Understanding the rise of the regulatory state of the South*

This paper, and the special issue it introduces, explores whether, and how, the rise of the regulatory state of the South, and its implications for processes of governance, are distinct from cases in the North. With the exception of a small but growing body of work on Latin America, most work on the regulatory state deals with the US or Europe, or takes a relatively undifferentiated “legal transplant” approach to the developing world. We use the term “the South” to invoke shared histories of many countries, rather than as a geographic delimiter, even while acknowledging continued and growing diversity among these countries, particularly in their engagement with globalization. We suggest that three aspects of this common context are important in characterizing the rise of the regulatory state of the South. The first contextual element is the presence of powerful external pressures, especially from international financial institutions, to adopt the institutional innovation of regulatory agencies in infrastructure sectors. The result is often an incomplete engagement with and insufficient embedding of regulatory agencies within local political and institutional context. A second is the greater intensity of redistributive politics in settings where infrastructure services are of extremely poor quality and often non‐existent. The resultant politics of distribution draws in other actors, such as the courts and civil society; regulation is too important to be left to the regulators. The third theme is that of limited state capacity, which we suggest has both “thin” and “thick” dimensions. Thin state capacity issues include prosaic concerns of budget, personnel and training; thick issues address the growing pressures on the state to manage multiple forms of engagement with diverse stakeholders in order to balance competing concerns of growth, efficiency and redistribution. These three themes provide a framework for this special issue, and for the case studies that follow. We focus on regulatory agencies in infrastructure sectors (water, electricity and telecoms) as a particular expression of the regulatory state, though we acknowledge that the two are by no means synonymous. The case studies are drawn from India, Colombia, Brazil, and the Philippines, and engage with one or more of these contextual elements. The intent is to draw out common themes that characterize a “regulatory state of the South,” while remaining sensitive to the variations in level of economic development and political institutional contexts within “the South.”     

Power transitions and the rise of the regulatory state: Global market governance in flux

This special issue examines the consequences of the ongoing power transition in the world economy for global regulatory regimes, especially the variation in rising powers' transition from rule-takers to rule-makers in global markets. This introductory article presents the analytical framework for better understanding those consequences, the Power Transition Theory of Global Economic Governance (PTT-GEG), which extends the scope of traditional power transition theory to conflict and cooperation in the international political economy and global regulatory governance. PTT-GEG emphasizes variation in the institutional strength of the regulatory state as the key conduit through which the growing market size of the emergent economies gives their governments leverage in global regulatory regimes. Whether or not a particular rising power, for a particular regulatory issue, invests its resources in building a strong regulatory state, however, is a political choice, requiring an analysis of the interplay of domestic and international politics that fuels or inhibits the creation of regulatory capacity and capability. PTT-GEG further emphasizes variation in the extent to which rising powers' substantive, policy-specific preferences diverge from the established powers' preferences as enshrined in the regulatory status quo. Divergence should not be assumed as given. Distinct combinations of these two variables yield, for each regulatory regime, distinct theoretical expectations about how the power transition in the world economy will affect global economic governance, helping us identify the conditions under which rule-takers will become regime-transforming rule-makers, regime-undermining rule-breakers, resentful rule-fakers, or regime-strengthening rule-promoters, as well as the conditions under which they remain weakly regime-supporting rule-takers.     

The rise of the constitutional regulatory state in Colombia: The case of water governance

This article interprets the regulatory state in Colombia as the result of a dialectic process between transnational knowledge and domestic politics, which influence, transform, and inspire each other. Such a process results in an interesting constitutional variant of the regulatory state, in which neo‐constitutionalism becomes a counterbalance to the unchecked expansion of neo‐liberal regulatory practices. I, therefore, distinguish between neoliberal and constitutional regulatory states. As a result of neo‐constitutionalism, the domestic judiciary is empowered, and becomes a crucial actor to understand both the specific traits of this regulatory experience, and its interaction with global centers of power.     

