(Studies in The Political Economy of Public Policy) Giliberto Capano, Michael Howlett, M. Ramesh (Eds.) - Varieties of Governance - Dynamics, Strategies, Capacities-Palgrave Macmillan UK (2015

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M. Ramesh, Lee Kuan Yew School of Public Policy, National University of
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Michael Howlett, Simon Fraser University, Canada
John Hobson, University of Sheffield, UK
Stuart Shields, University of Manchester, UK
Lee Jones, Queen Mary, University of London, UK
Kanishka Jayasuriya, University of Adelaide, Australia
Shaun Breslin, University of Warwick, UK
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Wil Hout, Institute of Social Studies, Erasmus University, The Netherlands
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EU–ASEAN RELATIONS IN THE 21ST CENTURY
Towards a Stronger Partnership
Philippe Zittoun
POLICY AS POLITICS
Discursive Transformations and Public Policymaking
Philip Mader
THE POLITICAL ECONOMY OF MICROFINANCE
Financialising Poverty
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Varieties of Governance
Dynamics, Strategies, Capacities
Edited by
Giliberto Capano
Professor, Scuola Normale Superiore, Italy
Michael Howlett
Burnaby Mountain Chair, Simon Fraser University, Canada and Professor, National
University of Singapore
and
M. Ramesh
Professor, National University of Singapore
Editorial matter, selection, introduction and conclusion © Giliberto Capano,
Michael Howlett and M. Ramesh 2015
Individual chapters © Respective authors 2015
Softcover reprint of the hardcover 1st edition 2015 978-1-137-47796-5
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Library of Congress Cataloging-in-Publication Data
Varieties of governance / edited by Giliberto Capano, Michael Howlett,
M. Ramesh.
pages cm.—(Studies in the political economy of public policy)
1. Comparative government. 2. Policy sciences. I. Capano, Giliberto,

1960– editor of compilation. II. Howlett, Michael, 1955– editor of compilation.
III. Ramesh, M., 1960– editor of compilation.
JF51.V37 2015
320.3—dc23 2015002376
Contents
List of Figures vii
List of Tables viii
Acknowledgements ix
Note on Contributors x
Part I Introduction: Varieties of Governance as a

Concept and Empirical Reality
1 Re-thinking Governance in Public Policy: Dynamics,
Strategy and Capacities 3
Giliberto Capano, Michael Howlett and M. Ramesh
Part II Governance Dynamics

2 Governing Cross-border Capital Flows: The Dynamics of
Capital Account Policies 27
Manuela Moschella
3 Similar Regulatory Challenges but Contrasting Modes of

Governance? The Puzzle of Governing Human
Biotechnology across Western Europe 51
Isabelle Engeli and Christine Rothmayr Allison
4 Environmental Policy and Governance: Bringing the

State Back In (Again)? 74
Anthony R. Zito
Part III Governance Strategies

5 Federal Strategies for Changing the Governance of Higher
Education: Australia, Canada and Germany Compared 103
Giliberto Capano
6 Research Policy as “Carrots and Sticks”: Governance

Strategies in Australia, the United Kingdom and New Zealand 131
Jenny M. Lewis
v
vi Contents
7 Changing Multi-level Governance: The Regained

Centrality of National Policy-makers in Recasting
Pensions in Central Eastern Europe 151
David Natali
Part IV The Capacities of Governance Modes:

Explaining Variation in Modes of Governance
8 Capacity and Autonomy: An Exploration of Fukuyama’s
Governance Hypothesis 173
Eduardo Araral, Riccardo Pelizzo, Aziz Burkhanov, Yu-wen Chen,
Saltanat Janenova and Neil Collins
9 Governing Health Care in an Imperfect World: Hierarchy,

Markets and Networks in China and Thailand 194
M. Ramesh, Xun Wu and Michael Howlett
10 Governance Capacities in the European Union: Normative

Goals and Empirical Evidence 211
Eva G. Heidbreder
Part V Conclusion: Moving Forward in Studies of

Governance Arrangements
11 The Past and Future of Governance Studies: From
Governance to Meta-governance? 235
Jeremy Rayner
Index 255
List of Figures
3.1 Dynamics in modes of governance over time 54

8.1 Intra- and inter-regional variations in perception on
control of corruption in Asia, using normalized scores 181
8.2 Inter- and intra-regional comparison of government
effectiveness in Asia, using normalized scores 186
9.1 Expenditure on health, total and private 205
9.2 Share of government and out of pocket (OOP)
expenditure in total expenditure on health (TEH) 205
11.1 The dimensions approach 241
vii
List of Tables
2.1 Governance modes of cross-border capital flows 28

4.1 Government versus governance framework 77
4.2 Comparative multivariate conclusions 95
5.1 Types of governmental strategy 105
6.1 Perceptions of the research assessment system 144
6.2 University and government policy changes 146
8.1 Comparison of governance scores in Asia (2011) 178
8.2 Stylized comparison between democracy and capacity 184
9.1 Governance tools, problem types and modes of governance 197
11.1 “Modalities” of governance 239
11.2 Four types of problem structures 244
11.3 Problem structure and “policy-politics” typology 245
viii
Acknowledgements
This book is the culmination of several years of effort by an accom-

plished group of international experts on the subject who have worked
together at conferences held by the International Political Science
Association, the International Conference on Public Policy and others,
and have been presented and discussed in dedicated workshops
including a special two-day session held at the National University of
Singapore in February 2013.
ix
Notes on Contributors
Christine Rothmayr Allison is a professor in the Department of

Political Science at the University of Montreal. Her fields of interest
are comparative courts and politics and comparative public policy. Her
recent research analyses the agenda of the Canadian Supreme Court
in comparative perspective and looks at how courts contribute to
shape biotechnology policies in Europe and North America. Her books
include The Politics of Biotechnology: Policy Networks, Institutions and
Internationalization (co-edited with E. Montpetit and F. Varone, 2007) and
Comparative Policy Studies: Conceptual and Methodological Challenges (with
Isabelle Engeli, 2014). Her work has been published, among others, in
European Journal of Political Research, Comparative Political Studies, Journal
of European Public Policy and West European Politics.
Eduardo Araral is an assistant professor at the Lee Kuan Yew School

of Public Policy, National University of Singapore. He is consultant to
numerous donors and governments, and specializes in the study of
institutions for collective action.
Aziz Burkhanov is an assistant professor at the Graduate School of

Public Policy at the Nazarbayev University in Kazakhstan. He specializes
in identity and language policies.
Giliberto Capano is Professor of Political Science and Public Policy at

the Scuola Normale Superiore, Florence, where he coordinates the PhD
programme in Political Science and Sociology. He is the co-editor of the
journal Policy & Society and Journal of Comparative Policy Analysis. His
research focuses on governance dynamics, policy change, legislative
behaviour and comparative policy. He has published on these issues in
a number of journals, including Journal of European Public Policy, Public
Administration, Comparative Education Review, Higher Education, Higher
Education Policy, European Political Science, Journal of Comparative Policy
Analysis, South European Politics and Policy and Journal of Legislative Studies.
Yu-wen Chen is an associate professor at the Graduate School of Public

Policy at the Nazarbayev University in Kazakhstan. She is Executive
Editor of Asian Ethnicity, and specializes in Chinese politics and ethnic
politics.
x
Notes on Contributors xi
Neil Collins is Dean of the Graduate School of Public Policy at the

Nazarbayev University in Kazakhstan. He specializes in Chinese
politics.
Isabelle Engeli is an associate professor at the Graduate School of Public

and International Affairs at the University of Ottawa. Her research
focuses on biotechnology regulatory regimes and gendering policy atten-
tion and action. Her work has been awarded the 2012 APSA Best Paper in
Comparative Policy Analysis, and appears in European Journal of Political
Research, European Journal of Public Policy, West European Politics and
Regulation & Governance. She has recently edited Morality Politics in Western
Europe: Parties, Agenda and Policy Choice (with Christoffer Green-Pedersen
and Lars Thorup Larsen, 2013) and Comparative Policy Studies: Conceptual
and Methodological Challenges (with Christine Rothmayr Allison, 2014).
Eva G. Heidbreder is Junior Professor of Political Science/EU Integration

at the Heinrich Heine University in Düsseldorf. Her research focuses,
in particular, on public policy and public administrative aspects of EU
integration. She holds a PhD from the European University Institute
in Florence and a post-graduate degree in European Integration from
the Institute for Advanced Studies in Vienna. She has worked at the
Hertie School of Governance and the Freie Universitaet Berlin, and has
had visiting professorships at the Humboldt University Berlin and the
University of Konstanz.
Michael Howlett is Burnaby Mountain Chair in the Department of

Political Science at Simon Fraser University, Canada, and Yong Pung
How Chair Professor at the Lee Kuan Yew School of Public Policy at the
National University of Singapore. He specializes in public policy anal-
ysis, political economy, and resource and environmental policy. He is
the author of Canadian Public Policy (2013) and Designing Public Policies
(2011), and co-editor of Policy Work in Canada (2014). He is editor of the
Annual Review of Policy Design and Policy Sciences, and co-editor of Journal
of Comparative Policy Analysis and Policy & Society. His articles have been
published in numerous professional journals in Canada, the United
States, Europe, Latin America, Asia, Australia and New Zealand.
Saltanat Janenova is an instructor at the Graduate School of Public

Policy at the Nazarbayev University in Kazakhstan. She specializes in
social policies and public services provisions.
Jenny M. Lewis is Professor of Public Policy at the School of Social and
Political Sciences of the University of Melbourne, and an Australian
xii Notes on Contributors
Research Council Future Fellow for 2013–16. She is also the Research
Director for the Melbourne School of Government. She is a public policy
expert, with particular interests in governance, policy influence and the
policy process. She has published widely in journals and books, and
has been awarded American, European and Australian prizes for her
research. Her most recent book is Academic Governance: Disciplines and
Policy (2013).
Manuela Moschella is an associate professor at the Scuola Normale

Superiore, Florence. Her research expertise focuses on international
financial governance and regulation. She is the author of Governing
Risk: The IMF and Global Financial Stability (2010) and co-editor of
Great Expectations, Slow Transformations: Incremental Change in Post-crisis
Regulation (2013). She has published on these issues in a number of jour-
nals, including Review of International Political Economy, New Political
Economy, The Journal of Public Policy and Comparative European Politics.
She co-edited the new Handbook of Global Economic Governance (2013).
David Natali is an associate professor at the University of Bologna in

Forlì. He also teaches the PhD course on Political Science and Sociology
in the Scuola Normale Superiore, Florence. He collaborates with the
European Social Observatory of Brussels. He holds a PhD from the
European University Institute of Florence. His research focuses on
pensions reform in Europe, the politics of the welfare state, and EU
social policy and governance.
Riccardo Pelizzo is an associate professor at the Graduate School of
Public Policy at the Nazarbayev University in Kazakhstan. He previously
worked for the World Bank, and specializes in governance and corrup-
tion control.
M. Ramesh is Professor of Public Policy at the Lee Kuan Yew School

of Public Policy of the National University of Singapore. He has served
as the Founding Head of the Department of Asian and Policy Studies
and Chair Professor of Governance and Public Policy at the Hong Kong
Institute of Education and he has been Professor of Social Policy at the
University of Hong Kong, and Chair of the Department of Government
and International Relations at the University of Sydney. Specializing
in public policy and governance in Asia with a particular focus on
social policy, he has authored and edited many books. His co-authored
textbook Studying Public Policy has been translated into over a dozen
languages and is used throughout the world. His books and journal arti-
cles on social policy in Asia are the standard starting points for research
Notes on Contributors xiii
on the subject. He has also published extensively in reputed interna-

tional journals. He is the co-editor of Policy and Society, and serves on
the editorial board of several reputed journals. He has also served as a
consultant to prominent international organizations.
Jeremy Rayner is a professor and Centennial Research Chair at the

Johnson-Shoyama Graduate School of Public Policy, University of
Saskatchewan. His research focuses on theories of the policy process (espe-
cially policy learning and policy change), policy analysis, governance,
resource policy, energy policy and environmental policy. His research
currently focuses on governance arrangements for complex policy prob-
lems, especially at the intersection of forests, climate change and energy.
As chair of the Global Forest Expert Panel on the International Forest
Regime during 2009–2011, he was responsible for editing and contrib-
uting to the panel’s assessment report, and co-authoring and presenting
the panel’s policy brief to the ninth session of the United Nations Forum
on Forests in January 2011.
Xun Wu is Professor of Public Policy at the Lee Kuan Yew School of

Public Policy of the National University of Singapore. He specializes in
the analysis and evaluation of policy reforms in developing countries,
with an emphasis on social and environmental sectors. His current
research focuses on water governance, environmental valuation, power
sector restructuring, anti-corruption strategies, comparative health-care
reforms and integrated approaches to sustainable development. He
teaches research methods for policy analysis, policy evaluation, cost–
benefit analysis, environmental policy and natural resource manage-
ment. He has been a consultant to the World Bank, Asian Development
Bank, UNEP and International Vaccine Institute for a variety of assign-
ments ranging from electricity sector reform to integrated water resource
management.
Anthony R. Zito is Professor of European Public Policy at Newcastle

University. Zito is currently Co-Director of the Jean Monnet Centre
for Excellence at Newcastle University and co-editor of the journal
Environmental Politics. He has authored Creating Environmental Policy
in the European Union and numerous journal articles on the European
Union policy process and environmental actors and policy-making, as
well as recently co-authoring Environmental Governance in Europe (2013).
He was a 2007 Leverhulme Fellow, and is currently funded by a British
Academy grant to compare governance arrangements in Germany and
the Netherlands to Australia and Canada.
Part I
Introduction: Varieties of
Governance as a Concept and
Empirical Reality
1
Re-thinking Governance in Public
Policy: Dynamics, Strategy and
Capacities
Giliberto Capano, Michael Howlett and M. Ramesh
1.1 Introduction
Governance is not a fashion, but a firmly established lens through which

to analyse the complexity of contemporary policy-making, that is the way
in which a society and its political processes are organized and steered.
Thus, governance needs to be seen as a general concept within political
analysis that represents a necessary, heuristic tool with which to describe
some of the complexity of political processes. Governance is not only a
fashionable term, but one destined to remain with us for some time yet.
However, despite a great deal having been written on the subject
in recent years, questions remain about many fundamental aspects
of governance. This is especially the case in both defining and under-
standing governance modes and their dynamics, the subject of this
book. Many “varieties of governance” exist, both cross-nationally and
cross-sectorally, and understanding why this is the case and how it has
come about is important for the future of governance studies.
In this introductory chapter, after a brief reflection on the heuristic
relevance of the concept, we focus on the following three specific aspects
of governance: dynamics, strategy and capacity.
The notion of governance dynamics suggests that “modes of govern-
ance” identified in earlier studies may not be stable, but rather dynamic,
meaning that that there are no set governance arrangements within a
given political system. These may change over the course of time, as
governments adopt different architectural features and mix policy tools
in different ways. A mode of governance, in this perspective, is an equi-
librium moment, rather than a permanent stable construct.
3
4 Giliberto Capano, Michael Howlett and M. Ramesh
Governance strategy is a concept that reflects this ability of govern-

ments to alter governance arrangements and give them their dynamic
character. It suggests that behind every mode or governance equilibrium
lies a specific undertaking by different policy actors, as they seek the
best governance arrangement to attain their purposes, and consequently
try to see that it is established. This is particularly true of governments,
since they continue to be in charge of systemic responsibility and are
the most powerful authoritative actors in virtually all societies.
Governance capacity is a third critical concept, one which emphasizes
that not every choice of governance mechanism is likely to be equally
successful in terms of attaining government goals. Every governance
arrangement must be effective, that is capable of resolving political
and policy problems, but simply designating or advocating a specific
arrangement does not ensure its success.
1.2 Governance as a heuristic means
Following 20 years of enthusiastic discussion as a theoretical panacea

capable of finally explaining contemporary policy-making, the time has
come to start afresh in the study of governance as a social phenomenon.
In fact, following the passing of the fashion of studies of “new govern-
ance” arrangements due to its empirically unsustainable nature, there is
now a fair degree of agreement among public policy scholars as to what
governance is, and what it does
The general concept behind governance thinking – of complexity in
government policy processes beyond the confines of what goes on in
formal state structures – is not a new one. This is because policy-making
is an arena full of actors who are not only vertically structured, but are
also linked by a series of informal relationships, and this is not a recent
discovery (Solomon 2008; Richardson 2012). Nevertheless the use of
the term “governance” to capture these additional aspects of govern-
ment and governing achieved importance not because it was fashion-
able, but because it was, and still is, necessary to redefine the scope of
public policy research and of all branches of political scientific analysis
where a multitude of actors interact in both formal and informal ways
(for example: international relations, international political economy,
global studies).
The governance lens is useful in this context because one can re-direct
the analytical perspective away from the details of formal institutional
behaviour and towards answering the fundamental question of polit-
ical theory, namely “How is the social and political order possible?” We
Re-thinking Governance in Public Policy 5
know perfectly well that in order to answer this question we need to

understand how political power is distributed and exercised, and how
policy problems are dealt with by it. In other words, we need to under-
stand how society is steered. And here the concept of governance is
useful from a heuristic perspective, since it enables us to render the
apparently chaotic reality of policy-making organized and readable by
describing sets of state and societal relationships as different “modes of
governance”.
Assuming such an inquisitorial pose allows one to deal with the fact
that political and policy reality cannot be grasped simply by observing
the behaviour of those actors who are formally granted power (govern-
ments, parliaments, courts). Of course this does not mean that hierarchy
no longer matters (Goetz 2008; Heritier and Lehmkuhl 2008; Bell and
Hindmoor 2009; Lynn 2012). Many actors participate in the power game
by pursuing their own interests and ideas; and there are many places
where such participation may be witnessed. However many different
games can be played by policy actors at different levels, or at different
times at the same level and such complexity cannot be resolved, from
either an analytical or a practical perspective, simply by recourse to
the hierarchical approach to steering. There will always be a degree of
hierarchy, because governments exist and have to do their job, but this
blends with other principles of co-ordination and co-exists with market-
driven principles and network-oriented behaviour, and a focus on
“governance” mechanisms and modes helps address this complexity.
Governance thinking, however, requires a dynamic orientation
since the way in which society and its political processes are steered
can radically change, at least in terms of the intensity of this steering
process. It is clear that even in the past, governments were not the
sole decisional forces, at least not in democratic political systems and
even dictatorial and totalitarian systems encountered resistance from
many elements of society. However, thinking about the dynamics of
general modes of governance in recent years has focused on shifts away
from governments to societal actors and has attributed this change to
two converging factors. On the one hand, it notes a trend towards the
current fragmentation of the policy-making process, during which a
number of actors have found new room for manoeuvre they may not
have had in the past (interest groups, non-governmental organizations
(NGOs), social movements), and notes the fact that many countries
have decentralized their political institutional arrangements in response
to it. On the other hand, studies have also shown that this change has
been intentionally pursued by governments, following the discovery
that the traditional command and control approach to steering was

inefficient and ineffective, and that the involvement of other actors
in policy-making could help temper the constant social pressure they
were under. These counter-forces have generated what may appear at
first sight to be a radical change of the way in which society is steered,
involving more actors and making decision-making more horizontal
and less hierarchical, but on closer inspection emerges as a complex
new trend in designing the ways of governing.
After lengthy, heated debate among policy scholars, the original
dichotomy proposed by a first generation of governance scholars –
between old governance/new governance – finally appears now to
have been superseded. Only those with a specific normative afflatus
continue to see current governance as something totally different
from “old” governance (Rhodes 1997; Sabel 2011; Zeitlin 2011). Not
only are such dichotomies historically inaccurate, many scholars have
pointed out that the features of the new governance arrangements
often promoted as effective responses to changes in state–societal
arrangements (polycentrism, flexibility, co-operation, deliberation,
non-coerciveness) seem to be less effective than expected and, above
all, that their effectiveness and enforcement are closely linked to the
presence and actions of public institutions and their own fundamental
resources (authority, financial means, information and organization)
(Davis 2002; Richards and Smith 2002; Kooiman 2003; Heritier and
Eckert 2008; Lynn 2010). So, new governance often simply means
that new actors have entered the policy-making arena and new policy
instruments (contracts, partnership, recommendations, participation,
benchmarking, learning) have been added to the traditional policy-
steering tool-kit. These changes are undoubtedly important, since they
have increased the complexity of policy-making, and thus its possible
dynamics, direction and equilibria, but not do not represent a sharp
distinctive non-linear break with the past.
Thus, it is clear that the ways in which policy is steered in many coun-
tries and sectors at present are less monocentric than previously, as they
are characterized by the presence of a plethora of policy actors; however,
whether this means a reduced degree of hierarchy and greater co-opera-
tion is a matter for empirical research to establish, and cannot be taken
for granted. Furthermore, the use of new policy tools does not mean that
they do not need to be hierarchically addressed, at least from a distance,
through various other policy instruments that governments adopt in
such cases: instruments such as financial incentives, periodic evaluation,
the request for transparent processes, and so on (Howlett 2011).
So while some of the ingredients have changed in contemporary

governance arrangements, we need to direct our research towards
answering the right questions with respect to their import and variety.
Having superseded the problem of whether or not there is more, or less,
government in governance, it is now time to examine how governments
can interpret their role in governance arrangements, which new actors
really matter, how these arrangements evolve over time, and whether,
and in what sense, such arrangements are effective.
1.3 Elements of governance: beyond the

typological tradition
Political scientists use typologies as a methodological tool with which

to order reality and grasp the most important aspects of a political
phenomenon and there is a vast array of typologies in governance
studies. The typological tradition present in the governance literature
gives a rather clear picture of what may be the more important dimen-
sions of governance arrangements. Many scholars emphasize the funda-
mental principles of co-ordination on which a governance arrangement
can be based. Considine and Lewis (2003), for example, focus on hier-
archy, network and enterprise bases of state–societal linkages. Others
like Treib et al. (2007) focus on three pairs of dichotomies related to
both co-ordination modes but also tools and actors involved in specific
arrangements (soft vs. hard law; only public actors/only private actors;
hierarchy vs. market). These are applied according to the specific field
of governance (politics, policy and polity) involved. Börzel (2010), on
the other hand, focuses above all on the institutionalized structure of
governance, by distinguishing between hierarchy, competition and the
negotiating system. Howlett (2011), by using the dichotomization of
implicit and explicit rules, and of hierarchical and non-hierarchical
interaction, has proposed four types of governance arrangements: legal,
network, corporate and market. Howlett et al. (2009) and Tollefson et al.
(2012) have gone beyond the focus on the fundamental co-ordination
mechanisms characterizing the previous typologies, and assume that
governance arrangement fulfil a multi-dimensional space in that each
can be more, or less, hierarchical, and thus more, or less, plurilateral,
with corresponding possibilities in their institutional, political and regu-
latory dimensions.
All of these typologies offer important insights into the ways in which
governance arrangements can be designed, but nevertheless they only
portray a rather general picture of what governance is. They clarify the
fundamental co-ordinating logic of a governance arrangement, but

as always happens with typologies, they only offer a static picture of
something which is intrinsically dynamic. Governance arrangement
are usually composed of a prevailing co-ordinating principle (hierarchy,
market, network) accompanied by other principles (it is quite rare to
find a monopolistic governance arrangement, that is an arrangement
governed or monopolized by just one co-ordinating principle). The
reason for this is not only the ever-present shadow of hierarchy, but
also because policy-making is usually characterized by the asymmetric
co-existence of different co-ordinating principles. For example, in educa-
tion policy – even in the more market-driven systems (for example, in
the Netherlands or England) – policy instruments such as institutional
autonomy and competition are accompanied by the supervision of
public institutions and work through the involvement of several stake-
holders in a network-based system (Woessman 2007; OECD 2010) Over
the course of time, the balance between these constituent principles
may change as a result of the pressure or actions of the most impor-
tant actors, and may shift in a specific direction (towards the increased
institutional autonomy of schools or, on the contrary, towards the more
intrusive role of the state by means of a closer link between funding and
national testing). This way of working can be found in all policy fields.
Governance is ever changing.
Several further elements also emerge from the governance litera-
ture that merit consideration in relation to existing typologies of
governance. First, these typologies do not offer any further informa-
tion about how prevailing governance arrangement is chosen; this is
a matter for further theorization as we explain below. Second, recent
research shows how hierarchy is always present, at least potentially,
in every governance arrangement, albeit in different forms (Hill and
Lynn 2005; Goetz 2008; Heritier and Lehmkuhl 2008; Börzel 2010;
Lynn 2010; Capano 2011), and this constant factor slips away in many
typological efforts in which it appears as only one of the principles
of co-ordination Finally, the typological approach only manages to
account for the some prevailing trends in governance arrangements
and policy designs, but is inherently limited by the fact that, very
often, real governance arrangements consist of complex policy mixes,
that is of a blend of different co-ordinating principles and their respec-
tive policy instruments (Capano et al. 2012).
So, what emerges from the aforementioned literature is that we need
to further analyse the actual workings of governance arrangements, in
order to get a better grasp of their dynamics (due to the fact that they
change over time and very often are characterized by different policy
mixes), of their strategic nature (since they are the products of the actions
and interactions of policy actors driven by specific goals), and of their
capacity (that is how likely governance arrangements can be effective in
relation to certain important collective goals).
1.4 Governance dynamics
Governance arrangements are dynamic, and thus – paraphrasing

Hogwood and Peters (1983) – all governance is governance change. This
means that governance arrangements and workings should be analysed
from a diachronic perspective. Thus, the nature of a governance arrange-
ment will change over the course of time, even in the short term. A mode
of governance thus is not stable but rather in equilibrium, meaning
the mix of co-ordinating principles and policy instruments adopted at
time 0, which persists until one of the components is changed, is only
temporarily at rest.
Very often, the intrinsically dynamic character of governance is not
taken into consideration, and scholars tend to portray a static picture
of the reality of governance, characterized by diachronic punctua-
tions. This tendency is evident in all studies of the “demise of the state”
produced during the 1950s and 1960s, which a couple of decades later
was reversed by a series of studies on the “return of the state” (Evans
et al. 1985; Evans 1997). The same could be said about the “new public
management” (NPM) movement, which has often been assumed to
have radically changed the ways in which public policies are steered,
governed and managed (Aucoin 1990; Lane 2000; Barzelay 2001). Once
again it too was reversed in recent years by a significant body of work
underlining the partial, contextualized impact of NPM itself (Lynn
2006; Pollitt and Bouckaert, 2000, 2009; Ramesh and Howlett 2006;
Ongaro 2009). In order to understand governance dynamics, we need to
focus on certain important aspects of a diachronic development, namely
initial equilibrium, directionality, temporal dimension and relationships with
the external environment, which “traditional” governance studies have
largely ignored.
The initial equilibrium refers to the specific configuration of governance
arrangements and policy instruments at time 0. This implies defining the
kind of balance to be found between the general principles of co-ordi-
nation, how such principles are implemented with regard to the chosen
policy tools, and which types of actor are present. Here the analyst is
asked to accept the idea that a specific set of policy tools is not necessarily
closely related to any given general principle of co-ordination. For

example, assuming that policy instruments may be subdivided into either
three or four large categories – inducements (including both incentives
and sanctions), regulations and knowledge or capacity tools (Bemelmans-
Videc et al. 1998; Schneider and Ingram, 1997; Hand 2012) or authority,
nodality, organization and treasury (Hood 1983) – it is not immediately
evident or necessary that instruments of regulation and authority are
or should be directly linked to the prevalence of a hierarchical mode of
governance. Similarly, nor can the capacity or nodality tools be deemed
necessarily ascribable to a network mode.
Similarly, the capacity of national policy styles to influence the signifi-
cance and employment of policy instruments should not be underes-
timated. For example, in general the UK and other English-speaking
nations are more reluctant to use the instrument of authority than are
continental European countries where there is a deep-rooted tradition of
strict regulation. However, the meaning of such instruments may vary
considerably, in that apparently strict regulation may offer great freedom
to policy networks within a specific policy field (meaning less hierarchy
and greater self-organization), whereas the prevalence of nodality or
organizational instruments employed by government may be more
intrusive and hierarchical. It is therefore a rather complex operating of
trying to get the right picture of the initial equilibrium in governance
arrangements, but it is one that needs to be done in a proper manner
since all subsequent analyses of governance dynamics depend specifi-
cally on the initial picture.
The directionality of governance dynamics means focusing on the logics
of their development. Governance arrangements may change in an
either an incremental or radical way, thus moving away from the initial
equilibrium point in terms of both the mix of general co-ordinating
principles and policy instruments, and of the set of actors involved.
However, the real challenge is that of understanding whether the direc-
tion of governance dynamics is reversible or not, that is whether it is
subject to oscillation over time, returning to previous equilibrium points
and mixes. Clearly, the timespan in question represents the real problem
here. We should assume that there is something cyclical in the direc-
tionality of governance dynamics (for example, the direct role of the
state in policy-making), but also that certain features are less likely to be
reversed, particularly the set of policy actors involved.
Understanding the temporal dimension of governance dynamics
gives us the sense of the historical sequence through which govern-
ance dynamics develop. A number of specifications need to be made
here with regard to this point. Governance dynamics can develop in a

punctuated way, with long periods of stability followed by periods of
radical change; however, such dynamics may also develop according to
a continuous process characterized by the occasional micro-change (the
progressive calibration of specific policy instruments) while the equi-
librium between the general principles of co-ordination remain appar-
ently the same (although an incremental change in policy instruments
can lead to a more radical degree of change in the medium/long term).
Furthermore, any reconstruction of the time sequence should focus
on the timing of potential changes. It is quite clear, in fact, that the
same intentional change can have different effects, depending on the
time it is enforced. The temporal dimension of governance dynamics
is also important if we are to understand the kind of reaction seen in
relation to the external perception of the inefficiency or ineffectiveness
of the existing governance arrangements: is there temporal alignment
or misalignment between the internal development of the governance
arrangement and the external environment? What is important here is
the potential synchrony with the external environment.
These relations with the external environment represent a complex aspect
of governance dynamics, which needs to be simplified if theoretical and
conceptual progress is to occur. The first form in which these relationships
take place is within the boundaries of the constitutional arrangement of
the state. Unitary, regional and federal state structures have different effects
on governance arrangements. As we know from the work of scholars such
as Baumgartner and Jones (1993, 2002), the greater the number of insti-
tutional venues that policy actors may use to pursue their interests, for
example, the greater likelihood there will be that changes will also occur
to a governance equilibria. The second important aspect is the nature of
interest groups (Dür and De Bièvre 2007; Binderkrantz and Krøyer 2012).
The more pluralistic the external environment, the greater the pressure
on governance dynamics will be. On the contrary, if the social environ-
ment is organized in a more corporatist way, then governance dynamics
will be subjected to less pressure for change. The third important external
factor is the social relevance of the policy field. The more a policy field is
considered important in the public’s eye, the more it will be subjected to
external pressures that can affect governance dynamics.
1.5 The strategic nature of governance
Very often, governance arrangements are viewed from a functionalist

perspective, as a structure of institutionalized relationships by means of
which certain systemic functional requirements are met and structural-

functional needs are satisfied. There is nothing wrong with this view,
except that it does not help us understand the intrinsic dynamics of
governance or the importance of actors’ behaviour to it. This is probably
one of the most significant shortcomings of governance theory, due to
the need to consider the agents’ own view of governance (Peters 2012).
We do not intend here to bridge any gap in the micro-foundation of
governance (Mayntz 2004), but simply to point out that actors them-
selves influence the development of governance arrangements and the
workings of governance.
Governance in this sense can be seen as a strategic dimension of
policy-making. This means that actors know that the features of govern-
ance arrangements and the types of policy instruments adopted have an
impact on the interests they are pursuing, and that the positions/roles
they have in the existing governance arrangement represent a funda-
mental source of power and/or influence. This awareness justifies the
emphasis that all governments have placed on continually re-designing
governance arrangements within policy fields in order to better accom-
plish their goals. At the same time, this awareness underlies the ongoing
battle over policy instruments and the features of governance arrange-
ments (which can be defined as “meta-governance”).
Governments, for example, are interested in achieving public policy
results according to their respective electoral manifestos, and in resolving
contingent policy problems. Governments play a central role in govern-
ance changes and shifts: they are constantly searching for solutions
to their policy and political problems, and very often changes in the
components of governance – from ministerial re-organization to stake-
holder limitation or enhancement – represent a highly promising way
forward.
Regarding policy problems, most governments and especially demo-
cratic ones subject to the whims of the ballot box are intrinsically
committed to offering better performing policies, and they are very
often the first to promote governance reforms in order to do so. It
should be assumed that it is in the interests of government to adopt
those instruments and equilibrium in governance arrangements which
in a specific context may help build effective policies. The increasing
role of the “market” principle of co-ordination in many policy fields is
governments’ response to the financial crisis afflicting “the big state”.
NPM policy instruments have been adopted by governments in order
to make public administration more accountable and responsible. As
far as political problems are concerned, governments are continuously
faced with the problem of having to legitimize their decisions outside

the normal route of democratic parliamentary procedures.
This means that the governance toolkit can provide certain solutions
to the issue of political and social consensus. For example, the stable
involvement of specific interest groups in governance arrangements,
or the structural openness of such arrangements, may represent a stra-
tegic decision designed to ensure government’s control of the agenda,
and the significant probability of effective implementation. At the same
time the contrary may hold true; that is, a reduction in the openness of
policy-making within a specific field may allow government to publicly
demonstrate its will to take radical decisions, thus altering the joint
decision-making impasse.
However, every policy actor needs to understand that the design of
governance and the instruments adopted in steering policies are of
importance to that actor. Every policy-maker should find room for his/
her own interests within the governance arrangement. They should be
aware that having a governance arrangement that best fits their own
preferences, amounts to institutionalizing them and to guaranteeing a
positive trade-off in the medium term.
So, governance arrangements lie at the heart of the constant battle for
power constituting the very substance of politics. While actors pursue
their substantial contingent policy goals, at the same time they try to
gain advantages in relation to the governance arrangements. Trade
unions would prefer a more corporatist form of governance, or at the
very least a series of very impermeable arrangements; large firms would
prefer strongly market-oriented governance arrangements; while social
movements would prefer highly decentralized, poly-centric arrange-
ments together with deliberative policy-making tools, and so on. It
is clear that not all policy actors are successful in their battle for such
arrangements, and that the losers will continue to pursue their under-
takings with regard to the governance design.
Thus, from this point of view, governance should also be studied
by focusing on the “battle” for governance arrangements. Researchers
need to answer the following questions: What strategies are the most
important actors pursuing? What kind of coalition building has proven
successful? What kind of trade-off between contingent policy solutions
and medium-term governance arrangements has been achieved? Do
network or co-operative forms of governance exist simply as a conse-
quence of overcrowded policy arenas, or because of a strategic deci-
sion made by governments, or a strategic form of negotiation between
actors?
Furthermore, observation of the strategic behaviour of policy actors in

