Stephen Bell, Andrew Hindmoor - Rethinking Governance - The Centrality of The State in Modern Society (2009) PDF

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Rethinking Governance
The Centrality of the State in Modern Society
Several problems plague contemporary thinking about governance, from the mul-
tiple definitions that are often vague and confusing, to the assumption that gov-
ernance strategies such as networks and markets represent attempts by weakening
states to maintain control.
Rethinking Governance questions these assumptions and seeks to clarify how we
understand governance. Arguing that it is best understood as ‘the strategies used
by governments to help govern’, the authors counter the view that governments
have been decentred. They show that far from receding, states are in fact enhancing
their capacity to govern by exerting top-down controls and developing closer ties
with non-government sectors.
Identifying several ‘modes’ of governance, Stephen Bell and Andrew Hindmoor
use a wide range of practical examples to explore the strengths and limitations of
each. In so doing, they demonstrate how modern states are using a mixture of
governance modes to address specific policy problems.
This book demonstrates why the argument that states are being ‘hollowed out’
is overblown. Rethinking Governance refocuses our attention on the central role
played by governments in devising governance strategies.
Stephen Bell is Professor and former Head of the School of Political Science and
International Studies at the University of Queensland.
Andrew Hindmoor is Senior Lecturer in the School of Political Science and
International Studies at the University of Queensland.
Rethinking
Governance
The Centrality of the State
in Modern Society
Stephen Bell and Andrew Hindmoor

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For Jo and Hillary,
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Contents
List of figures and tables page xi

Preface xiii
Chapter 1: A state-centric relational approach 1

Society-centred governance 3
A fundamental transformation? 6
A state-centric relational approach 10
Modes of governance 16
Conclusion 18
Chapter 2: The resilient state 20

Public choice theory and state failure 21
Government overload and the fiscal crisis of the state 23
The implementation gap? 27
A crisis in legitimacy? 29
The decentring of government 32
Globalisation 39
Conclusion 44
Chapter 3: Metagovernance and state capacity 46

The functions of metagovernance 47
Metagovernance as a problem of public good provision 55
State capacity: a state-centric relational account 59
vii
viii CONTENTS
The challenges of metagovernance 66

Conclusion 69
Chapter 4: Hierarchy and top-down governance 71

Rolling back the state? 72
Hierarchical governance: challenges and adaptations 85
Self-regulation in the shadow of hierarchy 89
The growing volume of governance 92
Conclusion 95
Chapter 5: Governance through persuasion 97

Legitimacy, persuasion and governance without government 99
The metagovernance of persuasion 105
Persuading states 106
Combining modes of governance: persuasion and hierarchy 108
Social capital and governance through persuasion 109
Conclusion 113
Chapter 6: Governance through markets and contracts 115

The marketisation of governance 116
State capacity and markets 120
The resilience of hierarchy 121
The metagovernance of markets: markets through hierarchy 123
Policy learning and metagovernance 126
Relational capacity 129
Governance through business? 131
Conclusion 135
Chapter 7: Governance through community engagement 137

Citizen and community engagement 139
The foundations of community engagement 144
Willing and capable citizens and communities? 146
Accountability and legitimacy 149
A willing and able state? 151
CONTENTS ix
Power-sharing and the state 155

Do-it-yourself community engagement 158
Conclusion 160
Chapter 8: Governance through associations 162

Forms of associative governance 164
Private-interest government 169
The role of the state within associative governance 174
Governance without government? 181
Conclusion 184
Chapter 9: Conclusion 186
Notes 192
Bibliography 194
Index 223
Figures and tables
FIGURES
2.1 Network and structures page 35
4.1 Labour market deregulation in three industries, 1975–2003 74
4.2 Pages of Commonwealth Acts of Parliament passed per year,
1901–2006 93
4.3 Agreements signed by the European Community/Union,
1969–2007 94
4.4 Expansion of the number of regulatory agencies,
1960–2002 95
TA B L E S
2.1 Total social expenditure, selected OECD countries, 1980

and 2001 25
2.2 Total taxation, selected OECD countries, 1975–2007 26
2.3 Public confidence in parliament, selected OECD countries,
1981 and 1999/2000 31
2.4 A typology of regulatory coordination 44
4.1 Total economic subsidies, selected OECD countries, 1980
and 2004 73
5.1 Social trust, selected countries, 1980–4 and 1998–2000 112
7.1 Forms of public participation in governance 140
xi
Preface
T HE TERM GOVERNANCE has become a part of day-to-day

vocabulary. Politicians talk about the importance of ‘good governance’
in developing countries and the significance of corporate governance in
firms. Journalists write about the governance of charities, football clubs,
museums, universities, schools and football clubs. In these cases it appears
that governance is an alternative term for management or leadership. In
political science, however, governance has a distinct meaning. Here writers
talk about a transition from ‘government to governance’ and even of the
exercise of ‘governance without government’. At its simplest, the argument
is that governments have been ‘hollowed out’ or ‘decentred’ and must now
work with a range of non-state actors in order to achieve their goals.
In our view these arguments are overblown. In fact, part of the motiva-
tion for writing this book was the lack of a sustained alternative account of
governance in which the state played a central role in governance arrange-
ments and relationships, but also steered or metagoverned them. Although
we point to instances in which governments have been marginalised and
collectively valued policy goals are being pursued by non-state actors, such
cases are few and far between. In our view governments and the broader set
of agencies and public bodies which together constitute the state are and
should remain central in governance processes. But while rejecting what we
call ‘society-centred’ arguments about governance, we also express reserva-
tions about alternative ‘state-centric’ accounts in which governments are
imagined to operate in splendid isolation from the societies they govern,
descending from on high occasionally to impose their policy preferences.
Instead, we develop a ‘state-centric relational’ account of governance, argu-
ing that states have enhanced their capacity to govern by strengthening their
own institutional and legal capacities but also by developing closer relations
xiii
xiv P R E FA C E
with non-state actors. Ultimately, the choice between society-centred and

state-centric approaches to governance or between governance and govern-
ment is a false one. Our state-centric relational approach emphasises the
importance of the state and also the importance of state–society relations
in governance.
OUTLINE OF THE BOOK

The first three chapters survey existing debates and arguments about gov-
ernance and develop our state-centric relational approach to governance.
Chapter 1 sets out our aims and emphasises that the state is still central
to governance processes. The next chapter critically examines arguments
that the state has been undermined by a range of forces, including neo-
liberal ideology, regulatory failure and globalisation. Chapter 3 looks at the
concept of metagovernance, defined as the ‘government of governance’,
and links empirical arguments about how governments govern to norma-
tive debates about the role and responsibilities of government within a
democratic society.
Chapters 4–8 apply these perspectives to ‘governance in action’ across
the five modes of governance we have identified: via hierarchy, persuasion,
markets, community engagement and associations. The wide-ranging sur-
vey mixes theoretical discussion with practical examples of governance
arrangements, exploring the role that governments and state agencies play
in designing and managing various modes of governance. These five chap-
ters develop our state-centric relational account by including perspectives
from international relations, economics, development studies and com-
parative politics. Some studies of governance neglect major developments
in political science, but discussions about networks, power, ideas and
institutions can illuminate understanding of the forms and limitations of
governance.
In challenging society-centred accounts of governance, we do not wish
to create the impression that states are omnipotent. Instead, we show how
states have augmented their policy capacity by developing closer relations
with non-state actors. Governments are not like a modern-day Gulliver
tied down by non-state Lilliputians. When there is interdependence in the
relations between states and non-state actors, it is often asymmetrical.
Most of our examples are taken from major Western democracies, with
a few from other countries. We examine governance beyond as well as
within countries. Arguments about the hollowing out of the state and new
ways of governing are related to arguments about globalisation and to what
P R E FA C E xv
some see as the gradual emergence of ‘global governance’. We discuss the

governance role played by various international institutions, but we do not
believe that global governance is a separate category.
All dollar sums are in US$.
ACKNOWLEDGEMENTS
We are extremely grateful to Gerry Stoker and Grace Skogstad who pro-
vided us with incisive comments on early drafts and whose endorsements
the completed book now carries. Thanks to Brian Head who read and com-
mented on several draft chapters. Thanks to Mike Keating who read some
early draft chapters and keenly supported this project. We have also ben-
efited from the comments, suggestions and examples offered to us by the
undergraduate and postgraduate students at the University of Queensland
upon whom we have piloted various versions of our arguments.
Stephen Bell
Andrew Hindmoor
1 A state-centric relational
approach
T HE WORD GOVERNANCE derives from the Classical Greek

kybernan, meaning to pilot, steer or direct. The term has a long heritage
and might be applied to any number of activities. In the Elizabethan Age
in England people talked about the governance of the family. These days
many use the term corporate governance to refer to the management and
control of companies (Kim & Nofsinger, 2007; Maillin, 2007), or more
broadly the governance of particular organisations. This book focuses on
the increasing use of the term governance to describe the attempts of
governments or other actors to steer communities, whole countries, or
even groups of countries in the pursuit of collective goals.
A large body of work presents what we call a ‘society-centred’ focus upon
governance. The argument is that the last few decades have resulted in a
‘fundamental transformation not just in the scope and scale of government
action, but in its basic forms’ (Salamon, 2002, 1–2). National governments
are said to have been ‘hollowed out’ by neo-liberal governments intent
upon ‘rolling back the frontiers of the ‘state’ (Thatcher, 1993, 744–5),
by globalisation, and by the growth of international and occasionally
supra-national organisations. The alleged weakening of the state is said
to be driven by growing fiscal or legitimacy deficits, by institutional frag-
mentation, or by pressures from below from social groups wanting more
say in policy and governance. As a result of these pressures, it is argued, gov-
ernments now lack the ability to govern unilaterally and must instead work
with interest-groups, private firms, charities, non-governmental organisa-
tions (NGOs), supra-national organisations, and a range of other bodies if
they are to achieve their objectives.
This book rejects many of these claims. In particular, states have not
been hollowed out and the exercise of state authority remains central to
1
2 RETHINKING GOVERNANCE
most governance strategies. The main problem with many of the current
approaches to governance is that the role of the state has either receded from
view or remains ambiguous. In our view, governments and the broader set of
agencies and public bodies that together constitute the state are, and should
remain, central players in governance processes. We thus reject the notion
that there has been any general loss of governing capacity and instead agree
with Tabatha Wallington, Geoffrey Lawrence and Barton Loechel (2008, 3)
who argue that governance is about governments seeking to ‘govern better
rather than govern less’. We also argue that the scope and scale of gover-
nance is actually expanding, and that state-based, hierarchical or top-down
forms of governance are doing likewise. States are attempting to expand
their governing capacities not only by strengthening central state institu-
tions but by forging new governance partnerships with a range of social
actors.
We thus agree that governments have, in recent decades, adopted a
broader range of governance strategies. But we disagree that this consti-
tutes a ‘fundamental transformation’. This is partly because alternative
governance strategies have a far longer pedigree than many of those writ-
ing about governance recognise, and also because states generally retain
effective control over such arrangements. States are constantly choosing
new policy goals and learning to pursue them in different ways. But while
much has changed, the state remains a central actor in governance arrange-
ments. We therefore define governance from a state-centric perspective and
argue that governance arrangements are largely created and orchestrated
by the state to help govern society. Governing can generally be defined as
shaping, regulating or attempting to control human behaviour in order
to achieve collective ends. Yet effective governance often requires states
to build strategic relationships with a range of non-state actors. This is a
process of engagement that Donald Kettl (2002, 123) refers to as ‘govern-
mentalising’ previously non-governmental sectors in attempts to draw in
extra governing resources from society, allowing governments to increase
their reach without necessarily growing in size. Hence, we argue for a def-
inition of governance from a state-centric relational perspective and define
governance as the tools, strategies and relationships used by governments to help
govern. This approach suggests that governance can be seen as an extension
of more traditional notions of public policy, except that the rubric of gov-
ernance implies experimentation with a wide variety of governing strategies
and the involvement of a wider range of non-governmental actors.
Our approach is state-centred because we argue that governments rely
upon hierarchical authority to implement their policies, and because, even
A S TAT E - C E N T R I C R E L AT I O N A L A P P R O A C H 3
when governments choose to govern in alternative ways, the state remains the
pivotal player in establishing and operating governance strategies and part-
nerships. We thus see governance and changes in governance arrangements
as substantially driven by changes in state preferences and strategy. Our
approach to governance is also relational because we emphasise the extent
to which governments, in establishing and operating governance strategies,
develop strategic relationships or partnerships with a range of non-state
actors. For this reason, ultimately, the choice between society-centred and
state-centric approaches to governance, or between governance and gov-
ernment, is a false one. Our state-centric relational approach emphasises
the importance of the state and also the importance of state–society rela-
tions in governance. Our state-centric relational approach thus absorbs the
relational aspects of the society-centred approach, but from a state-centric
perspective.
The rest of this chapter elaborates on these claims. We examine the
society-centered perspective on governance and ask to what extent changes
in governance amount to a fundamental transformation. We then define
our state-centred relational approach and outline the range of ways in
which governments have deployed different ‘modes of governance’ in order
to govern.
S O C I E T Y- C E N T R E D G O V E R N A N C E
Much of the existing literature on governance is society-centred: it empha-
sises the proliferation of complex horizontal forms of societal relations and
governance networks that are said to have marginalised government or ren-
dered its role ambiguous. As Eva Sorensen and Jacob Torfing (2008a, 3)
put it: ‘the sovereign state . . . is losing its grip and is being replaced by new
ideas about pluricentric government based on interdependence, negotia-
tion and trust’. We begin by critically reviewing this writing as well as the
notion that governance represents a ‘fundamental transformation’ (Sala-
mon, 2002, 1–2) or a ‘substantial break from the past’ (Stoker, 1998, 26)
in the scope, scale and basic forms of government action.
In our view, the society-centred approach consists of two parts. The first
is that the alleged shift from government to governance has resulted in the
involvement of a wider range of actors within governing processes, and
that these actors are held together not by rules, regulations and hierarchy
but by informal and relatively egalitarian networks. Hence a major theme
within the society-centred approach consists of a focus upon partnerships
and networks and the blurring of the boundaries between the public and
private sectors. According to Mark Bevir and Rod Rhodes (2003, 55–6),
‘networks are the defining characteristics of governance’ and offer a ‘coordi-
nating mechanism notably different from markets and hierarchies’. Policy
network is the name given to the formal and informal links and exchanges
that develop between governments and civil society associations, NGOs
and interest-groups in specific policy arenas (Marsh & Rhodes, 1992a, b).
A major proposition of the society-centred approach is that an increasing
number of policy decisions are being taken in and through self-organising
policy networks.
Thus Lester Salamon (2002, 2) associates governance with ‘an elabo-
rate system of third-party government in which crucial elements of public
authority are shared with a host of nongovernmental or other-governmental
actors, frequently in complex collaborative systems’. Rod Rhodes (1997,
15) defines governance in terms of ‘self-organising inter-organisational net-
works characterised by interdependence, resource exchange’ and a shared
acceptance of the ‘rules of the game’. In a recent edited work, Sorensen
and Torfing (2008a, 3) acknowledge that ‘forms of top-down government
remain in place’, but nevertheless suggest that a major shift in governance
has occurred and that ‘public management increasingly proceeds in and
through pluricentric negotiations among relevant and affected actors on
the basis of interdependency, trust and jointly developed rules, norms and
discourses. The ‘surge in governance networks’, they continue, ‘is prompted
by the persistent critique of traditional forms of governance in terms of
hierarchies and markets.’ Similarly, Mark Bevir (2007, 2) uses the term gov-
ernance to describe a ‘shift from a hierarchic bureaucracy to a greater use
of markets and networks’; while Adrienne Heritier (2002a, 185) concludes
that governance entails ‘types of political steering in which non-hierarchical
modes of guidance . . . are employed’.
The second part of the argument is that the challenges to the state
noted above, as well as the involvement of a larger range of actors in the
process of governing, have resulted in government being superseded or at
least marginalised. As Eerik-Hans Klijn and Joop Koppenjan (2000, 136)
argue, a ‘broad consensus has developed around the idea that government
is not actually the cockpit from which society is governed’. Andrew Jordan,
Rüdiger Wurzel, and Anthony Zito (2005, 480) suggest that ‘most scholars
associate governance with the decline in central government’s ability to steer
society’. Similarly, for Gerry Stoker (1998, 17), ‘the essence of governance
is its focus on governing mechanisms which do not rest on recourse to the
authority and sanctions of government’. Maarten Hajer (2003) contends
that governance has led to a dispersal of power and the emergence of an
‘institutional void’ in which there are endless negotiations but no clear rules
about how policy should be decided. Finally, Rhodes (1997, 52) describes
governance networks as operating with ‘significant autonomy from the
state’.
To be sure, there are some countries in the world where central gov-
ernment has collapsed and non-state actors have stepped in to perform at
least some of the functions previously performed by the state. In Somalia
the civil war that raged between 1988 and 1992 resulted in the deaths of
around a quarter of a million people. In its aftermath, informal coalitions
of business leaders, clan elders and Muslim clerics assumed responsibil-
ity for constructing a system of local courts and other dispute-resolution
mechanisms in the absence of any functioning state (Menkhaus, 2007).
As Chapter 7 on community engagement explains, Elinor Ostrom (1990;
Dolsak & Ostrom, 2003) has shown that non-state actors are sometimes
capable of developing elaborate but informal rules, norms and conventions
governing the allocation of natural resources. There are, furthermore, a
number of instances in which NGOs have pressed firms to collectively
develop and voluntarily agree to abide by codes of conduct in the appar-
ent absence of any state involvement. David Vogel (2008, 262) reports
that there are now more than 300 such codes, primarily addressing either
labour or environmental practices, on such high-profile political issues as
child labour, sweatshops, diamond mining and fair-trade coffee and cocoa
production. ‘Non-state market-driven’ arrangements of this sort (Cashore,
2002) come closest to a model of ‘governance without government’. Nev-
ertheless, a later chapter shows that such governance arrangements are
limited in scope, are often poorly enforced, and are pursued by NGOs as
a second-best alternative to state action.
We acknowledge that not every writer who points to the involvement of
a larger range of actors in the process of steering society is willing to discount
the state. Janet Newman (2005, 1) suggests that ‘governmental power is
both retreating – with state institutions being slimmed down, hollowed
out, decentred and marketised – and expanding, reaching into more and
more citizens’ personal lives: for example their decisions about work, health
and parenting’. We concur with this latter view. In several of their texts Jon
Pierre and Guy Peters (2000; 2005) have offered an avowedly ‘state-centric’
perspective on governance, proclaiming that, ‘despite persistent rumours
to the contrary, [the state] remains the key political actor in society and
the predominant expression of collective interests’ (2000, 25). Yet, even
here, changes in, and the limits of, the state’s authority are emphasised.
Although Pierre and Peters dismiss claims that the state is disappearing, they
nevertheless maintain that its role and capacities have been fundamentally
changed. The state is no longer the pre-eminent actor whose ‘centrality can
be taken for granted’ and which can ‘be employed to enforce the political
will of the dominant political constituency’ (p. 82).
The society-centred approach to governance also downplays concepts
such as political power and authority (Koppenjan, 2008, 133). For New-
man (2005, 4), ‘governance theory offers an account of the dispersal of
power within and beyond the state, undermining the privileged place of
representative democracy’ (see also Hajer, 2003, 177). Vasudha Chhotray
and Gerry Stoker (2009, 12) see governance as a system that is ‘not neces-
sarily hierarchical in nature’. Similarly, Sorensen and Torfing (2008a, 10)
argue that within governance networks, ‘nobody can use their power to
exert hierarchical control over anybody else without risking ruin to the
network’. In this view, hierarchy, power struggles and conflict seem to
get marginalised or replaced by contracts, bargaining, negotiation, net-
working, mutual dependence, or reciprocity and trust relations. This is a
horizontal view of politics in which the state is receding or playing a more
marginal role in a system of ‘self-organising networks’ built on bargain-
ing and negotiation, rather than authority structures. Hence, when writers
such as Sorensen and Torfing (2008a) emphasise the centrality of ‘non-
hierarchical forms of governance’, the ‘absence of top-down authority’ or
the ‘role of horizontal networks of organised interests in the production
of public policy and governance’ (pp. 3, 44, 3; see also Borzel & Panke,
2008), this implies that public actors do not have any distinctive role or
authority vis-à-vis private actors. Indeed, Tanja Borzel and Diana Panke
(2008, 155) argue that ‘public and private actors enjoy equal status’ in
such networks. In other words, the role of government is marginalised or
rendered seemingly equivalent to that of private actors amidst processes of
horizontal bargaining and negotiation.
A F U N D A M E N TA L T R A N S F O R M AT I O N ?
The society-centred account argues that states are being weakened by an
array of forces and that, as a result, governments now govern less frequently
through the unilateral application of top-down, hierarchical, authority and
more frequently in partnership with non-state actors through markets,
network associations and other ‘new’ forms of governance. What are we to
make of these empirical claims? We focus in detail on the ‘resilience’ of the
state in the next chapter, but here it is worth exploring the idea that other
modes of governance have increasingly marginalised the state.
We do not doubt that governments across the world are more likely
than they once were to make use of, in particular, market mechanisms.
In some cases – most notably the cap-and-trade provisions found in emis-
sions trading systems – market mechanisms have acquired a high political
profile. We accept that faith in market mechanisms is more than a passing
policy fad. Neo-liberal governments and international organisations like
the World Bank were the first to eulogise the use of markets, but their
acceptance has spread beyond this relatively narrow political base. We also
recognise that governments have increasingly experimented with strategies
to engage the community and governance through partnering with civil
society associations. In this sense, the state is certainly experimenting with
a wider palette of modes of governance, as we outline below.
Nevertheless, the extent to which there has been a ‘fundamental trans-
formation’ in the ‘basic forms’ of governance can be exaggerated (Salamon,
2002, 1–2). In most policy areas in most countries, top-down governance
through hierarchy remains the most frequently employed governance strat-
egy. Consider, in this regard, the illuminating study of European environ-
mental policy by Jordan, Wurzel and Zito (2005). They document the
extent to which various ‘new’ environmental policy instruments – eco-taxes,
tradable permits, voluntary agreements, eco-labels – have been adopted
in seven European countries. They found that, while every country had
adopted at least one new policy instrument, ‘there has been no wholesale
and spatially uniform shift from government to governance’ (p. 490).
Hierarchy is not simply holding its own against other governance mech-
anisms. In many cases it is resurgent, as described in Chapter 4. Govern-
ments have increasingly come to rely upon hierarchical solutions to address
new policy problems such as:
r speeding: heavy fines, surveillance cameras, compulsory educational
programs
r illegal immigration: fines for lorry drivers or airlines caught intentionally
or unintentionally carrying immigrants
r obesity: bans on the advertising of junk food during children’s television
programs, on the sale of junk food within school premises, on the use
of certain trans fats in the preparation of food
r drug abuse: compulsory drug testing for prisoners and, in some countries,
public servants and, in almost every country, longer prison sentences for
those caught dealing
r anti-social behaviour: court orders in Britain banning people from fre-
quenting a certain area or socialising with certain people
r smoking: bans on smoking in public places
r terrorism: new legislation making it a criminal offence not simply to

plan a terrorist attack but to acquire information likely to be of use to a
terrorist.
In some cases the forms of hierarchy employed by governments have
changed. Governments are now more likely to employ ‘smart’ regulatory
systems in which the threat of fines and other punishments is accompanied
by the promise of self-regulation and extensive consultation. Governments
have also devolved more authority to quasi-independent bodies such as
central banks, regulatory agencies and courts (Vibert, 2007). Yet such
developments do not spell the end of governance through hierarchy. Smart
regulatory systems still rely upon the threat of hierarchical intervention to
encourage firms and associations to regulate their own activities. Indeed,
critics have suggested that smart regulatory systems increase overall govern-
ment control over society by giving officials the opportunity to intervene
in the absence of any clear legislative mandate (Berg, 2008, 45–55). As
for the shift toward quasi-autonomous bodies such as independent cen-
tral banks and regulatory authorities, it should be remembered that they
remain a formal part of the state with their authority being parcelled out
by government.
Hence, even where governments have embraced alternative governance
arrangements, hierarchy remains of central importance. Pierre and Peters
(2006, 218) suggest that governments, ‘rather than relying on command
and control instruments’, are now ‘utilizing “softer” instruments to achieve
their policy goals’. We question this depiction because, although govern-
ments are experimenting with different modes of governance, this does
not necessarily imply a shift away from hierarchical command and control
strategies or from the use of governmental or state authority in structuring
a range of governance modes. Instead, the new instruments are running
in parallel with command and control strategies because the operation
of a wide range of governance mechanisms usually entails hierarchical
state oversight; Chapter 3 explores this process further under the rubric of
‘metagovernance’.
There are two other reasons why we are sceptical about the notion of a
fundamental transformation in the state’s role. First, we believe that those
writing about governance risk exaggerating not only the extent to which
governments now govern through markets, associations and community
engagement but also governments’ past dependence upon hierarchy. Con-
sider the way in which governments can contract with private firms or
voluntary organisations to provide particular services: an important com-
ponent of governance through the market. There has, undoubtedly, been
a dramatic growth in the use of such contract arrangements. The basic

principle of contracting-out services is, however, a venerable one. Services
provided by private firms under contract to governments in the 17th and
18th centuries included prison management, road maintenance, collection
of tax revenue and refuse collection. In that period the British government
granted the East India Company monopoly control on overseas trade with
the East Indies, India and China and the authority to use armed force to
protect its position (Bernstein, 2008, 214–40). Meanwhile, the convict
ships that carried prisoners from Britain to Australia were operated by
private profit-making firms (Industry Commission, 1996, 74).
Neither can the involvement of organised interests in the policy pro-
cess be considered novel. In the 1950s President Eisenhower warned of
the influence exercised by the military-industrial complex over the United
States’ defence and procurement policy. In the 1960s social policy inno-
vations such as the Model Cities program saw governments engaging with
neighbourhood and religious organisations. And academic work on Amer-
ican democracy in the 1960s pointed to the influence exercised by interest-
groups in shaping public policy (Lowi, 1969). In many European countries
‘corporatist’ power-sharing arrangements between governments and peak
associations representing the interests of unions and/or business have been
an established feature of the governance landscape for decades. We thus
reject the claim by Rod Rhodes (1996, 652) that governance implies ‘a
change in the meaning of government’ or ‘a new process of governing’ (see
also Stoker, 1998, 26).
Our second reason for scepticism is that, even where governments have
chosen to cede some of their authority to non-state actors, they always
retain the authority to change governance arrangements. The authority
the state gives to non-state actors is only ever on loan, and such arrange-
ments are always potentially reversible. Consider, for example, the fate
of the United Kingdom’s privatised rail network. In 1994 a new profit-
making firm, Railtrack, acquired ownership of all track, signalling and
stations. Following a fatal rail crash that revealed systemic weaknesses in
Railtrack’s engineering culture, the rail network ground to a halt in 2000
and, largely as a result of the losses it incurred during this period, Railtrack
was bankrupted the following year. A new company, Network Rail, was
subsequently established that, in the place of a responsibility to maximise
the value of shareholdings, had a board of directors with a responsibility
to pursue the public interest. More specifically, Network Rail is required
to set policies in a manner consistent with guidelines devised by the Office
of Rail Regulation. Nominally, Network Rail is still classified as a private
company. In reality, and as ministers have frequently boasted, Network

Rail is controlled by the Department of Transport, which sets the overall
policy framework within which the Office of Rail Regulation and Network
Rail operate.
A S TAT E - C E N T R I C R E L AT I O N A L
APPROACH
One of our key arguments then is that governance through hierarchical
control imposed by the state is alive and well. In some arenas – defence,
security, monetary policy – policies continue to be made and implemented
hierarchically by the state and consultation is non-existent or extremely
limited. And when governments have chosen to govern in alternative ways,
we argue that the state usually retains a pre-eminent position. On this basis
we argue that states and governments remain critical players in governance
and that governance is also about state–society relationships, whatever the
governance arrangements in place.
Governments and state agencies are attempting to further boost their
capacities by employing an expanding array of governance strategies. Gov-
ernments can choose how they wish to govern and can exercise this
choice without necessarily limiting their own powers. As Hans Andersen
(2004, 7) writes:
Many researchers have claimed that the restructuring of governance is a gen-

eral retreat of government and the state . . . yet there is no reason to assume
that the rise of governance necessarily leads to a decline of government . . . the
main reason for the rise in state capacity through restructuring is . . . the fact
that the state is now able to influence hitherto non-governmental spheres of
social life through partnerships, i.e. an enlargement of state competencies
[see also Keating, 2004; Pierre & Peters, 2000, 49].
Thus, by building close relationships with non-state actors through alter-

native governance arrangements, state leaders are attempting to enhance
their capacity.
How can this happen? One way of thinking about the relationship
between state and non-state actors is in terms of a mutually beneficial
exchange. By working with other actors the state can sometimes achieve
more than it could by working on its own. The exact nature of these
exchanges will vary depending on the type of governance mechanism being
employed and the goals being sought. In general terms, however, govern-
ments can often acquire greater legitimacy and assistance in implementing
their policies by developing relations with interest-groups and community
bodies. By working with private firms, governments can purchase expertise
and, in the case of controversial decisions, a certain amount of political
credibility. Policies that have been endorsed by key stakeholders are more
likely to be regarded as legitimate by the media and public. In return, gov-
ernments must concede to these actors at least some measure of influence
in the policy process. Essentially, governing capacity is enhanced or poten-
tially enhanced in such cases because governing relies not only on the state
but on a broader array of actors who collectively bring more capabilities to
the table than the state alone can.
The existence of exchange relationships between state and non-state
actors does not, however, mean that these relations are equal. As we describe
more fully in the next chapter, and as Vasudha Chhotray and Gerry Stoker
(2009, 22) observe, states are often able to ‘dominate the exchange’ (also
see Pierre & Peters, 2000, 100; Flinders, 2006, 245). Michael Lister and
David Marsh (2006, 255) say that ‘modern governance involves the state in
more complex relationships with other governmental and societal actors,
but it doesn’t inevitably reduce its role or power’. Similarly, Martin Smith
(2006, 32) suggests in a discussion of pluralist theory:
The problem with [society-centred] governance accounts of state reform

and development is that they fall back on the simplistic assumptions of
pluralism. They . . . ignore the asymmetries of power that potentially exist
even in network relations. Perhaps the main problem is the way in which
governance assumes that the central state has lost power when there is a
raft of empirical evidence to demonstrate the high level of resources and
authority that remains within the central state.
There is a second reason to be wary of assuming that governments

have been superseded or marginalised. Even where governments choose to
govern through markets, associations and community engagement, they
usually retain a responsibility for metagovernance, or the ‘government of
governance’. As Chapter 3 explains, whatever the governance mechanism
employed, the state typically plays (and should play) a key role in over-
seeing, steering and coordinating governance arrangements; in selecting
and supporting the key participants; in mobilising resources; in ensur-
ing that wider systems of governance are operating fairly and efficiently;
and in taking responsibility for democracy and accountability issues.
Governments and state agencies thus typically play roles at two levels
in governance arrangements. First, they are, with others, players in specific
governance arrangements. Second, they also have a metagovernance func-
tion, an overall management and oversight role, that transcends specific
governance arrangements.
Existing discussions about the role of the state in governance arrange-
ments sometimes encourage us to think about a spectrum of possible
positions running from, on the one hand, society-centred governance with
minimal governmental presence to, on the other, a state-centric view of
governance. Such a typology underpins the work of Jon Pierre and Guy
Peters (2005) in Governing Complex Societies (see also Chhotray & Stoker,
2009, ch. 1; Jordan, Wurzel & Zito, 2005). Pierre and Peters identify five
models of the state and society interactions in governance that are now said
to be operating among contemporary democratic systems. These models
are distinguished in terms of the actors involved, the nature of the pro-
cesses and political dynamics at work, and the outcomes of the governing
processes; together they constitute a ‘continuum ranging from the most
dominated by the state to those in which the state plays the least role’
(p. 11).
r The etatiste model: government is the principal actor for all aspects of
governance and can control the manner in which societal actors are
involved, if at all, in governance.
r The liberal-democratic model: government is influenced by interest-
groups but can nevertheless ‘have the opportunity to pick and
choose . . . [who] it will permit to have influence’ (ibid).
r The state-centric model: the state ‘remains at the centre of the process’ but
has institutionalised its relationships with social actors in corporatist-
type arrangements.
r The so-called Dutch governance school model: the state is ‘merely one
among many actors involved in the process’ and ‘society may be the
most powerful actor’ (ibid).
r The governance without government model: the state has lost its capacity
to govern and is, at best, an arena within which private actors play
out their own interests to create more or less self-steering governance
arrangements (p. 12).
This typology in which the authority of the state waxes and wanes
loses sight of the integral role that governments play in all governance
arrangements; a role that is the foundation of our state-centric relational
approach to governance. Government and governance are not mutually
exclusive alternatives between which societies must choose. They are not
even the end-points along a spectrum of institutional arrangements. As

we argue throughout this book, it is typically the case that government
is routinely and authoritatively implicated in the exercise of all forms of
governance.
States are central actors because they can bring to bear enormous finan-
cial resources to develop and support governance arrangements. In recent
decades it has become commonplace to observe that states operate under
continuous fiscal stress. Yet as we argue in the following chapter, the finan-
cial position of most states remains reasonably robust. In metagoverning
its relationships with other actors, a state can deploy not only vast financial
resources but large and often highly trained workforces. The US fed-
eral government employs around 55 000 physical and biological scientists,
68 000 computer specialists and 33 000 accountants and auditors. More
generally, and at a local as well as national level, governments employ large
numbers of policy officers trained to identify policy problems, find possible
solutions, and negotiate agreements.
Another source of authority states have at their disposal typically sus-
tains their dominance of exchange relationships. Governments do not
simply operate within exogenously given sets of governance rules. They
also have an authority, not possessed by any other actor, to choose the
governance rules. Governments select the mechanisms to address policy
problems: they can choose governance partners and can choose whether
to govern through hierarchy, markets, persuasion, community engagement
or associations. Having chosen which governance mechanism to employ,
governments can also choose how to structure governance arrangements.
In the case of governance through markets, governments can choose which
services to contract-out and the criteria by which contracts are awarded.
In the case of governance through community engagement, governments
can choose the circumstances in which to engage with community groups
and, invariably, how to interpret and respond to the results. Furthermore,
governments can always choose to revise the existing governance mech-
anisms. This is a significant power because, even if governments do not
choose to change governance arrangements, the knowledge that they can
do so is, in itself, an important resource. Non-state actors will sometimes
be deterred from pressing strident demands upon the government if they
know that the government can simply change the underlying governance
mechanism.
The choices governments make incur opportunity costs. Governing in
partnership with other actors often requires governments to make policy
concessions. Indeed, governing unilaterally through hierarchy can result
in a loss of legitimacy. This is hardly surprising. Every action incurs

opportunity costs. In some cases the distribution of resources between
state and non-state actors means that states will incur significant costs if
they operate unilaterally. Chapter 8 suggests that, if they are to govern effec-
tively, governments must often learn to work constructively with business
associations. Yet, even here, governments, in our view, retain a meaningful
choice about how to govern. In the first place, governments can still choose
how to structure their governance arrangements. In the case of governance
through association, governments can set agendas and attribute ‘public
status’ to favoured groups (Offe, 1981). Second, governments can, if they
wish, choose to incur considerable short-term costs by governing unilat-
erally in order to strengthen their long-term position. Upon being elected
to office, neo-liberal governments in the United Kingdom, Canada, and
Australia chose to dissolve existing corporatist arrangements. In doing so
these governments risked considerable political damage. By changing the
rules of governance, however, governments can hope to secure a long-term
advantage by undermining their opponents.
Governments do not always find themselves in a position to endure these
short-term costs. In 2006 the French government, led by Prime Minister
Dominique de Villepin, tried to change the prevailing governance rules by
excluding the trade union movement from discussions about the introduc-
tion of a new employment contract that would have allowed employers
to fire employees under the age of 26 during the first two years of their
employment. In this case the government underestimated its ability to
withstand the resulting political protests. Following a general strike that
attracted the support of about two million people, the proposed legislation
was eventually abandoned. Governments are not, however, always so con-
strained. Equipped with an express mandate for reform, President Nicholas
Sarkozky more recently managed to oversee a number of similar reforms
to French labour markets.
States alone have the capacity to change the rules of the governance
game because when operating within nation-states they continue to possess
legal sovereignty in the sense that they remain the ‘final and absolute
authority in the political community’ (Hinsley, 1986, 26). Governments
are constrained by constitutions, parliaments, elections and the media, but
they remain authoritative actors who can change the rules of the political
game. Governments can, if they wish, impose legal restrictions upon trade
unions, side-step pressure groups whose views they oppose, forbid private
firms from operating in certain locations or selling certain products, and
renege upon the contracts they have signed with private firms.
On what basis does the state’s legal sovereignty rest? There are two very
different answers to this question, but both of them emphasise the cen-
trality of the state. One theory is that the state’s sovereignty rests upon
its legitimacy: that is, upon a popular acceptance that the state is entitled
to be the final and absolute authority in the political community and has
the right to make authoritative decisions, largely because its leaders hold
a democratic mandate from the people. In this sense legitimacy is linked
directly to notions of democratic authority. Over the last few decades,
trust in politicians and willingness to participate in the political process
have fallen, in some cases dramatically (Stoker, 2006). A second notion
underpinning legitimacy is that the state retains political legitimacy in the
sense that people still routinely expect governments to solve policy prob-
lems and steer society. In a classic statement of neo-liberal philosophy,
Ronald Reagan used his inaugural presidential address in 1980 to argue
that, ‘in the present crisis, government is not the solution to our problem;
government is the problem’. Yet in a secular age it is still government and
not God to which people are most likely to turn. When a flood strikes,
unemployment increases or an inquiry reveals falling standards of care for
the elderly or the mentally ill, it is elected politicians or, occasionally, the
executive of a government agency who appear on our television screens
to promise swift action. When the American sub-prime mortgage mar-
ket started to fail in September 2007, placing individual banks and the
wider capital market under enormous financial pressure, it was the federal
government and the US Federal Reserve which was called upon to inject
liquidity into markets and support and even nationalise parts of the banking
system.
A second and more brutal argument is that the state’s sovereignty rests
upon its monopoly on the legitimate use of violence. This might seem
dramatic, but the capacity of the state to unilaterally alter governance rules
might, ultimately, be thought to depend upon its capacity to force other
actors to behave in certain ways. Just as states continue to possess signifi-
cant financial and bureaucratic resources, so they continue to possess not
only an effective monopoly on the legitimate use of violence in society
but a near-monopoly on the use of all violence. In some countries, well-
organised criminal gangs pose a threat not only to public order but to the
financial stability of the state. Yet in recent years the Italian judiciary (Della
Porta, 2001) and (with a great deal of American assistance) the Colombian
army (Bowden, 2001) have shown that they are capable of frustrating the
activities of, respectively, the Mafia and the Medellin and Cali drug cartels.
Concerns have also been expressed about the legitimacy of, and the dangers
posed by, the large and legally protected private security forces employed
by Russian energy companies and by large American security firms such
as Blackwater (recently renamed Xe for reasons that are discussed in
Chapter 6). These concerns need to be placed in context. Blackwater
executives have spoken about creating a brigade-sized unit of around 2000
troops capable of being deployed to world trouble-spots at short notice
(Scahill, 2007, 348–9). The US Army by contrast consists of around
400 000 enlisted soldiers and 80 000 officers.
MODES OF GOVERNANCE
Far from withering away, states have adapted to new environments and
remain the public faces of governance. We therefore remain profoundly
sceptical of transformationalist arguments and agree with Graham Wilson
(2000, 235) when he says that: ‘the popularity of anti-state rhetoric in
the 1980s and 1990s [has] led many to confuse changes in the modes of
state activity . . . with a decline in the significance of the state’. Our state-
centric relational approach to governance recognises that governments have
developed new tools, strategies and relationships in order to govern and that
governments can therefore choose between different modes of governance.
This book distinguishes five modes of governance: hierarchy, persuasion,
markets, community engagement, and associative governance.
VIA HIERARCHY
Governance via hierarchy, or top-down governance, occurs when govern-
ments or agencies of the state act authoritatively to bring about an outcome.
Governments and state agencies directly allocate resources through taxing
and spending, or they attempt to impose order, rule and outcomes via direct
regulatory, legal and enforcement measures. In this mode of governance
state authority is used to foster order, rule and collective capacity. When
governments ban smoking in public places (thus directly bringing about
an outcome) or raise the taxes on a packet of cigarettes (thus changing
the incentives for smokers in order to bring about an outcome), this is an
example of governance via hierarchy.
VIA PERSUASION
While an enormous amount has been written about hierarchy and mar-
kets as instruments of governance, far less has been said about governance
through persuasion – a mode of governance achieved through inculcating

modes of ‘self-discipline’ or ‘compliance’ in target subjects. Yet attempts
by governments to persuade people to change their behaviour have become
a familiar feature of everyday life. As well as inducing citizens to change
their behaviour through laws, taxes or regulations, governments also try to
change their attitudes and behaviour by persuading them to smoke less, eat
more healthily, drink less alcohol, save water, recycle their rubbish, report
suspected terrorists, engage in voluntary work, use public transport, take
regular exercise, undertake regular medical examinations, gamble respon-
sibly, eschew drugs, and save for their retirement.
VIA MARKETS
One obvious change in the way in which governments govern is the grow-
ing commercialisation of government and the use of markets and contracts
in governance processes. Governments across the world have contracted-
out services to private firms and encouraged the development of public–
private partnerships. Governments have privatised state-owned industries
and deregulated other markets. They have also established new markets
to tackle policy problems such as climate change. Yet we are sceptical of
the claim that markets, any markets, operate independently of govern-
ment. Rather than ‘free markets’, we talk about ‘managed markets’ and
suggest that ‘the shift to marketisation largely represents an attempt by
government to enhance or restore their power to achieve their economic
and social objectives, while minimising any loss of efficiency’ (Keating,
2004, 6).
VIA COMMUNITY ENGAGEMENT

In the 1970s members of the New Left argued that bureaucratic struc-
tures had become too large and unwieldy and that the bureaucrats in them
had become divorced from the public they were meant to be helping. Far
from transforming people’s lives, welfare expenditure had simply led to
the ‘regulation of the poor’ (Squires, 1990; Smart, 1991). But whereas a
similar neo-liberal critique of hierarchy led to a preference for governing
through markets, the New Left argued for a radical democratisation of
politics through the devolution of decision-making powers to local citi-
zens and communities. In the 1990s community engagement became a
favoured strategy of local and, eventually, central governments seeking
to enhance their democratic credentials and legitimacy. Governments are
now awash with citizens’ juries, consensus-building conferences, delib-

erative polling surveys, public hearings and focus groups. As a working
example of such an approach consider the system of Participatory Budget-
ing developed in Porto Alegre, Brazil, in the late 1980s and now practised
in around 300 cities across the world. Following a series of preliminary
open meetings to discuss past budget performance and future budget pri-
orities, citizens elect a Budget Council, which negotiates final investment
priorities and a budget for the city (Fung & Wright, 2003; Stoker, 2006,
187–9).
V I A A S S O C I AT I O N S
In associative or network governance arrangements, the state works with
firms, private associations and interest-groups to develop and implement
policy. Through both corporatist and private-interest government arrange-
ments (Streeck & Schmitter, 1985), states offer business associations and
other groups influence over the contents of public policy in exchange for
public support, access to information, and direct assistance in implement-
ing policy. The involvement of non-state actors in the policy process is, in
itself, nothing new. What is said to have changed is the scale of interest-
group involvement and the legitimacy accorded to it (Sorensen & Torfing,
2008a, 4). Within a number of European countries, for example, peak
organisations representing the interests of labour or industry have on occa-
sion assumed the role of formal co-legislators who are able to negotiate
the contents of European Union directives (Treib, Bahr & Falkner, 2007,
10). Indeed, Rod Rhodes, whose work on governance we have already
mentioned, argues that the shift from what he describes as government
to governance is synonymous with the proliferation of networks in which
public and private sector actors exchange resources.
CONCLUSION
This chapter has outlined our critique of existing ‘society-centred’ accounts
of governance and introduced our ‘state-centric relational’ alternative to
them. Our basic aim here has been to emphasise two points: the continu-
ing centrality of governments to the process of governance; and the degree
to which governments’ capacity to govern requires the development of
effective working relationships with a range of non-state actors. In the fol-
lowing two chapters we develop these themes: first by critically examining
arguments that the state has been undermined by neo-liberal ideology,

regulatory failure and globalisation; and then by looking in more detail at
the notion of metagovernance. The remaining chapters then explore the
role that governments continue to play in designing and managing gov-
ernance through hierarchy, persuasion, markets, community engagement
and association.
2 The resilient state
A RGUMENTS ABOUT GOVERNANCE are closely connected to

those about the fate of the nation-state. In many commentaries, the state is
depicted as ineffective, fiscally constrained, weakened by globalisation and
increasingly unable to respond to the demands placed upon it. In response,
so the argument goes, states have off-loaded substantial responsibility onto
alternative modes of governance. This chapter restores some balance to the
governance debate by highlighting the ongoing importance of the state.
Far from being hollowed out, governments and state agencies remain the
central architects of governance strategies. Rather than receding, states are
changing and adapting in the face of new challenges and experimenting
with more elaborate forms of both hierarchical and relational governance.
It was during the 1970s that social scientists seriously began to question
the existing capacity and future relevance of nation-states. At a time when
the world economy was faltering and terrorist groups like the Baader–
Meinhof Gang in Germany and the Red Brigades in Italy were threatening
the stability of mature liberal democracies, it became common to talk of
government ‘overload’ and an impending ‘legitimacy crisis’. In the 1980s
and 1990s the economic and political environment changed and, in most
countries, improved. Yet many academics, buoyed by concerns about glob-
alisation and regulatory failure, proclaimed the retreat (Strange, 1996),
decline (Mann, 1990) or even death (Hobsbawm, 1990) of the nation-
state.
Arguments about the state underlie discussions of governance and, in
particular, the society-centred account of governance reviewed in the pre-
vious chapter. The so-called hollowing out of the state features as both a
cause and an effect of the alleged shift from government to governance.
It is a cause in the sense that it is thought to have required governments
20
T H E R E S I L I E N T S TAT E 21
to reach out to non-state actors in the private sector, in policy networks

and in communities, to help with – or even assume responsibility for – the
process of governing. At the same time, it is an effect in the sense that the
decision of governments to govern in different ways has undermined state
policy capacity. Having had to learn to work with others, the state is now
unable to work alone.
Yet academic arguments about the decline of the state, although viewed
uncritically in many works on governance, remain controversial. In some
cases, specific variants of the hollowing-out argument have been overtaken
by events. The concern of many UK political scientists in the 1970s about
government overload soon gave way to equally strident critiques of the
‘authoritarian populism’ (Hall, 1985) and ‘executive dictatorship’ (King,
1988) of Margaret Thatcher’s Conservative governments in the 1980s.
At other times, eye-catching academic theories about the infirmity of the
state have encouraged government reform, as with arguments about policy
implementation or policy coordination; or they have given way to more
nuanced academic debates that recognise the strengths and weaknesses of
the state, as with arguments about globalisation.
This chapter evaluates arguments about the weakening of the state as
they relate to the public choice theory of ‘state failure’, the ‘fiscal crisis’ of
the state, the implementation ‘gap’, the ‘decentring’ of national govern-
ments, the loss of state legitimacy, and globalisation. Chapter 1 argued
that the extent of the shift from governance through hierarchy to gover-
nance through markets, associations and community engagement is often
exaggerated and that the choice between society-centred and state-centric
approaches to governance is a false one because governments, in establish-
ing and operating governance strategies, must develop and maintain close
relationships with a range of non-state actors. Building on this, we argue
that the pressures that are supposed to have led to a weakening of the state
have been exaggerated and that governments are changing and adapting in
the face of new challenges and experimenting with more elaborate forms
of relations with society.
P U B L I C C H O I C E T H E O RY A N D
S TAT E FA I L U R E
Public choice (or, as it is often called, rational choice) theory involves the
application of the methods of economics – principally the assumptions
of methodological individualism, rationality and egoism – to the study
of politics (Mueller, 2003, 1; Hindmoor, 2006a, b). Public choice theory,
which was initially developed within American universities in the 1960s

and early 1970s, had by the 1980s acquired a measure of both academic
hegemony (Green & Shapiro, 1994, 3; Lalman et al., 1993, 79) and
practical policy influence (Self, 1993; Sretton & Orchard, 1994).
Perhaps the easiest way to understand public choice theory is to see it
as a reaction to the theory of market failure. One of the achievements of
post-war economic theory was the demonstration that, in conditions of per-
fect information and perfect competition, markets will clear, allowing for
the achievement of a welfare-maximising equilibrium (Arrow & Debreu,
1954). Yet, as many economists soon recognised, one obvious implication
of this fundamental theorem of welfare economics is that imperfect mar-
kets characterised by, for example, monopolies, externalities, public goods
and uncertainty will generate imperfect results, so providing a prima facie
justification for state intervention. In concluding that the existence of mar-
ket failure justified state intervention, public choice theorists argued that
economists had simply assumed that politicians and state officials would
be able and willing to act in the public interest. In their view, economists
had made an entirely misleading comparison between imperfect markets
and a perfect state and so had, unsurprisingly, found in favour of the latter.
In fact, public choice theorists argued, the state would often fail, either
because self-interested bureaucrats would inflate their budgets (Niskanen,
1971) or because self-interested politicians bent on securing re-election
would manipulate the economy for political purposes (Nordhaus, 1975;
Hibbs, 1977), use their monopoly control of economic policy to effectively
‘sell’ policy favours to firms and pressure groups (Rowley et al., 1988), or
use the taxation system to redistribute income to marginal constituencies
or key groups of swing voters (Tullock, 2005).
In denouncing a ‘romantic’ view of politics in which politicians and
public officials can simply be trusted to act in the public interest (Buchanan,
1999), public choice theorists have come to view any and every instance
of state intervention as both harmful and motivated by considerations of
electoral or bureaucratic self-interest. For this reason they have argued for
a balanced budget amendment (Buchanan, 1997); more local referendums
to approve proposed expenditure increases (Tullock, 1993, 78–85); and
more restrictive budget rules to prevent the kind of porkbarrel politics that
led, most famously, to the proposal to build a $400 million ‘bridge to
nowhere’ in Alaska as a part of the 2005 Transportation Equity Act (New
York Times, 21 October 2005).
During the 1970s and 1980s, public choice arguments were popularised
by think-tanks like the Cato Institute in the United States and the Institute
for Economic Affairs in the United Kingdom. They provided intellectual
ammunition and a burgeoning policy agenda for neo-liberal politicians

determined to ‘roll back the frontiers of the state’ and make more use of
markets as a governance mechanism. Yet in political science departments
there has been a growing backlash against the assumptions made and
conclusions reached by public choice theorists (see Green & Shapiro, 1994;
Friedman, 1996; Bell, 2002; Marglin, 2008). One recurring argument is
that they have exaggerated the propensity for the state to fail. In economic
markets competition generates efficiency. Donald Wittman (1995) argues
that competition from opposition parties and between interest-groups and
the press to draw the public’s attention to government malfeasance similarly
ensures the efficiency of political markets. Globalised financial markets are
also likely to punish politicians seeking short-term electoral advantage. The
former governor of the Reserve Bank of Australia, Bernie Fraser, invokes
markets as one reason for the disappearance of opportunities for loose or
politically manipulated monetary policy.
These days . . . such manipulation will be caught out . . . the financial mar-
kets in particular will see through the ruse and punish the perpetrators.
Today’s politicians appreciate that extended front page reportage of a plung-
ing exchange rate, for example, could easily outweigh any positive effects of
a politically inspired cut in interest rates [quoted Bell, 2004a, 120].
The irony is that reforms inspired by public choice theory in the 1980s
and 1990s have enhanced state capacity. The encouragement to devolve
responsibility for monetary policy to independent central banks (Buchanan
& Wagner, 1977) has helped states control inflationary pressures during
the last few decades (Alesina & Summers, 1993). The support offered
by public choice theorists like William Niskanen (1971) to introducing
competition within the public service has arguably enhanced the capacity of
the state bureaucracies to deliver services efficiently. Finally, public choice
arguments about the dangers of regulatory ‘capture’ (Stigler, 1971) have
led governments to rethink the ways in which they interact with private
firms and associations. Far from reining in the state, public choice assaults
have in some ways helped to strengthen it.
GOVERNMENT OVERLOAD AND THE

