Giandomenico Majone

The rise of the regulatory state in Europe

Privatization and deregulation have created the conditions for the rise of the regulatory state to replace the dirigiste state of the past. Reliance on regulation ‐ rather than public ownership, planning or centralised administration — characterises the methods of the regulatory state. This study examines the growth of regulation in Europe, at the national and Community levels. It stresses the advantages of this mode of policy making, but also recognises its problems. It is suggested that political accountability can be ensured by a variety of substantive and procedural controls, among which judicial review is especially important. Executive oversight and co‐ordination may be improved by using new tools of public management like the regulatory budget or the regulatory clearing house.

From the Positive to the Regulatory State: Causes and Consequences of Changes in the Mode of Governance

Since the late 1970s European governments have been forced to change their traditional modes of governance in response to such trends as increasing international competition and deepening economic and monetary integration within the European Union. Strategic adaptation to the new realities has resulted in a reduced role for the positive, interventionist state and a corresponding increase in the role of the regulatory state: rule making is replacing taxing and spending. The papers first part identifies three sets of strategies leading to the growth of the regulatory state as external or market regulator, and as internal regulator of decentralised administration. The second part examines major structural changes induced by changes in regulatory strategies. The institutional and intellectual legacy of the interventionist state is a major impediment to the speedy adjustment of governance structures to new strategies. It would be unwise to underestimate the difficulties of the transition from the positive to the regulatory state, but it is important to realise that international competition takes place not only among producers of goods and services but also, increasingly, among regulatory regimes. Regulatory competition will reward regimes in which institutional innovations do not lag far behind the new strategic choices.

Europe’s ‘Democratic Deficit’: The Question of Standards

Arguments about Europe’s democratic deficit are really arguments about the nature and ultimate goals of the integration process. Those who assume that economic integration must lead to political integration tend to apply to European institutions standards of legitimacy derived from the theory and practice of parliamentary democracies. We argue that such standards are largely irrelevant at present. As long as the majority of voters and their elected representatives oppose the idea of a European federation, while supporting far-reaching economic integration, we cannot expect parliamentary democracy to flourish in the Union. Economic integration without political integration is possible only if politics and economics are kept as separate as possible. The depoliticisation of European policy-making is the price we pay in order to preserve national sovereignty largely intact. These being the preferences of the voters, we conclude that Europe’s ‘democratic deficit’ is democratically justified. The expression ‘democratic deficit,’ however, is also used to refer to the legitimacy problems of non-majoritarian institutions, and this second meaning is much more relevant to a system of limited competences such as the EC. Now the key issues for democratic theory are about the tasks which may be legitimately delegated to institutions insulated from the political process, and how to design such institutions so as to make independence and accountability complementary and mutually supporting, rather than antithetical. If one accepts the ‘regulatory model’ of the EC, then, as long as the tasks delegated to the European level are precisely and narrowly defined, non-majoritarian standards of legitimacy should be sufficient to justify the delegation of the necessary powers.

The new European agencies: regulation by information

The new European agencies have been denied powers normally granted to regulatory bodies. In most cases their functions are limited to providing information and networking with other institutions. Thus, they seem to be doomed to play an auxiliary role; but they could also turn their statutory limitations into opportunities by developing information-based modes of regulation more in tune with current economic and political conditions than the coercive powers denied to them. In fact, a good deal of empirical evidence suggests that regulation by information is often more effective than direct regulation. However, information can change expectations and behaviour only if it is credible. In turn, credibility depends crucially on reputation. It is suggested that networking could help the agencies to enhance their reputation and independence. An agency that sees itself as part of a transnational network is more motivated to defend its independence and professional integrity: unprofessional or politically motivate...

Nonmajoritarian Institutions and the Limits of Democratic Governance: A Political Transaction-Cost Approach

This paper is a first step towards a positive theory of nonmajoritarian institutions. Delegation of powers to such institutions is best understood as a means of reducing certain political transaction costs. The precise nature of the relation between political sovereign and independent delegate has not been carefully investigated. Both economists and political scientists tend to rely on the available results of principal-agent theory. This paper shows why this approach is not entirely satisfactory. While the key problems of agency theory - hidden action and hidden information - are present in any relation based on specialisation and the division of labour, they are not central to the context investigated here. Instead, I argue that the fiduciary principle should be recognised as the central element in the governance structure of nonmajoritarian institutions.