the governance battle is of fundamental importance to an understanding
of why, very often, within the context of structural multi-level policy-
making, actors change behaviour according to the level of governance.
Structurally speaking, the governance game is a multi-level one, and
thus the power/position preferences of actors may vary according to the
governance equilibrium at each level, and to the kind of links (strong/
loose) that exist between the different levels of governance.
By abandoning a structuralist or a functionalist perspective and
assuming the strategic nature of policy actors’ behaviour, our under-
standing of governance development become both more realistic but
also more complex. It becomes more realistic because the analysis of
policy actors’ strategic behaviour enables us to get a better understanding
of what practical governance actually is, and of how and why it changes.
It is precisely by viewing the development of governance in terms of
actors’ strategies, that the real role of the state and government can be
understood; and it is exactly from this micro-perspective that the real
political nature of existing governance arrangements can be understood.
It becomes more complex due to the intrinsic difficulties of gathering
data on actors’ preferences and behaviour, and of showing that actors’
behaviour in the governance battle is strategically oriented. However,
this greater complexity can be resolved by the adoption of the right,
theoretical research design, and in the public policy field by a suitable
reconstruction of policy dynamics. Furthermore, our focus on the stra-
tegic actors involved in the governance battle does not limit the theo-
retical foundations of actors’ preferences. It does not matter whether
actors’ preferences, regarding their strategic interests in governance, are
exogenously or endogenously driven. This is a legitimate, epistemolog-
ical and theoretical decision to be taken by the researcher. What matters
is the “fil rouge” by means of which policy actors interact, compete and
negotiate in the search for a specific governance equilibrium.
1.6 Governance capacity
Thirdly, we need to focus on governance capacity in order to get a better

understanding of the effectiveness of governance arrangements once
launched. Most literature and research focuses above all on the architec-
tural features of governance arrangements, and we have suggested addi-
tional work should be done on which actors or types of relationship matter
in governance, and on how governance arrangements change. However,
attention also must be paid to the real effects of changes in governance
on policy and governance outcomes. From our point of view, having

suggested the need to focus on the dynamic character of governance
and on its strategic-behavioural component, there are several reasons
why we should also focus on the capacities of governance. The first is
that governance arrangements are institutionalized patterns of behav-
iour whereby public policies are designed, and commonly perceived
problems are handled and possibly resolved. Hence the inescapable
problem of the importance of the capacity of governance arrangements
to deliver policy results. Second, governance arrangements also represent
one of the places where the power game leading to legitimization of the
social order is played out. Thus we need to understand how governance
arrangements can preserve political consensus and legitimation, both of
which are prerequisites for successful policy attainment. Third, govern-
ance changes (that is changes in the dynamics and strategic aspects of
governance) cannot be understood without a more detailed analysis of
the capacity of governance.
Governance capacity is not the same as good governance in its different
definitions (World Bank 1994; Pierre and Peters 2005; Fukuyama 2013),
or state or government capacity (Besley and Persson 2011), or quality of
government (Rothstein 2011), or systemic sustainability in governing
pooled resources (Ostrom 1990), or the capacity to produce optimal or
good regulation (Jordana and Levi Faur 2004). It is clear that all of these
things can help us focus on governance capacity, although they are too
partial or too prescriptively oriented to identify with capacity as such.
Governance and state capacity and the quality of government, that
is the capacity to maintain social order and to effectively decide and
implement democratically legitimized policies (Matthiews 2012), are
clearly one aspect of governance capacity. On the other hand, the
search for optimality is less important from our point of view. The
concept of governance capacity from a public policy perspective can be
used to evaluate the capacity of a governance arrangement to achieve
its declared goals, and to obtain and maintain the necessary polit-
ical consensus among the actors involved in the specific policy field
in question. So, governance capacities directly affect both the degree
of effectiveness of a specific governance equilibrium in reaching the
expected goals, and the degree of legitimization it is capable of reaching
and maintaining.
More specifically, the capacity of governance arrangements concerns
two fundamental aspects of the governance game (which are also the
drivers of governance), namely policy and politics. Policy capacity
focuses on performance in the respective policy field: if performance
is perceived as satisfactory, then the existing governance arrangement

will persist, otherwise a decision may be taken to change that govern-
ance arrangement and/or policy instrument, in order to improve policy
performance or to redefine policy issues. At this point, the researcher
should focus both on the qualitative/quantitative indicators of policy
performance, and on the definition of policy problems at time t0, and
then establish whether, after a reasonable period of time (not less than
ten years, according to Sabatier and Jenkins Smith 1993), performance
has improved/worsened, the reasons for such, and whether the defini-
tion of the policy in question has persisted or has been changed (clearly,
this kind of analysis requires verification of any changes in the govern-
ance equilibrium during the period in question).
Political capacity means the capacity to maintain the political
consensus both of those actors involved, and of those not involved,
and to preserve the general perception of legitimacy. When the polit-
ical aspect of governance does not work, this constitutes a situation in
which the inherited governance arrangement is challenged by actors
(not necessarily new ones) demanding a role (if outsiders) or a stronger
role (if insiders). At this point, the researcher needs to diachronically
reconstruct the dynamics of governance starting from t0 (a point of
substantial political legitimization of the existing governance arrange-
ments), in order to observe what kind of changes have occurred during
the period in question (changes in the position of existing actors, the
entry of new actors, changes in the public’s perception of the govern-
ance arrangement in question). Governance arrangements and their
workings are constantly under pressure from both sides of the capacity
dimension, which very often interact with one another: dissatisfaction
with the performance of policy leads to delegitimation and political
disagreement regarding existing governance arrangements, while a fall
in political consensus may encourage a different perception of policy
performance.
1.7 The plan of the book
Thanks to the above-mentioned understanding of governance as a

heuristic lens through which the reality of policy governance can be
reconstructed, we can achieve a more detailed and convincing descrip-
tion of that governance by looking at governance in terms of its
dynamics, of its role as a strategic goal for policy actors and at its dual
capacity. Thanks to this heuristic strategy, the complexity of governance
can be more clearly ordered, and can thus become a challenging field
of study in which rival theories and explanations flourish, notwith-

standing the fact that our own approach is clearly based on a contin-
gent perspective.
The empirical chapters of this book examine these concepts and
measures in specific national and sectorial cases in order to grasp the
nature of actually existing governance arrangements and the workings
of governance modes and their dynamics within a variety of different
policy fields from a comparative perspective.
In her work, Manuela Moschella examines governance dynamics in
the sector of global finance. Focusing on the historical evolution of
the policies governing the movement of cross-border capital flows, the
chapter provides a diachronic perspective on the varying policy instru-
ments and institutional features that governments have selected over
time to steer the movement of private capital flows. In order to explain
the choice of specific governance modes over time and the directionality
of governance dynamics, the chapter draws attention to misalignments
between governance arrangements and the external environment, on
the one hand, and to the conditions in place at the initial equilibrium
point influenced the governance dynamics over time, on the other.
Continuing with the theme of dynamics, Isabelle Engeli and Christine
Rothmayr Allison analyse how modes of governance emerge and evolve
over time in the field of human biotechnology. The four case studies on
the United Kingdom, Italy, France and Germany shed light on the impact
of the dynamics between stakeholders on building governance modes
over time. During this process, governments have taken into account
the dynamics of interactions between actors. We can discern two basic
forms of interaction: collaboration versus competition and contention.
The four case studies highlight how these forms of interaction influence
the process of building governance modes. Their diachronic comparison
allows us to identify and isolate the critical differences in prima facie
similar initial regulatory arrangements that ultimately lead to divergent
outcomes and widely varying modes of governance.
Anthony Zito then examines whether the governance-related devel-
opments in four OECD countries (Australia, Canada, Germany and
the Netherlands) follow any particular pattern of convergence. In
examining the governance arrangements, the chapter explores the
balance and relationship between both public and private actors, and
how innovations in instruments may have affected this balance. The
sample of countries focuses on three federal systems and one unitary
system. Special attention is given to the role of the European Union
(EU) in shaping the governing processes in the two EU member states.
The chapter uses a mixture of interviews for the Netherlands, Australia

and Canada (interviewing over 60 mid-level policy officials in both
state and society spheres as well as academic and non-academic policy
experts), government documents and secondary sources to highlight
the nature of environmental policy-making across multiple levels of
analysis.
Examining the second theme of government strategies, Giliberto
Capano looks at how over the last three decades there has been a signifi-
cant governance shift in higher education in all Western countries.
Previous governance modes have been reshaped by the continuous
efforts of governments concerned about the capacity of higher educa-
tion to genuinely serve their respective societies. In this broad dynamics,
Capano focuses the strategic choice of governments in changing govern-
ance of higher education by analysing three federal countries, where the
governance game can be even more complex due to the presence of
two levels of strong government, thus implying that every attempt that
federal government makes to modify the status quo will be met by the
reaction of the other level of government. The efforts of such govern-
ments represent an ongoing process characterized by the adoption of
similar policy tools (albeit assembled in different policy mixes, due to
the specific combination of individual federal dynamics, the structure
of the vested academic interests and certain specific contingencies) by
a clear strategic approach aimed to circumvent or overcome previous
governance modes.
This is followed by Jenny Lewis who examines which strategies
governments have used to direct research policy. By arguing that, since
the 1980s, governments have pursued their goals for the sector through
new public management initiatives (such as assessing and rewarding the
research outputs of universities) and network governance schemes (such
as providing incentives for research collaboration), Lewis tries to empiri-
cally demonstrate these governance strategies in action by comparing
Australia, the United Kingdom and New Zealand. The empirical analysis
shows that the two different governance strategies are neither mutu-
ally exclusive, nor temporally sequential in their conception and their
implementation. Both of these differently oriented governance modes
can be seen operating in the same location at the same time. Sometimes
they work in concert while, at other times, they pull in different direc-
tions. But regardless of this tension, strategic interventions by the state
have produced a particular configuration of research policy in each
nation, which has resulted in a set of strong incentives and deterrents to
do specific types of research in particular ways.
David Natali then investigates the changing governance of pension

policy in Europe. In this policy area, as well as in many others, analysts
have stressed the progressive shift from the hierarchical “command and
control” (centred on the key role of national governments) to multi-
level governance (consistent with soft modes of regulation and the
growing role of supranational organizations). This is particularly the
case of Europe, where the EU has an evident role in shaping national
pension policy. The chapter analyses most recent pension reforms in
Central-Eastern Europe. through an actor-centred approach, which
sheds light on the reasons why national governments have regained a
central role in reforming pensions. In a context marked by weak lock-in
mechanisms, actors’ strategies have been crucial to shape governance
dynamics. Both national and supra-national actors have altered their
governance priorities, and consequently their role in policy-making,
on the base of their own political and policy goals. In particular, the
changing pensions governance is interpreted to be the consequence of a
number of factors: the partial retreat of international organizations (IOs)
from the field; the changing policy goals of the EU in the wake of the
economic crisis; and the new opportunities for national policy-makers
to pursue credit-claiming strategies.
Turning to the third theme of “capacities”, Edoardo Araral and his
colleagues test Fukuyama’s recent hypothesis that argues that govern-
ance is “the government’s ability to make and enforce rules, and to
deliver services, regardless of whether that government is democratic
or not”. The key to Fukuyama’s argument is to de-link governance from
democracy. He suggests that scholars should pay attention to two critical
dimensions, which have been neglected in the literature: state capacity
and autonomy. Araral et al. build on this hypotheses by proposing
several conceptual and operational measures of capacity and autonomy
and show this with comparative data from 27 countries in Asia and with
stylized comparative country analyses. Thanks to this research strategy
they show that varieties of governance can be explained by variations
in capacity and autonomy of governments, but also that capacity and
autonomy can vary overtime, across instrumentalities, size and levels
of government. (and thus that an aggregated, single measure of state
capacity across countries – as is conventionally used in the World Bank
Governance Indicator (WBGI) – is very controversial).
This is followed by M. Ramesh, Wu Xun and Michael Howlett who
look at health-care governance in China and Thailand. They argue that
while it is widely accepted in policy circles that markets and networks
are superior forms of governance in delivery of public services, this claim
is no more than an article of faith, however, regardless of its widespread

acceptance among scholars as well as practitioners. The objective of the
chapter is to analyse the experience with different forms of governance
in health care in China and Thailand with the purpose of assessing the
workings and implications of different governing arrangements.
The “failures” of different modes of governance – governments,
markets and networks – are well recognized in the literature. What is less
recognized is that, while all three modes suffer from severe limitations,
they do not all afford the same level or type of risk. In situations where
both market and network failures are likely and substantial, hierarchical
governance may remain a preferred option even in the face of various
government failures since at least the needed services will be delivered,
although perhaps inefficiently distributed in a technical sense and in all
likelihood not as responsive to users’ preferences.
Given that all governance modes are vulnerable to failures of different
kinds, when governments adopt one or the other modes, they need to
understand: (1) the nature of the problem they are trying to address
and the tools they have at their disposal to address it; (2) the innate
features of different governances mode so that they can match these
to the problem they seek to address; and (3) the capabilities of govern-
ments and their societal partners to successfully implement the first best
option.
Eva Heidbreder then evaluates the governance capacity of a non-state
polity, namely the EU. Given that the EU does not unambiguously
qualify as either a state or an international organization, only certain
dimensions of the EU but not the polity as such can be captured by tradi-
tional, state-centred concepts. Not least for this reason, the standard
characterization of the EU has become “a system of multi-level govern-
ance” (the term was branded by Gary Marks’ work on cohesion policy –
see Marks 1996; see also Marks et al. 1996; Scharpf 1997; Bache 1998).
If we conceptualize the EU as a multi-level governance system that
is marked by multiple interacting levels of authority, actors in which
policy-making processes transcend not only vertically different levels
of governance but also horizontally different co-existing jurisdictions
(cf. Hooghe and Marks 2003), the question of governance capacity
presents itself as pre-eminent: because the EU has only limited state-
like features, its tool-box of governance modes differs from those of
states in which authority and capacities are monopolized for a given
territory.
In the context of this edited volume, the questions this chapter derives
from these defining features of the EU focus on the framing and the
effect of EU governance capacities. First, how do central EU actors deal

with the notion of governance and what are the capacities these actors
aim to realize? Second, how well have these desired capacities been real-
ized or, in other words, how efficient in achieving specific policy objec-
tives are they? Finally, what do the results tell us, on the one hand,
about governance in the EU and, on the other hand, about governance
capacities more generally?
In conclusion, Jeremy Rayner reviews the historical development of
three main approaches to governance and their ultimate convergence
on the idea of meta-governance in the context of this volume’s focus on
the dynamics, strategies and capacities of governance. In the modes of
governance approach, hierarchy is usually distinguished from markets
and networks as ideal types. In the dimensions approach, governance is
understood as a shift away from a common starting point along one or
more dimensions of governing functions. Both the modes and the dimen-
sions approaches tend to be concerned with dynamics and, to a lesser
extent, strategies. In the governance of problems approach, governance
is treated as a problem-solving activity, with different kinds of prob-
lems calling for different kinds of governance. The problems approach
to governance, in particular, introduces a concern with problem-solving
capacity. Each approach has characteristic strengths and weaknesses but
it is argued that each leads in its own way to the important concept of
meta-governance, the balancing and rebalancing of governance compo-
nents in response to particular governance contexts.
Most of the case studies in this volume describe meta-governance
activities in addition to routine governance and tend to support the
conclusion of the meta-governance literature that, although any actor
can engage in meta-governance, state actors have considerable advan-
tages over non-state actors in most circumstances.
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Part II
Governance Dynamics
2
Governing Cross-border Capital
Flows: The Dynamics of Capital
Account Policies
Manuela Moschella
2.1 Introduction
In line with the themes set out by the editors of this book, this chapter
sheds light on the governance dynamics in the sector of global finance.
Focusing on the historical evolution of the policies governing the
movement of cross-border capital flows, the chapter illustrates that
these policies can be fruitfully analysed from a diachronic perspec-
tive that brings into reliefs the mix of policy instruments and archi-
tectural features that usually characterize governance arrangements at
each point in time (Capano et al. 2012). The chapter then moves on to
investigate the factors that help account for the governance dynamics
of capital account policies from the 1940s to the present. Anticipating
briefly the findings discussed below, the arrangements governing the
movement of cross-border capital flows has evolved from an initial
equilibrium point characterized by governance arrangements based on
“command-and-control” policy instruments (such as capital controls)
administered by domestic governments under the auspices of a public
intergovernmental organization, to a new governance equilibrium
based on softer policy instruments such as voluntary standards and best
practices, whose enforcement has been primarily delegated to the exer-
cise of market discipline. In the aftermath of the global financial crisis,
then, the direction of governance dynamics has somehow reversed its
previous trend because of mixed combination of preceding modes of
governance (Table 2.1).
In order to explain the governance dynamics, I suggest that the evolu-
tion of international capital account policies reflects several factors
27
28 Manuela Moschella
Table 2.1 Governance modes of cross-border capital flows
Policy Institutional Regulatory Enforcement

instruments arrangements Intensity mechanisms
1940s–1970s Capital Intergovernmental Hard-law IMF sanctions

controls negotiations (international and domestic
code of co-operation
conduct)
1970s–2007 Standards and Delegation to Soft-law Market
best practices; international (voluntary discipline
information bodies and standards)
consultation with
private sector
actors
2007–present Standards, Intergovernmental Attempt at IMF
capital negotiations – IMF hardening
controls and the
prudential international
regulation code of
conduct
that cannot be solely reduced to the instrumental and conscious will

of governments. While governments, especially those of the advanced
economies, were certainly important to the development of the govern-
ance arrangements primarily because they facilitated the globalization
of finance by refraining from intervening in the markets, a full under-
standing of the evolution of the governance arrangements would be
incomplete without taking into consideration their relationship with
the external, social environment as well as the constraints to change
that initial equilibrium points exerted on the choices of governance
arrangements over time.
Indeed, as will be illustrated below, the evolution of capital account
policies were heavily shaped by the ideational environment in which
governments and other social actors operate and by public perceptions
of the relevance of the policy field. When the ideational cohesiveness
around specific governance modes weakened and changed, as was the
case in the 1970s with the shift from Keynesianism to Monetarism, the
governance arrangements came under pressure for change. In other
words, similarly to the effect exerted by the increase in the numbers
of institutional venues that policy actors use to pursue their interests
(Baumgartner and Jones 1993), the emergence of a new ideational
context increased the pressure for change in the governance equilib-
rium. Pressures for change also stemmed from the increased social
Governing Cross-border Capital Flows 29
relevance of the policy field as new problems that threatened the effi-
ciency of existing governance arrangements emerged. For instance, the
re-emergence of sizeable cross-border flows in the 1970s challenged the
policy performance of existing governance arrangements, thus creating
the conditions for their change.
Next to the relationship with the external environment, the dynamic
of the governance of cross-border capital flows has also been influenced
by the governance arrangements developed at time 0. In other words,
pre-existing governance arrangements mattered for future evolutionary
paths. As the financial turbulence initiated in 2007–2008 demonstrates,
although the crisis created the conditions for a radical and rapid-type
of change of global financial governance by catalysing public and poli-
cy-makers’ attention around the failures of financial regulation, the
characteristics of the pre-crisis governance arrangements have thus far
hindered a substantive transformation of existing governance modes
(Moschella and Tsingou 2013). In short, once a governance mode has
been selected, its transformation becomes the most difficult – even
if there are efficiency or political reasons for such a change. Previous
governance arrangements thus matter for governance dynamics in that
they act as a filter to the pressures for tilting change towards an incre-
mental dynamic (Moschella 2014).
In what follows, the chapter examines the governance dynamics
of the policies governing cross-border capital flows. In order to facili-
tate the analysis and provide the historical sequence through which
governance dynamics develop, I distinguish between the governance
mode selected under the Bretton Woods regime (1945–1971) and the
governing arrangements that were adopted following its collapse from
the 1970s to 2007. The chapter also provides an assessment of more
recent developments by focusing on what is changing in capital account
policies following the onset of the global financial crisis.
Focusing on the governance modes through which public authori-
ties have attempted to manage the potential instability deriving from
financial integration and liberalization, this chapter provides an impor-
tant case study for the purposes of this collective study because it sheds
light on the evolutionary dynamic of a specific governance sector and
on the factors that influence its directionality in historical perspective.
Furthermore, the case study also complements the other cases assem-
bled in this volume by providing evidence of how societies are steered
in different ways over time. In particular, the case study on capital liber-
alization, which is largely regarded as the quintessential manifestation
of neoliberal policy reform (Nelson 1990; Haggard and Kaufman 1992;
Rodrik 1996), allows gauging the changing balance between competing

governance principles, such as hierarchy and market. In other words,
the case study offers some insights into the changing role of public
authority and its relationship with non-state actors.
Before proceeding, some clarifications are in order with regard to
the issue area whose governance is the object of this chapter. First,
although it is commonplace to refer to “global financial governance”
in the singular, the term comprises several governance arrangements
that apply to the various sub-sectors in which financial markets
operate. In this vein, scholars have focused on governing modes in
areas such as banking, securities and insurance among other sectors
(Singer 2007). Recognizing the issue-specific diversity that exists in
the governance arrangements of global finance, this chapter nonethe-
less concentrates on the arrangements governing cross-border capital
flows at large. The distinctive feature of these arrangements is the
problem they set out to solve. Indeed, I focus here on those govern-
ance modes whose goal it is to mitigate the destabilizing effects of the
integration of the world’s financial markets. Specifically, I focus on
those governance modes that aim at correcting potential market fail-
ures deriving from the removal of restrictions in the flows of foreign
direct investments, portfolio flows (debt and equity) and short-term
bank loans. In contrast, the analysis of the rules and institutions that
aim for market creation – such as the rules governing competition –
are not a direct object of this study.1
Second, the governance arrangements that are the object of this study
represent cases of supranational governance, and therefore extend
beyond the territorial boundaries of the nation-state. In other words,
the development of a governance framework for mitigating the desta-
bilizing effects of financial flows stems from the progressive integra-
tion of the world’s financial markets over the past decades and from
the freedom of movement granted to capital flows. This integration has
indeed created new problems that can hardly be solved by the efforts of
a single government. In particular, the sources of financial instability do
not necessarily lie in the domestic economy but may well be imported
from abroad. The case for state co-operation is thus compelling and has
taken different forms over time, reflecting changing economic condi-
tions, power configurations and ideational factors – as illustrated at
greater length below.
The chapter is organized as follows. After having introduced the
governance problems associated with financial integration and liberali-
zation, the following sections examine the evolution of international
capital account policies from the 1940s to the present. In doing so, the
chapter illustrates empirically how governing modes have changed over
time and why they have done so. The final section concludes by summa-
rizing the empirical findings and reflecting on their implications for the
study of global financial governance.
2.2 Governing cross-border capital flows at time 0: the

Bretton Woods system
Why is the cross-border movement of capital flows an object of public

policy? This is the preliminary question that we should address in order
to understand the evolution of capital account policies over time. The
starting point is the fact that financial markets do not work “by magic or,
for that matter, by voodoo” (McMillan 2002: 8); the smooth functioning
of financial markets thus requires some form of “government”. It is this
underlying infrastructure, comprising institutions, procedures, rules and
customs (whether formal or informal), that allows for the achievement
of two necessary – but often conflicting – goals: the maximizing of the
potential advantages that derive from financial integration and the mini-
mizing of the risks that this integration brings with it.
Indeed, the free movement of cross-border capital transactions entails
both benefits and costs. On the one hand, the free movement of capital
flows may lead to the efficient allocation of capital and the diversification
of risk.2 By augmenting domestic savings, transferring capital to where it
might be most productively used and boosting investment and economic
growth, individual countries as well as the world economy benefit. The
removal of restrictions from the capital account also improves opportu-
nities for risk diversification through international risk-sharing arrange-
ments and increases the efficiency of the domestic financial system by
introducing competition from abroad. Macroeconomic management
may also improve through the influence of market discipline on domestic
policy-makers. On the other hand, however, the size and speed of inter-
national capital movements may be destabilizing and potentially disrup-
tive to economic growth. For instance, large capital inflows may lead to
inflationary pressures, loss of competitiveness induced by exchange-rate
appreciation and increased vulnerability to crisis due to sudden shifts in
markets sentiment. Furthermore, since economies are rife with distor-
tions – caused, for example, by incomplete and asymmetric informa-
tion – free capital mobility does not guarantee that capital is allocated
towards its most productive use. Indeed, an economically sub-optimal
situation may come to exist.
The evolution of capital account policies closely reflects the dual

nature of financial liberalization. Over time, policy-makers have selected
different measures along which to steer the movement of capital flows
in an attempt to affect their size, direction and composition. These
measures differ in the extent to which they intervene in capital markets
and the modalities through which such intervention takes place. They
also differ – and reflect – the dominant economic understanding of the
time on the balance between the benefits and costs of financial liber-
alization. And although the benefits of free capital flows are today
generally regarded as outweighing their costs, justifying liberalization
as the ultimate policy goal, more nuanced views on these issues have
existed before. An example of such views is the international agree-
ment reached at Bretton Woods in 1944, which embodied a distinct
view of the management of cross-border capital flows.3 In particular, one
of the primary features of post-Second World War governance was the
inclusion, in the policy tool-kit, of capital controls that countries could
legitimately use.
National authorities convening in Bretton Woods to redesign the
international economic and financial order opted for fixed exchange
rates and monetary policy autonomy. At the same time, they abandoned
the objective of the free movement of capital across borders and instead
resorted to the tool of capital controls to safeguard the selected policy
combination. This specific combination of the “trilemma” options is
also known as “embedded liberalism”4 (Ruggie 1982): member coun-
tries gave pride of place to the objective of monetary autonomy as the
channel through which full employment would be sustained. In order
to achieve this objective, restrictions on capital flows were required;
without them, the threat of capital outflows would have nullified the
effects of expansionary domestic policies.5
The choice to prevent the potential instability deriving from the free
movement of capital flows through the use of controls can be explained
by a number of factors. Lessons drawn from the policy failures of the
Great Depression, as well as a widespread belief among elites about
the need to regulate “hot money” (as John Maynard Keynes described the
capital flows that had disrupted international financial stability in the
1930s), were key components of the policy goals of international finan-
cial governance at the end of the Second World War (c.f. Ikenberry 1992;
Helleiner 1994: 26–33). Although Keynes was one of the most outspoken
advocates of this intellectual consensus, which held that the “control
of capital movements, both inward and outward, should be a perma-
nent feature of the post-war system” (as quoted in Horsefield 1969: 13,
31), it is also important to note that Keynes’s view on the perils associ-
ated with capital flows was largely shared by his US counterpart Harry
Dexter White during the Bretton Woods negotiations (Boughton 2002).
Keynes’s position would have been much less influential without the
support of the United States, the major economic power of the time.
Alongside the ideational consensus among the policy elites involved
in the design of global financial governance, other factors contributed to
shaping capital account policies after the Second World War. In partic-
ular, the very limited volume of capital flows following the war made it
possible to manage these effectively. The constellation of political forces
in the major creditor country of the time – that is the United States – was
also key to the selection of capital controls as a viable tool to supporting
the emerging financial regime. In particular, and in spite opposition
from members of the New York financial community (Helleiner 1994:
39–41), an implicit industry–labour alliance came to dominate US poli-
tics based on the common interest of these two sectors in expansionary
domestic policy (Ferguson 1995; Gallagher 2013).
In short, an ideational environment that favoured a large social
support to the use of controls set the stage for the prioritization of mone-
tary autonomy over the freedom of capital flows within the context of
the fixed exchange regime that was shaped at Bretton Woods. After
balancing the benefits and costs of the free movement of capital flows
the policy-makers of the 1940s largely shared the conclusion that the
latter outweighed the former.
Having chosen to restrict the movement of capital flows for the sake
of monetary independence and fixed exchange rates, governments legal-
ized the policy instruments necessary to attain this goal, and designed
mechanisms to ensure its implementation. Specifically, governments
enshrined the key features of the emerging financial regime in the Articles
of Agreement of a new intergovernmental organization, the International
Monetary Fund (IMF). According to these Articles of Agreement, the IMF
was assigned the responsibility of presiding over the implementation a
well-defined code of conduct based on the observance of fixed exchange
rates. To this end, the countries that joined the IMF between 1945 and
1971 agreed to keep their exchange rates pegged at rates that could be
adjusted only to correct a “fundamental disequilibrium” in the balance
of payments, and only with the IMF’s agreement. At the same time,
in order to ensure that countries adopted policies consistent with the
pegged exchange rate, the IMF was expressly assigned no responsibility
in promoting the liberalization of capital flows. Furthermore, its Articles
of Agreement granted member countries the right to introduce capital
controls, provided only that these controls did not restrict international
trade (Article VI, Section 3). Under Article VI, Section 1, even today,
the Fund may request that a member “exercise controls” to prevent the
Fund’s financial assistance bring used to finance a large or sustained
outflow of capital. If the member fails to exercise appropriate controls, it
may be declared ineligible to use the Fund’s general resources.
The governance arrangements forged in Bretton Woods, which relied
on a legalized code of conduct enforced by a public intergovernmental
organization, provides an example of the way in which governance is
characterized by the combination of specific policy instruments and archi-
tectural features. In particular, the Bretton Woods governance represents
a specific governance mode tilted towards a traditional hierarchical form
of command-and-control regulation. Indeed, the workings of the Bretton
Woods regime were characterized by clearly defined policy goals, inbuilt
monitoring strategies and the application of sanctions in the event of non-
compliance. Although the IMF has never sanctioned a member country
for not using capital controls,6 the “shadow of hierarchy” provided by
the Fund’s Articles was designed as a crucial incentive for governments to
maintain their hierarchical control over the markets.7
Another key feature of the Bretton Woods governance was the
repartitioning of the responsibilities for implementation between the
domestic and the international level. If the IMF Articles granted states
the possibility of introducing controls, it was up to national authori-
ties to implement them if conditions so required. In other words, the
policies designed in Bretton Woods were based on a close collaboration
between the international and the domestic levels of public authority.
The Bretton Woods regime of cross-border capital flows can thus be
characterized as one of “cooperative decentralization” (Gallagher 2013):
an order was established that allowed individual nations to regulate
cross-border finance on their own and to informally co-operate at the
international level where necessary.
2.3 Governing cross-border capital flows at time 1: from

the 1970s to 2007
The agreement reached at Bretton Woods on cross-border capital flows

was put under strain by two important and related developments: the
progressive growth of cross-border capital flows and the demise of the
fixed exchange regime. In other words, changes in the external environ-
ment and, in particular, the emergence of new societal problems exerted
pressure on governance dynamics.
After having virtually disappeared in the aftermath of the Second