F I S C A L C R I S I S O F T H E S TAT E
At the same time as those on the political right were using public choice
theory to expose the alleged failings of the post-war state, left-wing aca-
demics influenced by various strands of Marxist thought were predicting
an inevitable ‘fiscal crisis’ for the capitalist state (O’Connor, 1973; Offe,
1984). The basic argument was that governments were caught between the
increasing need to invest additional money in support of private capital,
and their inability to finance that expenditure through taxation. These
arguments found an echo during the 1970s in other and more gen-
eral writings about government ‘overload’ (Brittan, 1975; King, 1975;
Crozier et al., 1975). The post-war years, it was argued, had seen a
rapid and unsustainable growth in public expectations about what gov-
ernments could manage, which, once challenged, had led to a growing
loss of confidence not only in particular political parties but in the demo-
cratic process (Birch, 1984). Summarising this development, Anthony
King (1975, 166) suggested that ‘once upon a time man looked to God
to order the world. Then he looked to the market. Now he looks to gov-
ernment. And when things go wrong people blame not “Him” or “it” but
“them”’.
Concerns about government overload and the apparently inexorable rise
in post-war public expenditure provided part of the intellectual justification
for neo-liberal efforts to cut public expenditure in the 1980s and 1990s.
Even today, fears about excessive government spending continue to drive
political debates in the United States and Europe about the cost of public
health care and pensions. As Gerry Stoker (1998, 18) wryly observed, the
demand to reduce public expenditure means that ‘governance’ is often
regarded within government as a code for spending cuts. Equally, Jon
Pierre and Guy Peters (2000, 52) suggest that the ‘emergence of the new
governance’, has been propelled by an ‘astounding’ decline in the financial
resources of the state. Yet when we look at the data we find that, measured
as a share of gross domestic product, overall state expenditure in nearly
all the countries within the Organisation for Economic Co-operation and
Development (OECD) has either remained constant or slightly increased
over the last 20 years (OECD, 2005a, 212–15). Between 1980 and 2001
overall public expenditure across the OECD increased by almost four per
cent of GDP (Castles, 2007, 22–3). The limited impact of neo-liberalism
upon the state is even more apparent when figures on state expenditure are
placed in historical perspective. In 1870 state expenditure accounted for
around 10 per cent of US gross domestic product; by 1980 this figure had
risen to 31 per cent. In Germany over the same period state expenditure rose
from around 12 per cent to 48 per cent of gross domestic product (Tanzi
& Schuknecht, 2000). Judged against this baseline, little has changed in
recent years. There is no evidence that state expenditure is likely to fall
to the levels experienced in the 1960s, let alone the 1870s. Moreover,
Table 2.1. Total social expenditure as a percentage of gross domestic product, selected
OECD countries, 1980 and 2001
Total social expenditure
Country 1980 2001 % change, 1980–2001
Australia 11.3 18.0 + 6.7

France 22.6 28.5 + 5.9
Germany 23 27.4 + 4.4
Italy 18.4 25.8 + 7.4
Japan 10.6 16.9 + 6.7
Netherlands 26.9 21.8 − 5.1
United Kingdom 17.9 21.8 + 3.9
United States 13.3 14.8 + 1.5
Source: Castles, 2007, 22.
welfare expenditure, one of the key targets of neo-liberal governments,

grew sometimes dramatically in the 1980s and 1990s (Table 2.1).
Why has social welfare expenditure increased over the last few decades?
In most countries it has done so in response to labour market insecurity,
ageing populations and rising health care costs. Neo-liberals may see such
expenditures as evidence of government overload, but governments regard
societal acceptance of the market system and economic openness as contin-
gent upon the continued existence of social protection and redistribution
(Rodrik, 1997, 1998; Alesina & Perotti, 1996). The once conventional
wisdom about globalisation was that it would generate irresistible pres-
sures to reduce social expenditure as states competed to reduce taxes in
order to attract and retain investment capital. Yet empirical studies show
that indicators of globalisation, such as relative openness to trade or cap-
ital movements, are in many cases positively related to various levels of
government expenditure (Rieger & Leibfried, 2003; Brady, Beckfield &
Seeleib-Kaiser, 2005; Castles, 2007). As Dani Rodrik (1997, 53) argues:
this puzzle is solved by considering the importance of social insurance

and the role of government in providing cover against external risk. Societies
that expose themselves to greater amounts of external risk, demand (and
receive) a larger government role as a shelter from the vicissitudes of global
markets. In the context of the advanced industrial economies specifically,
this translates into more generous social programs. Hence the conclusion
that the social welfare state is the flip side of the open economy.
Table 2.2. Total taxation as a percentage of gross domestic product, selected OECD
countries, 1975–2007
Total taxation
Country 1975 1995 2007 % change, 1975–2007
Australia 25.8 28.8 30.6 (2006) + 4.8

Belgium 39.5 43.6 44.4 + 4.9
Canada 32.0 35.6 33.3 + 1.3
Denmark 38.4 48.8 48.9 + 10.5
France 35.5 41.9 43.4 + 7.9
Germany 34.3 37.2 36.2 + 2.5
Italy 25.4 40.1 43.3 + 17.9
Japan 20.9 26.8 27.9 (2006) + 7.9
Netherlands 40.7 41.5 38.0 − 2.7
United Kingdom 35.2 34.5 36.6 + 1.4
United States 25.6 27.9 28.3 + 2.7
OECD average 29.4 34.8 35.9 (2006) + 6.5
Source: OECD Tax Revenue Trends, 1965–2006 (2008 edition).
Have states managed to raise the taxation needed to pay for this increased
expenditure, so averting a fiscal crisis of the state? Broadly, the answer is
yes. As Table 2.2 shows, between 1975 and 2007 overall levels of taxation
measured as a proportion of gross domestic product increased in a range of
European countries and remained constant in the United Kingdom and the
United States. Across the OECD as a whole (including a range of countries
not included in the table shown here) average taxation increased from 30.3
to 36.3 per cent of GDP. Because most OECD economies have doubled in
size over this period, absolute tax income has grown dramatically; indeed,
as economies have grown, the ‘tax state’ has grown even faster. In Australia,
for example, for more than a decade to 2007, corporate tax receipts grew
at over three times the rate of GDP growth (Braithwaite, 2008, 7).
Although tax revenues within OECD countries have remained buoyant,
there is a general trend to finance public expenditure through long-term
public debt. As long as the world economy continued to grow these public
debt levels were manageable. Between 1980 and 2001 net debt interest
payments as a proportion of GDP only rose from 1.8 to 2.3 per cent in
the United States and from 1.5 to 2.0 per cent across a broader sample of
18 OECD countries (Wagschal, 2007, 26). Whether the combination of
a global recession and additional public borrowing to rescue private banks

brings into question governments’ ability to service their debt is, at the time
of writing, an open question. In January 2009 the European Commission
predicted that the UK budget deficit would rise to nearly 10 per cent of
GDP and that, overall, public debt would be equivalent of 72 per cent of
GDP. At this time, financial markets were awash with speculation that the
credit rating of the UK government was to be downgraded and that this
would limit its borrowing capacity.
T H E I M P L E M E N TAT I O N G A P ?
In 1964 US President Lyndon Johnson pledged to build a great society
through the elimination of poverty and racial injustice. Over the next
few years a series of new government programs were introduced, including
Medicare and Medicaid, funds to assist children from low-income families,
and a new housing act to provide rent supplements for the poor. Despite the
huge sums of money involved, the results of these programs were generally
considered to be disappointing. In trying to account for their failure, policy
analysts stumbled upon the idea that programs had failed not because the
programs themselves were inherently flawed but because they had been
poorly implemented (Pressman & Wildavsky, 1973). According to one
public official:
we became increasingly bothered in the late 1960s by those aspects of the

exercise of government authority bound up with implementation. Results
achieved by the programs of that decade were widely recognised as inade-
quate. One clear source of failure emerged: political and bureaucratic aspects
of the implementation process were, in great measure, left outside both the
considerations of participants in government and the calculations of formal
policy analysts who assisted them [quoted Brewer & DeLeon, 1983, 249].
Over the next few years academics came to recognise the difficulties –
sometimes impossibilities – of successful policy implementation in pol-
icy environments characterised by multiple centres of decision-making,
ambiguous policy objectives, high levels of uncertainty and uncoopera-
tive ‘street-level’ bureaucrats (Lipsky, 1980; Maynard-Moody & Musheno,
2003). A tidal wave of case-studies showed how frequently great policy
expectations are dashed during implementation (for reviews see Sabatier,
1986; DeLeon, 1999). Consider, as one example, the fate of the Kyoto
Protocol. Attention focused on the refusal of the United States and, to
a lesser extent, Australia to sign the treaty (Australia eventually signed in

December 2007, following the election of a Labor government). Less media
attention has been devoted to the implementation of the protocol itself. As
of January 2008, Sweden and the United Kingdom were the only countries
likely to meet their Kyoto emissions commitments, calling into doubt the
value of the further promise made by leaders of the G8 countries in June
2007 to at least halve carbon dioxide emissions by 2050.
In the 1990s research on the difficulties faced by governments in suc-
cessfully implementing public policy was tied to the discussion of pol-
icy networks. In most policy arenas in most countries, public policy is
formulated and implemented through networks of government officials
and non-government actors who represent functional interests such as
peak business associations, professional associations, farmers groups and
welfare associations. Dave Marsh and Rod Rhodes (1992c) argued that
these policy networks had become so entrenched in the United Kingdom
that government efforts to bypass networks and unilaterally impose pol-
icy nearly always ended in failure. It is certainly true that governments
can enhance their governing capacity by developing closer relations with
non-state actors. Non-state actors provide legitimacy, expertise, and some-
times direct assistance in implementing policies. But the extent to which
governments are constrained by the existence of policy networks can be
exaggerated. Governments are not only leading players within networks,
they retain the hierarchical authority to change governance rules if they
can bear the short-term political costs of doing so. The discussion below
on the alleged decentring of the state, for example, shows how the French
government simply bypassed the two main farming unions when it came
under pressure to reduce agricultural subsidies as part of trade talks in the
early 1990s.
Three further points are worth making about the literature on imple-
mentation. The first is that the academic study of implementation failures
has prompted governments at both national and local level to more closely
invest in, monitor and control the implementation process. For example,
in a study of implementing work requirements as part of social welfare
policy in Wisconsin, Lawrence Mead (2001) ‘confirms [the] success of a
top-down model of implementation’ by showing how the authorities effec-
tively ‘built up an employment bureaucracy’ in efforts to further improve
policy implementation. In similar centrist moves, the UK government cre-
ated a ‘delivery unit’ in 2001 (Richards & Smith, 2004) and the Australian
government a Cabinet Implementation Unit in 2003 (Wanna, 2006). The
second is that the academic search for further cases of implementation
failure and ‘policy disasters’ (Bovens & Hart, 1996) in the 1970s and
1980s risks creating a highly distorted picture of government performance
which ignores instances of successful policy implementation. This is not to
suggest that policy implementation is always perfectly managed: clearly it is
not. But the third point to make here is that the perfect implementation of
policy may itself be a sub-optimal result: the marginal benefits of investing
additional money and staff in the implementation of a policy ought to be
balanced against the marginal costs involved. Overall, implementation is a
challenging task, but we argue that governments now have a better grasp
of implementation issues and are addressing them more effectively than in
the past.
A CRISIS IN LEGITIMACY?
Governance arrangements can be described as legitimate to the extent
that they are popularly accepted. Fritz Scharpf (1997; 1999) suggests that
legitimacy is a two-dimensional concept, relating to the inputs and outputs
of the political system. On the input side, legitimacy requires that political
choices are derived, directly or indirectly, from the preferences of citizens
and that governments are accountable for the actions. On the output side,
legitimacy requires a high degree of effectiveness in achieving goals.
Governance arrangements that are democratic and accountable but
result in ineffective policies will not be considered legitimate. In the United
Kingdom, the Child Support Agency, an executive agency of the Depart-
ment of Work and Pensions, catastrophically lost public support when the
Independent Case Examiner’s Office revealed that it took an average of 300
days to process a claim (BBC, 14 November 2004). Eventually, the agency
was abolished and replaced by the Child Maintenance and Enforcement
Commission. By streamlining the process of determining and collecting
child support payments from absent parents, the commission eventually
acquired some measure of output legitimacy.
Equally, governance arrangements that result in effective policies but
are undemocratic and unaccountable are unlikely to be considered legit-
imate. After the World Trade Organisation had been the focus of many
anti-globalisation protests, its director, Michael Moore, sought to defend
its record in liberalising trade arrangements and alleviating poverty in
developing countries (Address to the European Parliament, 21 February
2000). This is unlikely to persuade critics who view the organisation as
undemocratic and unaccountable. The political scientist Susan George
suggests that the World Trade Organisation gives ‘transnational corpora-

tions . . . the ideal tool to complete their globalisation and impose new
rules’, and complains that the way panels are appointed to settle trade
disputes is ‘obscure . . . the names of the “experts” who sit on them and
who meet behind closed doors and hear no outside witnesses are not made
public’ (Le Monde Diplomatique, November 1999). This argument is not
about policy outputs but about democracy and accountability.
What evidence is there that states are losing their legitimacy? First,
we might point to declining levels of voting. In competitive elections in
all countries between 1945 and 1990 turnout rose steadily to reach an
average of 68 per cent. In the 1990s turnout began to fall back towards
an average of 60 per cent (Stoker, 2006, 32). Falling turnout might show
evidence of voter satisfaction with the status quo. But polls have also
shown a rising cynicism about politicians and political systems. European
Social Survey data shows that around 25 per cent of Europeans believe
that ‘hardly any politicians care’ about what they think (Stoker, 2006,
120). In the United States Joseph Nye and colleagues (1997) showed
that whereas three-quarters of people expressed confidence in the federal
government in 1964, only one-quarter were prepared to do so by the late
1990s. Second, we might point to the resurgence in some countries of
anti-system parties with non-democratic ideals whose members engage
in unconventional, illegal or violent behaviour (Capoccia, 2002; Keren,
2000). More prosaically, the decision of Dutch, French and Irish voters
to reject the European Union’s constitution in referendums held in 2005
and 2008 was also interpreted as showing a profound dissatisfaction
with existing political processes. Finally, widespread political protests and
marches – whether against the Iraq War, rising fuel prices, job losses or
globalisation – might be taken as expressions of a loss of legitimacy in
either national governments or international bodies.
We might account for declining legitimacy in terms of a growing belief
that politicians are venal or incompetent; a lack of social cohesion; a rise in
post-material values that has eroded any sense of deference to politicians; a
professionalisation of politics that has made it harder for ordinary citizens
to participate; the corrosive effects of a cynical media eager to assume polit-
ical wrongdoing; or even the effects of public choice theory (see Stoker,
2006, 47–67 for an overview). Yet we should not see a continuing decline in
overall levels of legitimacy as being somehow inevitable. Governments have
adopted alternative governance arrangements precisely in order to enhance
their legitimacy. This is most obviously true of community engagement
strategies intended to give ordinary citizens the opportunity to directly
Table 2.3. Public confidence in parliament, selected OECD countries, 1981

and 1999/2000
Question: I am going to name a number of organisations. For each one, could
you tell me how much confidence you have in them: is it a great deal of
confidence, quite a lot of confidence, not very much confidence or none at all?
Figures show proportion of respondents expressing ‘a great deal’ or ‘quite a lot’ of
confidence in their parliament.
Country 1981 1999/2000
Belgium 38.4 35.6

Canada 43.7 41.1
Denmark 36.6 48.4
Japan 26.8 21.7
United Kingdom 41 35.4
United States 52.5 38.1
Source: World Values Survey <http://www.worldvaluessurvey.org/>.
influence decisions. According to A Manager’s Guide to Citizen Engagement:

‘Public engagement strategies provide decision-makers with opportunities
to improve the substance of public input, cultivate trust through the pro-
cess, raise the legitimacy of decisions in the public eye, and lay the ground-
work for lasting implementation’ (Lukensmeyer & Torres, 2000, 16).
The shift toward governance through persuasion and association, dis-
cussed in Chapters 5 and 8, can also be understood as an attempt by the
state to bolster its legitimacy. Governance through persuasion is attractive to
states because it provides an alternative to coercive policy instruments that
may attract public opposition. Governance through community engage-
ment or association is meant to ensure that policies are viewed as legitimate
by stakeholders.
The loss of state legitimacy in recent years should not, however, be
exaggerated. As we have said, voters continue to demand that states act
to mitigate the effects of natural disasters, bank failures, environmental
catastrophes, social disorder and threats to public health. Indeed, the pres-
sures being placed upon governments often reflect growing and sometimes
unrealistic expectations about what governments can achieve. The public
is not turning its back on government; witness the historic voter turnout
in the 2008 US presidential election. The World Values Survey allows us
to track the amount of ‘confidence’ citizens have in various public insti-
tutions. Table 2.3 shows the proportion of voters who had ‘a great deal’
or ‘quite a lot’ of confidence in their parliament in the early 1980s and in

the late 1990s. With the notable exception of Denmark, confidence has
generally fallen over this period. But it has not fallen dramatically. Only in
the United States did overall confidence fall by more than 10 per cent.
In the 1930s the legitimacy of democratically elected governments was
brought into question by the Great Depression and then challenged by
both communism and fascism. In 1968 student-led protests in France,
the United States, Belgium, Mexico and Brazil heralded a brief moment
of acute political turmoil. In the 1970s stagflation and government over-
load precipitated the collapse of the Keynesian post-war consensus. As
Gerry Stoker (2006, 32) observes, however, the paradox of growing
public disillusionment with politics today is not so much that it has
occurred but that it occurred during the long economic expansion of the
1990s and 2000s when confidence in democratic decision-making remains
high.
THE DECENTRING OF GOVERNMENT

A further argument about the alleged hollowing out of the state is that
states and governments have become increasingly less central to governance
or have been ‘decentred’ (Bevir, 2002). The argument has two strands.
The first is that governments have devolved much of their authority to
market contractors or policy networks. The second is that governments
have lost power or authority and can no longer effectively coordinate or
steer the activities of the multitude of actors now involved in governance
processes. Hence, it is argued, the authority of central government has
been compromised. Matthew Flinders (2006, 223), for example, points
to the inherent difficulties of managing complex governance processes:
‘The state consists of a highly heterogeneous network of organisations and
controlling, steering and scrutinising this increasingly diverse flotilla of
organisations and partnerships, many of which enjoy significant levels of
autonomy from elected politicians and legislatures, remains the primary
challenge of modern governance.’
The Dutch academic Walter Kickert (1993, 275) similarly argues that
‘deregulation, government withdrawal and steering at a distance . . . are
all notions of less direct government regulation and control, which lead
to more autonomy and self-governance for social institutions’. Donald
Kettl (2002, 161) writes: ‘Hyperpluralism, policy networks, devolution,
and globalisation have all greatly diffused power. Government might
retain its legal position, but exercising political sovereignty amidst such
diffused power represents a major challenge.’ It is the existence of such

self-organising networks that animates the society-centred account of gov-
ernance described in the previous chapter. Indeed, Rhodes goes so far as to
equate the alleged transition from government to governance with the pro-
liferation of self-organising networks. In our view these arguments, which
find an obvious extension in the claim that states have been decentred or
hollowed out, have been overplayed.
True, the relational aspects of governance might in certain circum-
stances see outside groups achieve considerable influence within governance
arrangements. This is certainly the case in associative governance arrange-
ments such as corporatism, as we argue in Chapter 8. In another instance,
the American Medical Association and the health insurance industry were
widely credited with derailing Hillary Clinton’s health reform proposals
in the 1990s (Burns & Sorenson, 1999, 120–32). Kettl (2002, 143) adds
that dealing with an array of partners obliges governments to recognise and
deal with the fact that the partners may have their own missions, operating
procedures and other projects that do not necessarily align with central
governance purposes. But these dynamics do not mean that governments
across the board have lost power or that networks are autonomous or self-
organising. There is a significant difference between arguing that networks
or devolution complicate governments’ efforts to steer policy, and arguing
that governance networks operate independently of the state. The prob-
lem is that self-organisation and self-responsibility are demanding criteria
against which to judge the existence of such networks.
Nor do the standard discussions of policy networks support the idea
that non-state actors or interest groups dominate networks or operate
autonomously. Central is the work of Marsh and Rhodes (1992a), who ini-
tially distinguished between two kinds of policy networks: issue networks
and policy communities. Where groups lack resources, where contacts
between interest-groups and government fluctuate in frequency and inten-
sity and the basic relationship is one of consultation rather than negotiation,
an issue network is said to exist. It seems clear, from this analytical account,
that issue networks cannot reasonably be described as self-organising
(for case-studies see Damgaard, 2006; Parker, 2007). Therefore networks
per se do not lead to governance without government. Policy communities,
on the other hand, are characterised by a limited membership; frequent,
high-quality interaction on all matters related to policy issues; stability
of membership and outcomes; shared basic values; the acceptance of the
legitimacy of outcomes; and the possession, by each of the members,
of some valuable resources. In the case of policy communities, however,
interest-groups are assumed to be in a stronger position; indeed, policy

communities are defined in these studies partly in terms of a balance of
power between government and non-state actors. Yet, even here, it is clear
that interest-groups are not viewed as working autonomously from govern-
ment. Policy communities are defined precisely in terms of the exchange of
resources and the development of a close relationship between government
and interest-groups. Indeed, in most cases actors join policy communities
precisely because they wish to influence government.
A critical issue is that networks almost always contain authoritative
actors from the state. There may be varying degrees of interdependency
within networks or within contractual arrangements, but such arrange-
ments are typically established by the state for wider public purposes.
In many cases governments can choose which firms and interest-groups
to work with. Interest-groups and firms, on the other hand, often have
no choice but to work with government if they wish to acquire policy
influence. Also, because non-state actors participate in networks mainly in
order to influence the state, the notion that they end up operating with
significant autonomy from the state is doubtful. Indeed, interest-groups
have an incentive to lobby governments because the latter retain hierarchi-
cal authority. ExxonMobil was prepared to invest resources in the effort
to persuade the US federal government to relax restrictions on oil explo-
ration in Alaska precisely because the government retains the authority to
determine where and when exploration can take place.
Governments occupy a privileged position in networks and can change
existing governance rules to bypass or even dissolve networks. In recent
years governments have abandoned policy communities centred on health
in Canada (Kay, 2006, 104–15), agriculture in Australia (Botterill, 2005),
and industrial relations in the United Kingdom (Marsh, 1992). The
relationship between governments and other network actors is usually
asymmetrical.
The self-styled ‘structural’ approach to the study of policy networks
developed by David Knoke (1990; 2001) can help us to understand how
governments can ‘dominate the exchange’ (Chhotray & Stoker, 2009,
22). Knoke makes two claims. First, that we can identify the partici-
pants in a network and formally measure the strength of the relationships
between them in terms of, for example, the frequency of their meetings
or membership of shared committees. The second – and, for our pur-
poses, more interesting – claim is that we can explain actors’ success in
achieving their goals in terms of their structural position within a network.
(i) (ii)
A B
A
B
C D
C D
Figure 2.1. Network and structures
Figure 2.1 shows two possible network arrangements between four actors,
A–D. In the first network every actor is connected to every other actor. In
the second, A, C and D are connected only to B.
It seems obvious that B will be at a relative advantage in the second
network. But why is this? One possibility is that network position deter-
mines the flow of information: a key bargaining resource within networks
(Dowding, 1995, 158). In the second network A, C and D have to depend
upon B for any information about the behaviour of other actors, while B
can withhold or distort information to its advantage. A second possibility
is that network position determines the opportunities actors have to form
coalitions. In the second network A, C and D are at a disadvantage because
they have no alternative but to work with B, who is therefore in a strong
bargaining position.
In our view governments occupy a central location within associational
networks equivalent to that enjoyed by actor B in the second network.
As we have said, groups want to develop close working relationships with
government officials because government possesses hierarchical authority –
the authority to make binding policy decisions. This is not to say that non-
state actors will operate in splendid isolation. Even when they are in direct
competition for members and influence, groups want to exchange some
information and, on occasions, develop joint negotiating positions. But the
strongest network relationships are likely to be those between government
and groups. A government’s central position in a network gives it a number
of advantages in steering the groups: the opportunity to control flows of
information; to play interest-groups off against each other; and to demand
that groups accept its preferences as the starting-point for negotiation. Of
course the government cannot simply require groups to accept its policies.
But the structural position of government within associational networks
frequently imposes an asymmetrical form on this exchange.
In their influential book Reinventing Government, David Osborne and

Ted Gaebler (1992, 30) called on governments to devolve responsibil-
ity for ‘rowing’ – the actual delivery of services to citizens – to non-
state actors while retaining responsibility for ‘steering’ – raising resources
and setting priorities. Crucially, however, they argued that by doing less
rowing governments would enhance their capacity to steer – by creat-
ing more opportunities for strategic management (or metagovernance; see
Chapter 3).
A critical issue is the government’s capacity to exert control and to
steer; it seems that in a wide range of instances governments continue
to exercise considerable coercive power and regularly govern using hierar-
chical means. Indeed, Chapter 4 documents ways in which governments
have extended their hierarchical control to meet the challenges posed by
restructuring the state to boost governance capacities or those posed by
new technologies, market failures and security and environmental threats.
Here are some examples in which governments across the world have relied
upon the threat or the actual use of coercive force to achieve particular
goals:
r In 2005 the United States passed a ‘Real ID Act’ requiring states to
redesign their drivers’ licences in ways that would allow them to serve
as a de facto compulsory identity card.
r In 2002 the United Kingdom introduced tough money-laundering leg-
islation which requires banks and other financial institutions to report
any suspicious financial activity to the Serious Organised Crime Agency.
r In the same year the Israeli government started to construct an 8-metre-
high security barrier physically dividing the West Bank from Israel.
r In 2001 the Australian government courted international unpopularity
in denying access to asylum-seekers seeking to enter Australian territorial
waters, or by locking those that did in harsh detention centres.
r In 1998 the European Union effectively suspended the production or
importation of genetically modified organisms, a decision which led to
a near trade war with the United States.
It is also the case that government can restructure or overturn networks.
A case in point is French agricultural policy, which was traditionally made
within a closed policy community composed of the two main farming
unions, the FNSEA and CNJA. These groups worked closely with the
Ministry of Agriculture to defend the subsidy arrangements contained
within the Common Agricultural Policy (Keeler, 1987). In the early 1990s
the French government came under intense pressure to reduce overall pro-
tection levels as a part of the Uruguay round of trade talks taking place as
part of the General Agreement on Tariffs and Trade (GATT). The French
business community, represented through a different policy network cen-
tred on the Ministry of Finance, made it clear that a successful conclusion
to the GATT talks was vital to its interests. The agricultural network
predictably resisted making any concessions. At this point the president
and prime minister, together with the minister for finance, decided that
limited agricultural reform was nevertheless in the national interest and
authorised senior officials to essentially bypass the agricultural policy com-
munity and conclude a trade deal. As Paul Epstein (1997, 357) concludes:
when it became clear that a solution on agriculture was the key to progress in
other sectors more important to the country’s economic welfare . . . the influ-
ence of the traditional policy community was undermined, as interest-group
leaders and high-ranking officials . . . found themselves playing second fiddle
to those closer to the power centre of the French Government, specifically
to the offices of the President and the Prime Minister.
The exercise of this kind of coercive power requires governments to

possess legitimacy as well as a monopoly on the use of violence. This search
for legitimacy has sometimes led governments to govern in conjunction
with a variety of non-state actors. Yet, even here, governments can con-
tinue to exercise coercive power in metagoverning these arrangements, by
choosing and revising governance rules, selecting participants, mobilising
resources, monitoring effectiveness, establishing chains of accountability,
and ensuring legitimacy. In the case of Australia’s Job Network, for exam-
ple, a complex contractual mode of governance delivering employment
services, the federal government went to extraordinary lengths to control
the market by setting service standards, imposing codes of conduct and
determining prices (see Chapter 3).
As Flinders (2004, 895) observes, ‘contemporary projects concerning
“joined up” or “holistic” government represent an attempt to devise new
mechanisms or tools to steer dense organisational webs’. Referring to
the United Kingdom, he cites new regulatory bodies created for such
purposes – including the Food Standards Agency and the Office of the
Communications Regulator – as examples of state adaptation.
The claim by Flinders that a range of governance organisations possess
significant levels of autonomy from governments also needs to be treated
cautiously. Within the state itself, it is true that independent regulatory
agencies may be granted parcels of authority, but these mandates are always
on loan from governments. Indeed, governments have extended their
efforts to monitor and render such organisations accountable. The mech-

anisms of steering and accountability may not always work well (Flinders,
2006, 237), but this simply underlines the metagovernance challenges, as
well as ongoing efforts by governments to improve performance. This is
especially the case when metagovernance failures reach the political arena,
quickly shattering any illusions that devolved governance arrangements are
somehow at one remove from government or ‘depoliticised’.
In the United Kingdom, where the most empirical research on the gov-
ernance capacities of the state has been undertaken, the argument that
governments have lost control of governing processes has been widely
challenged. For example Andrew Taylor (2000) finds that the use of task-
forces and other mechanisms to coordinate policy across government has,
far from hollowing out, helped ‘fill in’ government. Oliver James (2004)
argues that the central coordination capacity of the ‘core executive’ has
been strengthened using various instruments, particularly through Public
Service Agreements (PSAs). Similarly, Ian Holliday (2000, 173) argues that
an increasing emphasis on central government capacity, coordination and
‘joined-up government’ has meant that the ‘enhancement of core execu-
tive capacity has been considerable’ (see also Flinders, 2002). Francesca
Gains (2003, 66) initially suggests that the creation of quasi-autonomous
executive agencies within the public service has created power-dependent
networks, but nevertheless concludes that ‘political resources legitimising
the operation and the authority to act are still ultimately held by minis-
ters’ (emphasis in the original). Josie Kelly (2006) argues that devolution
of authority to local councils has been accompanied by more stringent
central auditing controls which have strengthened central authority and
steering. Two studies by Ian Bache (2000; 2003), one on regional policy
and one on education policy, also found that the devolution of parcels of
authority has been accompanied by increased central control and steering.
In fact, study after study of central control over local governing strategies
has reached similar conclusions (Benyon & Edwards, 1999; Morgan et al.,
1999; Davies, 2000). Central government continues to set the goals and
rules of governance arrangements.
In reviewing these and other studies, Mike Marinetto (2003a, 592)
concludes that ‘central government is still highly resourced and has at its
disposal a range of powers . . . it is difficult to see how recent developments
have transformed the capacities of the core executive’. Adam Crawford
(2006) argues that heightened social surveillance and an ‘elaborate and
complex mosaic of micro-management by government’ show that ‘ambi-
tious interventionist government is alive and well’ (2006, 455). Michael
Moran (2003, 6) argues that new audit and regulatory rules have ‘widened
the range of social and economic life subject to public power’ (see also
Power, 1997). According to Michael Saward (1997), hollowing-out pro-
cesses such as privatisation and decentralisation are best seen as efforts to
rationalise the state in order to promote central coordinating authority.
In the case of privatisation, he contends that there is no ‘strong evidence
in favour of the hollowing out hypothesis. Indeed, we can see it as core
actors flexing their political muscles’ (p. 22). Similarly, Giandomenico
Majone (1994, 79) argues that privatisation tends to strengthen rather
than weaken the regulatory capacity of the state (see also Muller & Wright,
1994).
Carolyn Hill and Laurence Lynn (2005) note that ‘the growing accep-
tance of governance as an organizing concept . . . reflects a widespread,
though not universal belief that the focus of administrative practice is
shifting from hierarchical government toward greater reliance on horizon-
tal, hybridized, and associational forms of governance’. Yet in a review
of over 800 individual studies of governance arrangements they find that
‘hierarchical investigations of the nature and consequences of government
action predominate in the literature’. They conclude that experiments
in more horizontal forms of governance reflect ‘a gradual addition of new
administrative forms that facilitate governance in a system of constitutional
authority that is necessarily hierarchical’ (p. 173). Such arguments and con-
clusions have led Rhodes (2007, 1253), the originator of the hollowing-out
thesis, to state that ‘the weight of criticism meant that I had to reconsider
my discussion of the changing role of the state’.
G L O B A L I S AT I O N
The argument that states are being hollowed out is frequently associated
with the claim that globalisation – the widening, deepening and speeding
up of worldwide interconnectedness (Held et al., 1999, 2) – has heralded
‘the end of geography’ (O’Brien, 1992) and so ‘undercut the policy capacity
of the nation state’ (Cerny, 1995, 612).
There are several parts to this argument:
r Globalisation has left states with little alternative but to engage in a race
to the bottom by cutting taxes and regulatory standards in an effort to
attract inward capital investment from transnational firms.
r Global financial markets act as a form of ‘golden straitjacket’ (Friedman,
1999), requiring states to adopt business-friendly policies.
r Globalisation has empowered regional authorities and city states to

bypass national governments and work with each other to secure their
economic development.
r Globalisation has transferred policy-making authority to international
and, occasionally, supra-national organisations (Rosenau & Czempiel,
1992), multinational banks, accountancy firms and ratings agencies,
which provide the infrastructure of global economic trade and to
transnational NGOs.
These academic arguments have been challenged by evidence that there
are no clear relationships between:
r overall levels of globalisation and patterns of state expenditure (Keating,
2004, 6; Castles, 2004, 8 and references therein)
r the levels of business taxation and inward capital investment in countries
(Wilensky, 2002)
r the degree of globalisation within a country and the level of business
regulation (Kenworthy, 1997; Vogel & Kagan, 2004; Basinger & Haller-
berg, 2004)
r the degree of globalisation within a country and its level of social welfare
expenditure (Swank, 2002; for an overview see Hay, 2005, 241–2).
In discussing the relationship between government expenditure and
globalisation, for example, Mike Keating (2004, 6), a former head of the
Australian public service, concludes that:
even a cursory examination shows that government intervention, as mea-

sured by the ratio of expenditure and taxes relative to GDP, has not
fallen, and that the amount of government regulatory activity continues
to increase . . . it is simply misleading to assert that governments have lost
power and are withdrawing from their responsibilities.
Why has globalisation failed to result in the expected ‘policy race to

the neo-liberal bottom’ (Garrett, 1998, 823)? One answer is that, with the
exception of capital markets, the extent of globalisation has been exagger-
ated. Most economic activity continues to take place within the boundaries
of the nation-state, and those parts of it that span borders are largely con-
tained within European, North American and Asia–Pacific regional trading
blocs (Hirst & Thompson, 1996).
A second answer is that globalisation has actually increased the salience of
the state’s role – not only in protecting its citizens via social expenditure but
in attracting inward investment and supporting businesses (Evans, 1997;
Weiss, 1998). Rather than taxes, it is the quality of a country’s education
and skills training and other publicly provided business infrastructure that
can best account for levels of inward investment (Hay, 2005, 252–3).
Those governments that have worked most closely with non-state actors
such as business associations and invested the most in vocational training
and university education have benefited the most from globalisation.
A third answer is that the policy demands made by global markets, espe-
cially financial markets, are actually quite narrow. Layna Mosley (2000;
2003), for example, demonstrates that financial market decision-makers
do not factor a wide range of government policy variables into their cal-
culations but instead focus on two main issues: inflation levels and ratios
between government deficits and GDP. These are regarded by traders as
the key measures of a government’s willingness to protect monetary val-
ues and ensure debt repayment. As she argues: ‘Market actors forcefully
demand particular values on key variables, but the number of key variables
is small, so that many national economic policy choices . . . reflect domestic
political and institutional constraints rather than external financial market
pressures’ (2000, 745). Even in arenas such as monetary policy, which is
widely assumed to be highly constrained by market pressures, there is still
evidence that national policy preferences and institutional dynamics matter
in shaping the details of policy (Bell, 2005).
A final answer, contrary to race-to-the-bottom arguments, is that glob-
alisation has, in some instances, been associated with a ‘California effect’,
whereby manufacturers have standardised production values to align with
those demanded in the toughest regulatory regimes. Originally, this referred
to the practice of car manufacturers who set vehicle emissions standards to
the high Californian levels rather than incur the costs of having different
production processes for different states or of producing cars to a lower
standard that could not then be sold in America’s largest domestic market
(Vogel, 1995; Fredriksson & Millimet, 2002). In principle, the California
effect could also ratchet up product standards in international trade in so
far as countries with large domestic markets set higher regulatory stan-
dards (Vogel, 1995, 259). For example, Canadian businesses are prepared
to support some form of emissions-trading because ‘big trading partners,
including the United States, have either put a price on carbon or are about
to do so [and] exporters worry that their products could be penalised if
Canada does not follow suit’ (Economist, 3 July 2008).
In another area of debate, the argument that globalisation has resulted
in the transfer of policy-making authority to international organisations is,
in some senses, irresistible. Organisations such as the European Union,
the World Trade Organization, the Financial Stability Forum (which
promotes international cooperation in financial supervision and surveil-

lance) and the Internet Governance Forum either have been created or
have acquired considerable new powers over the last few decades. States
choose to join such groupings or regimes voluntarily because they expect
to further their own strategic interests. States remain beyond such regimes,
and although they may involve some constraints on policy autonomy, these
constraints are accepted by states in order to further their wider strategic
interests.
The European Union is the most extensive example of a supra-national
body to which national states have surrendered significant elements of
decision-making authority. It is also represents the most obvious exception
to our earlier argument that states remain the ‘final and absolute authority
in the political community’ (Hinsley, 1986, 26). In a range of policy
areas – trade, competition, agriculture, energy, fisheries, immigration,
regional policy – the European Union has acquired formal regulatory
authority. Its 27 member states have undertaken a process of economic and
monetary union requiring the adoption of a single currency and the transfer
of monetary policy authority to the European Central Bank. Furthermore,
an ongoing process of ‘Europeanisation’ means that there are now few, if
any, areas of policy-making unaffected by a European dimension (Borzel,
1999; Featherstone & Radaelli, 2003). Following the near-collapse of the
Northern Rock bank in September 2007, for example, the UK government
argued that it had been unable to lend public money to the bank in order to
secure its position because doing so would have breached European Union
rules on the provision of state aid (Hindmoor, 2008).
European integration results in a process of ‘multi-level’ governance,
comprising local governments, national governments, bodies like the Euro-
pean Council composed of representatives of nation-states, and supra-
national bodies like the European Commission (Marks et al., 1996; Kohler-
Koch & Rittberger, 2006, 34–5). In some policy areas, most notably foreign
policy and justice and home affairs, the European Council – composed of
the representatives of the governments of all the member states – remains
the ‘pre-eminent political authority’ (Cini, 2003, 150). For this reason
Andrew Moravcsik (1993; 2005) argues that the European Union ought
to be viewed as an ‘intergovernmental regime’ rather than a nascent supra-
national European state. It is clear, however, that a growing number of
policy debates within the European Council are subject to qualified major-
ity voting, and that supra-national bodies like the European Commission,
European Parliament and European Court of Justice have acquired signif-
icant policy-making powers.
It is routinely argued that globalisation necessitates further European

integration. The claim is that in order to tackle transnational problems like
migration and climate change nation-states must sacrifice their sovereignty.
In an address to the American Chamber of Commerce, the president of the
European Commission, Jose Barroso (2008), claims, for example, that ‘it
is only through the European Union that the Member States can acquire
sufficient collective weight to influence the worldwide debate on climate
change, energy security and sustainable development’. Similarly, Tony Blair
(2006) says that ‘the nature of globalisation’ requires nations to ‘build
strong alliances’ and that for this reason ‘an ever closer [European] union’
is ‘the only way of advancing our national interest effectively’.
Within ‘realist’ conceptions of international relations, sovereignty has
traditionally been defined in terms of an internal supremacy over all other
decision-making authorities and external independence over all outside
authorities (Bull, 1977, 8). As Stanley Hoffmann (1987, 172) describes it,
sovereignty is the doctrine that the state is ‘subject to no other state and has
full and exclusive powers within its jurisdiction without prejudice to the
limits set by applicable law’. Membership of the European Union requires
countries to surrender their external sovereignty. In a landmark ruling in
1964 the European Court of Justice confirmed that:
by creating a Community of unlimited duration, having its own institutions,

its own personality, its own legal capacity and capacity of representation, on
the international plane and more particularly, real powers stemming from
a limitation of sovereignty or a transfer of powers from the States to the
Community, the member states have limited their sovereign rights [quoted
Wallace, 1999, 510].
By limiting their external sovereignty, states have enhanced their capacity

to deal with policy problems. On this reading, sovereignty has been pooled
and enhanced rather than surrendered and diminished (Keohane, 2002,
744). States have chosen to comply with European regulation in order to
enhance their influence (G. Sorensen, 2006, 200–1; Marsh, Richards &
Smith, 2003, 328–31).
In terms of wider international regulatory issues, a major study by
Daniel Drezner (2007) finds that the ‘great power’ governments of the
United States and the European Union are the major players in creating
and shaping transnational governance arrangements. Drezner (2007, 63–
88) distinguishes between situations in which there is a high and low diver-
gence of interest among the great powers and a high and low divergence
Table 2.4. A typology of regulatory coordination
Divergence of interests between great

powers and other international actors
Divergence of interests
among great powers High conflict Low conflict
High conflict Sham standards Rival standards

Low conflict Club standards Harmonised standards
Source: Drezner, 2007, 72.
of interests between the great powers and other international actors (see
Table 2.4).
When the great powers agree on the need for regulatory action with
other international actors, the result, Drezner argues, is harmonised stan-
dards formulated and monitored by international governmental and non-
governmental organisations like the International Organisation for Stan-
dards and the International Accounting Standards Committee. Within
these organisations, the great powers steer ‘policy interventions behind the
scenes’ by making appointments and setting agendas (2007, 73). Where the
great powers agree among themselves on the need for regulatory action but
disagree with significant parts of the rest of the international community,
‘club’ standards result. Here, the great powers create new regulatory bodies
and standards, and invite other countries to adhere to them. In the case of
international finance, for example, the great powers effectively sponsored
the Basle Accord requiring banks in signature countries to keep an agreed
amount of reserve capital available. They did so in the knowledge that,
over time, other banks, usually in developing countries, would be forced to
meet these standards in order to engage in international commerce. Where
the great powers disagree with each other about regulatory standards, as
has been the case with genetically modified foods, the result is either rival
standards or, if the disagreement is broad, sham global standards such as
the labour standards promulgated but not enforced by the International
Labour Organization. The overall import of Drezner’s argument is that
states remain the major players in international affairs.
CONCLUSION
This chapter has argued against the theory that the state is being hol-
lowed out. Our approach to governance rests on the continued centrality
of governments and state agencies because it is these entities that are the
architects and key players in governance arrangements. This view does not
overlook the fact that such arrangements involve various types of relations
with society or major actors within society. Rather, governments and state
agencies are attempting to increase their governing capacity by experiment-
ing with an array of governance arrangements involving strategic relations
with society.
Chapter 3 further explores the role of the state in governance arrange-
ments by looking in more detail at the role of governments and state
agencies in establishing and managing governance arrangements. We refer
to this government of governance role as metagovernance. As we shall see
it involves important design and strategic considerations and important
normative elements as well, because governments remain responsible for
ensuring that governance arrangements are effective, accountable, legiti-
mate and democratic.
3 Metagovernance and state
capacity
G OVERNMENTS AND STATE agencies are participants in par-

ticular governance arrangements, but they also play a key role in metagov-
ernance, or the ‘government of governance’. As Mark Whitehead (2003,
8) argues, ‘metagovernance . . . focuses explicitly on practices and proce-
dures that secure governmental influence, command and control within
governance regimes’. Yet, as Eva Sorensen (2006, 101) complains, ‘gov-
ernance theorists do not define the concept of metagovernance precisely’.
An example of this can be found in a paper by Josie Kelly (2006) on
the devolution of regulatory authority over local government in England
to an independent regulatory agency (the Audit Commission, AC). She
argues that ‘the shift from direct to indirect regulation has resulted in
the AC becoming a vehicle of metagovernance, acting on the govern-
ment’s behalf’. In our view the devolution of authority to the AC is
more accurately seen as a governance strategy itself; essentially a real-
location of parcels of authority from one part of the state to another.
By contrast, the central metagovernance role in the case explored by
Kelly is how such governance relationships (between the government and
the AC and between the AC and local councils) are developed, man-
aged, resourced, audited, assessed and ultimately controlled by the central
government.
The first part of this chapter defines metagovernance in terms of the
performance of six functions. We show why metagovernance functions are
the prime responsibility of the state, a view also adopted by scholars such
as Renate Mayntz (1993) and Fritz Scharpf (1994). We then explore some
of the challenges of metagovernance and examine the concept of ‘state
capacity’ in relation to metagovernance.
46
M E TA G O V E R N A N C E A N D S TAT E C A PA C I T Y 47
T H E F U N C T I O N S O F M E TA G O V E R N A N C E
There are six core elements of metagovernance: steering, effectiveness,
resourcing, democracy, accountability and legitimacy, conveniently sum-
marised as SERDAL. These are the functions that governments typically
perform, or at least arguably should perform, in relation to any governance
arrangement.
STEERING
Steering implies the need for overall strategic management, goal setting,
coordination and control of specific governance arrangements. It also covers
the choice of mode or modes of governance to deploy in different settings
and the roles to be played by non-state actors. Within any given set of gov-
ernance arrangements, steering requires that governments provide (and, if
necessary, change) the ground rules for governance; ensure the compatibil-
ity or coherence of different governance mechanisms; provide information
and organise dialogue with which to shape the expectations and even the
identities of actors within governance arrangements; act as a court of appeal
for disputes between the actors involved in governance arrangements; and
rebalance power differentials by strengthening the position of weaker actors
(Jessop, 1997a, 575; 2002).
A good example of such a steering and regulatory role in relation to
governance is Australia’s Job Network. In 1998 the federal government
dissolved the Commonwealth Employment Service and in its place created
the Job Network, in which profit-making firms and organisations such
as the Salvation Army competed for contracts to provide job search, job
training and ‘work for the dole’ programs (Considine & Lewis, 2003).
The involvement of these non-state actors has not prevented the govern-
ment from controlling the direction and performance of the Job Network.
As Michael Keating (2004, 91–5) demonstrates, governments have, over
time, woven ever-tighter controls in order to minimise the discretion of
contractors. This has included: controlling the number of eligible referrals
to specific service providers; setting tight service standards; establishing
codes of conduct; setting prices in what is, in effect, a managed market;
establishing appeals processes; rating providers; and monitoring and polic-
ing service quality. These mechanisms ‘have left the government very much
in control of the market’ (Keating, 2004, 95).
EFFECTIVENESS
Effectiveness is an obvious goal of metagovernance and closely related
to the strategic management and steering of governance arrangements.
Ultimately it is up to governments to establish, or at least approve, the goals,
targets and evaluative criteria and methods used in overseeing governance
arrangements. The government needs to monitor performance and take
remedial action if the performance of specific governance arrangements is
deemed inadequate.
As an example of the role governments can play in ensuring overall effec-
tiveness, consider the complex governance arrangements for the provision
of water in Guyana. Two publicly owned water utilities, the Georgetown
Sewerage and Water Commission and the Guyana Water Authority, tra-
ditionally provided services. In 2001 the introduction of private sector
management was made a condition of funding by the World Bank as a
part of its country assistance strategy. At this time, less than 50 per cent of
Guyanese houses had connections for water and less than 10 per cent had
sanitation. In 2002 the Guyanese government created a new organisation,
Guyana Water International, which subsequently awarded a contract to
an English firm, Severn Trent Water International, to provide a range of
services. The entire funding for this contract was met through a grant
by the UK Department of International Development. Under these com-
plex arrangements, responsibility for metagovernance was retained by the
Guyanese government. In February 2007 a consultancy report showed
that Severn Water had met only two of the seven key performance tar-
gets it had been set with regard to the provision of potable water and the
collection of revenue. In the case of a target to supply 52 per cent of resi-
dents in the Amerindian settlements with potable water by 2005, the audit
showed a 45 per cent shortfall. On this basis the Guyanese government
announced that it was terminating its contract with Severn Water and
that it would develop alternative strategies for developing effective water
supply.
RESOURCING
Properly resourcing governance arrangements is an important aspect of
metagovernance. Of course not all the requisite resources need come from
governments or the state. Partnership arrangements with non-state actors
are often forged by the state precisely because it lacks critical resources.
But the depth of the government’s financial resources, its access to a large
professional bureaucracy and its monopoly on the legitimate use of violence

mean that governments are, and in most cases probably should be, major
supplies of governance resources. The resources in question might include
leadership and authority, fiscal or administrative resources, in-depth policy
expertise, information, or the capacity to promulgate laws or shape rules
or norms.
An example of metagovernance via resourcing is the provision of mental
health care services in southern Arizona, a case extensively studied by H.
Brinton Milward and Keith Provan (2000; 2003). In 1995 a new not-
for-profit organisation, the Community Partnership of Southern Arizona,
was given overall responsibility for providing a range of mental health
services in two counties. Four provider networks, each headed by a non-
profit mental health agency, were also created and randomly allocated
around 1000 clients. The health agency in each network was required
to set up its own network of collaborating agencies, with which they
could sign contracts for the delivery of services. Each health agency was
paid the same monthly capitation rate for each patient and encouraged
to use this money as it saw fit in the best interests of its patients. As
a result, the direct involvement of the county’s Department of Health
Services in the day-to-day delivery of services was effectively ended and
significant competition injected into the system. In terms of the standard
society-centred view of governance, this seems to be a prime example of a
transition from ‘government to governance’. Yet under these arrangements
government retains responsibility for funding and oversight. Furthermore,
although only employing around 100 people, the Community Partnership
of Southern Arizona received $180 million public funding in 2006, which
it used to purchase contracts.
DEMOCRACY
Ensuring compliance with democratic practices and norms is an important
metagovernance function. In Western systems of representative democ-
racy elected politicians are generally regarded as the font of democratic
authority, and the involvement and ultimate control of these politicians
over decision-making processes is regarded as the guarantor of democratic
legitimacy. The inclusion of unelected non-state actors in the governance
process might therefore be thought to undermine democratic control. Con-
sider, for example, the decentralisation of decision-making authority that
has taken place within Denmark over the last 20 years (Greve & Jespersen,
1999; Greve, 2004). User boards have been established in schools, kinder-
gartens and care homes to give recipients of these services some measure of
control over the delivery of services. Legislation allows groups of clients to
organise their own service delivery through self-owned institutions which
can levy fees. Under these arrangements it looks as though decision-making
authority is being taken from elected politicians.
In our view governments can enhance the democratic credentials of
governance arrangements involving non-state actors in two ways. First,
insofar as they continue to assume responsibility for steering, effectiveness
and resourcing, governments will, through these activities, continue to
provide a measure of democratic legitimacy. In the case of the Danish
reform process, a report by the Ministry of the Interior stated that the role
of municipal politicians should no longer be to make all decisions but to
‘decide the overall priorities and define overall goals for the economy and
for the service delivery’. Discussing this report, E. Sorensen (2006, 107)
suggests that ‘this new role for politicians is problematic for democracy
because it gives politicians a marginal role’. Yet so long as there is a way to
ensure that the strategic decisions of elected politicians are translated into
action, the opportunity to metagovern by setting overall goals and priorities
is a far from marginal activity and an important source of democratic input
and legitimacy.
The same argument might be applied to the governance of independent
central banks and other ‘non-majoritarian’ public organisations which are
deliberately shielded from the pressures of day-to-day politics (Coen &
Thatcher, 2005; Vibert, 2007). The creation of an independent central
bank may seem to entail a loss of democratic control. Indeed, the credibil-
ity of central banks is usually thought to depend upon their freedom from
political interference. Yet, even here, democratic controls remain in place.
Elected governments determine the objectives that central banks must
pursue. In most cases governments appoint the bank’s governing board.
Governments also usually retain the legislative authority to suspend inde-
pendence in the event of a national emergency or in the case of misconduct
by the central bank (see Bell, 2004a, 149–55; Blinder, 1996).
Democratically elected politicians can enhance the democratic qualities
of governance arrangements in a second way. We have suggested that
the involvement of non-state actors poses a problem for representative
democracy because it risks separating elected politicians from decision-
making. Others argue that democracy ought to be understood as requiring
the engagement and empowerment of citizens. The central idea is that the
devolution of authority to civil society groups or associations can enhance
democracy by encouraging participation, checking centralised power, and