Cross-National Sources of Regulatory Policymaking in Europe and the United States

Because events occur too fast and ideas mature too slowly for responses to be designed anew for each pressing problem, policy innovation often relies on pre-existing models, foreign or domestic. This seems to be especially true for regulatory policymaking, since public regulation is typically introduced in conditions of crisis. In this paper we examine several cases of policy innovation in the area of economic and social regulation where the influence of foreign models is quite clear: the development of competition policy in Europe in the 1950s, the growth of European Community regulation, and the impact of the American deregulation movement on the telecommunications policies of different European countries. The analysis shows that while utilization of preexisting models is a common feature of policy innovation, such models are not literally translated into current policy. More or less extensive adaptations to a particular political, institutional and economic context are usually required. We also identify two distinct ways – push or pull – in which foreign models can affect domestic policy.

The Precautionary Principle and its Policy Implications

The European Commission is actively promoting the precautionary principle as a ‘key tenet’ of Community policy, as well as a general principle of international law. This article explains why this promotional effort is likely to fail or to produce unanticipated and undesirable consequences. The principle has a legitimate but limited role to play in risk management, for example whenever there is an imminent danger of irreversible damage. As a general approach to risk regulation, however, it suffers from a number of shortcomings: it lacks a sound logical foundation; it may distort regulatory priorities; it can be misused to justify protectionist measures; it undermines international regulatory co-operation; and it may have undesirable distributive consequences. What is perhaps an even greater cause for concern is that the principle, as interpreted by the Commission, tends to favour a double standard for what is permissible internationally and in intra-Community relations.

The European Commission: The Limits of Centralization and the Perils of Parliamentarization

The idea of an inevitable process of centralization in the European Community (EC)/European Union (EU) is a myth. Also, the metaphor of “creeping competences,” with its suggestion of a surreptitious but continuous growth of the powers of the Commission, can be misleading. It is true that the functional scope of EC/EU competences has steadily increased, but the nature of new competences has changed dramatically, as may be seen from the evolution of the methods of harmonization. The original emphasis on total harmonization, which gives the Community exclusive competence over a given policy area, has been largely replaced by more flexible but less “communitarian” methods such as optional and minimum harmonization, reference to nonbinding technical standards, and mutual recognition. Finally, the treaties of Maastricht and Amsterdam explicitly excluded harmonization for most new competences. Thus, the expansion of the jurisdiction of the EC/EU has not automatically increased the powers of the Commission, but has actually weakened them in several respects. In addition, the progressive parliamentarization of the Commission risks compromising its credibility as an independent regulator, without necessarily enhancing its democratic legitimacy. Since the member states continue to oppose any centralization of regulatory powers, even in areas essential to the functioning of the internal market, the task of implementing Community policies should be entrusted to networks of independent national and European regulators, roughly modeled on the European System of Central Banks. The Commission would coordinate and monitor the activities of these networks in order to ensure the coherence of EC regulatory policies. More generally, it should bring its distinctive competence more clearly into focus by concentrating on the core business of ensuring the development and proper functioning of the single European market. This is a more modest role than that of the kernel of a future government of Europe, but it is essential to the credibility of the integration process and does not overstrain the limited financial and legitimacy resources available to the Commission.

The common sense of European integration

Abstract The rejection of the Constitutional Treaty and the various events following the negative referenda provide an excellent occasion for reconsidering the real meaning of European integration. Paradoxically, the integration process is often praised for its clumsy and ultimately unsuccessful attempts to mimic the nation state, while its truly important contribution to European civilization – the establishment of a supranational constitutional order – is belittled or even ignored. An example of this distorted vision is the debate on the so-called democratic deficit – a condition which could be easily corrected if a majority of Europeans supported a supranational federal state. Since it is obvious that no such majority exists, now or in the foreseeable future, the ‘democratic deficit’, however defined, is the price we pay for wishing to integrate our national economies while preserving the core of national sovereignty. The current crisis is methodological rather than systemic: it amounts to a rejection of the stealthy approach to European integration – cryptofederalism – which has entailed the triumph of process over outcome. The legitimacy problem of the EU can be solved by limiting, rather than continuously expanding, the competences of the supranational institutions.The institutional system established by the founding fathers was not designed for effective policy-making, but largely to pursue objectives of negative integration.

Paradoxes of privatization and deregulation

Abstract The article draws three main lessons from recent regulatory developments on both sides of the Atlantic. First, deregulation and privatization have not meant an end to all regulation. On the contrary, newly deregulated or privatized industries lose their pre‐existing statutory immunity from competition law and other regulatory requirements. Thus, privatization leads to the creation of new regulatory bodies and to a considerable widening of the scope of agencies to promote competition. Second, experience has revealed the fallacy of assuming that public ownership guarantees public control. The crisis of the nationalized industries is more a failure of regulation than a problem of productive efficiency. Public ownership not only reduced governments ability to regulate the economy, but also interrupted a policy learning process which could have produced, half a century ago, the kind of regulatory institutions which Europe is struggling to develop now. Finally, American deregulation has proved to be c...