The Nature of Regulatory Regimes

In political science, the ‘regime’ term developed prominently in the context of governance issues in international relations (cf. Keohane 1982; Krasner 1983). However, over time it became increasingly attractive also to students of regulatory policy-making.

Today, we observe the existence of a variety of different regime definitions. One regime definition is given by Francis. According to him, a regulatory regime is a “reasonably enduring purposive arrangement […], embracing both formal and informal organizations, incorporating the relationship between private interests and public bodies that make governing decisions” (Francis 1993: 43). Francis argues that the nature of regulatory regimes is determined by two characteristics. First, by the location of regulatory authority.

Whether regulation is exerted in an unitary or a federal system can have major consequences for the nature of a regulatory regime. In an unitary state, the formal regulatory authority rests with the national government, while in federal systems the subnational units retain regulatory powers. In addition, European states have to share regulatory competencies with EU institutions, i.e. the Commission or the European

Parliament. In course of Europeanization much of the original regulatory authority of nation states has been transferred to the EU-level.

The second regime characteristic according to Francis is the division of regulatory responsibility between the state and private actors. We could imagine a continuum along which the extent of regulatory responsibility is placed. At one end, all regulatory power is delegated to private organizations and at the other, regulatory responsibility rests entirely with the government. Usually, the situation will lie somewhat in the middle of these two extremes. The interesting question is whether the relationship between the state and the regulatees is adversarial or collaborative in nature. This depends to a large degree on the role of private-sector groups in the formulation of regulatory structures and standards.⁵⁴ In some regimes producer groups will play a more prominent role, while in others consumers and those that generally have a tougher stand articulating their interests, i.e.

environmentalists, can possess considerable influence (Francis 1993: 49-64).

Similar to Francis’ regime definition, several studies on regulatory reform use a rather narrow interpretation of the term and focus almost exclusively on regulatory institutions and the relationship between the various actors involved. In these studies, regime analysis is usually based on the division of regulatory power among state entities, the influence of public opinion and interest groups or the organization and policy objectives of regulatory agencies (cf. Hood, Rothstein and Baldwin 2001). In the same vein, some authors perceive the emergence of NRAs and the growing relevance of courts and parliamentary committees as the distinct characteristic of the new regulatory state (cf.

Majone 1997). Especially the extensive treatment of regulatory authorities in recent publications on the topic reflects this institutional focus. The latter usually discuss the delegation of regulatory competencies and rule-making power from the state to (independent) regulatory authorities (cf. Gilardi 2002; Thatcher 2002b).

But let me point to some alternative definitions of regulatory regimes that are somewhat broader than the above discussed as they include the role of ideas and regulatory

54 According to corporatist theory, there are sustained relationships between the state and specific private-sector groups, i.e. peak organizations. Pluralism, on the other side, posits that the relationships between organized groups in a society are not fixed and often even competitive in nature (cf. Wilson 1990).

policies. Eisner (2000: 1), for instance, defines regulatory regimes as “a historically specific configuration of policies and institutions which structures the relationship between social interests, the state, and economic actors in multiple sectors of the economy”. In contrast to Francis, whose regime definition is based more on the international relations tradition, he takes on a more general regime perspective with less room for sector-specific variation.⁵⁵ Although Eisner’s definition includes the individual role of ‘policies’, it still rests with an emphasis on the institutional linkages between regulatory authorities and private actors.

This emphasis is more or less transcended in other definitions of the regulation literature. Harris and Milkis (1996: 23), for instance, posit rather generally that a regime refers “to the system of ideas, institutions, and policies that determine how a society is governed”. They go on and define it more precisely as “a constellation of (1) new ideas justifying governmental control over business activity, (2) new institutions that structure regulatory politics, and (3) a new set of policies impinging on business” (ibid.: 25). And Vogel (1996: 20) refers to regimes even more generally as “specific constellations of ideas and institutions”. Both of these two perspectives share the emphasis of the role of ideas for the shaping of a regulatory regime.⁵⁶

Ideas and Institutions

What exactly is the impact of ideas and institutions and how do these variables interact? Basically, ideas relate to regime orientation, while institutions embody aspects of regime organization. Taking into account the factors that sparked regulatory reform, it does certainly make sense to integrate the role of ideas in the regime definition. If we analyze the reform process, we notice that one of the reasons for regime transformation

55 I am grateful to Frank Janning for this comment.

56 A similar framework is adopted by Lehmbruch (1992: 31), who distinguishes between two dimensions of economic policy: the ideological interpretation of the state-economy relationship (ideas), and the linkages between state actors and the economy (institutions).

was a change in beliefs about the role of the state.⁵⁷ In the context of regulation, ideas are linked to the regulators’ beliefs about the proper scope, goals and methods of state intervention in the economy. The assumption is that in designing policies, actors adhere to specific doctrines. Prominent examples of such doctrines are Marxism or neo-liberalism, the latter of which has become the ideological underpinning for many reform programmes of recent years. What is more, state actors possess beliefs about functional tasks and commitments to policy mechanisms (Vogel 1996: 20-21).