increasing the opportunities for deliberation and compromise (Elster, 1998;
Fung & Wright, 2003).
It is easy to see how the decentralisation of decision-making authority to
user boards in Denmark might, thereby, be argued to have enhanced democ-
racy. This appears to render redundant our argument that governments
must provide democratic legitimacy through metagovernance. Yet even on
this account, an important role for government remains. One obvious dan-
ger of decentralised systems of decision-making is that the community and
stakeholder activists who involve themselves in the management of user
boards, self-governing institutions and other bodies become an unrepre-
sentative and self-perpetuating elite. For this reason Grace Skogstad (2003)
concludes that mechanisms of participatory democracy are a useful sup-
plement for, rather than an alternative to, government and representative
democracy. A second lesson here might be that government should play an
important metagovernance role in designing and monitoring mechanisms
of participatory democracy in order to ensure that those who make deci-
sions are representative of the broader community and, when they are not,
that decisions can be appealed and reversed (see Fung & Wright, 2003).
We will pursue this argument further in Chapter 7.
A C C O U N TA B I L I T Y
The capacity to be called to account is an important criterion of metagov-
ernance because it implies the need for clear lines of responsibility and
transparency. Accountability is essentially about responsibility, or where
the buck stops. But accountability also covers responsiveness and control.
As Richard Mulgan (2000, 563) puts it, ‘accountability and control are
intimately linked because accountability is a vital mechanism of control’.
Accountability in all its forms is especially important not only when gov-
ernments or state agencies act, but also when non-state actors become
involved in governance arrangements as contractors or partners.
The division of decision-making authority between the European Coun-
cil (the body within the European Union comprising the heads of state)
and the supra-national European Parliament and Commission is often
argued to have resulted in a loss of accountability within the European
Union (see Arnull & Wincott, 2003). Similarly, the creation of networks
composed of state and non-state actors is routinely argued to under-
mine accountability (Barrados, Mayne & Wileman, 2000). Rod Rhodes
(2000, 77) suggests that networks ‘substitute private government for public
accountability’ which ‘disappears in the interstices of the webs of institu-

tions which make up governance’. In these circumstances governments
ought to retain (and, in our view, frequently do retain) a metagovernance
responsibility for safeguarding accountability arrangements.
One possibility is that governments accept responsibility for perfor-
mance even in those cases where a large number of actors are involved.
Mulgan (2006) suggests that the arm’s-length contracting arrangements
underpinning the Australian Job Network raise potential accountability
issues. He nevertheless states that, ‘having flirted with the temptation of
off-loading blame on to contractors’, governments have ‘come to accept
the public expect them to remain accountable’ (p. 49). This, he goes on to
argue, has given governments a powerful incentive to exercise close control
over contractors.
Second, and even on those occasions when it has not assumed respon-
sibility for steering, effectiveness and resourcing, the state can hold other
actors to account for their behaviour. The most obvious manifestation of
this accountability is legal. Under laws relating to, for example, corporate
manslaughter, private firms and individuals within them can be held to
account for their actions through the courts. Following the deaths of 21
tourists in a canyoning disaster in Switzerland in 1999, six managers of
the adventure company responsible for organising their trip were charged
with negligent manslaughter. In most countries politicians can also hold
non-state actors to account through hearings conducted by legislative com-
mittees. In February 2009 senior bankers were hauled before committees
in the United States and United Kingdom, questioned about their bonuses
and invited to apologise for having caused the credit crisis.
We are not naı̈ve: there is no doubt that government sometimes seeks to
evade accountability within partnership arrangements. Indeed, the possi-
bility of off-loading blame onto other actors can be a key attraction of such
governance arrangements. Yet even in these cases governments can still be
held to account by legislatures, the media and the electorate. Governments
can still seek to deny responsibility for the operational behaviour of non-
state actors within governance systems. But this is hardly a novel problem.
Ministers are equally reluctant to accept responsibility for actions taken by
public servants of which they were unaware (Mulgan, 2002). In the after-
math of the Abu Ghraib torture scandal in Iraq, numerous critics called
for the resignation of the US Defense Secretary, Donald Rumsfeld. In tes-
timony before the Senate Armed Services Committee, Rumsfeld claimed
that his office had received no warnings about the abuse and that in these
circumstances his responsibility was only to ‘evaluate what happened, to
make sure those who have committed wrongdoing are brought to justice,
and to make changes as needed to see that it doesn’t happen again’ (New
York Times, 8 May 2004).
A good example of a metagovernance failure, at least in the initial
phase, occurred in relation to accountability arrangements within Aus-
tralian detention centres. Since the early 1990s Australia has had a system
of mandatory detention for those arriving in the country without a valid
visa. In 1998, 3500 people – the majority of whom were claiming political
asylum – were detained in various holding centres across Australia, mostly
in remote areas. By 2001 this number had risen to nearly 8000. In 1997
a contract was awarded to a private company, Australasian Correctional
Management (ACM, a subsidiary of an American firm, Wackenhut), to
run the detention centres. ACM was later widely criticised for conditions
in the centres and held responsible by opposition parties and parts of the
media for a series of riots and breakouts, self-mutilations and hunger strikes.
When questioned, ACM consistently argued that it was accountable
for its behaviour under the terms of its contract with the Department
of Immigration and Multicultural Affairs (DIMA). Critics argued that
the contracting-out of services had resulted in a loss of accountability as
DIMA ministers routinely referred questions about conditions within the
detention centres to ACM or declined to answer them on the grounds of
commercial confidentiality. In 2002 a report by the Regional Advisor of
the United Nations High Commissioner for Refugees, Justice Bhagwati,
concluded that ‘the situation in the detention centres seems to be bedev-
illed by a lack of transparency and accountability’ (Melbourne Age, 31
July 2002). A subsequent report by the Australian National Audit Office
(2003) warned that ‘the administrative practices in place did not establish
accountability’ and recommended that DIMA be made to report to Parlia-
ment on the results of its monitoring programs and details of its funding
outlays.
This loss of accountability is unlikely to have happened by accident. At
a time when the basic principle of mandatory detention was popular with
the electorate but the details of the actual conditions in which detainees
were being held provoked considerable disquiet, ministers had a strong
incentive to minimise their accountability. The Inspector of Custodial
Services in Western Australia, Richard Harding, suggested that account-
ability had been compromised because ‘the government wanted this to be
out of sight and out of mind’ (ABC, 20 June 2004). Similarly, a former
Attorney-General and Minister for Corrections in Victoria, Jim Kennan,
argued that, ‘one of the driving political motives for [the contracting-out
of detention centre services] was to distance the government from prob-

lems . . . they can say it is a matter for the contractor’ (Melbourne Age, 9
January 2003).
The government’s initial refusal to accept responsibility for the manage-
ment of the detention centres provides a good example of metagovernance
failure. However, to argue that states can sometimes fail is not to argue
that states must always fail. As we observed in Chapter 2 when discussing
the limitations of public choice theory, the media, opposition parties and
interest-groups have an incentive to monitor government performance and
draw public attention to any failings. Governments may sometimes have
an incentive to avoid their metagovernance responsibilities but they risk
paying a heavy political price for doing so. Precisely because the public
expects states to retain overall responsibility for the delivery of services,
governments remain politically vulnerable to claims that they have failed
to effectively metagovern. In the case in hand, the failure to ensure the
public accountability of governance arrangements within detention centres
became a popular cause with the media and Opposition, causing the gov-
ernment long-term political difficulties. When a new contract was signed
with Global Solutions to manage the detention centres in 2004, account-
ability procedures were, as a consequence, overhauled. In this sense, the
expectation that the government will metagovern itself creates an incentive
for the government to do so.
LEGITIMACY
Legitimacy is an important criterion of effective metagovernance. Gover-
nance arrangements that are seen as fair in terms of processes and out-
comes, have popular support, and are regarded as legitimate are likely to
be more stable and effective than arrangements that are thought to be
upheld through force or arbitrary power (Kjaer, 2004, 12). The legitimacy
of governance arrangements can best be secured as a byproduct of the per-
formance of other metagovernance functions. Chapter 2 discussed the view
of Fritz Scharpf (1997; 1999) that legitimacy is a two-dimensional concept
relating to the inputs and to the outputs of the political system. On the
input side, legitimacy requires that political choices are derived, directly or
indirectly, from the preferences of citizens. On the output side, legitimacy
requires that organisations perform effectively. If governments effectively
steer governance arrangements, ensure effectiveness and provide neces-
sary resources, the legitimacy of the outputs is enhanced. If governments
provide democratic oversight and ensure accountability, the legitimacy of

the inputs is enhanced.
Where, for whatever reason, governance arrangements lack legitimacy,
governments come under pressure to take action. Following the interna-
tional credit crisis which began in late 2007, banks, investment firms, credit
agencies and accountancy firms lost a significant measure of public support.
Immediately, governments in the United States and Europe were urged to
revise light-touch regulatory systems in order to prevent banks from taking
excessive risks in the knowledge that taxpayers would ultimately have to
cover any losses that threatened the integrity of the financial system. As
The Economist argued:
For three decades, public policy has been dominated by the power of
markets—flexible and resilient, harnessing self-interest for the public good,
and better than any planner-in-chief . . . [but] new rules became inevitable
the moment the Federal Reserve rescued Bear Stearns and pledged to lend
to other Wall Street banks. If taxpayers are required to bail out investment
banks, the governments need to impose tighter limits on the risks those
banks can take [3 April 2008].
M E TA G O V E R N A N C E A S A P R O B L E M O F
PUBLIC GOOD PROVISION
Metagovernance is exercised not only by state actors but also by various
networks of public and private actors and a whole range of supranational,
regional, and local levels in the formal political system. In fact, metagov-
ernance can potentially be exercised by any resourceful actor – public or
private. All it takes is resources and a desire to influence activities performed
by self-governing actors [E. Sorensen, 2006, 103].
So far we have been assuming that metagovernance functions must be dis-

charged by the state. Eva Sorensen challenges this assumption by suggesting
that ‘any resourceful actor – public or private’ can metagovern. This raises
two issues: whether private (that is, non-state) actors have the resources and
legitimacy needed to metagovern; and whether they have the incentives or
desire to do so.
We will start with a discussion of resources. Chapter 1 said that states
retain a monopoly on the legitimate use of violence. This is a key metagov-
ernance resource. States can metagovern because they can impose decisions,
change governance rules, extract resources through compulsory taxation,
and require actors to appear in court or before parliamentary committees

to account for their action (also see Mayntz, 1998). With regard to the first
of these activities, imposing decisions, non-state actors could, in the event
of a dispute, agree to accept decisions made by an independent arbitrator
acting as a metagovernor. But it is difficult to see how non-state actors
might force each other to abide by decisions that they do not accept. It
is even harder to see how a non-state actor performing this metagover-
nance function might force the state to accept such decisions where it is
involved as one of the participants in a governance arrangement. The same
holds true of the second and third functions. Lacking any coercive power,
non-state actors will only be able to change governance rules and extract
resources if all the groups affected agree.
There is one further resource states possess which enhances their
metagovernance capacities: legitimacy. Even if firms or sectional interest-
groups have the required organisational and financial resources, they may
lack the legitimacy needed to metagovern effectively. It is not hard to imag-
ine how a non-state organisation like the American Automobile Manufac-
turers Association might position itself to metagovern a policy to reduce
vehicle emissions. But such an arrangement would be unlikely to attract
the support of environmental groups or concerned citizens. In some cases
NGOs may acquire sufficient legitimacy to metagovern. Chapter 8 on
associative governance shows how the World Wide Fund for Nature has
played a metagovernance role in encouraging private forestry firms to sign
a charter committing them to sustainable forestry practices. In other cases
criminal groups have come to perform some metagovernance functions.
Diego Gambetta (1993) argues that in the 19th century the Italian state
was so weak and corrupt that the Mafia was, within limits, regarded as a
trustworthy and legitimate body to enforce commercial exchanges. These
are, however, exceptional cases. When either a new policy problem emerges
or the failings of an existing policy become apparent, people continue to
expect states to provide solutions; this expectation is itself a key metagov-
ernance resource.
Let us now turn to the more complex issue of incentives. Sorensen sug-
gests that actors must have a ‘desire’ to metagovern but does not consider
whether this desire will be forthcoming. We argue that it is often absent.
Economists classify goods in terms of their ‘excludability’, and their ‘rival-
ness’ (Hindmoor, 2006a, 103):
r A good is excludable if its owner can prevent its consumption
benefiting anyone else; it is non-excludable if the benefits deriving from
its consumption are available to all.
r A good is rivalrous when its consumption by one person reduces the

amount available to others; it is non-rivalrous to the extent that con-
sumption by one person does not reduce the amount available to
others.
Public goods like defence, sanitation, clean air, street lighting and law
enforcement are non-excludable and non-rivalrous. Street lighting on pub-
lic roads provides a benefit to everyone who walks or drives down them and
this benefit is non-rivalrous in the sense that the light ‘consumed’ by one
person does not reduce the amount of light available to others. Economists
generally regard the existence of public goods as a key source of market
failure. Because everyone benefits from the provision of a public good
whether or not they contributed to its supply, everyone has an incentive to
free-ride and none of the good will be supplied. Economists then conclude
that the state must intervene to directly secure the supply of public goods
using its coercive powers to, for example, extract taxation.
In our view the supply of metagovernance raises equivalent issues. Effec-
tive metagovernance provides benefits both for the participants in any
governance mechanism and for the broader public. Let us look first at
the function of steering. Without a court of appeal to settle disputes,
governance arrangements risk being paralysed by disagreements between
participants. Without the timely provision of information, actors risk being
committed to sub-optimal plans. Or consider effectiveness. Individual par-
ticipants in a governance arrangement may resist the imposition of per-
formance targets but nevertheless recognise that others will perform more
effectively if they are in place. The same applies to accountability. When a
policy has failed, the public wants to see those responsible held to account.
The benefits provided through effective metagovernance are, how-
ever, non-rivalrous and non-excludable public goods. That the benefits
of metagovernance are non-rivalrous is obvious. If one actor in the net-
work consumes information about the demand for services, this does not
reduce the amount of information available to others in the network.
Equally, the benefits a taxpayer derives from knowing that someone has
taken responsibility in accounting for the actions of the participants in a
network do not reduce the ‘amount’ of accountability available to others.
The sense in which the benefits of metagovernance are non-excludable is
initially less obvious. By way of an introduction, think about the provision
of human rights and, more specifically, the right to free speech. There is
no doubt that this right could be framed to exclude specified groups of
people: suspected terrorists, organised criminals, or employees of tabloid
newspapers. In this practical sense free speech is excludable. But an advocate
of human rights will argue that a right to free speech which excludes certain
groups of people is no right at all: that the principle of free speech is
intrinsically non-excludable.
In an analogous sense we suggest that metagovernance is non-excludable.
Assume that two of the three members of a network agree to share the cost
of collecting and distributing general information about the demand for
different kinds of services. It is not hard to see how they could refuse to
provide this information to the third member. In this sense, the information
is a non-rivalrous but excludable toll good. But if, as a result of their
decision, this third organisation sets incorrect plans, we could say that the
right information had not been provided, that the function of steering
had not been discharged effectively and that there had been a failure of
metagovernance. For the functions of metagovernance to be discharged,
they must be discharged inclusively. Steering requires the steering of all
the actors in the network; resourcing requires the provision of adequate
resources for all the actors in a network; accountability requires the calling
to account of all the actors in a network, and so on. Hence metagovernance
is non-excludable.
Because the benefits provided through effective metagovernance are
public goods, interest-groups, private firms and other non-state actors
operating in networks and other governance arrangements have an incen-
tive to free-ride on their provision. Actors might recognise that there is
a need to collect and distribute information, coordinate plans, provide a
neutral court of appeal, monitor the overall effectiveness of the network,
and account for actions; but each recognises that any investment it makes
in metagovernance will benefit not only the actors in the network but
the taxpayers and others outside it and, conversely, that they will bene-
fit from free-riding on any investment made by others. The ‘market’ for
metagovernance is thus likely to fail because none of the actors in that
market has an incentive to invest in metagovernance. Just as the state
must correct for the existence of market failures by providing public goods
like defence, law enforcement and sanitation, so, too, it needs to provide
metagovernance if the other actors who benefit from its supply are driven
by consideration of their own interest. Organisations may sometimes have
an incentive to undertake metagovernance responsibilities if they have a
general commitment to the welfare of all the actors in a governance system.
We point to such an example in Chapter 8. Yet it would be a mistake to
assume that, simply because a range of actors benefit from the provision
of metagovernance, any non-state actor will find it in its interest to supply
that metagovernance.
S TAT E C A PA C I T Y: A S TAT E - C E N T R I C
R E L AT I O N A L A C C O U N T
The challenges of metagovernance raise important questions about whether
states have the capacity to operate coherently and forge effective governance
relationships. Here the widely discussed concept of state capacity or ‘gov-
erning capacity’ is relevant. This approach provides a broad institutional
and relational blueprint for understanding governing capacity by drawing
on a range of comparative studies. States’ capacity to formulate and imple-
ment policies varies both within and between countries (Weiss & Hobson,
1995, 28). As an example of varying capacity between countries, consider
taxation. Chapter 2 showed that the amount of money raised through tax-
ation has risen steadily within the largest OECD economies over the last
30-odd years. There are, however, striking differences between the capaci-
ties of states in this regard. In Sweden it is estimated that the state collects
over 95 per cent of the revenue owing to it each year; in Russia the equiv-
alent figure is thought to be as low as 10 per cent (Rothstein, 2005, 1–2).
As an example of varying capacity within the state consider how, in the
United States, a federal government that had successfully mobilised more
than a quarter of a million troops for the invasion of Iraq was paralysed by
the flooding and subsequent breakdown of public order in New Orleans
in 2005 following Hurricane Katrina.
How do we account for such startling differences in governing capacity?
Political scientists have tended to define both institutional and relational
components of state capacity. Institutional arrangements can be vital in
this respect. As Stephen Krasner (1984, 228) says:
The ability of a political leader to carry out a policy is critically determined by

the authoritative institutional resources and arrangements existing within a
given political system. Industrial policy can be orchestrated in Japan through
the Ministry of International Trade and Industry. There is no American
institutional structure that would allow a political leader, regardless of the
resources commanded, to implement a similar set of policies.
We can define institutions as formal or informal rules, norms or sanc-

tions designed to shape human behaviour (Thelen & Steinmo, 1992;
Thelen, 1999; Hall & Taylor, 1996). For pioneering researchers, such
as Douglas North (1990, 4), an institution is ‘any form of constraint
that human beings devise to shape action’. The core claim of insti-
tutional researchers is that institutions matter because they shape the
behaviour of individuals and the possibilities for governance. All strands of
institutionalism share a common focus on institutionally ‘situated’ actors

or individuals, whose behaviour is shaped by their institutional location
and role and by the authority relations and ideational orientations that
institutions embody. Institutions also matter because governance typically
occurs in and through them, whether they are specific organisations or
clusters of rules, norms, or other institutional arrangements. Existing insti-
tutional configurations also shape governance strategies and outcomes.
Hence, we might expect that relatively centralised and unitary political
systems such as those in New Zealand and the United Kingdom might
be more inclined to govern via hierarchy. By contrast, more decentralised
institutional arrangements may lend themselves to more negotiated gov-
ernance approaches, especially across the multiple levels of government
in federal systems. In turn, governance strategies shape institutions. For
example, market-oriented governance strategies have tended to strengthen
those institutions engaged in various forms of market regulation, such as
the organisations administering competition policy.
As a further illustration of the importance of institutional arrangements
in shaping state capacity, consider the case of nuclear energy. In the 1950s
and 1960s most Western governments decided to invest heavily in com-
mercial nuclear energy programs in the mistaken belief that nuclear power
would prove to be an exceptionally cheap source of energy. These nuclear
programs met with varying fates. In France 67 nuclear reactors were built
and nuclear power now generates more than 70 per cent of France’s electric-
ity. In the United States and the United Kingdom nuclear power continues
to provide around 15 per cent of electricity, but it fell out of favour in the
1980s and 1990s and has only recently been resurrected as a potential solu-
tion to the problems of climate change and energy security. In Germany
20 reactors were built, but a decision was taken in 1998 to phase them
out. Austria (1978), Denmark (1985), Greece (1975), Ireland (1999), Italy
(1990), and Switzerland (1990) have gone so far as to ban the future use
of nuclear power (OECD, 2001, 228).
In each of these countries the capacity of government to hierarchically
impose its preferred nuclear solutions depended upon existing institutional
rules. In France, ‘although there was considerable resistance to nuclear
energy’, the political weakness of local government, enshrined within the
constitution of the Fifth Republic, meant that ‘there were few paths’ for
protestors (Kitschelt, 1986, 79). In the United States, by contrast, a federal
political structure that devolved considerable decision-making power to
states severely constrained the capacity of central government to develop
nuclear power (Joppke, 1993). In New York, for example, the Shoreham
nuclear power plant, built in the late 1970s, was never switched on because
the governor of the State of New York, Mario Cuomo, refused to sign the
Emergency Evacuation Plan, so the plant could not receive a full power
licence from the Nuclear Regulatory Commission. In Germany, mean-
while, the federal government’s attempts to develop a nuclear program were
eventually frustrated by a proportional voting system that resulted in the
Green Party entering government in coalition with the Social Democratic
Party in 1998 on the condition that Germany’s nuclear power program be
abandoned (Feigenbaum, Samuels, & Weaver, 1993).
A range of scholars who have explored the major institutional attributes
of ‘capable’ states have suggested the following key components:
r Centralised decision-making: Strong states (or perhaps strong sectors
within states) have centralised political and administrative authority
and a minimum number of ‘veto points’ (Tsebelis, 2002). Such cen-
tralisation implies the ability to act as a coherent, corporate actor. This
capacity may stem from the structure of the state or from mecha-
nisms that can effectively coordinate activity across a number of arenas.
In weak states (or sectors), by contrast, decision-making authority is
likely to be fragmented, perhaps because of federal structures or a lack
of effective coordinating or steering mechanisms. For example, recent
Australian experience shows that the problems of dealing with salina-
tion and water management have been exacerbated by the institutional
structures and state and regional divisions of the federal political system
(Connell, 2007). Hence, capable states (or state sectors) typically have
centralised, or at least clearly defined and coordinated, decision-making
hierarchies.
r A strong administrative apparatus: States must also have the requisite
resources at their disposal to be able to act effectively. Bureaucratic and
administrative resources, including high-quality information, forums
of active policy debate, and expert, dedicated and experienced staff in
key areas of policy formulation and implementation, are also a vital
component of state capacity. Skocpol (1985, 16) writes that ‘loyal and
skilled officials’ are the ‘universal sinews of state power’. As Max Weber,
the original theorist of bureaucracy, pointed out long ago, the key
elements underpinning an effective bureaucracy include highly selective
meritocratic recruitment and promotion procedures, combined with
high status and rewards, long-term career prospects and a sense of service
and professionalism. In the case of taxation, for example, the capacity
to tax citizens does not depend on simply imposing coercive power by
issuing credible threats to fine or imprison those who refuse to pay. It also
requires a large bureaucracy capable of tracking people’s employment

and salary (for income tax); their overall wealth (for property or capital
gains tax); their place of residence (for determining liability on income
earned overseas); the movement of goods in and out of the country
(for tariffs); and the cumulative addition of monetary value through the
production process (for sales taxes).
r Fiscal resources: The taxation example relates directly to another ele-
ment of state capacity: fiscal resources. The capacity to extract financial
resources through taxation remains a key source of state capacity. His-
torically, a state’s fiscal capacity has always been a major determinant of
its capacity to wage war, but increasingly projects of public infrastruc-
ture, industrial competitiveness and social compensation and welfare
have made heavy claims on the fiscal state. The capacity to raise rev-
enue via taxes reflects the state’s ‘extractive capacity’ (Weiss & Hobson,
1995, 7).
r Policy instruments: Policy instruments are the actual means or devices
that governments have at their disposal for implementing policies (see
Hood, 2007, for an overview). States must have the necessary tools,
inducements and sanctions to shape the behaviour of societal or external
actors in appropriate ways. Policy instruments may include anything
from subsidies or tax incentives to moral suasion or regulation. John
Zysman (1983) suggests, for example, that the capacity of the Japanese
and French states to develop new industries crucially depends upon the
existence of ‘state-led’ systems of capital allocation within which the
bureaucracy is able to control the flow of investment to private firms. In
the United Kingdom and the United States, by contrast, the easy access
of firms to capital markets and external sources of finance has limited
the capacity of the state to direct economic development.
r Legitimacy: We have repeatedly pointed out that the successful exercise of
state power requires legitimacy (Seabrooke, 2006). Government leaders
must ultimately be regarded as having a mandate to rule and delivering
effective policies if legitimacy is to be established or maintained. Hence,
governments require the consent of those being governed. In the United
Kingdom in the late 1980s, for example, the government found it almost
impossible to implement a new tax, the community charge or poll tax,
which large parts of the population regarded as illegitimate (Butler
et al., 2004).
Our account of state capacity also has important relational compo-
nents involving the nature of the links between the state and society. It
was once orthodox to say that the strongest states were those that were
relatively insulated from the push and pull of political conflicts and pos-
sessed the authority to impose or push through their own policy agendas.
Theda Skocpol (1985, 9), for example, defines state capacity in terms of
autonomy, and autonomy in terms of the ability of government to ‘imple-
ment official goals, especially over the actual or potential opposition of
powerful social groups or in the face of recalcitrant socioeconomic cir-
cumstances’. State capacity is thus simply defined in terms of a triumph
over opposing groups. The problem with this account, however, is that
it is too ‘state-centric’; states are assumed to gain policy capacity to the
extent that they operate independently from the societies they govern. Yet,
as Michael Mann (1988) points out, states have been able to enhance their
policy capacity over the last few centuries by strengthening their ties to
society. In the 14th and 15th centuries rulers exercised almost unlimited
despotic power over their subjects. Yet in many respects, these ‘absolute’
states (Gill, 2003, 98–102) were surprisingly weak. They lacked the capac-
ity to promote economic development or control people’s lives, and their
expenditure probably accounted for no more than two or three per cent
of gross domestic product. States have a greater capacity to govern today
because they exercise ‘infrastructural’ as well as ‘despotic’ powers. Infras-
tructural power refers to the way in which states can ‘actually penetrate
civil society, and . . . implement logistically political decisions throughout
the land’ (Mann, 1988, 5).
Developing Mann’s arguments about infrastructural power, writers such
as Peter Evans (1997), Linda Weiss (1998) and John Hobson (2000) have
argued that state capacity requires states not only to ‘penetrate’ society but
to work closely with non-state actors. This argument obviously bears upon
our state-centric relational account of governance. The notion that the
state’s capacity and authority may in part be derived from sophisticated
links with key social actors is not new. Talcott Parsons (1963) made a
distinction between active notions of state capacity and simpler but cruder
forms of coercive state power several decades ago. But by documenting
the ways in which, in particular, Asian governments have been able to
construct successful economic relationships with non-state actors, political
economists have identified an economic alternative to the Washington
Consensus of free markets and shrinking government. Hobson (2000, 234)
suggests that states are more likely to be able to achieve their goals if the
interests of the state and society are advanced ‘collaboratively rather than
competitively’. Similarly, Evans (1992, 162) argues that the most capable
states are now more likely to be those in which ‘concrete sets of social
ties . . . bind the state to society’, allowing for the ‘continual negotiation
and renegotiation of goals and policies’ (see also Onis, 1991; Martin,
1989).
Governments can often extend their capacity to govern by developing
closer relations with non-state actors, and thus the relationship between
government and interest-groups ought to be viewed as positive-sum rather
than zero-sum. In order to successfully formulate and implement policy,
governments often need to acquire the expertise, support or assistance of
interest-groups and NGOs. In return, governments must offer these groups
a measure of policy influence. The existence of these exchange relationships
means that governments are often not in a position to unilaterally impose
their policy preferences. Thus, our critique of the society-centric approach
does not require us to regard the state as a behemoth capable of trampling
over any opposition. Instead, our state-centric relational approach leads us
to emphasise the ways in which the relationships government builds can
enhance its policy capacity.
An interesting example of the significance of such relational capacity
is offered by Heather McKeen-Edwards and colleagues (2004) in a paper
on financial integration within North America and the European Union.
Despite greater rhetorical commitment to the free market, the United States
and Canadian financial markets are less integrated than those within the
European Union, both in terms of regulatory control and cross-national
ownership. This apparent paradox is explained in terms of the ‘relation-
ship between private and public actors in the policy process’ (p. 336). The
European Union has developed centralised corporatist structures of policy
negotiation that mobilise major financial interests through peak organisa-
tions; this has made it easier for the state to negotiate market liberalisation.
The United States and Canada have a ‘more pluralist pattern of policy
making’; thus government–business relations tend to be riven by conflict
as firms lobby for narrow concessions rather than negotiate collectively on
market structure (p. 342).
In a book dealing with ‘policy networks’, or the interaction of state and
non-state actors in specific policy arenas, Michael Atkinson and William
Coleman (1989) look at industrial policy and offer an account that helps
explain these relational dynamics. They are interested in the ways in which
different kinds of policy networks are structured by institutional factors,
including the authority and institutional capacities of the state and the
associative capacities of key non-state actors or groups. In turn, such struc-
tured policy networks can facilitate or constrain industrial policy, especially
in relation to what they call ‘reactive’ and ‘anticipatory’ policy styles. The
former is a short-term, incremental policy style responding to events or
particular lobbying demands; anticipatory policy is more plan-oriented and

implemented around long-term strategic goals. It might appear that gov-
ernments are more likely to be able to develop anticipatory policies where
the state is relatively ‘strong’ and business interests are relatively weak
and fragmented and so unable to challenge the government’s edict. Yet
Atkinson and Coleman argue that successful anticipatory policy requires
the presence of strong business interests mobilised through powerful peak
associations interacting with an authoritative and centralised state. In such
‘concentation’ networks ‘state officials seek an accommodation with busi-
ness that not only meets the latter’s need for freedom of action and eco-
nomic support, but is also in step with a set of broader political objec-
tives’, most of which are ‘negotiated over a period of time with business’
(p. 59).
Post-war Japanese industrial policy offers a paradigm of this kind of
relational policy capacity. In the aftermath of World War II Japanese leaders
decided on a strategy of accelerated economic development in order to raise
living standards, enhance national security (Weiss & Hobson, 1995, 187)
and recover lost national prestige. How did Japan achieve its ‘economic
miracle’? The conventional answer is that it was achieved in a hierarchical
fashion through a ‘developmental state’ (Johnson, 1995) which diverted
resources to high-growth, high-technology industries. On this reading, the
Japanese state was successful because organisations like the Ministry of
International Trade and Industry (MITI) were able to create a ‘governed
market’ (Wade, 1990) by issuing hierarchical ‘administrative guidance’ to
private firms, imposing restrictions upon foreign ownership and imports,
licensing the use of particular technologies, and subsidising research and
development.
Yet as Daniel Okimoto (1989) observes, the Japanese state is far from
being a leviathan. Unlike the United Kingdom, France, Italy and a number
of other European countries, Japan did not own the industries it set about
promoting. Furthermore, when the economic miracle was unfolding in
the 1960s, state expenditure remained relatively low. The state was able
to guide development only because it was able to operate through a web
of formal and informal contacts with individual firms, industrial clusters
(Keiretsu) and industry associations with whom it was able to negotiate
long-term policy. ‘Instead of labelling Japan a “strong” state therefore,
perhaps it would be more accurate to call it a “societal” or “relational”, or
“network” state, one whose strength is derived from the convergence of
public and private interests and the extensive network ties binding the two
together’ (Okimoto, 1989, 145).
In his analysis of Japanese industrial policy, Richard Samuels (1987)

talks of ‘reciprocal consent’. Linda Weiss (1998, 48), who uses the term
‘governed interdependence’ to describe similar relationships, suggests that
the Japanese model was effective because policies were ‘the result of regular
and extensive consultation, negotiation and coordination with the private
sector’. The Japanese state was not robbed of its policy capacity through the
development of policy networks in which there were frequent, high-quality
exchange relationships. Instead, as Atkinson and Coleman suggest, the state
gained through the opportunity to work with a capable and well-organised
business sector. The lesson is that state capacity is a function both of state
structure and of associational capacities in society. Governments are more
inclined to engage with groups not only when those groups possess valued
resources but when they are effectively organised, a theme we return to in
Chapter 8 on associative governance.
THE CHALLENGES OF
M E TA G O V E R N A N C E
The metagovernance of complex governance arrangements presents major
challenges to governments. For example, our argument that state capacity
can be enhanced through the development of closer state–society relations
has one important qualification. On the one hand, a state that is too
insulated from society will struggle to implement its goals. On the other
hand, there is a danger that governments end up being captured by the non-
state actors with whom they are seeking to develop closer relations (Stigler,
1971; Laffont & Tirole, 1991). In public choice theory, where the notion
of capture unsurprisingly originates, the concern is that governments do
the bidding of interest-groups, firms and business associations. Such rent-
seeking activity is thought to explain, for example, the US government’s
continued commitment to farm subsidies that harm not only exporters in
developing countries but also American consumers (Tullock, 1989; 1993;
2005). In another example, a critical aspect of economic governance in
capitalist economies necessarily relies on the activities of private wealth
holders, investors and entrepreneurs. A capable state needs to be able to
achieve its goals by working with and encouraging such private actors
while retaining the necessary authority to avoid slipping into relations
of clientism, capture, rent-seeking, corruption or other manifestations of
government failure. In this sense, close ties between the public and private
sectors, or between the state and the community, need to be managed or
metagoverned in order to achieve public rather than private goals.
In what circumstances are state actors most likely to retain their author-
ity and independence within governance networks? We may already have
answered this question. States are most likely to do so when either indi-
vidual ministries or the state as a whole possess authority and a clear sense
of their own legitimacy and mission, and when there is a well-trained,
well-equipped public service with a strong sense of its own identity. To
this extent, then, we might conclude that state capacity requires both a
relational state and a strong state. Furthermore, where state officials are
captured, it is important that other state actors are in a position to inter-
vene by challenging policy decisions made within the network and change
its membership. Chapter 2, for example, showed how French authorities
overturned an established agricultural network in order to achieve wider
strategic goals. Another example is the Tariff Board, a statutory authority
charged with tariff administration in Australia in the late 1960s, which
eventually destroyed the post-war protectionist policy network. The Tariff
Board worked to establish its authority, expertise and eventually enough
key allies to challenge the dominant tariff policy network, led by the pow-
erful Deputy Prime Minister John McEwen (Bell, 1989). Such an exercise
can be thought of as a further form of metagovernance in the sense that
it requires the state to steer governance arrangements in order to ensure
effectiveness and accountability.
In the final analysis, then, governments are instrumental in the creation
of governance networks and they can choose whether to revise such arrange-
ments (Pierre & Peters, 2005, 68). A further example of such state capacity
comes from Alan Greer (2002, 465) who examines the development of
organic agricultural policy in Ireland and shows how the government set
up ‘an Organic Development Committee composed of representatives from
state bodies, the organic farming sector, the food processing and retail sec-
tor, and consumers to oversee the formulation of a development strategy’.
When structuring networks, governments may have to choose between
the interests of competing groups. Policy decisions taken in one network
can generate costly external effects for other actors. The adoption of lax
food safety standards in agricultural policy, for example, might generate
high political and financial costs for a health ministry that must deal with
the resulting public health crisis. In such situations metagovernance and
coordination by higher state authorities may be necessary.
Despite efforts to build central state capacity, the challenges of metagov-
ernance are not always met. The analysis by Stephen Bell and Alex Park
(2006) of water management through community engagement across a
range of river catchments in New South Wales, Australia, provides an
illustration of the problems involved. In the early 2000s the state gov-
ernment established 36 Catchment Management Committees comprising
local and other stakeholders; they were tasked with formulating water-
sharing plans to allocate water to users and the environment. However,
the selection of participants in the governance arrangements, the resourc-
ing and information flows provided to the committees, the specification
of goals, and confusion over the rules relating to authority-sharing and
decision-making arrangements, all caused consternation among partic-
ipants. This was a classic case in which the authorities were relatively
unskilled, under-resourced and over-stretched in attempting to metagov-
ern a governance system.
Other problems associated with metagovernance are illustrated by Mark
Whitehead (2003) in a study of decentralised urban regeneration schemes
in the West Midlands in England. Contrary to the difficulties of con-
trol emphasised by Flinders (2006), Whitehead emphasises the continued
presence of central government hierarchy in shaping such governance rela-
tionships and the powerful role played by government oversight bodies
that insist on adherence to central strategies and perform ongoing moni-
toring and assessment procedures while employing a strategy of ‘fear and
discipline’ to intimidate local units (p. 12). The intensity of these metagov-
ernance arrangements has certainly increased steering and accountabil-
ity. But it has done so, according to Whitehead, at the cost of ‘choking
and constraining the flexibilities’ ascribed to such decentralised networks.
The ‘bureaucratic burden’ stemming from metagovernance is ‘deflecting
important time and resources from the actual projects’ the local units
were attempting to pursue. Whitehead concludes that the ‘practices of
metagovernance are currently facilitating hierarchical rule, not local self-
determination in policy decision making processes’ (p. 13). A similar con-
clusion is reached by Tabatha Wallington and colleagues (2005, 13) in their
study of regional governance arrangements in Australia; they point to the
potentially contradictory tendencies of metagovernance in both fostering
and inhibiting local decision-making capacity: ‘The more that account-
ability is demanded by higher levels of government, the more likely that
the regional bodies – created to be flexible, community-oriented vehicles
for change – will become rigid bureaucratic structures, thereby nullifying
their original purpose’ (see also Flinders, 2002, 70). Similarly Donald Kettl
(2002, 146) points to the concerns of academics in New Zealand who have
studied the development of a contract-based state and concluded that such
governance arrangements have compromised social capital and reduced
opportunities for wider engagement and debate. As he argues, government
strategies to increase control run the risk of ‘weakening government’s abil-

ity to manage the networks on which effective implementation of public
programs depends’.
Despite such problems, the challenges of governance and metagov-
ernance may require a degree of restructuring of the state and perhaps
further strengthening of central state authority. Kettl (2002) argues that
such challenges are being faced in American public administration with-
out a theoretical compass and with ‘theory and practice sagging under
the strain’. The traditions of American public administration, he argues,
have been built on centralised institutions and hierarchy that are strug-
gling to adapt to new governance arrangements and networks. On the
other hand, he also points out that, ‘to a surprising degree, governmental
institutions have shown remarkable resilience in adapting’ (2002, 123).
These adaptations have required government leaders and administrators to
develop better relational skills, especially in networking, negotiating and
contracting. Nevertheless, he argues that there is a continuing need to join
up government and develop new systems of budgeting, accountability and
personnel management better adapted to relational modes of governance
(p. 120). This requires negotiation and compromise, but it also requires
strong hierarchical arrangements and a strong central state to exert controls
and mobilise resources. As Glyn Davis and Rod Rhodes (2000, 94) argue,
the experience of the outsourcing ‘contract state’ may help strengthen the
‘hierarchical state’; one featuring a ‘permanent, autonomous, career-based
and policy-focused core public service, with a commitment to neutral
professional advice’.
CONCLUSION
The state-centric relational approach to governance places both the state
and the nature of state–society relations at centre stage in analysing and
understanding governance arrangements. The state may be a direct player
in specific governance arrangements, but it also has a metagovernance role
that transcends such arrangements.
The study of metagovernance is still embryonic. Relatively few scholars
have explicitly explored it (see Scharpf, 1994; Jessop, 1997a; 2002; Bell &
Park, 2006; Kelly, 2006; Whitehead, 2003; E. Sorensen, 2006; Sorensen &
Torfing, 2008b), although some have implicitly done so by emphasising an
overall ‘state-centric’ management role in overseeing governance arrange-
ments (Skogstad, 2003; Mayntz, 1993; Fung & Wright, 2003). We need to
know much more about metagovernance functions. First, governments and
state managers must move beyond notions that governance arrangements

can somehow be self-managing. For Gerry Stoker (1998, 17), ‘governance
can be defined as a concern with governing and achieving collective action
in the realm of public affairs, in conditions where it is not possible to
rest on recourse to the authority of the state’. From our perspective, this
society-centric view of governance is problematic because it rules out the
use of state authority and hence the possibility of metagovernance. In our
view, the exercise of metagovernance results in a continuing role for hier-
archical government in any governance regime. Even when governments
choose to govern through markets, networks and community engagement
rather than through hierarchy, they retain a key role in the governance
process.
In a much-cited article Fritz Scharpf (1994, 41) suggests that governance
always take place under the ‘shadow of hierarchy’.
In most western democracies . . . the unilateral exercises of state authority

has largely been replaced by formal or informal negotiations, in policy for-
mulation as well as in policy implementation, between governmental actors
and the affected individuals and organisations . . . but these are typically
negotiations under the shadow of hierarchical authority.
Hence, even when actors appear to be operating under governance arrange-

ments apparently designed to secure a degree of autonomy from govern-
ment, metagovernance casts the shadow of hierarchy over them. This is a
necessary function of the state in pursuit of the SERDAL functions out-
lined early in this chapter. Metagovernance, however, is always vulnerable to
under- or over-regulation. In the case of the New South Wales catchments
(Bell & Park, 2006), weak or poorly thought through metagovernance
was the main problem. In the case of urban regeneration in the West
Midlands (Whitehead, 2003) it appears that onerous levels of metagover-
nance inhibited local creativity and flexibility. The challenge, then, is to
develop effective metagovernance without inhibiting local capacity. Given
the hierarchical nature of the state, this is indeed a challenge.
4 Hierarchy and top-down
governance
G OVERNANCE REFERS TO THE TOOLS, strategies and rela-

tionships used by governments to help govern. Hierarchical governance
is distinguished by the direct application of state authority to target pop-
ulations. It arises when states impose rules or standards of behaviour on
other actors, backed by sanctions and rewards, in order to achieve collective
goals. The claim that there has been a ‘fundamental transformation’ in the
‘basic forms’ of governance (Salamon, 2002, 1–2) can be understood as
saying that governance through hierarchy is being gradually superseded
by governance through markets, associations and community engagement.
We believe that this society-centric argument is misleading; that the state is
far from being passé and that we still need to recognise the ‘distinctiveness
or uniqueness of state action within contemporary governance’ (Crawford,
2006, 458). The actors who control the modern state have at their dis-
posal a set of powers and resources – from formal constitutional and legal
authority to vast fiscal, administrative, informational resources and access
to expertise – that are qualitatively and quantitatively unlike those avail-
able to other actors in society. These resources are frequently employed to
govern hierarchically.
In later chapters we pursue our argument that states can enhance their
capacity by developing close relations with a wide variety of non-state
actors. This chapter argues that the extent to which governance through
markets, associations or communities has replaced hierarchical governance
has been exaggerated. Hierarchy is not simply holding its own against other
governance mechanisms: in some cases it is resurgent. We recognise that
reliance on governance through hierarchy varies across states and among
policy sectors. Constitutional democracies are characterised by institution-
alised safeguards against the exercise of certain forms of hierarchical control
71
not present within authoritarian regimes (Bellamy & Castiglione, 1997).

As Kenneth Dyson (1980) observes, there are also differing state traditions
within constitutional democracies. A French statist political culture that
invests substantial legitimacy in the exercise of centralised state author-
ity can be contrasted with a more liberal American tradition. Comparing
policy sectors rather than countries, we might note that defence and mon-
etary policy are almost always developed exclusively by senior politicians
and public officials. By contrast, in areas where successful implementa-
tion requires the cooperation of semi-autonomous professionals – health
and education policy being the sterling examples – extensive networks of
consultation often develop.
While recognising that such variations are relevant, we concur with
those who point to the growth of the ‘regulatory state’ (Moran, 2002;
Jordana & Levi-Faur, 2004; Braithwaite, 2008). The first part of the chapter
acknowledges a partial retreat in the use of hierarchical governance in
some areas of economic management and in some areas of public policy.
However, hierarchical governance has expanded significantly to address
perceived risks posed by new technologies, market failures and threats to
civil security. We do not claim that nothing has changed or that governance
today is little different from governance yesterday. Indeed, we go on to
show how states have institutionally re-engineered themselves to exert
more effective control, often as a direct response to weaknesses identified
by academics and practitioners.
R O L L I N G B A C K T H E S TAT E ?
Chapter 2 demonstrated that state expenditure measured as a share of
gross domestic product, far from being rolled back, has increased in most
countries over the last 20-odd years. However, this headline figure masks
a significant retrenchment of hierarchical governance in relation to some
areas of economic management. Governments have progressively with-
drawn economic subsidies, exchange and credit controls and tariffs; loos-
ened regulatory controls on capital creation; privatised state enterprises; and
deregulated a range of markets. Two important measures of this change
are worth highlighting. Table 4.1 shows that overall state expenditure on
economic subsidies as a share of GDP fell on average by just over one per
cent of GDP in a sample of 20 OECD countries between 1980 and 2004.
Interestingly, this withdrawal of state support was not limited to coun-
tries like the United Kingdom and the United States, which first elected
neo-liberal governments. The largest falls in state support were in those
HIERARCHY AND TOP-DOWN GOVERNANCE 73
Table 4.1. Total economic subsidies as a percentage of gross domestic

product, selected OECD countries, 1980 and 2004
Total economic
subsidies
% change,
Country 1980 2004 1980–2004
Australia 1.44 1.32 −0.13
Canada 2.74 1.17 −1.57
France 2.13 1.29 −0.84
Germany 2.08 1.27 −0.81
Italy 2.70 1.07 −1.63
Japan 1.50 0.86 −0.64
Norway 5.15 2.25 −2.90
Portugal 4.60 1.64 −2.96
United Kingdom 1.96 0.53 −1.43
United States 0.35 0.34 −0.01
Total (20-country
OECD average) 2.37 1.24 −1.02
Source: Obinger & Zohlnhofer, 2007, 184.
countries, Norway, Sweden and Portugal, with the strongest traditions of

state intervention. Second, Figure 4.1 shows that the telecommunication,
airline and electricity industries have experienced a marked decline in mar-
ket regulation in most OECD countries. Remarkably, in not one of these
policy sectors did the level of market regulation increase in any country
between 1975 and 2002.
These figures must be regarded with caution. In the first place, they
focus exclusively on developments in Western countries. Reaction to the
explosion in world commodity prices in 2007 shows that hierarchical
governance remains a reflex response within many developing economies.
Faced with rising domestic food prices and the prospect of political unrest,
the governments of Argentina, Cambodia, Indonesia, Russia, the Ukraine
and Thailand responded to rising prices either by raising taxes on exports
of basic foodstuffs or by simply banning the export of rice, beef or wheat
(Economist, 2 April 2008). In Egypt, the army was redeployed to bake more
bread.
In the case of the so-called ‘developmental state’ economies of East
Asia – Japan, South Korea and Taiwan – it is sometimes argued that
these states have, over the last decade or more, abandoned their efforts to
74
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Figure 4.1. Labour market deregulation in three industries, selected OECD

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Note: Regulation is measured in each case on a 0–6 scale with 0 being the least
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es es es
intervene strategically in their economics and have become more neo-

liberal in orientation (Jayasuriya, 2001). It is certainly true that market
instruments have been used more fully in such countries, but it is less
true that they have abandoned state activism in the economy or their
tradition of working closely with key firms (Weiss & Thurbon, 2006).
In South Korea, for example, state elites led an aggressive campaign to
restructure and reorient the activities of the giant conglomerates that dom-
inate the economy – the chaebol – in the wake of the Asian financial
crisis (Cherry, 2005). Similarly, using as his case-study the creation of a
new bio-technology industry, Joseph Wong (2006, 653) demonstrates that,
although the Taiwanese state’s ability to direct ‘industrial transformation
from the top-down has weakened’, it continues to provide important sup-
port for the development of key sectors. Thus, the Ministry of Economic
Affairs provides tax deductions for corporate investments in research and
development in bio-technology, and offers ‘improvement loans’ for small
and medium-sized industries contemplating work in this area. In addition,
the ministry confers generous tax exemptions on profits acquired through
patented intellectual property and has overseen the allocation of nearly
$1 billion of private funding in bio-technology. The Taiwanese state does
not own any bio-technology firms: it does not need to. The state has
achieved its development goals by developing closer relations with private
actors.
Even within Western liberal democracies, hierarchical economic control,
although in partial retreat, frequently remains significant. The economic
logic of privatisation may have been accepted in most countries in the
world, but the OECD (2005b, 29) estimates that the asset value of state-
owned enterprises in France, Greece and South Korea still exceeds $1000
billion. Furthermore, where governments have privatised industries they
have often found ways of retaining a measure of control. In the Netherlands
and Norway governments have retained majority shareholdings in the firms
they have privatised. In France governments have retained a ‘golden share’,
which allows them to appoint two non-voting members to the board of
directors and block the sale of any privatised firm to a foreign company. In
Italy governments have restricted the sale of state assets to a small group of
trusted shareholders – usually banks and industrial conglomerations – that
they have worked with closely in the past and trust to protect their interests.
These companies are prohibited from selling their shares for a certain
period and, after this, can only sell their shares to a firm approved by the
government. Furthermore, privatisation, where it has occurred, has led to
significant extensions in regulatory powers as governments have sought to
protect consumers from monopoly abuses by privatised companies (Vogel,

