At a workshop on Law and Finance in Rising Powers, held at the Centre for Business Research, University of Cambridge, Boya Wang, Research Fellow at the Centre for Business Research, presented his research on corporate governance in China. In this podcast interview, he summarizes his findings on corporate governance and institutional factors of firm valuation during
the financial crisis of cross provincial data of Chinese companies.
Wang said: “I have done some field work trips in China interviewing business people and that is where my business research hypothesis developed from. There is a divergence between the central and local government, their roles, and their incentives in corporate governance practices. The western media generally hold a monolithic view of the Chinese state as a unified entity, but actually it is not. Marketization and political reform have led to a divergence of interests across the local bureaucracies.
“The financial crisis provides the ideal test ground to test my hypothesis. During the financial crisis Chinese business was suffering from one of the worst economic situations and in this case the appropriation incentives will be strong. I think that this will expose many existing and neglected weaknesses in the corporate governance system.
“The political reforms and crack- down on corruption that is happening now are a reflection of what is happening in the economic sector and where we can see the rise of large non-state firms such as Alibaba and Tencent. These private businesses constitute a new constituency. For the Chinese party state, this will counter balance the conservative or entrenched interests and their power. I don’t think China will morph into the political situation that we find now in Russia.”
Listen to the full interview with Boya Wang
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
Saturday, 30 May 2015
Saturday, 16 May 2015
Changing Labour Regulations and Labour Standards in China: interview with Khalid Nadvi
At a workshop on Law and Finance in Rising Powers, held at the Centre for Business Research, University of Cambridge, Khalid Nadvi, Reader in International Development University of Manchester, and the
research programme co-ordinator for the ESRCs Rising Powers and
Inter-dependent futures programme,
presented his work on labour standards in China. This podcast interview gives an overview.
Nadvi said: “Our paper has been looking at how our changing labour regulations are impacting on labour standards in China. The paper that we presented is an introduction to a special issue of the International Labour Review which is on this theme coming out in December 2014.
What we are trying to look at is how does the rise in the labour regulation that we have seen in China in recent years impact on questions around labour standards working around labour conditions and labour rights.
I think things are changing and what we are beginning to see in those changes is that increasingly there is an improvement in real wages. There has been a lot of labour activism and in fact grass roots activism with wild cat strikes and so on, and one of the consequences of that is that there has been a rise in real wages in much of the region along the coastal belt and pearl-river delta and the province of Guangdong. But the nature of the labour regime in China and the working conditions in China is varied and so if you move further inland to inner provinces you might still see very poor conditions and very harsh working environments.
We need to do more analysis of ways in which national, regional and local levels of government engage with this agenda. Looking at labour regulations and the law that has been passed is not going to be enough we need to see how they get implemented and what our evidence is pointing to is that the nature of that implementation varies at the local level. There are reasons why those variations take place.
When you look at the BRICS, Brazil is the most interesting it is a fascinating story of the ways in which regulation around law, around finance, around labour standards, have really moved ahead. Brazil is interesting and is almost an outlier. China falls somewhere in the middle and Russia is at the other extreme, where we don’t see very strong legal institutions beginning to take effect and so therefore we see all sorts of issues around corruption.”
Listen to the full interview with Khalid Nadvi
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
Nadvi said: “Our paper has been looking at how our changing labour regulations are impacting on labour standards in China. The paper that we presented is an introduction to a special issue of the International Labour Review which is on this theme coming out in December 2014.
What we are trying to look at is how does the rise in the labour regulation that we have seen in China in recent years impact on questions around labour standards working around labour conditions and labour rights.
I think things are changing and what we are beginning to see in those changes is that increasingly there is an improvement in real wages. There has been a lot of labour activism and in fact grass roots activism with wild cat strikes and so on, and one of the consequences of that is that there has been a rise in real wages in much of the region along the coastal belt and pearl-river delta and the province of Guangdong. But the nature of the labour regime in China and the working conditions in China is varied and so if you move further inland to inner provinces you might still see very poor conditions and very harsh working environments.