Ideas influence the decisions and policy choices of state actors especially in situations in which stimuli from the market or signals by certain actors are unclear (Goldstein 1993; Goldstein and Keohane 1993). Thus, actors’ beliefs can tell us in which direction a policy is likely to go. Regulatory ideas are “conceptions developed by some intellectual enterprise, which express how and why the government ought to control business” (Harris and Milkis 1996: 26).⁵⁸ The question that follows is, first, how ideas inherent in a specific regulatory regime manifest themselves in concrete policy choices and, second, how these policies can be observed. Privatization and liberalization are policies that have strongly been influenced by ideas. The diffusion of neo-liberalism as a political-economic idea, for instance, has led to the promotion of competition throughout the EU and the IMF members (cf. Simmons and Elkins 2004). In addition, the beliefs and ideologies of the governing parties played an important role for the timing and scope of infrastructure privatization, at least in the 1980s (Schneider, Fink and Tenbücken 2005).

57 According to Vogel (1996: 22), ideas cannot explain why reforms occurred, only how these reforms have evolved over time in different countries. This view can be challenged. First, the Christian-Democratic and Conservative governments that came to power at the end of the 1970s and early 1980s and their predecessors, mostly Social Democrats, showed important differences in political-economic ideas. Many programmes of deregulation (in the United States) or regulatory reform (in the United Kingdom or Germany) originate in the beliefs and convictions of party leaders at that time. Second, ideas alone do certainly not explain why programmes of regulatory reform were set up. Obviously, governments are more receptive to certain reform ideas under specific environmental conditions, i.e. economic crises. However, even in times of economic downturn, after the coming to power of the Socialists in 1981, the French government under Mitterrand initiated several programmes of renationalization, while their Christian-Democratic and Conservative counterparts started programmes of regulatory reform. This shows that political-economic ideas can indeed alter the course of action as they result in different reactions to similar forces for change, i.e. technological pressure and financial crisis.

58 This conceptualization is based on Guralnik’s definition of ideas as “conceptions existing in the mind as a result of mental understanding, awareness or activity” (cited in Harris and Milkis 1996: 26).

The second defining regime component focuses on the organization of regulatory actors and their relationship to the regulatees. In this context, institutions may be defined as

“established and structured patterns of relationships among various organizations involved in regulatory policy” (Harris and Milkis 1996: 27). Institutions shape state capabilities, because they define the relationship between the state and the economy and determine how regulatory policies are formulated and implemented. Second, institutions mediate the influence and pressure exerted by interest groups on regulatory actors (Vogel 1996: 22).

And finally, institutions can even shape the preferences of state officials or the industry (Thelen and Steinmo 1992).⁵⁹ New regimes might involve new legislative and administrative powers and procedures as well as new channels of participation for private actors. This, in turn, impinges on the two regime aspects according to Francis’ definition:

the location of regulatory rule-making power and the distribution of responsibility between the state and private actors.

Both regime aspects, organization and orientation, influence policy choices. Ideas constrain choices in that they define acceptable behaviour, for example as regards the reactions of state actors to external pressures. Thereby, they influence how actors interpret market trends, apply lessons from abroad or put in place new regulatory mechanisms. In the same vein, ideas shape actors’ reactions to external stimuli and their receptiveness to new ideas. Institutions constrain policy choices by shaping state-society relations, structuring the role played by interest groups, and defining state capabilities. Thus, policies are directly shaped and influenced by distinct ideas about how to organize the economy and by the relationship between the state and the private sector. However, they are also shaped indirectly via institutional change. NRAs or interest groups, for example, transport new regulatory ideas and thus help to translate them into political reality. Often, institutional changes result in policy changes (Harris and Milkis 1996: 28). Institutions and policies thus both embody ideas, the latter of which are of a certain permanence.

59 It can be assumed, for instance, that politicians judge the viability of reform programmes according to their potential impact on established institutions.

Categorizing Regulatory Regimes

Although the basic components of regulatory regimes can be exemplified, the level of abstraction still creates problems for systematic comparison. It is, for example, rather difficult to measure political or economic ideas, the location of rule-making power between governmental entities or relationships between regulatory actors and private interests. We therefore need to investigate how these components materialize in form of measurable variables. A suitable operationalization provides the grounds for a systematic regime categorization. Based on such a categorization, we can in a second step conduct cross-national and cross-sectoral comparisons that constitute the basis for empirical analysis and case selection.

The elements that serve to define the process of regulatory reform can also help us to categorize a specific infrastructure regime. The variables that constitute such a regulatory regime are (1) ownership structure, (2) market liberalization and (3) regulatory institutions. They reflect the material outcomes of the three policy dimensions that constitute the process of regulatory reform: a distinct ownership structure is the result of privatization programmes, a certain level of market opening is the outcome of liberalization efforts and a certain degree of agency independence is caused by a strategy of reregulation. Depending on the specific configuration of these variables we are able to put forward five ‘ideal’ regime types (Table 2.3), which can be found across several different issues areas and sectors.

A sector-specific approach has repeatedly been propagated as the most appropriate level of analysis by studies on policy networks and policy communities.⁶⁰ It has, for example, been applied in studies on industrial policy (Wilks and Wright 1991), corporatism (Gorges 1996), organized interests (Greenwood and Ronit 1994) or economic governance (Hollingsworth, Schmitter and Streeck 1994). Similarly, a regulatory regime is not simply a copy of the larger political system but possesses distinct institutional characteristics.⁶¹ Therefore, the study uses an approach that allows for cross-sectoral variation. The regime approach is a suitable framework also for the discussion of state retreat, since the state might be in retreat in some sectors while it is expanding in others. In specific, network infrastructures seem to have produced quite different regimes in course of regulatory reform, as the developments in the telecommunications and water sector, for instance, indicate.