World War, international capital flows grew steadily. This put pres-
sure on the US dollar, the anchor of the fixed exchange-rate regime.
The growth of capital flows in unregulated offshore financial markets
such as the euro-dollar market made capital controls more difficult to
enforce, creating new functional problems for governments to confront.
The growth of the stock of dollar claims in the euro-dollar market is
a good indicator of these developments. Indeed, the stock rose from
US$15 billion in 1960 (compared with a US gold stock equivalent to
US$23 billion) to US$83 billion in 1972 (compared with a US gold stock
equivalent to US$10.5 billion) (Elson 2011: 50).
Here it is interesting to note that capital mobility stemmed from
public authorities’ deliberate decision not to intervene in the markets.
For example, when the euro-dollar markets were growing rapidly in
London, the American authorities not only refrained from taking actions
that might control or guide these developments (Germain 2010: 52) but
even supported these developments (Helleiner 1994: 4). The result was
an open-ended flow of the dollar into the global financial system that
ultimately made a regime of fixed exchange rates untenable, in line with
the principles of the impossible trinity.
The tension in the system receded in August 1971, when President
Nixon put an official end to the Bretton Woods regime by delinking
the US dollar from gold. The shift to a floating rate regime opened up
new opportunities for capital to move across borders. It also marked the
beginning of an intellectual rethink on the benefits and costs of finan-
cial liberalization. The emergence of a new ideational venue created
further pressure on existing governance arrangements by providing
policy actors with the intellectual instruments to support new govern-
ance modes.
Indeed, starting from the mid-1970s, virtually all advanced countries
moved decisively towards the removal of capital controls on cross-border
capital transactions. The example set by the governments of Ronald
Reagan in the US and of Margaret Thatcher in the UK is often pointed
at as one of key factors that help to explain the wave of liberalization
that has swept the world since the 1980s.8 The diffusion of liberaliza-
tion policies was also supported by the paradigm shift that took place
in policy-making circles, marking the passage from Keynesian economic
ideas to those based on monetarist, supply-side and rationalist assump-
tions.9 These ideas were not confined to the advanced economies, but
spilled over to developing and emerging market countries alike – as
attested by the diffusion of the Washington Consensus.10 And although
capital account liberalization has always been one of the most contested
elements of the Consensus,11 one of the primary reasons for the inte-
gration of developing and emerging-market economies into global
financial markets can be traced back to that particular understanding
of the world economy that underpinned the neoliberal prescriptions of
the Washington consensus (Chwieroth 2010; Jeanne et al. 2012: 1). In
this new ideational environment, the process of financial liberalization
gained steam. The liberalization process, in turn, increased the size of
cross-border flows and deepened global financial integration creating
new societal problems for governments to confront (Moschella 2010: 3).
In spite of these fundamental changes in both the ideational and mate-
rial environment, the governance of cross-border capital flows lagged
behind financial market developments until the late 1980s. Indeed, the
removal of capital restrictions has not been steered or supported by the
type of international public rules and institutions that, for instance,
the World Trade Organization (WTO) provides for the liberalization
of trade in goods. But capital liberalization became an objective of
domestic and international public policy despite the lack of international
co-ordination and agreement on how to manage the risk deriving from
the free movement of capital flows. This is not meant to suggest that
governments’ decisions were irrelevant to the shift towards the policy
goal of financial liberalization. On the contrary, states allowed and facil-
itated the globalization of finance. As already noted, for instance, the
“Euromarket was heavily dependent on state support from the outset”
(Helleiner 1994: 82). In particular, states, especially those with advanced
economies, played a crucial role in the emerging governance framework
because they refrained from imposing more effective controls on capital
movements and intervened to prevent crises that might have under-
mined market confidence (Helleiner 1994).
However, states’ deliberate support for the liberalization of capital flows
created new problems for domestic public authorities around the world,
raising the societal relevance of the policy field. For countries that have
opened up their economies to international capital flows, integration
with the world’s capital markets meant a reduced room for manoeuvre
in domestic economic management in line with the “trilemma” logic
(Goodman and Pauly 1993). The progressive integration of the world’s
financial markets also exposed domestic economies to foreign instability.
That is to say, it created the connections through which contagion could
spread from one market to another, and from one country to another;
“innocent” bystanders have often been affected. The potential insta-
bility was also exacerbated by the expansion of financial integration to
emerging and developing countries that had decided to open up their

capital accounts to emulate the success of developed economies and
thereby enter their “club”. However, since these countries possessed less
experience of managing large capital flows and weaker domestic finan-
cial institutions and regulatory systems, their integration posed new
risks to global financial stability. These risks materialized clearly in the
1990s, the decade of the emerging markets’ financial crises. The crisis
that struck Mexico in 1994 was the first alarm bell. Indeed, although it
started as a typical macroeconomic crisis, triggered by growing budget
deficits and rising inflation, the crisis and its contagion intensified due
to a sharp reversal of capital flows. In short, the event dramatically
revealed the potentially damaging effects of rapid and large-scale cross-
border capital flows.
Despite the recognition of the risks associated with the free movement
of “hot money”, the experience of the Mexican crisis did not lead to the
rejection of liberalization as had been the case after the Second World
War. It did, however, create the conditions for rethinking the modali-
ties through which to govern the free flow of cross-border capital. In
order to minimize the potential costs associated with liberalization,
several reform proposals to strengthen IMF financial sector surveillance
were discussed (Moschella 2011). Furthermore, a proposal was made
to expand the Fund’s legal jurisdiction to encompass the promotion
of capital liberalization by amending the IMF’s Articles of Agreement
(Leiteritz 2005; Chwieroth 2008). Reverting to the logic that had guided
the Bretton Woods founders, the IMF was to have been allowed to lead
member countries towards financial liberalization by sanctioning the
use of capital controls, while providing financial assistance in the event
of any balance of payments disequilibria caused by capital flight.
The onset of the Asian crisis in 1997, however, stopped the emerging
direction of the governance dynamic towards based on the IMF role and
the application of sanctions to guide members’ behaviour. The disrup-
tion caused by the sharp reversal of capital flows that many Asian coun-
tries experienced led several observers to think outside the parameters of
the dominant “ideational venue” leading them to question the benefits
of international financial liberalization (Bhagwati 1998; Williamson and
Mahar 1998).12 Furthermore, the Asian crisis sparked a vigorous contes-
tation of the Fund’s role as guarantor of global financial stability. Because
the IMF’s intervention in the crisis-hit countries was unable to restore
confidence and often even damaged domestic prosperity, the IMF’s
ability to effectively govern the markets appeared shaky at best. Key
governments thus withdrew their support from the proposal to amend
the Articles, thereby giving in to the scepticism of both emerging/devel-

oping countries and the private financial sector; the latter had never
been enthusiastic at the prospect of IMF involvement in the regulation
of cross-border capital flows (Moschella 2012).
After the failed attempt to govern the risks deriving from financial
liberalization through the workings of the IMF, the governance of
cross-border capital flows has taken on new features. In particular, the
policy problem of financial instability has been addressed by relying
on soft policy instruments such as standards and codes of conduct
that provide incentives for both governments and market actors to
adopt “sound” behaviour. The fact that weaknesses in domestic finan-
cial sectors – such as the existence of substantial foreign borrowing
by the private sector and a weak and over-exposed banking system –
had significantly contributed to the severity of the 1997 Asian crisis
brought home the lesson that strengthening domestic financial
systems was the key instrument through which to ensure global finan-
cial stability.13 This was particularly the case in emerging economies,
where domestic financial weaknesses appeared most pronounced. In
the late 1990s, the governance of cross-border capital flows therefore
came to rely on a soft “regulatory project” (Walter 2008): the diffu-
sion of voluntary and internationally agreed financial standards,
modelled upon those of the Western economies and aiming to mini-
mize the probability of a crisis in capital-recipient countries. Standards
and codes of conduct were thus intended to increase financial and
economic stability by inducing governments to adopt policies aimed at
strengthening domestic economic and financial institutions. Measures
favouring information and transparency have also gained pride of
place in the list of policy instruments through which governments
hope to effectively govern the potential instability of global financial
integration (Best 2005). The underlying logic was that increased infor-
mation would allow market participants to make more informed and
rational investment decisions, disciplining those countries judged to
be following inappropriate policies.
It is interesting to note that governments delegated the production
of the relevant standards to several international bodies: the interna-
tional standard-setter bodies. These include, among others, the Basel
Committee on Banking Supervision (BCBS) (for banking supervision),
the International Organization of Securities Commission (IOSCO) and
the International Association of Insurance Supervisors (IAIS) (for securi-
ties and insurance regulation).14 The co-ordination of work among these
bodies was delegated to the newly created Financial Stability Forum (FSF)
(this was renamed the Financial Stability (FSB) in April 2009). This body,
whose membership comprises both domestic regulators of consistently
important countries and international institutions, identified 12 key
standards as priorities.15
The 1990s governance of cross-border capital flows is also based on
distinct enforcement mechanisms. An assessment programme was estab-
lished under the auspices of the World Bank and the IMF to foster imple-
mentation of these standards. This programme is known as the Reports
on the Observance of Standards and Codes (ROSCs). Although reports
have been prepared for a large majority of Bank and Fund members,
the programme is entirely voluntary, reflecting another key feature of
governance since the 1990s.
Along with the ROSCs, the other mechanism to ensure the enforce-
ment of standards builds on the involvement of private-sector actors
and, in particular, on the use of market discipline. Again, the standards
and codes initiative helps illustrate this point. As anticipated above, the
logic that underpinned the selection of standards as policy instruments
was that these standards might be of help in promoting good economic
policies and transparency and therefore contributing to international
financial stability (Financial Stability Forum 2001). Nevertheless, it was
also widely believed that the success of the international standardiza-
tion initiative would be closely dependent on the involvement of the
private sector (Mosley 2003). If market participants assessed coun-
tries’ performances against internationally recognized standards in
their investment decisions – thereby pricing capital on the record of
compliance with international standards – the threats to international
financial stability would be reduced. In consequence the post-Asian
crisis financial-standards policy delegated the international monitoring
of domestic policies to the private sector by giving them the task of
assessing domestic policies against globally defined standards and of
enforcing these, “as non-compliance would send negative signals to the
international financial community, resulting in possible capital flight
and investment strike” (Soederberg 2003: 13).
The progressive reliance on the expertise of market actors and market
discipline as key pillars of global financial stability signals an important
change in the role that governments exercise in governing the movement
of cross-border capital flows. Public authorities have become increas-
ingly enmeshed in a relationship with private actors that has replaced
the old dynamics of “command and control” with a more “integrated
ensemble of governance” (Underhill 2000). This new frame of reference
for global financial governance “places less emphasis upon coercion and
compulsion ... instead relying on a complex mix of incentives and direc-

tion to effect appropriate regulatory behaviour” (Germain 2010: 74).
In conclusion, the governance dynamics of cross-border capital flows
from the 1970s to the 1990s was shaped by the pressure exerted by
important changes in the economic environment, including the emer-
gence of new ideas on the benefits and costs of liberalization and the rise
of new societal problems deriving from increased financial integration.
As a result, in contrast to the Bretton Woods regime, through which the
potential instability effects of capital-flow movements were kept at bay
by governments’ use of capital controls under the oversight of a public
intergovernmental organization, the governance that has taken shape
over the past 30 years no longer relies on the command-and-control
strategies of the past. The new modes of governance involve entrusting
the problems of market correction to specialized international regula-
tory bodies that produce soft-law standards and codes of conduct. The
new modes also involve a progressive reliance on information and
market discipline as key mechanisms of enforcement. However, as shall
be shown in the following section, the financial crisis that started in
2007 has exerted renewed pressure on the governance dynamics, setting
once more the conditions for change.
2.4 Governing cross-border capital flows after the

global financial crisis of 2007–2008
As already anticipated, one of the key features of the governance of global

finance from the late 1990s until the onset of the 2007 global financial
crisis was the delegation of rule-making and enforcement functions to
technical bodies and private sector actors.16 These choices reflected a
widespread belief that financial markets were inherently self-stabilizing
by virtue of their rational efficiency and capacity to process and respond
to information (c.f. Quiggin 2010). In this context, a market-based solu-
tion – the exercise of market discipline – became the primary vehicle
through which actors could attain the policy goal of mitigating the risks
associated with the integration of the world’s financial markets.
However, the beginning of a global financial crisis in 2007 has seri-
ously called into question the intellectual underpinnings of the govern-
ance framework that has been in place since the late 1990s. Although
many factors contributed to the crisis, market failures were paramount.17
As the IMF unmistakably puts it in one of the documents investigating
the causes of the crisis, the financial turmoil revealed that “market
discipline failed as optimism prevailed, due diligence was outsourced
to credit rating agencies, and a financial sector compensation system

based on short-term profits reinforced the momentum for risk taking”
(IMF 2009: 2).
Similarly to what had happened with the governance dynamics
discussed in the previous section, change in the ideational context
within which policy actors operate put pressure on existing govern-
ance arrangements. Indeed, the recognition of the failures of market
discipline has led several commentators to call for strengthened public
control over the markets. In the words of Randall Germain (2010: 4), for
instance, “this crisis has amply demonstrated (yet again) how impor-
tant nation-states are to the general operation of the global political
economy”. After decades of triumphant neoliberalism when policy-
makers embraced self-regulating markets, governmental interventions to
rescue the banks and to support key domestic industries have revamped
memories of economic nationalism (Clift and Woll 2012), suggesting
that a bigger role for the state in the financial market is warranted in
order to help maintain economic stability, drive growth and create jobs
(World Bank 2012).
Although it is probably too early to speculate to what extent the
market failures brought to the surface by the crisis will lead to a
fundamental overhaul of the global financial governance regime, this
section is an initial assessment of the changes that capital account
policies have undergone since the start of the crisis in light of the pres-
sures exerted by the ideational changes in the external environment
in which policy actors operate and by the emergence of problems that
challenge existing governance arrangements. Indeed, although the
bulk of attention has been focused on the issue of financial regula-
tion reform (Helleiner et al. 2009; Baker 2012; Moschella and Tsingou
2013; Porter 2013), the governance problems associated with the
movement of cross-border capital flows have also attracted renewed
political attention. Specifically, the debate on how to manage poten-
tially destabilizing capital flows (especially inflows) is once again at
the centre of public and scholarly attention. This is closely associated
with the development of the crisis since 2007. In the early stages of
the crisis, emerging markets had to cope with severe capital outflows
caused by the process of global deleveraging. By the final quarters of
2009, on the other hand, the easing in monetary conditions in the
advanced economies had begun to push capital flows in the opposite
direction. Since then, several emerging countries such as Brazil, Chile
and Peru have heavily intervened in their currency markets, reviving
memories of currency wars (Financial Times 2011). In the summer of
2011, even the Swiss National Bank was forced to intervene in the
foreign-exchange markets in response to the strong and rapid appre-
ciation of the franc and the negative effects on the domestic economy.
In short, the volatility of capital flows from 2008 onwards has once
again raised the important question of what tools policy-makers can
use to stem the potentially disruptive effects associated with the free
movement of capital.18
If capital flow management measures in the 1990s explicitly ruled out
the use of capital restrictions (Cohen 2002; Grabel 2003; Williamson
2003: 49),19 favouring policy instruments such as standard-setting
and information-gathering, the global financial crisis has expanded
and transformed the tool-kit on which national policymakers are now
expected to draw.
This transformation is particularly evident in the relaxation of the
fully-fledged rejection of capital controls as attested, among others, in
the public pronouncements of the IMF. Indeed, since the start of the
crisis, the IMF has been gradually edging towards an acceptance of the
view that capital controls may help countries to manage the financial
stability risks deriving from large capital inflows (Moschella 2014). As
the IMF’s former Managing Director Dominique Strauss-Khan put it,
“there is no reason to believe that no kind of control is always the best
kind of situation” (Financial Times 2009). This change of view has even
prompted the IMF to remark that “there may be circumstances in which
capital controls are a legitimate component of the policy response to
surges in capital inflows” (Ostry et al. 2010: 15).
In other words, capital controls are no longer taboo. Their use – as a
policy instrument through which to mitigate the potentially destabi-
lizing effects of cross-border capital flows – has also begun to be regarded
as legitimate. The prevailing orientation seems to be one of reasserting
some form of public control over capital markets by authorizing govern-
ments to restrict the movement of capital flows under particular circum-
stances, echoing positions prevalent in the 1940s.
As previously mentioned, it is too early to reach firm conclusions on
the new modes of governance of cross-border capital flows. The debate
on the policy tool-kit that governments should use to manage these
flows and the role of the IMF in setting the rules of the game is far from
settled. However, the current policy debate signals an important trans-
formation as compared with the recent past. In particular, it signals an
emergent preference towards a more formal, controlling type of govern-
ance that will complement the softer modes of governance that have
been designed over the past two decades.
Next to these important signs of change in the governance of

cross-border capital flows, an analysis of the evolution of governance
dynamics would be incomplete without drawing attention to elements
of continuity with the past, and to the factors that hinder the process
of transformation despite the “window of opportunity” provided by the
crisis. Previous governance arrangements – such as initial equilibrium –
influenced the directionality of the governance dynamic by bringing
about an incremental dynamic that, combined with the changed idea-
tional environment, has thus far led to an oscillation of the pre-crisis
governance dynamics (Moschella and Tsingou 2013).
Indeed, although all the textbook conditions were in place for a radical
departure from pre-existing governance arrangements, because of the
exogenous shock of the crisis combined with heightened public and
government awareness (Baumgartner and Jones 1993; True et al. 2007),20
the empirical evidence so far lends support to the hypothesis that the
evolution of global financial governance is proceeding by way of incre-
mental adaptations. (Moschella and Tsingou 2013). This incremental
dynamic largely reflect the containing effect exerted by the pre-crisis
governance arrangements, that is by the initial governance equilibrium.
Factors such as the fragmentation of rule-making authority, the isola-
tion of professional communities from public pressure and the diffusion
of regulatory ideas are all combining to slow reform.
The obstacles confronting the revision of global financial regulation
are also evident in the efforts to reform the governance of cross-border
capital flows (Moschella 2014). These obstacles largely stem from pre-
existing governance modes, such as the initial equilibrium. Specifically,
after having developed a system of governance based on the close
co-operation with market actors and on market discipline within the
overarching framework of capital mobility, governments now confront
serious challenges in loosening their reliance on these instruments and
reasserting their command and control over capital flows. These chal-
lenges are well described by the notion of “stigma”, that is the vulner-
ability to capital flight from which domestic authorities are likely to
suffer when they decide to use controls to direct the movement of
private capital flows. This phenomenon constitutes a serious limit on the
freedom of countries to use capital controls. In late 2009, for instance,
Brazil imposed only very weak restrictions on capital inflows in order to
avoid upsetting the markets and was thus unable to effectively address
the inflow problem (Jeanne et al. 2012: 111).
In short, the global financial crisis, and the attendant capital vola-
tility that has resulted, has raised public and political attention to the
problem of financial instability and led to a change in the external idea-

tional environment because of the growing contestation of the principle
of market discipline. The crisis has thus opened up space for redesigning
the governance of cross-border capital flows. The governance modes
that have been discussed so far include the use of capital controls by
domestic authorities and a new role for the IMF, in order to allow this
public organization to set the rules that justify governmental interven-
tion in the capital markets. Although it is too early to draw firm conclu-
sions about the ultimate directionality of the governance arrangements
here analysed, the changes of the past few years suggest that governance
dynamics of the policy field is reversible and that governance modes
used in the past may gain currency again.
2.5 Conclusions
Following on the editors’ suggestion that contributors to this volume

analyse how actual governance arrangements operate and how and why
these change, this chapter has examined the governance dynamics in
the field of the movement of cross-border capital flows. In particular, the
chapter has discussed and illustrated the varying policy instruments and
institutional features that governments have selected over time to steer
the movement of private capital flows. In so doing, particular attention
has been devoted to shedding light on the variety of governance modes
and the varying roles that public authorities can exert in governing
capital markets.
The chapter has thus shown that the governance of cross-border capital
flows has evolved through an incremental directionality. Specifically,
it has moved from a system based on the adoption of command-and-
control policy instruments (i.e. capital controls) administered by domestic
governments under the auspices of a public intergovernmental organi-
zation, to a system based on softer policy instruments such as voluntary
standards and best practices, the enforcement of which has been prima-
rily delegated to the exercise of market discipline. Furthermore, the
policy-making venue has shifted from an arena of intergovernmental
negotiations, as provided by public organizations such as the IMF, to
one of supranational bodies made up of experts, such as the interna-
tional standard setter bodies. In spite of the shift from hard to soft policy
instruments, and from government-directed to market-based enforce-
ment mechanisms, governments have continued to play a key role in
ensuring stability. For instance, it has been a primary responsibility
of governments to foster and enhance information-sharing, thus

allowing market actors to make effective and discriminating investment
decisions.
In the attempt to identify the factors that help account for this
governance dynamics, the chapter has built on the scholarship that
has demonstrated how governments have been the key policy actors
in shaping the relevant governance arrangements (c.f. Helleiner 1994;
Pauly 1997; Germain 2010). In particular, governments, especially those
of the advanced economies, have over time selected different policy
instruments and designed several mechanisms through which they
have aimed to solve the governance problem posed by the integration
of global financial markets.
Next to the role played by the deliberate governmental activity, the
chapter has also drawn attention to the changes of the external, economic
environment within which policy actors operate. In particular, the rele-
vant changes are those in the economic paradigms to account for the
benefits and costs of financial liberalization and in the level of societal
attention to the problems deriving from increased financial integration.
When ideas on the benefits/costs liberalization have changed, the pres-
sure for change in governance arrangements has been paramount as
attested in the shift towards market-based mechanisms since the 1970s
on the heels of the paradigm shift that led to the assertion of monetarist,
supply-side economic ideas. Furthermore, the emergence of new societal
problems created by capital volatility created impetus for new govern-
ance arrangements by highlighting the limitations of previous arrange-
ments in effectively dealing with the new challenges.
The directionality of the evolution has then been heavily shaped
by the governance arrangements selected at time 0, or at the initial
equilibrium. Specifically, previous governance arrangements tilted the
logic of evolution towards an incremental dynamic by filtering the
pressure coming from the external environment. This is particularly
evident in the current debate on governance reforms following the
problems brought to the surface by the crisis that burst in 2007–2008.
The stigma attached to the use of capital controls is, for instance, one
of the most remarkable obstacles to the acceptance of these controls in
the policy tool-kit that governments can use to steer the size and direc-
tion of private capital flows. As a result, the evolution of the govern-
ance arrangements has been more incremental than would otherwise
be the case under the post-crisis conditions favouring more dramatic
transformations.
Notes
1. On the distinction between governance modes aimed at market correction
and those aimed at market creation, see Germain (2010: 52).
2. It is important to note that, in contrast to the liberalization of trade flows,
there is no scholarly consensus supporting the case for the liberalization of
financial flows. Examples of different positions on this issue can be found in
Greenspan (1998) and Bhagwati (1998) among others. For a thorough discus-
sion on the benefits and costs of financial liberalization, see, for instance,
Caprio et al. (2006) and Stiglitz (2000).
3. For works on the history of the Bretton Woods agreement see, for instance,
Gardner (1956), Horsefield (1969) and James (1996).
4. The “trilemma” derives from the Mundell–Fleming approach to open
economy macroeconomics.
5. For instance, under conditions of free capital mobility an expansionary
monetary stimulus causes capital exit unless and until interest rates rise to
the world rate.
6. For an explanation of why the IMF has never invoked the provisions of
Article VI see, for instance, James (1996:).
7. On the “shadow of hierarchy” see, for instance, Héritier and Lehmkuhl
(2008).
8. According to some authors, a significant boost to financial liberalization
came from the activity of international institutions such as the IMF and the
OECD (e.g. Abdelal 2007).
9. On the shift in economic doctrine in the US see, for instance, Blyth (2002).
On the shift in the UK see the classic treatment provided by Hall (1993).
10. The policy and ideational diffusion of the Washington consensus took place
via both coercive and persuasive channels (Babb 2013).
11. For instance, the inventor of the term, John Williamson, has repeatedly
argued that he did not intend capital account liberalization to be part of the
Washington consensus (Williamson 2004).
12. The literature on the Asian crisis is extensive and references provided here
are simply meant to provide an indication of the broader debate. For an
analysis of the crisis from an economics perspective, see Goldstein (1998)
and Krugman (1998). For accounts of the crisis from a political economy
perspective see Haggard (2000) and Noble and Ravenhill (2000).
13. For the debate on the reform of the international financial architecture in
the aftermath of the Asian crisis see, for instance, Eichengreen (1999) and
Goldstein (1999).
14. While some of the international bodies involved in the standards initiative
are intergovernmental, quasi-universal organizations such as the IMF, the
membership of other bodies is not made up by national governments. The
members the above-mentioned BCBS, IOSCO and IAIS, for instance, are regu-
latory authorities that are usually granted a status independent from execu-
tive control. Furthermore, their membership is less universal in scope than
that characterizing the major international financial institutions (i.e. the IMF
and the World Bank).
15. These pertain to three areas: policy and data transparency; financial sector
regulation and supervision; and market integrity. For the full list of standard
and standard setters, see the FSB website at www.financialstabilityboard.org/

list/fsb_cos_issuing_body/index.htm.
16. Such delegation can be justified in terms of the comparative informational
and expertise advantage that private actors have in specific areas over public
authorities. For instance, in the area of market regulation, Adrienne Héritier
and Dirk Lehmkuhl (2011) have found that 1) governments tend to rely
more frequently on self-regulation by sectoral experts, particularly in areas of
highly complex issues of market regulation; and 2) increasing delegation of
complex regulatory issues to private actors
17. The literature on the causes of the global financial crisis is already quite large
and it is not the purpose of this volume to review it thoroughly. For an intro-
duction to the causes of the crisis from an economics perspective see, among
others, de Laroisiére (2009), IMF (2009) and Obstfeld and Rogoff (2009).
18. As far as concerns capital inflows, large inflows raise the problem of managing
inflationary pressures and stem asset price bubbles.
19. However, it is worth remembering that, according to the letter of the IMF
Articles of Agreement, members may adopt capital controls, but that no
member may exercise these controls in a manner that restricts payments for
current international transactions or that unduly delays transfers of funds in
the settlement of commitments (Article VI, Section 3).
20. These are precisely the conditions that characterized the post-crisis envi-
ronment. The crisis catalyzed the attention of policy-makers and the public
around financial regulatory issues (see also Helleiner et al. 2009); at the
same time, the debate on the content of financial rules became increasingly
politicized, spilling over from discussions in technical bodies to negotiations
among the G20 political leaders.
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3
Similar Regulatory Challenges but
Contrasting Modes of Governance?
The Puzzle of Governing Human
Biotechnology across Western
Europe
Isabelle Engeli and Christine Rothmayr Allison
3.1 Introduction
Human biotechnology is a fairly recent policy issue that emerged

onto the political agenda in the 1980s and 1990s in most Western
European countries. As an emerging policy area, human biotech-
nology was largely unstructured and the governance was mostly left
to the medical and scientific communities. In the meantime, with the
exception of Ireland, all Western European states have designed regula-
tion, yet governance modes still vary considerably. Various governance
modes have been developed. Some of these modes rely on traditional
“command and control” governing arrangements, others operate with
delegated or partial self-governance. While the government has taken
a more pre-eminent role over time in the governance of the field, some
striking variation remains. The challenge is to understand when, how
and under what conditions modes of governance emerge and evolve
over time. In this chapter, we shed light on the impact of the dynamics
between stakeholders in building up modes of governance over time.
We argue that the variation in the configuration of and the interac-
tions between stakeholders, in particular medical and scientific stake-
holders, impacts on the trajectory of governance modes over time.
The continuous process of structuring a new policy problem is tightly
linked to establishing modes of governance (Capano et al. 2012). These
modes of governance are dynamic and the mix of policy instruments
51
52 Isabelle Engeli and Christine Rothmayr Allison
and other design features are part of an overall governance architecture

that builds up over time.
Investigating the emergence and the trajectory of policy issues over
time is ideal for assessing how, when and under what conditions modes
of governance evolve over time. Most Western governments have faced
the same challenge of answering the question of why and how to
address the risks and the uncertainties that new technological develop-
ments in human biotechnology bear. The development of in vitro fertili-
zation (IVF) at the end of the 1970s, resulting in the first birth of a baby
conceived through IVF in 1978, has opened up avenues for the develop-
ment of a number of cutting-edge techniques such as genetic diagnosis
and screening, cloning and embryonic stem-cell research. Advances in
human biotechnology have also provided effective treatment against
infertility, offered great promise for the treatment of life-threatening
diseases such as diabetes and Parkinson’s disease, and permitted the
extension of organ transplants. The rapidly developing field attracted
public attention early on, as the dissociation of reproduction from sexual
intercourse raises complex issues regarding such questions as surrogate
mothers, embryo selection and cloning, to name only a few of the
contentious issues widely discussed. Governing this fast developing and
complex policy field requires states to balance a series of contrasting,
and potentially conflicting interests and policy goals (Weimer 2006;
Salter and Frewer 2009; Banchoff 2012) to balance the protection of the
public with the promotion of scientific and economic development.
Determining how to protect society from potential medical and social
abuses while encouraging technological development and stimulating
economic competitiveness by funding, for example, stem-cell research
constitutes one paradigmatic case of an intractable policy problem
(Hisschemöller and Hoppe 1995). Thus, there is no certainty on the
policy means that have to be developed as well as no a priori consensus
on the moral and social values that the policy should seek to pursue.
The results of comparative studies indicate that governments across
Western Europe have taken an active part in building up modes of
governance and have progressively played a more pivotal role in the
field over time. Based on purely economic interests, we would rather
expect a limited and active promotion research and development
activities (Banchoff 2005: 204; Tiberghien 2009). Rather, the state has
progressively become a central actor in governing the field of human
biotechnology and has increased its steering capacity over time. In the
process of building up governance arrangements, governments took
into account pre-existing self-regulatory arrangements in the field. The
Similar Regulatory Challenges but Contrasting Modes 53
process of building up governance mechanisms did not simply take the

form of imposing solutions in a top-down manner but, rather, in several
but not all cases, the state built up governance arrangements based on
existing self-governance mechanisms (Rothmayr 2003, Engeli 2012;
Engeli et Rothmayr forthcoming). The resulting governance modes for
human biotechnology vary greatly in their focus, form, aim and tools,
but in all cases governments have assumed the authority of shaping
and co-ordinating the process of building and establishing governance
modes.
During this process of building governance arrangements and devel-
oping them further over time, governments have taken into account the
dynamics of interactions between actors. We can discern two basic forms
of interaction between stakeholders that influence governance modes:
collaboration versus competition and contention. In this chapter, we
analyse the impact of these forms of interaction on the dynamics of
governance modes by looking at four cases. The United Kingdom has
been characterized by collaboration between various stakeholders and
political actors, resulting in delegated governance. Germany, France and
Italy all represent cases of competition; however, each of these three
cases represents a different type. Germany’s policy-making process
was characterized by competition between physicians and scientists
regarding self-regulatory capacity, and ended up adopting a mode of
partial self-regulation. In Italy we can observe vigorous competition
between secular and religious actors, in France between private and
public health-care providers. The four case studies trace the interaction
between actors over time by highlighting how collaboration, competi-
tion and contention contribute to framing the issue and influencing the
process of building governance modes.
3.2 The impact of stakeholders’ interaction on

governance arrangements over time
As argued in the introductory chapter, governance arrangements should

be conceived as being dynamic and should constitute the object of
longitudinal studies. In fact, different authors interested in policy
change have argued that we need periods of at least ten years to prop-
erly observe how policies evolve. The diachronic analysis of modes of
governance for assisted reproduction reveals that governance modes
have evolved over time.
Early stages of governance arrangements on human biotechnology
were mostly characterized by self-governance. This self-governance
did not result from explicit delegation, but is anchored in the strong
self-regulatory tradition of the medical profession. In cases where self-
regulatory norms are only adopted by some, but not all relevant stake-
holders, there is the possibility of competing self-governance modes.
National medical associations might be composed of various regional
associations, and there are also specialized medical organizations (spatial
and sectoral segmentation). In addition, given the growing stature of the
reproduction industry, there are standards or guidelines of practice at the
level of the clinics themselves, for example adopted by a specific group of
reproductive clinics. Therefore, when investigating governance modes,
we need to take into account the possibility of multiple self-governance
arrangements that might influence the policy-making processes.
Figure 3.1 summarizes the dynamic of governance modes over the
last 35 years for the four cases. The temporal dynamic can be analysed
according to three dimensions, as explained in the introductory chapter:
initial equilibrium, directionality and temporality, and relationships
with the external environment.
Initial equilibrium: Initially, self-governance was the dominant mode in all
four countries. However, as discussed below, already these modes of self-gov-
ernance varied considerably across countries, from rather comprehensive
and well-respected self-regulatory guidelines to mere general declarations
that were not implemented. For example, in one case this initial self-govern-
ance took the form of top-down arrangements (Germany), while in another
it could be characterized as a form of network governance (Britain).
Directionality and temporality: From the mid-1980s on, there were
important public and legislative debates on regulating assisted repro-
duction in several countries. Germany and the UK were among the
early regulators adopting legislation or constitutional changes, at the
“Delegated
Governance”
UK
“Hybrid” Germany
“Command France
and
Control”
Italy
Government Steering Self-governance
Figure 3.1 Dynamics in modes of governance over time

beginning of the 1990s. France joined those countries later in the same
decade, whilst in Italy the process was considerably slower. As Table 3.1
and the case studies below clearly illustrate, while governance modes
have constantly adapted to new challenges, the overall type of govern-
ance mode remained rather stable within cases after the initial choice
had been made in the 1990s or at the beginning of the 2000s. There is
no clear shift across cases back to more self-regulatory mechanisms, but
rather the hybrid forms initially chosen continue to be dominant up to
the present day. Given this uniform stability after the typically long and
complex process of building up governance modes, it seems particu-
larly intriguing to understand how the process of defining and framing
the (initially) novel and intractable policy problem common to all cases
leads to considerable variation in governance modes across those cases.
In order to better understand the path dynamics of policy choices, we
analyse the interaction between the major stakeholders and look at how
the state takes into account these interactions while building up govern-
ance modes in the section below.
Relationship with the external environment: Regarding this aspect of
temporal dynamics, the case studies are less germane to the effect of
institutional arrangements on policy-making processes than the impact
of socially relevant and highly publicized medical breakthroughs. What
is particularly intriguing for the biomedical sector is the fact that medical
and technical breakthroughs routinely receive vast amounts of media
attention worldwide, and trigger the same type of “external shocks” for
all the four cases under study. The first milestone was without doubt
the birth of Louise Brown in the UK in 1978. The first IVF birth took
place in each of the three other countries under study in the 1980s, and
the use of IVF became more frequent. The second important milestone
consisted of the technique known as “preimplantation diagnostics”
which was successfully conducted for the first time in 1989 and became
increasingly used during the 1990s. The third important breakthrough
concerned embryonic stem-cell research during the 1990s, which trig-
gered much optimism about curing various diseases. Also important were
non-human biotechnology breakthroughs, for example the birth of the
first cloned mammal (the sheep Dolly in 1996). Hence, all four countries
had to find answers to this new policy challenges. As the case studies
reveal, the first breakthroughs were generally important for setting the
political agenda and were also important for the initial problem defini-
tion. New challenges from the late 1990s onwards did not, however,
fundamentally change governance modes built up earlier on. Rather, as
the case studies show, while initial governance modes were adapted to
respond to these new challenges, the overall mix of instruments, that is

the type governance mode, was not reversed. The external environment
also played a role, as discussed in the introductory chapter, regarding
the nature of interest groups and the organization of the social environ-
ment. More specifically, we are interested in the interaction between
actors in order to explain how governance modes were established and
then adapted. The following section analyses how collaboration, compe-
tition and ignorance as forms of interaction are taken into account by
the state when building up governance arrangements.
3.3 Building governance modes: dynamics of interaction

between stakeholders
Governance capacity can be defined as the capacity to co-ordinate

among stakeholders. Stakeholders are important actors in policy-
making processes for several reasons. First of all, as noted in the litera-
ture on interest groups, stakeholders might engage in various lobbying
activities and public relation strategies to gain public and eventually
political approval for their policy objectives. The literature on govern-
ance arrangements points to two additional, important ways in which
stakeholders contribute to policy-making processes: through expertise
and because they are indispensable partners for policy implementation.
In order to understand the building up of governance arrangements, we
need to take into account the governance capacity of key stakeholders.
Their governance capacity, in terms of organizational structures and
abilities, helps us to explain the potential importance of self-governance
mechanisms within a specific governance arrangement and hence to
better understand why a particular mode of hybrid governance emerged
(Knill and Lehmkuhl 2002).
As discussed in the introductory chapter, it is essential to have a
careful look at initial governance arrangements in order to provide an
accurate account of governance dynamics over time. Already the initial
equilibrium – in terms of self-governance – reveals that the governance
capacity of the medical associations varied considerably across countries.
Previous research points out that medical associations have continued
to try and preserve their autonomy in terms of medical practice, and
this independently from their substantive preferences for what to prac-
tise and how to practise human biotechnology (Rothmayr 2003; Bleiklie
et al. 2004; Engeli 2012). Given their strong self-regulatory tradition, but
also their interest in preserving self-regulation, one strategy has been
to adopt voluntary self-regulation early in the policy-making process.
Such initial self-regulation, however, can take various forms. As we

discuss below in more detail, the institutional characteristics of volun-
tary self-regulation for human biotechnology, namely their comprehen-
siveness and enforcement mechanisms, varied across countries. This
initial equilibrium was, in the case of the novel and intractable policy
issue of human biotechnology, an important factor that influenced how
the problem was structured and framed. Accordingly, we understand
governance capacity not simply as an organizational attribute (Knill
and Lehmkuhl 2002), but also as the capacity to structure and frame a
problem.
Governments do not build up governance arrangements in a political
vacuum, but take into account the interaction between actors and the
struggle for defining and framing novel policy issues. They also take
into account the capacity and co-ordination among key stakeholders. It
would be a mistake to classify the medical community, because of its self-
regulatory tradition, as necessarily a homogeneous actor that possesses
the capacity to successfully co-ordinate among its various members.
Various factors can lead to competition within the medical community,
such as religious cleavages, diverging interests between the private and
public sector, differences in interests between research and medical prac-
tice, to name but the most important factors structuring competition
within the medical community. Co-operation and consensus within
the medical community allow medical actors to intervene in the public
debate as a more convincing and unified force and thereby to influence
the framing of assisted reproduction as a medical rather than a moral
policy issue.
The process of building up governance arrangements is influenced by
the degree of collaboration or competition between key stakeholders.
As discussed in the introductory chapter, governance arrangements can
change in a radical or more incremental way from the starting equilib-
rium and the general mix of policy instruments and the actors involved
might also change in a more incremental or in a more radical way. In the
case studies below, we argue that collaboration and co-ordination among
key stakeholders lead to processes of incrementally building up governance
arrangements that do not move away from initial self-regulation in a radical
way. In contrast, competition and contention among stakeholders may lead
to more radical moves away from this initial self-regulatory mode of govern-
ance. Furthermore, new scientific breakthroughs might also challenge
the governance mode in place. The introduction to this volume raises
the question of whether governance modes are reversible. In our chapter,
which deals with a novel and intractable policy problem, this poses the
question that once a mode of governance with a more or less hybrid

character has been chosen, does new knowledge lead to remaking the overall
governance mode?
The following section analyses how collaboration and competition
have led to different processes and policy outcomes for four case studies:
the UK, Italy, Germany and France. We discuss how governance modes
have been built up over time, to what extent and in what direction they
have moved away from the initial self-regulatory equilibrium and to
what extent the governance arrangements have remained stable over
time, even in the face of the evolution of practice in the field and highly
publicized technological advances.
3.4 Collaboration: the case of the United Kingdom
The UK exemplifies an advanced form of delegated self-regulation