1995).
In the case of trade policy, it is certainly true that the Kennedy, Tokyo
and Uruguay rounds of trade talks under the GATT system prompted sig-
nificant liberalisation in the era following World War II. But, more recently,
the Doha round of talks ended in an impasse when the United States and
the European Union refused to dismantle agricultural subsidies and trade
protection in return for greater access to markets in developing countries.
A study by Kym Anderson and Alan Winters (2008) estimates that state-
created trade barriers continue to cost the global economy up to $3 trillion
each year. The bottom line is that states still subsidise production in order
to pursue domestic policy agendas, such as protecting the livelihoods of
farmers and rural populations. The United States prohibits overseas firms
with assets in the US from trading with Cuba and has blocked foreign
take-overs of oil companies and ports.
Even where governments have come to rely on alternative governance
strategies, states continue to exert strong oversight and metagovernance
controls. An example comes from Giandomenico Majone’s discussion of
the use of devolved authority or government by proxy using third parties
to regulate or help deliver services. As Majone (1996, 146) says, ‘indirect
government involves . . . new forms of control and accountability’ – in our
language, more metagovernance. ‘If policy makers wish to control or influ-
ence agencies and other organisations operating at arm’s length, they must
do so by contractual arrangements, and by means of rules and regulations.’
Further evidence of hierarchical control in the midst of apparent devolution
of governance control can be seen in what Michael Power (1994; 1997)
has described as an audit ‘explosion’ as governments seek to monitor and
sanction the behaviour of charities, businesses, sports associations, housing
associations, and other bodies that receive public funding. Several factors
drive this change: intensified competition in markets, increased individu-
alism, the decline of earlier norms of trust and social cohesion, a greater
appreciation of principal-agent problems, and increased recognition of risk
factors in societal and governance processes (Beck, 1992). Hence, the per-
ceived escalation of risk in modern societies has occasioned increased efforts
in both the public and private sectors to impose more control and auditing
in attempts at the ‘remanagerialisation of risk’ (Power, 1997, 138).
There are other, non-economic, issues on which it is possible to point
to the erosion of hierarchical governance over a longer period of time.
Legislation criminalising homosexuality was repealed as long ago as 1893
in Belgium and 1933 in Denmark, in the 1960s in the United Kingdom,
Canada and Germany and as recently as 1994 in South Africa. Laws relat-
ing to the possession of certain types of drugs, prostitution, pornography
and blasphemy have also been loosened or repealed in many countries over
the last few decades. Yet in these cases it may be a mistake to equate state-
sanctioned tolerance with the decline of hierarchical governance. In the case
of gay rights, repeal of discriminatory legislation has recently given way
to legislation recognising same-sex marriages (Netherlands, 2001; Canada
and Belgium, 2003; South Africa, 2006) or same-sex civil unions and
state-recognised partnerships (Denmark, 1989; Sweden, 1995; Germany,
2001; United Kingdom, 2004). In these the state has directly intervened to
give same-sex relationships legal status. Limited decriminalisation of recre-
ational drugs has occurred at the same time as far stricter regulatory regimes
have been introduced to monitor and sanction performance-enhancing
drugs within sport. Finally, the repeal of blasphemy laws has been balanced
by the promulgation of hate laws in more than 40 countries since the early
1990s.
NEW TECHNOLOGY
New technologies, new perceived sources of market failure and concerns
about growing risk and social disorder have provided three specific stimu-
lants to hierarchical governance. The rapid growth of the digital economy
and information flows has prompted states to build or underwrite the con-
struction of new communication networks (Zysman & Newman, 2006).
It has also required states to legislate to define and protect intellectual
property rights. States have played a major role in defining property rights
in new global services markets such as aviation and telecommunications.
In a study of such developments, Peter Cowhey and John Richards (2006,
301) conclude that the ‘hand of governments has gripped the markets
firmly’.
State responses to the development of genetically modified organisms
(GMOs) have confirmed the durability of long-standing regulatory differ-
ences. Working with other food exporters including Argentina, Canada,
Chile and Uruguay in the so-called Miami Group, the United States has
lobbied for a permissive regulatory regime for genetically modified crops
(Drezner, 2007, 161). Adopting the precautionary principle in responding
to widespread public alarm about the use of so-called Frankenstein foods,
the European Union has, by contrast, sustained an effective moratorium on
GMOs. This is despite an adverse ruling by the World Trade Organisation
that it had acted illegally in banning imports of genetically modified crops
between 1999 and 2004 (BBC News, 29 September 2006). This pattern
of hierarchical control has been largely reversed in the case of stem cell
research. In 2001 President Bush announced that federal funds would not
be used to support research on human embryonic stem cells. The following
year the European Union identified stem cell research as a funding priority.
In the case of the internet, it was once regularly claimed that because
‘cyberspace slips seamlessly and nearly unavoidably across national bound-
aries’, governments have been ‘pushed effectively to the sidelines’ (Spar,
1999, 82). Such a claim now seems less sustainable. Nation-states have
played a leading role in funding initial research into the internet, in sub-
sidising the creation of broadband and wireless access, in setting internet
technical protocols and in fixing rules on e-commerce and data privacy.
Through firewalls, proxy servers, routers and software filters, as well as
simple prohibitions on the possession of personal computers, states have
been able to block the content of websites considered to be morally or
politically undesirable.
The extent and varying methods of internet control have been docu-
mented by the Open Net Initiative (http://opennet.net/). Three examples
will suffice, the first two taken from authoritarian governments. Saudi
Arabia requires all web access to be routed through a proxy server, which
blocks access to politically or religiously sensitive material. In China, the
state employs an estimated 30 000 public servants to monitor the content
of websites (Guardian, 14 June 2005), and companies like Yahoo, Google
and Microsoft have been required to censor their own material in order
to gain access to the Chinese market. This provoked a political storm in
2006 when Yahoo was widely criticised for releasing information to the
Chinese authorities about the use of the internet by a political dissident.
Yahoo executives argued that they had no choice but to abide by the ‘laws,
regulations and customs’ of the countries in which they operate (Time,
3 October 2005). Finally, in South Korea, a law was passed in 2008
requiring the users of all major internet portal sites to verify their identity
following the earlier removal of some sites that had expressed personal
criticism of politicians.
M A R K E T FA I L U R E S
Market failures occur when the individual pursuit of self-interest in a
market setting leads to collectively sub-optimal outcomes. Externalities or
non-priced impacts (such as damage from pollution) on third parties who
are not part of direct market transactions are a case in point. We have
already seen in Chapter 2 that public choice theory offers a riposte to the
orthodox theory of market failure, arguing that state intervention can be
a source of inefficiencies. Recognition of the costs of state intervention
has certainly encouraged privatisation and deregulation. Yet over the same
period, new forms of market failure have been identified and dealt with
through hierarchical intervention.
In the environmental arena, scarce resources such as water have increas-
ingly been managed through hierarchical forms of state intervention. In
Australia, for example, the federal government imposed a quantitative cap
on water extractions in the largest river system in the country, and uses
markets and other means to price water to reflect its scarcity value (Connell,
2007). There are proposals in Australia to transfer difficult and contentious
water allocation decisions to an independent authority, along the lines of
the policy authority held by independent central banks. More broadly,
the use of hierarchy in environmental management is widespread. As we
noted in Chapter 1, a wide-ranging study by Andrew Jordan and colleagues
(2005, 490) found that, despite the development of a range of new envi-
ronmental policy instruments, the state remains a central player and that
there has been ‘no wholesale and spatially uniform shift from government
to governance’.
In the case of climate change, much has been made of market-based
emissions trading schemes. We examine the European Union’s Emissions
Trading Scheme in Chapter 6. The fourth report of the Intergovernmental
Panel on Climate Change (2007) says clearly that states must continue to
play the lead role in steering investment decisions, promoting the use of
alternative energy sources, encouraging the development and transfer of
technologies, and investing in public transport in order to reduce carbon
emissions. States have also relied on hierarchical governance mechanisms
to tackle other environmental market failures, such as traffic congestion.
London, Milan, Stockholm and Singapore have exploited new technology
to introduce congestion charges. In London charging has resulted in a 20
per cent fall in inner-city congestion since 2003. In Germany trucks are
now charged for their use of roads according to the distance they travel
and their emission levels. Finally, in the case of pollution caused by plastic
bags, some states have moved beyond moral suasion of the sort examined
in the following chapter to impose taxes, levied at the point of sale, upon
consumers. The introduction of such a tax in Ireland resulted in a 90 per
cent reduction in the production of bags (DELG, 2002).
Governments have also identified obesity (especially in children), pen-
sion provision and population decline as policy problems that competitive
markets are unable to resolve. Hierarchical governmental action to address

obesity includes requirements that manufacturers list ingredients clearly
and bans on the sale of junk food in schools. In 2006 the New York
City Board of Health attracted publicity when it prohibited the use of
artificial trans fats in public restaurants. In the case of pension provi-
sion, deregulation in the 1980s and 1990s resulted in the misselling of
pensions and a long-term shortfall in provision. To address this market
failure, states are increasingly requiring individuals to contribute a certain
proportion of their income to state-regulated pension schemes. Finally,
worries about declining population levels in Italy, Sweden, Japan, France
and South Korea have encouraged governments to try to boost birth rates
through ‘baby bonuses’, tax incentives, and improved maternity and pater-
nity payments (OECD, 2007). In France, all-day nurseries, income tax
reductions and subsidised rail transport have all been employed. Such
measures supplement the Medal of the French Family which, since the
1920s, has been awarded to any woman who gives birth to more than eight
children.
Perhaps the most dramatic recent example of hierarchy being used to
deal with market failure is the role of governments in dealing with the
global credit market crisis since late 2007. In September 2008, for exam-
ple, central banks, led by the US Federal Reserve, the European Central
Bank and the Bank of England, injected over $620 billion of liquidity into
the banking system by, effectively, lending taxpayers’ money to banks that
were refusing to lend money to each other. In order to reassure savers, the
Irish government subsequently took the extraordinary step of guaranteeing
all deposits held in high-street banks for a two-year period. This cre-
ated a competitive pressure similar to the California effect documented in
Chapter 2. Once Ireland had guaranteed savings in its banks, the govern-
ments of Greece, Germany, Austria, Denmark and Sweden succumbed to
intense pressure to guarantee savings in their banks in order to prevent
capital flight. When it became clear that these measures had not restored
confidence and that stock markets were continuing to crumble, a num-
ber of governments then proscribed the short-selling of shares while the
governments of Austria, Iceland, Russia, Romania and the Ukraine simply
suspended share trading altogether.
When even these measures failed and the global financial system came
close to meltdown, governments directly intervened to effectively part-
nationalise the world’s banking system. In the United States, the giant
insurance company American International Group was the beneficiary of
a $85 billion loan, which its former chief executive officer characterised
as nationalisation. Before the political dust had settled, America’s two

giant mortgage corporations, Freddie Mac and Fannie Mae, were taken
into the ‘conservatorship’ of their regulator, the Federal Housing Finance
Agency, at an immediate cost to the US taxpayer of at least $200 billion.
After protracted negotiations and much political grandstanding during
an election year, Congress agreed to spend more than $700 billion to
buy ‘toxic’ debts from failing banks. In the United Kingdom two banks,
Northern Rock and Bradford & Bingley, the latter specialising in ‘self-
certifying’ mortgage applications, were taken into public ownership before
a further £500 billion of taxpayers’ money was found to take equity stakes in
a number of banks. In return, the UK government extracted guarantees that
these banks would limit executive pay and resume lending to businesses,
mortgage applicants, and other banks. Following its lead, the French,
German, Austrian and Spanish governments pledged upwards of €800
billion of taxpayers’ money to rescue crippled banks and inject further
liquidity into European capital markets.
Beyond the immediate crisis, policy debate began to focus on the need
for long-lasting reform in the management and organisation of the world’s
financial markets. The important point to make here is that all the proposals
for reform required the extension of hierarchical authority. At the time of
writing in November 2008, in no particular order of either significance or
feasibility, proposals included:
r restrict the use of derivatives and securitisation; one specific option was
to require those who securitise debt to retain a part of the risk of the
securities they create
r proscribe the creation of hedge funds that seek to minimise client risk
by engaging in short selling
r tighten capital adequacy requirements in order to prevent banks from
exposing themselves to too much debt
r create new insurance schemes to guarantee savings, the schemes being
funded out of bank profits during periods of economic boom, rather
than by taxpayers at a moment of bust
r require financial institutions to reveal their debt liabilities to each other
r establish new rules requiring central banks to target not only underlying
inflation but the ‘asset bubbles’ that frequently precede financial crises
r restrict executive pay and tax, or simply prohibit incentive schemes that
encourage risk-taking to meet short-term performance targets
r empower international bodies, whether the International Monetary
Fund, the G7 or the G20, to standardise international financial
regulations.
It might be objected that the financial crisis was caused by financial

deregulation and sustained by an apparently limitless neo-liberal faith in
markets and that it is therefore ironic to cite the crisis as evidence of a
resurgent state. The global credit crisis certainly exposed the limitations of
an ideology which maintained that the pursuit of individual self-interest
in competitive markets would always and everywhere secure the collective
good. Its inadequacy is now recognised even by neo-liberals such as the
former chairman of the Federal Reserve and chief cheerleader for finan-
cial deregulation, Alan Greenspan (in testimony to Congress in October
2008). Although a supporting role was played by Congress – which, for its
own political reasons, pressed Freddie Mac and Fannie Mae to underwrite
the ‘sub-prime’ mortgages being offered to poor American families – it is
difficult to avoid casting financial deregulation as the villain of the financial
debacle. Yet the coordinated and extraordinary response to the credit crisis
showed that the state remains capable of intervening decisively in deregu-
lated and globalised financial markets. The failure of governments across
the world to anticipate and prevent the crisis from occurring reflected a
failure of political will rather than of governing ability.
Partly in response to the regulatory challenges of globalisation and partly
due to a desire to integrate markets, states have worked together to enhance
their national policy capacity in a wide range of areas. This will certainly be
a central issue in dealing with the global financial crisis. In another arena
the development of the European Union has seen the rise of a Europe-
wide ‘regulatory state’ dominated by Brussels and using a wide array of
relatively independent regulatory agencies, such as the European Central
Bank (Majone, 1996). The continuing relevance of hierarchical regulatory
rule-making within the European Union can be seen in the ‘almost expo-
nential growth, during the last three decades, of member directives and
regulations produced by the Brussels authorities each year’ (Majone, 1997,
144). Moreover, the ‘Europeanisation’ of regulation continues to empower
national regulators linked to complex European regulatory regimes.
On a similar transnational regulatory note, and as we saw in Chapter 2,
a major study by Drezner (2007) argues that state authority, especially
that of the major states, is the driving force behind new extensions of
state regulation in fields from the internet to international finance and
the international pharmaceutical industry. Because of the growth of reg-
ulation and legal standards as extensions of state authority to regulate or
police the international arena, scholars have also observed the growth in the
‘juridification’ of international relations and regulatory policy (Jayasuriya,
2001). Even in international arenas once considered the domain of private
transnational corporations, such as the oil industry, it is now increasingly

the case that national oil corporations, in many cases backed by state
authority, have been out-manoeuvring oil giants such as Shell and Exxon
Mobil in securing oil reserves around the world. Moreover, critical studies
of global governance find plenty of evidence that international organisa-
tions from the United Nations to the World Trade Organization possess
only limited autonomy from their most powerful member states (Murphy,
2000), and that the leading nations, such as the United States, still exert
considerable hegemony in shaping the rules of the international policy and
regulatory arena (Gowan, 1999; Wade, 2003; Beeson & Bell, 2009).
POLICING SOCIETY
In developed countries the last few decades have witnessed a significant
extension of policing and surveillance. This has occurred amidst a general
set of fears, articulated by both the right and the left, about a breakdown
of social responsibility following the erosion of traditional forms of social
conditioning and restraint such as religion, community and family.
In the welfare field, new forms of ‘welfare contractualism’ now exemplify
new or additional layers in the state’s regulation of behaviour. Prompted
by concerns about the growth of a dependency culture and fraud, welfare
payments have been made conditional upon a recipient’s willingness to
look for work or retrain or undertake voluntary work. Following the devel-
opment of a number of state-based programs, in 1996 President Clinton
signed into law a new federal welfare system, Temporary Assistance for
Needy Families. This requires welfare recipients to retrain and imposes a
lifetime limit of 60 months upon the payment of support (Lurie, 1997). A
number of countries – including the United States, the United Kingdom,
Australia and France – have adopted conditional welfare payments for the
unemployed, lone parents, and the disabled (Clegg & Clasen, 2007). In
Australia, contracts are being used to codify, monitor and regulate the
behaviour of welfare recipients through arrangements developed under the
Howard government’s system of ‘mutual obligation’.
States have used tax incentives, subsidised nursery places and job-sharing
schemes to encourage mothers to return to work. In Mexico, Brazil and
other South American countries, conditional cash transfers provide finan-
cial incentives for mothers to take nutritional supplements, keep their
children in school, and ensure they attend regular health check-ups. Par-
ents are paid only if they effectively police their own activities. This kind
of disciplinary power has also been employed in New York, where private
charities, funded through the mayor’s office, have offered cash payments
to students in poor neighbourhoods who excel in exams.
In parallel with such developments, and possibly overshadowing them,
there has been an increase in policing and the micro-management of society.
The case of speeding fines is a classic example of governments ratcheting
up legal sanctions and technologically sophisticated methods of surveil-
lance in order to extend (increasingly successful) controls over drivers’
behaviour. The spread of random breath testing to detect alcohol and
other drugs among drivers is a related example of the state further encroach-
ing on societal behaviour. Writing about trends in the United Kingdom,
Adam Crawford (2006, 455) argues that ‘ambitious, interventionist gov-
ernment is alive and well’. He documents the rise of a ‘complex mosaic of
micro-management’ in previously semi-autonomous schools, universities
and other public bodies. More generally, he points to enhanced efforts to
regulate a wide range of behaviour through such hierarchical instruments
as anti-social behaviour and parenting orders (see also Burney, 2005).
The 1000 new criminal offences encoded in law in the United Kingdom
between 1997 and 2005 included measures allowing the state to prosecute
and jail the parents of persistent truants. There have also been increas-
ing incursions designed to curb ‘anti-social’ behaviour in public places,
including police crack-downs, curfews, dispersal orders and court orders to
restrict freedom of movement. Over the same period, the development of a
network of linked closed-circuit television cameras has allowed the police to
track the movements of individuals and cars in city centres. It is estimated
that the average UK citizen is now caught on a surveillance camera more
than 300 times a day (BBC News, 2 November 2006). The authorities are
even deploying technologies such as miniature remote-controlled drone
aircraft fitted with surveillance cameras, and ‘talking’ surveillance cameras
that can shout public rebukes to offenders dropping litter or engaging in
other anti-social behaviour (Economist, 27 September 2007). The former
abode of George Orwell, the author of the authoritarian dystopia 1984,
now has surveillance cameras outside it. Recently, in response to continu-
ing concerns about binge drinking, the government proposed measures to
ban pubs and restaurants from running promotions offering women free
drinks.
The rhetoric of ‘crisis’ is increasingly an excuse for sidestepping routine
policy processes and strengthening the hand of centralised government.
A classic example occurred in Australia where the federal government
(in the run-up to a tough election) declared a national emergency in
2007, following the publication of a report that alleged that child sexual
abuse was occurring in ‘almost every’ Aboriginal community in the remote

Northern Territory (Toohey, 2008, 45). The decision to intervene was made
hastily by a small inner circle without wide consultation with the Northern
Territory government (whose chief minister subsequently resigned). The
relevant legislation was rushed through the federal parliament. With the
assistance of the army and police and the notable absence of any community
engagement or stakeholder consultation, the federal government forcibly
acquired five-year leases over township land, quarantined welfare payments,
introduced new restrictions on the sale of alcohol and pornography, and
announced compulsory health checks for all children.
Finally, fears of terrorist attacks and rogue states have been used to justify
a wide range of military interventions, security and surveillance measures,
new powers of detention, curbs on civil liberties, extended detention with-
out charge, ‘offshore’ detention centres such as Guantanamo Bay, as well as
the use of torture and practices such as ‘extraordinary rendition’. The US
government has invested an estimated $3 trillion and the lives of over 4000
of its soldiers fighting the war in Iraq (Stiglitz & Bilmes, 2008). The former
US Secretary of State, Condoleezza Rice, argued for a system of ‘preven-
tative detention’, claiming that ‘you can’t allow somebody to commit the
crime before you detain them’. A wide range of such security incursions
has been deployed in the United Kingdom, the United States and Aus-
tralia. In the United States, legislation introduced shortly after September
11 enabled the federal government to monitor and freeze bank accounts
suspected of being used to support terrorism (Woodward, 2002, 45). Sub-
sequently, the Patriot Act has relaxed controls over phone-tapping and
other forms of surveillance. In the United Kingdom the government opted
out of parts of the European Convention on Human Rights in order to pass
legislation allowing it to hold indefinitely and without charge any foreigner
who is deemed a national security risk. Following legal challenges to this
measure the government introduced indefinitely renewable control orders,
including electronic tagging, a ban on phone and internet use, and strict
curfews on any suspected terrorist, British or foreign (Economist, 4 October
2007).
HIERARCHICAL GOVERNANCE:
C H A L L E N G E S A N D A D A P TAT I O N S
Despite such continuing incursions, a body of work points to various
problems of hierarchical control and the dangers of regulatory overreach
(Sunstein, 1990). Echoing a widespread view in the governance literature,
Jon Pierre and Guy Peters (2000, 3) argue that ‘states can no longer control
society in a conventional command and control mode’. Arguments first
developed in the 1970s about the difficulties of policy implementation
(Jordan, 1999; Lampinen & Uusikyla, 1998; Goggin et al., 1990) and
state failure (Winston, 2006; Orcalli, 2007) continue to be applied to
new subject matter. Such arguments should be taken seriously. There are
problems with implementation failure; vested interests can exert powerful
pressures on regulation; and there can be complex disputes over legal
interpretation and enactment.
On the other hand, the difficulties involved in hierarchical governance
ought not to be exaggerated. The claim that governments always fail has
no more veracity than the claim that governments never fail. It is clear
that, sometimes against all expectations, hierarchical governance remains
an effective means of addressing some policy problems. For example, in a
review of clean air regulation in the United States, Daniel Cole and Peter
Grossman (1999) challenge accounts of regulatory failure and argue that
top-down regulation has proved reasonably effective in many instances.
They invite critics to be more sensitive to the historical, technological,
institutional and political environment of regulation; and they review a
range of studies to demonstrate that these contextual factors shape the
efficacy of command and control strategies compared to alternative strate-
gies, such as market-based instruments. Despite the difficulties countries
have experienced in meeting their obligations under the Kyoto Treaty,
internationally coordinated hierarchical intervention to deal with environ-
mental problems can be effective. In the 1980s and early 1990s countries
negotiated a series of deep cuts to the production of chlorofluorocarbons
(CFCs) used in refrigerators and many industrial processes at an estimated
long-term cost of $20–40 billion (Sandler, 2004, 215). These gases were
implicated in the creation of a growing ozone hole above the Antarctic. As
a result of these agreements, overall global consumption of CFCs has more
than halved, while the atmospheric concentration of most ozone-depleting
gases started to drop in the late 1990s.
States have also adapted and reconfigured themselves in ways that have
increased centralised control and hierarchical authority. First, government
leaders in a number of countries have increasingly centralised executive
power and authority, a trend commentators have referred to as the pres-
identialisation of politics (Poguntke & Webb, 2005), the strengthening
of a culture of command (Walter & Strangio, 2007; Walter, 2008), or
the rise of post-democratic leadership (Hocking, 2005). The powers exer-
cised by Prime Ministers Tony Blair and John Howard and President Bush
exemplify this dynamic, which emphasises ‘strong leadership’ in the face

of real or constructed ‘crises’. The centralisation of executive power is
reflected in the strengthening and growing insulation of inner circles of
policy formulation and advice, often featuring the rise of political advisers
and spin doctors, the bypassing of party structures and parliamentary are-
nas of decision-making, and the sidelining of departmental advice or input
and even, at times, of cabinet government itself. Wide consultation and
community engagement are obvious casualties of this approach.
Second, states continue to rely upon – and indeed strengthen – hierarchi-
cal governance options partly because their own reform efforts have made
such options more attractive. As Michael Moran (2002, 410) observes,
some of the ‘biggest upheavals that have taken place are actually within
state structures themselves’. Attacks on state intervention in the name of
public choice have actually encouraged politicians to undertake reforms
that strengthen state capacity. States are combating principal-agent prob-
lems by tightening authority structures and escalating the use of audits and
other internal disciplinary measures such as competition and the use of
tightly specified contracts.
Governments have also sought to institutionally redesign their own state
systems to make them more responsive and authoritative. Across most
Western governments, for example, there have been extensive reforms
of the public sector in recent decades, often under the banner of ‘new
public management’. This has resulted in a shift in the focus of manage-
ment systems from inputs and processes to outputs and outcomes; towards
greater measurement of results; and a preference for leaner, flatter and more
autonomous organisations (Hood, 1991). In the United States, the United
Kingdom, New Zealand, Australia, Canada and Sweden and, to a lesser
extent, in France, Germany and the European Commission, the applica-
tion of such ideas over the last 20 years has entailed greater use of targets
and performance indicators, tighter budgetary controls, the creation of
semi-autonomous executive agencies, and performance contracts between
finance and delivery agencies (see Pollitt & Bouckaert, 2000, 192–298, for
country-by-country reviews). Performance contracts have exerted greater
ministerial control over the bureaucracy. Such management reforms have
aimed to abolish the security of tenure of senior bureaucrats, placing them
on short-term contracts where performance is judged against specified tar-
gets. As we said in Chapter 2, such reform measures, as well as the use
of taskforces and other mechanisms to coordinate policy, rather than hol-
lowing out government have helped to fill it in and strengthen central
coordination and the authority of central state institutions.
As a part of this reform process, there has been an explosion not only
in the degree to which state agencies regulate non-state agencies but in the
regulation of state agencies by other parts of the state (Hood et al., 1999).
Over the last few decades watchdog bodies have acquired additional staff,
budgets and regulatory powers. For example, in the United States the Office
of Management and Budget monitors the performance of federal agencies;
in the United Kingdom the Office for Standards in Education monitors
and reports upon the performance of state schools; the European Court
of Auditors must declare whether the European Union’s budget has been
implemented correctly; and in Australia assorted Crime and Misconduct
Commissions investigate allegations of public sector corruption.
In an important survey of governments that have increased central steer-
ing and control in the face of external risks and the imperatives of internal
control, Moran (2002) documents the growth of the ‘regulatory state’.
Similarly, writers such as Martin Loughlin and Colin Scott (1997), Fran-
cis McGowan and Helen Wallace (1996) and Kanishka Jayasuriya (2001)
argue that the institutional architecture of the state is changing, with an
increasing emphasis on institutional self-regulation, technocratic rule, and
patterns of intervention designed to support and police markets and other
arenas of social life. According to these authors, central state powers have
been consolidated and insulated, and core policy-making has been dis-
tanced from disruptive politics and partisan intervention. This has been
associated with moves towards independent and partly self-regulating pol-
icy institutions whose rules and behaviour take on an increasingly juridical
character at one remove from the government (see also Majone, 1996).
A range of factors have been adduced to explain the increasing delegation
of powers to independent agencies within government. In particular, the
establishment of quasi-autonomous agencies offers politicians the prospect
of boosting the expertise and authority of regulators, enhancing the credi-
bility of a policy in the eyes of third parties, and perhaps shielding politicians
from the political heat of making tough regulatory decisions (Gilardi, 2002;
Elgie, 2006). The recourse to specialised regulatory remits and the honing
of specialised expertise are important developments that have helped build
or rebuild the authority of states in complex environments.
Although his work concentrates on the United Kingdom, Moran (2003;
2006) offers us one way to summarise the general effect of such changes
in the way states order their activities. He charts a shift away from an
earlier form of closed and genteel control by cloistered elites, which he
refers to as ‘club government’, in favour of the development of a new
form of ‘high modernism’ and a new and more hierarchical ‘regulatory
state’. The latter is characterised by stronger central controls, and extensive

auditing and quantitative measurement of performance (see also Porter,
1995; Baldwin, 2004). In response to claims by Rhodes (1997) about
weakening central controls and the hollowing out of the state, Moran
(2006, 35) suggests: ‘to maintain this paradigm in the face of the evidence
of the state’s transformed role – notably its invasion precisely of those
self-regulating networks that were once central to British regulation –
involves serious intellectual contortion’. Similar observations regarding the
strengthening of the UK state in the context of the drive for neo-liberal
reforms, particularly under Prime Minister Thatcher, have been made
by Andrew Gamble (1998), who talks about the combination of a ‘free
market and the strong state’. More broadly, Stephen Vogel (1996) shows
that the creation of ‘freer markets’ has resulted in the imposition of more
rules. Echoing earlier classical themes in political economy, especially as
developed by Karl Polanyi (1957), Moran (2006, 42) argues that the ‘road
to a more market liberal society was cleared and sustained by a massive state
intervention and a sharp rise in state control of regulatory systems’. He
traces this process in various developments, from the tightening of controls
over financial markets and the City of London to the imposition of new
top-down governance agendas in arenas as diverse as school performance
and the administration of sports. This is a discussion to which we will
return in Chapter 6.
S E L F - R E G U L AT I O N I N T H E S H A D O W O F
HIERARCHY
Criticisms were first made in the 1970s and 1980s about the difficulties
of successfully regulating the activities of non-state actors through hierar-
chical control. In response there has been an important movement toward
various systems of self-regulation, or light-touch, smart or responsive regu-
lation, particularly in business and the professions (Cunningham & Rees,
1997; Ayres & Braithwaite, 1992). We will consider this reform process
in detail because it offers a good example of state-centric relational policy
capacity.
The growth of self-regulation in business sectors, financial markets and
the professions reminds us that states must frequently forge governing
coalitions with societal interests in order to achieve their policy goals. In
other words, state capacity is achieved through coalition with other powerful
non-state interests to achieve joint aims. As this book argues, state capacity
ought to be understood not only as a product of the state institutional
capacities but also as a network or relational concept. The relationship

between state and non-state actors in such systems of self-regulation is
not, however, one of equality; it should not be interpreted simply as an
abandonment of hierarchical governance. As Ian Bartle and Peter Vass
(2007, 902) point out, under self-regulation we may have moved beyond
‘conventional hierarchy’, but ‘the state still retains a special place . . . in a
self-regulatory world, that place, at the very least, is primus inter pares’.
If states are always central players in shaping patterns of self-regulation,
it is also useful to point to the impact of state traditions and institutional
structures in shaping cross-national variations in regulatory practice. David
Vogel (1986) looked at differing ‘national styles of regulation’ some time
ago, suggesting that a formal and legalistic pattern of regulation in the
United States could be contrasted with informal and cooperative modes in
the United Kingdom. Abraham Newman and David Back (2004) pointed
to a similar distinction in patterns of self-regulation, arguing that in the
United States there is stronger recourse to direct threats by the state to
impose punitive action if industry does not meet self-regulatory standards.
These relations of cooperation and hierarchy in self-regulatory practice
have been analysed by Ian Ayres and John Braithwaite (1992) in their
influential model of ‘responsive regulation’. They emphasise that effec-
tive self-regulation can be fostered by continuing persuasion and dialogue
between regulators and those being regulated. In the place of a confronta-
tional relationship they show how expectations, agreements, and codes
and norms of compliance can over time be agreed cooperatively (see also
Cunningham & Grabosky, 1998). As Chapter 5 emphasises, persuasion is
increasingly recognised as an important aspect of governance. But respon-
sive regulation requires more than persuasion. Ayres and Braithwaite are
clear that the compliance of non-state actors with understandings and
expectations agreed through dialogue is best fostered in a pyramidal set of
relations. The base of this pyramid represents the ongoing arena of per-
suasion, norm-building, codification and voluntary compliance within the
regulated sector. Yet such activity occurs in the shadow of hierarchy, with
recourse, if needed, to the top of the pyramid, through the imposition of
coercive power if there are failures or breaches in self-regulation or compli-
ance. Self-regulation works if, as well as speaking softly, the state carries a
big stick.
In surveying the role played by the Occupational Health and Safety
Administration in the United States, Charles Caldart and Nicholas Ash-
ford (1999) found that cooperation between state and non-state actors to
ensure more responsive regulation required strong systems of deterrence
and authority. Similarly, in a study of competition policy and corporate reg-

ulation in Australia, Christine Parker (2002) describes a process whereby
the role of the state has changed from direct command and control to
a system of state-guided ‘metaregulation’, entailing the constituting of
markets and overseeing systems of self-regulation. Parker compares the
performance of two regulatory agencies, the Australian Competition and
Consumer Commission and the Australian Securities and Investments
Commission. She argues that both agencies adopted a strategy broadly in
line with Ayres and Braithwaite’s pyramidal, responsive regulation model.
In her view the former has been a more successful metaregulator because
it has more effectively connected the use of moral suasion and cooperation
to state coercion.
To what extent have such responsive partnerships weakened the state
and drained its power? Lester Salamon (2002, 15, 12) reflects a common
view when he argues that collaborative forms of governance entail mutual
dependencies between state and non-state actors, in which ‘no entity is in
a position to enforce its will on others’ and ‘negotiation and persuasion
replace command and control’ (see also Pierre & Peters, 2000, 99). In these
conditions states are forced to ‘surrender significant shares of authority’
in order to make such collaborations effective (Salamon, 2002, 12). We
disagree. Governance through partnerships, whether by means of self-
regulation in associative networks or through community engagement,
has allowed states to strengthen their capacity by reducing much of the
burden of previously cumbersome regulatory controls. Yet in systems of self-
regulation the state, operating under the shadow of hierarchy, remains the
weighty actor. Indeed Chris Berg (2008) argues that responsive regulation
has allowed governments to increase their regulatory reach in the economy
because firms have been pressured into accepting ‘voluntary’ agreements
that they must abide by.
We have concentrated here on responsive regulation, but in other cases
the state’s commitment to power-sharing can be even more limited. States
do sometimes grant parcels of decision-making authority to non-state
actors, but such grants are likely to be limited, highly conditional and
potentially reversible. This is partly because states do not like to share power
and usually consent to do so under only special or restrictive conditions.
It is also because, even in a brave new public management world, politi-
cians know that voters expect government to be ultimately accountable for
outcomes. Thus governments set the parameters of acceptable agreements,
and they may even overturn negotiated outcomes or plans submitted by
devolved negotiating forums. In recent years, following a series of public
scandals over the misbehaviour of doctors, the UK government withdrew

from the British Medical Council the authority to determine a doctor’s
fitness to practise. At the same time, in order to meet an ambitious target
to build 3 million new homes between 2008 and 2020, the government
created a new Homes and Community Agency with the legal authority to
issue binding directives to housing associations which, although publicly
subsidised, have previously operated as independent not-for-profit NGOs.
A further example of states enhancing their capacity by developing
close relations with non-state actors is offered by Geert Teisman and Erik-
Hans Klijn (2002), who examine various partnership arrangements in
the redevelopment of Rotterdam Harbour. Their main finding is that
government actors wanted to ‘retain their primacy’ in the processes and
were largely unwilling to share power (p. 204). Similarly, in a study of
ecological modernisation policy in Sweden, Lennart Lundqvist (2001, 332)
sets out to test Rhodes’ arguments about ‘governance without government’
and finds that, ‘contrary to Rhodes’ assertions, central government has
been found to hold the initiative in the process of implanting Sweden’s
new strategy of ecological modernisation’. The central government went
out of its way to build new processes and institutions that increased its
power in relation to interlocutors such as independent expert agencies and
municipal governments.
THE GROWING VOLUME OF

GOVERNANCE
This chapter argues that, contrary to the conventional wisdom, gover-
nance through hierarchy remains an essential part of the policy armory of
governments. However, we do not argue that governing and governments
have remained unchanged. The following chapters illustrate the develop-
ment of governance through persuasion, markets, community engagement
and associative governance. Is there a contradiction in arguing that gov-
ernance through hierarchy is resurgent and that there has been growth
in the use of other governance mechanisms? We think not. The use of
governance mechanisms can be measured in relative and absolute terms.
Relatively, there has been some shift towards governance through markets,
community engagement and associations. Yet because the total volume of
governance has grown, the absolute level of governance through hierarchy
has also increased.
The total volume of governance has increased within many countries
because the range of the collective goals that governments pursue has
10,000
9,000
8,000
7,000
6,000
Pages
5,000
4,000
3,000
2,000
1,000
0
1908
1914
1920
1926
1932
1938
1944
1950
1956
1962
1968
1974
1980
1986
1992
1998
2006
1901–2
Year
Figure 4.2. Number of pages of Commonwealth Acts of Parliament passed per year,
1901–2006.
Source: Berg, 2008, 12.
increased. As the first part of this book argued, we live in an age in which,
despite the apparent political appeal of neo-liberal promises to ‘roll back
the frontiers of the state’, people still expect governments to solve policy
problems and steer society. It is true that governments once pursued pol-
icy goals that are long abandoned: for instance, most Western countries
abandoned food rationing in the late 1940s. By and large, governments
no longer attempt to control the movement of currencies across national
boundaries, and in many European Union countries internal border con-
trols have been dismantled. Yet as new policy problems have been identified
and new technologies developed, the range of activities that governments
seek to encourage, discourage, regulate, monitor, prohibit or offer advice
on has grown. Obesity, species extinction, water conservation, smoking,
carbon emissions, anti-social behaviour, the use of mobile phones while
driving, busking, hate speech, cloning, the numbers of senior female busi-
ness executives, the transfer of personal data between organisations, doping
in sport, road pricing, the transmission of major sporting events on terres-
trial rather than satellite television, stalking, binge drinking, the number of
gold medals won at an Olympics – all have become the subject of political
debate and government action.
As a measure of the absolute growth in governance through hierarchy,
consider the graphs shown here. Figure 4.2 shows the total number of
pages of legislation contained in new acts of the Australian Parliament
300
250
Number of agreements
200
150
100
50
0
69
72
75
78
81
84
87
90
93
96
99
01
04
07
19
19
19
19
19
19
19
19
19
19
19
20
20
20
Year
Figure 4.3. Total number of agreements signed by the European Community/Union

with third countries and international organisations, 1969–2007
Source: <http://eur-lex.europa.eu/en/accords/accords.htm>.
between 1901 and 2006. It shows a spectacular increase in the late 1960s
which, far from reversing itself with the election of a succession of increas-
ingly neo-liberal governments in the 1980s and 1990s, has accelerated.
Figure 4.3 shows the total number of formal agreements signed by the
European Union with other countries and international organisations
over three-year periods between 1969 and 2005. The subject matter of
these agreements is incredibly varied. In 2007 the European Union signed,
among other things, a fisheries partnership agreement with Mozambique;
a partnership agreement with the Republic of Tajikistan; a scientific and
technological cooperation agreement with India; a protocol with Thai-
land relating to manioc production, marketing and trade; a convention on
jurisdiction and the recognition and enforcement of judgments in civil and
commercial matters with Switzerland; and an agreement with Serbia on
the issuing of visas. The important point to note is a dramatic increase in
the overall number of agreements. In the 1970s when the then European
Economic Community was first formulating many of its policies dealing
with trade and agriculture, fewer than 20 agreements were being signed
every three years. Between 2002 and 2005 alone, 260 such agreements
were signed. Finally, Figure 4.4 shows the total number of regulatory agen-
cies contained within 16 policy sectors across 49 countries between 1960
and 2002. It also shows that a dramatic expansion in regulation started at
precisely the moment in the early 1980s when resurgent neo-liberal parties
were promising to ‘roll back the frontiers of the state’.
40
Number of RAs created

30
20
10
0
1970 1980 1990 2000
Year
Figure 4.4. Expansion of the number of regulatory agencies across 16 sectors and 49
nations, 1960–2002
Source: Braithwaite, 2008, viii.
CONCLUSION
This chapter has provided evidence that hierarchical governance, far from
retreating, continues to expand in response to new policy challenges.
States are clearly building in new governance instruments and expand-
ing their reach. We agree with Moran (2003, 6) and Crawford (2006,
471), who argue that there has been ‘an extraordinary growth of the
“regulatory state”’ and that ‘recourse to command and control contin-
ues to occupy a prominent place in the contemporary social regulatory
armoury’. States are the only policy actors that have the authority to kill,
deport, tax, imprison, usurp property, or send people to war. As Christoph
Knill and Derk Lehmkuhl (2002, 43) argue, states are often in a unique
position to ‘accommodate conflicting interests and define governance
priorities’.
In deference to public sensitivities, neo-liberal ideology or even, perhaps,
academic writing, governments have sometimes eschewed the rhetoric
of hierarchical control and coercive power. Politicians and state officials
have found the notion of an ‘enabling’ state particularly attractive. Yet as
we explain in our discussion of governance through community engage-
ment in Chapter 7, there is danger in confusing rhetoric with reality.
We have described governance in terms of an exchange of authority and
resources between states and societies. This is the essence of our state-centric
relational approach to governance. This chapter has documented an

extraordinary growth in a wide range of forms of top-down authority.
Some extensions of authority have been criticised as excessive and may
be amended or repealed, while others have been accepted by society as
legitimate exercises of power. Either way, the political exchange between
state and society is ongoing.
5 Governance through persuasion
M UCH OF THE LITERATURE ON GOVERNANCE focuses on

the means of hierarchy, markets and associational networks (Thompson
et al., 1991; Borzel & Panke, 2008). We have argued for a broader concep-
tion of governance that allows for the possibility of community engage-
ment, which we discuss in the following chapter, as well as governance
through persuasion, the focus of this chapter. This can be contrasted with
governance through markets or hierarchies in terms of the motives of those
governed. Markets and hierarchies rest upon the application of rewards and
sanctions, whether in the form of profits and losses or prohibitions and
subsidies. When governing through hierarchy and markets, governments
achieve their goals by making it in the interests of other actors to behave
in particular ways. Governance through persuasion takes a different form,
in which governments or other actors seek to convince people that they
ought to behave in a particular way. Governance through persuasion leads
not simply to a change in behaviour but to a change in people’s ideas about
how they ought to behave.
The capacity to exercise power by changing someone’s beliefs and values
constitutes an important source of power analysed in Michel Foucault’s
work on ‘governmentality’: a term coined to refer to the styles of reason-
ing characteristic of governing practices (1991). One of Foucault’s most
important books, Discipline and Punish (1979), opens with a lengthy and
horrifying account of the torture and public execution of a murderer in
Paris in 1757. This is contrasted with the austere and soulless order of
a young offenders’ institute in France in 1838. For Foucault, the differ-
ence between these two regimes symbolises a more general transition during
this period from ‘repressive’ to ‘disciplinary’ power; a transition that vividly
97
illustrates the differences between governance through hierarchy and gov-

ernance through persuasion.
Repressive power, as characterised by Foucault, is exercised in the name
of the sovereign and is, in its nature, episodic, violent and destructive. The
purpose of repressive power – exemplified through military occupations
and the suppression of insurrections as well as executions – is not simply to
punish those who break established laws but to destroy them. Repressive
power is exercised on individuals. By contrast, disciplinary power is per-
vasive, bureaucratic and productive. Disciplinary power is exercised with
the intention of changing people’s behaviour. Where repressive power is
destructive, disciplinary power is productive, in the sense that it operates
through individuals not to break them down but to reconstitute them in
ways that render them fit to be governed.
Although disciplinary power was initially confined within what Goff-
man (1968) called ‘total’ institutions such as prisons, hospitals, psychiatric
institutions and military barracks, Foucault suggests that it has become a
pervasive – indeed, defining – feature of modern society. Factories, schools
and hospitals have come to resemble prisons (Foucault, 1979, 225). Super-
visors, teachers, administrators, probation officers, career advisers, doctors,
social workers, psychiatrists and, yes, lecturers, have all come to share
with prison officers a responsibility for setting and monitoring standards
of ‘acceptable behaviour’. Constant regulation within the disciplinary or
‘carcereal’ society has the cumulative effect of shaping not only people’s
preferences but their very identities. Foucault challenges the notion that
there is an autonomous individual whose preferences the government and
other actors can shape. In Foucault’s work there are no autonomous indi-
viduals who lie behind and remain unaffected by the exercise of power.
Power ‘constitutes’ people.
There is an apparent paradox here. The rise of the disciplinary society
has coincided with the triumph of a liberal governmentality that prescribes
strict limitations upon government intervention. The Foucaultian answer
to this paradox is that, if people are to be left to their own economic devices,
they must first possess the required liberal virtues of self-discipline, frugality,
entrepreneurship, morality and sexual restraint. So the state must intervene
in order to create the conditions for its subsequent non-intervention. Yet
in Foucault’s view it is not only representatives of the state such as social
workers and probation officers who exercise this disciplinary power. Power
also ‘circulates’, to use one of Foucault’s favourite phrases, within churches,
universities, workplaces, community groups and the media.
GOVERNANCE THROUGH PERSUASION 99
Foucault’s arguments about the exercise of disciplinary power raise an

important issue about the relative significance of state and non-state actors
as agents of persuasion. In Chapter 1 we showed that states retain an effec-
tive monopoly over the exercise of coercive power and that this underpins
the continuing relevance of governance through hierarchy. Governance
through persuasion, however, requires the exercise of a different kind of
power, and it is not immediately obvious why the state must always play
the same leading role in its application. This chapter provides examples of
non-state actors engaging in governance through persuasion and demon-
strates that, on occasions, non-state actors may have a greater capacity to
change people’s behaviour. This is important because governance through
persuasion might therefore constitute an important example of ‘governance
without government’.
Yet as the chapter unfolds we point to a number of reasons why gover-
nance through persuasion depends crucially on the continued involvement
of governments:
r The resources that states possess – their financial muscle, expertise and
legitimacy – usually provide a significant capacity to shape people’s
preferences.
r Even where non-state actors are engaged in efforts to change people’s
behaviour, governments retain responsibility for the metagovernance of
governance arrangements.
r Because the state has a monopoly on the exercise of coercive power, it is
often the target of others’ persuasive efforts.
r States have a key advantage over non-state actors in that they can com-
bine attempts to change people’s behaviour through persuasion with
the application of rewards and sanctions. Hierarchical governance is not
simply an alternative to governance through persuasion; in many cases
it enhances the efficacy of governance through persuasion.
r States play a major role in the development of social capital: one of the
key institutional prerequisites for effective persuasion.
L E G I T I M A C Y, P E R S U A S I O N A N D
GOVERNANCE WITHOUT GOVERNMENT
Non-state actors routinely attempt to persuade each other to change their
behaviour. Advertising and marketing conducted by and for privately
owned firms constitute a massive exercise in persuasion. In 2007 Procter &
Gamble spent $4.6 billion on advertising in the American market; General
Motors spent $4.3 billion; Time Warner spent $3.4 billion; and AT&T,
$2.4 billion. Although precise estimates are difficult to obtain, the US
federal government spent around $5 billion on advertising in 2001 (Weiss,
2002, 222).
Many of these efforts at persuasion may be considered to have little
direct political consequence. Yet efforts to persuade people to buy particular
brands of cigarettes, drive sports utility vehicles, or buy fast food obviously
have the potential to undermine government efforts to persuade people
to smoke less, reduce their carbon emissions and eat more healthily. But
non-state actors also contribute positively to the achievement of collectively
valued goals through persuasion. Consider the following examples.
r Over the last 30 years governments have sought to reduce rates of
HIV/AIDS infection. The most effective work in promoting safe sex
has often been undertaken by not-for-profit charities. In the United
Kingdom the Terrence Higgins Trust, named after one of the first Britons
to die of AIDS, has sought to promote sexual health through information
campaigns and HIV testing programs; it has acquired a reputation for
being able to communicate effectively with gay men and change their
behaviour. In Brazil (Levi & Vetoria, 2002), Australia (Mameli, 2001)
and Hungary (Danziger, 1997), programs to reduce the incidence of
HIV/AIDS have also largely relied upon the involvement of NGOs.
r Chapter 4 pointed to efforts by governments, governing through hier-
archy, to tackle obesity by, for example, banning the sale of junk food in
schools. Non-state actors have also contributed to the achievement of
the same goal. McDonald’s, which was subject to a barrage of bad press
following the 2004 release of the film Super Size Me, has promoted a
range of healthier menu options and committed itself to providing clear
and accessible information about the nutritional content of its food. At
the same time, it has sought to promote children’s exercise through, for
example, a national exercise program run in conjunction with primary
schools in Canada, sponsorship of a junior-league soccer competition
in South Korea, and the construction of gym clubs in France.
r Non-state actors are also routinely involved in attempts to persuade peo-
ple to contribute to the provision of collectively valued goods. A variety
of airlines and companies like Climate Care, the Carbon Neutral Com-
pany and Offset My Life have sought to persuade people to offset their
carbon emissions by paying to have trees planted (Smith, 2007, 14).
The fair trade movement, created in the early 1960s, has collaborated
with charities like Oxfam to persuade supermarkets to stock products
from manufacturers in developing countries who pay fair wages and
employ environmentally sustainable methods of production. Today, the

fair trade movement is regulated through the Fairtrade Labelling Organ-
isations International, which sets common labelling standards (Moore,
2004).
These examples of governance through persuasion raise an impor-
tant issue about individual rationality, which we will pause to discuss.
Economists and public choice theorists assume, and arguments for the use
of markets tend to presuppose, that people can be trusted to further their
own interests through the choices they make. Yet the fact that we sometimes
regret the choices we make suggests that people do not always act rationally.
Jon Elster (1979; 1983; 1989) has shown how information asymmetries,
weakness of will and wishful thinking frequently lead people to act in ways
that are inconsistent with their own interests. In the absence of rewards
or sanctions, people can therefore be persuaded to change their behaviour
in order to serve their own interests by, for example, practising safe sex or
eating more healthily. Governance through persuasion can, however, take
a second form. Economists also tend to assume that people are exclusively
self-interested and that acting rationally means acting egoistically. Yet the
empirical evidence is that people’s normative commitments frequently lead
them to act in ways that are contrary to their narrowly defined self-interest
(see Hindmoor, 2006a, 122–5; Ostrom, 1990; Funk, 2000; Caplan, 2007,
148–9 and references therein). This does not come as a surprise. We know
that in certain situations people’s normative commitments can lead them
to make dramatic personal sacrifices. We live in a world where politicians
sometimes go to jail for their beliefs; thousands of people have chosen to
take their own lives (and those of others) in suicide attacks; and millions
of people have volunteered to defend their country in times of war, or
given blood, or donated time and money to charity. More prosaically, there
is a wide body of evidence that public sector managers and workers are
motivated by a commitment to public service (Brewer, Selden & Facer,
2000; Taylor-Gooby et al., 2000).
People’s willingness to act upon their normative commitments creates
an opportunity to seek to persuade people to contribute to the collective
good by, for example, offsetting the carbon footprint of a flight. Foucault’s
arguments about ‘disciplinary power’ paint a bleak picture of a carcereal
society in which, collectively, people can be manipulated to act in ways
that are contrary to their own best interests. An equally bleak picture
is painted by Steven Lukes (1974), who shows how powerful elites can
shape people’s preferences in ways that undermine their real interests. Our
account of governance through persuasion is more positive. Any power can
be abused, but the power to shape people’s preferences can be used to further
people’s long-term interests and those of the communities in which they
live.
Having discussed the relationship between rationality and persuasion,
we return to the central issue of this chapter: the relative significance of
state and non-state actors as agents of persuasion. The involvement of non-
state actors in governance through persuasion can be linked to arguments
about the declining legitimacy of the state. One obvious way in which a
loss of legitimacy may manifest itself is in people’s growing reluctance to be
persuaded to behave in certain ways by politicians and government officials.
In the United Kingdom, efforts to persuade parents of the safety of a newly
introduced vaccine for measles, mumps and rubella were undermined by
what is now known to have been rogue research suggesting a possible link
between the vaccine and the onset of autism. The government declared
that there was absolutely no additional risk in using the combined vaccine.
But a widespread belief that the vaccine was only being introduced in order
to save money combined with memories about a previous government that
was thought to have deliberately misled people about the dangers of mad
cow disease, so that, at one time, up to 30 per cent of parents refused to
have their children immunised (Magennis, 1999, 136–8).
Where governments lack legitimacy and are not trusted, it is easy to see
why non-state actors may be influential in persuading people to change
their behaviour. In the case of the vaccination saga, the UK government
eventually turned to the British Medical Council for support. In the case
of HIV prevention, the Terrence Higgins Trust acquired a significant role
when it became clear that a significant proportion of the gay community
did not trust a government which, it believed, was ideologically opposed
to gay rights (Street, 1988).
Chapter 2 explained that the extent to which national governments have
lost legitimacy can be exaggerated. Voters still expect governments to solve
policy problems and steer society. Indeed, the problems that governments
face often reflect growing, and occasionally unreasonable, expectations
about governments’ capacity to resolve policy problems. There are specific
cases in which governments are not trusted and non-state actors have a
greater capacity to successfully engage in governance through persuasion:
the management of HIV/AIDS offers a striking example. Yet Table 2.3
showed that, with the notable exception of the United States, levels of
confidence in national parliaments have not fallen dramatically over the
last few decades. Furthermore, in most countries the public’s confidence in
government exceeds its confidence in private firms whose efforts to persuade
people to eat more healthily or take regular exercise are regarded as being
tainted by self-interest.1 One interesting, although dated, study into efforts
to promote energy conservation in New York found that the behaviour of
consumers was more likely to be affected by a message from the New York
State Public Service Commission than by an identical message from their
local utility company (Craig & McCann, 1978).
As described in Chapter 4, one way in which states have enhanced
their governing capacity is through the creation of arm’s-length and semi-
independent agencies. In situations where the government lacks legiti-
macy, such agencies have a vital role. Take, for example, efforts to ensure
an adequate supply of blood for medical purposes. Globally, it is esti-
mated that about 18 per cent of all blood is donated on a voluntary basis;
15 per cent is donated specifically to help relatives; and about five per cent
is donated in return for cash payments (WHO, 2007, 12). In South Africa,
Canada and Singapore, voluntary donations are organised through not-for-
profit charities. In most countries, however, blood donation is organised
through quasi-autonomous governmental organisations like the National
Blood Service in the United Kingdom, the Irish Blood Service or the New
Zealand Blood Service. Even where trust in government has declined, it
appears that these organisations have retained a reputation for political
impartiality and expertise. It is striking that in the United Kingdom, Ire-
land and New Zealand, the overall number of voluntary blood donations
each year has remained stable at a time when confidence in government
has declined slightly. In China, voluntary blood donation increased from
45 to 91 per cent of all donations between 2000 and 2004 following a
concerted government campaign (WHO, 2007, 29). In Bolivia, the estab-
lishment of a national blood program and concerted media campaign by
the government resulted in the rate of voluntary donations rising from 10
per cent in 2002 to 50 per cent in 2006.
Governments can also seek to enhance their legitimacy by governing
through persuasion. Consider instances in which states attempt to change
the behaviour of a large but dispersed and unorganised group which broadly
agrees about the desirability of achieving a goal. Persuasion will be an attrac-
tive governance mechanism in such instances because it is non-coercive
(Vedung & Doeelen, 1998; Weiss, 2002). We have shown how the reach
of the regulatory state has been extended. Yet except for a wartime emer-
gency, most states would quail at the thought of trying to institute a system
of compulsory blood donation. As well as the financial and logistical diffi-
culties of constructing and policing such a system, the government would
suffer political costs from loss of legitimacy if people believed this to be an
inappropriate and excessive use of coercive force. Hence, governments can

economise on their legitimacy by governing through persuasion.
Similarly, governance through persuasion is attractive to governments
where it can create the appearance of decisive action. In cases where policy
issues are regarded as important but intractable, states can seek to enhance
their legitimacy – or at least avoid a loss of legitimacy – by being seen
to tackle a problem. There is little evidence that large-scale government
campaigns to persuade schoolchildren of the dangers of drugs, or citizens
of the need to report suspicious activity in order to prevent terrorism,
reduce levels of addiction or terrorist attack. They may, however, create a
politically useful sense of urgency.
As governments have sought to persuade citizens to behave in particu-
lar ways, they have enhanced their communication strategies. Governing
parties increasingly regard themselves as fighting a ‘permanent campaign’
for media and public attention. James Stanyer (2007, 42) writes:
An obsession with promotion increasingly shapes all government commu-

nication efforts . . . many of the techniques pioneered in the public relations
and public opinion industries, and practiced during election campaigns,
have become the mainstay of government communication, the belief being
that such promotional techniques are essential for administrations to get
their message across.
Reflecting upon such developments, Sydney Blumenthal, formerly a senior

adviser to President Clinton, suggests that campaigning has become the
new ideology underpinning government (quoted in Lilleker, 2007, 144). In
order to enhance their capacity to communicate with citizens, according
to David Deacon and Peter Golding (1994, 4–6), modern states have
turned themselves into ‘public relations states’ in which the ‘marketing
of government activity has become a central activity of modern statecraft’.
The employment of media advisers, consultants and spin doctors is nothing
new, but Deacon and Golding show how governments have institutionalised
such activities (see also Ward, 2007).
Communication strategies have become professional, political and cen-
tral. They have been professionalised through the appointment of mar-
keting consultants in the place of public servants; the consultants have
adopted – outside the usual campaign environments – focus groups,
tracking polls, planning grids, rebuttal units and ‘information subsidies’
(the strategic deployment of information to trusted sources in order to
maximise favourable coverage, Gandy, 1982). Innovative and increasingly
sophisticated techniques have been employed to sell government messages.

