legal governance in China.
Overall, this volume makes a great contribution to the study of extra-legal governance in China. It will be of interest to readers in criminology, sociology, economics, law and China studies.