when it comes to governance arrangements for assisted reproduction
and embryo-related research. What is notable about the UK is the fact
that this characteristic delegation of regulatory authority has marked
the regulatory regime since its inception in the 1990s and has further
expanded over time. Nonetheless, even in the most delegated self-regu-
latory regime that we have studied, there are still some “command and
control” features, explicit prohibitions that have been included in the
various acts of parliament that circumscribe the field. For our purposes,
what is important to draw from the case of the UK is the way in which
the issue of assisted reproductive technology (ART) was quickly framed
as one for the medical and scientific communities to address, and the
manner in which this occurred; it was a direct consequence, we argue, of
the rapid instigation of a voluntary self-regulatory regime, and this was
facilitated by shared policy preferences among health professionals.
It is worth noting that none of this occurred with public disinterest.
Indeed, the UK has been a leader in human biotechnology since the
early days, including the world’s first successful IVF in 1978, which
garnered an immense amount of public and media attention. Although
there was a certain enthusiasm and national pride, there was an equal
amount of concern regarding the possible consequences of the break-
through and indeed the future possibilities of human biotechnology.
This became manifest in the polarization of the debate over a private bill
in the House of Commons for the “protection of unborn children”, with
the pro-life movement and the Catholic Church also raising opposition
to the nascent human biotechnology field (Blank 2004). The potential
for a politically sensitive and polarizing issue was recognized very early
on by the government, with the real possibility that it could divide

an increasingly unpopular ruling Conservative Party, and in 1982 the
government created a Committee of Inquiry to review the social and
ethical implications of human biotechnology.
From the outset, the major professional organizations, chief among
them the Medical Research Council and the Royal College of Obstetricians
and Gynecologists, co-operated closely with the Warnock Committee –
whose membership featured predominantly scientists and medical
professionals – and they acted quickly to follow the recommendations
of the committee, published in 1984, by setting up a voluntary licensing
body, the Voluntary Licensing Authority for Human in vitro Fertilisation
and Embryology (VLA). Despite strong objections in some quarters that
the Warnock Committee had failed to adequately address the issue of
the legal status of embryos, the voluntary licensing arrangements put in
place by the medical and scientific community were essentially enshrined
in law in the Human Fertilization and Embryology Act (1990), and the
VLA became the Human Fertilization and Licensing Authority (HEFA).
The Act did establish a limited number of outright prohibitions (e.g. a
ban on implanting animal embryos in humans), but in general it granted
broad autonomy to HEFA to decide how ART and embryo research were
to be conducted; as stated by the Department of Health consultation
in the 2005 review of the legislation, it “has enabled science and medi-
cine to flourish within the bounds agreed by Parliament” (Department
of Health 2005: 5). HEFA was granted not only rule-enforcement but also
rule-making powers, through the Code of Practice that may set binding
requirements. Thus it is HEFA, not the legal framework, that de facto
determines the direction of ART research and development, in terms of
what specific practices may be allowed or proscribed, as long as they are
conform with the broad outlines of the act. Indeed, this approach was
strengthened in the 2001 and 2008 revisions of the legislation, and in the
2001 Human Reproductive Cloning Act.
The composition of HEFA was heavily influenced by the pre-existence
of the VLA/ILA. Highly concerned about the potential for divisiveness
and debate to explode into the public consciousness and to paralyse the
field (McLaren 2002), the medical and scientific community had acted
swiftly to incorporate the bulk of the Warnock Committee’s recommen-
dations into its voluntary regime. The VLA/ILA had been created with
the intention of reviewing, authorizing and inspecting ART and research
activities (Allan 2010). Key to its legitimacy was the recognition of the
need to sway public opinion in favour of biotechnology and ART, and to
co-opt lay-people and non-professional organizations into the VLA/ILA.
Indeed, it was chaired by Dame Mary Donaldson who, although having

trained as a nurse, had forged a career in public service, had been the
first female Lord Mayor of London, and had no particular background
or training in the field of ART/human biotechnology. Equally important
was the fact that, despite the absence of any formal sanction for non-
compliance, the majority of ART centres and research facilities chose to
adopt the ILA guidelines and apply for licences (McLaren 2002; Blank
2004). For example, in its first year, the VLA visited 25 research centres
and approved licences in all but one case.
This swift and successful implementation of voluntary self-regulation,
in the wake of the public consultation of the Warnock Committee, was
crucial in demonstrating the efficacy of the governmental approach of
“defining the minimum requirements of acceptable practices” and then
delegating responsibility for day-to-day regulation and oversight to a
self-regulatory authority, the HEFA (Department of Health 2005: 5). By
opening up the VLA/ILA to a non-professional membership, the medical
and scientific community demonstrated a degree of transparency and
(as put by a member of the Warnock Committee) provided “very valu-
able reassurance to the public that there weren’t nasty scientists doing
wicked things behind closed doors” (McLaren 2002: 5). The VLA, from
the outset, expressed its support for a legislative framework.
There was a noticeable shift in public opinion in the UK in the wake of
the creation of the VLA/ILA, and by the time of the passage of HEFA in
1990, the scepticism and fears of the early 1980s had given way to broad
public support for ART. The history of the regulation of ART and embryo
research in the UK demonstrates how the risk of issue-expansion, which
was very real in the political and social climate of the 1970s and 1980s,
was headed off by early and decisive voluntary self-regulation by the
medical and scientific community.
3.5 Competition between private and

public actors: France
In France, what began as a self-regulated, voluntary framework (as in the

UK) gave way to a regime that is a classic form of “command and control”
(in contrast to the UK). When the French state first became involved in
the regulation of ART and biotechnology in 1988, the inclination was
to legislate a licensing framework for ART, and to leave the substance
of regulation of the field to the medical and scientific community. That
community had already developed voluntary self-regulation to address
medical and ethical issues related to sperm and egg donation at the
beginning of the decade, and then extended it to other ART procedures

(Engeli 2004). But what distinguishes France from, say, the UK is that
the medical community had a long-standing history of fragmentation
and internal conflict, and these divisions manifested themselves in two
ways. On the one hand, the voluntary self-regulatory approach struggled
to achieve legitimacy and compliance within the medical community
itself; on the other hand, scientists and physicians found themselves in
substantial disagreement about what approach they wished to see from
the state. In the absence of coordination or compliance from professional
organizations, there was an issue expansion, with non-professional and
non-medical actors becoming heavily involved, and the state was pushed
to take over the regulation of ART and embryo research and to develop a
comprehensive legislative framework for biotechnology.
In contrast to the UK, where two of the main professional organiza-
tions acted quickly and decisively to set up a voluntary self-regulatory
body, the two main professional organizations in France – the National
Order of Physicians and the National Academy of Medicine – were luke-
warm about creating any such institution. When that move happened,
it occurred as a result of an initiative by the major public centres that
were specializing in sperm and egg donation, and who created their own
federation, the Centres d’étude et de conservation des œufs et du sperme
humains (CECOS). This approach was later mirrored by federations in
other areas of ART and human biotechnology.
All of this took place amidst the backdrop of a public craze for ART
and an explosion in demand. This demand led to an expansion of
both the number of centres in existence, notable private centres, and
the range of techniques and approaches used. As a result, the extent
to which practitioners comply with voluntary self-regulation signifi-
cantly dropped. The initial mode of governance that had been intro-
duced in 1988, which instigated licensing procedures, failed to monitor
the rapid changes in the supply of ART treatments. Thus, by the end
of the decade, the situation in France was chaotic and fragmented, a
patchwork quilt of legislated and voluntary licensing procedures that
did not achieve uniform acceptance or compliance. Equally so, there
were challenges to this already fragile regime from new ART practices
such as surrogacy, single-motherhood and use of a deceased husband’s
sperm, which posed moral and ethical challenges outside of the guide-
lines put in place by the federations. Again in stark contrast to the UK,
where the success of early voluntary self-regulation and high levels of
compliance effectively defused and disarmed controversy, there was
an expansion of the scope of conflict in France, and the situation was
heavily criticized for promoting confusion. It was into this scenario that
the government stepped and sought to gain control of the field. After a
long process of public consultation and decision-making, the resulting
1994 laws on bioethics comprehensively regulated the field and severely
constrained ART practices. Further laws in 2004 and 2011, occasioned
by breakthroughs in stem-cell research, extended the command and
control approach to embryonic stem-cell research.
Thus, the initial attempt at voluntary self-regulation by the CECOS
had only a limited impact, and only in the area of sperm, egg and
embryo donation. In these domains, the CECOS succeeded in having
its policy preferences reflected in the 1994 laws, despite opposition
from other medical organizations. However, when it came to other
ART technologies and embryonic stem-cell research in particular, the
pleas of various medical actors (including CECOS) for autonomy were
discounted. The institutional fragmentation of the medical community
itself (Hassenteufel 1997), in conjunction with a wide range of policy
presences among professional and scientific groups, led to a negation of
their effectiveness when participating in the consultative policy process.
Neither the National Order of Physicians nor the National Academy of
Medicine was willing to demonstrate leadership on the issue. The former
has had its legitimacy periodically contested since its creation under
the Vichy regime, with social and family issues often providing a spear-
head for this criticism of the NOP; one of the peaks being the abortion
struggle in the 1970s (Engeli 2010). Indeed, it was out of that struggle
that three of the major pioneers of ART were to come, and they were
later co-founders of the CECOS. Although individual federations were
able to promulgate narrow, but widely enforced, guidelines for their
memberships, the overall effect was one of fragmentation and incoher-
ence. Thus, when challenges arose to this initial set of arrangements
(both for more permissive and more restrictive policies), the medical
and scientific stakeholders who had participated in the development of
the guidelines were unable to prevent the widening of debate.
The expansion of the scope of conflict was driven by three major
factors. First, new ART centres had been created that refused to accept
regulation or participate in the framework proposed by the federations
such as the CECOS. Diverging from the CECOS on such issues as surro-
gacy and post-mortem sperm donation, these new centres vehemently
opposed any public intervention into what they argued was an arena of
private choice. Second, new ART techniques, and particularly the ques-
tion of human cloning, posed serious ethical challenges to the existing
regime and galvanized public and political action (for example, President
Chirac declared his fundamental opposition to human cloning). In the

absence of any unified or coherent position on the part of professional
and scientific actors, that ethical debate found voice in the wider public
arena. Non-medical actors – such as women’s organizations and reli-
gious groups – promoted alternative framings of the ART question, and
began to question the legitimacy of “science for science’s sake”. Third,
a series of incidents, notably the “tainted blood” scandal and “mad cow
disease” (BSE), sparked fear and scepticism among the public, much of
it directed towards the medical and scientific communities. In the early
1990s the government launched a large-scale exercise in deliberative
democracy, unusual in the French unitary system, seeking to engage
and corral public opinion on the subject. That same consultative proce-
dure was used in the revision of the bioethics laws in 2004 and 2001;
medical and scientific actors were represented, but found themselves
only as one (disunited) set of actors among many, with no privileged
place at the table.
In sum, France is a case that shows the conditions under which initial
voluntary self-regulation in the field of human biotechnology did not
work. Instead of a unified, co-ordinated position with strong leadership,
the scientific and medical communities were divided by historical differ-
ences and divergent policy preferences, and the voluntary self-regulatory
regime that emerged was fragmented, patchy and struggled to achieve
compliance. Although initial indications were that the French state
might accept a self-regulated approach, the incapacity of the medical
and scientific communities to develop a common voice and high levels
of compliance led to an expansion of the scope of conflict, drawing in
political and social actors with their own ideological and theological
agendas. When the state chose to react to these pressures, it did so with
comprehensive and overarching legislation in a command and control
fashion, and over the objections of many of the practitioners of ART
themselves.
3.6 Competition between religious and secular: Italy
Like France, initial self-regulation in Italy later gave way to the state
imposing a “command and control” mode of governance. Unlike
France, the cleavages in the medical community that rendered initial
self-regulation ineffective and unworkable gave way to the expansion of
the issue along religious versus secular lines, drawing in a multiplicity
of actors already entrenched in this debate. Although the Italian state
entered the regulatory arena later than in the other cases under study,
when it did so it did so with comprehensive regulation and an eye on

mollifying the opposing social and political actors in the moral and
ethical debates sparked by human biotechnology, notably the Catholic
Church.
The initial Italian governance response to the rapid diffusion of repro-
ductive technology following the first IVF baby in 1983 was rather
limited in scope. In 1985, the Ministry of Health issued a circular regu-
lating those reproductive technologies services covered under the public
health system (Ramjoué and Klöti 2004).1 This first governance arrange-
ment resulted in a two-track system that de facto limited practices in the
public sector but left the private sector largely unregulated. The broad
autonomy afforded to the private sector opened the door for sensational
reproductive technology procedures, such as post-menopausal preg-
nancy, that attracted worldwide media attention. The de facto permis-
siveness of the regulatory regime received little political attention until
the mid-1990s. The collapse of the Christian Democratic Party and its
hegemony almost certainly reinforced the lack of political will to get
engaged in contentious decision-making over human biotechnology.
Several bills never even reached the legislative agenda, and the report of
the first commission on human reproduction in 1995 ended up being
totally disregarded (Hanafin 2013). The first serious attempt to impose
comprehensive state regulation over human biotechnology came in 1997
and immediately revealed the religious polarization on the issue that
still prevails. Sponsored by the centre–left coalition government of the
day, the restrictiveness of the bill was drastically sharpened by Catholic
MPs. While the fall of the government put an end to the legislative
trajectory of this particular bill, the political “career” of human biotech-
nology regulation had just taken off. The Vatican’s call to Catholic poli-
ticians to not adopt voting positions contrary to the teachings of the
Catholic Church was heeded, and the newly formed Berlusconi govern-
ment quickly got a revised bill approved (Fenton 2006). The 2004 Act
has placed Italy among the most conservative regulatory regimes over
human biotechnology, with severe restrictions and prohibitions, and
established a traditional “command and control” mode of governance
with no room for self-regulation and little professional autonomy.
The leftist libertarian and anti-Catholic Radical Party, with the
support of various women’s and patients’ interest groups, gathered four
millions signatures in favour of five abrogative referendums against the
2004 Act, and four were deemed acceptable by the Constitutional Court
(Fenton 2006). While the referendums passed, their effort fell short of
mobilizing sufficient turnout to reach the 50 per cent quorum required
to validate the vote in June 2005. The opposition camp, led by promi-
nent Catholic groups, successfully played with the 50 per cent quorum
that is required for referenda to become law in Italy, urging voters to
abstain from voting with slogans such as “Life cannot be put to a vote”
(Metzler 2011: 113). While several factors related to the transformation
of the Italian party system and the renewed influence of the Catholic
Church in the politics accounted for this drastic change in the govern-
ance mode over human biotechnology in Italy, the exacerbation of
religious polarization has cut across the scientific and medical commu-
nities and added a second layer of division among these communities
that has decisively prevented the elaboration of any comprehensive
and well-respected self-regulation. The divide seems to have frozen
the governance arrangements in an Arctic frost, where judicial action
seems to be the only venue for change. The 2004 Act has been success-
fully challenged before courts on several occasions, and over time has
been emptied of some of its most restrictive clauses regarding the ART
practices; meanwhile the highly restrictive legal framework for embryo
research has remained almost unchanged.
The religious polarization that sharpened the policy process cascaded
into the human biotechnology sector as a whole. Self-regulation by the
Italian medical community took some time to take off and never reached
any comprehensive scope. Initial regulation in the 1980s unintention-
ally resulted in the development of a two-track system for the delivery of
reproductive technology services. The public sector drastically restricted
services to the ones that were covered by the national health system,
while the private sector developed practices in full autonomy. The
National Federation of the Orders of Physicians and Dentists did not
show any leadership in developing self-regulation and mostly reacted
only to media attention. The Code of Italian Medical Ethics was not
amended until 1998, and then only to include a clause on reproduc-
tive technology. The clause did not provide any guidelines for good
practices, but just four prohibitions, notably regarding surrogacy and
menopausal pregnancy. The enforcement of the clause was delegated
to the local orders which did not show much inclination to enforce it
(Ramjoué and Klöti 2004)
The lack of co-ordination between the private and public sectors was
reproduced among the private centres as well. Some private centres, the
CECOS, developed some comprehensive self-regulation in the beginning
of the 1990s. Other centres refused any form of self-regulation, pushing
boundaries further with post-menopausal pregnancy and surrogacy,
and focalizing media attention on ART practices. The Italian CECOS
grouped into a federation and in 1992 adopted very similar guidelines to

their French counterparts (Nappi et al. 2000). In 1994 they also created
a voluntary national register on medically assisted reproduction. A
number of professional organizations emerged around the same time
period, such as the Italian Society for Reproduction. In 1998, some of
these professional organizations created an umbrella organization, the
T.R.A Forum for the protection of assisted reproduction, together with
patients’ organizations. The umbrella organization immediately called
for the repeal of the 1985 circular and the establishment of licensing and
monitoring procedures as well as quality control. The organization built
on the self-regulation launched by the CECOS with a national code of
self-regulation for medically assisted reproduction. While this attempt
at self-regulation was well enforced among member organizations, it
still left out a wide range of centres that were engaged in various ART
practices.
The development of pre-implantation diagnosis and breakthroughs in
embryonic stem-cell research accentuated the lack of co-ordination and
coherence among ART practitioners and placed the field in an vulnerable
position against the Catholic backlash that grew stronger between the
1987 Donum Vitae Instruction on Respect for Human Life in Its Origin and
on the Dignity of Procreation and the 2004 Act.2 Invasive techniques raised
considerable concern in Italy regarding the status of the human embryo
and opened a profound divide between the secular majority and the
religious minority that cut across party lines and scientific and profes-
sional bodies alike (Corbellini 2007). A vivid illustration of the embed-
dedness of the religious cleavage in the regulatory debate can be found
in the incapacity of the National Committee for Bioethics to agree on
any unanimous position regarding the human embryo (Hanafin 2007).
The field increasingly organized into two separate camps, secular actors
and the religious ones (Liverani 2011). When the advisory commission
on stem-cell research, chaired by the Nobel Prize winner Dubelcoo,
recommended rather permissive regulation of embryonic research in
2000, the Pontifical Academy for Life3 stated the immorality of embry-
onic stem-cell research and the human status of the embryo. During
the referendum campaign, both camps mobilized in committees, the
“Science and Life” committee for the Catholic camp and the “Research
and Health” committee for the secular camp (Liverani 2011). While
the “Research and Health” one gathered the support of the majority of
the scientific community, the “Science and Life” committee was able
to attract prestigious spokespersons within the scientific community
(Cattaneo and Corbellini 2011; Beltrame 2013).
Despite the fact that the 2004 Act has been gradually modified through
court decisions, the freezing effect of the religious divide seems to be still
salient, as no revision of what has been called the “confessional” Act has
been announced; a recent survey shows the persistence of considerable
division over the legitimacy of stem-cell research among the medical
community (Fenton 2006; Frati et al. 2014).
3.7 Competition between physicians and scientists:

Germany
The governance mode in Germany can best be described as partial

delegation. Thus we see federal legislation that combines prohibitions
on a number of research activities and manipulations of embryos, with
binding self-regulation that addresses the medical practice of assisted
reproduction (Rothmayr and Ramjoué 2004; Rothmayr 2006; Abels and
Rothmayr 2007). In order to analyse the process of building up govern-
ance arrangements, we need to start with the initial self-regulation of
the German Medical Association and look at three major pieces of legis-
lation, the elaboration of the Embryo Protection Act (EschG), the adop-
tion of the Stem Cell Act (StzG) and the Preimplantation Diagnostics Act
(PräimpG). Together, they contribute to a hybrid mode of governance
delegating some issues to self-regulation while reserving others for clas-
sical command and control-type intervention.
The Bundesärtzekammer, the German Medical Association, has a strong
tradition and institutionally recognized capacity of self-regulation. Since
the mid-1980s assisted reproduction has been regulated through the
professional code (Berufsordnung) of the German Medical Association
(Bundesärtzekammer 1985, 1988, 1998, 2006). The professional code is
legally binding and can be enforced in court. Self-regulation involving
medical practice as well as embryo research has been implemented and
generally well respected. In a political context, where assisted reproduc-
tion is highly politicized because of the abortion debates in the past and
the experience of the Second World War, their self-regulatory capacity
is crucial to understand the resulting governance arrangements as the
following analysis reveals.
In 1990, all questions related to the protection of the embryo, and
hence embryo research, were regulated through the Embryo Protection
Act (Embryonenschutzgesetz), adopted under a coalition government
of Christian Democrats (CDU/CSU) and Liberals (FDP). The law focuses
on protecting the embryo from possible harm by the new technology
and, in contrast to other countries, does not propose comprehensive
legislation on all aspects of assisted reproduction. The framing of

assisted reproduction in terms of embryo protection is the result of
several components: In 1975 the Federal Constitutional Court declared
the abortion law to be unconstitutional, stating that the constitutional
protection of human dignity (Art. 1 GG) and the right to life (Recht
auf Leben, Art. 2 GG) apply to the embryo after implantation, and the
state accordingly recognized the obligation to protect the embryo. This
jurisprudence on the protection of the embryo strongly contributed to
framing ART in terms of embryo protection. Evidently, the fact that the
Christian Democrats were in power, and that there was broad mobili-
zation of religious interest groups and the Churches (Landeskirchen),
are crucial in order to understand this very specific focus of the debate.
However, the comprehensiveness of early voluntary self-regulation and
its strong enforcement capacity due to the legally binding character of
the professional code equally contribute to explaining the absence of a
more comprehensive federal legislation for assisted reproduction.
Since the Länder Medical Chambers are public law bodies and the
professional code is legally binding, medical self-governance is explic-
itly delegated. From the beginning of the agenda-setting process, the
German Medical Association proved to be a reliable partner, setting
national, well-respected standards for a broad range of assisted repro-
ductive technologies and related ethical issues. The professional code
imposed limits, guided doctors in their therapeutic choices, assured
patients of quality and guaranteed them the necessary counselling.
Even if the medical profession would have preferred more comprehen-
sive legislation, there was already a functioning self-regulatory regime
in place anchored in the strong German neo-corporatist tradition. This
self-governance is certainly not the cause of the focus on embryo protec-
tion, but it reduced the scope of conflict, and rendered a multi-faceted,
very divisive issue tractable by signalling that the medical profession
were willing and capable of finding a consensus, adopting meaningful
guidelines and enforcing them.
At the same time, the German mode of governance is characterized
by the division between command and control type legislation for
embryo research and any intervention on embryos, and the delegated
self-regulation for infertility treatments. While the factors mentioned
above explain part of this outcome, we also need to look at the compe-
tition within important stakeholder groups. The German Medical
Association’s 1985 guidelines on embryo research triggered strong
resistance within the research community. There were two major lines
of conflict. The first one, between pro- and anti-abortion groups is not
surprising. The second opposed practitioners to scientists. Physicians

emphasized more the public concerns about embryo research and
wanted to show the public that the medical profession was willing and
well enough equipped to prevent ethically questionable uses or interven-
tions on embryos (Augst 2000). Other, more research-oriented scientists
pointed to the importance of embryo research for further developing
IVF and related techniques. In fact, to a certain extent, we can observe
a negative depiction of the research community by a part of medical
community. In contrast to the British case, and because of their corpo-
ratist tradition and also their internal divisions, the medical community
insisted upon their traditional monopoly over medical knowledge and
they did not engage in more inclusive strategies of public collabora-
tion, as was the case in the UK (Catenhusen 1994). The command and
control-type approach to embryo protection, and related to this focus
the building up of a partially delegated mode of governance, is hence
also the result of internal divisions and of the lack of more collaborative
strategies in order to engage with public concerns.
This hybrid mode of partially delegated self-regulation has
continued to be the dominant mode of governance since the begin-
ning of the 1990s. It has now been 22 years since the embryo-protec-
tion law has been adopted, and there has been ample time to adopt
more comprehensive legislation, but this has not happened. As the
subsequent stem-cell research and the pre-implantation genetic diag-
nostics debates confirm, putting assisted reproduction on the agenda
is very costly in Germany. In 2002 and then in 2011 two important
legislative changes occurred: first, under a Social Democratic govern-
ment, the Bundestag decided to allow research on imported stem-cell
lines (Stammzellgesetz, StZG); and second, a coalition government of
Christian Democrats (CDU/CSU) and Liberals (FDP) has allowed pre-
implantation genetic diagnostics on a case-to-case basis. For both of
these debates, similar observations can be made as discussed above for
the Embryo Protection Act. Internal provisions prevented the medical
community from pushing for more important changes towards more
liberal approaches to regulating assisted reproduction. At the same
time, they were able to affirm again their important position in the
implementation of medical practice. The decisions on practising pre-
implantation diagnostics within the strict rules of the Pre-implantation
Diagnostics Act are delegated to ethics commissions affiliated with the
centres that practise this technique and the majority of the members
of these ethics commissions come from the medical community
(Präimplantationsdiagnostikverordnung, PIDV).
While these adaptations show the dynamic evolution of governance

modes over time, the overall type of hybrid mode, partial delegation,
remained stable after the adoption of the embryo-protection law in
1990. In fact, we cannot observe any fundamental reversal regarding
the overall mode of governance. Regulations were, rather, adapted in an
incremental manner, in order to allow for research on imported stem-cell
lines and in order to allow for pre-implantation diagnostics under some
genetic circumstances. The overall governance arrangement, however,
remained unchanged.
3.8 Conclusion
We set out in this chapter to investigate the regulatory trajectories and

governance modes of an emerging and potentially contentious policy
area, that of human biotechnology. As we noted, the visibility and
public interest in the issue, and the immense media attention world-
wide, provides a fascinating set of quasi-experimental conditions under
which to study both the development of governance modes and their
evolution over time. Given that all our cases (indeed, all cases!) start
from an initial zero state – no policy issue, no regulation, no govern-
ance mode – we can reasonably conclude that as regulatory regimes
and governance modes emerge, variations across them can be ascribed
to case-specific conditions. It has been our challenge in this chapter to
isolate and describe those conditions.
The initial impulse across all four cases was towards voluntary self-
regulation. Yet, from the 1990s onwards, as the state has engaged in
legislative activities and in deterring patterns of regulation, we see diver-
gence across our cases. From one end of the spectrum (broad delegation
in the UK) to the other (command and control in France), we are able to
observe a number of factors that influence those regulatory outcomes.
At the top, what matters is whether the medical and scientific research
communities are able to speak with one voice, and to find common
ground and the means of developing self-regulatory guidelines that are
respected across the board. Where there are divisions that prevent self-
regulation from being effective, the next question is, why? In Germany,
the medical community was able to remain relatively unified and effec-
tive at self-regulation, whilst the scientific research community failed to
halt the expansion of issue-conflict. In France, the medical community
was riven by political and ideological conflict, dating back to the corpo-
ratist medical structures of the Vichy regime. And in Italy, the fault-lines
of the conflict mirrored that of the religious–secular societal cleavage,
drawing a multitude of political and social actors into the debate leading
to dramatic issue expansion.
Finally, our research demonstrates the value, indeed the necessity,
of incorporating the temporal dimension into policy studies in order
to understand regulatory and governance outcomes. Our diachronic
comparison across the cases has allowed us to identify and isolate the
critical differences in prima facie similar initial regulatory arrangements
that ultimately lead to divergent outcomes and widely varying modes
of governance. From the specificities of each case, we have been able to
isolate characteristics that are common to, but vary across, cases – that
is the variables – and we have pointed the way towards a systematic
understanding of the influence of voluntary self-regulation on govern-
ance modes across countries.
Notes
1. Another circular in 1987 imposed some precautionary measures regarding
the prevention of HIV transmission through sperm donation while a couple
of ordinances prohibited human cloning, surrogacy advertisement and the
importation/exportation of cryopreserved embryos (Ramjoué and Klöti 2004).
2. The Church supplemented this instruction in 2008 with Dignities Personae:
On Certain Bioethical Questions, which addressed issues relating to embryonic
stem-cell research that had emerged in the interim.
3. The Pontifical Academy for Life had been created in 1994 to address bioethical
problems “relative to the promotion and defence of life”. Its members include
specialists in the biomedical sciences, and it serves as the focal point for the
position of the Catholic Church on human biotechnology.
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4
Environmental Policy and
Governance: Bringing the State
Back In (Again)?
Anthony R. Zito
4.1 Introduction
This contribution follows the introductory chapter of Capano, Howlett

and Ramesh, arguing that the study of governance both requires a multi-
variable explanation and an awareness that governing in the current
age has not abandoned the issues and mechanisms of government. The
chapter explores the utility of a fourfold governance framework that
explores structural, ideational and instrumental levels of political inter-
action. To empirically challenge the framework, the contribution studies
the environmental policy sector. It investigates whether new forms of
state–society networks (and the policy styles that they encompass) and
new policy instruments are transforming traditional state arrangements,
or whether national institutions continue to shape path-dependent
dynamics of how actors behave and how instruments operate. Do federal
(as opposed to unitary) structures, the orientation of the legal/constitu-
tional structure and the national political economic structures continue
to limit the direction and nature of governance?
The contribution asks whether the governance-related developments
in four OECD countries (Australia, Canada, Germany and the Netherlands)
follow any particular pattern of convergence. In examining the govern-
ance arrangements, the chapter explores the balance and relationship
between both public and private actors, and how innovations in instru-
ments may have affected this balance. The sample of countries focuses
on three federal systems and one unitary system. Special attention is
given to the role of the European Union (EU) in shaping the governing
processes in the two EU member states. The chapter uses a mixture of
74
Environmental Policy and Governance 75
interviews for the Netherlands, Australia and Canada (interviewing over

60 mid-level policy officials in both state and society spheres as well
as academic and non-academic policy experts), government documents
and secondary sources to highlight the nature of environmental policy-
making across multiple levels of analysis.
4.2 Governance framework
In order to analyse the movement towards governance, we need to

define several dimensions. The first dimension is the degree to which
the political system has moved towards some semblance of a govern-
ance position, that is a move from more traditional, top-down governing
procedures (for the sake of simplicity, labelled “government”) towards
a large-scale integration of vertical and horizontal actors in the steering
process (Marinetto 2003). The general literature expects such a move in
the governance scenario: “political analysts have all come to perceive
governance as a departure from traditional, state-centred styles of
governing” (Palumbo 2010: xiv). In making this proposition, one must
acknowledge the longstanding question as to whether traditional forms
of governing actually did lack such involvement of multiple layers and
civil society: are the more flexible governance arrangements all that
“new”? By looking at our four political systems over time, hopefully we
will be able to get some sense of this reality.
There is a second objection, namely that the concept of governance,
as differentiated by Hooghe and Marks and others, is actually made up
of ideal types. A number of legal scholars have argued that processes
and tools of governance may cohabit the same policy space as more
traditional processes and tools of government – the concept of hybridity
(Burca and Scott 2006; Trubek et al. 2006; Trubek and Trubek 2007). The
conjunction of such dynamics and tools may create conflicts but also
may operate relatively harmoniously. Although scholars may pose polar
opposites on the governance continuum, it is actually much more likely
that most systems have some hybrid arrangement that moves them away
from such poles. There are two possible hypotheses that may explain this
hybridity. First, the empirical examinations for governance have tended
to assess these poles during the period of transition between a govern-
ment-oriented policy system and a governance-oriented system. Such a
transitional period may simply take time and be ongoing at the point
of observation. The second possibility is that the process of governing is
likely over time to combine both governance and government elements:
hybridity is the permanent reality (Capano et al. 2012).
76 Anthony R. Zito
The second important set of dimensions concerns the elements of