Stanyer (2007, 64) describes how the Clinton administration paid televi-
sion networks producing popular shows like ER and Beverly Hills 90210 to
include in their scripts references to the government’s anti-drugs campaign.
In the United Kingdom the government paid Jeremy Kyle, the host of a
controversial ‘car crash’ television show in which men take on-air paternity
tests, to host a chat show discussing the ways in which the government
can help people find work. At the same time, communication strategies
have been politicised as the boundaries between informing the public and
selling the government have blurred. During the lead-up to the 2003 Iraq
War, the US and UK governments exploited their hierarchical control over
the release of intelligence information to inflate the threat posed by Iraq
(Kaufmann, 2004) and marginalise critics of the war. Finally, communi-
cation strategies have increasingly been centralised within and around the
office of the president or prime minister as governments have sought to
coordinate the activities of disparate departments and ministers (Stanyer,
2007, 48; Maltese, 2003). In 1997 the newly elected Tony Blair decreed
that ministers would be required to agree the timing and content of any
speeches, press releases, or media interviews with the Downing Street Press
Office.
T H E M E TA G O V E R N A N C E O F
PERSUASION
Even where non-state actors engage in governance through persuasion,
states usually retain the responsibility for the metagovernance of such
arrangements. In the case of HIV/AIDS prevention, the decision to forge
closer links with the Terrence Higgins Trust was taken within the Ministry
of Health. Politicians and senior public servants decided which organisa-
tions they were prepared to work with and eschewed campaigning groups
like Stonewall which, at the time, were thought to be promoting too radi-
cal an agenda. The Ministry of Health set the overall goals and targets for
the HIV/AIDS campaign and provided most of the resources used to fund
campaigns. Today, the Terrence Higgins Trust (2007), although apparently
independent of government, continues to receive about three-quarters of
its budget via statutory government grants or contracts.
In other cases, governments assume a metagovernance role in coordinat-
ing and steering governance efforts. In 2002 the UK government launched
a high-profile campaign to encourage people to eat five portions of fruit
and vegetables a day, amidst reports that up to 42 000 people were dying
each year as a result of their failure to do so. Much of this campaign

was delivered in conjunction with 500 partner organisations, including
NGOs like the British Heart Foundation and profit-making companies
like Weight Watchers, supermarket chains and food manufacturers (Collins
et al., 2003). Yet responsibility for the content and management of the
campaign was retained by the Ministry of Health; it intervened when,
for example, a food manufacturer, Heinz, started to promote its range of
tinned spaghetti with the slogan ‘five-a-day the Heinz way’.
Our state-centric relational account of governance emphasises the ways
in which governments have strengthened their governance capacity by
developing close relations with non-state actors. Governance through per-
suasion offers another example of the potentially positive-sum relationships
involved. Consider, once again, efforts to prevent the spread of HIV/AIDS.
The UK government’s initial efforts to inform people of the dangers
foundered when it became clear that large parts of the gay community
saw it as out of touch and politically hostile. The devolution of responsibil-
ity to organisations like the Terrence Higgins Trust helped the government
to achieve its goals. Yet, as we have argued, the relationship between gov-
ernment and NGOs is unequal. Governments continue to set objectives,
provide resources and monitor effectiveness.
P E R S U A D I N G S TAT E S
When states are not the agents of persuasion, they are frequently its recip-
ients. Because states retain a monopoly of coercive power and, with this, a
monopoly on the authority to construct and revise governance rules, non-
state actors routinely attempt to persuade states to change their behaviour.
Chapter 6 shows how businesses routinely use the political process to try
and achieve a competitive advantage. More generally, charities, interest-
groups, trade unions, universities, local governments and community asso-
ciations all lobby government in pursuit of their goals.
The notion that non-state actors attempt to change the behaviour of
states is hardly novel. Chapter 2 mentioned many studies of policy networks
that seek to explain how governments trade policy influence for support in
formulating and implementing policy. Yet there is a conceptual problem in
viewing these relationships as examples of governance through persuasion.
The studies of policy networks view the relationship between governments
and pressure groups in entirely instrumental terms. Networks are animated
by, and constituted through, the efforts of actors to bargain with each other,
exchange resources and achieve mutually beneficial outcomes (Rhodes,
1986, 16–23; Marsh & Rhodes, 1992a, 10–11; Rhodes, 1997, 36–7).
There is no obvious room for persuasion here. Governments and pressure-
groups know what they want and flex their muscles in order to achieve
it. Preferences are, in the language used by economists, exogenously given
and fixed.
Yet pressure-groups do not simply bargain with government. Just as it
is open to governments to try to persuade individuals that they have mis-
construed their interests and should change their behaviour, it is open to
interest-groups and other actors to persuade the government that a partic-
ular policy promotes not only their own interest but the public interest.
In 2001 during the crisis over foot-and-mouth disease, the UK govern-
ment was widely criticised for its refusal to abandon its policy of selective
slaughter of animals in favour of one of preventative vaccination.2 Sev-
eral inquiries later concluded that the costs of closing the countryside to
tourists, an inevitable consequence of the slaughter policy, far outweighed
the benefits of protecting British meat exports. So why did the government
get its policy so wrong? At the time, newspaper commentators routinely
argued that the government had wanted to vaccinate but that the National
Farmers Union (NFU), which opposed vaccination, had been allowed to
exercise a ‘veto’ over policy (Whittam Smith, Independent, 30 April 2001).
In its report on the handling of foot-and-mouth disease, the European
Parliament (2002, para. 34) denounced the way in which a ‘relatively small
special interest group’, the NFU, had been given an ‘undue influence over
decisions affecting the wellbeing of whole regions’.
There is a major problem with this argument: there is no evidence
that the UK government ever favoured widespread emergency vaccination
as an alternative to slaughter, let alone that the NFU prevented it from
implementing this policy (the following draws on Hindmoor, 2009). Of
course, the NFU’s opposition to the vaccination was relevant, but the
access the NFU was given to policy-makers throughout the crisis enabled
them to repeat to ministers and senior officials the arguments for selective
slaughter and the potential costs and uncertainties of vaccination. The
NFU was a large group which could, if it wanted to, make life politically
uncomfortable for the government during an expected general election
campaign. The government granted high-level access to NFU officials
because it believed that it was in its interest to do so. Groups like the Soil
Association, the National Consumer Council, the National Trust, the Royal
Society for the Protection of Birds, Friends of the Earth and the Wildlife
Trust favoured vaccination, but they were considered politically lightweight
and were largely ignored. The important point here is that the relationship
between the NFU and the government was not simply one of bargaining. In
interviews, speeches, press releases, articles and, no doubt, private meetings
with government officials, the NFU sought to persuade the government
of the merits of its case. Rather than bargaining with the government,
the NFU persuaded it; the government publicly endorsed many of the
arguments the NFU had advanced against vaccination.
COMBINING MODES OF GOVERNANCE:

PERSUASION AND HIERARCHY
We have so far examined governance through persuasion in isolation. Yet
one source of the comparative advantage that states have over non-state
actors in persuading people to change their behaviour is that they can
combine persuasion with hierarchy. Public health campaigns to encourage
people to eat more fruit and vegetables have been combined with bans on
advertising junk food on children’s television programs and the provision
of free fruit in schools. Campaigns to persuade people to quit smoking
have been combined with bans on smoking in public places and punitive
taxes on cigarettes. Campaigns to persuade people to drive safely have
been combined with increased penalties for those caught drink-driving or
speeding.
There are two reasons why the application of hierarchical sanctions
and rewards is likely to make efforts at governance through persuasion
more effective. In the first place prohibitions, taxes and subsidies send a
clear signal to people about the significance a government attaches to an
issue and so are likely to attract their attention. Second, sanctions and
rewards reassure people who are willing to contribute to the provision of
a collective good but fear that free-riders may take advantage of them. In
these circumstances, the provision of sanctions and rewards may persuade
people that they will not be exploited.
As we saw in Chapter 4 in relation to ‘responsive regulation’, govern-
ments can combine efforts at horizontal coordination and moral suasion
with (if needed) the application of hierarchical controls. It is worth re-
examining this approach in a different context. Over the last decade a
combination of government and consumer pressure has led many firms to
create or join voluntary compliance regimes in which members promise to
meet certain standards of ethical or environmental behaviour. Voluntary
programs have proved a popular method of dealing with environmental
problems in the United States (Potoski & Prakash, 2004), Japan (Welch &
Hibiki, 2002), the European Union (Borkley & Leveque, 1998), and
developing countries such as Costa Rica (Rivera, 2002). To take one exam-
ple, the US Environmental Protection Agency’s WasteWise program has
attracted the support of nearly 1500 companies and public sector bodies
(Delmas & Keller, 2005). There is no fee to join the program; participants
agree to set waste reduction targets and report on their progress in meeting
them. In return, the Environmental Agency provides information on how
to reduce waste and sponsors case-studies and award ceremonies.
Sceptics might argue that voluntary agreements are of no more than
symbolic value as they allow firms not only to set their own standards
but also to break them routinely. In some cases firms only agree to join a
voluntary scheme in return for a guarantee that they will not be prosecuted
for any failure to meet the standards set out in an agreement (Steinzor,
1998). In the case of the WasteWise program it is notable that only about
20 per cent of member firms even submitted reports to the Environ-
mental Protection Agency indicating whether they had met their perfor-
mance targets (Delmas & Keller, 2005, 93; for other critical accounts see
Darnall & Carmin, 2005).
The more effective schemes combine voluntary efforts at persuasion with
the threat of hierarchical regulation (Mackendrick, 2005). There appear
to be two models on offer here. In the first, voluntary agreements are
signed as a supplement to, rather than replacement for, existing regulatory
standards. In these cases firms may not meet the new standards contained in
the voluntary agreement but there can be no erosion in overall standards. In
the second model governments indicate that tougher hierarchical controls
will be introduced unless voluntary standards are met (Reitbergen et al.,
1999). In the late 1980s the Netherlands government introduced long-term
agreements on energy efficiency in an effort to reduce carbon emissions
by 3–5 per cent by 2000 (Welch & Hibiki, 2002, 410; Wallace, 1995).
Over 90 per cent of Dutch firms signed these agreements, which were
negotiated with peak-level industry associations. The agreements required
firms to report upon their performance against agreed targets, and they
allowed the Environment Ministry to revoke the operating licence of any
firm that consistently failed to meet minimum standards.
S O C I A L C A P I TA L A N D G O V E R N A N C E
THROUGH PERSUASION
Social capital can be defined as ‘all those features of social organisation,
such as networks, norms and social trust, that facilitate coordination and
cooperation for mutual benefit’ (Putnam, 1994, 67). A useful distinction
is between ‘bonding’ and ‘bridging’ social capital. Bonding capital refers

to the range and depth of relations between similar groups of people in
a society; bridging capital refers to the range and depth of the relations
among different groups of people. Over the last decade or so social capi-
tal has attracted huge interest from academics and policy-makers. This is
because empirical studies of, in particular, bridging social capital – mea-
sured through such indicators as interpersonal trust, membership of vol-
untary organisations, community volunteering and engagement in social
and political affairs – have shown that it seems to be closely linked to such
valued policy goals as high economic growth (Knack & Keefer, 1997),
rising education standards (Dika & Singh, 2002), good health, and low
levels of crime (OECD, 2001). Social capital has come to be viewed as a
panacea for all policy problems.
The existence of high levels of social capital may also underpin the
efficiency of market mechanisms. Economic sociologists such as Mark
Granovetter (1985) argue that markets work more efficiently when actors
are embedded in interpersonal social networks, with ‘dense’ networks facil-
itating information exchange and the development and enforcement of
norms. Empirical research by Wayne Baker (1984) found that, as the num-
ber of traders in particular markets increased (thus reducing the density
of social networks), so too did price volatility. The point is that, contrary
to mainstream economic analysis, market relationships are not impersonal
transactions based on narrow, short-term calculations of utility; they are
typically rooted in deeper sets of cultural and social understandings, expec-
tations, norms and even obligations. Ash Amin and Jerzy Hausner (1997,
5) refer to this as the ‘soft institutional parameters’ of the market.
Correlation does not mean causation: the existence of a strong empirical
relationship between social capital and valued policy outcomes is not con-
clusive. It may be that social capital is a consequence, and not the cause, of
economic growth, low crime and so on (Scanlon, 2004). However, it is easy
to see how high levels of social capital may make it easier to persuade actors
to contribute their share to the provision of a collectively valued good.
Indeed, there is a tendency in the literature to define or at least measure
social capital precisely in terms of a person’s willingness to contribute to
collectively valued goods. Consider, for example, the World Bank’s (1998)
definition of social capital in terms of a ‘common sense of civil respon-
sibility’. High levels of social capital also facilitate efforts at governance
through persuasion by encouraging people to believe that they ought to
contribute their share to the provision of some goal and also that others are
likely to do so as well. In this way high levels of social capital may provide
an institutional catalyst to resolve collective action problems. Finally, high

levels of social capital are likely to result in higher levels of trust not only in
people but in government (Keele, 2007). Governments that are considered
trustworthy are, of course, more likely to persuade people to change their
behaviour. For all these reasons governance through persuasion, whether
by state or non-state actors, benefits from the existence of high levels of
social capital.
In his influential book Bowling Alone, Robert Putnam (2000) argues that
social capital in general and bridging capital in particular are in rapid decline
in the United States and that this is compromising the quality of millions of
people’s lives. Putnam says that Americans are leading increasingly isolated
lives: commuting alone, working at a desk in a competitive office and, on
returning home, collapsing in front of the television in their own room in
a house. Academic studies, however, seem to indicate that the rapid loss in
social capital that has occurred in the United States since the 1960s has not
occurred elsewhere. In the United Kingdom (Hall, 1999), the Netherlands
(De Hart & Dekker, 1999), Japan (Inoguchi, 2000) and France (Worms,
2000), people are less likely to engage in traditional activities such as
attending church or joining political parties, but they are often more likely
to socialise with friends and engage in voluntary community work.3
If there is a clear empirical lesson in the mass of data that has been
collected on social capital, it is of the sheer variety in, rather than decline
of, social capital. Table 5.1 tracks people’s trust in other people between the
first wave of the World Values Survey in the early 1980s and the third wave
of surveys in the late 1990s. The survey shows that levels of generalised
trust increased in almost as many countries as it declined in, and that there
are huge disparities in trust between Argentina and France on the one hand
and Australia, Canada and Denmark on the other.
Despite this mixed empirical record, many countries have expressed a
determination to invest in the production of social capital. Joining the parts
of our argument together, this will, all other things being equal, enhance
the capacity of state and non-state actors to govern through persuasion.
Yet it is clear that most of the methods of building social capital require
not simply state action but hierarchical governance. In the conclusion to
Bowling Alone Putnam (pp. 402–14) offers a manifesto for the restoration
of social capital and American society. He calls for the development of
community programs in schools; family-friendly policies in workplaces;
less urban sprawl; the provision of more arts and entertainment facilities
in communities; the reform of election finance laws to encourage citi-
zens to contribute time as well as money to their political causes; and the
Table 5.1. Social trust, selected countries, 1980–4 and 1998–2000

Question: Generally speaking, would you say that most people can be trusted or that
you need to be very careful in dealing with people?
% saying that most people can be trusted
Country 1980–4 1998–2000

Argentina 24.5 15
Australia 46.3 39.5
Belgium 25.1 29.4
Canada 42.1 38.4
Denmark 45.9 64.1
France 22.3 21.4
Ireland 40 46.8
Japan 37.4 39.6
Nigeria 21.7 25.3
South Korea 36 27.3
United States 39.2 35.5
Source: World Values Survey (http://www.worldvaluessurvey.org/).
decentralisation of government authority. Others have suggested that social

capital might be enhanced through the sponsorship of community groups;
better traffic management schemes to encourage people to walk to school
or work; and the provision of more public festivals (Productivity Commis-
sion, 2003, 60). According to Rothstein (2005, 71–92), the provision of
universal welfare services that benefit everyone regardless of their income is
an important source of social capital and must be maintained in the face of
demands for greater welfare selectivity. Similarly, Gittell and Vidal (1998)
argue that the provision of high-quality public services is a key source of
social capital. Where education and health services have been allowed to
decline, they argue, the private sector has flourished and this has resulted
in the segregation of services and the loss of bridging capital.
Yet most of these reforms require hierarchical government interven-
tion to change planning regulations, subsidise public transport, reform
electoral laws and welfare systems, decentralise decision-making authority,
and so on. It is possible to imagine how non-state actors might be given
contracts to develop community programs in schools, organise public fes-
tivals or build arts and entertainment centres. It is also possible that some
profit-making firms will perceive it as being in their own long-term inter-
ests to develop more family-friendly employment policies. Yet the policy
agenda for investing in social capital is largely an agenda for hierarchical

state action. As Simon Szreter (2002, 613) concludes,
far from being an alternative to the state and to government activity, [social
capital] is symbiotically related to it . . . social capital is not a form of do-it-
yourself civil elastoplast, for patching together polities with poor systems of
central and local government and depleted public services . . . the first task
in building social capital in poor communities is, paradoxically, to restore
collective faith in the idea of the state as and in local government as a
practically effective servant of the community.
Even where non-state actors are engaged in governance through persuasion,

their efforts will be parasitic upon state action. States provide the environ-
ment within which governance through persuasion can be effective.
CONCLUSION
There are plenty of academic studies on governance as it relates to markets,
hierarchies and networks, but little has been written about the possibilities
of governance through persuasion (but see Bemelamans-Vedic et al., 1998;
Weiss, 2002; Collins et al., 2003). Does this matter? If we were to follow
the public choice approach – regarding individuals as not only exclusively
self-interested but possessing fixed views about how best to achieve that
interest – there would indeed be little scope for governance through per-
suasion. But as political scientists have recently come to emphasise, ideas
matter (Campbell, 2004, 90–101; Blyth, 2002; Fischer, 2003; Menahem,
2008). They matter because people’s normative commitments, their val-
ues, attitudes, and morals, can lead them to act in ways that are contrary
to their self-interest. They matter because it is people’s empirical notions
about how the world works, about cause-and-effect relationships, programs
and paradigms, which lead them to believe that certain courses of action are
in their interest. As Colin Hay (2002, 209) puts it: ‘if actors lack complete
information, they have to interpret the world in which they find themselves
in order to orientate themselves strategically toward it. Ideas provide the
point of mediation between actors and their environment.’ It is because
ideas matter in politics that persuasion is possible. People can be persuaded
to act out of a commitment to the collective good or to change their views
about how best to pursue their own interests.
In Michel Foucault’s view, the kind of preference-shaping activity we
have examined in this chapter destroys individual autonomy. He equates
what we have called governance through persuasion with the rise of the
‘disciplinary society’. Our account is less bleak. We agree with Foucault that
efforts to shape people’s preferences, or perhaps even identities, are becom-
ing more common. We also agree that the state, in partnership with a range
of other organisations, plays a leading role in such activities. Yet governance
through persuasion offers an effective and non-coercive means by which
governments can achieve collectively valued outcomes. There are instances
in which non-state actors are engaged in governance through persuasion,
and even some cases of governance without government, but the state
retains a crucial role. States have attempted to enhance their legitimacy by
governing through persuasion. They have also attempted to enhance their
governance capacity by working with non-state actors. Under such arrange-
ments, however, governments retain responsibility for the areas identified
in Chapter 3: steering, effectiveness, resourcing, democracy, accountability
and legitimacy.
6 Governance through markets
and contracts
A MARKET CAN BE DEFINED AS A SOCIAL arrangement allow-

ing for the voluntary exchange of goods and services. Markets are charac-
terised by the existence of private property rights, competition, and the use
of the price mechanism to allocate resources. The use of markets is usually
defended on efficiency grounds. Private property rights, when combined
with competition, are believed to give firms and entrepreneurs incentives
to develop new products and anticipate consumer demand. Prices pro-
vide participants in the market with a constant flow of information about
demand and supply (Hayek, 1945; Kirzner, 1973). In these ways, the invis-
ible hand of the market is, according to liberal ideology, said to harness
individual self-interest for the collective good. As we have observed, the
idea that competitive markets represent the most efficient way of allocating
resources has become a paradigm of (neo-liberal) governance. In recent
decades in a range of countries an ongoing process of ‘marketisation’ has
resulted in waves of privatisation and deregulation, contracting-out and
the creation of new markets. Not only have the boundaries between the
public and private sectors been redrawn, but the public sector itself has
been partly recreated in the image of the market.
Economists continue to debate the economic consequences of mar-
ketisation. Critics suggest that, in many cases, market failures and high
transaction costs outweigh efficiency gains.1 Our focus in this chapter,
however, is on the relationship between marketisation and state capacity.
There are two strands to the argument. The first is that marketisation has
resulted in significant powers being surrendered to private businesses oper-
ating independent of government control. If governance means steering,
marketisation, it is argued, has led to a reduction in the total amount of
governance. Indeed Susan Strange (1996, 14) suggests that ‘the diffusion of
115
authority away from national governments’ has resulted in ‘ungovernance’.

The second strand is that states have also lost control in those situations
where markets have been used as an alternative means of pursuing policy
goals. The contracting-out of public services to private firms is argued to
have led to a hollowing-out of the state.
There are indeed cases where marketisation has led to a loss of state
capacity and a failure of metagovernance. In one of the cases we examine,
the outsourcing of defence contracts in Iraq, marketisation led to an even-
tually catastrophic loss of accountability, legitimacy and life. Emblematic
of this failure are newspaper reports that one contractor, KBR, threatened
to stop feeding the US army in Iraq unless it was immediately paid in full
for a disputed contract (New York Times, 17 June 2008). Yet, as might be
expected, we are sceptical about arguments that present the relationship
between the state and hierarchy on the one hand and markets on the other
in zero-sum terms. The extent to which markets, or indeed major players
in them such as business interests, have replaced hierarchy as a mode of
governance can easily be exaggerated. Furthermore, marketisation and the
metagovernance of markets frequently require the exercise of massive hier-
archical authority. In short, we concur with Michael Keating (2004, 6),
who suggests that ‘the shift to marketisation largely represents an attempt
by government to enhance or restore their power to achieve their economic
and social objectives’.
T H E M A R K E T I S AT I O N O F G O V E R N A N C E
What we describe as the ‘marketisation of governance’ covers some related
but distinct reforms. We will look at them in turn.
P R I VAT I S AT I O N
Governments across the world have privatised state-owned enterprises
either by selling shares in those companies on stock markets, by selling
firms to private companies or by giving shares to citizens (OECD, 2005b).
Pioneered in the United Kingdom, New Zealand and Australia, privatisa-
tion has had the greatest impact in those countries which had the largest
number of state-owned enterprises. In Portugal, the Czech Republic and
Hungary, the cumulative proceeds of privatisation sales have amounted to
more than 20 per cent of current annual GDP (OECD, 2005c, 24). Even
where privatisation has been rejected, the impact of the philosophy has
GOVERNANCE THROUGH MARKETS 117
been such that governments have committed themselves to rules requir-

ing them to run state-owned enterprises on a commercial basis through
independently appointed boards of directors, a process often referred to as
‘commercialisation’.
D E R E G U L AT I O N
This is the process by which states seek to eliminate, reduce or at least sim-
plify restrictions on the activities of individuals or firms with a view to cre-
ating freer and more competitive markets. Chapter 4 noted that in OECD
countries the telecommunications, aviation and electricity industries were,
to varying degrees, deregulated in the 1980s and 1990s. Deregulation,
along with technological change, has been a key driver of globalisation.
Reductions in trade barriers, the elimination of restrictions upon the oper-
ation of foreign banks in domestic markets, and the removal of restrictions
on the overseas transfer of capital have resulted in a massive expansion in
international trade, overseas foreign investment and currency speculation.
EXTERNAL MARKETS
When governments privatise firms, a market for the products of those firms
already exists. In the case of what we call external markets, the state actually
creates markets by establishing new property rights and encouraging trade
with a view to resolving specific policy problems. In response to a continu-
ing drought exacerbated by intensive farming, the Australian government
created a new market in water by limiting the amount of water farmers
can extract from rivers while simultaneously creating water entitlements
and allowing farmers to buy or sell their water allocations (Bell & Quiggin,
2008). The policy prescription is that, for any given limit upon the amount
of water to be extracted, market trading ought to ensure the lowest loss in
production as more efficient farms buy additional water from less efficient
ones. External markets are still a relatively novel governance approach. In
recent years, however, markets have been created to allow the exchange of
a range of pollutants, including emissions of sulphur dioxide (associated
with acid rain) and carbon dioxide (one cause of climate change).
CONTRACTING-OUT
In contracting-out (or competitive tendering), services once performed by
state agencies are exposed to competition. Contractors are selected on a
range of criteria including, most obviously, cost. As Chapter 1 pointed out,

there is nothing new in the principle; but contracting-out has proliferated,
spurred on by a neo-liberal ideology and the prevalence of outsourcing in
the private sector. Defence provides an interesting example, given our earlier
discussion about sovereignty and the state’s monopoly on the legitimate use
of violence. Having abolished military service, a previously reliable source
of labour, armies across the world have come to depend on private firms
to provide support functions such as training, base maintenance, health
services and supply transport (Avant, 2005; Singer, 2001). In the United
States more than 50 per cent of the navy’s military research, development,
testing and evaluation have been outsourced to private, profit-making
firms, along with large parts of the work of nuclear laboratories and test
centres at Los Alamos and Lawrence Livermore (Markusen, 2003).
In other cases, government services, particularly for health, education
and personal well-being, have been contracted to not-for-profit organisa-
tions with commitment to the delivery of high-quality services in a partic-
ular area. The most recent comprehensive survey estimates that, globally,
not-for-profit ‘third sector’ organisations account for around five per cent
of world gross domestic product and employ around 40 million people
(Salamon, Sokolowski & List, 2003). In the United States, the United
Kingdom and Australia, the third sector employs an average eight per cent
of the economically active population. Indeed, in the United Kingdom the
crime-reduction charity NARCO, which has criticised the use of prison
as a deterrence strategy and warned that Britain is in danger of becoming
the ‘prisons capital of Europe’, has worked with a private security firm,
Group 4, to tender to run two new vast ‘superprisons’ in Liverpool and
London. According to NARCO’s chief executive, ‘if we’re both [Group 4
and NARCO] involved in working together on the design, planning and
regime of a new prison, it increases the chances that [the] regime will be
one which helps to reduce re-offending by resettling prisoners effectively’
(quoted, Guardian, 7 September 2008).
P U B L I C – P R I VAT E PA RT N E R S H I P S
Public-private partnerships (PPPs) extend the role of private firms in the
provision of public services to include the design, construction, mainte-
nance and operation of infrastructure assets traditionally provided by the
public sector (OECD, 2005a, 140). The arrangements vary but usually
governments either pay rent for infrastructure designed, built and main-
tained by a private firm, or allow that firm to charge customers a fixed rate
to use the facilities. Such PPPs were pioneered in the United Kingdom in
the early 1990s to fund massive programs to build hospitals and schools.
Elsewhere, PPPs have financed road construction in Portugal, a high-speed
rail network in the Netherlands, and a new airport in Athens (OECD,
2005a, 140–3).
INTERNAL MARKETS
In the pursuit of public sector efficiency, governments across the world
have pursued a program of ‘new public management’. This has entailed the
hierarchical imposition of benchmarking exercises, targets, performance-
related pay and short-term contracts. Governments have also pursued
reform through the creation of internal markets or quasi-markets in which
public sector organisations are encouraged to compete against each other
to provide cheaper or better services (Barlett & Le Grand, 1993; Le Grand,
2003). The most significant example of such a market was established
within the National Health Service (NHS) in the United Kingdom. Tra-
ditionally, the NHS has been hierarchically managed through top-down
budgets. In the early 1990s general practitioners were given more con-
trol over their budgets and encouraged to purchase treatment for their
patients from local hospitals. The expectation was that doctors would send
their patients to those hospitals with the shortest waiting times, the lowest
costs and the best standards of care, and that the resulting competitive
pressures would force every hospital to improve its performance. This did
not amount to a privatisation of the NHS: medical treatment remained
entirely free at the point of delivery. The money circulating within the
internal market was, ultimately, all taxpayers’ money.
C O M M O N FA C T O R S I N M A R K E T I S AT I O N
What do these market-based reforms have in common? Recall here our
definition of markets in terms of competition, property rights and prices.
First, contracting-out requires private firms and public sector agencies to
compete to provide the best and cheapest service. Similarly, deregulation
is meant to make it easier for new firms to enter existing markets. Second,
these reforms have created new property rights. Australian farmers have
always had the right to extract water from their land; the creation of a
water market has given them an additional right to exchange this resource.
Privatisation has created new property rights for shareholders, while dereg-
ulation has extended the existing rights of property owners. Third, these
reforms have resulted in a greater reliance on prices as a mechanism to

allocate resources. Privatisation is meant to ensure that investment, pricing
and employment decisions are sensitive to changes in price. By creating a
price for water and pollutants, external markets are meant to ensure that
use of resources reflects their environmental impact.
The marketisation of governance has not usually led to unfettered com-
petition, unqualified property rights and absolute dependence upon prices.
Governments have often chosen to privatise state-owned enterprises as
monopolies in order to maximise revenue from their sale (Marsh, 1991).
In the case of the internal health market in the United Kingdom, property
rights are carefully controlled. Doctors are not given the option of selling
their surgery and, until recently, could not choose to send their patients to
a privately owned hospital at the taxpayer’s expense. In otherwise deregu-
lated markets, residual controls on prices also remain. The amount airlines
must pay for landing slots at major international airports like Heathrow
and Los Angeles and the fares they are allowed to charge on many interna-
tional routes are still heavily regulated (Cowhey & Richards, 2006). Yet if
we think of competition, property rights and price-based decision-making
as a matter of degree rather than as binary alternatives, it is clear why
the changes described here might be said to constitute a marketisation of
governance.
S TAT E C A PA C I T Y A N D M A R K E T S
Alberta Sbragia (2000, 243) observes that ‘market forces are widely viewed
as threatening, diluting or eroding the powers of the state . . . the power of
public authority to protect its citizens over the long-term is seen as dimin-
ished’. Susan Strange (1996, 4) argues that ‘where states were once the mas-
ters of markets, now it is the markets which, on many critical issues, are the
masters over the governments of states’. Christopher Pierson (1996, 124)
suggests that the globalisation of markets has ‘strengthened the bargaining
position of capital [and] . . . undermined the authority and capacity of the
interventionist state’. Similarly, Hans-Peter Martin and Harald Schumann
(1996, 10) argue that ‘the whole of politics’ has become ‘a spectacle of
impotence’ and that the ‘democratic state has lost its legitimacy’ as a conse-
quence of the diffusion of market forces. Governments, in this view, have
not simply disappeared but have been relegated to a ‘market-supporting’
rather than ‘market-steering’ role (Levy, 2006, 3–4). Governments have
become the handmaidens of markets; they must enhance labour market
participation, remove trade barriers and set minimal standards of regula-

tion. Using alternative terminology, Jon Pierre and Guy Peters (2005, 104)
suggest that the ‘enabling’ policy style adopted by many governments in
the 1990s was one in which the state ‘defines its role in society as one of
removing obstacles to economic growth. More broadly, the enabling state
is less intervening, less steering, and less proactive than a state pursuing a
more traditional policy style.’
How, precisely, has marketisation challenged and undermined the role
and capacity of the state? There are various theories. One is that pri-
vatisation has denied to governments an important policy tool by which
they once directly influenced wages, employment practices and investment
decisions within countries. Another is that deregulation in general, and the
globalisation of markets in particular, have acted as a ‘golden straitjacket’
requiring states to adopt business-friendly policies (Friedman, 1999). The
Asian financial crisis in 1998 and the global credit crisis beginning in 2008
showed that financial markets may have slipped beyond the control of
regulators.
Turning to contracting-out, critics argue that a loss of in-house expertise
and experience has made it impossible for states to manage or oversee
the tangle of relationships they have voluntarily entered into (Milward,
Provan & Else, 1993). Contracting-out is also said to have led to a loss of
legitimacy and accountability. In Sydney there was a public outcry in 2006
when the state government refused to publish the full terms of a contract
it had signed with a private sector consortium to build and operate a
road tunnel. This was controversial because one clause in the contract was
reported to require the government to close alternative traffic routes if
business fell below projected levels (Sydney Morning Herald, 17 November
2006). Patricia Ranald (1997) argues that the lack of transparency entailed
by ‘commercial confidentiality’ clauses in contracts constitutes a removal
of citizens’ democratic rights, since it denies public debate.
Finally, by encouraging competition, internal markets have been argued
to undermine the public service ethos upon which government, in the long-
term, must depend (see Le Grand, 2003, 41–4 and references therein).
THE RESILIENCE OF HIERARCHY

The use of markets to solve policy problems has attracted considerable
academic attention. We have already argued in Chapter 4 that, even in
Western liberal democracies, hierarchical economic control remains signif-

icant, although it is diminished in some areas of the economy. In the case
of deregulation, the elimination of rules in some industries has occurred
at the same time as new regulations have been introduced relating to
airport security, genetic research, data privacy, smoking, advertising and
the use of mobile phones. In the United States, the spiritual home of
the deregulation movement, a number of states have recently introduced
regulations requiring people to pass a written examination and acquire
a formal licence before advertising their services as an interior designer
(Economist, 27 October 2007). Globally, important resources are still placed
beyond the reach of price-based markets. Most countries prevent pay-
ments for surrogate-pregnancy arrangements. With the exception of Iran –
which created a highly regulated market in the sale of kidneys for trans-
plant purposes in 2006 – governments have sought to prevent decisions
about organ donation being influenced by price.2 Finally, we pointed in
Chapter 2 to studies that emphasise the limits of globalisation and the
continuing significance of national economies.
In regard to the contracting-out of services, the OECD (2005b, 134)
observes that almost every developed economy has now outsourced routine
support services such as cleaning, facilities management and security. At
the same time, it notes that only a handful of countries have outsourced
core state activities such as the provision of emergency services, policy
advice, and audit and inspection. Even the contracting-out of basic ser-
vices remains inconsistent. One study in the United States found that the
majority of bus services and libraries continue to be provided directly by
local government (Lundsgaard, 2002, 112). PPPs are flourishing in the
United Kingdom but still fund only about one-tenth of capital investment
projects (for a general discussion of the limits of such partnerships see
Bloomfield, 2006). Outside the United Kingdom, internal markets and
PPPs have been used sparingly (OECD, 2005a, 140). Finally, while car-
bon markets have been established in the European Union and California
and are set to be introduced in Australia in 2010, a number of studies
have confirmed that market-based solutions to environmental problems
remain the exception rather than the rule (Wurzel et al., 2003; Rittberger
& Richardson, 2003; Jordan et al., 2005). Also, after examining the case of
water markets in Australia, Bell and Quiggin (2008) found a range of lim-
itations in the use of market instruments, particularly related to difficulties
in establishing property rights, high market transaction costs, and severe
deficiencies in the capacity of market instruments to achieve environmental
goals.
T H E M E TA G O V E R N A N C E O F M A R K E T S :
MARKETS THROUGH HIERARCHY
In both political and academic discourse it is conventional to draw a sharp
distinction between public and private and between markets and hierarchy.
This, however, takes for granted the elaborate institutional infrastructure
that underpins the effective functioning of markets. Markets are based
on systems of state-enforced property rights that define ownership rights
and the appropriate use of resources. The exchange of goods and services
requires the continuing presence of, for example, courts, police forces,
competition and fair trading authorities and contract law, along with edu-
cation, health and welfare policies to provide an adequate and trained
workforce (North, 1990; Fligstein, 1996; 2001; Evans & Rauch, 1999). In
other words, as Karl Polanyi (1957, 139) observed, there is ‘nothing natural
about laissez-faire’. Graham Wilson (1990, 4) makes the same point:
It is the state which, by laws, establishes ‘the market’ whose existence is

sometimes treated as if it were an act of nature. Markets require a vast insti-
tutional underpinning. Without courts to interpret and enforce agreements,
for example, commercial life would become chaotic. Without laws to define,
and police to enforce them, property rights would be non-existent. The
modern corporation itself – the limited liability joint stock corporation –
is, in historical terms, a comparatively modern creation of the state.
Market systems also rely on institutions to ensure fair and transparent

market competition. The private sector and the wider society also play
important roles in supporting markets. As Adam Smith and other founders
of market theory have pointed out, markets rely on a moral underlay of
trust which is crucial in ensuring the fulfilment of contracts (Hirsch, 1978).
Where these institutional conditions do not exist, attempts to introduce
governance through markets often fail. In Russia, for example, the transi-
tion to a market-based economy through privatisation and the withdrawal
of state subsidies has been compromised by the absence of stable prop-
erty rights and an independent judiciary. According to Andrei Sharonov,
a former adviser in the Economics Ministry, the absence of any legally
enforced property rights shows that ‘we have turned our back on healthy
competition. The system rewards those who are closer to the centre of
power, not those who work better. It is easier to get a competitor into a jail
than to compete with him’ (quoted in Economist, 28 February 2008). The
NGO Transparency International has recently ranked Russia as one of the
30 most corrupt countries in the world.
In order to govern through markets, governments must first create those

markets through the exercise of a hierarchical authority. The construction
of global financial markets, for example, required governments to devise
and enforce regulations relating to insider trading, standard accountancy
practices, banking standards, and the disclosure of business information in
order to ensure shareholder confidence. Hence the central paradox that ‘the
development of financial markets and the increasing prevalence and import
of market relations, so often linked to the diminution of state power and
authority, have been accompanied by a substantial and ongoing expansion
of law and prescriptive regulation’ (Cioffi, 2006, 186).
Governments thus retain responsibility for the metagovernance of the
markets they create. This requires ongoing steering and resourcing, as well
as the monitoring of effectiveness and the provision of accountability and
legitimacy. Privatisation may have created freer markets, but it has also
led to more regulations (Vogel, 1996). Where privatisations have occurred,
‘hierarchical safeguarding’ has been introduced to protect public values
such as universal services and affordability (De Bruijn & Dicke, 2006; see
also Heritier, 2002b). In Belgium, for example, the public value of social
inclusion has been translated into an obligation on privatised electric-
ity providers to maintain uniform price structures. Eiji Kawabata (2001)
shows how the privatisation of the Nippon Telegraph Company (NTT)
in the 1980s actually enhanced the authority of the Ministry of Posts
and Telecommunications. In return for acquiescing in the sale of NTT,
the ministry received exclusive jurisdiction and the coercive authority to
require firms to make their infrastructure available to rivals, veto the entry
of firms it believed would be unable to effectively compete with NTT,
and approve proposed price changes. Where services are contracted out,
governments, as well as providing the funds, decide which services to out-
source, the criteria by which bids are judged, and the final terms of any
contract. Governments also retain responsibility for monitoring perfor-
mance and applying sanctions where performance is judged unsatisfactory.
Trevor Brown and Matthew Potoski (2004) show that in the case of a
simple contract to manage refuse collection in Ohio, public service man-
agers continuously intervened to stimulate competition and sanction errant
firms.
In the case of more complex contract arrangements, the metagovernance
of governance arrangements is ongoing. Chapter 3 briefly examined the
contracting of private firms and voluntary organisations to provide training
and employment services for Australia’s Job Network. The contractual
authority of these organisations to assess a client’s willingness to work
and to withhold welfare payments seems to give significant discretion in

decision-making to NGOs. Yet contractors, whether from the private or
voluntary sectors, are expected to adhere to detailed regulations set by the
Department of Employment and Workplace Relations. As Mark Considine
(2003, 75) affirms:
the quasi-market is controlled by a government department that is the

monopoly purchaser of services. This gives senior bureaucrats enormous
power to steer this market from behind the safe walls built upon the
commercial-in-confidence tender process, and the contracts then written
leave the agencies with little room to manoeuvre.
Considine raises an important point. Studies of contracting often express

the fear that it renders governments vulnerable to ‘hold-ups’. These occur
when a firm that has obtained a contract acquires, over time, knowledge and
‘transaction-specific investments’ that prevent other firms from mounting a
credible bid against it in the future. Hold-ups obviously make governments
vulnerable to predatory pricing and poor performance (Williamson, 1985;
Klein, 1996). Such fears are not without foundation. The UK tax collection
agency, the Inland Revenue, spent £9 million paying suppliers to bid against
its incumbent IT supplier, the American-owned Electronic Data Systems
(Lonsdale, 2005, 225). Yet if governments must sometimes confront a
monopoly seller, it is worth emphasising that private firms must always sell
their services to a limited number of local and central government organ-
isations and that they also make transaction-specific investments in these
contracts. Martin Sellers (2003, 608) argues that this level of dependence
has, over time, led to a process of ‘publicisation’:
private companies become more like public agencies because competition

for contracts is keen and they must be perceived by the contracting agent,
government, as being agreeable with the government’s demands in order
to be contracted with again . . . government makes suggestions, sets require-
ments, and provides recommendations which, over time, cause the private
companies to look more and more like government agencies.
Hierarchical metagovernance is also a salient feature of government-

created external markets. The world’s largest carbon market, the European
Union’s Emission Trading Scheme (ETS), was launched in January 2005.
Under the rules of the agreement, large emitters of carbon dioxide –
currently around 12 000 installations accounting for about 40 per cent
of total emissions – must match their emissions to an annual allowance

they are given each year. Firms that wish to emit more pollution must
purchase other firms’ allowances (Watanabe & Robinson, 2005; Soleille,
2006). At first glance, emissions trading represents a significant loss of
regulatory control because governments cannot fix the amount of carbon
to be emitted by any one country, let alone firm. Yet governments, acting
collectively, play a crucial metagoverning role in steering this market by
setting overall limits on carbon emissions and by facilitating and policing
subsequent exchanges.
The capacity of national governments to manage the ETS is clear when
the limitations of the policy itself are considered. Expectations that it would
lead to a significant reduction in carbon emissions have, so far, been dashed.
This is because national governments have awarded carbon allowances
to firms which, cumulatively, often exceed existing emissions levels. In
April 2006 pollution allowances were trading at around €30 per tonne of
carbon dioxide. In 2007, after it became clear that national governments
had issued so many allowances, the price fell to €0.05. Promising to
play a leading role in combating global climate change, European leaders
subsequently promised to issue fewer allowances in iterations of the market.
Yet at a summit held in March 2008 national leaders agreed to offer
special protection to energy-intensive industries exposed to international
competition. On current evidence it is difficult to judge the ETS a success.
This is not because of a lack of state capacity. The market has failed because
governments have, for current political reasons, chosen to structure the
market in such a way that total emissions are unlikely to fall.
POLICY LEARNING AND

M E TA G O V E R N A N C E
We do not wish to appear too sanguine about the possible consequences of
marketisation. Privatisation and contracting-out can, if managed ineffec-
tively, lead to a haemorrhage of state capacity. Governments usually retain
the resources and incentives necessary to metagovern markets effectively
but, as Chapter 3 acknowledged, failures of metagovernance do occur. We
will describe two examples of costly failures: the contracting-out of chil-
dren’s residential home care in the United Kingdom and the contracting-
out of military support services to Blackwater USA in Iraq. These failures
reflected, in the first case, poor strategic planning and, in the second, an
absence of political will. However, they do not show that contracting-out
inevitably leads to baleful consequences and a loss of state capacity. Indeed,
the interesting point in these cases is the evidence that governments have
learnt from their mistakes and reasserted control.
In the late 1980s local authorities in the United Kingdom started to pay
privately owned firms to house vulnerable children in their care. In a careful
review of this policy Ian Kirkpatrick, Martin Kitchener and Richard Whipp
(2001) show that the creation of this market had some unfortunate results.
Large numbers of children were moved into homes located outside the
boundaries of their local authority, making it harder for social workers to
monitor their progress and standards of care. Some children with specialist
needs were ‘warehoused’ in unsuitable accommodation, and authorities
awarded expensive contracts to private firms without soliciting alternative
bids or linking payments to performance. One manager is quoted as saying
that their local authority was ‘getting stung, left, right and centre’ because
‘social workers who are not very good at negotiating on money’ were left
to write contracts (p. 60). Another suggests that the failure to seek out
alternative sources of supply meant that ‘most of the local authorities have
behaved as if they are hostages to fortune and the providers have set their
fee levels and said take it or leave it’ (p. 57).
Although generally critical of the performance of the market in children’s
care, the authors show how, over time, some of the authorities involved
learnt to metagovern. One local authority established a Children’s Con-
tract Unit to negotiate with and monitor the performance of private firms.
Another offered formal training to social workers on negotiating and writ-
ing contracts. Working through the Association of the Directors of Social
Services, others developed a register of approved suppliers. Others replaced
short-term contracts with long-term ‘relational’ contracts with firms that
had already established a reputation for providing a high-quality service.
We have already noted that nations – most prominently the United
States – in recent years have contracted-out a range of military support
functions (Avant, 2005). It has been estimated that during the occupation
of Iraq private contractors working for the US military there outnumbered
US Army personnel (Los Angeles Times, 16 October 2007). In 2004 one
private firm, Aegis, was even awarded a contract to coordinate and oversee
the activities of all the other private contractors working in Iraq (Scahill,
2007, 158–9). However, it was Blackwater USA (renamed Xe in Febru-
rary 2009) that captured the public’s attention. In 1997 Blackwater was
established by a former Special Forces soldier, Erik Prince, whose stated
ambition was ‘to do for the national security apparatus what FedEx did
to the postal service’ (Scahill, 2007, xix). In 2003 the State Department
awarded a contract to Blackwater to guard diplomats and the US embassy
in Baghdad. Blackwater obtained several other lucrative contracts and by

2005 had more than 1000 employees working in Iraq. In 2006 a Black-
water vehicle crashed into a US Army Humvee in Baghdad. Enraged by
the incident, the Blackwater employees disarmed the soldiers and held
them at gunpoint. In December 2006 an off-duty and apparently drunk
Blackwater employee shot and killed a member of the Iraqi vice-president’s
security detail. In September 2007 Blackwater contractors escorting a sup-
ply convoy shot and killed 17 Iraqi civilians in what a large number of
witnesses described as an entirely unprovoked attack. In total, data col-
lected by the State Department shows that between 2005 and September
2007 Blackwater employees were involved in 163 incidents in which they
shot at someone before they had been shot at.
These incidents raised important questions about the accountability of
Blackwater’s employees and the legitimacy of its operations in a war zone.
Soldiers serving in Iraq are individually responsible for their actions and
can, in theory if not always in practice, be tried through military courts.
Those working for private firms appeared to operate outside the law. Not
one contractor was investigated by the military or the police or other civil
authorities between 2003 and 2007. Indeed Blackwater and other private
security firms led ‘a lobbying effort . . . to try to block congressional or
Pentagon efforts to bring their companies and employees under the same
justice code as active-duty soldiers’ (Minneapolis Star Tribune, 23 May
2004).
In considering the relationship between marketisation and state capacity
it should be emphasised that Blackwater employees were not called to
account for their actions because the Pentagon and the State Department
chose to allow them to remain unaccountable. Under an order signed by the
head of the Coalition Provisional Authority, Paul Bremer, two days before
the establishment of the new sovereign Iraqi government, US contractors
working in Iraq were exempted from Iraqi laws. In Congressional hearings
the Democratic chairman of the House Oversight and Government Reform
Committee, Henry Waxman, suggested that US authorities went on to
become Blackwater’s ‘enabler’ in Iraq. The State Department had arranged
an immediate flight home for the contractor accused of shooting the vice-
president’s bodyguard, thus preventing a thorough Iraqi investigation of
the incident (New York Times, 3 October 2007). The failure to metagovern
Blackwater and other private security firms was not an oversight: it was a
deliberate political strategy.
Yet the Blackwater debacle shows that governments can, if they wish,
reassert control over private firms. When news broke of the shooting of
the 17 civilians, the Iraqi government announced that it would prosecute

anyone who it believed had broken Iraqi law and threatened to revoke the
operating licence not only of Blackwater but of all the other private security
firms in Iraq. In response, the US government described the September
shootings as a potential crime and dispatched the FBI to investigate them.
A few days later the State Department official responsible for monitoring
the activities of private contractors in Iraq was sacked. New rules were
introduced requiring a representative of the State Department to accom-
pany convoys operated or protected by Blackwater, and Blackwater itself
to install video camera equipment in all its vehicles and keep a record
of all communications. Finally, in October 2007, the Congress passed a
bill, with the overwhelming support of both Democrats and Republicans,
making all private contractors working in Iraq subject to prosecution by
US courts.
R E L AT I O N A L C A PA C I T Y
Chapter 1 explained that governments, in establishing and operating gov-
ernance strategies, develop strategic relationships or partnerships with a
range of non-state actors. Governments choose to work with private firms
and other actors in market-based governance arrangements because they
believe that, by doing so, they can enhance their capacity to achieve certain
policy goals. Up to now we have emphasised the extent to which states
retain control over markets. Here we point out that, even in situations
where governments have largely forsworn such hierarchical controls, the
use of markets can enhance state capacity.
A good example is the role played in the global economy by a hand-
ful of credit rating agencies like Moody’s and Standard & Poor’s. These
firms issue judgments on the creditworthiness of borrowers. Such is the
significance attached to these that it is almost impossible for a firm or
sovereign government entering the bond market to borrow money without
first obtaining a credit rating. The rating agencies argue that they have
acquired such a dominant position because they have established a record
for reliable advice. Critics suggest that their dominance is due to govern-
ment regulations requiring firms to possess a favourable credit rating from
one of a list of credit agencies approved by the US Securities and Exchange
Commission.
Several rules require firms to obtain a credit rating. First, regulations
designed to protect the long-term interests of investors in pension funds
prohibit pension fund managers from investing in a company unless it has
the highest possible credit rating. Second, regulatory provisions relating

to the disclosure of financial information have been tied to credit ratings:
firms that have been judged as a low financial risk are not required to
disclose as much information to the market. Third, finance ministers and
central bankers operating through the G10 group of countries have, in
part, founded global regulatory requirements for banking on credit ratings.
Banks that are not in a position to undertake internal credit assessments of
sufficient sophistication to comply with the Basle II Accords can instead
calculate their capital reserve requirements using ratings issued by credit
agencies. As Christopher Bruner and Rawi Abdelal (2005, 193) comment,
the ‘private authority of the rating agencies is not so private after all.
Governments have both valorised and codified their authority.’
The authority delegated to credit rating agencies has led to a concern
that a small number of exclusively US firms have been left ‘wielding de
facto government power . . . a market-based authority that is almost as
centralised as the state itself’ (Bruner & Abdelal, 2005, 207). Dieter Kerwer
(2005, 464) suggests that credit rating agencies have been turned into
‘quasi-public regulators’ and that this raises important questions about
their accountability and legitimacy. The argument about accountability is
straightforward. Credit rating agencies can be hauled before Congressional
committees to answer questions about how they operate. But under the
terms of the first amendment to the US Constitution protecting free speech,
they are not legally accountable for the judgments they issue so long as they
are made in good faith. What legitimacy do these firms have in the absence
of such an accountability mechanism? The agencies claim that they have
the output legitimacy which comes from a generally successful record, but
this record is controversial. Poor judgments made by the agencies have been
implicated in the 1997 Asian financial crisis, the 2000 dot-com crash, the
failure of Enron and Worldcom in 2001, and the global financial crisis that
began in 2008. In the latter case, agencies have been widely castigated for
issuing the highest possible credit ratings to banks trading in sub-prime
debt which were subsequently shown to be insolvent. Sceptics point to a
conflict of interest because the rating agencies have an incentive to compete
for business by giving the firms who pay their bills a higher rating. Critics
also argue that the agencies lack legitimacy because their judgments about
creditworthiness overemphasise fiscal orthodoxy and the presence of weak
labour unions (Kerwer, 2002).
Yet in assessing the relationship between the credit rating agencies
and governments, it should be remembered that the US government has
chosen to foster closer relations with the agencies. From the government’s
perspective there are good reasons to tie business regulations to credit-
worthiness. Light-touch regulation for firms demonstrating a strong credit
position allows regulators to focus on more risky firms. Preventing pension
funds from making high-risk investments may save the state from meeting
the costs of more people’s retirements. Governments could, if they wanted,
reach their own judgments about the creditworthiness of firms.
For the US government there are advantages in using the judgments
reached by private firms. In the first place, they are less costly. Credit ratings
are available free of charge to market participants: the firm seeking a rating
must pay for that service. Governments would have to devote considerable
resources to devising their own ratings. Second, it is less politically risky to
rely upon private firms. A government which classified as creditworthy a
firm that subsequently went bankrupt would be accused of incompetence
and held liable by voters and taxpayers for the losses incurred. By relying
on the judgments reached by private firms, the US government has a
ready-made scapegoat. As Bruner and Abdelal (2005, 209) wryly observe:
When Enron collapsed with no warning from the rating agencies, capping
a series of perceived failures including several global financial crises in the
1990s, Congress and the SEC could call hearings, investigate, and berate
the agencies, querying whether ratings-dependent regulation makes sense
in the future, without digging too deeply into whether incorporating them
in the past was simply a bad decision.
The US government has in some ways enhanced its capacity by devel-

oping close relations with credit rating agencies. But there are also losers
in this market. Given the effective duopoly maintained by Moody’s and
Standard & Poor’s, European and Asian governments have no alternative
but deal with agencies whose political views they do not always share. The
relationship between the US government and the rating agencies has thus
far been mutually supportive, although the severity of the 2008 credit crisis
is likely to lead to further strains.
GOVERNANCE THROUGH BUSINESS?

