Globalization and Private Governance

Globalization has led to the emergence of private actors playing an increasingly important role in global governance. As economic activity has become more globalized, the power and influence of states have been challenged by transnational corporations, international non-governmental organizations, and other non-state actors (Strange, 1996). At the same time, many of the policy issues raised by globalization do not fall neatly within the jurisdiction of individual states, leading to governance gaps. In response, private actors have stepped in to fulfill governance functions traditionally associated with states, such as rule-making, implementation, monitoring and enforcement (Hall & Biersteker, 2002). This phenomenon has been described as private governance, defined as “regulation by non-state actors of their own activities or those of others in the absence of overarching state authority” (Green, 2014, p. 24).

This article provides an overview of the growth of private governance in the context of contemporary globalization processes. It begins by outlining the characteristics of contemporary globalization that have enabled the rise of private authority. It then discusses the range of private governance mechanisms that have emerged across different issue areas and economic sectors. The article examines debates around the legitimacy, accountability, and effectiveness of private governance. It explores the complex interplay between public and private authority in global governance. It also considers the implications of private governance for democratic sovereignty and representation. The article concludes by assessing the future prospects for and limits of private governance.

The Rise of Private Governance

Contemporary globalization is distinguished by high levels of economic interdependence, transnational production networks, and increased flows of capital, people, goods, services, and ideas across borders (Held & McGrew, 2003). This intensification of global interconnectedness has been driven by political choices to liberalize trade and capital accounts, technological changes enabling better communications and transportation, and economic restructuring (Mittelman, 2000). A key feature of contemporary globalization is that its central driving forces have been private market actors rather than states (Scholte, 2005). At the same time, many of the negative consequences of global market integration, such as financial instability, climate change, and rising inequality have crossed borders, exceeding the regulatory reach of individual nation-states. These governance gaps highlight the limits of a state-centric world order in addressing transnational challenges (Rosenau, 1995).

In this context, private actors have taken on growing authority in transnational regulation and governance. According to Cutler et al. (1999), contemporary global private governance has four key characteristics: 1) it operates through decentralized forms of organization with no overarching hierarchy; 2) it relies on voluntary standards and norms rather than codified rules; 3) compliance is driven through market mechanisms rather than political authority; and 4) it taps distributed networks rather than territorial jurisdiction. Private governance takes shape through private regulatory organizations and cross-sectoral partnerships that bring companies, NGOs, experts, and sometimes states together to develop voluntary standards and certification programs (Bäckstrand, 2006). For example, the Forest Stewardship Council, a non-profit established in 1993, has developed one of the most widely recognized voluntary sustainable forestry standards used today (Cashore, 2002).

Overall, private governance covers self-regulation by individual corporations, business-driven regulation through associations and collaborative partnerships, NGO monitoring and certification programs, and hybrid arrangements mixing state, business, and civil society actors (Vogel, 2010). It relies on various tools – voluntary codes of conduct, certification and labeling programs, private contracting, and arbitration, market-based incentives and sanctions, and transparency policies – rather than state authority and law (Abbott & Snidal, 2009). The next sections review the growth of private governance across different sectors and issue areas.

Private Governance in Different Sectors

A variety of private governance mechanisms have emerged across economic sectors, including forestry, fisheries, mining, apparel, food, finance, and technology.

Forestry

In forestry, certification programs like the Forest Stewardship Council and industry associations like the Sustainable Forest Initiative have established voluntary standards for sustainable logging verified through third-party auditing (Cashore et al., 2004). These schemes certify timber and wood products as sustainably sourced through eco-labeling.

Fisheries

The Marine Stewardship Council, founded in 1996, administers a certification and eco-labeling program for sustainable fisheries based on third-party audits of operators (Gulbrandsen, 2010). Industry groups have also created voluntary codes of conduct for reducing bycatch and protecting marine environments.