We need to do more analysis of ways in which national, regional and local levels of government engage with this agenda. Looking at labour regulations and the law that has been passed is not going to be enough we need to see how they get implemented and what our evidence is pointing to is that the nature of that implementation varies at the local level. There are reasons why those variations take place.
When you look at the BRICS, Brazil is the most interesting it is a fascinating story of the ways in which regulation around law, around finance, around labour standards, have really moved ahead. Brazil is interesting and is almost an outlier. China falls somewhere in the middle and Russia is at the other extreme, where we don’t see very strong legal institutions beginning to take effect and so therefore we see all sorts of issues around corruption.”
Listen to the full interview with Khalid Nadvi
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
Saturday, 9 May 2015
Law and finance in Russia: interview with Rilka Dragneva-Lewers, Larry King, and Sveta Borodina
At a workshop on Law and Finance in Rising Powers, held at the Centre for Business Research, University of Cambridge, Rilka Dragneva-Lewers (University of Birmingham), Larry King (University of Cambridge), and Sveta Borodina (University of Cambridge) presented their work on law and finance in Russia. In this podcast interview, they summarize their findings.
Rilka Dragneva-Lewers presented on the EUs influence on Company Law Reform in the Eastern Neighbourhood:
“My main area of interest is the Ukraine, which stands out amongst the rest of the eastern European states in that it was probably the last country to reform its law on the books and it is of course in a state of very serious turmoil at the moment.
“The main approach of the EU has been to insist on legal approximation so it has pursued both integration and stimulating economic development through reform of the laws. But as we have seen this is definitely not enough and this external pressure has not been a critical factor, for legal change. Businesses manage to protect their property rights through various extra-legal ways through access to political power for example and protection.
“The difficultly with large businesses in Ukraine is that there are often run by holding companies and they are owned by oligarchs. This has meant that there has been a very strong business effort to keep transparency low and maintain the privacy of dealings. Transparency remains a critical issue in business dealings.
“At the EU level the economics is quite complex. The EU despite having had a very strong response to Russia’s policy in Ukraine with sanctions still suffers from a lot of disagreement with its member states because Russia’s approach of subsequently imposing its own sanctions against the EU has been divisive.”
Larry King, Professor of Sociology and Political Economy University of Cambridge spoke about 'The Governance Grenade, the Effect of Mass privatisation on Corporate Governance in Russia':
“There are many different ways to privatise and we looked whether how you privatise makes a big difference, for example how do you allow state owned enterprises to compete with other private firms? How do you allow domestic owners to emerge which then go on to privatise firms and which will probably have much better outcomes? This happened in Poland and much of Central and Eastern Europe, and here there is a big role for foreign investors. However, when you try to privatise everything at once, without waiting for domestic owners to emerge, or without inviting in competitive auctions involving foreigners, you have to embark on artificial privatisation.
“Rather than that being a corrupt process in itself, my argument was that it created corruption. It led to firm failure. Creating owners who had no capital, who had no expertise, who had no connections, and who couldn’t monitor firm insiders, created a perfect storm for firms to fail. Once they started to fail it created a fiscal crisis for the state as nobody was paying taxes.
“This led to a situation where firms were retreating from the market as state bureaucrats, who were already demoralised from the transition and were not being paid, were now ripe for corruption. What emerged in many of these countries, Russia or Ukraine, is a system of social property relations that were based on client type ties between political officers and captured businessmen who were what we call Oligarchs.
“Clearly these systems needed to change but Russia for example could have done what Poland did and it could have protected its domestic market and allowed competition to drive enterprise restructuring and reforms of the state but they tried to do everything at once and that led to disaster.
“In summary, you can’t really describe these countries as in transition from socialism to a market society, what you have is a new type of market society developing, one in which the relative separation of the political and the economic spheres is different. There is much less separation and to be in big business you also have to be in a political community in these countries.”
Sveta Borodina outlines her findings on law and finance in Russia:
“In Russia people tend to do business with their friends and acquaintances and there is also the concept of reputation so people know each other. They rely on law to formalise what they have agreed informally previously. Trust used to be the way of making deals but nowadays lawyers are getting involved at earlier stages and they look at the letter of the law before the signatures are put on the paper.