Transnationalism,neo-liberalism,and the rise of the shadow state

This paper examines the processes through which a neo-liberal agenda is broadened and entrenched through time. The case study focuses on a federal immigration policy in Canada in the 1980s, which encouraged the rapid entry of wealthy entrepreneurs and investors from Hong Kong. One of the many impacts of the arrival of this Chinese business élite in British Columbia was the rapid growth of a key volunteer organization in Vancouver dedicated to social service provisioning for immigrants. With the donations and volunteerism of the new Chinese arrivals, this organization grew from a small, narrowly focused social service institution, to one of the largest and most extensive providers in the lower Mainland, supplying numerous goods and services formerly controlled primarily by the province and the federal government. As a result of the actions of this voluntary organization, a type of interstitial organization that some scholars have termed under the rubric, 'the shadow state', conservative politicians in the 1980s were able to roll back many welfare state programmes in British Columbia without a corresponding loss of legitimacy occurring from the immediate truncation of services. The Business Immigration Programme thus aided in the entrenchment of a neo-liberal agenda both through the increased circulation of capital and articulation with Asian networks, and also through the devolution of direct welfare-state governance. I argue that this immigration programme thus represents one good example of the multiple ways that seemingly simple policy shifts can have much broader effects, and can entrench neo-liberal policy socially,culturally and institutionally as well as economically.     

The regulatory state and the UK Labour Government's re‐regulation of provision in the English National Health Service

Following its election in 1997, the UK Labour Government embarked upon a 10 year program of reform of the National Health Service (NHS). By 2005, Labour had doubled the NHS budget and dramatically transformed the shape of the Service. In England, a basic characteristic of the NHS is the organizational split between provider and commissioning agencies. In this article I argue that Labour's re‐regulation of NHS provision is a coherent representation of the influence of the “regulatory state” in restructuring arrangements between government, market, and society. The article offers an account of the regulatory state based on a discussion of five key theses: The Audit Society, Regulation Inside Government, The New Regulatory State, The British Regulatory State, and Regulatory Capitalism. The article unfolds Labour's program of reform across themes common to these accounts: the division of labor between state and society, the division of labor within the state, the formalization of previously informal controls, and the development of meta‐regulatory techniques of enforced self‐regulation. It concludes that the key themes of the regulatory state are at work in Labour's transformation of NHS provision and it offers a discussion of the implications for both scholars of regulation and the UK and European health policy literature.     

Civil society and the regulatory state of the South: A commentary

The basic rationale of the regulatory state is to insulate certain kinds of decisionmaking from political actors. The main purpose of this commentary is to assess the ways that members of civil society, in fact, often shadow and contest the central actors of the regulatory state, even though they are ostensibly well outside it. I offer three distinctions to help broaden and sharpen analysis of the roles and impact of civil society actors: whether civil society actors have special expertise or not; whether the regulatory state is being put in place or already exists; and whether civil society actions are broadly complementary to, or substitutive of, state action. In discussing each of these, I also explore the consequences of the transfer of the regulatory state to the global South, and the way that change in location shapes both the role and impact of civil society and the regulatory state itself.     

Regulatory mobilization and service delivery at the edge of the regulatory state

Where there is weak state capacity to carry out regulatory, redistributional, and developmental functions characterizing much of the developing world, the role of governance and service delivery is also performed by a myriad of private actors. Institutional reform in the utility sector in developing countries has often failed to distinguish between social and economic regulation. I show how private actors like NGOs and local community groups undertake what I term “regulatory mobilization” to influence the new rules of the service delivery game, as well as to deliver much‐needed basic services to urban poor communities. Based on extensive fieldwork carried out in the Philippines, this article reveals and explains the politics of the informal sector at the edge of the regulatory state. More than a decade since the privatization of the Metropolitan Waterworks and Sewerage System in Metro Manila in 1997, water access for the urban poor remained limited as privatized water utilities faced difficulties in extending service provision. In the context of an unpredictable regulatory landscape and an oligarchic patrimonial state, unexpected collective action by organized urban poor communities and NGOs has taken place around water as a subsistence right. Combining hybrid mobilizations to obtain water as well as influencing the rules governing their provision, these forms of regulatory mobilization appear to be peripheral and episodic. However, depending on how local and sectoral politics are conflated, such regulatory mobilization may sometimes not only result in obtaining subsistence goods, but may also occasionally project countervailing power in the policy sector, and influence formal regulatory frameworks in surprising ways.     