At the beginning of this chapter we distinguished two strands in the dis-
cussion about marketisation and state capacity. We have looked at the
argument that states have lost control of the markets they have created.
Now we look at the argument that marketisation has resulted in the sur-
render of significant powers to private businesses operating independently
of government control. As we have said, we are generally sceptical about
viewing the relationship between the state and hierarchy on the one hand
and markets on the other in zero-sum terms. We also doubt that markets –
or major players within them, such as business interests – have replaced
hierarchy as a key mode of governance. This section argues that the rela-
tionship between governments and business can be usefully understood
from a state-centric relational perspective. States shape the environment in
which business operates. States sometimes constrain and discipline business
interests for wider purposes. But generally the state–business relationship
should be understood as a productive, positive-sum relationship.
Businesses – whether small local businesses or giant transnationals –
make decisions that affect the lives of millions of people. These decisions
fall within the scope of governance because they contribute to the provision
of such collectively valued goals as full employment, economic growth,
sustainable development and rising wages. We cannot draw a line and
say that governance has nothing to do with the activities of private firms.
Neither can governments afford to ride roughshod over the interests of
business, especially if this threatens a widespread loss of confidence or a
substantial slowdown in private investment. In capitalist systems, in which
investment decisions are primarily taken by private firms, governments
are structurally dependent upon businesses for private investment and
economic growth (Lindblom, 1977; Przeworski, 1985; Bell & Wanna,
1992).
Whether acting collectively or individually, businesses are often in a
strong bargaining position when lobbying government. Chapter 2 noted
that the American health insurance industry was widely blamed for derail-
ing Hillary Clinton’s proposals for health reform. This chapter has shown
that private security firms sought to secure a favourable legal environ-
ment for their activities in Iraq. The examples of businesses using political
processes for their own ends are legion. ExxonMobil was instrumental in
persuading the US government to allow further oil exploration in Alaska.
The defence firm BAE Systems was heavily implicated in the UK govern-
ment’s decision to terminate a police inquiry into the alleged payment of
bribes to Saudi officials. The scandal over food-for-oil sanctions in Iraq
revealed that the Australian Department of Foreign Affairs and Trade and
the Wheat Export Authority had sought to maximise the export revenue
of the privately owned Australian Wheat Board at the expense of fulfilling
their regulatory duties (Bartos, 2006).
Examining governance through associations Chapter 8 looks more

closely at the interactions between business associations and governments.
Here we identify a number of reasons why the authority of business is
limited. Chapter 1 explained that states possess key resources including
legitimacy and a monopoly on the use of violence, so they cannot simply
be rolled into submission by business. It is clear, though, that business pos-
sesses some preference-shaping power. Firms can persuade governments of
the virtues of acting in certain ways and can seek to persuade consumers of
the legitimacy of their behaviour. They can also help set government and
media agendas. David Coen (1997) argues that business groups pressed
for the creation of a European Single Market. Yet business lacks coercive
power: the ability to impose its decisions against opposition. Sovereign gov-
ernments can and have forced businesses to pay minimum wages, recognise
trade unions, accept the welfare state, reduce pollution and pay taxes on
windfall profits. Businesses can and do bargain and negotiate with govern-
ments, but they cannot force them to behave in certain ways.
Businesses may sometimes be more lucky than powerful. Here, power
means being successful despite opposition, whereas luck means getting
what you want without trying (Barry, 1989). Businesses sometimes get
what they want because government also wants what they want: a classic
positive-sum outcome. As we have seen, this is the case with credit rating
agencies, which have been gifted a dominant market position because it is
in the interest of government to require firms to gain a credit rating from
an approved agency. Another example is the issue of nuclear power, which
we touched on in Chapter 3. In recent years the governments of the United
States, the United Kingdom, South Korea, Japan and China have commit-
ted themselves to expand the use of nuclear power. Some environmental
critics have sought to account for this decision in terms of the power of
large nuclear firms like EDF Energy. Yet we might alternatively describe
these firms as the lucky beneficiaries of government’s determination to
be seen to be addressing problems of energy security and climate change
without creating state-owned nuclear companies.
In capitalist systems governments rely on private firms to invest and
spur the economy. Globalisation is argued to have given transnational
firms an additional lever on national governments by making the threat to
exit a national economy more plausible. However, Chapter 2 showed that
the key determinants of investment decisions are market access, a skilled
workforce, and other publicly provided infrastructure. Globalisation has
not resulted in a qualitative shift in the power of business. Furthermore,
as we have emphasised, states retain responsibility for the metagovernance
of markets. Governments not only operate under established governance

rules: they play a major role in choosing governance rules. Where a gov-
ernment believes that marketisation has resulted in a loss of effectiveness,
accountability or legitimacy, it can assert hierarchical control. In 2001 sev-
eral large American companies, including, most famously, Enron, collapsed
shortly after revealing massive and previously undisclosed debts. One year
later, Congress passed and the President approved a new law prohibiting
audit firms from engaging in a variety of non-audit consultancy work,
and requiring firms to protect whistleblowers and to establish genuinely
independent audit boards with a legal responsibility to disclose any ‘mate-
rial weakness’ in a company’s internal control structures. These measures
proved hugely controversial; many companies threatened to move overseas
because of the increased cost of doing business in America. One study
published by the right-wing American Enterprise Institute describes the
legislation as a ‘colossal failure, poorly conceived and hastily enacted dur-
ing a regulatory panic’ (quoted, Economist, 20 April 2006). Yet the survival
of the law in the face of sustained business opposition ought to encour-
age scepticism about the ability of business or any other organisations to
operate independently of national governments. In Rupert’s Adventures in
China, Bruce Dover (2008) provides an entertaining account of the limits
of one transnational firm: Rupert Murdoch’s News Corporation. Murdoch
first tried to gain access to the Chinese market in 1993 with the purchase
of Hong Kong’s STAR TV. Murdoch saw the potential for a positive-sum
relationship between the Chinese government and his company. He stood
to gain access to the world’s largest domestic market; in return the Chinese
sought more ‘objective’ and ‘balanced’ coverage of China in the Western
media. In 2001 a deal was struck: STAR TV programs were carried on a
cable network in the Guangdong region, and in return Murdoch agreed to
show the Chinese government’s new 24-hour rolling news service, CCTV9,
on his Fox cable network in the United States at no cost. The bargain was
an unequal one. STAR TV broadcast programs in Mandarin, but most
people in Guangdong speak Cantonese. Despite spending hundreds of
millions of dollars on programming, STAR TV remained in a financially
precarious position. Murdoch had been forced into the deal because the
Chinese government had the coercive power to ban satellite dishes, pro-
hibit joint ventures between overseas firms and local media companies, and
censor programs. In the long term Murdoch hoped that he would secure
access to more of the Chinese market. Following the appointment of a new
leadership cadre in Beijing, News International hit, in Murdoch’s words, a
‘brick wall’ in 2005. The government, fearing ‘cultural pollution’, affirmed

its ban on satellite dishes and prohibited the further involvement of any
foreign media company in China.
Nor have governments in Western democracies hesitated to take the
kid gloves off and exert forceful authority over powerful business inter-
ests. Aggressive industry restructuring in the United Kingdom under the
Thatcher government, for example, roused a hostile response from indus-
try, with the leader of the Confederation of British Industry at one point
promising a ‘bare-knuckle fight with the government’. The government,
however, prevailed in its plans for industry restructuring and marketisa-
tion. Similarly, in the United States in the 1930s, the Roosevelt adminis-
tration successfully introduced new labour laws and welfare state policies
that raised hostility from important business sectors (Skocpol, 1980; Block,
1980; Helleiner, 1994). In Australia as well, the Keating Labor government
turned on big business during the 1990s, claiming (largely erroneously)
that the peak business association, the Business Council of Australia, had
been ‘partisan’ during the 1993 federal election. Keating publicly attacked
CEOs, and ministers and senior bureaucrats were discouraged from active
engagement with the Business Council. As a former director commented:
the philosophy that informed government’s attitude was if business put its
head above the parapet then it’d be kicked in. And that had the effect of
causing many in the business leadership to actually retreat. They ultimately
had an obligation to their own shareholders not to expose the company to
retaliation at the political level . . . and they backed off [Bell 2008a, 564].
CONCLUSION
In Reinventing Government, David Osborne and Ted Gaebler (1992) argue
that governments can devolve responsibility for ‘rowing’ – delivering actual
services to citizens – without compromising their ability to ‘steer’ – to
raise resources and set priorities. Their book is written in the style of a
can-do business manual complete with inspiring examples; at times it is
quite galling. It has also been read as constituting an unqualified defence
of the application of neo-liberal economic principles to the government
sector (see Bevir, 2007, xxiii). Yet, while recognising that ‘privatisation is
one arrow in the government’s quiver’, Osborne and Gaebler (1992, 47)
are clear that those who ‘believe business is always superior to government
are selling the American people snake oil’.
Privatization is simply the wrong starting point for a discussion of the role
of government. Services can be contracted out or turned over to the public
sector. But governance cannot. We can privatize discrete steering functions,
but not the overall process of governance. If we did, we would have no
mechanism by which to make collective decisions, no way to set the rules
of the marketplace, no means to enforce rules of behaviour. [p. 47 emphasis
in original]
The choice is not between markets and hierarchies. Markets are suffused
with hierarchy. States not only create markets: they manage them. Privatisa-
tion, deregulation, contracting-out, PPPs and internal and external markets
all require ongoing hierarchical intervention. Markets are managed and, as
Michael Keating (2004, 6) argues, can be used to ‘assist in the achievement
of many of the state’s policy directions and goals’.
7 Governance through
community engagement
D ESPITE TRENDS TOWARDS fragmentation and greater indi-

vidualism in modern Western societies, there has been a growing interest in
a wide range of governance engagements or partnerships between govern-
ments, citizens and communities. These arrangements vary from relatively
inconsequential forms of public consultation to ambitious provisions for
joint decision-making.
There is nothing new in the principle of community engagement, but
this chapter describes precedents for apparently novel governance arrange-
ments. The scale and scope of engagement efforts have increased over the
last decade or more for several reasons.
r The development of the internet and the explosion in the ownership
of home computers has made it easier and cheaper for governments
to solicit citizens’ opinions. (On the possibilities of e-governance, see
Torres et al., 2006; Dunleavy et al., 2006; Budd & Harris, 2008.)
In 2006, when the UK prime minister’s office launched a website
(http://petitions.pm.gov.uk/) that allowed visitors to create or sign on-
line petitions, one petition, calling on the government to abandon pro-
posals to introduce a road-pricing scheme, attracted almost 2 million
signatures.
r At a normative level, democratic theorists have, in recent decades, cham-
pioned the virtues of deliberation and civic engagement over established
forms of representative democracy. It is now routinely argued that public
deliberation in which citizens reflect carefully on and debate the merits
of policies enhances the legitimacy of decisions (Barber, 1984; Elster,
1998; Dryzek, 2000; Besson & Marti, 2006).
r Civic engagement and the fostering of ‘active citizens’ are key policy prin-
ciples of the ‘communitarian’ (Etzioni, 1995) and ‘third way’ (Giddens,
137
1998) philosophies that proved attractive to a number of centre-left gov-

ernments in the 1990s. They are argued to lead to healthier and more
prosperous societies, where rights are balanced with responsibilities.
r Perhaps most significantly, governments have learnt that community
engagement can enhance their capacity to formulate and implement
policies. Governments have sought to engage more thoroughly with
citizens in order to inform themselves of potential discontent; to enhance
the legitimacy of decisions and ease implementation; to broaden the
base of responsibility for policy and thus help shield government from
blame; and to incorporate wider inputs or participation in government
decision-making (Irvin & Stansbury, 2004). The evidence is that citizens
are more likely to conclude that policies are fair if they have been given
the opportunity to participate in their formulation (Keating, 2004, 159).
In promoting community engagement, governments have recognised –
or have at least said that they recognise – that there are occasions when
hierarchical governance unleavened by community engagement can be
counterproductive. Community engagement is regarded as an antidote
to a declining state legitimacy which manifests itself in growing mistrust
of politicians and falling rates of political participation.
r Finally, governance through community engagement is sustained by
a growing conviction that centralised forms of expert knowledge can
be inappropriate or unreliable and that forms of knowledge garnered
through dialogue and engagement with citizens or communities should
be valued (Bell, 2004b).
This chapter explores the role of citizens and communities as partners
in governance in national and local settings. We defer analysis of interna-
tional governance until the next chapter, mainly because such activism is
generally conducted through internationally based activist associations and
NGOs rather than directly through citizens or communities. We start by
distinguishing among the many different forms of community engagement
and offer examples of particular governance arrangements. Advocates of
community engagement argue that the state should share its power and
resources and devolve governance functions to citizens and communities.
In accordance with our broader state-centred relational approach to gover-
nance, we stress that governance processes involve a range of state–society
links, but that the role of the state remains of central importance.
While recognising that there have been many useful experiments and
initiatives, we emphasise the limitations of community engagement as a
mode of governance. Three critical issues shape and potentially impede
governance via community engagement. There are questions about:
GOVERNANCE THROUGH COMMUNITIES 139
r the willingness and capacity of citizens and communities to participate

in such arrangements, especially on a sustained basis
r who exactly is being engaged, and how representative and legitimate
such engagements are
r government motives and capacities, especially in relation to power shar-
ing.
CITIZEN AND COMMUNITY

ENGAGEMENT
Community engagement can be defined as ‘the process of working col-
laboratively with and through groups of people affiliated by geographical
proximity, special interest, or similar situations to address issues that affect
them’ (Lowe & Hill, 2005, 170). Community engagement can sometimes
devolve responsibility for both the formulation and the implementation of
policy to communities and, on this basis, has been celebrated as constitut-
ing an alternative to markets, hierarchies and pressure-group politics. Yet
it is clear that the term community engagement can describe a variety of
different arrangements.
Table 7.1 draws on work by the International Association for Pub-
lic Participation (2005; see also Arnstein, 1969; Bishop & Davis, 2002;
Head, 2007). It depicts a range of engagement alternatives distinguished
in terms of the amount of authority shared between government and citi-
zens. Towards one end of the spectrum is ‘empowerment’, which formally
incorporates public input; at the extreme it places final decision-making
authority in the hands of the public via community committees, citizens’
juries, ballots and referendums. Here the claims of community engage-
ment to constitute a distinct mode of governance are clearest. The other
end of the spectrum is the simple sharing of information. Towards the
middle are options such as ‘consultation and collaboration’, where the
government solicits the views and input of citizens and communities in a
spirit of partnership but reserves the right to take final policy decisions.
In formal consultation processes governments listen to and acknowledge
the public’s concerns and aspirations and provide feedback on the extent
to which their views influenced policy decisions. At its best, such con-
sultation becomes an ongoing dialogue involving mutual learning and
accommodation. At its worst, it is tokenistic and creates a sense of betrayal
when communities believe that their views have been ignored. ‘Stand-
ing’ involves innovations such as formal participation in forums of review
and decision. Examples include formal public engagement in processes
Table 7.1. Forms of public participation in governance
Form of Technique or
participation Goal Promise to the public instrument Limitations
Inform To provide the public with We will keep you Fact sheets Limited public input
balanced and objective informed. Web sites One-way communication
information to assist Open homes Passive communities
them in understanding
the problem, alternatives,
opportunities and/or
solutions.
Consult or To work or partner directly We will keep you Workshops Expensive and time-consuming for
collaborate with the public informed, listen to Deliberative polling complex issues
throughout the process to and acknowledge Surveys Communities feel betrayed if they
obtain feedback or input concerns and Dialogue sessions do not like the decision
and to ensure that public aspirations and Consensus forums Issue of who can speak or engage on
concerns and aspirations provide feedback on Advisory bodies behalf of the community
are consistently how (or how not) Public hearings Raises important questions about
understood public input or Focus groups community commitment and
and considered. advice influenced Public comment capacity
the decision. Power differentials, privileged
access, and bias towards
established community interests
Possibility of co-option
Legitimacy issues for those excluded
Involve To work with communities We will work with you Joint task forces Heavy demands on local activists,
in joint on the ground to help solve local Co-management of burnout
projects such as problems and assist resources Limited resources and inputs from
community development, with resources and Landcare groups government
environmental protection ideas Neighbourhood
Watch groups
Collaborate To allow third party We will ensure your Review courts and Only relevant to those issues that
involvement in formal right to legal tribunals come to formal reviews or court,
review processes standing in review Statutory processes legalistic
processes and for social and Expensive and time-consuming
acknowledge input environmental Bias towards well-funded interests
and detail our impact assessments
responses
Empower To devolve aspects of We will implement Devolved decisions to Costly, time-consuming
decision making to what you decide, formal community Raises legitimacy issues about
communities, parcel out although committees, representation
authority, or place final governments set the citizens’ juries, Possibility of co-option
decision-making in the parameters, parcels ballots and Capacity questions re local
hands of the public. of authority or referendums, communities
questions for e-democracy Potentially divisive
decision. Are votes/referendums the best way
to participation?
Source: Adapted from International Institute of Public Participation <http://iap2.org>.

such as environmental impact reviews (Glasson et al., 2005, 5–7). Such

forms of engagement can be effective but also time-consuming, expensive
and legalistic, requiring funding and specialised resources to operate effec-
tively. Finally, in ‘joint projects’ the government helps or provides resources
to community groups to implement policies. Examples include conserva-
tion groups or Neighbourhood Watch schemes performing tasks which, in
other instances, might have been undertaken by government.
We will look at some examples of these arrangements. A good example
of empowerment is the provision in nearly half of all the states in the
United States to hold a public referendum on policy propositions which,
through a petition, have attracted the support of a minimum number of
citizens. Referendums have a long history. The Swiss federal constitution
of 1891 permitted citizens to request a vote on constitutional provisions.
In California ballot propositions have, for some time, been a staple part
of the political process (Allswang, 2000). In 2004, 18 ballots were held
on topics as varied as stem cell research, the collection of DNA samples,
gambling, and additional taxation on personal incomes above $1 mil-
lion to fund mental health care. Provisions for citizens’ initiatives have
recently been included in the French constitution and the constitution
of the European Union. In 2004 British Columbia, Canada, created a
Citizens’ Assembly on Electoral Reform to explore options and make rec-
ommendations about a new electoral system. The assembly comprised 160
randomly selected citizens who were charged with receiving submissions,
consulting with interested parties and experts, and discussing available
options. In assessing the impact of the Assembly’s efforts, Bob Goodin
and John Dryzek (2006, 225) observe that British Columbia’s legislature
gave a commitment to put any recommendations to a formal referendum:
‘the macro-political uptake of this mini-public’s recommendation was hard
wired’.
Danish consensus conferences are a good example of collabora-
tion. Consensus conferences – which have subsequently been employed
in Israel, the United States, Spain, Japan, Australia, Switzerland and
New Zealand (http://www.loka.org/TrackingConsensus.html) – deal with
techno-scientific topics of interest to the public whose character is uncer-
tain, contested or controversial (Fixdal, 1997, 370). The Danish Board
of Technology has organised consensus conferences on genetically mod-
ified food, gene therapy, electronic identity cards, food irradiation, fish-
ing, road pricing and electronic surveillance. The conference consists of a
broadly representative Citizen Panel of about 15 lay people and a Planning
Committee of eight or so experts. Introductory material, often written
by a science journalist, is reviewed by the Planning Committee and then

distributed to the Citizen Panel. At the conference, experts answer ques-
tions in public sessions before the Citizen Panel submits a final report and
recommendations to the government and parliament (Blok, 2007, 167;
Bruun, 2005). Consensus conferences are a significant form of engage-
ment, yet the government retains considerable power: it sets the agenda by
deciding which issues to take to a conference, and it decides whether to
accept the conference’s recommendations.
The Pacific Northwest of the United States provides an example of
a joint management arrangement in which about 20 Native American
tribes co-manage the salmon fisheries with state and federal agencies. This
arrangement grew out of a history of debilitating conflict between the
relevant parties, who were finally forced to cooperate under court orders.
The co-management arrangements have encouraged parties to cooperate to
analyse and assess biological data and pursue initiatives to improve habitat
and construct fish hatcheries. In what Sara Singleton (2000, 13) describes
as a ‘striking transformation’, disputes between the parties now rarely go
to adjudication by third parties or the courts.
Landcare projects in Australia provide an alternative example of a joint
arrangement: the federal government has devolved partial responsibility
for environmental restoration and conservation projects to more than
4000 community-based Landcare groups (Curtis & Lockwood, 2000).
Another system of natural resource governance in Australia is the array
of community-based regional bodies that co-manage regional projects and
challenges with government, from bio-diversity and habitat protection to
water quality and soil conservation (Head & Ryan, 2004).
Archon Fung and Erik Olin Wright (2003) bring together a range of
fascinating examples in which communities have provided various inputs
to policy-making, including joint decision-making, in areas as diverse as
local public schooling policy in Chicago, worker training in Wisconsin,
species protection and conservation policy in the United States, participa-
tory local budgeting in Brazil, and local village empowerment in Kerala,
India. In the case of species protection and conservation policy in the
United States, a former state of conflict and gridlock between developers
and conservationists over the protection of endangered species threatened
by development projects has been ameliorated through the formation of
local stakeholder management committees. Typically composed of gov-
ernment officials, developers, conservationists and local groups, they are
charged with formulating Habitat Conservation Plans to balance develop-
ment interests with acceptable levels of species protection. After the local
committee has formulated a plan, it is submitted for approval (or not) by

higher authorities within the state (see also Thomas, 2003).
These examples demonstrate successful experiments in governance
through community engagement. We will now look at the features they
share. On a cautionary note we then consider the governance capacities of
citizens and communities before discussing the democratic legitimacy of
such governance arrangements.
T H E F O U N D AT I O N S O F C O M M U N I T Y
ENGAGEMENT
What are the common features that underpin successful citizen or com-
munity engagement? In a study of watershed management in the United
States, Thomas Koontz and Elizabeth Johnson (2004) found that success-
ful community engagement required the broad participation of the full
range of affected interests. Others have highlighted the importance of cit-
izen skills and knowledge (Kellogg, 1998); the need to engage the public
early in the decision-making process (Duram & Brown, 1998); careful
selection of community representatives; transparent decision-making; and
clear lines of authority (Irvin & Stansbury, 2004, 61). Singleton (2000, 4)
lists a number of ‘necessary conditions’ that must be in place to underpin
effective community engagement.
r Governments must exhibit a strong prior preference for collective action
and effective community engagement.
r Citizens must be given sufficient information and data in order to reach
a decision.
r The community must have the social and material capacity to overcome
collective-action problems.
Singleton notes that small or close-knit communities in which people have
existing social ties find themselves in a stronger position.
Along similar lines, Kenneth Kernaghan (1993, 62) has considered
genuine collaboration between community organisations and government.
Ideally, he says, it involves shared decision-making between parties; the
mutual acceptance of a certain loss of autonomy; and a shared contribution
of resources. He goes on to argue that collaborative forms of governance
are most likely to prove successful when all significant stakeholders are
involved; there is a mutual dependence between the partners and the
potential for positive-sum cooperation; and arrangements are sustained
through resource commitments and effective institutions.
In their review of the factors underpinning successful community

engagement, Fung and Wright (2003, 15–24) outline three ‘primary back-
ground conditions’.
r Engagements must cover specific areas of community concern, of suffi-
cient magnitude to help mobilise communities.
r There should be ‘involvement of ordinary people affected by these
problems and officials close to them’.
r There should be genuine deliberation between participants in the
sense that solutions are achieved through ongoing dialogue and
negotiation.
Ideally, the power asymmetries between those who actually engage in such
processes should not be too large because ‘individuals [who] cannot dom-
inate others to secure their first best preference are often more willing to
deliberate’ (Fung & Wright, 2003, 23).
Beyond these background conditions, Fung and Wright isolate three
‘institutional design features’ – metagovernance functions – common to
the cases they examined. The necessary features are:
r Clear lines of responsibility with some devolution of authority to
empowered local units charged with specific functions and responsi-
bilities. In other words, governments must devolve specific and clearly
articulated parcels of authority to local participants.
r Formal links between communities or local units and the state through
shared resources and information flows and clear lines of responsibility
and accountability (see also Singleton, 2000, 16).
r New state institutions designed to support and guide decentralised local
units.
The conditions identified by Fung and Wright suggest that effective
community engagement requires restructuring both of the state and of
the incentives of state officials. This is why they describe their exam-
ples of deliberative democracy as state-centric; ideally, such governance
arrangements are developed in intimate association with the state. Local
participatory bodies need to be carefully linked to the state, which performs
critical metagovernance functions: coordinating and distributing resources;
solving problems that local units cannot deal with; rectifying incompetent
decision-making in local units; diffusing learning and innovations across
boundaries; and helping to build more equal access and power balances
in local arenas to facilitate participation. Chapter 2 emphasised that the
state often finds itself in a strong position in networks because it occu-
pies a structurally ‘central’ position. If community engagement is to prove
effective, governments must empower others.
These factors are a challenging list of ingredients and criteria. Com-

munity involvement makes potentially heavy demands on local citizens. It
is also clear that the role of the state is central in successful institutional
designs. We will now explore the requirements for successful public engage-
ment in governance, starting with detailed questions about the governance
capacities of citizens and communities.
W I L L I N G A N D C A PA B L E C I T I Z E N S A N D
COMMUNITIES?
Those who proclaim the merits of community engagement as a mode of
governance sometimes assume an idealised vision of community, in which
communities or citizens are eager activists, relatively homogenised, rich in
social capital, well organised and led by capable leaders. But if we reverse
or substantially qualify these assumptions, does the idea of community
engagement look as potentially attractive?
One important issue relates to the willingness of citizens to engage in
governance processes. Chapter 5 showed that high levels of social capi-
tal – ‘those features of social organisation, such as networks, norms and
social trust that facilitate coordination and cooperation for mutual ben-
efit’ (Putnam, 1993, 67) – are an important prerequisite of governance
through persuasion. Governance through community engagement is also
more likely to prove effective when there are high levels of social capital and
a community is able and willing to engage in governance. Yet in the case
of the United States Robert Putnam (2000) has documented a precipitous
decline in levels of social capital since the 1960s as communities have been
buffeted by job mobility, social fragmentation, long working hours and the
dominance of home (rather than public) entertainment (see Chapter 5).
Theda Skocpol (1996) offers an account of such developments based on
changed processes of electoral and advocacy politics, which involve a shift
away from local activism and grassroots activities towards nationally organ-
ised, poll-driven, top-down forums. She also charts a shift in the focus of
civic elites and leaders, from local groups and participation to wider and
more professionally organised processes and the marginalisation of civil
elites and local leaders – upon whom processes of community engagement
often depend – by professional lobbyists and party apparatchiks. As she
argues:
privileged Americans remain active in think tanks, advocacy groups, and

trade and professional associations, jetting back and forth between man-
icured neighbourhoods and exotic retreats. Everyone else has been left to
work at two or three poorly paid jobs per family, coming home exhausted to
watch TV and answer phone calls from pollsters and telemarketers [Skocpol,
1996, 24].
Even in the United States many citizens still wish to be informed and
consulted and engage in governance activities. As we have emphasised,
individuals are not exclusively self-interested and sometimes work for the
public interest. Sidney Verba, Kay Schlozman and Henry Brady (1995)
estimate that up to 10 per cent of the American population is politically
active. This is a small proportion of the overall population but nevertheless
amounts to more than 25 million people engaged in governance activities.
On the other hand, one study of community responses to the local stock-
piling of chemical weapons in the United States found that, although many
expressed an interest in participation, only around one per cent of people
followed through on this interest by phoning for information about how
to become engaged (Williams et al., 2001). Looking at particular exam-
ples, Skocpol (1996) estimates that, in major civic associations such as the
American Association of Retired Persons, no more than 5–10 per cent of
members participate even in the most minimal ways in local affiliates or
clubs.
We have noted that the rapid loss in social capital that has occurred in
the United States seems not to have occurred in other countries. Yet there
is plenty of evidence of limited willingness to engage in political activities
elsewhere. In the late 1990s the UK government introduced a system
called Best Value to replace, or at least augment, the system of compulsory
competitive tendering in which local councils were required to contract-out
certain activities. Under Best Value, local councils are required to compare
their service provision with that found in other areas and consult with
business and the local community about the quality of service delivery
(Boyne, 2000). In reviewing the levels of community engagement councils
were able to elicit, Paul Foley and Steve Martin (2000, 486) sound a note
of caution:
Only a fifth of residents living in Best Value pilot areas stated that they
would like to have more of a say in the ways local services were run.
Moreover, most of those who wanted to be more involved favoured passive
forms of consultation such as postal surveys as opposed to more interactive
approaches such as public meetings and citizens’ juries.
Best Value consultations about service delivery are not, of course, the
most glamorous or ambitious of governance activities. Proponents of
community engagement might argue that limited exercises in consulta-

tion will not generate the same interest as genuine efforts to empower local
communities. Yet, although generally supportive of governance through
community engagement, Fung and Wright (2003, 37–8) recognise that
ignorance about local political issues, when combined with an underlying
sense of apathy and a predisposition to free-ride, can endanger effective
governance. For these reasons Graham Pearce and John Mawson (2003,
63) conclude that ‘devolved [governance] processes should not be too
ambitious’, while Renee Irvin and John Stansbury (2004, 58) indicate
that ‘where communities are complacent, there is a strong argument for
top-down administration, simply on grounds of efficiency’.
A second problem is that civil society associations and communities may
not have the organisational resources or capacities to engage effectively with
government. In a study of the capacity of community organisations to work
with government to deliver local housing services in the United States,
Patricia Fredericksen and Rosanne London (2000) found that only one of
the 18 organisations they studied could be described as well organised in
terms of its service delivery functions.
A third problem arises when engagement processes are dominated by
unrepresentative local elites who use engagement procedures to pursue their
own interests (Irvin & Stansbury, 2004; Abel & Stephan, 2000; Smith &
McDonough, 2001; Keating, 2004, 162; Halpin, 2006). As Fung and
Wright (2003, 33) comment, ‘perhaps the most serious potential weak-
ness of [community engagement] experiments is that they pay insufficient
attention to the fact the participants in these processes usually face each
other from unequal positions of power’. Because of inequalities of income,
gender, race or education, certain groups are able to mobilise and defend
their interests at the expense of others. As Foley and Martin (2000, 486)
reflect,
community aspirations are nowhere near as homogeneous as government

pronouncements frequently imply. Previous community-based initiatives
have repeatedly demonstrated that local people rarely speak with one voice
and their influence is not unambiguously positive. Communities can be
deeply fragmented and many local people support policies which would
exacerbate rather than combat social exclusion. Moreover, ‘community rep-
resentatives’ are often atypical precisely because, unlike most local people,
they are willing to become involved.
Encouraging local engagement while ensuring a basic level of equal-

ity in that engagement constitutes an important metagovernance function
for the state. Community activists do not simply spring de novo from
a voluntarist soil, but must be cultivated through public assistance. As
Brian Head (2007, 444) says, ‘The community sector (as with the busi-
ness sector) comprises a shifting range of unorganised, partially organised
and well organised stakeholders. Their capacity and interest in interaction
and engagement will vary widely.’ Accordingly, governments must con-
tinuously develop the capacities of weaker groups through programs that
provide training or resources to encourage people to recognise and defend
their mutual interests (Head, 2007; Keating, 2004; Wiseman, 2006). As
Michael Marinetto (2003b, 110) points out, ‘public authorities as the gate-
keepers to executive power and as holders of significant resources are crucial
to creating opportunities for active citizenship’. In one study, William Mal-
oney and colleagues (2000) showed that Birmingham City Council in the
United Kingdom achieved a tangible increase in the number and capacity of
community-based voluntary associations through targeted financial grants
and community development schemes. In other instances governments
have attempted to deal with another problem of community activism, the
burnout of activists. This has been a problem in the Landcare movement
in Australia and has prompted government agencies to offer assistance and
training to find and motivate new activists and leaders.
Citizens or groups may decline to be involved in formal governance
arrangements for fear of being co-opted by the state. Many environmental-
ists, for example, worry about this; the danger is that ‘incorporation’ into
consensus or deliberative forums might isolate group leaders from their
communities or limit alternative forms of political mobilisation (Doyle,
2000). Whelan and Lyons (2005) document a case in Queensland, Aus-
tralia, where conservation groups decided to boycott engagement that was
seen as potentially co-optive or unproductive. ‘By rejecting both hierarchi-
cal, centralised decision-making and the inadequate engagement practices
proposed by the state, activist groups mobilised community opinion and
action to bring about an historic win’ (Whelan & Lyons, 2005, 596).
A C C O U N TA B I L I T Y A N D L E G I T I M A C Y
Traditional systems of representative democracy require only limited
engagement of citizens through occasional elections. The Austrian
economist Joseph Schumpeter (1942, 269) defines such ‘competitive’ forms
of democracy as constituting an ‘arrangement for arriving at political deci-
sions in which individuals acquire the power to decide by means of a
competitive struggle for the people’s vote’. Schumpeter contrasts this mod-
ern, competitive notion of democracy with its ‘classical’ alternative, which
requires direct, community-based, decision-making. In Ancient Greece

major decisions were made by the Assembly, or Ecclesia, which met about
50 times a year, at which every (male) citizen was entitled to speak and
vote (Hansen, 1991).1 Schumpeter argues that in a world where millions of
people living in cities must confront technically complex issues there is no
alternative to the competitive model of democracy. John Mueller (1992)
also defends limited concepts of democracy because they do ‘not require
more from the human spirit than apathy, selfishness, common sense, and
arithmetic’.
The arguments for community engagement that have been developed
over the last few decades draw upon and seek to promote broad-based
‘participatory’ or ‘deliberative’ systems of democracy in which decisions
are taken directly by the people (see Goodin, 2003, 1–8). According to
Eva Sorensen and Jacob Torfing (2008b, 32–3), governance arrangements
involving such participatory schemes could potentially deal with several
‘problems’ encountered in representative democracies. They could enhance
a vertical balance of powers through the establishment of sub-elites and
governance networks; establish a link between top-down representative
democracy and bottom-up participatory democracy; serve as a medium
for enhancing political empowerment and mutual trust; widen the institu-
tional and discursive sphere of the political and thus enlarge the space for
political discussion and contestation; and improve governance efficiency
and ‘output legitimacy’ in processes of public governance.
We encountered the distinction between input and output legitimacy in
Chapter 2 (Scharpf, 1999). Input legitimacy may be strengthened where
decisions are taken by politicians who are elected to office. But community
engagement may lead to more output legitimacy if it results in better
decisions being taken. In a similar vein, Michael Keating (2004, 159) has
argued:
Currently, increased public participation is widely seen as the best way to

draw disaffected citizens back into the political mainstream and of overcom-
ing increasing perceptions of a ‘democratic deficit’. By involving citizens in
some way in the decision-making process, governments then hope to bridge
any ‘legitimation gap’. Indeed, a representative body that has sought and
considered the advice of constituents is on much stronger ethical ground,
even if they subsequently reject that advice, than representatives whose
judgment is formed without consultation.
Governance through community engagement requires a careful balanc-

ing of different modes of legitimacy. Where it is difficult to define the
boundaries of a community affected by a decision, and where engagement

processes are dominated by unrepresentative local elites, the state needs
to exercise its metagovernance responsibilities by continuously monitor-
ing, and perhaps curtailing, the authority devolved to local communities.
Grace Skogstad (2003, 968) offers a solution to this dilemma of achieving
a balance of the various forms of authority in society, from hierarchical
state authority to popular authority: underline the centrality of represen-
tative democracy and the legitimate authority of the state. As she argues,
popular authority, as manifested in community engagement strategies, can
only ever be a potentially useful complement to formal systems of repre-
sentative democracy. ‘Mechanisms of participatory democracy . . . that give
representatives of society formal or informal rights of participation can-
not substitute for state-centred governing because of their representational
inadequacies.’ Still, such participatory schemes can help to boost ‘input
legitimacy’.
A W I L L I N G A N D A B L E S TAT E ?
A central claim made in this book is that the state remains the major
player in shaping and managing public governance. We have emphasised
the state’s role both as a direct participant in governance arrangements
and as operating the crucial higher-level functions of metagoverning such
arrangements. Now we consider the state’s role in citizen and community
engagement, looking at the institutional disjunctures and coordination
problems that may damage links between governments and communities,
and consider how much power governments or state agencies are actually
willing or able to devolve to communities.
Our starting-point is a widely held view: governments do not like sharing
power. In examining the Blair government’s devolution of governance
authority in the United Kingdom, Mike Marinetto (2003b, 116) concludes
that ‘for all its support for community involvement, the Labour government
[retains] a predilection for strong central control’. Jonathan Murdoch and
Simone Abram (1998, 49) found that central government strategies and
objectives consistently limited community input into housing policy in the
United Kingdom. Local groups were given some discretion in how best to
meet objectives but were ‘tied’ into ‘a set of calculations and relations that
extend down a planning hierarchy from the central state’.
It might be objected that the UK state has always been reluctant to
embrace ‘horizontal inclusivity’ (Wallington, Lawrence & Loechel, 2008).
Yet in writing about community engagement experiments in the Nether-
lands, Geert Teisman and Eric-Hans Klijn (2002, 198) similarly conclude
that, although ‘there is intensified interaction between public and private

partners, there is little joint decision-making and continuity in coopera-
tion’. In the case of a commitment to ensure public participation in the
redevelopment of Rotterdam Harbour, they conclude that public officials
‘wanted to retain their primacy’ and consistently thwarted engagement
efforts (p. 204). Examining the development of community-based gover-
nance mechanisms in the United States, Singleton (2000, 16) also points
to ‘the depth of resistance among state managers to sharing regulatory
authority’. Wallington, Lawrence and Loechel (2008, 17) reach a simi-
lar conclusion in their study of local input into regional governance in
Queensland, implicating ‘unequal power relationships’. The ‘official fram-
ing of policy’ remained the centrepiece of such governance arrangements,
leading them to conclude: ‘The reluctance of farmers and others to par-
ticipate in what amounts to a co-option of regional participants serving a
policy agenda in the interests of, and defined by, government is perhaps
unsurprising.’ Again in Australia, Brian Head (2007, 449), an academic
with practical experience in community engagement, points out that:
non-governmental organisations and community groups often report

unhappy experiences of ‘participation’, owing to poor project management
or even bad faith by governments; for example, in cases in which people
enter an apparently participatory process, only to find there is an absence
of genuine devolution or meaningful involvement because the government
sector has been unwilling to forgo control over processes and the shaping of
results.
Previous chapters argued that governance arrangements ought to be

viewed in terms of an exchange relationship between governments and
non-government actors. Governments may not like to share power but they
may be required to do so where non-state actors possess valuable resources
and there is a strong mutual dependency. The following chapter on asso-
ciative governance describes the substantial power-sharing that occurs in
corporatist arrangements where business, and perhaps trade unions, are in
a position to negotiate access to the policy-making process. By contrast,
community engagement is often a limited, sometimes symbolic, activity
because communities do not generally possess the resources governments
need, or at least not enough to encourage governments to devolve power
or authority to them (Head, 2007, 450).
A case in point is the experience of what Jurian Edelenbos (2005) terms
‘interactive governance’ in urban redevelopment in the Dutch municipality
of Enschede in the 1990s. Edelenbos (2005, 111) starts by depicting a

shift ‘from government to governance’, that is, ‘a shift from hierarchical
and well institutionalised forms of government towards less formalised,
bottom-up forms of governance in which state authority makes way for
an appreciation of mutual interdependence with different stakeholders’.
However, the details of this case reveal a different story. The activities
of local participatory forums of deliberation and advice ran in parallel
with, but did little to affect, traditional decision-making structures. Local
councillors remained the final decision-makers and were largely disengaged
from the participatory process. Furthermore, public servants who became
involved used the participatory processes as little more than a ‘sounding
board’ (p. 122) for their own ideas. Ultimately, the ‘politicians and civil
servants did not perceive the temporary organisational structure of the
interactive process as having any authority’. As Edelenbos concludes, ‘the
case of Enschede has shown that institutional dissociation takes place
between the interactive process and the existing administrative structures
and procedures’ (p. 123).
The experience of water resource planning in New South Wales, Aus-
tralia, offers another telling example of the limits of community engage-
ment (Bell & Park, 2006). The challenge was to devise plans to share water
between rival users while leaving enough water in the drought-affected
river system to maintain a sustainable environment. The New South Wales
government established 36 catchment management committees across the
state in 2002 which included representatives of the stakeholders. These
committees were given the responsibility, but not the power, to create
water-sharing plans. The legislation stated that the committees were advi-
sory and that the relevant minister had the discretion to alter or change the
plans. We can conceive of such a governance arrangement as the ‘networks
in the shadow of hierarchy’ described by Scharpf (1994, 27). It seems clear
that the government wanted stakeholders to negotiate among themselves,
to ‘sort things out’, and then advise the government about an appropri-
ate plan to share water based on local input and compromise; in other
words to offer the product of what Scharpf (1994, 28) calls ‘negotiated
self-coordination’. Formally, this is not a power-sharing model. As we will
see below, this highlights the dilemmas confronting governments who wish
to reap the benefits of stakeholder commitment and negotiation but do
not wish to relinquish power or authority (Teisman & Klijn, 2002).
In choosing to establish community engagement, the government must
weigh up its potential benefits. These include the legitimacy derived
from community involvement; information benefits arising from the
coal-face knowledge of stakeholders; and the possibility of ‘negotiated

self-coordination’. However, in this case these benefits were not seen as
outweighing the results of decisions made by the government on the basis
of arm’s-length stakeholder input. After a lengthy process of often painful
negotiation, committees submitted their water-sharing plans to the state
government in 2004. The minister then amended most of them. Clearly,
the government either did not recognise or could not realise strong mutual-
ity gains from stakeholder involvement, despite the creation of an extensive
system of governance. By overruling the water-sharing plans developed by
the management committees, the government left stakeholders feeling frus-
trated and ignored. As the Irrigation Association of Australia explained:
It was quite contentious and it led to a number of sections of the industry

feeling that they had been disenfranchised to some extent. There was a
consultative process gone through, then the recommendations of that con-
sultative process disappeared into the bureaucracy . . . The only thing worse
than not consulting is to consult and then to ignore the results . . . Where
that happened it has given those water sharing plans a difficult start in life
because significant number of the stakeholders are feeling ‘well, that wasn’t
agreed by us’ [Bell & Park, 2006; see also Craig & Vanclay, 2005].
There is a general lesson to be learnt here about governance and the use of
language. Rod Rhodes, whose notion of ‘governance without government’
we encountered in Chapter 1, suggests that, rather than simply defining
governance in terms of particular institutional arrangements, we ought to
look at the ways in which ‘individuals construct governance’ (Rhodes &
Bevir, 2003, 195) and how governance ‘arises from the bottom up’ (Bevir
& Rhodes, 2006, 99). Rhodes is right to emphasise that governance is
not simply a piece of academic jargon ‘divorced from [the language] of
practitioners and commentators’ (Riddell, 2000, quoted, Bevir & Rhodes,
2003, 9). Politicians and public servants discussing governance often pep-
per their speeches and policy documents with references to ‘community
engagement’, ‘partnership’ and ‘policy capacity’. Drawing upon such refer-
ences, academics have documented what they describe as a transition from
government to governance. In this self-reinforcing circle academics and
practitioners feed off each other. Our suspicion is that many politicians
and public servants have learnt to use the language of community engage-
ment strategically; it becomes a presentation device to obscure, or at least
make more palatable, the exercise of hierarchical control. Public servants,
consciously or unconsciously, have adopted a new governance language
in order to achieve certain goals without revising the underlying ideas, or

indeed, power structures.
There is, however, an interesting question here. If people adopt lan-
guage for essentially strategic reasons, will that language eventually come
to constrain their actions? Does the language of networks and community
engagement eventually lead to more networks and community engage-
ment? Discussing deliberation and constitution-making, Jon Elster (1998)
suggests that language can have this effect. In a legislative setting there
is usually a strong expectation that politicians justify the demands they
make in terms of an appeal to the public interest. But the existence of this
norm gives politicians an incentive to alter their behaviour. A politician
who wishes to avoid the appearance of obvious self-interest might, for
example, demand a public subsidy or other allocation not simply for their
constituents but for all the residents of the area where their constituency is
located. Once having used a particular argument to justify a policy, politi-
cians come under pressure to accept other applications of that argument
so as not to appear incoherent or hypocritical.
It is easy to see how the language of networks, partnership and commu-
nity engagement might similarly constrain politicians and public servants.
Even if everyone in a room believes that everyone else is using language
strategically, the ideas embedded within that language may nevertheless
affect people’s behaviour. A public servant who has learnt to assert the
importance of community engagement will, for example, find it difficult
to always and everywhere dismiss requests to consult about policies. There
is one important difference between these settings. Elster focuses on the
relatively short period of time in which proposals are debated and voted
upon in a legislative assembly. Governments, however, have much more
time to claw back any concessions their language leads them to make
during the course of the policy process. At a stage when they are drafting
proposals and seeking stakeholder support, policy-makers might litter their
speeches and briefing documents with references to partnership, consul-
tation and community engagement. And this may lead them to modify
their behaviour. But, over time, governments can be expected to reassert
hierarchical control, so exposing the limits of their rhetorical commitment
to community engagement.
P O W E R - S H A R I N G A N D T H E S TAT E
We have argued that the development of community engagement as an
alternative mode of governance is often limited by the reluctance of state
officials to share power. How might we account for this reluctance? The
simplest explanation, to which public choice theorists might most easily
subscribe, is that power is a valuable resource and that self-interested politi-
cians will no more forfeit power than a private sector entrepreneur would
pass up a profit opportunity. Yet there may be more principled reasons why
state officials cling to their authority.
First, politicians may, rightly or wrongly, feel that community engage-
ment is too time-consuming to undertake in situations where there are
economic or political pressures to make – and be seen to be making –
immediate decisions. Amidst a growing water shortage crisis in 2006–7
in south-east Queensland, the state government initially promised, then
shelved, a community referendum on recycling waste water for human
consumption, such was the sense of urgency. Second, politicians or offi-
cials may believe that community engagement processes would upset or
contradict broader strategies or standards. A well-honed argument against
the ballot initiatives employed in California is that they result in contra-
dictory decisions that preclude strategic policy development. Voters find
it too easy to approve both lower taxes and higher public expenditure, or
improved environmental standards and lower vehicle taxes, when left to
determine these issues separately. Third, as we have suggested, government
officials may be reluctant to concede authority where they believe that
engagement processes are likely to be dominated by unrepresentative local
elites.
Fourth, governments may be reluctant to concede authority where they
believe that community engagement is unlikely to result to in a delib-
erative consensus. As Skogstad (2003) suggests, there may be limits to
what can be deliberatively handled, thrashed out or agreed upon in com-
munity engagement settings. Where significant interests are at stake and
competition between groups takes a zero-sum form, bargaining and delib-
eration may not be enough to resolve differences. As we have seen, there
are often dangers of parochialism and an inability to develop coherent
links to strategic plans or concerns of wider groupings of state agencies or
whole-of-government approaches (Keating, 2004, 168). Moreover, many
decisions involve voting, and community groups are often not structured to
accord with such processes of choice aggregation. Skogstad quotes Cham-
bers (2001, 48), who argues that ‘talking (understood as deliberation) and
voting do not mix well’. In a contest for votes, deliberation can become
‘strategic, competitive and adversarial’. Even when there is a shared com-
mitment to partnership and the public interest, individuals and groups can
fail to reach an agreement if they are committed, whether consciously or
not, to inconsistent policy ideas or competing policy paradigms. Skogstad