“People are starting to understand that if you lead your business according to the rules you are more secure you are safer and you will have more chances of keeping your business in case there is an attack from a hostile acquirer.
“I was very pleased to find that the micro side of the business is improving and that it has improved considerably and the technocrats are moving the country in the right direction but the trouble is that the political set up is in conflict with this forward movement. “
Listen to the full interview with Rilka Dragneva-Lewers, Larry King and Sveta Borodina
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
Rilka Dragneva-Lewers presented on the EUs influence on Company Law Reform in the Eastern Neighbourhood:
“My main area of interest is the Ukraine, which stands out amongst the rest of the eastern European states in that it was probably the last country to reform its law on the books and it is of course in a state of very serious turmoil at the moment.
“The main approach of the EU has been to insist on legal approximation so it has pursued both integration and stimulating economic development through reform of the laws. But as we have seen this is definitely not enough and this external pressure has not been a critical factor, for legal change. Businesses manage to protect their property rights through various extra-legal ways through access to political power for example and protection.
“The difficultly with large businesses in Ukraine is that there are often run by holding companies and they are owned by oligarchs. This has meant that there has been a very strong business effort to keep transparency low and maintain the privacy of dealings. Transparency remains a critical issue in business dealings.
“At the EU level the economics is quite complex. The EU despite having had a very strong response to Russia’s policy in Ukraine with sanctions still suffers from a lot of disagreement with its member states because Russia’s approach of subsequently imposing its own sanctions against the EU has been divisive.”
Larry King, Professor of Sociology and Political Economy University of Cambridge spoke about 'The Governance Grenade, the Effect of Mass privatisation on Corporate Governance in Russia':
“There are many different ways to privatise and we looked whether how you privatise makes a big difference, for example how do you allow state owned enterprises to compete with other private firms? How do you allow domestic owners to emerge which then go on to privatise firms and which will probably have much better outcomes? This happened in Poland and much of Central and Eastern Europe, and here there is a big role for foreign investors. However, when you try to privatise everything at once, without waiting for domestic owners to emerge, or without inviting in competitive auctions involving foreigners, you have to embark on artificial privatisation.
“Rather than that being a corrupt process in itself, my argument was that it created corruption. It led to firm failure. Creating owners who had no capital, who had no expertise, who had no connections, and who couldn’t monitor firm insiders, created a perfect storm for firms to fail. Once they started to fail it created a fiscal crisis for the state as nobody was paying taxes.
“This led to a situation where firms were retreating from the market as state bureaucrats, who were already demoralised from the transition and were not being paid, were now ripe for corruption. What emerged in many of these countries, Russia or Ukraine, is a system of social property relations that were based on client type ties between political officers and captured businessmen who were what we call Oligarchs.
“Clearly these systems needed to change but Russia for example could have done what Poland did and it could have protected its domestic market and allowed competition to drive enterprise restructuring and reforms of the state but they tried to do everything at once and that led to disaster.
“In summary, you can’t really describe these countries as in transition from socialism to a market society, what you have is a new type of market society developing, one in which the relative separation of the political and the economic spheres is different. There is much less separation and to be in big business you also have to be in a political community in these countries.”
Sveta Borodina outlines her findings on law and finance in Russia:
“In Russia people tend to do business with their friends and acquaintances and there is also the concept of reputation so people know each other. They rely on law to formalise what they have agreed informally previously. Trust used to be the way of making deals but nowadays lawyers are getting involved at earlier stages and they look at the letter of the law before the signatures are put on the paper.
“People are starting to understand that if you lead your business according to the rules you are more secure you are safer and you will have more chances of keeping your business in case there is an attack from a hostile acquirer.
“I was very pleased to find that the micro side of the business is improving and that it has improved considerably and the technocrats are moving the country in the right direction but the trouble is that the political set up is in conflict with this forward movement. “
Listen to the full interview with Rilka Dragneva-Lewers, Larry King and Sveta Borodina
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
Sunday, 19 April 2015
China-Russia cross-border trade: podcast with Caroline Humphrey and Sayana Namsaraeva
At a workshop on Law and Finance in Rising Powers, held at the Centre for Business Research, University of Cambridge, Caroline Humphrey, Emeritus Professor of Social Anthropology, University of Cambridge, and Sayana Namsaraeva, Research Associate Department of Anthropology, University of Cambridge, presented their insights into trade across the Chinese-Russian border. In a podcast interview following the presentation, they give an overview of their research findings.