Mining

The International Council on Mining and Metals, founded in 2001, has developed sustainable mining standards covering environmental, human rights and labor issues. Members commit to 10 principles and undergo third-party assessments (Dashwood, 2012).

Apparel

After activist pressure exposed poor working conditions, apparel companies adopted vendor codes of conduct in the 1990s banning child labor and sweatshops. Monitoring programs like the Fair Labor Association audit major supplier factories (Vogel, 2010).

Food

Major food corporations have developed private standards enforced through audit regimes and certification programs that cover issues from organic and fair trade labeling to food safety and traceability. For example, GlobalGAP standardizes agricultural production practices for food suppliers in over 100 countries (Havinga, 2006).

Finance

Rating agencies act as private regulators of global finance by evaluating the creditworthiness of financial instruments and national economies. Self-regulatory organizations like the International Swaps and Derivatives Association develop rules and standard contracts for derivatives markets (Sinclair, 2005).

Technology

Technology firms like Facebook, Twitter and Google enforce rules and community standards on user-generated content on their platforms that shape public discourse and debate (Gorwa, 2019). Industry associations have developed voluntary principles and guidelines for ethical challenges in areas like artificial intelligence and genetic engineering.

Private Governance Across Issues

In addition to sectoral initiatives, private governance arrangements have emerged around many cross-cutting environmental, social and economic issues.

Environmental Protection

Private eco-certification and labeling programs have proliferated, enabling consumers to choose products meeting standards from sustainable logging and fishing to organic agriculture (Bernstein & Cashore, 2007). Industry groups and multi-stakeholder partnerships develop voluntary environmental management standards on issues from greenhouse gas emissions to biodiversity loss.

Human Rights

The promotion of corporate codes of conduct and social responsibility initiatives since the 1990s has led firms to adopt human rights principles and workplace standards enforced through auditing and monitoring (Vogel, 2010). Reporting and benchmarking initiatives like the UN Global Compact encourage transparency.

Labor Standards

NGO monitoring of corporate supply chains along with shareholder activism has promoted adoption of private labor regulations and factory inspection programs improving worker conditions in sectors like apparel and food (Locke, 2013). Global framework agreements between multinational firms and international labor unions also establish voluntary labor standards.

Product Safety

Businesses collaborate to develop voluntary standards and industry norms governing product and process safety. For example, the International Electrotechnical Commission provides safety testing for electrical goods while the International Organization for Standardization has over 22,000 standards across industries.

Advertising

Industry associations develop advertising codes and standards on issues from misleading claims to controversial products that form guidelines for appropriate marketing content and techniques (Boddewyn, 1989).

These examples illustrate the breadth of private governance that has emerged across economic sectors and policy domains as private authority shapes an increasingly wide range of cross-border rules and practices. The next sections assess some of the key issues and debates regarding private governance and its implications.

Debates around Private Governance

The rise of private authority in global governance has generated academic debates around its legitimacy, accountability, effectiveness, and implications for state sovereignty and democratic representation.

Legitimacy

A major critique is that private governance lacks democratic legitimacy and procedural protections compared to public regulation (Dingwerth, 2008). Private rule-making often has limited transparency and participation since it largely involves negotiations between firms and NGOs rather than elected representatives. There are no formal public accountability mechanisms for businesses setting their own voluntary guidelines. The voluntary nature of private schemes raises concerns about inconsistent and patchy governance, as many bad actors can simply opt out of standards (Bernstein & Cashore, 2007).

In response, some argue private governance has pragmatic legitimacy based on incorporating business realities and technical expertise, which facilitates adoption and compliance (Black, 2008). Its voluntary nature provides flexibility and opportunities for organizational learning. Critics counter that such output-based legitimacy arguments cannot compensate for lack of democratic procedural legitimacy in private decision-making (Dingwerth, 2007). Overall, the democratic deficits of private governance remain a core challenge.