The regulatory state in developing countries: Redistribution and regulatory failure in Brazil

Following the traditional doctrine of the “regulatory state”, regulatory agencies should be given very focused mandates and stay away from the politicized realm of distributive policies and decisions. An opposing perspective would state that if regulatory agencies can contribute to economic redistribution, positive results such as network expansion, economies of scale, and fiscal efficiency will ultimately lead to lower levels of regulatory failure. This article tests whether, in countries of high socio-economic inequality, such as Brazil, the active incorporation of distributive considerations by regulatory agencies leads to lower levels of failure. Through the analysis of the activities of seven Brazilian network regulatory agencies, the article develops theory-driven expectations and tests these expectations using crisp set Qualitative Comparative Analysis (csQCA). It concludes that not prioritizing redistribution is a necessary but not a sufficient condition for regulatory agencies' failure. In most types of failure, a lack of priority to redistribution leads to failure when combined with low regulatory capacity and low levels of competence.     

The rise of the modern welfare state, ideology, institutions and income security: analysis and evidence

In the 25-year period between 1960 and 1985, there was a great expansion of welfare state programs throughout the West. The fraction of GDP accounted for by social expenditures doubled in much of Europe and grew by 40–50% in many other OECD nations. After 1985, growth in social insurance programs slowed relative to other parts of the economy. This paper explores the extent to which institutions and ideological shifts may have accounted for the period of rapid growth, for differences in the extent of that growth, and for the subsequent reduction in the growth rates of social insurance programs.     

Deregulating broadcasting: the West European experience

Abstract. This article is concerned with the relationship between systemic and ideological changes affecting West European broadcasting and the nature of the regulatory responses. In theoretical terms the research interest Lies in the question of the extent to which changes in the nature of West European broadcasting regulation are determined by technological factors and forces in the international political economy. Particular attention is given to the factors impeding or constraining deregulation and to the argument that national institutional structures and traditions are mediating the impacts of technology, markets and ideology. Whilst the ultimate effects on future broadcasting regulation remain controversial, certain broad trends can be identified.     

The local political economy of the regulatory state: Governing affordable housing in England

Regulatory governance involves the use of heterogeneous mechanisms to extract welfare gains from market-based processes. While often viewed as a depoliticization mechanism, here, we explore a distinctly political manifestation of regulatory governance. Our study focuses on the governance of affordable housing in England, specifically on local authorities' use of ‘Section 106′ (S106) powers to compel private developers to include affordable housing in new developments. We show that, following the financial crisis, the governance of affordable housing shifted from a partisan to a valence issue. As the crisis increased the issue salience of affordable housing, left-wing authorities' hitherto higher tendency to intervene was eroded in the midst of a broad-based increase in S106 deployment. In addition to extending insights into the political economy of regulatory state intervention, our findings shed valuable light on the undersupply of affordable housing in England.     

Power transition and the regulatory state in large emerging markets: Norm-breaking after the global financial crisis

I examine the ways in which the global financial crisis that began in 2007, and whose effects arguably condition policymaking to the present day, affected the ongoing global power transition as manifested by the unilateral decisions undertaken by official agencies comprising national regulatory states. The theory of that power transition articulated in the overview paper of this Special Issue is reinterpreted to take into account the circumstances of that crisis. Empirical evidence on the propensity to discriminate against foreign commercial interests by the BRICS, Turkey, the European Union, and the United States during the years 2008 to 2017 at, and behind, the border is employed to identify a group of six potential rule-shapers and two possible sham rule-takers.     