Summarising her research on 'Cross-Border E-trade and is Vicissitudes', Humphrey said:
“My paper was called e-trade between China and Russia and it was about the objective facts of how e-trade is taking place these days. One the one hand it is greatly encouraged and the relationships between China and Russia are getting much closer and this is a lovely high tech thing that could develop but on the other, in practice it has all sorts of problems.
“The problem is the big Chinese internet firms don’t accept payment from Russian banks and cards, and also the cheapest and best sites are in the Chinese language so they need interpreters to find out what the information is on those sites. They use mediators, middle men firms that have mushroomed up in Russia, and that helps them get access to the goods but it means that it is much more expensive for them and rather slow and cumbersome.
“I think there are some perils of trading. There are perils that the goods may be incorrectly described or that they arrive in the wrong quantity, that kind of thing, but there isn’t much come-back for the Russian consumer, the legal situation is not good at all. Deliveries from China to Russia have to go through several complicated ways of crossing the border and they have to pay big customs duties.
“You can send goods back if they are absolutely wrong in relation to what you ordered but if it is a minor issue, or it doesn’t look like it did in the catalogue, you certainly couldn’t. There is a certain amount of muddle, particularly in the Russian postal service that is coping with a gigantic numbers of parcels from all over the place, and things do often seem to get lost in there. Bribery is absolutely very common indeed particularly when crossing the borders.
“At the moment it is a punt if you want to buy something online and whether and how fast that will change is very difficult to say. But it is also exciting, because with the internet you have access to this huge range of goods and almost all of it produced in China.”
Namsaraeva described her work on 'The Effect of Exchange Rate Changes Post-Ukraine on Trans-border Trade between China and Russia':
“My research is on women border traders who do regular shuttle trade between Russia and China to buy things cheap and to sell dear on the Russian side.
“I think this kind of shuttle trade is very important for the local economies both for Russia and for China but at the same time, the border economy exists in the shadow economy of both countries.
“Border traders work in the professions in the week, they may be nurses, doctors, teachers but at the weekend they go to China and become shuttle traders to resell it. This is how they survive and how they support their families.
“The younger generation can go online and do this click and delivery thing but the elder generation that is not familiar with the internet still prefer to go to the real shop and touch and feel the real thing.
“Until recently border trade was also associated with tourism from Asia because as well as buying things they also spent quite a lot of time enjoying life in China, going shopping, eating out, visiting parks and saloons, and learning more about Chinese culture.
“Now there is a growing economic disparity between Russia and China, because once the Soviet Union was a very powerful regional super power State, but recently with China’s economic growth, the power balance has changed, and Russia has moved from being an older brother to the position of the younger sister.
“Nowadays people are really in an uncertain financial situation and with the devaluation of the Ruble they can’t plan their futures and because of this 40 per cent devaluation crossing border points are half empty. People need to save money in order to survive.“
Listen to the full interview with Caroline Humphrey and Sayana Namsaraeva
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
Summarising her research on 'Cross-Border E-trade and is Vicissitudes', Humphrey said:
“My paper was called e-trade between China and Russia and it was about the objective facts of how e-trade is taking place these days. One the one hand it is greatly encouraged and the relationships between China and Russia are getting much closer and this is a lovely high tech thing that could develop but on the other, in practice it has all sorts of problems.
“The problem is the big Chinese internet firms don’t accept payment from Russian banks and cards, and also the cheapest and best sites are in the Chinese language so they need interpreters to find out what the information is on those sites. They use mediators, middle men firms that have mushroomed up in Russia, and that helps them get access to the goods but it means that it is much more expensive for them and rather slow and cumbersome.
“I think there are some perils of trading. There are perils that the goods may be incorrectly described or that they arrive in the wrong quantity, that kind of thing, but there isn’t much come-back for the Russian consumer, the legal situation is not good at all. Deliveries from China to Russia have to go through several complicated ways of crossing the border and they have to pay big customs duties.