Accountability

A related critique is that private governance lacks accountability (Koenig-Archibugi, 2010). Reputational accountability to consumers provides limited oversight since information gaps persist around corporate practices. NGO and expert involvement enhances transparency but cannot substitute for political accountability in the public interest (Gugerty, 2009). Lawsuits provide ex post accountability but are costly and offer limited coverage.

Proponents argue that various accountability mechanisms have developed, including third-party audits and certification programs, public reporting initiatives like the Global Reporting Initiative, benchmarking and ranking schemes, internal corporate compliance systems, industry ombudsmen, and grievance procedures (Bernstein & Cashore, 2007; Bäckstrand, 2006). Butthese oversight mechanisms are selective, decentralized and largely dependent on media and NGO pressure rather than systematic processes. Fundamental accountability gaps remain regarding who private regulators answer to and how they incorporate public interests (Koenig-Archibugi, 2010).

Effectiveness

Scholars debate whether private governance is effective in achieving public policy goals (Green, 2014; Bernstein & Cashore, 2007). Optimists argue it fosters learning and flexibility to develop context-specific standards and leverage business interests to achieve change (Overdevest, 2010). Private schemes are credited with making real improvements on issues from working conditions to sustainable forestry (Locke, 2013; Gulbrandsen, 2010). Critics counter that private governance often produces vague and low standards that codify existing norms rather than drive progressive change. Compliance and implementation problems also persist due to auditing limitations, free rider issues, and lack of strong enforcement tools (Short & Toffel, 2010). Empirical evidence regarding effectiveness remains mixed.

State-Business Relations

Some view private governance as representing a shift from hierarchical state authority to polycentric networks of public-private collaboration (Abbott & Snidal, 2009). But critics argue it reflects increasing corporate capture and erosion of public capacity, as businesses shape regulatory agendas while cutting public budgets (Falkner, 2003). Complex debates persist around whether private schemes complement, undermine or hollowing out state regulatory roles. Evidence suggests partnerships with business can expand state capacity but may also delegitimize public policy-making over the long-term (Schäferhoff et al., 2009). The impacts depend on context and institutional design.

Democratic Implications

More broadly, some argue private governance undermines democratic sovereignty, citizenship and representation by transferring authority to global firms and NGOs with limited connections to affected publics (Macdonald & Macdonald, 2006). Private regulation displaces public decision-making and politicians’ responsibility for managing globalization pressures. But others contend focusing on democratic deficits ignores how private schemes open new space for civic participation and public debate through certification processes and campaigns targeting corporate responsibility (Gugerty, 2009; Dingwerth, 2007). Private governance thus produces complex reconfigurations rather than outright displacement of democratic practices.

Overall, private governance generates ongoing normative and empirical debates regarding its legitimacy, accountability, effectiveness, and embeddedness within wider structures of authority and participation. Critical perspectives highlight democratic risks and limitations while more optimistic views emphasize opportunities to harness business influence for public goals. As private authority expands, these issues remain intensely contested within both scholarship and policy.

The Interplay Between Public and Private Governance

Despite debates on whether private authority challenges or complements state power, in practice their relationship is complex and interdependent rather than zero-sum (Cafaggi, 2010). Governments rely on information, technical expertise and implementation capacity from businesses and NGOs around regulation and standards. Firms depend on stable public governance to enable global markets and trade. Varied patterns of interplay between public and private authority have developed across issues and contexts.

Mandating

Governments directly mandate private standards in areas like financial reporting and food safety, incorporating them into binding regulation. For example, the US Clean Air Act requires the Environmental Protection Agency to use private standards from non-governmental organizations when making pollution control rules. Mandating makes private schemes more legitimate and enforceable through state authority.

Endorsing

States endorse voluntary standards to encourage their adoption, like government purchasing policies favoring certified sustainable forest or fishery products. Endorsement enhances the credibility and impact of private schemes. For example, over 80 governments reference leading voluntary sustainability standards in their procurement policies.

