The regulatory state and regulatory capitalism
The evolution of governance practices and changes in the way we think about regulation have each contributed to a substantial reconfiguration of the regulatory landscape. These changes are captured in the idea that regulatory governance is concerned not only with the regulatory modes and functions of the state, but also with capitalist societies more generally (Levi-Faur 2013). Thus we think of regulation now as not simply something done by the state to businesses (often through independent agencies) but also as engaging businesses and civil society actors in a variety of ways. Within the model of regulatory capitalism, regulation is no longer conceived of as a mode of governing that is a monopoly of the state, but rather as a diffuse range of practices occurring frequently through network arrangements (Braithwaite 2008). More generally, regulation is conceived of as the set of activities that establish regulatory regimes through the setting of norms, together with mechanisms for monitoring or feedback and for correcting behaviour that deviates from the norms (Hood et al. 2001; Black 2002).
Norms may be set through legislation (primary or secondary) but also through contracts and, in many cases, are set through nonbinding instruments such as soft law, codes and technical standards, frequently issued by intergovernmental and transnational private regulators (Abbott and Snidal 2009). Instruments that are non-binding on issue may be made mandatory through adoption by legislation or through incorporation in contracts (Scott et al. 2011).
Feedback is traditionally conceived of as involving agency monitoring, supported by legislative powers to inspect or to collect information. Many public agencies collect feedback through complaints processes, for example from competitors and/or consumers. Within market settings, contracting parties routinely monitor the performance of other parties, and consumers and NGOs may also engage in either ad hoc or systematic monitoring (O'Rourke 2003).
Behavioural correction is traditionally concerned with public agencies enforcing public rules (May and Burby 1998), but extends also to contracting parties enforcing their contracts, including collective contracts such as self-regulatory regimes (Verbruggen 2013), third-party enforcement (Kraakman 1986) and a range of other behaviours exploiting market and community participation not only to punish those who breach norms, but also to reward those who behave well (Scott 2010a; Braithwaite 2002). These processes may involve highly informal applications of sanctions such as gossip, self-help remedies such as terminating or not renewing contracts, in some cases directly applied penalties provided for in legislation or in contracts, and dispute resolution in both private (for example, mediation and arbitration) and public (courts and tribunals) fora. The availability of the courts as both appeal and enforcement mechanisms does, of course, constitute one form of accountability for regulators.
Where public regulators are national state agencies, they are typically designed in such a fashion that they have a degree of independence from elected politicians, accompanied by mechanisms of oversight or accountability (Maggetti 2012; Gilardi 2008). The value attributed to independence derives from arguments that regulators should be oriented towards expert decision-making, insulated from day-to-day political concerns (Thatcher 2002), and that if decision-making is more political in character then it should be retained by elected politicians rather than delegated (Prosser 1997). Independent regulation, of course, is supposed to be a solution to the problem of politicians favouring powerful industrial interests. The rise of the regulatory state has been concerned with insulating regulatory decision-making from both selfinterested structures of self-regulation (Moran 2003) and self-interested structures of politics - across financial sectors but also network, food, pharmaceuticals and so on (Levi-Faur 2005). Clearly, the more extensive the delegation, the greater the problem for democratic governance.
Turning to private regulation, firms frequently oversee their own activities (for example, through developing and implementing corporate social responsibility (CSR)) (Vogel 2005) (Parker 2002; Parker 2007); oversee others (for example, through supply chain contracts providing for compliance and certification in respect of specified standards) (Blair et al. 2007); and regulate themselves through associations (such as self-regulation) (Black 1996) and in combination with others, such as NGOs establishing private regulatory foundations (the Forest Stewardship Council, for example) (Meidinger 2003; Black 1996). Such regimes frequently engage not only NGOs, both nationally and internationally, but also intergovernmental bodies such as the International Labour Organisation and the well-developed institutions of the European Union. The idea of government, business and civil society organizations interacting with each other to varying degrees in different modes of regulation is captured by the idea of the 'governance triangle' (Abbott and Snidal 2009).
The growth in regulatory agencies can be explained in a number of ways, not simply as a functional response to policy needs but also as mimeticism driven by international obligations (such as membership of the EU), horizontal policy-learning (for example, within the OECD or APEC) and as bottom-up responses to similar policy problems (Gilardi 2005; Levi-Faur 2005). With private regulators, explanations are somewhat different. In some instances their establishment provides a response to perceived weaknesses in the market, for example seeking to standardize terms or products to reduce transactional and other costs (or even to seek to cartelize a market). In other instances private regulation is concerned with enhancing reputation so as to strengthen market position. A third set of cases is driven by public actors encouraging or adopting private regulatory responses to address public policy problems. By definition private regulation is likely to have a high degree of insulation from government, and is typically valued precisely because it has different structures of governance and decision-making from public actors (Scott et al. 2011). Supranational regulatory regimes largely have their origins in concerns to address issues that states on their own cannot address, frequently because the effects of standards or behaviour cross boundaries. EU governance originated in concerns to reduce the adverse effects on trade of national regulatory rules, and so again, we would expect its regulation to be somewhat insulated from direct control of national electoral politics, even if some forms of democratic accountability emerge at the supranational level (which has happened in the EU, but not so much in the UN or other intergovernmental regimes).
Given the diverse forms of institutions and of practice, there is clearly a significant accountability challenge associated with regulatory capitalism. I address this in the next section, considering traditional accountability and how regulatory capitalism has within itself the seeds of a wider range of new modes of accountability that, as I argue in the following section, may be drawn into contemporary theories concerning post-democratic governance.