“You can send goods back if they are absolutely wrong in relation to what you ordered but if it is a minor issue, or it doesn’t look like it did in the catalogue, you certainly couldn’t. There is a certain amount of muddle, particularly in the Russian postal service that is coping with a gigantic numbers of parcels from all over the place, and things do often seem to get lost in there. Bribery is absolutely very common indeed particularly when crossing the borders.
“At the moment it is a punt if you want to buy something online and whether and how fast that will change is very difficult to say. But it is also exciting, because with the internet you have access to this huge range of goods and almost all of it produced in China.”
Namsaraeva described her work on 'The Effect of Exchange Rate Changes Post-Ukraine on Trans-border Trade between China and Russia':
“My research is on women border traders who do regular shuttle trade between Russia and China to buy things cheap and to sell dear on the Russian side.
“I think this kind of shuttle trade is very important for the local economies both for Russia and for China but at the same time, the border economy exists in the shadow economy of both countries.
“Border traders work in the professions in the week, they may be nurses, doctors, teachers but at the weekend they go to China and become shuttle traders to resell it. This is how they survive and how they support their families.
“The younger generation can go online and do this click and delivery thing but the elder generation that is not familiar with the internet still prefer to go to the real shop and touch and feel the real thing.
“Until recently border trade was also associated with tourism from Asia because as well as buying things they also spent quite a lot of time enjoying life in China, going shopping, eating out, visiting parks and saloons, and learning more about Chinese culture.
“Now there is a growing economic disparity between Russia and China, because once the Soviet Union was a very powerful regional super power State, but recently with China’s economic growth, the power balance has changed, and Russia has moved from being an older brother to the position of the younger sister.
“Nowadays people are really in an uncertain financial situation and with the devaluation of the Ruble they can’t plan their futures and because of this 40 per cent devaluation crossing border points are half empty. People need to save money in order to survive.“
Listen to the full interview with Caroline Humphrey and Sayana Namsaraeva
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
Monday, 13 April 2015
Shareholder rights in Rising Powers: podcast interview with Gregory James and Mathias Siems
At a workshop on Law and Finance in Rising Powers, held at the Centre for Business Research, University of Cambridge, Gregory James, Senior Lecturer in Economics at Loughborough University, and Mathias Siems, Professor of Commercial Law at Durham University, presented work on shareholder rights in developed and developing countries. In a podcast interview following the presentation, they summarize their findings.
James said: “We looked at 30 Countries, both developed and developing economies, and the convergence of legal rights in these economies. Does convergence in company law lead to some convergence in legal systems, towards best practice?
“Interestingly, we found that in countries where you wouldn’t really expect it like Russia and China shareholder protection is good, at least on the books, compared to somewhere like Germany.
“We are using the CBR shareholder protection index and other research methods, and the interesting finding we have from the legal data was that all the countries were keen on improvement for shareholder protection. There seems to be a global trend in terms of fads and fashions for global rules protecting shareholders – that is interesting from a political economy perspective. We also found that while similar legal rules may flow across borders the operation of those rules is often quite different in practice. “
Siems said: “Rather than shareholder protection always being a good thing, it could be the other way round, it could be that legal systems that are less protective maybe advantageous - because you don’t need to be bothered by too much red tape. We could ask, do we really need to protect shareholders to the maximum? Is shareholder protection always good or may it be counter-productive in some circumstances?
“We don’t have a global law maker, we don’t have the UN regulating corporate governance or company law so we have to look to country level. Do we need global rules or will we see national standards becoming more uniform?”
Listen to the full interview with Gregory James and Mathias Siems
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
James said: “We looked at 30 Countries, both developed and developing economies, and the convergence of legal rights in these economies. Does convergence in company law lead to some convergence in legal systems, towards best practice?
“Interestingly, we found that in countries where you wouldn’t really expect it like Russia and China shareholder protection is good, at least on the books, compared to somewhere like Germany.