Spillovers of state policy innovations: New York's hazardous waste regulatory initiatives

States are often seen as policy laboratories where innovations are tried that may later be adopted by other states or the federal government. Engendering such experiments may, however, promote spillovers on other states. We analyze several of New York State's policy initiatives from the 1980s that were intended to influence the selection of waste management technologies by hazardous waste generators. Time series analysis of hazardous waste manifest data reveals that constraints on land disposal of certain wastes and a tax on hazardous waste generation and disposal were associated with shifts to lower-risk technologies for waste management. The policies also constrained imports to in-state land disposal facilities and may have led to increased exports for incineration and recycling, thus shifting some of the risks of hazardous waste to other jurisdictions with less stringent regulations or lower taxes on waste generation and management.     

From rule-taker to rule-promoting regulatory state: South Korea in the nearly-global competition regime

When rapid economic growth catapults a country within a few years from the margins of the global economy to middle power status, does global regulatory governance need to brace for a challenge to the status quo? To answer this question, we extend the power transition theory of global economic governance to middle powers: A rising middle power should be expected to challenge the international regulatory status quo only if increasing issue-specific strength of its regulatory state coincides with preferences that diverge from the preferences of the established powers, which are enshrined in the status quo. We examine this argument empirically, focusing on South Korea in the realm of competition law and policy. We find that South Korea, a non-participant in the international competition regime until the 1980s, developed in the 1990s substantial regulatory capacity and capability and thus “spoiler potential.” At the same time, however, its policy preferences converged upon the norms and practices established by the United States and the European Union, albeit with some distinct elements. Under these conditions, we expect a transition from rule-taker to rule-promoter. We find that South Korea has indeed in recent years begun to actively promote well-established competition law and policy norms and practices – supplemented by its distinct elements – through technical assistance programs, as well as various bilateral channels and multilateral institutions. The findings suggest that the power transition theory of global economic governance is usefully applicable to middle powers, too.     

Building organizational reputation in the European regulatory state: An analysis of EU agencies' communications

Organizational‐reputation literature has advanced our understanding about the U.S. regulatory state and its agencies. However, we lack contributions on what a reputational account can add to our knowledge about the European regulatory state, the strategic behavior of supranational agencies, and their endeavors to legitimize themselves in a multilevel political system. We know little of how reputation‐management strategies vary across EU agencies and why. The study offers the very first mapping of organizational‐reputation‐management patterns across all EU agencies, as well as the first empirical assessment on how reputational considerations guide supranational agencies' legitimation strategies. The results indicate that EU agencies facing higher reputational threats revert to their avowed raison d'être (i.e., technical conduct). We find that regulatory agencies utilize a more diverse set of reputational strategies by emphasizing the technical, procedural, and moral reputations more than nonregulatory agencies, whereas social‐policy agencies foster their technical reputation more than economic‐policy agencies.     

National de-delegation in multi-level settings: Independent regulatory agencies in Europe

National politicians in Europe have created independent regulatory agencies (IRAs) with significant powers over markets such as communications and energy. After delegation, they have engaged in institutional politicization of IRAs and undertaken numerous attempted or actual de-delegations. Yet overall de-delegation over the period 2000–2020 has been limited, as many de-delegations have been abandoned, temporary or reversed, and also counterbalanced by extensions of IRA powers. The article examines different explanations for this pattern. It looks especially at Europeanization, which has operated through normative and particularly coercive mechanisms. EU coercion has involved threats of legal action, monitoring and enforcement of existing EU legal requirements, and EU legislation expanding IRA powers and protection. IRAs are more vulnerable to de-delegation than trustee non-majoritarian institutions because their position can be altered with simple legislative majorities. Yet even for such agents, the ability of national politicians to reverse delegation is constrained by multi-level institutional settings.     

Productivity growth and funding of public service broadcasting

In this paper we demonstrate how standard techniques for measuring productivity growth can be applied to the broadcasting sector to provide a benchmark for reasonable efficiency savings which public finance officials might expect public service broadcasting (PSB) to achieve. Using establishment level data from the UK, we produce estimates of productivity growth amongst commercial broadcasters between 1999 and 2003, which provide some evidence that improvements to PSB can reasonably be expected to be funded by efficiency savings rather than solely by increases in public funding.