governance. Treib et al. (2007) postulated that an integrated theory of
governance involves three dimensions of governance that need to be
studied simultaneously to get a full sense of how governance works.
As these elements interact, Treib et al. suggest the essential need for a
multiple dimension framework. Combining the multi-dimensional
approach with the concerns about hybridity, Howlett et al. (2009) and
Capano et al. (2013) warn against the typical governance literature
assumption that new governance arrangements will move at a clear, even
pace away from the traditional government configuration. The multi-
variate framework lends itself to the hypothesis that policy normally
tends towards more mixed arrangements. Such a system should allow
scholars to tease out the location of hybrid relationships and more care-
fully study the conjuncture of both “new” governance and traditional
government models, such as hierarchical instruments operating with
other more flexible instruments in less hierarchical situations (Howlett
et al. 2009).
One ambiguity in this recent multi-dimensional analysis of govern-
ance is the relative importance of each dimension, as well as the degree
to which they shape each other. This chapter turns to Hall’s influential
conceptualization of the policy process with its combined focus on the
nature of the state, how the state relates to society, the role of trans-
formative ideas and the actual policy content (1993: 276–278). Hall’s
argument defines several core elements of state policy-making: govern-
mental administrative structures and procedural arrangements; the
policy style of the sector, which encapsulates how state actors engage
with other relevant actors; and policy content involving: (1) the policy
goals, which will be centred on a framework of ideas that explain their
position and the means to implement the goal; (2) the instruments for
achieving the policy aims; and (3) the precise instrument calibration.
Adapting this framework should allow us to discern the scale at which
different governance processes may operate.
The chapter uses four overarching categories to encapsulate Hall’s
1993 notions (see Table 4.1). The idea of formal institutional structures
and more permanent yet often informal state–society relations is repre-
sented by the first category, governing structures. Within this first cate-
gory are the characteristics that are likely (but not necessarily) to be
more formal, namely: the institutional rules set out in national constitu-
tions (and, for EU member states, the EU treaties), and the processes and
norms of the policy-making institutions. The governing structures also
include the formal and informal structures that define the nature of the
Table 4.1 Government versus governance framework (adapted from Hall 2003)
Category Specification Government pole Governance pole
Governing Formal institutional rules and Authority is centralized within Authority is diffused over a wider
structures processes a limited group of actors who range of actors, in a less hierarchical
prescribe rules and resources, setting.
normally in hierarchical positions
within national governments.
Likely to be less formal but State actors/rules tend to define A wider range of actors in the global
permanent interactions between the scope of access and the and national society are involved
state/society actors. These exchange of resources. They steer in the interaction; they define their
relationships may involve rules the course of the interaction; more own input and even steer.
and principles that have a wider hierarchical dynamics.
application than the specific problem.
Governing frames Assessing the policy problem Centralized, limited number of Broader societal input defines the
elite tends to define the problems. problem.
Resolving the policy problem Centralized, limited political Wider range of actors negotiates
actors tend to steer the outcomes, response, delegates roles.
delegate the duties.
Governing goals Development of a strategy of Centralized state actors define Wider set of actors and interactions,
more specific responses, within a the strategy and system, make reflecting wider societal capabilities
time-frame, to tackle the framed changes to goals; top-down and set the strategy and governing
problem; may involve specific hierarchical. system, make changes to goals;
policy principles. more bottom-up.
Governing Instrument type Command and control Wider range of tools that involve
instruments instruments are typical, backed by societal actors in a more equal role,
state sanctions. with targets negotiated by all the
stakeholders.
Instrument calibration The prescription of instruments is The instrumental steering tends to
precise and detailed. be looser, more flexible.
78 Anthony R. Zito
key relationships between the public actors and the societal/civil society
actors. The governance approach would predict that decision-making
would be diffused away from the national government actors in their
effort to maintain control and direct interests towards a greater vertical
scope for supranational and international bodies and sub-national actors
and a horizontal diffusion of power away from traditional, centralized
(i.e. state) mechanisms of authority.
Hall’s original 1993 article gives a considerable prominence to the role
of ideas and learning; ideational paradigms have the ability to encom-
pass all of the elements of the policy process. This chapter, however,
integrates ideas more concretely into this governance framework, with
a focus on how ideas shape particular policy responses within a policy
sector – more of a mid-range concept than Hall uses. As such, the frame-
work places policy ideas on a lower part of the scale than constitutional
and institutional structures. The chapter relies on the policy framing
concept (Snow and Benford 1988; Schön and Rein 2004). Policy actors
(a) confront a situation where their policy understanding is problem-
atic; (b) create an understanding or story that helps make analytical
sense of the policy situation; and (c) then act and persuade others to act
upon the frame (Zito 2011). For a governing frame to be more oriented
towards the governmental pole, the expectation is that public actors
and essential experts should be the main group who both steer the
framing process and shape the perspectives of wider society concerning
the policy problem. A governance-orientated policy frame should see a
greater role for a wide range of actors and the need to build consensus in
the framing of the policy problem and the policy response.
This chapter privileges the role of policy goals, which forms a subset
of Hall’s (1993) concept of policy content. Governing goals are the over-
arching policy responses to a particular policy frame, involving a deter-
mination about the range of targets, time-frames and policy instruments
to be deployed. These responses form a system of policies to achieve the
goals of the policy framing. The hierarchy of goals articulated in such
a strategy are more likely to be stable over time than the constituent
instruments and their specifications. The government versus govern-
ance dichotomization centres partly on the question of the degree of
prescription embedded in the policies to be undertaken. It also assesses
how top-down and inclusive is the system/strategy, as well its moni-
toring, review and assessment processes.
The last governing category focuses upon policy instruments and their
calibration in specific contexts. Governing instruments constitute the
variety of tools and techniques that policy-makers deploy to implement
policy goals (Hood 1983; de Bruijn and Hufen 1998). The government
hypothesis would expect policy instruments to take the form of regula-
tion and other command and control devices (for example hazardous
waste legislation should have a high degree of prescription). Governance
predictions expect a greater role for more non-regulatory policy instru-
ments. According to the governance literature, these instruments might
be proposed, designed and implemented by some grouping of public and
private actors, or even adopted just amongst the societal actors (Jordan
et al. 2005). Examples of governance instruments include voluntary
consumer labels agreed within an industry; they engage the consumer
in the role of making choices. Nevertheless, the outward appearance and
design of the instrument may not reflect how the actual implementation
occurs in practice. Accordingly, command and control instruments may
be calibrated to have strong flexible and inclusive elements (an example
is the EU use of framework directives) while more supposedly flexible
instruments can be strict in their steering of society. Tradable permit
schemes are a prime example of an instrument that could be quite strict
or hierarchical or loose and flexible depending on its calibration (which
may explain its attractiveness to such a range of different actors).
Table 4.1 summarizes the policy elements and the characteristics
that government and governance ideal types would expect. In order
to utilize this framework, some consideration has to be given to how
these elements interact and shape each other. One question is the direc-
tion of influence; this chapter notes some of the possibilities as propo-
sitions to test empirically. Hall (1993) takes a rather explicit top-down
stance: ideational, institutional change drives the more micro elements
of public policy change. However, Majone’s (1994) work suggests that
instruments can define the nature of a state and macro institutional
innovation; for example, EU instruments helped to define its nature
as a regulatory state. A classic example of this was the creation of strict
command and control regime targeting particular environmental policy
problems long before the European Union included environmental
policy as an explicit treaty priority. The instruments to some extent
preceded the explicit governing structure. This chapter argues that it
is more likely that change in the more macro structural and ideational
broader policy elements will re-define the more micro policy elements;
nevertheless, the reverse dynamic is possible.
Another noteworthy dynamic is the degree to which any one frame-
work element or combination signifies the dominance of government
versus governance characteristics. As Table 4.1 indicates, the chapter
views government and governance poles as ideal types operating on
80 Anthony R. Zito
a continuum, with few environmental policy sectors clearly fitting at

either pole in terms of policy formulation and implementation.
This chapter does not assume that a strong orientation towards
governance in the one element necessarily means that the other catego-
ries follow suit. The approach taken here is that the presence of both
government and governance elements may be essential to explain how
society is steered and that the presence of this dimension at any level of
analysis is significant in its own right. In the environmental arena, we
see various more voluntary agreements established that bear a strong
stamp of a governance approach; nevertheless it is often the case that
these instruments exist and are used by societal actors because of the
threat of regulation or the need to adhere to specific pieces of regulation.
Scharpf’s idea of the “shadow of hierarchy” (i.e. voluntary co-operation
with public objectives is ensured by overarching authority or the threat
of sanctions) articulates this scenario (Héritier and Lehmkuhl 2008). The
presence and even dominance of governance dynamics in a policy area
may still be essentially defined and underpinned by governmental, top-
down dynamics.
4.3 Comparative country analysis
Before exploring the four countries, it is worth noting the hugely

significant role that the EU plays in Germany and the Netherlands.
Increasingly the EU defines much of the environmental policy goals and
specific instruments; it also can put restrictions on the use of instruments
(for example, due to concerns about implicit trade barriers or unfair
competitiveness advantages within the member states). Therefore, the
EU’s institutional system, grounded in the EU treaties, is a very mean-
ingful arena for policy and civil society engagement in Germany and the
Netherlands. The complex institutional chain involved in the decision-
making process and the lack of a substantial budget means that the EU
has a fairly open policy style, but one that tends to be reactive due to the
difficulty of getting policy decided (Weale 1996). Decision-making also
favours executive actors (member state and Commission representatives)
and informed interest groups, creating its own centralizing dynamic.
The lack of a budget and the imperative of protecting the single market
have also tended to make the regulatory instrument the dominant
weapon (Majone 1994). The EU, in response to international climate
change commitments, has developed one major instrumental innova-
tion, namely the emissions trading scheme. Entering into force at the
same time as the Kyoto Protocol, the scheme has triggered a substantial
realignment in how both the EU and the national governments steer

climate policy (Wurzel 2008; Wurzel et al. 2013).
4.3.1 Australia
Structures
Given the geopolitical challenges of managing a vast territory with
considerable ecological demands, the orientation of the Australian state
has historically focused on building infrastructure and the larger nation.
This has built legitimacy for strong state intervention that one can see
in the ecological politics of the Netherlands. As a three-tiered political
federal system, the Commonwealth (i.e. federal), the state and the local
government all have substantive powers to govern and regulate the envi-
ronment (Papadakis and Grant 2003: 30). Nevertheless, since the rise of
environmental concerns in Australia since the 1970s, there has been a shift
of power towards the Commonwealth level due to the rise of domestic
interest groups and popular interest and due to global agreements
(Parliament of Australia 2012, chapter two). The 1970s saw the creation
of several core environmental institutions as well as core legislation, such
as the Environmental Protection (Impact of Proposals) Act 1974. Without
a direct constitutional head of power, these acts tended to occur on an ad
hoc basis and relied more indirectly on a range of constitutional heads
of power, for example power over trade and commerce and international
treaties policy (Interview, national civil servant, 2012, 2013).
In a manner similar to the EU supremacy rule, state legislation that
is not consistent with Commonwealth law is invalid, subject to over-
ride (Petchey 2007: 18–19). The states have been active in this constitu-
tional process, challenging Commonwealth legislation with consequent
court decisions defining the scope of the Commonwealth’s role. The
judicial interpretation has allowed the Commonwealth to operate in an
expansive fashion (Parliament of Australia 2012, chapter two). We see a
pendulum swing in the balance between Commonwealth centralization
and decentralization of the states (Interview, Australian legal expert, 17
September 2013). In the 1990s there was some Commonwealth centrali-
zation power concerning the environment, but in the last 15 years there
have also been tendencies towards devolution to the states, something
likely to continue with the Abbott government in place. In 2014 the
national/Commonwealth level shares responsibility with the states for
key areas such as water, air and ecosystem management, particularly the
Environmental Protection and Biodiversity Conservation Act (Petchey
2007: 23–24). Local government retains a strong role in land-use plan-
ning and waste management.
82 Anthony R. Zito
Papadakis and Grant (2003: 30–31) argued that the Australian envi-
ronmental policy approach is generally less consensus-based and proac-
tive than one would expect in Northern Europe. Furthermore, there has
been a considerable alteration in its tendencies over time. Arguably in
the period of the 1980s, and particularly under the Labour government
of that decade, the national government had adopted a fairly consen-
sual style and proactive style towards the environment. Since 1992 this
has significantly shifted as greater concerns about economic health and
reductions in public finance took hold. Much of the Commonwealth
intervention has been rather ad hoc in its approach to environmental
protection, which raised questions about the consistency of policy and
the relations between the central and more local political levels.
One of the most vital institutional developments has been the creation
of a layered process of ministerial councils (Interview, Commonwealth
civil servant, 6 August 2013; see also Gates 2007). The greater concern
about the economic impact of state regulation led to the creation of the
Council of Australian Governments (COAG) as a key arena for ensuring
intergovernmental co-operation between the Commonwealth and state
levels. As a “political compact” rather than a legal document, there is
ambiguity in the roles and in how to implement the co-operative proc-
esses (Parliament of Australia 2012, chapter two). This move reflects a
shift from a top-down structure to a more complicated multi-level govern-
ance (Godden et al. 2013: 233–234). These co-operative arrangements
have helped create the co-ordination and information sharing that has
allowed some instrument initiatives to occur. As the Commonwealth
has moved into environmental policy-making, it has given the states a
role in defining national standards and reinforced the reality that the
states implement those standards (Kelemen 2004: 117).
Frames
In the 1970s, environmental policy was framed by the governmental
elite as a serious problem, but one that could be addressed by existing
bureaucratic approaches (Papadakis and Grant 2003: 32–33). This
frame, however, faces the overarching national narrative of extraction
of resource from the land which remains. Greater federal interven-
tion to protect the environment coincided with the creation of more
comprehensive and proactive policy responses in line with the policy
style mentioned in the previous section. However, the 1980s also saw a
graduate shift to the idea of empowering businesses to deal with market
failures and to incentivize businesses to create their own solutions. This
reorientation to the role of business actors was underpinned by a shift
in policy priorities towards sustainable development, with the idea that

economic development and environmental protection could be poten-
tially compatible (Papadakis and Grant 2003: 32–33).
Goals
The 1970s Australian governments tended to address environmental
policy priorities using the traditional command and control interven-
tions in specific media. Accordingly, during the 1974–1982 period, the
Commonwealth created the Environment Protection Act 1974, the
1975 Australian Heritage Commission and National Parks and Wildlife
Conservation Act 1975, and nature conservation with trade and trans-
boundary implications. The legislation tended to focus on building
institutions as well as administrative processes and responsibilities
(Parliament of Australia 2012, chapter two). Although regulation has
continued to be the dominant instrument, there has been a shift in focus.
First the nature of the regulation has altered by the 1990s. The change
in the policy frame (i.e. seeking to limit government intervention and
empower business while at the same time reflecting more adverse polit-
ical conditions and financial constraints) led policy-makers to design
regulation to be more flexible (Papadakis and Grant 2003: 33–34).
Furthermore, there was a move to supplement new regulations with
other types of instruments, including voluntary agreements, subsidies,
taxes and market instruments defining policy rights. This governance
shift was institutionalized in the National Action Plan for Salinity and
Water Quality National MBI Pilots Program MBI Pilot Programs which
ran from 2003 to 2008. The intent of this programme was to increase the
national capacity to use market-based instruments (MBIs) by national,
state and territorial support; states were heavily involved in the initiative
(BDA Group 2009). Perhaps the most important overarching programme
in terms defining Australian governance has been the massive orien-
tation towards funding the states in the 2000–2014 period. Interviews
differ about whether this represents a decentralization tendency, or
whether states have lost some of their focus on individual policy scope
in light of the importance attached to these national funds (Interview,
Victoria civil servants, 3 July 2013, 11 September 2013; see also Gates
2007: 137).
Instruments
Australia presents a mixed picture over time with respect to market-
based instruments, but with some dramatic developments in the 2010–
2012 period. It remains the case that regulations are the dominant
84 Anthony R. Zito
instrument although there has been a shift to more regulatory frame-

works (Interview, academic expert, 17 September 2013). The resulting
mix tends to be one containing traditional statutory provision with
other more self-regulatory measures.
The 2007 OECD review notes that the overall revenue from environ-
mentally related taxes had decreased and was below the OECD mean by
2007. This picture is complicated by the fact that there are a scattering of
taxes at the state (a waste levy in three states, an environmental contri-
bution levy in Victoria) and federal level (aircraft noise, oil recycling and
synthetic greenhouse gas levies) (OECD 2007: 161). This general picture
changed somewhat as the Gillard Labour government managed to push
through parliament an energy bill including a carbon tax (Interview,
Commonwealth civil servants, 5 August 2013). However, the Abbott
Coalition government saw its 2013 election as a mandate to scrap this
system, citing its damage to the Australia economy and consumers (The
Parliament of the Commonwealth of Australia, 2014). What will replace
it is less certain. The White Paper suggests an “incentive-based approach
that directly purchases emissions reductions and rewards practical and
positive action”, that is giving positive incentives to business and farmers
to install renewable energy infrastructure (Australian Government 2014:
21). However, the plan of the Coalition government to hike fuel excises
has also been labelled as a carbon tax (Bourke 2014).
Some of the instrumental innovations have been longer term. These
include incentive arrangements, such as the load-based licence fee oper-
ating in New South Wales and Victoria (which uses a mix of voluntary
agreements) and licence systems that have market and regulatory incen-
tives. Voluntary agreements and partnership approaches have played a
significant part in national resource as well as pollution management.
However, many critics raise telling questions about the actual impact
of such programmes (OECD 2007). The COAG structure has gener-
ated a great deal of the impetus for the market instruments, as seen in
the innovative Murray–Darling, National Action Plan on Salinity and
Water Quality, and so forth (Interview, Commonwealth civil servants,
6 August 2013).
4.3.2 Canada
Structures
Canada’s constitutional structure shares the power of legislation between
the federal and provincial levels (Harrison 2000). The steering of envi-
ronmental protection is divided between the federal and provincial
governments in a way that is inherently ambiguous and therefore ripe for
political tension. This tension and complexity have resulted in periods

of conflict and sometimes competition, as well as advances in environ-
mental protection. From 1970 until the present, the various national
governments have experimented with mechanisms to enhance shared
responsibility and co-ordination with a greater variety of civil society
actors participating in formulating public policy (Skogstad 1996).
Nevertheless, the dominant institutional reality is that provinces have
dominated environmental protection, and the federal level has gener-
ally not tested the limits of its constitutional powers in this area. This
combined with the fact that the provinces have such strong consti-
tutional prerogatives and control of the resources has led to a very
limited Canadian federal role (Harrison 1996). Thus, the provinces
have continued to have a strong role in implementation and enforce-
ment. The federal government has taken a greater environmental policy
profile, with the backing of Supreme Court decisions, but, like Australia,
has decided to avoid provincial resistance by involving the provinces in
the policy design process (Kelemen 2004). Intergovernmental fora, most
notably the Canadian Council of Ministers of the Environment, have
enabled this (Benidickson 2013).
In the 1970s, the Canadian policy approach tended to be a more
exclusive process that involved the regulators and industry. Other soci-
etal groups were largely excluded in a manner that harkens back to the
United Kingdom’s political system (Skogstad 1996). In the last 20 years,
there has been a conscious effort to build consultative mechanisms and
require public participation. Nevertheless, organized interest groups
have tended to exploit these processes more than the general public or
social movements. The ongoing policy-making tensions between federal
and provincial governments has given substantial scope to consultation
between levels of government although some provinces take initiatives
with minimal input from other provincial or the federal governments
(Harrison 2000; Valiante 2007: 85–86).
Frames
The traditional Canadian policy frame has gradually evolved from a
belief in unrestricted usage of the vast natural resources of Canada to
one of resource management. Nevertheless, the dominant policy frame
has remained one of grounding the concerns of resource management
in the context of promoting economic growth and prosperity (Hessing
et al. 2005). Other societal groups, notably indigenous peoples and
environmental groups, have sought to insert other perspectives and
world-views. This has led to a broader concept of environmental
86 Anthony R. Zito
stewardship, but without a pervasive rejection of economic concerns

and priorities.
Goals
Over the course of Canada’s policy history, the policy strategy has
focused on regulation and this remains the case in the 2014 Conservative
government (Interview, Senior Policy Advisor, 5 June 2014; see also
Benidickson 2013). However, one must be careful of describing this
process as “command and control”. Similar arguments are made about
how UK environmental policy works. Following on from the Canadian
policy strategy, there was a very significant input from the regulated in
terms of the development, enforcement and implementation of these
regulations. This reflected a strongly consultative process between the
regulators and the regulated (Hessing et al. 2005). Further scope and
variability arose out of the fact that it was often the provinces deploying
many of these instruments to achieve policy goals. Over time the
national government has moved to supplement the regulatory frame-
work with MBIs, non-regulatory agreements and informational tools.
A second significant change in strategy came with the gradual
move towards greater decentralization of environmental administra-
tion (Howlett 2000). The greatest investment in MBIs has been by the
provinces, rather than the federal government, with climate change
innovations seen for instance in British Columbia and its carbon tax.
Nevertheless, the most influential imperative for innovation has been
the United States market and the need both to co-operate with the
United States as well as adapt to its state standards and state-led emis-
sions trading schemes. Indeed, the Canadian federal government under
Harper explicitly tied itself in 2010 to US targets and pace (Winfield and
Macdonald 2012).
Instruments
Starting from 2003, the Canadian federal government instituted a “smart
regulation” strategy to improve policy implementation; this involved
having a flexible tool-box appropriate to any particular context (Valiante
2007). In addition to the dominant role of regulation, the federal govern-
ment has instituted fiscal incentives for renewable industry, biofuels
and land conservation as well as more general subsides and funding for
environmental objectives. Since the late 1990s, there has been an indus-
trial push to get greater prominence for voluntary agreements, with
the Canadian federal government negotiating several specific agree-
ments with particular industries as well as the creation of “voluntary
challenges” to target reduction of environmental degradation (Valiante,

2007: 93–96). Increased emphasis has also been placed on pollution
prevention information and eco-labelling, through the “Environment
Choice Scheme”. The federal government included other instruments
in the national tool-box, including: voluntary agreements and “chal-
lenges” targeting industry, fiscal incentives, subsidies and funding for
environmental activities, informational/educational schemes and eco-
labelling (Valiante 2007: 93–96).
The provincial level has contributed to the mix of different instru-
ments. The provinces have used their more limited taxation powers
to institute charges. There has been some experimentation with trad-
able permits in the provincial government and in bilateral talks with
US state counterparts. An example of the USA’s impact is the Canadian
federal implementation of the Energy Star (a voluntary energy product
standard) programme initiated at the US federal level (Interview, federal
civil servant, 14 April 2014).
4.3.3 Germany
Structures
Similar to the above federal systems, environmental competences are
not distributed equally across the various sectors and issues (Wurzel et al.
2013). The federal level has the key role in the traditional media areas of
air, waste and noise, but the German Länder have critical steering roles
concerning water management and nature protection. Consequently,
environmental approaches that seek to cross policy sectors and levels of
government responsibility require complex negotiations (Wurzel 2002).
The traditional, corporatist depiction of the German policy system
emphasizes extensive consensus building and consultation with soci-
etal actors (Wurzel et al. 2013). The policy-making approach is relatively
legalistic and formalized, focused on making explicit statements of prin-
ciple and minimizing administrative discretion (Weale et al. 2000). The
input of various societal groups has been more variable as has the ques-
tion of how activitist/reactive is the German policy steering. In the early
1970s, it would be safe to characterize German governing as relatively
activist but this depiction seems less accurate after reunification and
the rise of a wide range of concerns about economic competitiveness
(Wurzel 2002).
Frames
The core post-war German political frame has been one of maintaining a
“social market economy”, which allows the state to define the conditions
88 Anthony R. Zito
in which it interacts with and between societal actors (Wurzel 2002: 11).
It was a natural progression for the mainstream parties in the 1970s
and 1980s to argue for an ecological dimension to this core frame. The
frame holds that environmental protection is compatible with economic
growth when the state provides strong regulatory incentives (such as
requiring production facilities to make use of “best available technology”
or BAT) for economic actors to invest capital in ecology friendly tech-
nology, leading to green growth. Over time, Germany became one of
the core arenas where the idea of “ecological modernization” developed
(Mol and Sonnenfeld 2000). In the 1990s, this frame suffered a consider-
able challenge as the German state dealt with the enormous economic
costs of reunification, the impact of the 1990s German recession and
the debate about Germany’s competitiveness in the face of globalization
(Weale et al. 2000; Wurzel 2000).
Underpinning the policy frame of strict regulation and encourage-
ment to enhance environmental technological capacity, the Federal
Environmental Programme of 1971 offered three core principles that
fleshed out the policy behaviour norms (Wurzel et al. 2013). The first,
the polluter pays principle, tries to place a greater onus on those bits of
the economic sector that pollute. The second, the precautionary prin-
ciple, requires active intervention by public actors to prevent pollution
occurring even under conditions of policy uncertainty. Perhaps most
interestingly, the co-operation principle emphasized the importance of
co-ordination between government departments and different levels
of government (Wurzel et al. 2013). The inherent challenges posed by
German federal structures and coalition governments have arguably
limited such co-ordination.
Goals
The German policy strategy and environmental goals have followed a
strong activist principle and strongly stipulated command and control
regulation since the 1970s (Hèritier et al. 1996). The German ecological
modernization frame and the precautionary principle have pushed regu-
latory ambition and traditional instruments (Weale et al. 2000). Certain
other types of policy instrument have featured strongly in the German
tool-box, particularly voluntary agreements and the first “Blue Angel”
eco-labelling scheme (Wurzel et al. 2013). Both reflect a consensus-
focused relationship between the German state and business. Perhaps
for this reason, some of the other potential instruments, such as taxes,
have met with less enthusiasm. The EU context, however, has pushed
Germany to adopt instruments that have not fitted with the traditional
national approach to command and control and BAT, and met German
resistance, for example the eco audit and management system (EMAS)
(Hèritier et al. 1996).
Instruments
In the early 1970s, the German system focused its means on regula-
tions, often ones with quite ambitious targets, to target specific media-
based issues (Wurzel et al. 2003). With reunification and the consequent
economic changes, the German national government moved more
towards seeking EU solutions. Nevertheless, regulations continued to
accumulate in part because of the EU’s own generation process. Scholars
estimate that German regulations had reached roughly 35,000 by the
mid-1990s, but this number over-represents the various ordinances
that all the different Länder generate (Wurzel et al. 2013). These regula-
tions have tended to stipulate ambitious limits in line with the BAT and
precautionary principles. The precautionary and co-operation principles
helped the German government to justify more flexible policy instru-
ments such as voluntary agreements and eco-taxes. Germany has been a
global leader and pioneer in the adoption of a national eco-label, and its
companies have been at the forefront of adopting EMAS. Nevertheless,
the overarching dominance of regulations remains.
4.3.4 The Netherlands

Structures
There are several dynamics in the Dutch political structure. First, there is
a strong tendency for a segmentation of power within the state structure.
The electoral system rewards small parties, leading to coalition govern-
ments. The system spreads responsibilities and power across several
government layers: central, provincial and municipal (Eberg 1997).
Finally, the state’s organizational structure is segmented. Environmental
powers are spread across different organizations and ministries, placing
a premium on co-ordination efforts and processes (van Tatenhove 1993:
20–21, 33; van Waarden 1995: 341).
The Dutch national system has placed a historical priority in inclusive
governing and consensus building to deal with historical sectarian divi-
sions and environmental challenges (van Waarden 1995: 335–347). The
Dutch tradition is to incorporate private sector organizations and objec-
tives to help achieve public goals: this approach emphasizes the need
for consultation and co-operation with a wide range of different societal
groups in order to build a consensus. At the heart of this effort has been
the development of comprehensive national plans which also sought
90 Anthony R. Zito
to maintain a consensus-based approach by including various groups

in the strategic planning (Hanf and van de Gronden 1998). Into the
new millennium, this approach has changed: the government coalitions
tended to be concerned about the burden of ambitious environmental
targets (preferring international or EU-level solutions that maintained a
“level playing field”) as well as acknowledging the difficulty of imple-
menting some of the past ambitious targets (Liefferink and Wiering
2007; Liefferink and Birkel 2010).
Frames
From the 1970s to the 1980s, Dutch national policy was strongly
oriented towards substantial policy interventions by the government
to protect the environment. A coalition of Christian Democrats and
Liberals (VVD) that came into power in 1982 challenged this framing.
The coalition orientation towards the environment reflected a desire
to lessen the responsibility of government by involving societal actors
as well as improving efficiency in the face of increasing numbers of
studies questioning the implementation of the 1970s instruments
(Bressers 1990; Zito et al. 2003). Accordingly, the government devel-
oped a philosophy of regulatory streamlining with a focus on “inter-
nalization” (Hanf 1989). Internalization focuses on the principle of
co-ordination between the Dutch national ministries which bring
together their own societal constituencies (van Tatenhove 1993: 47).
Scholars have suggested that the Dutch internalization movement
is symptomatic of the wider ecological modernization and sustain-
able development frames. In line with both frames, the internaliza-
tion approach suggested that both the state and the market need to
reflect ecological priorities, but in doing so harness market efficiencies
(Liefferink 1997, 1998; Enevoldsen 2000).
Goals
The Netherlands fits somewhere between the law-based, standards-
oriented approach of Germany and the more discretionary Canadian
approach towards policy goals and instruments (Liefferink and van der
Zouwen 2004). In terms of types of instruments, the Dutch adopted
a command-and-control approach in the 1970s, emphasizing frame-
work legislation and licensing. This led to some centralization through
national regulation in order to confront the new environmental
concerns and implementation issues. This continues to be a core aspect
of Dutch environmental policy, reinforced by the EU. Since the 1980s,
newer environmental policy instruments have gained in importance
but tended to supplement and extend traditional instruments (Wurzel

et al. 2013).
Part of the focus on goals is the incorporation of societal actors. With
the movement towards the internalization policy, we see the develop-
ment of the target groups concept: an explicit categorization of both
individuals and organizations within civil society that share character-
istics and connections to a particular policy area. The target group idea
emphasizes that these similar actors are the focus of the policy instru-
ments; that is, they are the target of the instrument which is seeking to
change behaviour (Eurofound 2010).
Instruments
Various overviews of Dutch policy continue to assess traditional regula-
tion as being core (OECD 2003c; Liefferink and Wiering 2007). As in
Germany, the EU has become an important reason for the continued
reliance on traditional regulation and constraints on instrumental inno-
vation; for example, efforts to implement EU legislation through a more
flexible or voluntary scheme have met a very negative reaction from
the Commission and the European Court of Justice (Smith and Ingram
2002: 593).
Nevertheless, the Dutch policy elite have over time recalibrated the
nature of regulation, shifting from the top-down command-and-control
control character of the early Dutch environmental legislation towards a
set of more flexible and cost-effective environmental regulations which
were drawn up by the government only after extensive stakeholder
consultations. Since the 1990s the Dutch government has focused on
simplifying the licensing process in Dutch environmental policy, partic-
ularly by targeting the significant polluters and establishing general
regulations (with standard procedures) for most of the other polluters
(VROM 2005; Wurzel et al. 2013). The Dutch have also developed
“framework licences” that specify only general targets and give polluters
the flexibility to meet the targets (Liefferink and Wiering 2007).
The Dutch have made use of a significant number of other instru-
ments. The shift of policy frames towards internalization and target
groups in the 1980s saw the Dutch give a substantial role to negoti-
ated voluntary agreements, or covenants. The design of the agreements
evolved from fairly loose agreements to covenants targeted at particular
sectors and linked to regulation and the licensing system (Zito et al.
2003). The agreements between the relevant ministries and both the
public and private actors take on a binding nature after signing. The
Netherlands has also taken a substantial lead in using taxation and, to
92 Anthony R. Zito
a lesser extent, emissions trading schemes. The Dutch effort at emis-

sions trading was overtaken by the EU process, but the Dutch success-
fully implemented national plans to extend their carbon dioxide market
institutional mechanisms to include nitrogen emissions.
Environmental charges were the first taxation focus, taking a promi-
nent although secondary role in the Dutch system. From 1989 to
2000, the Dutch government turned increasingly to tax mechanisms
to provide substantial revenue and provide an efficient set of tools to
motivate actors, particularly the energy taxes. In 2008, the coalition of
Christian Democrats and Labor pushed one last burst of taxation inno-
vation creating a packaging tax and air passenger tax. However the rise
of domestic economic problems and a rightist coalition has changed
the momentum and led to the abolition of certain environmental taxes
(Wurzel et al. 2013).
4.4 Conclusions
This chapter first summarized the basic trends found in the four coun-
tries (filling out Table 4.2) before making some comparative analytical
conclusions about the governance propositions. Taking the countries
in order, Australia has seen some distinctive transformations over time.
As a federal system, it has an inherent multi-level governing dynamic
that spreads power; nevertheless, over time the Commonwealth has
used international agreements and other avenues to centralize some
policy authority with respect to the other levels of government but
this remains fairly limited and subject to reverse swings. In terms of
state–society relations, environmental policy has seen a wider range of
actors and engagement since the 1980s but Australia arguably remains
less orientated towards consensus-building and inclusion than the EU
member states. The environmental policy frame has likewise evolved
from a largely bureaucratic, hierarchical focus towards one that sought
to bring businesses and market dynamics into the governing equation
where individual actors have to face greater responsibility (Godden et al.
2013). The picture of the policy goals is one of hybridity, but with regula-
tions continuing to dominate. “New” environmental policy instruments
(NEPIs) have a more supplemental role and even the 2012 expansion of
MBIs to address climate change operates in a highly charged political
atmosphere and is vulnerable to roll back.
As was the case with Australia, the Canadian system of federalism has
inherent multi-level dynamics that accentuate the ambiguous relations
between the various levels. Nevertheless, the Canadian structure lacks
some of the centralizing instruments found in Australia. The state–society

relationship was originally rather exclusive but over time the political
elite have built mechanisms to engage a wider section of voices; never-
theless, the privileged position of business, as articulated by Lindblom,
remains. The overarching policy frame reflects a move towards sustain-
ability and away from a simple focus on resource exploitation; neverthe-
less, the balance in the dominant policy frame remains orientated towards
economic concerns in line with the institutional structure. Canada main-
tains a focus on regulation, but one that involves intensive consultation
with the regulated and a core role of provinces in enforcement. Some
significant NEPIs do exist, particularly at a provincial level, focused on
engaging other actors in a largely voluntary and non-compulsive basis.
Up until reunification, the German system witnessed a fairly active
national government enacting command and control regulation. At
the same time, however, the German states have maintained strong
inclusive elements of environmental governing. As is the case with the
Netherlands, the institutional structure relies on a heavily formalized
interaction with societal actors; this has not changed although the rise
of environmental issues created more voices that required engagement.
The essential ecological modernization frame inherently recognizes the
importance of engaging business actors in the linked priorities of the
environment and the economy. The governing goals that pursued this
frame have involved a focus on regulation with strict and often ambi-
tious limits and technological demands. Nevertheless, it is discernible
that the Europeanization of German environmental policy has seen
an evolution in the nature of the command-and-control policies, with
NEPIs playing a substantial but still secondary role.
The Dutch political system, although unitary, has its own institu-
tional dynamics between levels, in addition to a fragmented executive
requiring cross-party and cross-ministry co-ordination. The process of
including different societal elements is ingrained into the system. The
policy frame that developed over time, internalization, emphasizes the
essential role of target groups in being involved in the policy process.
As was the case with Germany, the EU has reinforced the importance of
regulations in the Dutch system. Nevertheless, the specification of regu-
latory instruments has evolved over time in a more flexible direction,
and it is arguable that the Dutch have seen the greatest shift towards
NEPIs. Nevertheless, even covenants, which are negotiated voluntarily
between the respective policy actors, become binding and are linked to
the law. NEPIs have not supplanted/displaced regulation; rather, there is
a considerable degree of instrument integration.
94 Anthony R. Zito
In terms of making sense of the comparison in Table 4.2, the evidence

of this chapter suggests that government–governance hybridity exists
across all four political systems to a lesser or greater degree. In arguing
this, I want to emphasize the merit of the multivariate approach of
Table 4.2 for the study of governance and the question of hybridity.
There is a real danger in governance studies of everything being labelled
as a hybrid arrangement. Differentiating it by four different analytical
categories as well as a continuum between government and governance
starts to give the analyst some nuance.
I now turn to the other governance hypotheses (whether the hybridity
was a permanent or temporary feature, the degree of movement along
the continuum for all four countries and the uniformity of movement
across countries). Based on the evolution of policy for all four coun-
tries, the evidence suggests that a government/governance mix is the
permanent reality rather than a temporary phase before the governance
dynamics become more dominant. Governance dynamics have entered
all four levels of analysis (although only in a minor way in the framing
dimension), but not in a way that supplants or for that matter signifi-
cantly erodes the traditional governing. The evidence suggests rather
that the dynamics have often modified the nature of the policy process
(particularly where it comes to the inclusion of a greater range of societal
voices interested in environmental priorities) and the outcomes (often
emphasizing more flexibility and a greater role for societal actors).
Comparing across the countries, the main change in the governing
structures has been one where there is more emphasis on including
wider cross sections of the population. In the case of Germany and
the Netherlands where consensus building mechanisms are relatively
elaborate and formal, this has been more a question of listening to the
greater range of societal interests and movements created by national
and EU environmental politics and policy. In contrast Australia and
Canada have seen a greater voice given to “green” actors but without
such systematic inclusion. To the degree that this overview can gener-
alize from one unitary state case, unitary systems do not seem to be on
a separate trajectory. The EU’s role is mixed in terms of the structural
dynamic: the EU environment has given greater scope to a wider set of
actors but also has privileged executive government in the EU decision-
making process.
The policy framing in all four cases reflects a greater prioritization of
environmental priorities. But it is noteworthy that all four frames enshrine
the importance of the market and engagement with market actors in
pursuit of environmental objectives. In the case of the Commonwealth
Table 4.2 Comparative multivariate conclusions
Country Governing Structures Governing Frames Governing Goals Governing Instruments
Australia Multi-level federal, Moderate shift to involve Regulation focused, with Regulation is evolving;
limited centralizing, less businesses more in a supplementary NEPIs MBIs have had some
inclusive, intergovern- sustainable approach noteworthy appearances
mental co-ordination
Canada Multi-level but with Fairly traditional focus Regulation focused, with “Smart regulation” that
more limited federal on sustainable economic supplementary NEPIs was always negotiated,
scope, system remains concerns but with other supplemented with
less inclusive voices persuasive NEPIs and
provincial MBIs
Germany Multi-level federal Ecological Command and control Less stipulation as
but activist national modernization, backed regulation, with regulations evolve and
government; a highly by BAT and precaution supplementary NEPIs newer instruments enter
inclusive process the picture
The Netherlands Segmented and inclusive Internalization Strong policy mix, More flexible regulation,
unitary state (ecological regulations and societal with strong support of
modernization and inclusion foremost MBIs and covenants
sustainable development)
96 Anthony R. Zito
states, it is difficult to argue that this ideational connection is a govern-

ance development. More emphatically, the German framing reinforces
traditional social market economic thinking. Perhaps the Dutch framing
reflects most a shift in understanding about how to steer and involve
societal actors.
The Commonwealth countries, although the policy framing has
embraced sustainability since 1970, still reveal a strong constitutional
and historical legacy that favours states/provinces in a significant
steering role reflecting a resource extraction prioritization; there is
more of a tendency to see the sustainability aim as being in tension
with the economic competitiveness aim. Another significant trend is
that the economic realities of German reunification and the concerns
about the competitiveness of the economy in the other three coun-
tries have seen a rather reactive approach to environment, even in the
Netherlands in the last decade.
Moving down the ladder to governing goals, the Dutch again come
closest to having a governance mix but even here the traditional statist
tool, regulation, remains primary. The EU has reinforced this tendency
in the two member states, but the reality is the same for Australia
and Canada. In all four countries there is a policy mix with particular
NEPIs often having a high political profile or significant policy impact.
Nevertheless, the biggest evidence for a governance shift comes with
the recalibration of instruments, in this case the regulatory instruments
that are becoming more flexible and more participatory over time.
Governance clearly is at work at this lowest level and it is significant.
At the same time, however, the Commonwealth countries, especially
Canada, have tended to take a more flexible approach to regulations
even before the trends towards governance were even conceptualized.
The reality that this is the traditional statist tool suggests the need
for a nuanced understanding of government/governance dynamics.
In terms of instrument alternatives, the rise of the emissions trading
scheme creates its own set of institutional changes and alterations in the
state–society interactions. Even without the changes to the governing
structures that have been identified, this change is a substantial and
significant one, but perhaps not one that transforms the elements of
government into the governance ideal type.
Having discussed the concepts across all four countries, all that remains
is to examine the governing dimensions in relationship to each other. In
terms of movement towards the governance pole, the governing frames
(in terms of a greater inclusion of actors in terms of quality and quan-
tity) and governing instruments suggest a stronger degree of governance
movement than the other two dimensions. The empirical evidence also
suggests the continued constraints that the higher level policy elements
(structural and policy frames) in the Hall model place on governance.
The reality of EU membership and the constitutional constraints in the
federal countries have stamped the evolution of environmental govern-
ance in all four countries; however, the limited, reactive frames of the
national governments in the four countries have been a very significant,
recent trend across the four states.
4.5 Acknowledgements
I am grateful to the editors as well as the other participants in the