(2001, 968) cites the case of an attempt to develop a provincial land use
strategy in British Columbia, Canada, where various community engage-
ment processes failed to produce a consensus. The deadlock was eventually
broken by the strategic use of state resources and authority, including more
traditional forms of ‘horse-trading’, overseen by the then premier, Mike
Harcourt.
Members of the Harcourt team recognised that the path to land use con-
sensus would have to be greased with dollars; forest workers threatened by
change would have to be appeased. Most important, they recognised that,
more often than not, the results generated by advisory processes would have
to be massaged into final outcomes, through traditional behind the scenes
bargaining [Skogstad, 2003, 908].
Finally, other scholars have suggested that fundamental institutional

mismatches can inhibit community engagement. Eran Vigoda (2002)
argues that in modern systems of public administration, serving citizens as
clients clashes with collaborating with them in governance arrangements.
The problem is that government bureaucracies are fashioned along classical
Weberian lines, with steep hierarchies of authority, concentration of power
among senior officials, professional specialisation, clear accountabilities,
impersonal rule-based behaviour, an increased fascination with business
models, and a fear of sanctions for poor performance and hence a risk-
averse culture. Vigoda cites Dennis Thompson (1983, 235), who says:
‘democracy does not suffer bureaucracy gladly . . . many values we associate
with democracy – equality, participation, and individuality – stand sharply
opposed to the hierarchy, specialisation and impersonality we ascribe to
modern bureaucracy’. Other institutional problems arise when government
structures attempt to mesh with local engagement. For example, in dealing
with problems that cut across agency jurisdictions or traditional lines of
responsibility, the separate ‘silos’ of government bureaucracies can create
problems as agencies attempt to coordinate activities not just with each
other but with a wide range of local groups and engagements (Head, 2007,
449; Boxelaar et al., 2006).
In institutional terms, the challenge for government is to understand
how to better connect the state’s administrative apparatus with quite differ-
ent local organisational environments that feature flatter structures, deliber-
ation and compromise. As Chapter 3 argued in relation to metagovernance,
public administrators involved in community engagement need to develop
skills in networking, negotiation, mediation, conflict resolution, and syn-

thesising or reconciling diverse frames of knowledge while also focusing on
broader strategic and accountability concerns (Hess & Adams, 2002; Davis
& Rhodes, 2000). The case described by Edelenbos (2005), however, indi-
cates that effectively linking hierarchical state structures with participatory
forums can be difficult. Case research by Lucia Boxelaar, Mark Paine and
Ruth Beilin (2006) suggests that reconciling diverse frames of knowledge
is no easy task and that bureaucratic, positivist and expertise-based forms
of knowledge tend to prevail in such participatory settings. Similarly, Gill
Callaghan and Gerald Wistow (2006) demonstrate in a case study of par-
ticipation in primary health care in the United Kingdom that hierarchical
power relations were inscribed in different knowledge forms and this served
to limit effective participation by the lay public.
If governments do attempt to share power, they must be clear about
their intentions in order to avoid confusion and disappointment. As Irvin
and Stansbury (2004, 59) conclude: ‘Lack of representation and authority
to make decisions appears to be the key reason for participatory processes
backfiring and actually increasing public dissatisfaction.’ Furthermore, as
Keating (2004, 160) argues:
disappointed expectations, leading to further alienation, are most common

where the participants believe that they will have more power over the
decision than is intended. It is therefore critical that government is clear
at the outset about its purpose in seeking greater citizen participation, the
means that will be employed to achieve that participation, and what that
implies for the respective roles of the participating parties. [See also Kane &
Bishop, 2002.]
Honestly stating the limits of its own willingness to share authority

constitutes an important metagovernance responsibility of the state.
D O - I T- Y O U R S E L F C O M M U N I T Y
ENGAGEMENT
Thus far this chapter has examined the governance potential of community
engagement from a state–community relational perspective. This perspec-
tive fits our broader approach to governance, but it does not exhaust the
potential opportunities for meaningful community engagement in gover-
nance practices. Indeed, the case we now examine comes close to one of
‘governance without government’, albeit on a small, localised scale and still

in the shadow of hierarchy.
Our focus is on how communities might deal with collective-action
problems. These are the problems that arise when individually advan-
tageous behaviour leads to a sub-optimal collective outcome (Barry &
Hardin, 1982). For example, it may be individually advantageous to drive
to work, but when everyone does this in a large city, traffic gridlock and high
levels of air pollution may be the (sub-optimal) collective result. Such prob-
lems have been a focus of public choice approaches to institutional analysis,
which focuses on ‘institutional design’ (Goodin, 1996) or on working out
how institutions – conceived of as sets of incentives and disincentives that
shape behaviour – might be devised to deal with collective-action problems.
One of the major puzzles in public choice theory, which always assumes
selfish behaviour, is why individuals would rationally contribute to the
solution of collective-action problems. The suspicion is that individuals
will simply free-ride on the actions of others, hoping to gain benefits but
not shoulder any costs.
For some time, scholars assumed that selfish behaviour would always
win and that only strict, even authoritarian, hierarchical controls could
deal with such problems (Hardin, 1968; Ophuls, 1977). However, in
examining collective-action problems arising from the consumption of
natural resources, using the principles of public choice analysis, Elinor
Ostrom (1990; Dolsak & Ostrom, 2003) identified an alternative and
seemingly non-hierarchical means of resolving such problems. Where the
number of users is relatively small and it is possible to monitor behaviour,
people can develop elaborate but informal rules, norms and conventions
governing the allocation of resources that prevent free-riding.
Some scholarly articles . . . recommend that ‘the state’ control most natural
resources to prevent their destruction; others recommend that privatizing
these resources will resolve the problem. What one can observe in the
world, however, is that neither state nor the market is uniformly success-
ful in enabling individuals to sustain long-term, productive use of natural
resource systems. Further, communities of individuals have relied on insti-
tutions resembling neither the state nor the market to govern some resource
systems with reasonable degrees of success over long periods of time [Ostrom,
1990, 1].
In the village of Alanya, Turkey, about 100 fishermen traditionally com-

peted for access to the best fishing in local waters. As a result fishing stocks
were being depleted while fishermen spent much of their time fighting for
the best spots. In the 1970s the fishermen agreed to allocate fishing spots
randomly and to rotate among them in an agreed sequence. As Ostrom
(1990, 19) observes, this system has the effect of spacing each fishing boat
far enough apart to maximise overall returns and gives each fisherman an
equal chance of fishing at the best spots at the best times. This institutional
solution is not entirely independent of the state, however. The calendar
allocating fishermen to spots is deposited each year with the mayor and the
local police. The implication is that hierarchy might be deployed if the col-
lective agreements fail, and this knowledge may spur efforts at cooperation.
Normally, however, the fishermen themselves monitor the agreement; they
have every reason to notice if someone is occupying their allocated space.
CONCLUSION
This chapter has outlined a range of possible options and design princi-
ples regarding citizen or community engagement in governance. In line
with our overall argument, it has highlighted the state-centred control
and oversight of such arrangements. Apart from a few exceptional cases,
such as the fishermen of Alanya, community engagement typically occurs
in the shadow of hierarchy. As Head (2007, 449) suggests, ‘if commu-
nity engagement is largely at the discretion of the state – and indeed, is
largely organised, shaped and subsidised by the state – there must be ques-
tions raised about the robustness and independent strength of community
engagement’. Such views underline the importance of adopting a state-
centred relational approach to the discussion of governance. Community
engagement promises benefits but needs to be carefully managed. The key
site of such management must be within the state itself, given its pre-
ponderance in such engagements. Governments choose when to engage
communities and what to engage them about. Even when governing in
partnership with communities, governments retain the authority to revise
governance rules and abandon engagement processes.
In light of the range of limitations and concerns described above, ambi-
tions about community engagement should probably be limited. Active
power-sharing is unusual in such settings; it occurs under tightly pre-
scribed conditions where the government has the whip hand. Moreover,
in practice, according to Patrick Bishop and Glyn Davis (2002, 22), ‘most
citizen participation takes the form of consultation, which begins with the
acknowledgment that governments decide’. They suggest, however, that
such consultation assumes some degree of reciprocity, with those being
consulted having at least some capacity to influence decisions. Whether

such reciprocity or influence occurs, however, may be another matter and,
as usual, is mainly at the discretion of authoritative decision-makers within
the state. Governments tend to commit themselves rhetorically to commu-
nity engagement. This may be, in part, because community engagement
offers governments a means of enhancing their legitimacy. Community
engagement, like governance through persuasion, is attractive because it is
non-coercive. Yet this rhetorical commitment to community engagement
is not always realised in practice.
8 Governance through
associations
A SSOCIATIVE GOVERNANCE OCCURS when governments or

state agencies form governing partnerships with societal organisations or
NGOs. In this chapter we explore associative governance in two loosely cat-
egorised forms: corporatism, where governments jointly make and imple-
ment public policy in cooperation with major interest associations; and
private-interest government, where governments or state agencies sanction
or encourage the use of private authority in governance arrangements. A
good example of corporatism is when governments formally negotiate with
labour associations to establish and jointly implement wage moderation
policies in a national economy. An example of private-interest government
is when governments allow firms or business associations to set codes of
practice or self-regulate their activities in certain sectors.
Political scientists have always debated how influential interest-groups
are within the policy process and how defensible that influence is. Two
contrasting positions are offered by pluralists and public choice theorists.
Although tracing its intellectual origins back to John Locke’s theory of
consent and Montesquieu’s 18th-century celebration of the separation of
powers, pluralist theory was developed mostly by American political sci-
entists in the 1950s and 1960s. At the core of pluralist theory is a belief
that power ought to be dispersed throughout society; that public partici-
pation in political processes should be encouraged; and that government
policy should command the consent of the public. Pluralists have argued
that interest-groups enhance the democratic process because they limit the
power of the state by checking and balancing any excessive concentrations
of political power that may arise (Truman, 1951; Dahl, 1956). In contrast,
public choice theorists challenge the involvement of organised private inter-
ests in governance arrangements. Since the 1970s they have argued that
162
G O V E R N A N C E T H R O U G H A S S O C I AT I O N S 163
interest-groups pursue their own narrowly defined concerns, lobbying for

special privileges or ‘rents’; and that, cumulatively, this undermines eco-
nomic efficiency (Tullock, 1989; 1993; 2005). On this basis public choice
theorists argued that the post-war proliferation in interest-group politics
had ‘overloaded’ the state and even led to the ‘decline of nations’ (Olson,
1982).
Our own account of the dynamics of governance through association
differs in two respects from such arguments. In the first place, rather
than being inherently attractive or unattractive, the costs and benefits of
governance through association depend, in particular, on prevailing insti-
tutional arrangements, especially on the capacities of associations and on
the strength and capacity of the state. Where the associations represent-
ing private interests have a high membership density or coverage, effective
internal procedures for mediating member interests, and selective incen-
tives to help mobilise members in collective action, interest-group politics
need not lead to rent-seeking or economic catastrophe. Second, far from
being a handmaiden for private interests, the state can enhance its policy
capacity by establishing associative governance arrangements with non-
state actors and by effectively metagoverning such relationships. Chapter 2
anticipated parts of this argument by challenging the notion that gover-
nance networks operate with substantial autonomy from the state. Here,
we provide more examples of the ways in which states can metagovern
associative governance relationships.
This chapter explores examples of associative governance in terms of
corporatism and private-interest government. We then probe the role
of the state in associative governance. The final section shifts the focus
of the argument, examining so-called ‘non-state market-driven’ governance
arrangements, in which private firms and associations work collaboratively
with campaign groups or NGOs to develop codes of conduct regulat-
ing the behaviour of firms. Such codes of conduct are entirely voluntary.
Firms have an incentive to embrace these codes if they calculate that by
doing so they can avoid adverse publicity or attract additional customers.
From our state-centric relational approach to governance, the most signif-
icant feature of such governance arrangements is that they seem to operate
independently of governments and perhaps even constitute an example of
‘governance without government’. The chapter concludes by examining
the limits to the significance of such arrangements. Codes of conduct are
not always followed; they cover only a small fraction of business activity;
and for campaign groups generally they remain an inferior alternative to
state regulation.
F O R M S O F A S S O C I AT I V E G O V E R N A N C E
As we said at the beginning of the chapter, associative governance can be
divided into two types, corporatism and private-interest government. We
will look at them in turn.
C O R P O R AT I S M
Most introductory textbooks recognise that interest-groups are important
political actors and that governments often adopt particular policies after
lobbying by such groups. Chapter 2 pointed to academic work on ‘policy
networks’ composed of interest-groups and government actors. Chapter
5 showed how the National Farmers Union persuaded the UK government
to adopt a particular policy in relation to an outbreak of foot-and-mouth
disease. However, the presence of powerful interest-groups with ready access
to government officials is not necessarily evidence of an alternative form of
governance. Governance through hierarchy is entirely consistent with the
presence of powerful interest-groups and their lobbying activities.
What we have called associative governance (see Hirst, 1994; Hirst &
Veit, 2001) requires interest-groups to play a formal partnership role in
governance and even perhaps in the development and implementation of
public policy. The lead candidate for this form of governance is corpo-
ratism, an arrangement in which government works with major interest
associations, usually peak bodies representing the collective interests of
a particular group, granting them a formal role in policy formulation
and securing their cooperation in implementing policy (Schmitter, 1974;
Lehmbruch & Schmitter, 1982; Cawson, 1986). Of course, the degree
of power-sharing under such relationships varies, but in the more robust
forms of corporatism, major interest associations acquire a quasi-public
status, becoming virtually an arm of the state’s policy-making and imple-
mentation apparatus. Claus Offe (1981) explores the conditions for such
an ‘attribution of public status’. Important associative capacities include
representing or speaking for key functional interests, such as business or
labour; and the ability to aggregate interests, to act as a source of support
for government policy, to act as a key bargaining interlocutor, or to help
shape member or sector compliance.
Probably the most prominent examples of corporatist policy-making are
bipartite or tripartite arrangements in which business associations and/or
peak union organisations bargain with government over wage modera-
tion or industrial restructuring, either at a sectoral or national level. Peak
union organisations, for example, may accept wage moderation and work
to encourage wage restraint as part of an anti-inflationary policy in return
for concessions from the state, such as tax relief or social policy or other
benefits. In this respect, discussions about corporatism ought to be under-
stood in the context of more general debates about how, at a sectoral
or national level, differing mixes of governance modes and sets of insti-
tutional relations have produced different ‘varieties of capitalism’ (Hall &
Soskice, 2001). Institutional configurations and relations between markets,
states and associations help govern and shape processes and preferences at
the level of the firm, such as investment, corporate governance, inter-firm
clustering, labour–management relations, training and skill formation, and
research, development and innovation (Morgan et al., 1999). Because of
institutional differences and varying modes of economic governance, capi-
talist economies have markedly different capacities for growth, innovation
and productivity, as well as methods of sharing the proceeds of economic
growth (Hall & Soskice, 2000; Berger & Dore, 1996).
In ‘liberal market’ systems such as those of the United States and the
United Kingdom, economic coordination and governance occurs mainly
through market processes, with clear boundaries between the public and
private sectors. Such a system can be compared, at the other end of
this ideal-typical spectrum, to ‘coordinated market’ systems in Japan,
Germany and much of Northern Europe, which feature much higher
levels of deliberative and collaborative activity within the private sector
and between the public and private sectors. In such systems the emphasis is
on long-term planning and investment strategies through the development
of close relationships between state and non-state actors. Corporatist forms
of governance are a defining feature of such coordinated market systems.
Northern European countries in particular have for decades engaged in
such corporatist forms of governance. For example, the Danish ‘negotiated
economy’ features patterns of wide social dialogue and bargained consensus
between major associations in the economy and with government (Nielsen
& Pedersen, 1993; Amin & Thomas, 1996). There are similar corporatist
arrangements in the Netherlands (Visser & Hemerijck, 1997). In recent
years the Irish economy has also been managed through ongoing coordi-
nation and bargaining between key state, business and union organisations
who have worked together to secure wage moderation and other goals as
part of a strategy to manage inflation and economic development (House
& McGrath, 2004).
There have also been some counter corporatist trends. In the United
Kingdom in the early 1980s corporatist decision-making procedures were
dismantled by a neo-liberal government intent on reducing trade union

power (Crouch & Dore, 1990). Even once avowedly corporatist Sweden
has seen a conceptual shift among many businesses, which led in the 1990s
to the repudiation of corporatist governance and the collapse of norms of
social partnership (Lindvall & Sebring, 2005). Yet as Jurgen Grote and
Phillipe Schmitter (1999) observe, there has, for the most part, been a
‘renaissance’ of corporatism in those European countries with collectivist
political cultures and established traditions of social partnership charac-
terised by power-sharing and the search for consensus (Lijphart, 1999).
In these countries the economic pressures of globalisation and economic
restructuring have been interpreted as affirming the need for greater coop-
eration with the state. In exploring the importance of ideas and ideology
in shaping governing practices, research by Peter Katzenstein (1985; 2003)
on European corporatism shows that the social construction of perceived
threats and a sense of external economic vulnerability have prompted coop-
eration between potentially hostile groups. As he concludes, ‘perceived vul-
nerability generated an ideology of social partnership that acted like glue
for corporatist politics’ (2003, 11). Hence, a favourable conceptual envi-
ronment constitutes one important prerequisite for corporatist governance
arrangements.
Of equal importance are the institutional capacities of the private organ-
isations drawn into corporatist arrangements. Private-interest government
roles, and especially corporatist governance arrangements, make substan-
tial organisational demands on civil society associations. Under associa-
tive forms of governance, associations must be able to draw resources
from members, such as funds or information, as well as loyalty and com-
mitment. Organisational capacity also implies aggregating and analysing
information, acting as a forum for deliberation and negotiation, building
trust and reciprocity among members, and perhaps fostering new or wider
definitions of interests and goals. In this way associations may help over-
come collective action problems and other organisational challenges posed
by participating in governance relationships with governments. Associa-
tions can also be seen as sources of private authority. This may inhere in a
past history of contributions to governing, the ability of the organisation
to represent and speak for its membership or constituency, and the social
or economic importance or reputation of its members.
If corporatism is to work effectively, peak associations must be able
to coherently represent particular sectors and bargain authoritatively in
closed forums with governments. In particular, associational elites must be
able to deliver the cooperation and compliance of group members, since
groups are required to play an active role in implementing centrally agreed
policies. In France, the fragmentation of the labour movement into com-

peting associations has been partly responsible for non-corporatist labour
arrangements; in the United Kingdom and the United States, the preva-
lence of liberal views about competition and the desirability of maintaining
an arm’s-length relationship between business, unions and government has
also limited corporatist policy-making (Gordon, 1998).
To see how normative ideas about the appropriate limits of state author-
ity and institutional capacities interact to determine the efficacy and dura-
bility of corporatist arrangements, we will examine the rise and fall of
corporatist governance in Australia. Within a generally liberal and con-
frontational political culture, the kind of corporatist arrangements com-
mon in Western Europe had traditionally found little favour in Australia.
However, a new Labor government elected in 1983 forged an initially
very successful corporatist wages policy via formal, ongoing negotiations
with the peak union organisation, the Australian Council of Trade Unions
(ACTU). The unions agreed to exercise wage moderation, while succes-
sive Accords (as they were called) committed the government to providing
tax cuts and other social benefits such as improved health care in return.
During a period in which the Labor government was, in other areas, dereg-
ulating markets, the Accords helped to control wage inflation and achieve
sustained economic growth (Kelly, 1992, 54–75; Matthews, 1994; Bell,
1995).
How can we account for the apparently sudden emergence of corpo-
ratism in Australia? The election of a social democratic government led by
an instinctive corporatist deal-maker, Bob Hawke, was clearly important,
as was Hawke’s union background as president of the ACTU (Kelly, 1984).
More generally, the Labor government needed the cooperation of the trade
union movement to help contain wage-push inflation, which at the time
was the major macroeconomic policy challenge facing the country. Earlier
confrontations with the unions under the conservative Fraser government
had failed, so a fresh approach was desired. The Accords were popular with
the electorate and helped promote industrial peace, which encouraged the
corporatist partners to support such deals.
The introduction of corporatism into Australia required a favourable
institutional environment. The established tradition of formal, centralised
wage negotiation provided a backdrop to Labor’s new approach. Through-
out the 20th century industrial relations in Australia had been managed
through a series of quasi-judicial tribunals, most importantly the Com-
monwealth Court of Conciliation and Arbitration, with legal authority to
set binding minimum pay levels and conditions of work and to impose
solutions in the event of industrial disputes (Bell, 1997, 183–4). One
reason Australian unions were prepared to accept the introduction of cor-

poratism in the 1980s is because of this centralised institutional tradition.
Government involvement in the industrial system was an established nor-
mative frame and institutional reality. Of equal importance in preparing
the ground for corporatism was the development of the ACTU into a pow-
erful peak body by the late 1970s with sufficient organisational capacity
and representational coverage to effectively lead the union movement. In
the face of political pressure from a threatening conservative government
in the 1970s, the ACTU, under Bob Hawke, became much more of an
‘encompassing association’; one able to negotiate and deliver on centrally
negotiated wage deals (Keating & Dixon, 1989; Matthews, 1994).
Corporatist political arrangements can be difficult to maintain in liberal
political systems that emphasise freedom of association and the voluntary
nature of group membership. Peak associations are also vulnerable to defec-
tions from their member units. Over time, the Accords slowly weakened
in the face of countervailing neo-liberal pressures and moves by strong
unions for collective bargaining to gain wage rises beyond the restrictions
of the Accords (Hampson, 1996). The unions became wary of the Accords’
promise to sustain economic growth, especially after the devastating reces-
sion induced by monetary policy in the early 1990s. Business interests
began pushing for more liberal arrangements under the banner of so-called
enterprise bargaining. By the late 1980s, both the government and unions
were offering qualified support to the new enterprise bargaining agenda.
The government increasingly recognised that such a move was the natural
corollary of its ‘competitiveness’ agenda and earlier financial and product
market deregulation.
The reluctance of peak business organisations – especially the body
representing big business, the Business Council of Australia (BCA) – to
embrace the Accords also weakened the system. Hawke had sought a formal
alliance with the BCA at the inception of the Accord system. The BCA,
reflecting entrenched liberal sentiments, flatly rejected such overtures, pre-
ferring instead to maintain a cordial but arm’s-length relationship with the
government (McLaughlin, 1991). As a former BCA insider put it:
Hawke thought the creation of the Business Council in 1983 was a mar-
vellous opportunity to shore up corporatism, but he was sadly disappointed
because the Council position was: ‘this is our policy and we are not going
to negotiate with you on policy. We’ll advocate our position. You’ll have to
take a decision in government’ [interview, 25 November 2003, Melbourne,
quoted Bell, 2008b].
The BCA’s steadfast refusal to embrace corporatism caused ongoing ten-

sions with the government. Yet the BCA would have found itself in an
extremely difficult position if it had behaved otherwise. The corporate sec-
tor was, on the whole, opposed to close ‘collaboration’ with government,
and especially to back-room corporatist deal-making. Moreover, the BCA
lacked the institutional capacity to negotiate on behalf of all businesses
in Australia, let alone to guarantee their compliance with any deals struck
(Bell, 1995).
P R I VAT E - I N T E R E S T G O V E R N M E N T
As it is usually defined, corporatism represents a particular form of gov-
ernance through association: one in which relations between the state
and key interests are mediated through peak organisations. In their work
on private-interest government Phillipe Schmitter and Wolfgang Streeck
(1985) demonstrate that a broad range of private associations do not simply
lobby governments for particular policies but come to exercise measures
of delegated authority on behalf of the state. Private-interest government
thus refers to the role played by private associations as either formal or
informal interlocutors with governments in helping to govern (Schmitter
& Streeck, 1985). The main governance relations typically include associ-
ations or organisations lending expert authority to governments, operating
under delegated authority, acting as regulatory partners with governments,
or working to ‘organise’ non-state roles in wider governance processes.
Operating locally or at the national or international level, the associations
in question act as sources of organisational capacity and private authority in
such governance processes. Examples of such associations include business
associations, trade unions, expert panels, and NGOs such as human rights,
consumer or environmental organisations.
Chapter 4 discussed a good example of private-interest government,
where industry associations work with government in systems of ‘respon-
sive regulation’. Another example is the role of business associations in
facilitating worker training and skills formation. Training workers within a
firm confronts employers with a serious problem of collective action: why
devote resources to training workers who can be poached by other employ-
ers in a competitive market? Firms have strong incentives to free-ride on
any training provided by other firms. Governments can attempt to over-
come this source of market failure with incentive payments or subsidies or
other assistance to firms: that is, through a form of hierarchical governance.
But in a study of training regimes in France and East Germany, Pepper
Culpepper (2001) shows that business associations can potentially play

an important governance role by organising ‘decentralised cooperation’
among firms.
States retain the significant capacity to sanction behaviour and offer
incentives. But because they lack detailed knowledge of skills shortages
within particular industries, they cannot tailor their policies with preci-
sion. Culpepper argues that business associations can assist governments
to implement policy, especially in targeting assistance to firms with the
greatest ‘cooperative propensities’ (p. 284). Cooperation is possible and
mutually beneficial because the ‘state is strong where private associa-
tions are weak, but it is also weak where they are strong’ (p. 281). In
France and East Germany in some instances associations helped over-
come cooperation dilemmas among firms by drawing on their views and
information, acting as a deliberative and learning forum for them, and
mobilising them in favour of agreed positions. In this way business associ-
ations helped develop and stabilise the expectations of firms and provided
important inputs for policy-makers. After studying a range of regional
cases in each country, Culpepper confirmed one of the key hypotheses
of his study: that ‘the presence of employers’ associations with capacities
of information, deliberation, and mobilisation is a necessary condition
for reforms premised on securing decentralised cooperation to succeed’
(p. 286).
Culpepper’s study shows the sorts of roles that associations can poten-
tially play as sources of ‘private governance’ working in partnership with
state agencies in a positive-sum relationship. Private associations represent-
ing individual firms can bargain over the details of policy and so save the
government the need to strike separate deals. Just as importantly, private
associations give firms the chance to talk to and learn from other firms
in a non-competitive setting. By building trust, reducing uncertainty and
resolving problems of collective action, private associations are crucial in
many countries in overcoming micro-level ‘coordination problems’ in cap-
italist economies. Peter Hall and David Soskice (2001, 11), whose work on
the varieties of capitalism we introduced in our discussion of corporatism,
argue that in such settings: ‘deliberative proceedings in which participants
engage in extensive sharing of information about their interest and beliefs
can improve the confidence of each in the strategies likely to be taken by
others’.
Another example of business associations playing a role in associative
governance was the development and implementation of the goods and
services tax in Australia from the late 1990s. Peter Hendy, a former chief
executive of the Australian Chamber of Commerce and Industry, recounts

this role:
The federal government worked closely with and leaned very heavily, much
more so than most people would realise, on business associations to help
educate companies on how to transition to the new tax system. Because it
was a new system the feedback to government was critical. As part of the
new system, there was initially a huge fuss about issues such as Business
Activity Statements and their administrative complexity. It should be noted
that the government threw large amounts of money at this problem. For
example, I recall that there was about $250 million in grants direct to busi-
ness associations to run the education campaign and another $250 million
to fund vouchers to small businesses to buy software etc. This is therefore
not just a market issue responding to an announced government policy, but
a policy implementation issue requiring (in the public interest) further gov-
ernment involvement than normal. The government took this path because
it simply didn’t have the administrative infrastructure to get to hundreds
of thousands of small businesses. If they hadn’t utilised business associa-
tions, the government would have had to otherwise spend large amounts of
resources creating that infrastructure for a one off administrative event. The
government simply doesn’t have the tentacles into the business sector that a
binocular view of the modern welfare state suggests. They don’t even have
a consolidated mailing list for small business to send out political messages
[Peter Hendy, personal communication, 10 June 2008].
There are many other examples of private associations playing a formal

governance role in ways which benefit government. For example, Gerald
Berk and Marc Schneiberg (2005) examine the role of business associ-
ations in ‘organising markets’ in the early 20th century in the United
States. A number of sectoral business associations used research into cost
accounting, deliberation, learning, and benchmarking to manage markets
and conclude a period of mutually destructive cut-throat competition.
Associations in industries such as printing, bridge-building, textiles, and
iron and steel production, among others, also used associative collabo-
ration to improve productivity and reduce excessive costs and prices. As
Berk and Schneiberg (2005, 73) argue, ‘developmental associations per-
turbed habits, invited firms to reflect upon background cost conditions,
and used information, deliberation, and benchmarking to foster discovery,
experimentation and productivity improvement’. Similarly, Kelly Koll-
man and Aseem Prakash (2002) look at the varying uptake in Europe
of a voluntary compliance regime on environmental factors, of the sort
examined in Chapter 5. They find that German firms are far more likely
than British or American ones to join, and then to comply, with these
arrangements. Why? Compliance with environmental codes is potentially
costly because it requires additional employee training, the collection of
data and preparations for certification. In Germany well-developed indus-
try associations and local chambers of commerce have reduced these costs
because they have ‘provided checklists to help firms carry out internal
audits’ (p. 47) and assisted with certification procedures.
In further examples of governance through associations, governments
often allow private associations to establish national accounting standards
for companies. In the United States the authority to set such standards has
for some time been delegated to the Federal Standards Accountancy Board,
a private association that is overseen by the Securities and Exchange Com-
mission but operates independently of it on a day-to-day basis. For gov-
ernments, the expertise provided by such private associations and the close
links they maintain with individual firms provide an important governance
resource (Mattli & Buthe, 2005). Similarly, the Australian federal govern-
ment gave responsibility for the implementation of an export promotion
program, Export Access, to a number of national industry associations in
the 1990s. It did so in the belief that such bodies have strong networks and
possess more detailed knowledge of the circumstances of individual firms
and so would be able to implement the program effectively (Bell, 1995).
In the international arena, Claire Cutler, Virginia Haufler and Tony
Porter (1999) and Rodney Hall and Thomas Biersteker (2002) provide a
range of examples of the exercise of private authority in international reg-
ulation. Walter Mattli and Tim Buthe (2003) show how the International
Organisation for Standards (ISO) and similar organisations promulgate
thousands of product standards covering areas such as health and safety
and environmental protection.1 The ISO is composed of representatives
of more than 150 national standards bodies and has a secretariat based
in Switzerland. Operating largely on a deliberative basis, delegations of
national organisations meet under the auspices of the ISO to debate and
argue about appropriate standards. Among the standards promulgated by
the ISO in 2007 are those relating to greenhouse gas validation and verifi-
cation; drinking water; the sustainable development of fisheries; biofuels;
and food safety. The ISO typically works by consensus and has no legal
coercive power to enforce the agreed standards. However, in the case of
standards relating to, for example, the dimensions of freight containers and
the format of bank cards, the use of ISO standards is enforced via national
regulatory bodies.
Other examples of associations shaping governance practices can be

found in the realm of ideas and their impact on defining interests and iden-
tifying problems; knowledge-based organisations, groups of experts or ‘epis-
temic communities’ can shape policy outlooks (Hass, 1992; Finnemore,
1996). The Intergovernmental Panel on Climate Change (IPCC, for exam-
ple, which operates under the auspices of the United Nations Environmen-
tal Program, is a scientific intergovernmental organisation whose main
decisions are taken in plenary sessions by national representatives. The
IPCC has no coercive power. National governments are under no obliga-
tion to accept or even directly respond to the recommendations in assess-
ment reports published in 1990, 1995, 2001 and 2007. Yet the IPCC
has used its reputation for scientific expertise and political impartiality
to set agendas and shape preferences. Similarly, in a mammoth analysis
of Global Business Regulation John Braithwaite and Peter Drahos (2000)
show how private authority plays an important regulatory role in inter-
national arenas, from aviation to food standards to labour standards to
finance.
An important potential institutional issue relating to associational gov-
ernance is the problem of organisational elitism. This raises again the
issues of accountability and legitimacy that were canvassed in relation
to community engagement. If anything, such problems become poten-
tially more serious under associative governance arrangements that involve
the substantial devolution of power to private associations. Early stud-
ies by Robert Michels (1915) and others in the tradition of elite theory
found that professional administrators and organisational leaders, even
in social democratic settings, often tended to dominate the rank-and-
file membership, which results in attenuated democratic processes and
outcomes.
A recent case in point is analysed by Knut Mikalsen and colleagues
(2006). The Norwegian Fisheries Association, as a result of a partnership
with the Norwegian government to manage fisheries, shifted over time
from a bottom-up organisation to one pursuing ‘the economic interests
of its most powerful members’ (p. 201). While the organisation ‘pays lip
service to the goals of social responsibility and the broader mission of the
association as the voice of all fishers, there is – in practice – a growing
emphasis on protecting the privileges and investments of a much narrower
group of “professionals”’ (p. 206). On a similar though broader scale,
Paul Magnette (2003) argues that new participatory forms of governance
in the European Union aimed at curbing the EU’s ‘democratic deficit’
are highly problematic, largely because the systems in place tend to be
dominated by narrowly organised and ‘elitist’ interests in policy-making.

Other studies point to similar problems of limited democracy and limited
internal accountability in a range of civil society associations (Warleigh,
2001; Lyons, 2001; McLaverty, 2002; Halpin, 2006).
T H E R O L E O F T H E S TAT E W I T H I N
A S S O C I AT I V E G O V E R N A N C E
Governance through associations often requires the state to share power
to a greater degree than any of the other modes of governance we have
examined. In the case of corporatist arrangements, the state commits itself
to a measure of joint decision-making with partner organisations. In the
case of private-interest government the state agrees to delegate authority
for the creation and implementation of regulatory rules to non-state actors.
The previous chapter argued that states are usually reluctant to share power:
there must be clearly perceived payoffs or relationships of dependency to
push governments down this path. In relation to strong associative forms
such as corporatism, it seems clear that such arrangements are most likely to
emerge when the state is sufficiently autonomous to avoid capture by major
interest associations, but not sufficiently authoritative to rule by decree and
hence reject cooperation with affected groups. Therefore states might share
power with associations which possess valuable resources, such as expertise
and legitimacy, and which can frustrate efforts by the state to implement
policy unilaterally. As Trevor Matthews (1988) suggests, associations can
be ‘vitally important allies’ in helping governments govern.
Yet the state remains a major actor within associative governance arrange-
ments. First, we stress that the corporatist and private-interest government
arrangements that we have discussed are created and maintained by the
state. A case in point is the study by George Christou and Seamus Simpson
(2006, 43) of the development of a ‘new European transnational private
governance’ arrangement for the internet. In the late 1990s the Euro-
pean Commission recognised a need to create a top-level domain name
of ‘eu’ as an alternative to national names like ‘dk’ (Denmark) or ‘hu’
(Hungary). In deference to the participatory culture of the internet and
the expertise of commercial interests, the European Commission recog-
nised that it could not manage the domain system unilaterally. Instead,
it created a private, transnational, not-for-profit company, the European
Registry for Internet Domains (Eurid), to administer the dot-eu registry.
The resulting arrangements, while containing elements of self-regulation
and private governance, gave the European Union ‘all rights’ relating to the
registry databases, including the ‘right to re-designate the registry itself’.

The authors conclude that ‘the shadow of hierarchy looms large’ over
governance arrangements because Eurid is subject to a ‘time-limited and
renewable agreement’ (p. 53).
Governments can revise governance rules, and any authority given to pri-
vate associations can potentially be withdrawn. For example, the activities
of rating agencies in credit markets and devolved forms of self-regulation in
industry are artefacts of state strategic choices in allocating and overseeing
such roles. In the United Kingdom in the early 1980s and in Australia
in the mid-1990s, incoming neo-liberal governments changed the rules of
governance and simply dissolved corporatist arrangements. Furthermore, it
is through the imprimatur of the state that these governance arrangements
acquire legitimacy. According to Ian Hurd (1999), to the extent that a
state accepts some rule or body as legitimate that rule or body becomes an
authority. In this respect, some accounts of the role of private associations or
firms risk confusing largely private functions with collective arrangements.
For example, the analysis by Cutler (2002) of ‘private coordination’ and
‘private international regimes’ blurs private organisational arrangements
in markets – informal agreements, production alliances, cartels and joint
research initiatives – with more publicly oriented arrangements such as
standards-setting and regulation.
Governance through association does not emerge spontaneously. States
must provide private actors with sufficient incentives to involve themselves
in governance activities. Governments and state agencies often place heavy
demands on associations to report data, comment on draft proposals, and
sit on consultative committees. There are demands for information; for
advice, often at short notice; for appearances before hearings; for partici-
pation on consultative bodies or corporatist forums; and the need to keep
members informed of the steady stream of new rulings and policy decisions
emanating from the state. One associational respondent in a study con-
ducted by Bell (1995) likened his role to that of an ‘unpaid public servant’.
A key metagovernance requirement for governments is to ensure that pri-
vate associations have sufficient incentives to undertake these governance
activities.
Typical was the largely unsuccessful attempt to implant corporatist
practices at a sectoral level by the government of Ontario between the
mid-1980s and mid-1990s. The government’s objective was to encourage
organised labour and business interests to work together to negotiate and
help implement a set of policies on industry, training, and occupational
health and safety across industry sectors. In his account of this experiment,
Neil Bradford (1998) points out that in a neo-liberal institutional and

conceptual setting this was always an ambitious strategy. One major prob-
lem was that business interests mostly resisted collectivist engagements. As
Bradford points out, ‘the viability and durability of such reforms depends
on the willingness of organised business interests to share power respon-
sibly with other social actors’. On the whole such cooperation was not
forthcoming, because business saw the incentives, largely provided by the
state, as insufficient; and because, more broadly, business interests dis-
trusted such ‘incorporationist’ governance strategies, preferring instead to
maintain the ‘autonomy of the firm’. Only in the case of industrial pol-
icy were the ‘inducements to business large enough and the threats small
enough to convince corporate managers that partnership did not mean
making unwarranted concessions’ (p. 568).
Once the rules of the game have been established, the state remains
a pivotal actor within associative governance arrangements. Although the
basic relationship in such arrangements is one of exchange, the roles of
government and associations are not equal. Chapter 2 pointed out that the
central position of governments in associational networks allows them to
‘dominate the exchange’ (Chhotray & Stoker, 2009, 22). As an example
of the ways in which states can dominate governance arrangements that
appear to involve a substantial measure of power-sharing, consider Mexico’s
approach to the North American Free Trade Agreement (NAFTA). The
decision to seek membership of NAFTA was made centrally by Mexico’s
political leaders. Having made this decision, the Mexican government
sought to win support for this agenda from the business community. It
created a new body, the Business Coordinating Council for Foreign Trade,
whose selected members were invited to discuss the trade deal with the
government. Before the first meeting of this corporatist body the Mexican
government revealed its hand through a political marketing campaign
which framed a free trade agreement as one in which businesses and social
groups would all gain. To limit any dissent, the government indicated
that business leaders would be invited to discussions and allowed to lobby
for temporary concessions only if they accepted the principle of NAFTA
membership. ‘The provision of these concessions gave potential opponents
an incentive to work for the best possible terms rather than against the
initiative in general. While the Mexican state allowed businesspeople to
participate in shaping NAFTA’s terms, that opportunity came with strings
attached’ (Fairbrother, 2007, 284).
In this case the central position of the government allowed it to set the
agenda, determining the key issues to be resolved through associational
governance. Yet governments can also exert control by setting agendas

within governance relationships. Consider the Open Method of Coordi-
nation (OMC) introduced in the European Union in 2000. The OMC
seeks to encourage mutual learning between national governments, the
supra-national institutions of the European Union, and interest-groups
across a range of policy issues. As described by Helen Wallace (2000, 33),
the aim of the OMC is ‘not to establish a single common framework,
but rather to share experience and encourage the spread of best practice’.
Whereas hierarchical governance results in coercive rules and regulations,
the OMC results in recommendations and regulations which actors are
encouraged to implement. These recommendations are negotiated between
‘public and private actors at different levels of decision-making’, meaning
that ‘no distinction is made between steering subjects and steering objects’
(Kohler-Koch & Rittberger, 2006, 36–7). The OMC has been lauded as a
‘new mode of governance’ and a retreat from centralised decision-making
in the European Union (Heritier, 2003). The European Commission, how-
ever, has shown that it can steer the OMC process from behind the scenes.
It can decide whether to use the OMC to address a particular policy prob-
lem. It frames policy problems, sets the sequence of consultation, drafts
recommendations, and monitors their implementation. As Burkard Eber-
lein and Dieter Kerwer (2004, 126) conclude: ‘Although the OMC should
be a combination of bottom-up participation and top-down guidance, in
reality it is often dominated by the centre.’
Governments can also dominate governance arrangements in situations
where actors possess very different empirical and normative ideas about
the appropriate policies to pursue. Conceptual differences can sometimes
be resolved through processes of deliberation or policy learning such as the
OMC, but they are often embedded in organisational cultures that resist
change (Alvesson & Sveningsson, 2008). This is partly because organisa-
tions are, from the moment of their inception, given differing mandates,
responsibilities and lines of accountability. Where organisations possess
very different cultures, attempts to govern through associational partner-
ships are likely to generate misunderstandings, conflict and paralysis. Even
when organisations are genuinely committed to working together in part-
nership, ‘the shadow of hierarchy’ may be needed to ensure the smooth
functioning of governance arrangements. In some cases the conceptual
differences among organisations in a network may even prompt the gov-
ernment to reassert control and govern through hierarchy.
The treatment of drug addicts in the United Kingdom offers a good
example of this governance dynamic. In a 10-year strategy document,
Tackling Drugs to Build a Better Britain, published in 1998, the govern-

ment identified drug addiction as a ‘wicked problem’ that required govern-
ment and non-government organisations to deliver ‘joined-up’ solutions
within a ‘network governance’ approach (Acevedo & Common, 2006).
The institutional expression of the government’s joined-up approach was
to create about 150 local Drug Action Teams (DATs). These teams were
charged with ‘bringing together representatives of local agencies involved
in delivery of the Drug Strategy, such as health services, social services,
police, probation services, local education authorities, youth services,
social housing providers and voluntary sector providers’ (http://drugs.
homeoffice.gov.uk/dat/). Initially, DATs were given the responsibility to
commission services, monitor and report on performance, communicate
with stakeholders and oversee the development of coordinated ‘street-level’
services.
Yet conceptual differences between the agencies involved in drug treat-
ment undermined the value of the partnership approach and the smooth
running of the DATs (Parker, 2004, 381). The criminal justice agencies,
principally the police and probation services, tended to frame addiction
in terms of criminal enforcement and the protection of the community.
In contrast, many of the voluntary workers in drug treatment charities
favoured harm minimisation. A second difference emerged within the
health sector between mental health workers who believed that addiction
was a symptom of underlying mental health problems that had to be treated
first and those working in health clinics who favoured immediate treat-
ment for the addiction itself. Finally, a third difference emerged between
youth justice workers, who tended to favour minimal intervention for fear
of stigmatising and so alienating drug addicts, and drug workers in non-
statutory agencies, who advocated long-term care relationships. According
to one senior official working within a DAT:
the cultural aspects [of working] were the key, particularly as . . . the main
ethos of the youth justice system is to divert youngsters from the criminal
justice system and very much based on minimal interventions. Whereas the
needs of a drugs worker in that system are much more intense and it’s not
minimal intervention, it’s about developing a relationship and getting into
a lot of the problems. So those two approaches didn’t work together, they
were contrary to how people worked [quoted Newburn, 2003, 616].
Over time, as the full extent of the differences between agencies and
the limits of a partnership approach became apparent, the government
started to metagovern the DATs more actively. In 2001 the Home Office
was given overall responsibility for the delivery of drug services in Eng-
land, while regional Government Offices, composed of representatives of
the major central government departments, were charged with monitoring
the performance of the DATs. In 2002 much of the remaining discretion
that DATs had been given to implement policy was eliminated when the
newly created National Treatment Agency was charged with determining
local treatment plans. Within three or four years the rhetorical commit-
ment to a network approach gave way to what was, in effect, hierarchical
control.
While acknowledging the extent to which governance through associ-
ation requires states to share power, we once again emphasise the ways
in which states can enhance their policy capacities by developing these
relations. Recall the argument of Michael Atkinson and William Coleman
(1989) in Chapter 3 that different forms of structured interaction between
the state and society are linked to different styles of policy-making. Long-
term, strategic and ‘anticipatory’ policy styles in industrial policy typi-
cally require the existence of state-directed or corporatist policy networks.
Governments concede policy-making authority to trade unions and busi-
ness leaders when they commit their authority to corporatist governance
arrangements. But in doing so, government can enhance their capacity in
achieving, for example, higher economic growth at a lower inflationary
cost.
In arguing that there is a positive-sum relationship between states and
private associations, we must return to the critique of public choice in
Chapter 2. The basic claim is that in a competitive economic market setting
the pursuit of self-interest leads (as if by an ‘invisible hand’) to the collective
good, but that in a competitive political market the pursuit of sectional
interests may be economically and politically destructive. Friedrich Hayek
(1982) argues that sectional interest-groups undermine the legitimacy of
the state and, in the case of trade unions, the rule of law. Mancur Olson
(1982) argues that interest-group politics leads to institutional sclerosis and
economic decline. Economists have estimated the costs of ‘rent-seeking’
by interest-groups to be as high as 50 per cent of American gross domestic
product (Laband & Sophocleus, 1988); 20 to 40 per cent of Indian gross
domestic product (Mohammad & Whalley, 1984); and 12 per cent of
American domestic consumption expenditure (Lopez & Pagoulatos, 1994).
For a critical assessment of such figures see Hindmoor (1999).
Whether or not private associations have an incentive to pursue a nar-
row, rent-seeking, agenda depends upon their institutional configuration.
As Mancur Olson (1982, 74–110) actually recognises, interest-groups that

form peak associations representing the interests of large numbers of mem-
bers have less incentive to pursue economically destructive rent-seeking
policies. Using evidence from Latin America, Richard Doner and Ben
Schneider (2000) seek to identify the factors that encourage business asso-
ciations to play a constructive political role. In their view, ‘progressive’
associations have a high membership density or coverage, effective internal
procedures for mediating member interests, and selective incentives to help
mobilise members in collective action. In addition to these institutional
attributes, associations are more likely to play a progressive rather than
rent-seeking role in the presence of ‘external drivers’. Doner and Schneider
emphasise the role of perceived threats of economic vulnerability in mobil-
ising business cooperation. Finally, and most crucially, they stress the role
of the state in providing incentives for appropriate forms of behaviour, par-
ticularly supportive incentives such as subsidies or institutionalised access
to policy deliberation within the state.
This final point is worth underlining. The relationship between the state
and private associations is most likely to take a positive-sum form when
the state intervenes hierarchically to secure the authoritative position of the
associations. This is a form of metagoverning or ‘steering’. Governments or
state agencies can bolster the strength of associations by offering financial
or other supporting resources. Furthermore, state leaders can actively shape
patterns of interaction between groups and the state, and act as brokers
among competing interests. Governments and their administrative agen-
cies may block the access of certain groups to forums of policy-making
while giving others a monopoly on representation. In Austria, for example,
membership in major business and union associations is compulsory under
law, thus strongly enhancing the associative capacity of key interests. And
as Streeck (1983, 270) points out in relation to Germany:
Ministerial departments tend to discourage individual firms from contacting

them directly on matters that can be dealt with by their associations . . . by
urging firms to go through established associational channels, state officials
increase the functional importance and the prestige of associations in relation
to their members [and] they help interest groups speak with one voice.
Such corporatist proclivities resonate with the state capacity literature,

where the term ‘embeddedness’ describes the ability of state leaders and
policy-makers to forge positive, collaborative and change-oriented rela-
tions with key groups or sectors (Evans, 1995). This capacity for positive
state–society collaboration, or what Linda Weiss (1998) terms ‘governed

interdependence’, in turn depends on the organisational and associative
capacity and outlook of major social or economic groupings and interest
associations.
GOVERNANCE WITHOUT GOVERNMENT?

The governance arrangements we have been examining so far in this chapter
consist of partnership arrangements between state and private associations.
Yet during the last decade academics have identified new forms of non-
state market-driven (NSMD) governance arrangements, in which private
firms, under pressure from consumers and non-governmental campaign
groups, develop and voluntarily abide by codes of conduct in the apparent
absence of any state involvement. David Vogel (2008, 262) reports that
there are now more than 300 codes, primarily addressing either labour
or environmental practices, with a particular focus on such high-profile
political issues as child labour, sweatshops, diamond mining and fair-trade
coffee and cocoa production.
One of the most successful and intensely studied NSMD arrangements
relates to forestry (Cashore, 2002; Bartley, 2003; Conroy, 2007; Tollefson,
Gale & Haley, 2009). The Forest Stewardship Council (FSC) was created
in 1993 and is managed through a general assembly and board of directors
on which environmental and social groups and forestry firms are equally
represented. The FSC has developed 10 principles of responsible forestry
management, including reduction of the environmental impact of logging
activities and maintenance of the ecological functions and integrity of the
forest; maintenance of forests of high conservation value, having outstand-
ing significance or critical importance; equitable use and sharing of benefits
derived from the forest; and recognition and respect of indigenous people’s
rights. Forest owners apply to the FSC for certification and, if successful,
can then display the FSC logo in an effort to attract customers. Based
in Bonn, Germany, the FSC now has national offices in more than 50
countries, including Burkina Faso, the Congo, Ghana, Brazil and Papua
New Guinea.
NSMD arrangements resemble some of the governance arrangements
we have already discussed. Chapter 6 showed how NGOs like the Terrence
Higgins Trust and firms like McDonald’s have attempted to persuade
people to change their behaviour in ways that contribute to the achievement
of collectively valued goods. In these cases NSMD governance results in
pressure upon firms to change their own behaviour. Chapter 4 examined
the proliferation of systems of self-regulation, showing that it occurs in the

shadow of hierarchy. In relation to NSMD arrangements, self-regulation
is apparently undertaken voluntarily in the absence of the state.
We finally seem to have encountered a credible example of ‘gover-
nance without government’. Cutler and her colleagues (1999, 2) describe
NSMD systems as amounting to the ‘privatisation’ of governance. Ben-
jamin Cashore (2002, 504) suggests that NSMD ‘governance systems’
derive their ‘policy-making authority not from the state, but from the
manipulation of global markets and attention to consumer preferences’.
Virginia Haufler (2006, 92) suggests that ‘one of the most significant
changes in recent years is that the “who” in “who governs” must now
be expanded to include the participation of nongovernmental and non-
corporate actors’. Similarly, Steven Bernstein (2005, 60) argues that the
civil regulations contained within NSMD systems ‘represent an innovative
form of governance’. Archon Fung (2002, 150), whose work on community
engagement we examined in Chapter 7, describes the ‘social markets’ con-
tained within NSMD systems as ‘creating distinctive areas of governance’.
Reviewing the literature on what he calls ‘private transnational governance’
within international relations, Phillip Pattberg (2005, 591) similarly points
to the way in which ‘the locus of authoritative problem solving does not
rest with governments and their international organisations alone’ and
how ‘authority is indeed relocated in many different settings, involving
public-private as well as purely private actor constellations’.
We recognise that NSMD systems constitute a separate and innovative
governance arrangement, and that the continued development of a global
civil society centred on campaigning organisations – Greenpeace, Amnesty
International, Human Rights Watch, the World Wide Fund for Nature
(instrumental in the creation of the FSC), World Vision, Oxfam, and the
fair trade movement – is likely to result in more of them. It is no surprise
that we doubt some of the claims made on behalf of NSMD arrangements,
especially the notion that they operate in isolation from governments.
First, it is clear that firms often work through associations to establish
NSMD systems with the explicit intention of forestalling government reg-
ulation. Vogel (2008, 268), for example, points to the example of Respon-
sible Care, a code of conduct governing the behaviour of chemical firms,
which was adopted by a number of national chemical associations in order
to reduce demands for further government regulation following the explo-
sion at a chemical plant in Bhopal, India, in 1984 which ultimately killed
over 13 000 people. As Mathias Koenig-Archibugi (2005, 122) observes,
the distinction between voluntary and state-imposed codes of conduct ‘is
best thought of not as a dichotomy, but as the ends of a continuum’.