Facilitating

Public actors play convening and coordinating roles to facilitate private governance initiatives. For example, the UN Environment Program and UN Global Compact have fostered corporate sustainability partnerships and reporting frameworks. Regional fishery management organizations assist formation of voluntary bycatch reduction codes in their sectors.

Adopting

Governments integrate private standards into public regulation, such as the EU’s adoption of International Accounting Standards developed by a private organization. This delegates technical rule-making while retaining public oversight and enforcement.

Hybridity

Collaborative hybrid arrangements like the Forest Stewardship Council and Marine Stewardship Council combine state, business and civil society actors in complex co-regulatory relationships merging public and private authority (Ponte & Daugbjerg, 2015).

These modes of interplay highlight that private governance both shapes and is shaped by state policies and rules. Many private schemes strategically leverage government recognition and delegation to bolster their legitimacy and sway. But they also depend on public enforcement and legal infrastructures to incentivize compliance. The interplay varies across issues, economic sectors, and national contexts based on local institutional configurations and political dynamics rather than following a single pattern. Private governance and state authority are not intrinsically opposed but intertwined in complex blends of competition and collaboration.

Future Trajectories

Looking ahead, debate continues on whether private governance will continue expanding or face limitations. There are several factors supporting its ongoing growth. Global policy issues like climate change and corporate social responsibility are rising in public concern but remain politically divisive, providing space for private initiatives. Complex cross-border problems pose coordination challenges exceeding state capacity. rapidly evolving technologies and markets require specialized technical expertise favouring industry self-regulation. Market incentives like consumer trust and investor demands for transparency rewards voluntary action. Social media activism empowers NGO monitoring and mobilization around private governance.

However, some boundaries and countervailing forces may constrain private authority. As private schemes expand, concerns over legitimacy and accountability may spur public demands to rein in industry self-regulation. State scrutiny of technology platforms like social media shows a reassertion of governmental authority over private sector activities with major public impacts. Private governance functions best when it aligns with business interests in stability and credibility, but clashes when it imposes unwanted constraints, highlighting the limits of relying on voluntary measures without state enforcement power. The unevenness of private governance across issues and sectors also risks creating regulatory gaps rather than comprehensive global solutions.

Overall, the trajectory remains uncertain and contested (Levi-Faur, 2005). But private governance appears deeply entrenched as a permanent feature of the contemporary global order. As long as governance gaps created by globalization persist, private authority seems poised to continue growing across issues and sectors, though the forms it takes will co-evolve with state policy and public opinion. The COVID-19 pandemic provides the latest example where voluntary private initiatives around vaccine access and coordinating travel restrictions have filled gaps in urgent cross-border governance needs exceeding state capacities. Private governance appears highly adaptive, though it continues to face ongoing critiques and recalibration in relation to countervailing forces of democratic accountability and state sovereignty.

Conclusion

This article has provided an overview of the rise of private governance under conditions of contemporary globalization characterized by transnational economic integration and regulatory gaps exceeding the jurisdiction of individual nation-states. Private authority has expanded through voluntary standards, certification schemes, corporate codes of conduct, industry self-regulation, NGO monitoring, and multi-stakeholder partnerships that shape cross-border rules and practices across a widening array of sectors and issue areas. I assessed debates around the legitimacy, accountability and effectiveness of private governance, along with its complex interplay with state authority and impacts for democratic representation. Issues of unelected industry influence versus pragmatic flexibility, oversight gaps versus innovative engagement, and erosion or recalibration of public sovereignty remain contested. Private governance appears deeply embedded within the contemporary global order, though its future evolution in relation to countervailing forces remains uncertain. This article provides an introduction to key issues surrounding this important trend in global regulation and governance.

References

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SAKHRI Mohamed
SAKHRI Mohamed

I hold a bachelor's degree in political science and international relations as well as a Master's degree in international security studies, alongside a passion for web development. During my studies, I gained a strong understanding of key political concepts, theories in international relations, security and strategic studies, as well as the tools and research methods used in these fields.

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