“We are using the CBR shareholder protection index and other research methods, and the interesting finding we have from the legal data was that all the countries were keen on improvement for shareholder protection. There seems to be a global trend in terms of fads and fashions for global rules protecting shareholders – that is interesting from a political economy perspective. We also found that while similar legal rules may flow across borders the operation of those rules is often quite different in practice. “
Siems said: “Rather than shareholder protection always being a good thing, it could be the other way round, it could be that legal systems that are less protective maybe advantageous - because you don’t need to be bothered by too much red tape. We could ask, do we really need to protect shareholders to the maximum? Is shareholder protection always good or may it be counter-productive in some circumstances?
“We don’t have a global law maker, we don’t have the UN regulating corporate governance or company law so we have to look to country level. Do we need global rules or will we see national standards becoming more uniform?”
Listen to the full interview with Gregory James and Mathias Siems
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
Tuesday, 31 March 2015
Podcast interview with Simon Deakin: Law and Finance in Rising Powers
In a podcast interview, Simon Deakin, Director of the Centre for Business Research (CBR), and Professor of Law at the University of Cambridge, has said that he is optimistic that the developing economies in the BRICS will find new ways to facilitate how business is conducted and will over time reduce the role of corruption in their economies.
Following a CBR, University of Cambridge, Workshop on Law and Finance in Rising Powers, Professor Deakin said:
“I am trying to be both optimistic and realistic. It is of tremendous importance not just for the BRICS but for the West that we do not see a race to the bottom. In the West we have a social norm that we don’t bribe officials, but in countries where there is a social norm to bribe an official to get somewhere, that is a very different world. We take for granted that by and large there is a very low level of corruption in our society and when we see corruption in the west we try and stop it. We must continue to take that line and we must encourage campaigns against corruption in all relevant contexts. However, we have to realise that corruption arises where there isn’t a functioning rule of law, so we can’t afford to preach to the BRICS; we need to help them to establish the appropriate laws and processes.”
“We have to take the view that transitioning from a clan based system and an authoritarian based system, such as China and Russia had, to one based on democracy and the rule of law, is a very difficult process and admit that we don’t fully understand how that process works. We have great models which explain how the free market works but this is where it is already established, where there is already a rule of law. We don’t yet have a convincing model of moving from one system to another. We need social science to help inform us in our policy making.”
Listen to the full interview with Simon Deakin
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
Following a CBR, University of Cambridge, Workshop on Law and Finance in Rising Powers, Professor Deakin said:
“I am trying to be both optimistic and realistic. It is of tremendous importance not just for the BRICS but for the West that we do not see a race to the bottom. In the West we have a social norm that we don’t bribe officials, but in countries where there is a social norm to bribe an official to get somewhere, that is a very different world. We take for granted that by and large there is a very low level of corruption in our society and when we see corruption in the west we try and stop it. We must continue to take that line and we must encourage campaigns against corruption in all relevant contexts. However, we have to realise that corruption arises where there isn’t a functioning rule of law, so we can’t afford to preach to the BRICS; we need to help them to establish the appropriate laws and processes.”
“We have to take the view that transitioning from a clan based system and an authoritarian based system, such as China and Russia had, to one based on democracy and the rule of law, is a very difficult process and admit that we don’t fully understand how that process works. We have great models which explain how the free market works but this is where it is already established, where there is already a rule of law. We don’t yet have a convincing model of moving from one system to another. We need social science to help inform us in our policy making.”
Listen to the full interview with Simon Deakin
More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014
Tuesday, 24 March 2015
Consumer choice, governance and the global stem cell therapy market
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| Image by dream designs, FreeDigitalPhotos.net |
Existing modes of regulation in stem cell therapy innovation offer little recognition of the role of health consumer choice in the governance of this emerging global market. Instead, there is a strong, and familiar, emphasis on the roles of scientists, clinicians and bioethicists in determining what regulation should be provided, when and by whom. For the most part it is assumed that health consumers (patients) should be protected from themselves through regulation that renders consumer choice redundant because the apparatus of the state or professions has ensured on their behalf that available treatments are safe and efficacious. Their best interests are served, it is maintained, by their continuing faith in their regulatory guardians. This article argues that such an approach to regulation is outmoded and inefficient because it fails to address the governance needs of motivated, mobile consumers in the global stem cell therapy market. Such consumers require a balance between information that facilitates their ability to make rational choices and the confidence that provider regulation is fit for their purpose.