NSMD systems may not operate directly under the shadow of hierarchy
in the same way as conventional systems of self-regulation, but they do
operate under the threat of hierarchy.
Second, the history of the FSC shows that, behind the scenes, national
governments can play an effective metagovernance role in supporting the
activities of campaign groups. Fred Gale (2008) shows how the UK govern-
ment supported the Friends of the Earth’s early interest in forest certifica-
tion by funding a series of consultancy projects to investigate the possibility
of using market incentives to ensure sustainable forest management. In Aus-
tralia, Gale (2008) shows how forest certification was kick-started by the
Department of Agriculture, Fisheries and Food: it hosted a conference in
Queensland in 1996, which resolved that ‘certification and labelling are
potentially useful tools among many others to promote sustainable forest
management’.
Third, it is not always clear what impact NSMD systems actually have
on firms’ behaviour and thus on the achievement of collectively valued
goals. The FSC system rests on rigorous external auditing which requires
firms to demonstrate to independently accredited auditors that they are
adhering to each of the 10 principles of responsible forestry management
on an ongoing basis (Cashore, 2002, 513). Yet in this respect the FSC is
something of an exception. ‘Relatively few’ industry and corporate codes
are independently monitored, and some contain absolutely no monitoring
provisions at all (Vogel, 2008, 269). Fervent hopes have been expressed
that NSMD arrangements represent a ‘civilising influence’ that can give
‘globalisation a human face’ (Cutler, 2006, 200). Yet these governance
arrangements are unlikely to do so in the absence of metagovernance to
ensure their effectiveness or accountability.
Fourth, while more than 300 business codes have been promulgated,
these cover only a tiny fraction of all business activity. The firms that
are most likely to adopt stringent codes of conduct are those with global
brand names who can afford the costs of certification processes and whose
reputation is most likely to be tarnished by allegations that they are acting
unethically. Codes of conduct have now been developed to regulate the
activities of industries that have previously attracted unwelcome newspaper
headlines. Firms in other industries have less incentive to develop codes of
conduct. The growth in NSMD governance arrangements may therefore
be subject to rapidly diminishing returns. Even within the forestry industry,
which has the most successful NSMD arrangement, the FSC has certified
only about three per cent of the world’s forests.
Because of inadequacies in the monitoring of their implementation and

limitations in their reach, NSMD systems remain a second-best alternative
for campaign groups. The World Wide Fund for Nature did not press for
the creation of the FSC until the manifest inadequacies of the Interna-
tional Tropical Timber Agreement became apparent and national govern-
ments had failed to develop an effective international forestry treaty during
the 1992 UN Conference on Environment and Development in Rio de
Janeiro. It is worth noting that nearly all of the codes of conduct govern the
behaviour of private firms, often transnational corporations, operating in
developing countries with weak or non-existent systems of national regu-
lation. If, over time, NGOs can persuade national governments to develop
international regulatory regimes that incorporate higher environmental or
labour standards and constrain the activities of multinational firms, the
demand for NSMD governance will probably fall.
CONCLUSION
This chapter has offered examples of associations playing a key role in gov-
ernance arrangements, showing that state and non-state actors can benefit
from these partnerships. A central argument is that associative governance
reveals the state making substantial use of private associative resources.
In some cases, states may come to depend heavily on these resources.
Such dependence implies reciprocity and a willingness on the part
of the state to provide incentives for cooperation, even to the point of
explicitly sharing authority with non-state actors. These state-sponsored
selective incentives are an important condition for successfully soliciting
associational cooperation.
Successful associative governance also depends on the willingness of
associations to cooperate or be incorporated in governance partnerships.
This willingness might be linked to incentives offered by the state, but it is
also associated with a favourable conceptual environment in which actors
trust each other and are prepared to cooperate for mutual gain. Associ-
ations must overcome difficult organisational or institutional challenges
in order to be effective partners, including issues related to membership
coverage and loyalty, resources and authority. Such arrangements may be
unstable: changes in government and changes in the state’s governing strat-
egy can easily weaken or undermine them. As we have seen, in the United
Kingdom, Canada and Australia corporatist experiments were brought to
an abrupt end by the election of new governments. We have also argued
that the ingredients for successful associative governance vary across dif-
ferent countries and policy arenas. In the final analysis, major associative
governance arrangements are chosen by states. Such choices are shaped
by ideological dispositions and by assessments of the institutional capacity
and resources of non-state associations and their ability to deliver.
9 Conclusion
To be governed is to be watched, inspected, spied upon, directed, law-

driven, numbered, regulated, enrolled, indoctrinated, preached at, con-
trolled, checked, estimated, valued, censured, commanded. . . . It is, under
pretext of public utility, and in the name of the general interest, to be placed
under contribution, drilled, fleeced, exploited, monopolized, extorted from,
squeezed, hoaxed, robbed; then, at the slightest resistance, the first word of
complaint, to be repressed, fined, vilified, harassed, hunted down, abused,
clubbed, disarmed, bound, choked, imprisoned, judged, condemned, shot,
deported, sacrificed, sold, betrayed. . . . That is government; that is its justice;
that is its morality.
Pierre-Joseph Proudhon, General Idea of the Revolution in the
Nineteenth Century, 1851.
States form a part of the backdrop to everyday life. They register births,
deaths and marriages. They control immigration, collect taxes, provide
public goods and regulate what people can eat, watch and buy. It is true
that in some countries communities of people have effectively opted out
of the state for religious or political reasons – the Amish in the United
States, for example. It is also true that states have sometimes collapsed. Yet
for most people in most countries the state remains as central (although
perhaps not as objectionable) an actor today as it was for Pierre-Joseph
Proudhon in 19th-century France.
Yet those writers who advocate a society-centred perspective on gover-
nance argue that governments have lost power and are no longer the ‘cockpit
from which society is governed’ (Klijn & Koppenjan, 2000, 136). Lester
Salamon (2002, 1–2), for example, argues that ‘problems have become too
complex for government to handle on its own, because disagreements exist
186
CONCLUSION 187
about the proper ends of public action, and because government increas-
ingly lacks the authority to enforce its will on other crucial actors without
giving them a meaningful seat at the table’. Similarly, Donald Kettl (2002,
161) says:
to rule effectively, government must first attain and then exercise sovereignty.
It must be able to chart its course and ensure that that course is followed.
Hyperpluralism, policy networks, devolution, and globalization have all
greatly diffused power. Government might retain its legal position, but
exercising political sovereignty amidst such diffused power represents a major
challenge.
One way of analysing these arguments about the power of governments

is in terms of a long-standing debate within political science about the
‘faces’, or dimensions, of power (see Hay, 2002, 171–82). Power is most
obviously manifested when one actor can force another actor to behave
in a certain way. Writing about the distribution of power in the United
States, Robert Dahl (1957; 1961) offered an ‘intuitive’ definition of power
in which ‘A has power over B to the extent that he can get B to do
something that B would otherwise not do’. In this case we can observe
the exercise of power by looking at who triumphs when actors disagree
with each other. This conception of power brings to mind the definition
by Theda Skocpol (1985, 9) of state autonomy in Chapter 3 as the ability
of government to ‘implement official goals, especially over the actual or
potential opposition of powerful social groups or in the face of recalcitrant
socioeconomic circumstances’.
There is, however, more to power than coercion. As Peter Bachrach and
Morton Baratz (1962; 1963) pointed out in a critique of Dahl’s argument,
a second face of power is manifested in the capacity of some actors to keep
issues off policy agendas. A classic example was identified by Matthew
Crenson (1971). In the town of Gary, Indiana, the largest local employer,
US Steel, succeeded in keeping clean-air laws off the local political agenda
despite the obvious health problems being caused by air pollution. There
was no obvious political conflict in Gary, no legislative tussles or interest-
group marches, and so no behavioural sign of power being exercised. Yet
this non-issue, far from demonstrating the absence of dominating power
relations, was actually testimony to US Steel’s power and the dependence
of the city upon the jobs it provided. Here, the exercise of power meant
keeping an issue off the agenda. But agenda-setting can also, of course,
mean putting issues on the agenda (Kingdon, 1984) and, less obviously,
determining the sequence in which options are discussed or voted on

(Riker, 1982, 169–92).
Finally, as Steven Lukes (1974) argues, a third face of power is manifested
in the capacity of some actors to shape the preferences of others:
A may exercise power over B by getting him to do what he does not want
to do, but he also exercises power over him by influencing, shaping or
determining his very wants. Indeed is it not the supreme exercise of power
to get another or others to have the desires you want them to have – that is,
to secure their compliance by controlling their thoughts and desires?
In challenging the society-centred account of governance, we have

argued that governments continue to exercise considerable power. In terms
of the first, coercive, face of power, governments in nation-states continue to
possess legal sovereignty and a monopoly on the legitimate use of violence,
and this underpins the exercise of hierarchical authority. Governments are
not simply one actor within ‘pluricentric’ networks (Sorensen & Torfing,
2008a, 3). Governments do not simply operate within exogenously given
sets of governance rules. They also have authority, not possessed by any
other actor, to choose the governance rules and, as we explained in our
discussion of metagovernance, act as a court of appeal for disputes between
other actors. Chapter 4 makes the case that, far from fading into obscu-
rity, hierarchical, top-down governance is resurgent. Governments can
nationalise failing banks, suspend share trading, ban certain food prod-
ucts, introduce traffic congestion charges, detain suspected terrorists and
ban the export of basic foodstuffs. Through their capacity to introduce
taxes or subsidies, governments can raise or lower the costs of a wide range
of activities.
Governments also retain considerable powers to set agendas. By exploit-
ing their marketing expertise and resources, as well as their democratic legit-
imacy, governments identify policy problems, frame debates and advance
policy solutions. In recent years Western governments have identified
weapons of mass destruction, energy dependence and the costs of an ageing
population as items for the policy agenda, thus preparing the ground for
the eventual invasion of Iraq, decisions on the future of nuclear power, and
pension reform. Of course governments do not have a monopoly on setting
agendas. The media, think-tanks, political parties, international organisa-
tions, private firms, community organisations and interest-groups can all
bring forward topics for agendas in the policy process (Majone, 2006). In
recent years the campaign group Landmine Action, having inspired public
CONCLUSION 189
debate about the use of landmines, has been instrumental in persuading

governments to sign a moratorium on the production, stockpiling, use
or export of cluster bombs. Oxfam and War on Want have primed public
opinion about debt relief (Busby, 2007) and, more recently, raised concerns
about the link between the use of biofuels and world food prices.
But governments can also exert control by setting agendas within gover-
nance relationships. In the case of governance through community engage-
ment, governments can decide which issues to consult a community about,
how to structure consultation processes and how to set the boundaries of the
community to be consulted. Governments can decide whether to promise
a referendum on the results of any consultation or simply promise to take
note of views expressed. In the case of associative governance relationships,
governments can use their central location in networks to set the objectives
of any partnership arrangement, the issues to be decided, the way in which
those issues are framed, the sequence in which issues are to be addressed,
and the procedures to be followed in the case of any disagreement. Chapter
8 showed the European Union exploiting its agenda-setting powers to steer
outcomes achieved through the Open Method of Coordination and the
Mexican government securing support for the North American Free Trade
Agreement by requiring businesses to express in-principle support for a
treaty before being able to negotiate concessions within it. The lesson is
that governments do not always need to ‘enforce their will’ (Salamon, 2002,
1–2) in order to achieve their goals.
Finally, as emphasised in Chapter 5, governments retain a considerable
power to shape people’s preferences. Where it would be too economically
or politically costly to impose policies, governments can exploit their legiti-
macy and marketing budgets to persuade people to change their behaviour
to protect either their own long-term interests or, in the case of collec-
tive goods, those of the society in which they live. Governments are not
the only actors who can govern through persuasion, but their capacity to
combine persuasion with the exercise of hierarchical authority gives them
a great advantage over non-state actors. Of course, governance through
persuasion is not always successful. After the failure of a campaign to per-
suade shoppers to use fewer plastic bags, the Irish government was forced to
introduce a tax, levied at the point of sale, upon consumers. Yet particularly
in societies with high levels of social capital, persuasion can prove a sur-
prisingly effective governance strategy. Richard Thaler and Cass Sunstein
(2008, 60–1) describe how a Texan television campaign in which local
football players collected litter, smashed beer cans in their bare hands, and
growled ‘don’t mess with Texas’ was credited with achieving a 72 per cent
reduction over six years in roadside littering. In our own city of Brisbane,
Australia, which is suffering the effects of years of drought, a long-standing
campaign to persuade people to use less water has been combined with
threats to fine or reduce water pressure to households using more than 800
litres of water a day; there has been a 30 per cent fall in average household
water consumption.
Power is a useful concept with which to analyse the limitations of the
society-centred account of governance. As Michael Lister and David Marsh
(2006, 255) argue: ‘modern governance involves the state in more complex
relationships with other governmental and societal actors, but it doesn’t
inevitably reduce its role or power’. Yet in talking about the faces of power
there is a danger of adopting a zero-sum conception in which the power of
governments is equated with the (relative) powerlessness of interest-groups,
businesses and other non-state actors. In our view power is ‘conditional
and relational’, and therefore an adequate theory of the state can only be
produced as part of a ‘wider theory of society’ (Jessop, 2001). As govern-
ments have experimented with a range of governance arrangements, the
boundaries between the state and society have blurred (McLennan, 1989;
Cammock, 1989; Mitchell, 1991). This blurring does not mean that gov-
ernments have forfeited the ‘ability to steer society’ (Jordan, Wurzel &
Zito, 2005, 480). Indeed a new wave of statist theorists – whose work we
reviewed in Chapter 3 – have emphasised that governing capacity is a prod-
uct both of the state’s institutional and other resources, and of the relations
it constructs with non-state actors. ‘Embedded’ states (Evans, 1992; 1995)
are not undermined by close links with powerful economic actors, but
rely on them. On this revisionist account, the ‘strong state is one with the
political support to be strong’ (Gourevitch, 1986, 238). As Cathie Jo Mar-
tin (1989, 191) suggests, this revised and relational statist theory suggests
the need for rethinking Theda Skocpol’s definition of autonomy, ‘since in
this view state elites achieve their agendas by working with private-sector
groups rather than by insulating themselves from them. The autonomy
question as traditionally posed allows for neither mutuality of interests nor
reciprocity of influence.’ This theme of expanding governance capacities
through partnerships is endorsed by John Braithwaite (2008, 26) when he
writes that the ‘state’s capacity to govern is actually extended by capacities
to enlist through negotiation the governance capacities of other actors’.
These revisionist statist approaches resonate with the state-centric rela-
tional approach to governance developed in this book. Governance through
markets, associations, community engagement and, potentially at least,
persuasion, requires governments to enter into exchange relationships with
CONCLUSION 191
non-state actors. But governance has not replaced government. This is

partly because, as we demonstrated in Chapter 5, the total amount of
governance has risen. Governance through markets, associations and com-
munity engagement has increased, but so too has governance through
hierarchy. It is also because governments have enhanced their capacity
to achieve their goals by developing closer governance relationships with
non-state actors. Finally, governance has not replaced government because
governments are not simply actors in governance relationships. They also
metagovern those arrangements by overseeing, steering and coordinating
them; selecting and supporting the key participants; mobilising resources;
ensuring that wider systems of governance are operating fairly and effi-
ciently; and taking prime carriage of democracy and accountability issues.
This is why existing accounts which encourage us to think about a spec-
trum of possible governance arrangements running from society-centred
to state-centred are flawed. By seeing government as one point on a gov-
ernance continuum, we lose sight of the integral role governments play in
all governance relationships and the strength that governments potentially
derive from their relationships with non-state actors.
Precisely because it has become all-pervasive, the term governance
attracts suspicion. As Guy Peters (2000, 35) observes, ‘the real danger
is that governance becomes meaningless and a tautology; something hap-
pened and therefore governance occurred’. It is true that governance has
been defined in many different ways. But this is true of just about any
interesting concept in the social sciences – including, of course, terms
like democracy, power and justice. In this book we have defined gover-
nance as the tools, strategies and relationships used by governments to help
govern, and identified a number of different modes of governance. Our
state-centric relational approach offers a useful way of understanding the
contemporary importance of the state, the adaptations of the state in the
face of new policy challenges, and the ways in which states across the world
are attempting to enhance their governing capacities.
Notes
5 GOVERNANCE THROUGH PERSUASION
1 The World Values Survey – cited in Table 2.3 – asks respondents how much confidence
they have in major companies as well as in governments and public servants. People in the
United States, Japan and South Africa have more confidence in major companies than in
government. In the United States 53% of respondents had either ‘a great deal’ or ‘quite
a lot’ of confidence in major companies and only 37% the same level of confidence in
government in 1999. Yet people in most OECD countries trust government more than
companies. The most striking result is for Iceland, where 70% have confidence in the
government but only 39% have confidence in major companies. At the time of writing
it is unclear how the implosion of the Icelandic economy caused by the global credit
crisis will affect trust. The Icelandic prime minister’s reported comments that ‘there will
always be fish’ seem unlikely to inspire confidence.
2 On 19 February 2001 a vet working at an abattoir in Essex reported a suspected case
of foot-and-mouth disease to the State Veterinary Service, which rolled out contingency
plans requiring the slaughter of animals on infected farms, a ban on all animal movements
near infected farms, and the tracing of ‘dangerous contacts’. Over the next 221 days more
than 2000 animals contracted the disease in the United Kingdom, and over four million
were slaughtered to limit its spread. As the crisis developed, the central argument became
whether the policy of slaughter should be abandoned in favour of preventive vaccination.
3 In his most recent work Putnam has detected signs of a dramatic turnaround in American
social attitudes. Research indicates that the generation of Americans currently in their
teens and twenties – whose attitudes, it is suggested, may have been most affected by
9/11 – will be the most engaged citizens for over 60 years. The evidence is that electoral
participation among this group is increasing and that college students are more interested
in talking about and taking part in politics (Economist, 10 July 2008).
6 GOVERNANCE THROUGH MARKETS AND CONTRACTS
1 In the case of privatisation see Megginson & Netter, 2001; Kikeri, Nells & Shirley,
1992; and OECD, 2005a. Assessments of the savings accrued through contracting-out
can be found in Mueller, 2003, 373–80; Miranda & Lerner, 1995; and Lavery, 1999.
192
N O T E S T O PA G E S 1 2 2 – 7 2 193
Debates on the performance of public–private partnerships can be found in English,

2005; Akintoye, Beck & Hardcastle, 2003; and Freeman, 2003. For an introduction to
writing on the economic consequences of globalisation see Brady, Beckfield & Zhao,
2007; Stiglitz, 2002; and, for developing countries, Wade, 2005.
2 States have not always succeeded in suppressing illegal markets. At a recent World Health
Organization conference, one participant reported that in some remote Pakistani villages
up to half of the residents had sold one kidney at a going rate of around $2500 (USA
Today, 30 March 2007).
7 GOVERNANCE THROUGH COMMUNITY ENGAGEMENT

1 Participation in Athenian democracy was in other respects limited. As well as women,
slaves and those lacking in property were excluded from the democratic process.
8 GOVERNANCE THROUGH ASSOCIATIONS

1 ISO is not an acronym. Because the acronym for ‘International Organisation for Stan-
dardisation’ would vary in different languages, its founders chose ISO, derived from the
Greek isos, meaning ‘equal’.
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Index
A Manager’s Guide to Citizen Engagement, 31 corporatist governance, 167–9

Abdelal, Rawi, 130, 131 corporatist institutional environment, 167
Abram, Simone, 151 corporatist wages policy, 167
Abu Ghraib, 52 Crime and Misconduct Commissions, 88
Aegis, 127 Department of Employment and Workplace
American International Group, 80 Relations, 125
Andersen, Hans, 10 Department of Immigration and
associations, 163, 184 Multicultural Affairs, 53
as sources of private authority, 166, 169, 170, Export Access, 172
172 forest certification, 183
associative collaboration, 171 goods and services tax (GST), 170–1
capacities, 163, 164 Hawke era, 167, 168
cooperation dilemmas, 170 immigration detention centres, 53
coordination problems, 170 industrial relations, 167
decentralised cooperation, 170 Job Network, 37, 47, 52, 124
governance relations, 169 landcare projects, 143
incentives for associative governance, 180 legislation, increase in, 93
knowledge-based organisations, 173 Northern Territory ‘intervention’, 85
organisational elitism, 173 regional governance, 68
and policy implementation, 170, 171 resource management, 79, 143
prestige, 180 Tariff Board, 67
‘progressive’, 180 water consumption, Brisbane, 190
use of delegated authority, 169 water management and the creation of
worker training, 169 markets, 117, 122
Atkinson, Michael, 64, 179 water management, New South Wales, 68,
Australia, 175 153–4
‘Accords’, 167, 168 water shortage, Queensland, 156
Australian Council of Trade Unions (ACTU), Australian Competition and Consumer
167, 168 Commission
Business Council of Australia, 135, 169 as metaregulator, 91
and corporatism, 168 Austria
centralised institutional tradition, 168 associative governance, 180
centralised wage negotations, 167, 168 authoritarian populism, 21
Commonwealth Court of Conciliation and Ayres, Ian, 90
Arbitration, 167
community engagement, Queensland, 152 Baader–Meinhof Gang, 20
corporate regulation, 91 Bache, Ian, 38
corporatism, 168 Bachrach, Peter, 187
223
224 INDEX
Baker, Wayne, 110 closed-circuit television (CCTV) surveillance,

Bank of England, 80 84
Baratz, Morton, 187 ‘club government’, 88
Barroso, Jose, 43 Coen, David, 133
Bartle, Ian, 90 Coleman, William, 64, 179
Basle accord, 44 collective good
Beilin, Ruth, 158 See goods, public goods
Belgium, 124 Colombian army, 15
Berk, Gerald, 171 communication networks, 77
Bernstein, Steven, 182 communities, idealised vision of, 146
Bevir, Mark, 4 community engagement
Biersteker, Thomas, 172 See governance, modes of
Bishop, Patrick, 160 community sector, 152
Blackwater, 16, 126, 127–9 diversity within, 148, 149
Blair, Tony, 43, 86, 105 government engagement, apprehension
blood donation, voluntary, 103 towards, 149
Blumenthal, Sydney, 104 competitive tendering
Boxelaar, Lucia, 158 See governance, contracting-out of services
Bradford, Neil, 176 congestion charges, 79
Bradford & Bingley, 81 conservatorship, 81
Brady, Henry, 147 Considine, Mark, 125
Braithwaite, John, 90, 173 corporate governance, 1
Bruner, Christopher, 130, 131 corporatism, 9, 14, 33, 162, 163, 164, 165, 166,
Bush, George W., 86 174
business corporatist governance, 165, 166, 167, 179
See private firms corporatist governance in liberal states, 168
Buthe, Tim, 172 corporatist institutional environment, 167,
184
California effect, 41, 80 corporatist policy-making, 164
Callaghan, Gill, 158 counter-corporatism, 165
Canada in Europe, 166
corporatist practices, Ontario, 175 industrial relations, 164
electoral reform, British Columbia, 142 and perceived vulnerability, 166, 180
provincial land use, British Columbia, state-maintained, 174
157 Crawford, Adam, 38
capital flight, 80 credit rating agencies, 129–31, 133, 175
capitalism Crenson, Matthew, 187
capitalist economies, 165 Culpepper, Pepper, 170
‘varieties of capitalism’, 165, 170 Cutler, Claire, 172, 175, 182
carbon emission reduction
through non-state persuasion, 100 Dahl, Robert, 187
carcereal society, 98, 101 Davis, Glyn, 69, 160
Cashore, Benjamin, 182 Deacon, David, 104
Cato Institute (US), 22 decriminalisation, 76–7
central banks, 8, 23, 50, 80 democracy, 50
Chhotray, Vasudha, 6, 11 and bureaucracy, 157
China classical, 149
CCTV9, 134 competitive, 149, 150
internet regulation, 78 constitutional democracies, differences
Christou, George, 174 between, 72
civil society democratic authority, 15, 49
See organisations, non-governmental (NGOs) democratic deficit, 150
climate change, 79, 126 democratic legitimacy, 137, 144
Intergovernmental Panel on Climate Change and interest groups, 162
(IPCC), 79, 173 loss of confidence in, 24, 120
role of states, 79 mechanisms of, 51, 71
Clinton, Bill, 83 participatory, 150, 151
INDEX 225
participatory and representative, linked, fair trade movement, 100–1

150 Fannie Mae, 81, 82
representative, 151 financial integration, 64, 82
Denmark, 49, 50, 51 firms
consensus conferences, 142–3 See private firms
‘negotiated economy’, 165 Flinders, Matthew, 32, 37
dependency culture, 83 Foley, Paul, 147, 148
developmental state economies Forest Stewardship Council (FSC), 181, 183,
East Asia, 73 184
Doner, Richard, 180 Foucault, Michel
Dover, Bruce, 134 and the ‘autonomous individual’, 98, 113
Drahos, Peter, 173 ‘disciplinary power’, 98, 101
Drezner, Daniel, 43, 82 ‘disciplinary society’, rise of, 114
drug cartels, Medellin and Cali, 15 Discipline and Punish, 97
Dryzek, John, 142 ‘governmentality’, 97
Dyson, Kenneth, 72 France
Medal of the French Family, 80
Eberlein, Burkard, 177 non-corporatist labour policies, 167
Edelenbos, Jurian, 152, 153, 158 Fraser, Bernie, 23
electoral politics Freddie Mac, 81, 82
and community engagement, 146 Fredericksen, Patricia, 148
elite theory, 173 French government, 28
elites agricultural policy, 36–7
and persuasion, 101 de Villepin, Dominique, 14
civil elites, marginalisation of, 146 investment in nuclear energy, 60
Elster, Jon, 101, 155 Sarkozy, Nicholas, 14
emissions trading schemes, market-based, 79, Fung, Archon, 143, 145, 148, 182
117, 122, 125–6
employment contracts, 14 Gaebler, Ted, 135
performance contracts, 87 Gains, Francesca, 38
Enron, 131, 134 Gale, Fred, 183
Europe Gambetta, Diego, 56
voluntary compliance environmental regime, Gamble, Andrew, 89
171 General Agreement on Tariffs and Trade
European Central Bank, 42, 80, 82 (GATT), 76
European Court of Auditors, 88 See also World Trade Organization (WTO)
European Court of Justice, 43 Uruguay round, 37
European Registry for Internet Domains George, Susan, 29
(Eurid), 174 Germany
European Union/European integration, 42–3, associative governance, 180
51, 64, 82 investment in nuclear energy, 61
.eu internet domain name, 174–5 voluntary compliance environmental regime,
Common Agricultural Policy, 36 172
‘democratic deficit’, 173 Global Business Regulation, 173
Emission Trading Scheme (ETS), 125–6 global financial crisis, 27, 55, 80, 82, 130
formal agreements, number of, 94 government loans to corporations, 80–1
and globalisation, 43 globalisation, 1, 21, 25, 30, 39, 40
governance, participatory forms of, 173 and business regulation, 40
intergovernmentalism–supranationalism and deregulation, 117
debate, 42 and government expenditure, 25, 40
Open Method of Coordination (OMC), 177, and its effect on the state, 40, 120, 133
189 and social partnership, 166
Europeanisation, 42 as source of power to business, 133
of regulation, 82 protests, 29
Evans, Peter, 63 regulatory challenges, 82
executive dictatorship, 21 Golding, Peter, 104
ExxonMobil, 34, 132 Goodin, Bob, 142
226 INDEX
goods hierarchies, 6, 28, 68, 92

excludability, 56 horizontal networks, 3, 6, 39, 108
public goods, 57, 108, 110, 115 implementation ‘gap’, 21, 27, 28–9
public goods and free-riding, 159 in a risk-averse culture, 157
rivalness, 57 interdependency, 4
governance, 60 inter-organisational, 4
See also metagovernance issue networks, 33
accountability issues, 11, 38, 52–4, 68, 128, language of, 154, 155
173 legitimation gap, 150
alternative strategies, 76, 86, 164 marketisation of, 116
and appearance of decisive action, 104 and the media, 104
as a construct, 154 multi-level, 42
attribution of public status, 14, 164 See also European Union/European
audit ‘explosion’, 76 integration
broader conception of, 97 networks, 3, 4, 5, 6, 21, 28, 32, 33, 34, 35,
business, relationship with, 132 38, 51, 64, 67, 106, 150, 153
business associations, 170, 171 networks, ‘concentation’, 65
codes of conduct, 5, 163, 181, 183, new forms of, 6, 24, 69, 177
184 non-state market-driven (NSMD), 5, 163,
collaborative, 91, 106, 144 181, 182, 183, 184
communication strategies, 104–5 norms, 4, 76, 155
community sector assistance, 149 of the internet, 78
contracting-out of defence services, 118 partners, 13
contracting-out of services, 9, 13, 36, 53, 68, pension provision, hierarchical management
116, 117–18, 119, 121, 122, 124, 136, of, 80
147 policing, 83, 84
inconsistent, 122 See also state, micro-management
contracting-out of services and fear of power-sharing, 91, 92, 174
‘hold-ups’, 125 ‘privatisation’ of, 182
contracting-out of services to not-for-profit relational approach, 3, 21, 62, 64, 69, 71, 90,
organisations, 118 158, 165
control mechanisms, 47 resources, 172
coordination, 67, 69 risk, 76, 77
core executive, 38 rules of, 13, 14, 15, 28, 34, 38, 47, 56, 134,
declining population levels, hierarchical 160, 175, 188
management of, 80 self-organising networks, 6, 33, 70
defined, 2, 71 self-policing incentives, parents, 83–4
discourses, 4 ‘shadow of hierarchy’, 70, 90, 91, 153, 159,
economic, 66, 72 160, 177, 182, 183
efficiency, 150 society-centred approach, 1, 3, 4, 12, 20, 21,
efficiency of community engagement, 148 49, 70, 71, 186, 188, 190
egalitarian networks, 3 state centrality in, 151, 160, 186
elite networks, 88 state-centric approach, 2, 5, 12, 21, 69
‘enabling’ policy style, 121 state-centric relational approach, 2–3, 16, 59,
executive power, centralisation of, 86, 87 63, 65, 69, 89, 96, 106, 132, 138, 145,
expanding scale of, 2 160, 163, 191
fundamental transformation of, 2, 3, 7, 8, state-society coalitions, 89
71 third-party government, 4
hierarchical authority, 35, 70, 76, 86, 90, and threat/use of coercive power, 36, 37, 90,
116, 124, 188 104
extension of, 81 through semi-autonomous agencies, 103
hierarchical control, 75, 78, 91–2, 108, 109, and traditional notions of public policy, 2
122, 129, 134, 154, 155, 179 transnational, 43–4
exploitation of, 105 transparency, 121
problems with, 85 trust, 4, 6, 76, 102, 103, 111, 150, 170
hierarchical sanctions and rewards, 71, 97, unrepresentative elites, 51, 148, 151, 156
99, 101, 108, 170 and use of language, 155
INDEX 227
and use of market mechanisms, 7, 64, 65, 75, input, 150, 151
79, 116, 117 loss of, 14, 21, 30–1, 104
and the use of popular media, 104–5 output, 150
volume of, 92 legitimacy/fiscal crisis, 1, 20, 21, 24,
without government/from government to 26
governance, 3, 5, 20, 33, 39, 49, 71, 92, legitimate authority, 151
153, 154, 159, 163, 182 marginalisation of, 4
governance, modes of, 6, 16, 47, 165 marketing of, 104
associative, 11, 18, 21, 31, 33, 91, 162, 164, ‘market-supporting’ role, 120
166, 172, 174, 184 neo-liberal, 7, 14, 25, 72, 89, 115, 135, 166,
costs and benefits, 163 175
state centrality in, 174, 176, 185 networks, 163, 164
community engagement, 5, 8, 11, 17, 21, 30, overload, 24, 25, 163
67, 91, 137, 139, 144, 146, 150, 152, See also government, legitimacy/fiscal crisis
160, 189 pluricentric, 3, 4
benefits of, 153 and social capital, 113
defined, 139 Granovetter, Mark, 110
features of, 144–6 Greenspan, Alan, 82
increase in, 137–8 Greer, Alan, 67
limitations of, 138, 153 Grote, Jurgen, 166
markets, 4, 17, 21, 97 Guyana
persuasion, 16, 31, 90, 97, 103, 106, 113, water provision, 48
189
defined, 97 Hajer, Maarten, 4
persuasion and hierarchical, combined, 108, Hall, Rodney, 172
109, 111 Harcourt, Michael, 157
persuasion and hierarchical, difference, Haufler, Virginia, 172, 182
98 Hawke, Bob, 167
persuasion through normative commitments, Australian Council of Trade Unions (ACTU),
101 168
top-down/hierarchical, 2, 4, 6, 16, 21, 36, 39, Hay, Colin, 113
60, 65, 70, 71, 72, 76, 79, 86, 87, 97, Hayek, Friedrich, 179
112, 132, 164, 169, 177, 188 Head, Brian, 149, 152, 160
increase in, 92, 93, 95, 96 Hendy, Peter, 170
stimulants, 77 Heritier, Adrienne, 4
government ‘high modernism’, 88
accountability, expectation of, 91 Hill, Carolyn, 39
as provider of democratic legitimacy, 50 HIV/AIDS
centralisation, 61, 84, 86 infection rates, reduction of, 100
confidence in, 102, 103, 113 Hobson, John, 63
debt, 26–7 Hoffmann, Stanley, 43
debt as proportion of gross domestic product Holliday, Ian, 38
(GDP), 26 homosexuality
decentring of, 4, 21, 28, 32, 38 See same-sex relationships, legal status
See also state, hollowing out of Howard, John, 86
decision-making, 138 Hurd, Ian, 175
expectations of, 93, 102
expenditure, 24–5, 72 ideas
expenditure on social welfare, 25 and governance through persuasion, 113
indirect, 76 individual rationality, 101
influence on non-state actors, example of, individual self-interest, 101, 113, 147
105 and markets, 115
intentions, 158 and normative commitments, 101,
legitimacy, 11, 15, 29, 37, 62, 103, 138, 173, 113
175 and sub-optimal collective outcomes,
decline of, 102, 121, 138 159
enhancement of, 104, 114, 161 Institute for Economic Affairs (UK), 22
228 INDEX
institutions King, Anthony, 24

and collective-action problems, 159, 166 Kirkpatrick, Ian, 127
institutional arrangements, 163 Kitchener, Martin, 127
institutional capacities, 166 Klijn, Erik-Hans, 4, 151
institutional configuration, 159, 165, 179 Knoke, David, 34
institutional relations, 165 ‘structural’ approach to study of policy
institutional solutions, 160 networks, 34–5
instruments, policy knowledge
command and control, 8, 86 diverse forms of, 158
intellectual property rights, 77 through community engagement, 138
interest groups, 33–4, 164, 179, 180 Koenig-Archibugi, Mathias, 182
See also governance, networks and public Kollman, Kelly, 171
policy, communities Koontz, Thomas, 144
effect on economic efficiency, 163 Koppenjan, Joop, 4
influence of, 162 Kyoto Protocol, 27, 86
partners in governance, 164
‘rent-seeking’, 179 Landmine Action, 188
International Association for Public Lawrence, Geoffrey, 2
Participation, 139 legislation, 76
International Organisation for Standards (ISO), blasphemy, 77
172–3 drugs, 77
international relations hate crimes, 77
‘juridification’ of, 82 homosexuality, 76
US hegemony, 83 Lister, Michael, 190
international trade London, Rosanne, 148
expansion in, 117 Lukes, Steven, 101, 188
International Tropical Timber Agreement, Lynn, Laurence, 39
184
internet Magnette, Paul, 173
and access to public opinion, 137 Majone, Giandomenico, 39, 76
investments Maloney, William, 149
decisions, determinants of, 133 Mann, Michael, 63
transaction-specific, 125 Marinetto, Mike, 38, 151
Ireland market failure, 78, 80, 115
bank deposit guarantee, 80 as justification for state intervention, 22,
governance, corporatist forms of, 165 80–1
organic agriculture policy, 67 due to market structure, 126
Irvin, Renee, 148, 158 externalities/non-priced impacts, 78
Italy hierarchical management of, 80
Italian judiciary, 15 sources of, 77, 169
Italian Mafia, 15 theory of, 22
markets
James, Oliver, 38 as replacement of hierarchical governance,
Japan 116
industrial policy, post-war, 66 ‘coordinated market’ systems, 165
Nippon Telegraph Company (NTT), defined, 115
privatisation of, 124 external, 117
social capital, 111 and metagovernance, 125
Johnson, Elizabeth, 144 imperfect, 22
Johnson, Lyndon, 27 institutional requirements, 123
internal, 119, 121, 122
Katzenstein, Peter, 166 invisible hand of the market, 115
Keating, Michael, 40, 47, 116, 150, 158 ‘liberal market’ systems, 165
Kelly, Josie, 38, 46 limits on, 122
Kerwer, Dieter, 130, 177 market relationships, 110
Kettl, Donald, 2, 32, 33, 68, 69, 187 ‘marketisation’, 115, 116, 119, 120, 126
Kickert, Walter, 32 ‘marketisation’ and government control, 120
INDEX 229
and need for hierarchical governance, 124, Moravcsik, Andrew, 42

136 Mosley, Layna, 41
and property rights, 123 Mueller, John, 150
‘publicisation’ of, 125 Mulgan, Richard, 51, 52
‘quasi-market’, 125 Murdoch, Jonathan, 151
reliance on states, 123 Murdoch, Rupert, 134
and resource allocation, 115 News Corporation and Chinese government,
‘soft institutional parameters’, 110 134–5
state creation of, 117 Muslim clerics, 5
transparent competition, 123
trust, 123 natural resources
use of, defended, 115 and free-riding, 159
Marsh, David, 11, 28, 33, 190 community responsibility for, 159
Martin, Cathie Jo, 190 neo-liberal philosophy, 15
Martin, Hans-Peter, 120 Netherlands
Martin, Steve, 147, 148 community engagement, 151
Matthews, Trevor, 174 governance, corporatist forms of, 165
Mattli, Walter, 172 interactive governance, Enschede, 152–3
Mawson, John, 148 social capital, 111
McEwen, John, 67 voluntary agreement on energy efficiency,
McKeen-Edwards, Heather, 64 109
metagovernance, 11, 37, 38, 45, 46, 55, 67, 69, new public management, 87, 119
76, 124, 125, 157, 163, 188, 191 NGOs
accountability, 51, 124 See organisations, non-governmental (NGOs)
as cause of ‘bureaucratic burden’, 68 Niskanen, William, 23
as learning process, 127 non-state actors
as public goods provision, 57–8 as agents of persuasion, 99, 102, 106, 108
by non-state actors, 55 as investors in social capital, 112
challenges, 66, 68 and lobbying of governments, 106
democracy, 49, 51 and positive use of persuasion, 100–1
effectiveness, 48, 57 and use of persuasion, 99, 105, 181
elements of, 47, 69 North, Douglas, 59
failure, 53, 54, 116, 126–9 Northern Rock, 81
functions, 145, 148 Norway
incentives, 56, 58, 126 Norwegian Fisheries Association, 173
legitimacy, 54, 56, 124 nuclear power, 133
of markets, 116, 123, 124, 134 investment in, 60
of non-state market-driven (NSMD) systems, Nye, Joseph, 30
183
remanagerialisation of risk, 76 obesity
resources, 55, 126 and non-state persuasion, 100
resourcing, 48, 124 hierarchical management of, 80
SERDAL, 47, 70 Offe, Claus, 164
state responsibility for, 105 oil industry, 83
steering, 47, 57, 105, 115, 124, 126, 135, Okimoto, Daniel, 65
177, 180 Olson, Mancur, 179, 180
Mexico Open Net Initiative, 78
North American Free Trade Agreement Organisation for Economic Co-operation
(NAFTA), approach to, 176, 189 and Development (OECD), 24, 26, 59,
Michels, Robert, 173 72
Mikalsen, Knut, 173 countries and deregulation, 117
military-industrial complex, 9 government outsourcing trends, 122
Milward, H. Brinton, 49 organisations
Model Cities program, 9 conceptual differences and associate
Moody’s, 129, 131 governance, 177, 178
Moore, Michael, 29 organisations, international, 43–4, 83
Moran, Michael, 39, 87, 88, 89 transfer of policy-making authority to, 41
230 INDEX
organisations, non-governmental (NGOs), 1, 4, of persuasion, 188, 189

5, 40, 125, 152, 162, 184, 189 repressive and disciplinary, differences, 98
inequality amongst, 148 to persuade, abuse of, 101
not-for-profit, 17 vertical balance of, 150
and persuasion, 100 Power, Michael, 76
resources, 148 power struggles, 6
organisations, supra-national, 1, 40, 42 Prakash, Aseem, 171
and accountability, 51 price mechanisms
Orwell, George, 84 as resource allocators, 115, 120
Osborne, David, 135 Prince, Erik, 127
Ostrom, Elinor, 159 principal-agent problems, 87
private firms, 11, 14, 21, 125, 132, 163, 181
Paine, Mark, 158 accountability, 130
Parker, Christine, 91 advantages for government, 131
Parsons, Talcott, 63 advertising expenditure, 99–100
Pattberg, Phillip, 182 and associations, 170
Pearce, Graham, 148 as public service providers, 118
Peters, Guy, 5, 8, 12, 24, 86, 121, 191 coercive power, lack of, 133
Pierre, Jon, 5, 8, 12, 24, 86, 121 conflicts of interest, 130
Pierson, Christopher, 120 and defence, 118, 132
pluralist theory, 162 government control over, 128, 129, 132, 133,
interest-groups, 162 134–5
policy, environmental, 7 legitimacy, 130
hierarchical management, 79 and loss of social capital, 112
instruments, 7, 79 and marketisation, 115
transnational, 86 preference-shaping power, 133
policy institutions public confidence in, 102
self-regulating, 88, 89 and ‘responsive regulation’, 91
policy instruments and use of political processes, 106, 132
command and control, 95 voluntary compliance programs, 108–9,
policy networks 172
See governance, networks private-interest government, 162, 163, 164,
policy styles 166, 169, 174
anticipatory, 65 defined, 169
reactive, 64 state-maintained, 174
political participation, 15 privatisation, 39, 75–6, 79, 116, 136
political power, 6 and decline in government influence, 121
dispersal of, 6 and markets, 117
political processes and price mechanisms, 120
confidence in, 30, 31, 32 and property rights, 119
political protests, 14 and regulations, 124
politicians, 155 ‘hierarchical safeguarding’, 124
criticism of, 78 proceeds of, 116
cynicism about, 30 retention of government control, 75
manipulation of economy/markets, 22, Russia, 123
23 property rights, 115, 119, 123
shielding of, 88 absence of, 123
trust in, 15, 22, 102, 138 Russia, 123
pollution, 79 Provan, Keith, 49
popular authority, 151 public choice theory, 21–2, 66, 79, 101, 156,
Porter, Tony, 172 159, 162
power, 156, 158, 187, 190 ‘capture’ of governments, 66
agenda-setting, 187, 188 and collective-action problems, 159
checks and balances, 162 critique of, 179
constitutive effect, 98 interest groups, 162
disciplinary, 98 and governance through persuasion, 113
from repressive to disciplinary, 97 of state failure, 21, 22, 23
INDEX 231
public management, 4 of aviation industry, 120

public participation, 150, 152, 158 of chlorofluorocarbons (CFCs), 86
negative experiences of, 152, 153 of non-state actors, 88, 89
public policy, 28, 106 of private firms, 134
campaigns, 108 regulatory agencies, number of, 94
communities, 33 regulatory control, loss of, 126
defence, 10 regulatory failure, 86
defence and procurement, 9 ‘regulatory state’, 89
development, 72 growth of, 72, 88, 95, 103
environmental ‘responsive regulation’, 8, 89, 90, 91, 108,
See policy, environmental 169
errors, 107 ‘responsive regulation’ and persuasion, 90
implementation, 27, 28–9, 72, 86 self-regulation, 89, 90, 91, 182
industrial, 64 devolved forms of, 175
instruments, 62 stem cell research, 78
monetary, 10, 23, 41 transnational, 82
security, 10 and world financial markets, 124
to increase social capital, 112 Reinventing Government, 36, 135
trade, 76 rent-seeking, 66
and use of ‘crisis’ rhetoric, 84 Responsible Care, 182
public service, 38 Rhodes, Rod, 4, 5, 9, 28, 33, 39, 51, 69, 89, 154
as source of social capital, 112 Rodrik, Dani, 25
commitment to, 101 Rothstein, Bo, 112
competition within, 23 Rotterdam Harbour, redevelopment of, 92
delivery, 36 Rumsfeld, Donald, 52
ethos, 121 Rupert’s Adventures in China, 134
instruments, 38 Russia
management reform, 87 corruption, 123
public-private partnerships, 118–19, 122, 129, market-based economy, transition to, 123
134 Russian energy companies, 16
See also state-society relations
and transparency, 121 Salamon, Lester, 4, 91, 186
Putnam, Robert, 111, 146 same-sex relationships, legal status, 77
Samuels, Richard, 66
Ranald, Patricia, 121 Saudi Arabia
rational choice theory internet regulation, 78
See public choice theory Saward, Michael, 39
Reagan, Ronald, 15 Sbragia, Alberta, 120
Red Brigades, 20 Scharpf, Fritz, 70, 153
regulation, 55, 77, 82, 84, 182, 184 on legitimacy, 29, 54
binge drinking, 84 Schmitter, Phillipe, 166, 169
cooperative compliance, 90 Schneiberg, Marc, 171
and credit ratings, 129–30 Schneider, Ben, 180
cumulative effect, 98 Scholzman, Kay, 147
deregulation, 79, 117, 119, 121, 122 Schumann, Harald, 120
deregulation, financial, 82 Schumpeter, Joseph, 149
and free markets, 89 Sellers, Martin, 125
genetically modified organisms (GMOs), Sharonov, Andrei, 123
77–8 Simpson, Seamus, 174
hierarchical, 109 Singleton, Sara, 143
independent state regulators, 88 Skocpol, Theda, 61, 63, 146, 147, 187, 190
international, 172 Skogstad, Grace, 51, 151, 156, 157
internet, 78 Smith, Martin, 11
light-touch, 131 social capital, 189
market, 73 as tool for persuasion, 111, 146
‘metaregulation’, 91 ‘bonding’, 110
national styles of, 90 ‘bridging’, 110, 112
232 INDEX
social capital (cont.) hollowing out of, 1, 5, 20, 32, 38, 39, 89,
and community engagement, 146 116
defined, 109 See also government, decentring of
enhancement, 111–12 incentives for associative governance, 175,
and hierarchical governance, 111 176, 180, 184
interest in, 110 institutions, 59–62
investment in, 111 key components of, 62
and market mechanisms, 110 intervention, limitations upon, 98
and policy outcomes, 110 legitimacy
and trust, 111 See government, legitimacy
variety in, 111 legitimate use of coercive power, 15, 37, 49,
social partnerships, 166 55, 99, 106, 188
power-sharing, 176 metagovernance responsibilities, 151
social responsibility, breakdown of, 83 micro-management, 84
society resilience of, 20, 71
constant monitoring of, 98 resources, 133, 157
Somalia, 5 restructuring of, 69, 87, 88, 145
Sorensen, Eva, 3, 4, 6, 46, 50, 55, 56, 150 role in community solutions, 160
South Korea sovereignty, 3, 15, 43, 187
chaebol, 75 state-owned enterprises, 116
internet regulation, 78 ‘commercialisation’ of, 117
Standard & Poor’s, 129, 131 state intervention, 38, 77, 79, 82, 89
Stansbury, John, 148, 158 See also market failure and public choice
Stanyer, James, 104 theory
STAR TV, 134 costs, 79
state criticism of, 87
See also government in societal behaviour, 84
as agent of persuasion, 99, 103, 113 regulation of, 22
as recipient of persuasion, 106, 107 state–society relations, 21, 23, 28, 45, 65, 69,
authority, 5, 13, 59, 63, 67, 70, 71, 82, 95, 106, 132, 165
157, 160, 188 as unequal, 90, 106, 176, 190
authority, consolidation, 88 associative governance, 163
authority, devolved, 76, 88, 91, 116, 139, bargaining, 106, 132, 157, 166
145, 148, 151, 152, 153, 173, 174 bargaining, complexities of, 107, 108
authority, devolved to businesses, 132 business associations, 14, 133, 169, 170
authority, limits of, 167 collaboration/consultation, 139, 142, 144,
bureaucratic resources, 15, 49, 61, 71, 171 148, 154, 160, 165
capacity, 2, 20, 21, 28, 39, 59, 60, 63, 66, 67, collective-action problems, 159, 169, 170
89, 102, 163, 180 community partnerships, 138
capacity and marketisation, 115–16, 128, 131 cooperation, 170
capacity and markets, 120, 126 deliberative consensus, 156, 165, 170, 172
capacity decline and markets, 120–1, 126 empowerment, 139, 142, 145, 148
capacity enhancement through community enterprise bargaining, 168
engagement, 138 exchange relationship, 152
capacity enlargement and markets, 129 information-sharing, 139
capacity, enlargement of, 10, 23, 36, 43, 45, institutional incompatabilities, 157, 158
63, 64, 71, 87, 91, 92, 106, 114, 179, institutional obstacles, 157
191 joint projects, 142, 143
capacity, varying, 59 metagovernance of, 66
centrality in governance through persuasion, mutual dependence, 91, 106, 132, 144,
114 152
control, 72, 76, 127, 160 ‘negotiated self-coordination’, 153
control of regulatory systems, 89 and policy-making, 179
control, increase of, 76, 87, 88 positive-sum relationship, 64, 132, 133, 134,
decline of, 20, 21 144, 170, 179, 180, 181, 184
expenditure on economic subsidies, 72 power-sharing, 139, 151, 152, 160, 164,
fiscal resources, 62 174
INDEX 233
obstacles to, 156–8 child vaccination, 102

state reluctance to engage in, 156, 174 children’s residential home care, 127
public engagement, 142, 158 contracting-out of, 126
pyramidal, 90, 91 corporatist policy-making, 167
reciprocity, 160, 184 counter corporatism, 165
resource exchange, 4, 10, 13, 64, 95, 106 Drug Action Teams (DATs), 178, 179
role of the state, 151 drug addiction treatment, 177–9
state-centric relational approach, 190 metagovernance of, 179
zero-sum relationship, 64, 156, 190 and European Convention on Human Rights,
Stoker, Gerry, 4, 6, 11, 24, 32, 70 85
Stonewall, 105 foot-and-mouth disease crisis, 107
Strange, Susan, 115, 120 forest certification, 183
strategic relationships/partnerships, 3, 45, 63, government, persuasive abilities, 102
65, 75, 129, 190 government healthy eating campaign,
Streeck, Wolfgang, 169, 180 105–6
Sunstein, Cass, 189 health market property rights, 120
Sweden Homes and Community Agency, 92
counter-corporatism, 166 industry restructuring, 135
ecological modernisation policy, 92 Inland Revenue and ‘hold-ups’, 125
Szreter, Simon, 113 NARCO, 118
National Farmers Union (NFU), 107–8,
Taiwan, 75 164
Ministry of Economic Affairs, 75 National Health Service (NHS) as internal
taxation, 24, 26, 59, 61 market, 119
and globalisation, 40 National Treatment Agency, 179
as persuasion technique, 108 and neo-liberal reforms, 89
as proportion of gross domestic product new criminal offences, 84
(GDP), 26, 40 policy networks, 28
Taylor, Andrew, 38 primary health care, 158
technologies, new, 77, 79 prisons, 118
and policing, 84 public-private partnerships, 119, 122
Teisman, Geert, 151 rail privatisation, 9–10
terrorism, fear of regulatory tradition, 90
as justification for state intervention, 85 social capital, 111
Thaler, Richard, 189 Tackling Drugs to Build a Better Britain,
Thatcher, Margaret, 21, 89 178
The Economist, 55 Terrence Higgins Trust, 100, 102, 105, 106
‘third sector’ United States of America, 59
See organisations, non-governmental anti-littering campaign, Texas, 190
Thompson, Dennis, 157 Army, 16
Torfing, Jacob, 3, 4, 6, 150 ballot propositions, California, 142, 156
trade business associations and ‘organising markets’,
barriers, 76 171
liberalisation, 76, 117 citizenry, politically active, 147
protectionism, 76 clean air regulation, 86
trade unions, 165, 166 Community Partnership of Southern Arizona,
trade union movement, 14, 167 49
Transparency International, 123 community-based governance, resistance to,
Turkey 152
fishing practices, community management of, Congress, 81, 82, 129
159 conservation policy, 143
corporatist policy-making, 167
United Kingdom, 175 and defence outsourcing, 118, 127
Best Value, 147 See also Blackwater
British Medical Council, 92 and deregulation, 122
central state control, 151 farm subsidies, 66
Child Support Agency, 29 Federal Housing Finance Agency, 81
234 INDEX
United States of America (cont.) Wallington, Tabatha, 2, 68

Federal Reserve Bank, 15, 80 Weber, Max, 61
Federal Standards Accountancy Board, and government bureaucracies, 157
172 Weiss, Linda, 63, 66, 181
government and credit rating agencies, 129, welfare
130, 131 as source of social capital, 112
and Guantanamo Bay, 85 contractualism/conditional welfare payments,
health insurance industry, 33, 132 83, 125
investment in nuclear energy, 60 economics, 22, 25
led war in Iraq (2003) and marketisation, Whipp, Richard, 127
116, 127 Whitehead, Mark, 46, 68
Occupational Health and Safety Wilson, Graham, 16
Administration, 90 Wistow, Gerald, 158
Office of Management and Budget, 88 Wittman, Donald, 23
Patriot Acts, 85 Wong, Joseph, 75
regulatory tradition, 90 World Bank, 7
salmon fisheries joint project, 143 social capital, definition of, 110
Securities and Exchange Commission, 129, world banking system
172 See also global financial crisis
social capital, decline in, 111, 146 and credit ratings, 130
State, Department of, 127, 128, 129 part-nationalisation of, 80
sub-prime mortgage crisis, 15, 82 world commodity prices, 183
Temporary Assistance for Needy Families, response to, 73
83 world financial markets, 124
US Steel, 187 reform, 81
use of public referendums, 142 World Trade Organization (WTO), 29, 77
WasteWise program, 109 as undemocratic, 30
Doha round, 76
Vass, Peter, 90 World Values Survey, 111
Verba, Sidney, 147 World Wide Fund for Nature, 56, 184
Vigoda, Eran, 157 Wright, Erik Olin, 143, 145, 148
Vogel, David, 5, 89, 90, 181, 182
Yahoo, 78
wage-push inflation, 167
Wallace, Helen, 177 Zysman, John, 62

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What are the main arguments made in the book?

What are the main arguments made in the book?

What modes of governance does the book identify?

What modes of governance does the book identify?

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Stephen Bell and Andrew Hindmoor

Cambridge University Press

© Stephen Bell & Andrew Hindmoor 2009

This publication is in copyright. Subject to statutory exception and to the

ISBN-13 978-0-521-71283-5 Paperback

Cambridge University Press has no responsibility for the persistence or accuracy

List of figures and tables page xi

Chapter 1: A state-centric relational approach 1

Chapter 2: The resilient state 20

Chapter 3: Metagovernance and state capacity 46

The challenges of metagovernance 66

Chapter 4: Hierarchy and top-down governance 71

Chapter 5: Governance through persuasion 97

Chapter 6: Governance through markets and contracts 115

Chapter 7: Governance through community engagement 137

Power-sharing and the state 155

Chapter 8: Governance through associations 162

Chapter 9: Conclusion 186

2.1 Total social expenditure, selected OECD countries, 1980

T HE TERM GOVERNANCE has become a part of day-to-day

with non-state actors. Ultimately, the choice between society-centred and

OUTLINE OF THE BOOK

some see as the gradual emergence of ‘global governance’. We discuss the

T HE WORD GOVERNANCE derives from the Classical Greek

r terrorism: new legislation making it a criminal offence not simply to

a dramatic growth in the use of such contract arrangements. The basic

company. In reality, and as ministers have frequently boasted, Network

Many researchers have claimed that the restructuring of governance is a gen-

Thus, by building close relationships with non-state actors through alter-

The problem with [society-centred] governance accounts of state reform

There is a second reason to be wary of assuming that governments

even the end-points along a spectrum of institutional arrangements. As

in a loss of legitimacy. This is hardly surprising. Every action incurs

through persuasion – a mode of governance achieved through inculcating

VIA COMMUNITY ENGAGEMENT

now awash with citizens’ juries, consensus-building conferences, delib-

arguments that the state has been undermined by neo-liberal ideology,

A RGUMENTS ABOUT GOVERNANCE are closely connected to

to reach out to non-state actors in the private sector, in policy networks

which was initially developed within American universities in the 1960s

ammunition and a burgeoning policy agenda for neo-liberal politicians

GOVERNMENT OVERLOAD AND THE

Total social expenditure

Country 1980 2001 % change, 1980–2001

Australia 11.3 18.0 + 6.7

Source: Castles, 2007, 22.

welfare expenditure, one of the key targets of neo-liberal governments,

this puzzle is solved by considering the importance of social insurance

Country 1975 1995 2007 % change, 1975–2007

Australia 25.8 28.8 30.6 (2006) + 4.8

Source: OECD Tax Revenue Trends, 1965–2006 (2008 edition).

a global recession and additional public borrowing to rescue private banks

we became increasingly bothered in the late 1960s by those aspects of the

a lesser extent, Australia to sign the treaty (Australia eventually signed in