Post Governance Workshop, Singapore, 13–15 February 2013 for their
comments and suggestions. I acknowledge the research support provided
by a 2013–2014 British Academy/Leverhulme Small Research Grant.
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Part III
Governance Strategies
5
Federal Strategies for Changing the
Governance of Higher Education:
Australia, Canada and Germany
Compared
Giliberto Capano
5.1 Introduction
Over the last three decades there has been a significant governance shift
in higher education in all Western countries. Previous governance modes
have been reshaped by the continuous efforts of governments, concerned
about the capacity of higher education to genuinely serve their respec-
tive societies. The efforts of such governments represent an ongoing
process characterized by the adoption of similar policy tools (albeit
assembled in different policy mixes) and by a clear strategic approach
aimed at circumventing or overcoming previous governance modes and
the inherited distribution of vested interests. This process of governance
change has constituted a multi-level battle in which governments and
certain other major policy actors (academic unions, university associa-
tions, students, business associations) have acted to pursue their own
interests, through a complex, unstable process characterized not only
by conflict, but also by agreements, bargaining as well as log-rolling,
horizontal networking as well as hierarchical relations. This process is
especially interesting in federal countries where the presence of two
levels of strong government has rendered matters particularly complex.
In fact, despite the fact that all federal constitutions clearly provide for
the granting to the state of exclusive powers regarding higher education,
federal governments have constantly operated regardless of said consti-
tutional design. The potentially intrusive actions of federal government
have pursued similar goals in Australia, Canada and Germany, although
103
104 Giliberto Capano
the results achieved have differed; that is the new systemic governance
modes are characterized by significant differences despite being based
on the same policy ideas and political intentions. This chapter aims to
investigate the cause of these differences, by assuming that they are the
result of the different ways in which federal governments have designed
and implemented their own strategies, which are pursued by capital-
izing on specific interpretations of the constitution, on economic and
political contingencies, and on their ability to coalesce with the other
actors involved.
The second section of the chapter outlines a strategic perspective on
federal governments’ actions in the higher education field. The third
section presents the theoretical framework and the research design,
while the fourth section focuses on the reconstruction of our chosen
empirical cases. The fifth section discusses the empirical evidence, while
the final section offers some observations about possible future research
into this topic.
5.2 Governmental strategy in changing higher

education governance
The focus on the strategic dimension of governance dynamics and

change implies consideration of the fact that political and policy actors
are perfectly aware of whether, and in what way, the existing govern-
ance mode favours their own interests, and if it may be changed in order
to maintain or reinforce these interests. The question is, what kinds of
strategy are available to governments?
Since the concept of “strategy” has been, and can be, defined in various
ways here it shall mean a pattern of behaviour, or a pattern of a “stream
of actions” (Mintzberg and Waters 1985; Mintzberg 1987).1 According
to Mintzberg, this pattern can be “deliberate” if strategies are realized
according to a predetermined plan, or “emergent” when the adopted
strategy is either not based on any intentional plan, or is pursued regard-
less of such a plan. The notion of “deliberate” means that the actions in
question are not only intended and planned, but also implemented. The
notion of “emergent” means that the initially unintended or unplanned
actions are based on an unintentional order, and thus emerge from the
process either by being imposed, or through contextual learning or
consensual agreement. An emergent strategy also represents the way in
which a deliberate strategy can change (Mintzberg and Waters 1985)
In order to more clearly define this understanding of strategy in rela-
tion to the role of government, it has to be classified according to the
Federal Strategies for Changing the Governance of Higher Education 105
capacity of government to impose and realize its policy guidelines, and

thus its plans. Such governmental capacity is based on the political-insti-
tutional, ideational and financial resources available to government.
Table 5.1 proposes a typology in which six ideal types of governmental
strategy are identified by dichotomizing governmental capacity.
Contingent strategy is a pattern of behaviour whereby a government
with low capacity finds itself pursuing an unplanned governance change
without any investment in it. It is a kind of “garbage can” situation that
leads to an alteration of existing governance modes as the unintended
consequence of the interaction of policy actors and stakeholders who
agree on a common strategy designed to solve an unforeseen problem. It
is an emergent strategy that is not driven by government, but one that sees
government as one of the parties subscribing to its implementation.
Reactive strategy is a pattern whereby government identifies a contin-
gent strategy that, thanks to its stock of resources, it can pursue from
a certain point on, since the new pattern is found to be useful despite
being unplanned.
Bottom-up imposed strategy is a pattern whereby the government’s plan/
will is completely reversed, as it has to accept the will of the other stake-
holders owing to the fact that it does not possess the necessary capacity
to oppose or negotiate these stakeholders’ aims.
Negotiated strategy is a pattern whereby the government’s plans cannot
be directly applied due to the forceful opposition of the most important
stakeholders involved, but thanks to its strong capacity a compromise
can be found and thus pursued.
A collaborative strategy is characterized by the fact that a planned course
of action may become a pattern of collective behaviour since govern-
ment, incapable of imposing its will on the other actors, has managed
to secure the cooperation of the majority, or least some, of the most
important actors.
Table 5.1 Types of governmental strategy
Governmental capacity
Type of strategy Low High
Emergent Contingent Reactive

because unplanned
Emergent Bottom-up Imposed Negotiated
against governmental plan
Deliberate Collaborative Enforced
planned and implemented according to
governmental plans
An enforced strategy is a planned pattern of behaviour whereby the

government imposes its plans on other important actors, for the simple
reason that it possess sufficient resources to do so.
These six ideal types represent six possible arenas in which the
game of changing governance is played out by governments and other
stakeholders.
In the field of higher education, this way of perceiving strategy may
be very useful, owing to strong empirical evidence that governments
are the real drivers of policy and governance change (Huisman 2009;
Capano 2011; Shattock 2014).
Why are governments so pivotal for higher education?
There are three basic reasons. First, because they need to address
the systemic usefulness of HE, that is to encourage universities direct
involvement in sustaining socio-economic development (Slaughter
and Rhoades 2004; Rothaermel et al. 2007; Etzkowitz 2008; Dzisah and
Etzkowitz 2012). Second, because access to higher education in the
developed world is considered the right of all citizens, and thus part of a
nation’s welfare-state provisions (Hega and Hokenmaier 2002; Willemse
and de Beer 2012). Third, because governments are the most important
funders of universities, and as such are accountable for the use of public
money – especially during periods of financial retrenchment or ration-
alization – (Kaiser et al. 2002; Shuetze and Alvarez Mendiola 2012).
At least one of these grounds is going to encourage governments to
take a proactive stance in regard to higher education, and over the last
three decades very often all three of them have operated together as a
result of the long-term effects of massification, the financial crisis of
the welfare state, and the challenges of economic globalization and
internationalization. These contingences have strongly affected the
governmental introduction of policy changes which, very often, have
constituted changes in governance modes.
This governmental focus on governance modes is easy to understand:
in order to achieve policy effects (increasing the number of enrolled
students and of those acquiring a university degree, improving the
quality of teaching, providing incentives to more innovative, applied
research, improving universities’ entrepreneurial capacities), govern-
ments should only intervene by changing the general principles under-
lying governance modes (by blending the concepts of hierarchy, market
and network in different ways) and, depending on the choice (delib-
erate or emergent) of general governance arrangements, by adopting
new policy instruments such as: greater institutional accountability; a
lump-sum budget (albeit characterized by certain competitive, targeted
features); the quality assessment of teaching; evaluation of research;

changes in institutional governance; performance agreements/contracts
between individual universities and the government; systemic pressure
designed to encourage increased competition (Lazzaretti and Tavoletti
2006; Maassen and Olsen 2007; Shuetze et al. 2012).
Governments, including federal governments, have pursued these
approaches to reforming higher education governance through a variety
of different strategies (which can be grouped together in the aforemen-
tioned six ideal types) according to their low/high capacity to ensure
their views prevail, and to their tendency to plan actions or to operate
on a more contingent basis.
5.3 The strategy of federal governments: theoretical

assumptions and research design
Federal governments ought to play a very limited role in higher educa-

tion due to the fact that in the majority of federal countries the govern-
ance of education and higher education is assigned wholesale to the
federation’s member states.
However, notwithstanding these constitutional limitations, in every
federal country concerned the federal government has been involved in
changing overall governance arrangements, and above all in augmenting
its own role in the higher education sector. To varying degrees, such
involvement has been successful in achieving the expected goals in
different ways. From this point of view, a strategic perspective can
significantly help us to understand under which conditions a specific
governmental strategy may develop, and above all how the institu-
tional arrangements of a federal country can influence its federal higher
education strategy, and how federal strategies develop within a context
featuring not only other stakeholders (universities, student associations,
public opinion, political parties) but also another “government” playing
the same game.
Thus any attempted analysis of the strategic role of federal govern-
ments in changing higher education governance will need to take the
nature of federalism into consideration. From this point of view, the
Colino typology (2010, 2013) may be highly useful, as unlike other clas-
sifications it unites the formal constitutional framework and the actual,
very often informal, organization of intergovernmental relations. By
dichotomizing the constitutional framework in integrative/disintegra-
tive and federal relations in centrifugal/centripetal, Colino proposes four
varieties of federalism: unitary, balanced, segmented and accommodating.
Balanced federalism is characterized by a disintegrative constitutional

framework combined with centripetal federal dynamics. The constitu-
tional pact guarantees the original powers of the founding members of
the federation. The main value is thus the balance of powers. The consti-
tutional design is normally interstate, while the intergovernmental
structure of decisions and resources is independent. The strategies of
governmental actors tend to be self-assertive, with conflict lines and
intergovernmental coalitions being more of a partisan type, although
sometimes also territorially driven. The cases closest to this ideal type
are those of the USA, Brazil, Australia and Switzerland.
Unitary federalism is characterized by an integrative constitutional
framework and by centripetal federal relations. It usually originates
from the decentralization of a previously centralist state. This is the
type of federalism usually adopted by culturally homogeneous societies.
The intergovernmental structure of decisions and resources is usually
interdependent, based on shared competencies and aimed at guaran-
teeing similar conditions for all citizens. The intergovernmental rules
of decision-making are usually of a hierarchical nature, dominated
by federal initiatives but mitigated by certain mandatory joint deci-
sions. Intergovernmental relations are normally based on a cooperative
approach, and conflict lines and coalitions are partisan rather than terri-
torial. Germany, South Africa, Austria and, to a certain degree, Spain are
closer to this ideal type.
Segmented federalism is based on a disintegrative constitutional
framework and on centrifugal federal relations and is typical of those
federations where two different cultural communities coexist, one
being in the majority. The typical executive-legislative configuration
of this subsystem is parliamentarianism. The constitutional design
is inter-state, in which agreements between the leaders of the cultur-
ally diverse communities and intergovernmental institutions prevail.
The intergovernmental structure of decisions and resources is highly
independent, also because powers are mainly exclusive and separated.
Intergovernmental decisional rules are usually negotiated between the
two orders of government, and interaction tends to be of a competi-
tive character, while the strategies of governmental actors tend to be
self-assertive, with conflict lines and intergovernmental coalitions being
predominantly of the territorial type. This ideal type is reflected in the
fundamental evolution of federalism in both Canada and Belgium.
Accommodating federalism is characterized by an integrative constitu-
tional framework and by centrifugal intergovernmental relations. It origi-
nates in societies with a certain degree of cultural heterogeneity, through
a process of devolution, or disaggregation, of a centralist state as a means

of preserving a common state. It is usually associated with asymmetric
arrangements, designed to satisfy different self-governing aspirations.
The intergovernmental structure of decisions and resources is usually
characterized by the interdependence of the levels, reflected clearly in
the dependence of the units on central funding. Intergovernmental
decisional rules are of the hierarchical type, and in practice interaction
may be either of a cooperative or quite competitive nature, depending
on the character of the constituent units. Conflict lines and intergovern-
mental coalitions may be both territorial and partisan. This ideal type
is reflected in the federal dynamics of India and, to a certain extent, of
Spain.
This classification is very useful from the point of view of my analysis,
since it allows me to make a clearer distinction among the three chosen
federations. In fact, according to the aforementioned classification, they
clearly represent different types of federalism (and thus also Canada and
Australia are differentiated, unlike in all other classifications where they
are assumed to belong to the same family of federalism). This implies
that we should expect very different strategies to be pursued by the
federal governments in question, owing to the different institutional
settings in which they work.
Furthermore, it should be noted that there are significant differences
among the three federations regarding the fiscal role of federal govern-
ment: Australia is very centralized; Canada is the most decentralized;
Germany represents something of a mix, since more than the 60 per cent
of revenues are shared, and federal laws on fiscal matters are based on a
joint decision taken in the Bundesrat (De Dominicis et al. 2011; Eyraud
and Lusinyan 2013; OECD 2013).
By uniting the features of the type of federalism and the fiscal, and
thus financial, powers of the federal governments, we would expect
the Australian federal government to be more capable of imposing its
policies than the Canadian one, while the situation of Germany should
represent something of a mix, due to the characteristic cooperative
and functionalist arrangements of the working of its unitary federal
dynamics.
However, the different federal policy-making capacities that may be
deduced from the institutionalized diversity of the three cases analysed
here should be placed within the context of the development of specific
policy trajectories. This means that that the three cases need to be
observed in every specific policy field, and federal strategies analysed
to see whether it has developed according to the emergent model (i.e.
without any initial plan) or in a deliberate way. In the case of higher

education, this implies two further considerations. First, the structure
and dynamics of the policy field need to be taken into consideration
in order to understand whether, and how, its characteristics have influ-
enced federal behaviour, and how the main policy stakeholders (state
governments and the universities themselves) have behaved. Second, a
diachronic reconstruction is needed in order to understand the develop-
ments of federal strategy and its contextual implications.
Thus, I am going to adopt a sequential perspective, reconstructing
policy dynamics in the three chosen cases by focusing on:
● the time-frame of the process (paying due attention to the starting

points and any critical junctures);
● policy developments;
● policy dynamics (the express intentions of federal governments and
their ideational assumptions; the reaction of state governments; the
reactions of the universities and their associations);
● the nature of the decisions made in order to achieve federal
strategies.
Empirical evidence is taken from the considerable number of studies of

such topics, from the official documents available and from around 60
interviews.2
Thanks to this sequential reconstruction, I can classify the kind of
federal strategy that has emerged in each of the three federations, and
the reasons why.
5.4 Federal strategies: dynamics and developments
5.4.1 Constitutional provisions for higher education

The original constitutional provisions for higher education in the
three federal countries differed somewhat. In fact, while in Canada and
Australia the constitution assigned responsibility for higher education
to the provinces and states, Germany’s federal government was granted
power to legislate on the general framework of higher education in 1969.
However, certain developments in constitutional praxis have changed
the picture slightly.
In fact, in Australia, despite the fact that section 51 of the Australian
Constitution (“Powers of the Parliament”) considers higher education to
be a residual area of power, and as such the responsibility of state govern-
ments, this changed radically in 1974 when, without any constitutional
reform being implemented (but on the basis of a specific interpretation

of Section 96 of Australia’s constitution3), the Commonwealth (i.e. the
federal government) was granted almost total responsibility for funding
higher education. This decision, seen in terms of the more general
intrusion of the Commonwealth in the educational field, represents a
watershed in the dynamics of Australian education policy, as it repre-
sented the ultimate blurring of the dual federal structure in both educa-
tion and higher education – which became the responsibility of both
levels of government – together with the transition towards a system
of cooperative federalism which some scholars have termed “coercive”
(Mathews 1977).
In Canada, the constitutional provision regarding education policy
(Section 93) is of the type characteristic of dual federalism, whereby
all powers regarding educational matters are allocated to the prov-
inces (although federal government is responsible for funding native
Canadians and for allocating federal funds in order to redress any imbal-
ances between provinces due to their diverse revenue-earning capaci-
ties). However, as we shall see, since the end of the Second World War
federal government has been very active in funding universities through
student grants and substantial investment in research (Cameron 1991).
In Germany, the 1949 Basic Law endorsed the federalist tradition
which had always assigned the majority of educational powers to the
Länder. In 1969 the constitution was reformed to allow a broader legis-
lative framework – the “general principles of higher education” – to be
implemented at the federal level. However, between the late 1990s and
2006, federal legislation and a constitutional reform led to the transfer
of almost all higher education powers to the Länder; finally, 2014 has
seen a political agreement designed to change the constitution in order
to grant federal government the power to directly fund universities.
5.4.2 Points of departure, time-frames and critical junctures

The most obvious point of departures for Canada is 1967, while in
the case of Australia it is 1972. The latter choice is a simple one, as it
corresponds to the electoral victory of Australia’s Labour Party, which
subsequently launched a significant project designed to reform both
education and higher education. The choice of 1967 for Canada, corre-
sponding to the establishment of the Canadian Ministers of Education
Council (CMEC), is admittedly a very “institutional” one although it
does mark a significant symbolic action in response to the challenges
of education policy in a country that is unique insofar as it does not
possess a central/federal ministry of education.
In the case of Germany, the choice of point of departure was more

problematic; however, the best possible choice was 1969, as this marked
a turning point with the amendment of the Basic Law designed to allow
federal government to legislate general principles on the construction
of educational infrastructures, higher education and research and with
the establishment of a Federal Ministry of Education and Research
(BMBF).
At the chosen points of departure, the respective governance modes in
higher education were as follows:
● In Australia and Canada the situation was rather similar, with

non-hierarchical forms of governance (considerable institutional
autonomy) in place. Universities came under provincial/state jurisdic-
tion, their funding was almost totally provided by the states and the
provinces, and they were sufficiently free from substantial and proce-
dural regulations. In both countries, however, from the end of the
Second World War onwards, successive federal governments have taken
an increasing interest in higher education. For example, in Australia,
the Australia University Commission was established in 1959 (a buffer
organization between higher education and the federal government),
and in 1961 a federal committee recommended the establishment of
colleges (this recommendation was subsequently implemented by the
states in 1965). In Canada, a couple of Royal Commissions set up in
the 1950s endorsed the major role of federal government in higher
education, and in 1966 the federal government decided to replace the
grants assigned directly to universities with unconditional grants given
to provincial governments (Cameron 1991; Tupper 2009).
● In Germany, the governance arrangements were of the continental
type (according to Clark’s typology). There was no real institutional
autonomy, owing to the universities’ confederation of chair-holders
(notwithstanding the democratization of internal governance
approved between the mid 1960s and the mid-1970s), while the
universities’ actions were directly governed by Länder laws and
directives.
As regards the aforementioned time-frames and critical junctures, they

can be identified as follows:
● In Australia, the important dates from the point of view of higher

education are: 1972 (the Labour Party winning an election after years
in opposition, and the establishment of the Karmel Commission);
1983 (the Hawke government); 1996 (a Conservative government

which continued with, and indeed radicalized, some of the previous
Labour government’s reforms); 2008 (the Labour Party winning the
elections again); 2013 (the new Conservative government appearing
to radically change the system of university funding). Basically, the
various steps in the evolution of Australia’s policy dynamics are linked
to changes in the ruling party. What should be pointed out here is
that the dynamics of higher education policy are characterized by
the ruling party’s specific emphasis on educational issues, and thus
on higher education, which has remained a constant of government
action. However, this constant attention to higher education does
not mean that each stage in the dynamics of said policy corresponds
to a critical juncture. From this point of view, two critical junctures
may be identified regarding federal strategy. The first critical juncture
is represented by what occurred in 1974, when the Commonwealth
took full responsibility for funding universities (representing a radical
change in the governance of higher education).The second critical
juncture was the profound economic crisis that hit Australia at the
beginning of the 1980s, which enabled Prime Minister Hawke to
launch a wave of neo-liberal reforms, with the reform of higher educa-
tion to the fore. The ideological basis of this reform strategy (known
as “corporate federalism”) represented a significant shift towards a
more cooperative mood in Australian federalism as a whole, and a
more substantial role for the Commonwealth in coordinating and
steering only higher education (but also primary and secondary
education as well).
● In Canada, the only dates of any great significance with regard to
the field of education are 1993 and 2008, representing the signing of
two joint ministerial declarations (the Victoria Declaration in 1993
and the Learn Canada 2020 declaration in 2008); this revealed the
common desire and will of the provinces to cooperate for the pursuit
of common goals and forms of governance in the educational field.
With regard to the all-important critical junctures, the only one of
any real significance at the national level seems to have been the
period from the mid-1990s to the year 2000 when, owing to a finan-
cial crisis (1995), the federal government reduced funding to the
provinces, which in turn cut funding to universities. Then, when the
financial situation had been restored (1997), the federal government
launched a number of funding programmes whereby it began to lend
significant support to research, through a series of selective mecha-
nisms (Axelrod et al. 2011).
● In the case of Germany, a number of important dates, coincide with

a whole series of changes in the country’s Constitution, starting from
1969 (when the federal government was allowed to legislate on a
general framework of higher education) and right through to 2006,
when the 1969 amendment was basically removed. There have been
three critical junctures over the last three decades: the first was German
reunification, which increased not only the social demands of the
university system, but also its financial problems; then there was the
subsequent federal reform strategy (Pick 2008; Kehm 2014), leading to
the introduction, in 1998/99, of the BA/MA system (in keeping with
the Bologna Process); then finally there was the Excellence Initiative
launched in 2005 – a joint decision of Germany’s federal and Länder
governments – which has strongly encouraged competition among
the nation’s universities.
5.4.3 Policy development

Australia
The federal government has been very active in developing a strategy for
change in Australia’s higher education governance, following the critical
juncture of 1974, particularly during the lengthy period of Labour rule
from 1983 to 1996. Under the umbrella of “corporate federalism”, the
then Prime Minister, Robert Hawke, launched a plan designed to revive
Australia’s economy (which was going through a period of significant
crisis), based on a neo-liberal policy in which education was considered
key to the nation’s interests (Lingard et al. 1993). As far as concerns
higher education, the most relevant measures have been the following
ones (DEET 1993; Meek and Hayden 2005):
● the reinforcing of the federal bureaucracy’s role, through the estab-

lishment of a new Department of Employment, Education and
Training;
● in 1993, in an attempt to better coordinate Australia’s new federal
approach to education and higher education, the Ministerial Council
of Education, Employment, Training, and Youth (MCEETYA) was set
up. Between 2011 and 2012 the MCEETYA was abolished and replaced
by two different standing councils within the COAG: the standing
council on School Education and Early Childhood, and the standing
council on Tertiary Education, Skills and Employment;
● the binary system was abolished (in 1988) through a coercive process
of amalgamation;
● in 1989, tuition fees were introduced (under a contribution scheme

asking students to cover 20 per cent of the cost of tuition). (Smart
1991)
Starting in 1996, the new Conservative government made substantial

cuts to university funding, whilst increasing the costs of higher educa-
tion for the students themselves. In 1998, and again in 2000, changes
were made to the aforementioned contribution scheme (the cap was
raised to 32 per cent). In 2003, a further reform was formulated – subse-
quently implemented from 2005 on – which enabled public universi-
ties to enrol up to 35 per cent of their domestic students on a full-fee
payment basis, provided for a new loans programme and allocated addi-
tional funding to universities subject to their compliance with National
Governance Protocols (issued in 2003).
In 2009, under the Labour government, the Research Excellence
Framework was tested before being launched in 2010 (and discussions
are currently under way aimed at partially linking universities’ funding
to the results of the REF). In 2009, the Rudd government (with Gillard as
Minister for Education) launched a plan entitled “Transforming Australia’s
Higher Education System” (Australian Government 2009), which for the
first time in 20 years provided additional funding for higher education.
The main aims of this plan are: to increase and improve the involve-
ment of students from poorer families; to promote greater diversity and
quality within the tertiary sector by phasing in a new system allocating
funding on the basis of student demand; to end traditional cross-subsidi-
zation by increasing funding covering the full cost of university research,
and enabling universities to strive for research excellence in their areas
of strength; to establish the Tertiary Education Quality and Standards
Agency (TEQSA), which will provide the basis for enhancing quality
and accreditation in non-university higher education; to guarantee a
substantial upgrading of universities and of institutions belonging to the
Technical and Further Education sector (TAFE).
In 2014, the new Conservative government has decided to imple-
ment the following significant changes in university funding: a 20
per cent cut in the funding of teaching; the cancellation of the cap on
student fees; the earlier repayment of student loans. According to the
new Commonwealth strategy, these savings are to be earmarked for the
funding of non-university higher education (meaning the broad private
system of tertiary institutions).
It should be pointed out that at present around 53 per cent of
Australian universities’ funding comes from private sources. Of the
remaining 47 per cent (public funding), 44 per cent is provided by the

Commonwealth and 3 per cent by state or local governments (National
Commission of Audit 2014).
Canada
To understand the policy developments in the Canadian case, where
federal government actions are more limited than they are in Australia
or Germany, two factors ought to be taken into consideration. The first
is the unique, historically rooted features of Canadian governance. Jones
(2002) has identified certain characteristics of the Canadian approach to
higher educational governance that are of considerable relevance from
the point of view of our analysis: lay universities; a public monopoly of
degree-awarding authority; limited competition; a high degree of insti-
tutional autonomy; marginal managerialism; exclusive, sectoral policy
networks; bicameralism; and decentralized, participatory governance.
Second, there is the provincial monopoly on higher education. Taken
together, they would appear to substantially limit seem any possible
federal influence.
However, things are also beginning to change in Canada, particularly
after the heavy cuts in federal funding made since the mid-1990s, due
also to federal measures.
First, the cuts in federal transfers during the mid-1990s have had a
significant impact, albeit indirectly, at the provincial level, and this has
contributed to governance changes. In fact, although the reactions of
Canada’s various provinces to these cuts have varied considerably, certain
common trends may be observed. Attempts have been made to create
structures (committees, agencies) offering systemic (province-wide) coor-
dination (Shanahan and Jones 2009); moreover, soft-competitive strate-
gies regarding public funding (and substantial increases in tuition fees in
all English-speaking provinces) have also been gradually adopted; insti-
tutional accountability has been pursued in all provinces, in particular
through the stipulation of contracts and agreements between universities
and the nation’s provincial governments. In some provinces, for example
in Ontario, governmental policy is aided by the services of an advisory
agency established in 2005 (the Higher Education Quality Council of
Ontario), while performance contracts between the universities and the
Ministry have been introduced. However, generally speaking provincial
governments, unlike in other Western countries, have not developed
a strong policy based on the assessment of institutional performance.
From this point of view, the case of Canada’s provinces is an excep-
tion, since pressure for institutional accountability and effectiveness has
not been exercised through those policy instruments generally adopted

in other countries. It would seem that there is a common idea, shared
at both political and social levels, whereby access to higher education
needs to be a prominent objective; and in fact, 40 per cent of the share
of Canada’s GDP invested in education (2.5 per cent) goes on tertiary
education.
Second, there is the proactive role of federal government in funding
universities. While on the one hand there has been a reduction in
the standard transfer of funds to the provinces for higher education
spending, on the other hand there has been an increase in the specific
funding of research activities and infrastructures (starting with the
“Network Centre of Excellences” launched in 1998, followed by other
measures such as: the Canadian Foundation for Innovation, set up in
1997; the Canadian Research Chair, established in 2000; and the New
Innovation Agenda).
Federal government’s policy of funding research has addressed the
institutional strategy adopted by many universities, especially the more
research-orientated ones, while at the same time creating the prereq-
uisites for greater institutional diversity (Jones 2006). So, even if the
constitutional framework has not been modified, and provinces have
complete control over the governance of their universities, federal and
provincial strategies have led to the presence of increased ties, more
targets to be met, more substantial funding and a greater degree of
“targeted” accountability to be taken into consideration, and ultimately
proven, by the institutions themselves. All of these changes have in prac-
tice forced universities to adopt more managerial, verticalized internal
governance modes; however, the expected results have yet to be seen,
and the pre-existing consensual legacy remains of importance (Boyko
and Jones 2010).
It should be pointed out that at present around 48 per cent of funding
to Canadian universities comes from private sources. As far as regards the
remaining 52 per cent (public funding), 9.5 per cent comes from federal
sources while 42.5 per eent comes from provincial or local governments
(Statistics Canada, 2014, table 477–0058).
Germany
Germany was late to reform its system of higher education governance,
and the net role of federal government is rather difficult to grasp due to
the cooperative style of German policy-making.
However, after the 1969 reform of the constitution permitting
federal government to pass framework legislation in the field of higher
education, federal government took control over the regulation of various

general aspects of higher education, such as the structure of curricula,
university admissions, membership of governing boards, academic
recruitment and careers. The decisions made on these issues, however,
were the result of close cooperation with the Standing Conference of
Ministers of Cultural Affairs of the Länder, based on the traditional
procedures underlying German cooperative federalism (Kehm 1999).
However, as I have already pointed out, between the late 1990s and
2006 federal legislation, together with a constitutional reform, led to the
transfer of almost all powers over higher education to the Länder. So, as
of 2008 the power of federal government to legislate on higher educa-
tion was limited to shared decisions on questions of admissions and
of the general principles governing the structure of university degrees
(Fussel and Wolter 2013).
Thus the German university system now consists of 16 independent,
sub-national systems which, however, constantly liaise with one another,
thus making it very difficult to effectively summarize the way in which
governance arrangements have been reformed. Certain common trends
may be identified, nonetheless (de Boer et al 2007 and Wolter 2012).
As far as concerns the issue of institutional autonomy, since the late
1990s all Länder have passed a series of specific regional laws changing
the existing arrangements. All of these laws are based on the princi-
ples inherent in the common policy template. Institutional autonomy
has been granted to universities, and the funding system has moved
towards the formula-based type (Orr and Jaeger 2009). In almost all
universities, the rector/president is now appointed by the board and/
or the academic senate, following a selection procedure performed by
an ad hoc committee: this appointment is still made by the Minister of
Education of the Land in question. Regional laws in 14 out of Germany’s
16 Länder require that at least one half of the members of the board
come from outside the university (and in many cases the external board
members, and in certain Länder all board members, are appointed by
the Minister of Education).
The following are the most relevant recent policy developments:
● An accreditation agency network has been set up as a consequence

of a shared decision of the federal and states governments (although
managed by the Länder and by the council of the education minis-
ters, the KMK). Germany’s regional governments are clearly urging
universities to focus more on the social needs of their students and
of society as a whole.
● In 2005 the federal government launched a new, well-financed

programme designed to encourage and reward excellence in research
(1.9 billion euros for the period 2006–2011 and 2.7 billion euros for
the period 2012–2017).
● In 2007 a special programme was launched to increase university
places, under an agreement between the Länder and the federal
government. These higher education pacts have provided for the
co-funding of 334,000 additional posts.
● In 2009 the federal government launched the High Tech Strategy,
designed to encourage researchers to orientate their research towards
the production of innovative services.
Apparently, the higher education system has become more competitive

(with institutes competing for both students and money), and many
scholars have underlined the decision made by the seven Länder (all
led by CDU/CSU governments) to introduce students’ fees starting from
2006 (Kehm and Lansendorf 2006; Orr and Jaeger 2009). However, in the
last few years all these seven Länder have decided, under pressure from
strong student protests and a change in the attitude of public opinion,
to revers the previous decision, and thus to abolish tutition fees.
Developments in higher education in Germany appear to follow a
pendulum-like pattern, as testified by the agreement established at the
end of May 2014, between the current federal ruling coalition (Grosse
Koalition) and the Länder governments. This agreement provided that:
1. The federal government shall bear the full cost of the country’s finan-
cial aid to its university students (currently standing at around 1.2
billion euros) – and the Länder have promised to invest the conse-
quent savings in schools and universities.
2. The constitution will be changed to allow federal government to
directly fund universities (and this would be a truly new critical junc-
ture in the development of German higher education policy).
In Germany only 12 per cent of university funding comes from private

sources. In 2013, 85 per cent of public funding came from the Länder, while
the remaining 15 per cent was provided by federal government – and the
latter figure has increased by 50 per cent in the last ten years (KMK 2013).
5.4.4 Policy dynamics