The dominant orthodox approach to governance works so long as the authority of science, medicine and, to a lesser extent, bioethics is able to control the operation of the health care market by convincing consumers that their choices of treatments should be what science, medicine and bioethics say they should be. The logic of this interpretation of the market is that consumer demand for stem cell therapies should adjust to the available supply generated by the orthodox scientific model of stem cell innovation characterised by the sequence of basic research, clinical experimentation, product development, clinical trials, product approval and clinical application, regardless of the timescale involved. In the case of stem cell therapies, this approach to market governance has clearly failed. The rapid and continuing expansion of a global market of innovative treatments measured in terms of hundreds of clinics treating thousands of patients has occurred independently of the very small stem cell therapy market supplied by the outputs of the orthodox model. Alternative, practice based models of stem cell innovation have developed that respond to consumer demand much more readily than the orthodox model. This poses demand side governance challenges which need to be recognised and addressed.
Much of the expansion in the supply of stem cell therapies has taken place in non-Western countries such as China and India where the assumptions of the orthodox model of stem cell innovation are less comprehensively embodied in regulatory arrangements and there is a greater tolerance of clinician led medical innovation. Whereas in Europe medical innovation supplies therapies for single or small groups of patients in what is presented, in the case of the Hospital Exemption at least, as a non-routine exercise, in non-Western countries this model routinely provides therapies for large populations of patients (see e.g. NutechMediworld, Zhongyuan Union Stem Cell, Celltex and Unique Cell Treatment Clinic). In other words, medical innovation and consumer demand responsiveness are regarded as normal rather than exceptional. In an interesting variant, some companies have combined elements of medical innovation and scientific innovation into a single business model. Here, profits from the stem cell medical innovation treatments for one set of diseases are re-invested in the funding of registered clinical trials for stem cell scientific innovation (orthodox model) with regard to a different set of diseases (e.g. Beike Biotechnology, Chaitanya Stem Cell Therapy Centre).
Health consumer demand for stem cell therapies is not easily diverted by the advice of leading authorities. It is not, as is frequently implied, merely a matter of toning down the hype and consumer demand ‘pull’ generated by the competing optimistic visions of the factions of stem cell science and stem cell clinics; there is also the very considerable demand ‘push’ created by the engagement between a consumer’s health status and the domestically available health care supply. The constraints imposed by a particular disease condition, the proximity of pain and/or death, and the limits of local treatment serve to structure a calculation of risks and benefits with its own internalist rationality. Where patient organisations are well organised, this economic demand for treatment may translate into political demand for changes in the orthodox model and its governance: for example, in the cases of AIDS and neuromuscular disorders. Most recently, in Italy protests from patient groups led the Italian Parliament to introduce legislation in May 2013 to allow experimental stem cell therapies on 32 terminally ill patients to proceed.
The general reticence to engage with the reality of the global market of stem cell therapies serves to perpetuate the present neglect of consumer demand led medical innovation and the forms of governance it requires. It is a reticence that has both supporters and opponents and is unlikely to remain politically unchallenged for long and bioethicists are beginning to acknowledge the issues posed by medical innovation in the stem cell field (5). It is important, also, that the present governance vacuum surrounding practice-based medical innovation is addressed by the medical profession itself through changes in its normal systems of self-regulation and professional guidance. Commenting on the ‘sclerotic’ qualities of the established drug innovation model traditionally sponsored by the US and European Union, Joyce Tait observes of China and India that ‘these increasingly powerful components of the bioeconomy may see a competitive advantage in leading regulatory reform so as to encourage more innovative health care sectors to develop, initially for their large and increasingly wealthy home markets, and perhaps also to encourage change in the United States and European regulatory systems’. Given the market benefits that may accrue from the association of these emerging economies with stem cell medical innovation as documented in this paper, it would be irrational of them to do otherwise.
For more details, please refer to:
Brian Salter, Yinhua Zhou, Saheli Datta (2015). Hegemony in the marketplace of biomedical innovation: Consumer demand and stem cell science. Social Science and Medicine. 131: 156-163.
doi:10.1016/j.socscimed.2015.03.015
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