To get a better grasp of the strategic dimension of federal actions in
higher education in the three countries examined here, I am now going
to briefly reconstruct the dynamics of such actions (the express inten-

tions of federal governments and their ideational assumptions; the reac-
tion of state governments; the reactions of the universities and their
associations).
Australia
In higher education, the features of the Australian political system (in
particular the federal government’s domination of policies) and the
specific situation created following the 1974 decision to take full finan-
cial responsibility for universities represent a powerful mechanism with
which to ensure strong policy capacity in the field (Marginson 1993,
1997). The lengthy tradition of university autonomy further rein-
forces this capacity, since it renders the strong collective reaction of all
Australian universities against any attempted federal reform less likely
(Meek 1995). Finally, this situation renders Australia’s state governments
less pivotal to the policy process.
This tradition acts as a kind of structural incentive to the adoption
of instrumental behaviour by the universities (as testified, for example,
by the establishment in 1994 of the Group of Eight (Go8), an associa-
tion of the “top universities”, followed by the establishment of other
associations such as the Australian Innovative Research Universities, the
Regional Universities Network and the Australian University Technology
Network). Federal strategy has basically forced the university system to
adopt a multi-tier structure (Sappey and Bamber 2007).
The role of federal government remains substantially unchallenged,
at least as far as regards higher education. Furthermore, following the
Hawke government’s reforms, higher education governance has been
characterized by a kind of bipartisan commitment.
The only important difference between the Labour Party and the
Conservative coalition to date has regarded their respective positions
on whether to increase or cut total public funding to universities. In
this regard, there is a difference between the Labour government’s
plan “Transforming Australia’s Higher Education System”, published
in 2009, in which the new neo-liberal governance approach remained
unchanged, but a forecast was made of increased funding to universities,
and the decision taken by the subsequent Conservative government to
cut university funding.
From this point of view, the Nelson Report (issued by the Conservative
government in 2003) can be considered a logical development of the
Dawkins Report (1988) representing the adoption of the neo-liberal
approach to higher education, with the focus on the universities’ role

in supporting national undertakings and on the challenges of the global
economy (Pick 2006, 2008). Australia’s universities seem to be following,
and thus to completely accept, if not share, the Commonwealth’s move
towards globalization, marketization and entrepreneurialism (Garret-
Jones and Turpin 2012).
Canada
As has already been pointed out, Canada’s federal government is like
a foreign guest in the field of higher education, due to the complete
jurisdiction of the country’s provinces with regard to this field (with
the one exception of Ottawa sharing the allocation of student grants
with federal government). However, as of the late 1990s, certain
federal projects (Canadian Research Chairs, Canadian Foundation
for Innovation) saw federal government begin to invest substantial
funds in higher education, being directly allocated to universities for
research purposes. This decision was based on the functional need to
help the nation compete at the global level (Wolfe 2002; Jones and
Young 2004). What is interesting about this watershed, which never-
theless represents the only issue in which federal government has a
say in the national university system, is that the decisions leading to
the aforementioned measures were the result of a complex process
guided from the offices of the Prime Minister and the Ministry of
Finance, which some universities (those belonging to the U10, now
the U15, an association set up in 1991 that groups together Canada’s
best research universities) had the opportunity to significantly
contribute towards.
What emerges in this specific case is that federal government wanted
to invest money in order to strengthen the link between Canada’s
universities and its economic growth requirements, but the content of
the strategy was the result of external pressures and ideas subsequently
discussed with the provinces (Axelrod et al. 2011), where once again
federal government and Quebec failed to see eye to eye (although in
the end Quebec accepted the federal plan, under pressure from its own
universities). So in this case, the strategy was planned on the basis of
negotiations between the government, the universities and the provincial
governments; what emerged from this process was the strong position
of the universities – due to the unique status of Canadian universities,
which are not only strongly independent but also highly considered by
society as a whole (Jones 2009).
Germany
As the reconstruction presented above clearly shows, the dynamics
of German higher education are unique insofar as they seem to have
developed in a “pendulum-like” manner: until the constitutional
amendment in 1969, federal government played no formal role; its role
then increased until the mid-1980s; this was followed by an upsurge in
the pressure to decentralize, exercised by the Länder which started to
claim greater autonomy, until the constitutional reform was passed in
2006 (which, however, was the result of agreements on the increased
federal funding of both research and teaching). Finally, the agreement to
change the constitution in order to allow federal government to directly
fund universities seems to have completely reversed the constitutional
decision taken less than ten years beforehand.
In order to get a better understanding of such dynamics, account
must be taken not only of the current state of the German economy (i.e.
highly prosperous with an unusual financial surplus), but also of certain
policy values and stakeholders/actors.
Regarding these stakeholders/actors, account ought to be taken of:
1. the role that certain bodies have played in developing an integrated,

shared vision of higher education – the role of the KMK is promi-
nent here, as is that of the Germans Rectors’ Conference (Schubert,
2008);
2. the importance of “national” academic bodies providing “strong”
advice on federal (and national) policies, such as the German Council
of Science and Humanities, which officially provides advice to both
federal and Länder governments on the structure and development
of higher education and research, but which has developed a real
capacity to actually influence decision making (Onestini 2002;
Braband 2004). Another federal collegial body capable of lobbying in
favour of academic and university interests is the German Research
Foundation.
Thus, the German higher education arena is characterized by a “real”

national level at which the two types of government are not the only
entities to interact, as there are also some intermediary bodies with
an influential role, representing the interests both of the institutions
as such and of academics and scientists. This system does not mean
that the other stakeholders matter more than the governments do, but
simply that the arena of discussion and interaction is more complex
than in the other countries in question.
As regards the policy ideas pursued, it should be pointed out that

there was a shared belief that things had to be changed at the end of
the 1990s, as testified by the 1999 federal government policy document
MutzurVeranderung (Courage to Change) (Ostermann 2002). This docu-
ment crystallizes the approaches and ideas for reform that had been
coming together throughout the 1990s, and shares the idea of the
adoption of the NPM policy “toolkit”. However, the implementation
of those tools at the Länder level has been less forceful than in other
countries. Furthermore, policy dynamics have been developed within
the traditional German “corporatist”, “joint-decisional” framework
which even survived the 2006 constitutional reform. This means that
each federal policy is pursued after a discussion with, and subject to the
agreement of, the Länder.
In this context, a significant role appears to be played by the social
perception of higher education as a citizen’s right, which lay behind the
social protests in Germany against the introduction of student fees. This
prevailing social value is a powerful driver of the dynamics of German
higher education policy, and thus one of the cornerstones of the tradi-
tional “national” framework that has guided such policy in recent
decades, notwithstanding the constitutional changes that only appear
to have had a minimal impact on the role of federal government and on
the shared nature of those policy strategies pursued.
5.5 Discussion
The reconstruction proposed in the previous paragraph reveals that in

all three countries federal governments have tried to pursue a degree
of national steering and coordination of their respective higher educa-
tion policies. These attempts have produced quite different results,
however, and this variation is clearly linked to the different structures
and dynamics of the federations in question.
From this point of view, the segmented nature of Canadian federalism
has countered any blurring of clear constitutional lines separating the
two jurisdictions: Canada’s provinces have not permitted federal govern-
ment to share their powers and responsibilities, and have accepted
changes only when fresh money has been put on the table (and in such
cases the most important universities have played a significant part in
convincing their provinces to do so).
The balanced nature of Australian federalism, united with the power
of the federal executive and the deep fiscal imbalance, have allowed the
Commonwealth to play a prominent role in reforming higher education
governance. Australia’s states have agreed, on the basis of strong, perti-

nent financial grounds, to leave the coordination of the whole univer-
sity system to the federal government, without any formal change in the
country’s constitution.
The unitary character of German federalism has been confirmed, from
the long-term perspective, notwithstanding certain competitive inter-
state dynamics that emerged during the period 1990–2006. In fact, the
cooperative intra-state style in higher education policy has changed in
form, but ultimately it has persisted all the same. Once again, it seems that
what matters here is the financial issue, due to the substantial demand
for higher education and the need to increase institutional income in
order to cope with such demand (in a situation where it is considered a
social disvalue to make students pay for their higher education).
So the institutional features of the different federations accounts for
the different capacities of federal governments to make any substan-
tial changes in higher education policy governance, and thus to signifi-
cantly influence their own strategies, although certain other elements
may help us understand the nature of the adopted strategies.
The typology on governmental strategies presented above in Table 5.1
shows that Australian and German federal strategies can be easily clas-
sified. In fact, the Australian case perfectly fits the label of deliberate/
enforced strategy, while the German case fits the deliberate /collabora-
tive type. In both countries, in fact, there has been a clear planning of
strategy, but supported by different governmental capacity to influence
the behaviour of the states/Länder governments. In the Australian case,
the federal government’s incredible financial clout makes the differ-
ence, while in the German case this power is more marginal as both
the constitutional framework and the inherited style of cooperative of
federal relations force federal government to constantly seek the coop-
eration of the Länder.
The Canadian federal strategy, on the other hand, is more complex
and so more difficult to classify. In fact, it is quite clear that the net
constitutional separation of powers, Quebec’s sensitivity to any
attempts by federal government to disregard such separation, and the
relatively minor financial power based in Ottawa, substantially tempers
the federal government’s ability to introduce any significant changes
in higher education governance. At the same time, however, precisely
due to the these concauses, when the Canadian federal government
decides to do something within the boundaries of its own powers, it is
very strong. Furthermore, in the Canadian case it is difficult to estab-
lish whether federal strategy was initially of a planned nature or not, in
that the actions taken at the end of the 1990s were the result of federal
government’s desire to invest more money in universities, but without
any clear idea about the solution to be adopted (which seems to be
more the result of informal consultation with the universities than with
provincial governments). So the classification of federal strategy in the
Canadian case is debatable: it could be classified as emergent/reactive or as
deliberate/enforced, depending on the analytical emphasis placed on the
strategy formulation stage.
Finally, what emerges from the comparative reconstruction of policy
developments is that the content of the adopted federal strategy differs
in particular in the two cases of Australia and Germany. In Australia,
in fact, the underlying principles of New Public Management (compe-
tition, accountability and internationalization in particular) are quite
clearly at the basis of Commonwealth policy guidelines. From this point
of view, then, Australian federal strategy is clearly market oriented.
On the contrary, in the German case this market orientation is rather
marginal, and federal strategy aims more at achieving a more equitable
system based on solidarity. Although certain elements of competition
are encouraged (through the Excellence Initiative, for example), they
are implemented thanks to additional funding and taking into consid-
eration the fact that institutional differentiation is not so clear-cut in
German universities as it is in the English-speaking world. The differ-
ence can only be explained in terms of the prevailing cultural values in
the two societies, and thus in the two political systems. It is quite clear,
then, that in Germany the interpretation of the new governance mode
has been mediated by, and translated into, the prevailing social values,
and thus its implementation has been less evident, appearing more as an
addendum to the existing system of higher education governance. On
the contrary, in Australia the Hawke “revolution” seems to have been
more effective due to being implemented within a society with a long
and stable tradition of individualism and competition.
In the Canadian case, the relatively marginal part played by federal
government in coordinating the “national” system makes the analysis
of the content of federal strategy less meaningful. However, it is quite
clear that there are two different policy principles driving federal strategy
in Canada: equalization (in the case of the student grant scheme), and
differentiation and competitive pressure (in the case of the federal
research funding plans).
One final point that ought to be made here regards the role of univer-
sities as stakeholders and potential lobbyists in federal countries. What
has emerged is that, notwithstanding their depending on the regulation
of the states/provinces/Länder governments, universities also play the

game at the federal level, and are quite capable of pursuing certain
results for their own benefit. This role, however, appears to be more
important in Canada and Germany than in Australia. Furthermore,
the more competitive nature of federal policies in the two English-
speaking nations has also been one of the reasons for the establishment
of different groupings and associations of universities, each of which
pursues its own policy interests outside of the scope of the national
associations. From this point of view, these new associations, especially
those grouping together the more prestigious research institutions, seem
to have become stable partners of federal government.
5.6 Concluding remarks
In this chapter I have analysed federal strategies for the reform of

governance modes in higher education. The topic is a very complex one
due to the specific institutional features of federal arrangements. I have
offered a classification of governmental strategies, and then tried to link
this to a classification of federal arrangements capable of accounting for
the real workings and dynamics of policy-making in federal countries.
My empirical analysis has shown that, from a theoretical point of view,
this approach can help us understand the range of strategic behaviour
that federal governments may pursue. From an empirical point of view,
certain rather debatable, unclear results, especially in the Canadian case,
indicate that further research is required in order to throw more light on
the real processes by which the content of federal strategy is designed
and pursued.
Notes
1. “Strategy” usually means a plan adopted by an actor for specific purposes.
This general definition does not take account of the fact that, in the end,
such plans can derive from different sources, dynamics and interactions, and
that they may undergo change when other actors have different “strategies”
and have the power to request that changes be made to the initial plan, or
to impose such changes. In the more traditional definition of strategy, such
problems are highly constraining, as a result of the adoption of the Mintzberg
definition here. Thanks to this definition, we can focus on how governmental
strategies are modelled, taking into consideration their capacity, the contex-
tual factors and the influence of other actors involved in, or affected by, the
governmental plan.
2. The interviews are part of a much broader comparative study I am conducting
together with other colleagues (relating to the three federal countries analysed
here together with five other European countries), aimed at perceiving

governance change from a micro perspective. Owing to the macro perspective
adopted in this chapter, these interviews are not quoted, although they can
help clarify the sequential reconstruction made in the three individual cases
in question.
3. Section 96 establishes that “During a period of ten years after the establish-
ment of the Commonwealth and thereafter until the Parliament otherwise
provides, the Parliament may grant financial assistance to any State on such
terms and conditions as the Parliament thinks fit”.
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6
Research Policy as “Carrots and
Sticks”: Governance Strategies in
Australia, the United Kingdom and
New Zealand
Jenny M. Lewis
6.1 Introduction
Over the last three decades, governments in many nations have pursued a
set of goals that have substantially changed research policy, transformed
how universities are governed and altered how academics do research.
The massive expansion of higher education, the growing importance
of training for the knowledge economy, and the need to tighten and
justify expenditure on universities in many Western nation-states have
all contributed to a redefinition of the relationships between national
governments, knowledge-based industries, universities and academic
disciplines. This chapter focuses on the strategies that governments
have used to direct national research policy. It begins with an examina-
tion of higher education and research policy, and then considers two
modes of governance: new public management (NPM) and network
governance (NG) in relation to research policy. It argues that, since the
1980s, governments have pursued their strategic goals for the sector,
by assessing and rewarding the research outputs of universities (NPM)
and providing incentives to collaborate (NG). An empirical examina-
tion of each of Australia, the United Kingdom and New Zealand is then
used to demonstrate the use of these two governance strategies, and
two specific policy tools associated with them, in action. Finally, the
effects of these on individual academics in three universities in different
nations are analysed, to highlight the resulting “carrots and sticks” of
research policy.
131
132 Jenny M. Lewis
6.2 Higher education and research policy
Examining the strategies that governments have used to redefine a policy

sector over time necessitates starting from some traditional characteris-
tics of that policy sector. Higher education revolves around universities,
which are its main delivery vehicle. Universities are unique institu-
tions, which have developed from a collegial ideal of scholarship, based
on academic freedom and the creation of a place where it is safe to
conduct open intellectual enquiry. The traditional idea of the university
is centred on the notion of a community of scholars, governed largely
from the bottom up, decentralized and co-ordinated through disciplines
(Lohmann 2004). A three-way classification of higher education institu-
tions by Burton Clark (1983) set this type against the two alternatives of
state authority (government control) and the market.
The traditional conception of universities sees the state’s role as
simply ensuring their autonomy as institutions. In this professional
model, academics have a monopoly from the state to exercise academic
freedom with strong faculty control in research and teaching. The
second conception casts the state as important in driving research in the
interests of society, through a command and control model. The third
conception stresses the role of the market, casting teaching and research
as commodities rather than public goods. Many have argued that the
state and the market versions have been on the rise since the 1980s
(e.g. Lucas 2006; Deem et al. 2007; Ferlie et al. 2009), as governments
have pursued a new set of goals in relation to universities, seeing them
as organizations that provide training for jobs in the new knowledge
economy, and create wealth-generating innovations.
This has shifted universities from being protected places for scholars
to open sites of governance (Marginson and Considine 2000). Battles
have been fought in the name of autonomy and freedom of enquiry
(supported by academics) against the quest for relevance and value for
money (by governments). But this chapter argues that the changes asso-
ciated with increasing state interventions in higher education along
these lines have created a system where control is exercised at a distance,
with individual universities now having a form of regulated autonomy
(Christensen 2011). Giliberto Capano’s (2011) examination of shifts in
the higher education sector in four European countries shows varying
degrees of change, but all of them towards steering at a distance. In
short, universities in many nations are now being strongly shaped by
Research Policy as “Carrots and Sticks” 133
national governments’ attempts to steer these institutions and the work

of the academics housed within them.
Higher education has expanded significantly since the 1980s, and this
has increased governmental concerns about the growth of public expend-
iture on universities, and the quality of the teaching and research being
funded by the public purse. Systems based on the tight specification of
performance with funds allocated on the basis of outputs have taken
hold as solutions to the perceived problems of containing the costs and
ensuring the quality of higher education. These have been pursued most
enthusiastically in Anglophone countries, including the three consid-
ered in this chapter, causing universities and academic discipline-based
associations (learned societies, academies and professional associations)
to engage in successive rounds of negotiations in attempts to ameliorate
their undesirable effects. In addition, many governments have become
more interested in funding research that has some obvious benefit, and
in investing strategically in particular research areas (notably technology
and science). This has also led to robust discussions about the purpose of
universities and of knowledge.
This chapter contends that, over the last three decades, Western
governments have substantially altered their strategies for governing
higher education and research policy. Nation-states have become
more proactive in defining what is valued as research “outputs” and
in defining research priority areas. States have taken up new modes of
governance to address concerns about value for money, and to direct
attention and funds towards research in a way that brings it closer to
national economic policy. This has redefined the relationships between
governments, individual universities and groups of universities (such
as the Russell Group of research-intensive universities in the UK), and
academic discipline-based societies and associations. Governments and
funding agencies have become far more influential in setting directions
and priorities for research (Whitley 2010).
To achieve this, governments have used both new public manage-
ment and network governance-based instruments. These have different
sets of drivers associated with them, but they have both been used in
a number of nations. As a consequence of this, the level of autonomy
that universities had three decades ago to set their own course, has been
reduced. Governments now have a greater say over what kind of research
is done, what kind of research is valued most highly, and how research is
conducted (Lewis 2013).
134 Jenny M. Lewis
6.3 New public management and network governance
NPM is shorthand for a blend of managerial and market reforms, which

encompass markets, competition and consumer choice, and manage-
rialism (Hood 1991). Managerialism (or corporate management) was
a new approach to governing the public sector in the 1980s. Rational
planning and tight control over organizational design and manage-
ment were supposed to eliminate excess and outputs rather than inputs
became central (Hood 1991). Alongside, or slightly later than manage-
rialism, market ideas began to be promoted as a mode of governance.
With deregulation, privatization and increased competition or quasi-
competition as its new instruments, it was also intended to promote
efficiency. These two modes of governance overlap both chronologi-
cally and conceptually (Considine and Lewis 1999, 2003), and “NPM” is
generally used to encapsulate both of these trends.
NPM has flourished as a policy paradigm and control technology
in higher education in the UK (Deem et al. 2007), as in other sectors.
One of its most important tools has been the measurement of
academic productivity and the increasing specification of which kinds
of research outputs are most highly valued. The spread of a performa-
tive and evaluative culture has been implemented through research
performance evaluation systems in many countries (Scott 2009).
The UK exported performance-based research assessment systems to
Australia and New Zealand. These systems have also had impacts in
European countries and beyond (Whitley and Gläser 2007; Whitley
et al. 2010).
Publishing is one of the main ways in which research is communicated
to the world, and publications have for a long time been important to
building academic careers (the phrase “publish or perish” apparently
dates back to 1932). The introduction of research assessment systems
made this even more important, as publications are tangible outputs of
research and they can be counted. Research assessment systems clearly
signal that publication is expected and they also make clear which types
of publications are valued the most.
NG connotes a need to steer a diverse range of (public and private)
actors, through contracts, alliances, partnerships and persuasion rather
than hierarchy. It builds upon forms of organizational affiliation and
history that bind agents to common tasks. A network consists of many
nodes that are connected, but not tightly coupled, where there is an
enforced sharing of resources and a requirement for joint action (Mayntz
1993; Scharpf 1997). This does not mean all actors in such configurations
have equal power, or that they cannot be deliberately created to achieve

a particular purpose.
In the policy and administration literature, NG describes increasing
fragmentation, the growth of problems that are ill-defined and which
span boundaries, and the resulting dynamics of interconnection that
define contemporary governance and policy making. It also signals a
set of governing responses to this new environment which has become
increasingly popular in recent decades (Lewis 2011). NG is apparent in
the research policy of many nations. In the descriptive sense, it includes
the development of networks between universities and between univer-
sities and other actors, and the substantial self-steering capacity of such
knowledge networks (Ferlie et al. 2009).
In the prescriptive sense, NG has been employed by governments and
funding agencies to try and encourage research collaboration. Research
collaboration is generally assumed to be highly productive. Governments
in many nations have used incentives to clearly signal that collabora-
tion is desirable, and to make clear that particular types of collaboration
are valued more highly than others. A belief in its benefits for research
has also spurred changes in the types of internal research grants offered
by universities, providing incentives to collaborate within and outside
the university, across disciplinary boundaries and with non-academic
partners (Lewis 2013).
The introduction of research assessment systems has been contro-
versial, spawning a large literature by academics in higher education
journals and magazines on their many evils. Research collaboration
incentives are generally less controversial, as they are voluntary “opt-in”
mechanisms for distributing funding (even though this means that
funds allocated in this way are not available for more open “investiga-
tor-driven” research purposes). Universities and academic disciplinary
associations engage in negotiations with governments and funding
agencies about the details of research assessment systems and collabora-
tive grants. Often it is the humanities and social science disciplines that
have expressed the greatest concerns, as research assessment systems are
seen to privilege the physical and biological sciences (Lewis and Ross
2011), and collaboration sits more comfortably with the approaches and
methods of the sciences (Lewis et al. 2012).
6.4 Governing research
As has been argued above, research policy since the 1980s has drawn on
both NPM and NG as governance modes. A comparison of governance
136 Jenny M. Lewis
changes in higher education based on these dual modes was used by

Paradeise et al. (2009) in a comparison of seven Western European coun-
tries. In their analysis, NPM is presented as seeking to produce a smaller,
more efficient and more results oriented public sector by concentrating
on efficiency, value for money and performance. NG brings into play
networks, collaboration, diversity and inclusion (Ferlie et al. 2009).
Tracing NPM and NG governance modes through seven countries,
Paradeise et al. (2009) conclude that universities in all countries have
become managed organizations with external steering by incentives and
performance. At the same time, NG has been introduced as a means for
dealing with new co-ordination challenges, involving new actors and
new arenas, since these cannot be addressed by concentrating solely on
efficiency and outputs. They regard the UK as an exceptional case – an
outlier that implemented the most radical NPM ideas, with the longest
history of moving in this direction, but concluding that there are traces
of NG even in the UK. It seems that many nation-states have success-
fully implemented both of these in their governing strategies, winning
the battle to gain greater steering power over what was previously a
more autonomous set of institutions.
Providing incentives for research collaboration of various types can
reside comfortably within NPM, if collaboration is seen as a means of
increasing research productivity and perhaps research quality too. NG
carries a set of assumptions about the benefits of joint working, which
include the ability to solve large and ill-defined problems. For research, it
is often also related to ideas about successfully solving problems that are
beyond the scope of a single discipline, institution or nation (Rambur
2009). In addition, research collaboration incentives are often directed
at particular priority areas, where governments and funding agencies are
trying to increase research activity.
Research centres, of the national government or individual univer-
sity type, provide an example of NPM and NG being utilized together
for restructuring purposes. Centres provide a structure for groups to
work together, often across disciplinary boundaries. The belief that
they generate research benefits has driven both national level funding
of them, and their widespread adoption as an institutional research
strategy (Sá 2008). Universities pool funds centrally and then redis-
tribute them competitively to these centres, driven by large external
funding incentives. Such structures represent top-down incubation
which is management driven, rather than bottom-up and researcher-
driven collaboration. Centres rest on collaborative principles, but also
increase managerial control over research activities by breaking down
departmental structures and disciplines. They are also often aimed at

ensuring that research is responsive to the demands of the market, rather
than driven by academic curiosity.
In summary, it is clear that these two modes of governance can be
directed at the same ends: increasing research quantity and quality.
While research assessment systems are an obvious manifestation of NPM
and provide the “stick” of compliance with a focus on outputs, research
collaboration reflects NG ideas and provides the “carrot” of incentives
to co-operate. Not surprisingly, the first of these has resulted in bigger
battles with universities and academic disciplinary associations, since it is
obvious that academic work is being directed and rewarded in particular
ways. The second has faced less criticism, as academics are not required
to engage in research collaboration (in the same way that everyone is
measured through national research assessment systems), although the
humanities and social science disciplines have expressed concerns about
the privileging of “hard science” ways of working. National govern-
ments have effectively pursued their goal of increasing their steering
power over universities, using these dual strategies.
In the following sections, research assessment systems and research
collaboration incentives in each of Australia, New Zealand and the UK
are described in more detail, to provide empirical examples of these
strategies in action.
6.5 Performance-based research funding systems
Concerns about the accountability of institutions and individuals

receiving public funding for research moved to centre stage in the 1980s.
A rising interest in universities as tools of the knowledge economy, a
desire to evaluate the productivity of universities, and the more general
shift to allocating funds on the basis of activity and outputs all contrib-
uted to this. The resulting funding approaches were based on the desire
of governments to steer universities (at arm’s length) in line with their
strategic interests.
The UK was the first mover in 1986, Hong Kong and China followed
in 1993 and Australia in 1995. A total of 14 countries had some kind of
system by 2010 (Hicks 2012). These systems account for relatively small
amounts of funding compared with grants and teaching funding. They
amount to around 6 per cent of total revenue in Australia and 10 per
cent in New Zealand, but a more substantial 25 per cent in the UK (Hicks
2012). However, they have important reputational effects, and universi-
ties are keenly aware of this. The American system of research evaluation
138 Jenny M. Lewis
run by the National Research Council is private and not linked directly
to funding at all, but it still generates a significant response from insti-
tutions (Hicks 2009). In addition, research status and standing are also
significant because of the influence of world rankings of universities
(the Times Higher Education and the Shanghai Jiao Tong are two of the
most widely known of these). These are substantially based on measures
of research quantity and quality.
The research assessment systems of the UK, Australia and New
Zealand are broadly comparable, and they have all been influenced by
each other’s attempts to measure research performance. All of them rest
on assessments that include publication quantity and quality as impor-
tant components. Importantly, unlike other countries (see Whitley and
Gläser 2007), they all have funding allocations tied to these research
performance measures. As such, these national systems are amongst the
most interventionist variants of research assessment.
In the UK, the Research Assessment Exercise (RAE) used specialist
panels to conduct peer review of the research of university-selected
researchers. The unit of assessment for rating was departments within
universities, and funding was calculated with weightings for the size
and cost of research. Institutions received funding based on aggregating
the departmental allocations. Higher ratings were heavily weighted
in the calculation of funding allocations. The RAE was conducted six
times between 1986 and 2008. It was substantially amended in each
iteration, in response to feedback and negotiations with universities and
learned academies/societies. The Research Excellence Framework (or
REF) replaced the RAE in 2014, and the most substantial change was the
inclusion of “impact” – meant to capture relevance outside of academia.
The quality profile of the REF is based on three elements: outputs
(assessment of originality, significance and rigour and 65 per cent of
the total assessment); impact (assessment of reach and significance and
20 per cent of the total); and environment (vitality and sustainability,
15 per cent) (REF 2014).
In Australia, in 1994 the Commonwealth government adopted a mix
of measures, or indices, as the basis for funding university research infra-
structure. The inputs used include research grants and research publi-
cations. This system did not include panels, but instead was presumed
to incorporate peer review through the assessment of competitive grant
applications (research income), and the refereeing of research publica-
tions. The university was used as both the unit of assessment and of
funding. A new system for assessing research performance, Excellence in
Research for Australia (ERA), was implemented in 2010 (ARC 2010). The
key shift was away from the heavily quantitative approach to measuring
publications to a stronger emphasis on quality. This was a major change,
taking on board the concerns of universities and academic disciplines
about the “more is better” message that was implicit in the previous
system (Butler 2002). The unit of assessment shifted from an institutional
to a discipline base, and much greater emphasis was placed on active
peer review through the use of panels. These changes brought Australia’s
system closer to those of the UK and New Zealand (Lewis 2013).
The Performance-Based Research Fund (PBRF) was first implemented in
New Zealand in 2003. New Zealand policy-makers were clearly influenced
by the UK RAE, with a similar use of disciplinary panels to provide peer
assessment. Unlike the RAE, however, the focus of assessment in the PBRF
is individuals rather than departments. The peer review process assesses
an Evidence Portfolio presented by selected academics incorporating
Nominated Research Outputs (70 per cent), Contribution to Research
Environment (15 per cent) and Peer Esteem (15 per cent). The most recent
PBRF Quality Evaluation was conducted in 2012. There have been only
minor changes to it in each new round. An independent review of the
2006 PBRF found that it has functioned relatively well (TEC 2012).
Academics have devoted much time and energy to identifying the
shortcomings, inequities and undesirable consequences of research
assessment systems (see Lewis and Ross 2011). They have been a major
topic in higher education journals and publications like the Times Higher
Education, and this reflects the battles that have occurred as govern-
ments have pursued their strategies for transforming universities. In
each of the three countries of interest here, performance-based research
funding systems have affected how universities organize their structures
and their data collection for evaluation exercises, and consequently how
academics do research. The central steering by these national govern-
ments, backed up by the rewards for increased research productivity, can
only be ignored by individual universities if they are willing to accept
significant losses of funding (Lewis 2013). Universities and academics
are given the freedom to find their own way to meet the expectations of
these systems, but there is a clear danger that producing outputs that are
not valued by the research assessment system will result in the “stick” of
a loss of funds, and (perhaps more importantly) reputation.
6.6 Research collaboration incentives
Research collaboration is being encouraged in all discipline areas, through

grants that aim to stimulate it within countries, between countries
140 Jenny M. Lewis
within regions and on a global scale, as well as through bilateral and

multilateral partnership and exchange agreements between universi-
ties in different countries (for example, Erasmus within the European
Union (EU) and Erasmus Mundus between EU and non-EU universi-
ties). Sometimes it occurs within the circle of universities and research
institutes, but at other times, its purpose is to engage with organiza-
tions whose main functions are outside of the realm of research and
teaching. The growing trend for funding agencies, particularly govern-
ment agencies, to encourage research collaboration, has escalated from
the 1990s onwards. The often-stated need for this is that many problems
defy disciplinary boundaries and national borders. In particular, many
biological and physical science problems are increasingly interdiscipli-
nary and complex, and rely on access to costly equipment. These of
course are also highly valued by governments because they promise to
deliver economic benefits through its applications.
The reasons why governments and other funding agencies might be
interested in supporting collaboration in the hard sciences are easy to
understand. Many of these require the joint use of expensive or unique
equipment without which research would be less productive (Meadows
1974; Thorsteinsdóttir 2000). Mode 2 research (Gibbons et al. 1994) rests
on collaboration with the “real world” to bring in special expertise and
knowledge which is crucial to applications of the research. An increased
emphasis on applied rather than pure research has gone hand in hand
with discussions about the need to fund research that is linked to govern-
ment priorities (rather than academic curiosity). It is also revealed by the
introduction in the UK REF (and current discussions in Australia about
the next ERA) of an assessment of the relevance (impact) of research.
Interdisciplinary collaboration has become fashionable amongst both
funders and practitioners, in recognition of the fact that problems do
not fit neatly within disciplinary boundaries (Jeffrey 2003). And collab-
oration is often important for mentoring graduate students and post-
doctoral researchers in the biological and physical sciences (Lee and
Bozeman 2005). It is not surprising, then, that many national govern-
ments are trying to stimulate collaborative research through a mix of
research grant schemes and grant criteria. “Policy makers have expressed
their enthusiasm for collaborative work by earmarking increasing funds
for research collaboration, in the form, for example, of centres of excel-
lence or in special research collaboration programmes” (Thorsteinsdóttir
2000: 145).
This impetus can be seen in the growth of different kinds of research
grants, across all the disciplines, offered by governments and other
funding agencies in each of the UK, Australia and New Zealand.

Australian governments appear to have been more obviously directing
funding towards research collaboration, both within the country and
outside it, than the other two national governments, as the following
overview demonstrates.
The UK Arts and Humanities Research Council’s funding guide notes
that it has grants to enable individual researchers to collaborate with,
and bring benefits to, other individuals and organizations through the
conduct of research (AHRC 2012). This collaboration may involve a
single institution or a combination of institutions, people from different
disciplines and researchers overseas or colleagues within other sectors.
The Research Councils UK, the strategic partnership of the UK’s seven
Research Councils, lists fostering of international collaboration as one
of its aims (RCUK 2012).
The Australian Research Council (ARC) offers a substantial range of
grants aimed at supporting collaboration of different types. Linkage
grants broker partnerships between researchers and industry, govern-
ment and community organizations. Research Network grants were
also funded by the ARC (in just one seed funding round in 2003 and
one major round in 2004) to encourage collaborative approaches to
research in interdisciplinary settings. The ARC also supports Centres of
Excellence, which are more specifically targeted at building research scale
and focus and strengthening major research partnerships and networks,
including internationally. Co-funded centres aim to do the same, but
with closer links (and partial funding) from industry, government and
community organizations. Linkage Infrastructure Equipment Fund
grants are another way of encouraging collaboration, in this instance
by building a team around some expensive equipment or technology,
which is then shared within the group of collaborators (ARC 2012). On
the medical side, the National Health and Medical Research Council has
a similar array of collaborative grants – Centres of Research Excellence
grants, partnership grants, equipment grants, team programme grants
and others (NHMRC 2012).
The Royal Society of New Zealand has a range of funds, with the
Marsden Fund the main source for investigator-driven research in all
fields except medicine, which is covered by the Health Research Council.
There are also sources of support for New Zealand scholars to study at
home and abroad, and funds for international collaboration and travel
(Marsden Fund 2012).
Research collaboration has also been promoted by regional govern-
ments such as the EU, which has been encouraging large research
142 Jenny M. Lewis
collaborations between countries within Europe. The Framework

Programme for Research and Technological Development is the EU’s
main instrument for funding research in Europe (European Commission
2012). Other initiatives have also been used to increase research within
Europe. A consortium of European member states and independent
physics institutes collaboratively fund CERN (European Organization for
Nuclear Research) in Switzerland, with its large and expensive technical
equipment, computing facilities and services. There are also clusters of
non-geographical alignments, such as Commonwealth countries (e.g.
British Council grants), which provide opportunities for international
exchange and collaboration between the member nations. And finally,
there are numerous bilateral arrangements (e.g. Canada–Australia
exchange grants) to undertake research.
Research collaboration is increasing in frequency and importance. Both
public and private research funding agencies often require interdiscipli-
nary, international and inter-institutional collaboration (Sonnenwald
2008). A sense that important research is not being undertaken because
of disciplinary and university structures underlies funding of interdis-
ciplinary centres in the US (Sá 2008), and universities have been called
upon to change their structures so that interdisciplinary collaboration
will become easier. Universities themselves have also created interdis-
ciplinary centres and institutes in attempts to access external funds
that are available for interdisciplinary research (Sá 2008). Criticism of
this has been rather muted compared with that expressed in relation to
performance-based research assessment systems.
Research collaboration incentives are growing and are now having a
substantial impact on shaping which topics are being privileged (real
world and economically beneficial), what type of research is being
done (less single discipline and more interdisciplinary) and how it is
being done (larger and international teams). These are the “carrots” of
contemporary research policy, and they reflect the strategic intent of
governments and other research funding bodies to provide more direc-
tion on research priority areas and methods of doing research. Incentives
to collaborate are often used in concert with the goal of increasing
research quantity and quality. For example, research centres are an
important means for shaping research directions, away from curiosity
based and investigator-driven, to economically relevant and strategy-
driven topics. Such funding is being increasingly used by governments
(and hence individual universities) in attempts to reap the presumed
benefits of collaboration by restructuring staff into more active, relevant
and productive configurations.
6.7 Individuals and research policy
With the introduction of these systems and incentives, a question arises

about their impacts on individual academics. Based on the successful
introduction of research assessment systems and research collaboration
incentives, governments appear to be achieving their strategic goals of
making universities more productive and more relevant. But does this
actually filter down to individual academics? Do academics in different
nations experience the effects of both performance imperatives and
collaboration incentives?
Results from an interview-based study of academics in these three
nations shed some light on these questions. In 2010, 236 interviews were
conducted with academics at the Universities of Melbourne, Birmingham
and Auckland (all research-intensive, comprehensive universities of
similar status within their countries). A stratified sampling frame was
used to ensure that the interviewees were fairly evenly split across the
three universities, the three discipline areas of the humanities, science
and social science, the levels of seniority (tutor, lecturer, senior lecturer,
associate professor and professor), and between men and women.1 In
2010, the University of Melbourne had recently been through a major
curriculum and organizational restructure, and Birmingham had recently
had a substantial organizational restructure. Auckland, in comparison,
was relatively unaffected by university reforms in 2010.
As part of these interviews, academics were asked about their
perceptions of the performance measurement system in their nation/
university. An important finding was that the differences between
universities were much more important than disciplinary, seniority or
gender differences. It seems that there is a particular institutional effect
related to the environment at the three universities (partly related to
national policy settings) which outweighs other factors (see Lewis and
Ross 2011; Lewis 2013). Auckland academics were generally more posi-
tively disposed to the performance measurement system than their
colleagues at both Birmingham and Melbourne. The relatively small
amount of change that has been implemented in the PBRF over succes-
sive rounds, compared to the Australian and the UK cases, is probably
related to this.
Further examination of these interview results provide some insight
into how academics experience the impacts of these systems in regard to
encouragement to publish in particular outlets, and encouragement to
work with others. These are taken as indicators of (respectively) output
imperatives and collaboration incentives.
144 Jenny M. Lewis
Table 6.1 shows that interviewees from each country demonstrate an

awareness of the encouragement to publish in particular outlets: There
is very little difference between the responses from the three universi-
ties – more than 85 per cent thought that this was either encouraged
or strongly encouraged. The particular types of publishing reported
as being encouraged by the system were publications in high-impact
journals (referred to as high profile, highly ranked, high impact factor,
highly cited, top ranked). International journals were regarded as better
than local journals, in this regard, and some interviewees mentioned
elite university publishers as being preferred for authored books. In
contrast, perceptions of the encouragement of collaboration were signif-
icantly different across the three universities. While around 60 per cent
of academics at Melbourne saw collaboration was being encouraged or
strongly encouraged, only about 30 per cent of Birmingham staff and
less than 20 per cent of Auckland staff did.
Academics were also invited to comment on the impacts of their
national/university research assessment system. Almost everyone, from
each university, took the opportunity to do so. The balance was heavily
weighted towards negative comments in each of them, but academics
at Auckland were more positive than their colleagues at Birmingham
Table 6.1 Perceptions of the research assessment system (percentages)
Strongly Disagree Neither Agree Strongly

Discouraged Encouraged
System encourages 1.7 2.1 6.8 25.8 61.9

writing
publications for
particular kinds of
outlets/publishers
Auckland 0 1.3 10.3 26.9 61.5
Birmingham 4.3 2.9 4.3 21.4 64.3
Melbourne 1.1 2.3 5.7 28.4 60.2
Changes in recent 5.1 24.3 28.5 31.9 5.5
years have
encouraged
academics to work
together more*
Auckland 6.4 24.4 43.6 17.9 1.3
Birmingham 4.3 29.0 31.9 26.1 4.3
Melbourne 4.5 20.5 12.5 48.9 10.2
* Differences between the three universities are statistically significant (χ2, p < .05)
Note: The small number of “not applicable” responses are not included so the percentages
do not add to 100.
and Melbourne. Typical negative comments at Auckland regarding the

production imperatives of the system included “It puts pressure on people
to publish regardless of quality”, and that they cannot spend time on
learning something new because of the need to “keep a flow of research
outputs”. However, there were also supporters of the PBRF, and many of
their comments related to the fact that people cannot be unproductive
anymore. For example: “The best impact it has is persuading people that
they have to publish”, and it “cleared out the dead wood.”
At Birmingham, the overwhelming majority of comments about
the RAE and the REF were negative, and many of these related to the
pressure to produce. Some claimed that the “quality of publications
has decreased because of the pressure on quantity”, or that the system
discourages “long, more risky papers that could be groundbreaking”. The
small number of people who were positive saw it as beneficial because
it “helped to identify and get rid of under-performing colleagues”, and
“it has made people aware of those who are not publishing and has
put people under pressure – justifiably so”. In Melbourne too, most of
the comments were negative or at least uncertain about the impacts of
the new ERA. Many predicted greater external influence on the choice
of journals to publish in, and some spoke of an expected reduction of
edited books, books and journal special editions “as these take a lot
more time to produce than journal articles”. Others said that assessment
systems “make you publish more superficially and more frequently”.
The interviewees were also asked to comment on the impacts of
university and government policy changes more generally, on them and
their work. Slightly different sets of responses came from each university
as can be seen in Table 6.2.
For Auckland, the most mentioned policy issue was the PBRF (22
people), and the comments were split between positive and negative
positions. Funding was the next most mentioned (18 people), and the
comments were overwhelmingly negative and related to reductions in
government funding. University grants were mentioned by 12 people at
Auckland, and this was mainly positive, and another eight comments
related to teaching changes and these also were positive in regard to
a new capped enrolments model. Finally, 18 people had no comment,
claimed that it was not relevant to them, or that it simply had no effect
on them; for example: “I pursue my research without any consideration
of university policy.”
In Birmingham, funding cuts dominated the list with 28 negative
comments on the government budget cuts, but also a preference for
large team grants: “Funders have moved towards funding large centres
146 Jenny M. Lewis
Table 6.2 University and government policy changes (number of people

mentioning topics)
Auckland Birmingham Melbourne
Research assessment system 22 (mixed) 12 (negative) 21 (mixed)

Government funding 18 (negative) 28 (negative) 28 (mixed)
University changes 12 (positive) 16 (negative) 30 (negative)
Teaching changes 8 (positive)
New focus on “impact” of research 10 (mixed)
No relevant changes 18 6 23
or groups.” University-related reforms were the second most mentioned

changes, also negative, with 16 people discussing university restruc-
turing. The RAE/REF was mentioned by 12 people, and all comments
were negative again, such as “The REF is imposing increasingly tight
surveillance”, and “it influences everything we do”. The fourth theme
was the introduction of the discussion of impact to grant applications,
and six people claimed there were no effects or they were not relevant,
noting that they “have resisted the pressures and done research in my
own way as usual”.
University changes topped the list at Melbourne, not surprisingly
since there had been a major restructure in the preceding years, and
most comments were negative. Some 30 people commented on univer-
sity changes. Funding was the second most often mentioned theme at
Melbourne, with 28 people commenting on this, noting an “Increased
emphasis on the need to do large scale projects and less emphasis on
individual projects”. The research assessment system comments (21
in total) were mixed, with some claiming “auditing and compliance
demands have increased dramatically”, and others that the move to ERA
would be “maybe positive”. And many people (23) claimed that there
were no effects or that these were not important for them personally.
As these comments indicate, academics do recognize the pressure to
produce outputs of a certain type, and link this to the research assess-
ment system. Comments about collaboration are linked to the topic of
funding. While it is difficult to separate university policies from national
policies in these responses, it is clear that in all three cases the impacts
of research assessment systems in regard to the imperative to produce
outputs is a real one for individual academics. In addition, the percep-
tions of these academics noted above, as well as in a number of other
aspects examined in the larger study (see Lewis 2013), indicate that
academics at Melbourne felt the need to collaborate most keenly, while
their colleagues at Auckland reported this the least. This fits with the
more numerous research collaboration incentives offered by Australian
governments, compared with the UK and New Zealand governments. In
contrast, the lack of any difference between the three universities on the
imperatives to publish, and to do so in particular outlets, suggests that
the effects of output-based performance measures are more similarly
experienced across these three universities in different nations.
6.8 Conclusions
Governmental steering of research policy has grown rather than dimin-

ished over the last three decades, in many nations. This chapter has
argued that it is useful to focus on two modes of governing – NPM and
NG – to understand how governments have pursued their goals in rela-
tion to research policy since the 1980s. These two strands of govern-
ance are exemplified by the twin initiatives of performance-based
research funding systems (NPM) and research collaboration incentives
(NG). Governments have used these in parallel, to steer universities
in new directions. To move too far away from the clear incentives to
increase research quantity and quality, and to engage in more research
collaboration, is to risk (for universities) losing substantial amounts
of funding and prestige and to risk (for an individual academic) your
career (Lewis 2013).
Comparisons across the three countries included in this chapter
have shown some important similarities and differences between
the strategies used and their effects on individual academics. In rela-
tion to national policies, it is clear that each of Australia, the UK and
New Zealand have been active in creating research performance
assessment systems that reward publications as important outputs.
Governments have introduced such systems in pursuit of a desire to
demonstrate that research funding is a good investment, which leads
to the production of desirable outputs. The individual researchers inter-
viewed in each of these three countries (at Birmingham, Melbourne
and Auckland universities) uniformly perceive that there is pressure to
publish in line with the priorities of the system – that is, in high-status
journals, in international rather than local journals and with high-
quality publishers.
Each of these nations has also been active in creating incentives for
collaboration, but here Australia stands out as having gone further in this
direction, through a greater range of grants that are specifically targeted
at bringing large groups of people together, including industry as research
148 Jenny M. Lewis
partners, and putting a premium on international collaboration and inter-

disciplinary collaboration. The general goal pursued by governments is to
encourage research in areas of priority and to promote particular ways
of working. The individual researchers interviewed in each university do
experience this encouragement to collaborate, particularly at Melbourne.
This chapter demonstrates that governments have successfully
increased their ability to steer research policy and universities, through
the introduction of NPM- and NG-based policies. Analysing the intro-
duction of research assessment systems (NPM) and research collabo-
ration incentives (NG) in three nations shows that universities and
academics have been increasingly steered towards producing specific
research outputs, and conducting research in particular ways. It is clear
that the research priorities and internal systems of universities, and the
research behaviour of academics, are influenced by governmental strate-
gies, and driven along by the “carrots and sticks” of research policy.
6.9 Acknowledgements
This work was made possible by an Australian Research Council Discovery

Grant. Thank you to Qian Zhang for his useful response to my paper in
Singapore, and also to the other workshop participants.
Note
1. All identified participants were contacted up to four times. The acceptance
rate was around 40 per cent – a more accurate estimate cannot be given since
quota sampling was used. There were no major variations in acceptance rates
between universities, or across disciplines, seniority or gender.
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7
Changing Multi-level Governance:
The Regained Centrality of
National Policy-makers in
Recasting Pensions in Central
Eastern Europe
David Natali
7.1 Introduction
In the field of pensions, analysts have stressed the progressive shift from
hierarchical “command and control” (centred on the key role of national
governments) to some forms of network and multi-level governance, in
line with the increased emphasis on soft modes of regulation.1 One of
the key dimensions of the “governance turn” is related to the increased
role of international organizations (IOs). This is particularly the case of
Central Eastern Europe (CEE), where IOs (like the World Bank – WB)
and regional organizations (like the European Union – EU) have had an
evident role in shaping national pensions policy.
In the following, I look at two decades of pension reforms in CEE
to show a more complex story. In the 1990s, most of CEE countries
have followed the “pension privatization” paradigm advocated by the
WB and to a lesser extent by the EU. Yet, since 2008, a new round of
policy initiatives have altered the scene. CEE countries have followed
different and partly contradictory paths: many have reduced the role of
private pension funds (contradicting the “pension privatization” para-
digm), while few others have continued the privatization path. Such a
complex reform trend shows while supranational actors are part of the
policy-making process, national governments have maintained if not
increased their crucial role to shape both reforms’ process and outputs.
151
152 David Natali
Through an actor-centred multi-level governance (MLG) approach, I

interpret such a changing governance and the regained centrality of
national policy-makers to be the consequence of actors’ strategies. The
latter are influenced by a complex set of political and policy goals. In the
last years, both supra-national and national policy-makers have altered
their governance strategies in the field of pensions. All this has consisted
of the partial retreat of IOs from the field; the new EU policy goals on
pensions in the context of the Great Recession and the unexpected
room for credit-claiming strategies national governments may pursue.
All this proves actors at all levels strategically pursue their interests and
consequently shape the evolution of multi-level governance.
The chapter is structured as follows. Section 1 summarizes the litera-
ture on MLG, with the expected declining role of national governments
and the spread of co-ordination modes based on non-binding rules
and financial aid. Section 2 provides a brief introduction to pensions
governance in the CEE countries. Three levels of governance have been
crucial in the field: the global level (with the key role of IOs like the WB);
the regional level (with the EU); and the national level (with national
governments playing the key role). Section 3 analyses the concrete func-
tioning of MLG in the last two decades. I refer in particular to Hungary,
Poland and Slovakia. They are representative of the diverse reform trends
in the region. While in the 1990s, CEE countries followed the guidelines
provided by international organizations and the EU – and thus partially
privatized their pension systems – since 2008, many national authori-
ties decided to reduce the role of private pensions while few others
continued the privatization trend. On the base of this evidence, section 4
concludes.
7.2 An actor-centred approach to multi-level governance
A growing number of contributions have analysed international organ-

izations and their weight in policy-making (for pensions see Ramesh
2009; Orenstein 2008). MLG has been one of the key concepts used
to describe such a changing policy-making (see Stephenson 2013 for a
review).
I follow Niemann and Schmitters (2009) definition of MLG as
an arrangement for making ... decisions that engages a multiplicity

of politically independent but otherwise interdependent actors ... at
different levels of territorial aggregation in more-or-less continuous
negotiation/deliberation/implementation, and that does not assign
Changing Multi-level Governance 153
exclusive policy competence or assert a stable hierarchy of political

authority to any of these levels.
Through these analytical lenses, Hix (1998: 54) states in Europe policy-
making has been transformed into “a system of multi-level, non hier-
archical, deliberative and apolitical governance, via a complex web of
public/private network and quasi-autonomous agencies, which is prima-
rily concerned with the re-regulation and de-regulation of the market”
(see also Hooghe and Marks 2001; Borzel 2011).
The MLG approach has been consistent with the assumption that
new plurilateral governing modes lead to the reduced relevance of
governments, in that they are nested in a complex set of actors and
levels (Pagoulatos and Tsoukalis 2012). National governments cannot
dominate these networks even if they are a constituent part of them.
This is especially the case of “day-to-day” decision-making, where actors
(lobbies, technical committees, independent agencies) interact with
each other and at different levels of jurisdiction. MLG gives particular
attention to the increased role of supranational institutions as well as
subnational actors who enjoy some freedom vis à vis the state (Piattoni
2010). What is more, the MLG perspective looks at the reciprocal inter-
ference between actors and levels of governance through open-ended
and non-hierarchical modes of interaction (Littoz-Monnet 2010).
In the following I question the assumption of a declining role for
national policy-makers, through an actor-centred perspective. In line
with Marks (1996), I distinguish between institutions and actors. The
former are sets of commonly accepted formal and informal norms that
constrain political actors. The latter are (both collective and individual)
agents that occupy positions of authority. The distinction between
institutions and actors allows shedding light on the strategic nature of
governance. In line with the introductory chapter of the volume, actors
influence the development of governance arrangements. They do so to
pursue their interests, goals and ideas. Policy-makers often change their
agenda and attitude towards a certain set of governance instruments
(Peters 2012). The focus on actors helps addressing the causal factors of
such an evolution in the role of each level of governance. Actors’ goals
shape their strategies2 to control and/or disperse authoritative compe-
tencies. As a consequence, the reduced role of the state and national
governments is an empirical question that needs to be assessed, rather
than a fixed trait of the “new” governance arrangements.
Seminal works on the role of agency in governance have focused
on some main factors that lead actors to promote the diffusion or
154 David Natali
concentration of political authority: the aim of improving actors’

bargaining condition; the need to shift responsibility for unpopular
measures; and the will to pass more effective policy measures. What is
more, actors may be trapped in a mode of governance. Lock-in mecha-
nisms or other institutional dynamics may prevent any further change
in governance (Marks 1996; Awesti 2007).
In line with a dynamic interpretation of MLG, I focus on actors’
strategies at all levels. National, regional and international players
have their own governance orientations for the allocation of authority.
In particular, I think the governance strategies of actors are shaped
by two sets of goals: political and policy goals (Bonoli 2012). Political
goals consist of the aim to increase consensus and legitimacy (e.g.
minimizing political costs of unpopular decision). Actors have policy
goals in that they aim at passing more performing policy decisions.3
These two sets of goals can lead actors to decentralize authority or by
contrast to concentrate it.
The case of pensions governance provides evidence for this. It shows
that the persistent – if not growing – role of the state and national
policy-makers has been the result of complex strategic games between
agents located at different levels (IOs, regional organizations like the
EU and national governments). Their preferences have been shaped by
political and policy goals. First, IOs and their representatives change
their strategy in line with changing policy goals. A certain topic may
be of interest at a certain time but then lose relevance. This may lead
IOs to abandon a certain policy area. Moreover, IOs have a complex
and ambiguous set of policy priorities. A single policy goal may acquire
more relevance over time and thus leaves some room to manoeuvre to
national policy-makers on the other policy issues.
The retreat of IOs may also be the consequence of new political goals.
Here we refer to the original hypothesis proposed by Marks (1996):
the blame shifting and the “wash your hands” attitude. IOs may want
to diffuse political authority because they do not want to assume the
responsibility for certain decisions.
National policy-makers – in changing economic context – may also
change their governance strategies for policy and political reasons. When
policy-makers pursue cost-containment and other risky policy measures,
they may need to shift the blame to other levels of governance. Yet in
other circumstances they may need to increase their power and visibility
to pass measures implying a credit to claim: as I show below, this is the
case of the re-nationalization of private pension funds in order to avoid
austerity measures.4
What is more, against the more institutionalist readings of govern-

ance, I think institutions inherited from the past do not limit actors’
strategic movements. This is especially the case of loose institutional
contexts, like MLG, that are based on non-hierarchical interactions
between actors and where supra-national organizations use non-binding
tools and ad hoc financial instruments (e.g. loans), both based on volun-
tarism. In these cases, institutional lock-in mechanisms are weak and do
not prevent strategic movements.
7.3 Multi-level pensions governance in Europe
Pensions policy is a typical example of MLG, where IOs exert an

increased influence on national decision-makers. The case of CEE
countries, in particular, has been indicative of a governance mode artic-
ulated in three main levels: the global level, where IOs exert their influ-
ence (in particular the WB5); the regional level where the EU aims at
co-ordinating national policies; and the national level, where govern-
ments have major regulatory and administrative functions (Angelaki
and Natali 2011).
7.3.1 The role of IOs at the global level

The influence of IOs on pensions policy is not a recent phenomenon. As
stressed by Orenstein (2003), in the wake of the Second World War and
in line with the Declaration of Philadelphia of 1944, the International
Labour Office (ILO) contributed to diffuse the idea of more generous and
unified national pension systems. Such a post-war consensus was then
questioned in the 1970s and little by little other IOs started to propose
alternative views. In a context marked by population ageing, persistent
administrative problems in developing countries, and financial and
budgetary strains in the more developed world regions, “pension priva-
tization” has become the new paradigm. The latter consists of the full
or partial replacement of social security pension schemes with pension
systems based on individual, private savings accounts.
Between the IOs active in the field, the WB had a leading role. In
1994, the WB published Averting the old age crisis. The volume proposed
to shift elderly protection from the state to market-based funds and to
focus on the role pension schemes could play for economic development
rather than for the protection of social risks related to old age (Ramesh
2009). The WB started to diffuse the multi-pillar pension model where
a mandatory public pillar (first pillar) should have been paralleled by a
mandatory private pension funds (second pillar) and voluntary private
156 David Natali
schemes (third pillar). Other IOs (e.g. IMF) followed the same line of
reasoning and supported the paradigm.
From the early 1990s, the WB has activated a number of instru-
ments to influence national policy-makers: discursive dissemination
(with the establishment of ideas on national political agendas through
seminal publications and reports); financial means (payments, loans,
and credits) of the organization to a country for establishing new
programmes or institutions; and instruments of technical assistance
(to support states’ capacities in designing and implementing reforms)
(Jacobi 2009; Ramesh 2009).
7.3.2 The role of the EU at regional level

In the last decades, the EU has intensified its attempts to influence
national pensions (Béland and Orenstein 2013). EU has favoured
domestic policy changes through a “holistic” approach and according to
three lines of action: market integration; the hardening of fiscal, mone-
tary and economic discipline; and the co-ordination of national social
and employment policy. Pension privatization has been a key point in
the programme (European Commission 2012). In the case of CEE coun-
tries this agenda has been implemented first through a set of measures
to steer their EU accession and then through the economic and social
governance for member states.
The first line of the EU action has to do with the completion of the
internal market. This centres on promoting labour mobility, and on the
creation of an integrated financial market. The question of pensions is
seen, from this point of view, as a factor concerning effective freedom
of movement. From a normative point of view, privatization is a key
issue.6
The second line is about the need to improve the long-term financial
sustainability of public pension programmes: policy-makers are asked to
review the “pension promise” in view of what the economy can support.
EU promotes policy measures – like the increased retirement age – in
that they help containing public spending. EU coordination of budg-
etary policy has been particularly keen to promote these measures. The
European fiscal framework was designed in 1991 and then included in
the Maastricht Treaty, which entered into force two years later. It was
then revised in 1997, with the creation of the Stability and Growth Pact
(SGP), and eventually reformed in 2005 and 2010. While the SGP did
not concern pensions policy, the Council for Economic and Financial
Affairs (Ecofin) and the related technical committees approached the
issue.7 The principal recommendation was to contain benefits, as the
main instrument for guaranteeing the solvency of public schemes.

Further recommendations were to move away from a solidarity-based
system to a pension system based on individual contributions, and to
gradually increase the role of funded schemes (Natali 2012).
The third line is focused on the need to provide adequate protection for
the elderly. This is consistent with providing pension benefits to protect
those in need and to pursue consumption smoothing (similar revenues
before and after retirement). Since the early 2000s, this more “social”
guideline has been at the core of the open method of coordination
(OMC) on pensions. Active ageing and the need for raising employment
rates and productivity have been further issues at stake. OMC does not
include any sanctions except moral pressure. Compared with the SGP, it
is a much weaker form of governance (Citi and Rhodes 2007: 223).8
Over time both economic and social policy co-ordination have
changed. Especially in the wake of the recent economic crisis, SGP has
been revised. New measures have been included in the so-called Six
Pack, Two Pack and the Fiscal Compact to reinforce EU surveillance of
member states and coercion in the case of non-compliance. As for the
more social co-ordination is concerned, in 2010 a new strategy “Europe
2020” replaced the Lisbon Strategy. The former includes all the instru-
ments for re-calibrating social policy (de la Porte and Heins 2014). Still
in 2010, the European Semester was developed in order to co-ordinate
ex ante national budgetary, economic and pensions policies (Pochet and
Degryse 2013).
All in all, through this “holistic” approach, the EU has been supportive
of pension privatization. In the words of EU decision-makers, “more
private sector funded provision can help reduce explicit public finance
liabilities” and “people need to be aware of possibilities for raising their
level of retirement income through the build up of supplementary
pensions and extra entitlements” (EPC–SPC–CEC 2010: 2–4).
It is important to note here that the list of policy guidelines promoted
by the EU has shown some potential tensions. As we will see below,
much of the recent pension reform process in Europe has been shaped
by the need to make short-term and long-term objectives consistent
with each other. From a budgetary point of view, by shifting the respon-
sibility to provide pension benefits to private schemes, pension privati-
zation reduces long-term state obligations (and thus public spending) to
protect against old-age risks. Yet, in the short term such a partial priva-
tization may lead to increased pressure on the public budget – part of
mandatory payroll taxes shifts from public to private schemes, with the
consequent reduction of public revenues.9
158 David Natali
7.4 Testing multi-level governance: two decades of

pension reforms in CEE
Recent pension reforms in CEE represent an interesting case to shed

light on the functioning of the MLG on pensions. I first refer to the
period 1990–2007, when the reform trend appeared coherent across the
region. Then I refer to the period 2008–2014, when reforms have been
much more diversified. For both periods I focus on the reform trend in
three countries: Hungary, Poland and Slovakia.
7.4.1 The first wave of pension reforms in CEE Countries

(1990s–early 2000s)
In the 1990s, CEE countries approached pensions reform in the context
of the broader package of structural reforms. The latter were keen to help
the transition from socialist to free-market economy. The major part of
the countries in the region followed the “pension privatization” para-
digm and the three-pillar pension model (Drahokoupil and Domonkos
2012). These pillars comprised: a publicly financed pillar, based on the
pay-as-you-go (PAYG) principle; a compulsory fully funded second pillar;
and a voluntary fully funded third pillar.
Hungary introduced a multi-pillar system in 1997. From the end of the
1990s up to the 2010 reform, Hungary’s pension system thus consisted
of three pillars. The first pillar was a publicly managed pension scheme
known as the Social Security Pension Scheme. Participation was manda-
tory for all workers. It was financed through contributions from employees
and employers. In addition, there was a means-tested, tax-funded benefit
designed to provide social assistance for persons in need who did not
have a sufficient contribution record (Hirose 2011). The second pillar
was a mandatory privately managed funded system for old-age pensions.
Participation was mandatory for new entrants into the labour market.
This scheme was a partial substitution for the Social Security Pension
Scheme. Contributions to these pension funds were diverted from the
total mandatory pension contributions paid by employees. The third
pillar was a voluntary privately managed funded pension. This pillar
aimed to supplement the benefits of the two mandatory pillars. Both
employers and employees could pay contributions. Tax deductions were
available for both contributions and benefits up to certain prescribed
limits (ibid., 173). The Hungarian example was then followed by Poland
in 1999, Latvia in 2001, and Bulgaria and Estonia in 2002.
In Poland, after a first phase of parametric subtractive interventions
in the early 1990s, the process took a technocratic turn. The “Security
through Diversity” reform plan was drafted in 1997 by national and

international experts in the Polish Plenipotentiary’s Office. Policy-makers
built up a large pro-reform consensus between social and economic
forces. The final result of the 1997–1998 reform was the inclusion of
all private workers aged below 30 (farmers excluded) in a multi-pillar
system from 1999 (Natali and Stamati 2013).
Slovakia was one of the latecomers and introduced the three-pillar
model in 2005. The second pillar consisted of mandatory savings in
personal accounts in pension management companies. Half of the
mandatory contributions (9 per cent) was directed to these accounts
(Vagac 2013). By the mid-2000s only two countries remained with a
mono-pillar system based on PAYG schemes: the Czech Republic and
Slovenia (Natali and Stamati 2013).
Many have stressed the main role plaid by IOs in the 1990s. Orenstein
(2003) has shed light on the WB and the diffusion of the “privatization
paradigm”. After the 1994 publication of its landmark volume Averting
the old age crisis, the WB advocated the set-up of mandatory funded
pensions in CEE. The economic and fiscal crisis of post-communist
countries facilitated the WB’s efforts by promising long-term relief and
more economic growth. The WB organized conferences and published
books about the reform and sent its experts to reforming countries,
such as Hungary, to help with technical aspects of the new measures to
pass (Ramesh 2009). In March 1993, the Pensions Administration and
Health Insurance Project (PAHIP) was the first WB project focused on
the pension system. The overall amount of the loan for the Hungarian
government was US$132 million (Palmer 2007). The same happened
a few years later in Slovakia. In 1998, the WB activated its first loan
within the framework of the so-called Country Assistance Strategy
(CAS) to implement structural reforms. For the period 2001–2003 it
consisted of US$765 million. In 2004, the WB issued the document CAS
progress report for the Slovak Republic in 2004: Information submitted to the
operation committee of the World Bank. The document was focused on
the technical assistance to help implementing the new pension legisla-
tion (Lesay 2006). As argued by Ramesh (2009), the WB became a key
player in the pensions arena because population ageing and budgetary
strains were a preoccupation for developing countries (e.g. in Africa
and Latin America) and especially for CEE. Both these regions asked for
assistance and the WB proposed a market-based strategy for economic
growth and social progress in line with the so-called “Washington
consensus”. In line with the framework proposed above, for the WB
this was a strategy based on a set of ideas on how to improve pension
160 David Natali
policy (policy goals) while responding to the clients’ demands (polit-

ical goals).
A second factor influencing the multi-level pensions governance was
represented by the EU strategy in the field. In the 1990s and first part
of the 2000s, the EU addressed the ageing challenge and the need for
completing the single market through pension reforms. As for CEE coun-
tries, they were subject to the pre-accession and accession programmes.
The EU set a general framework to help the countries adapting to EU
requirements, and to give financial aid (especially through the PHARE
programme) and to provide a forum for multilateral discussion. Pensions
reform was one of the economic and social reform priorities set by the
European institutions. The EU aimed at having a more evident role
in the field while competing with other IOs (Grabbe 1999). After EU
accession, eastern countries started to be influenced by the SGP and
the softer forms of social coordination mentioned above. Of particular
interest is the case of the 2005 reform of the SGP agreed on by the
European Council. The revised Pact dedicated much attention to the
reforms introducing a private and mandatory pension pillar. In line with
a more flexible understanding of stability, such reforms were favoured
because of the expected improvement in the long-term equilibrium
of the public budget and the increase in potential economic growth.
The Council agreed that an excessive deficit reflecting the adoption of
pension reforms “should be considered carefully”. In other words, the
Commission and the Council were asked to assess member states’ budg-
etary policies while considering the net cost of the pension reform for
the initial five years of its implementation (Beetsma and Oksanen 2007).
This proves the EU attempt to support pension privatization and the
expectation that after a few years of budgetary costs such reforms should
have led to important savings. Thus the EU had policy goals (a holistic
pension programme) and political goals, to play a more prominent role
in policy-making, that were consistent with the diffusion of authority
in pensions governance.
National governments proved very receptive to the IOs’ proposals. A
vast literature has shed light on their use of the external constraints and
opportunities (for CEE countries see Schimmelfennig and Sedelmeier
2005). Domestic policy-makers “used” global and regional IOs to
promote their reform agenda. EU and IOs provided the opportunity for
domestic actors to overcome opposition and uncertainty in the reform
process (political goals), while providing financial incentives and tech-
nical expertise to pass reforms addressing major social and economic
challenges (policy goals) (see the Polish case above).
This round of reforms was thus quite coherent: all CEE countries
implemented new measures to contain public spending and provide
more room for private pension funds. Yet, the reforms did not reach the
expected target. In many countries, the introduction of the mandatory
second pillar led to additional public budgetary tensions in the short
term (the so-called double-burden problem). While public pensions in
payment had to be financed, part of the contributions was saved for pre-
funding second pillar pensions. The resulting deficit had to be financed
by government through cutbacks on public pensions, reduced public
spending on other sectors of the budget, or by increasing public debt.
Inefficiencies in the collection of contribution, the regulation of the
pension market and the co-ordination of public and private schemes
further aggravated financial tensions (Guardiancich 2012).
7.4.2 The last wave of pension reforms since 2008

The most recent pension reforms in CEE clearly exemplify the concrete
operation of MLG. Changes in the actors’ strategies at all three levels
have had a direct influence on pensions governance and the reform
process. The latter was characterized by very diversified trends.
Hungary rolled back the earlier privatization through the re-nation-
alization of private pension funds. Poland reduced the size of second
pillar schemes and made it voluntary rather than mandatory. What
is more, the government directed large part of the financial resources
administered by private pension funds to the state budget. The Slovak
Republic, by contrast, maintained the role of supplementary private
funds.10
When the 2008/09 economic and financial crisis hit Europe, the
Hungarian government was the first to ask for a huge bail-out loan from
the International Monetary Fund (IMF) and the EU. In October 2008,
the country received the loan of about €20 billion, but in exchange a
long list of austerity measures was to be implemented. Between 2008
and 2010, the Socialist minority government introduced measures to
contain public spending. But the Socialists were then defeated at the
general election in April 2010. Taking office in May 2010 with unusu-
ally strong support, the new right-wing (and Eurosceptic) government
introduced a macroeconomic policy at odds with the previous austerity
measures supported by IOs. As a consequence of increased budgetary
tensions (the public debt about 80 per cent of GDP and the deficit at
4 per cent of GDP), the government decided first to give up financing
the transition costs of the pension reform and later opted for rolling
back the whole privatization process altogether (Gal 2011: 13–14).
162 David Natali
This new reform trend (a sort of “U-turn” compared with previous

pension privatization) was the results of a number of factors. First, the
WB lost ground in the field. As stressed by Orenstein (2011), under the
leadership of Robert Zoellick, the WB abandoned the strict focus on free-
market liberal policies and began to advocate “inclusive and sustain-
able globalization”. The WB also learned from past reforms and from
the early 2000s developed a more critical reading of the measures intro-
duced in the previous decade (Ramesh 2009). All in all, the WB has
shifted its focus onto other policy areas (e.g. anti-poverty measures).11 In
line with the analytical framework proposed in section 2, this is a case
of changing the policy goals (the old policy paradigm was largely aban-
doned) and political goals (the decision to leave the field and diffuse the
responsibility for past choices and new measures) that shaped the WB
strategy (see Orenstein 2011).
The EU too changed its strategy: the holistic approach set up in the
1990s was changed and directed towards a more unilateral focus on
fiscal sustainability. This is an example of changing policy goals. In
particular, EU policy-makers had to deal with the potential trade-off
between short-term costs and long-term benefits of pension privatiza-
tion. As proved below, in practice the EU prioritized short-term budg-
etary stability and left member states the decision to go on or abandon
pensions privatization (Pochet and Degryse 2013). This is related to the
many changes in the EU economic and social governance. The launch
of Europe 2020 and the European Semester marked the simplification
of the co-ordination process. Social policy co-ordination largely losts its
autonomy. This is proved by the full integration of pensions policy in
the European Semester guidelines for member states. The whole process,
in the context of the Great Recession, was inspired by the need for
austerity measures (de la Porte and Heins 2014).
This is clear when we refer to CEE countries. In August 2010, the
Ministers of Finance of nine member states (Poland, Bulgaria, the Czech
Republic, Hungary, Latvia, Lithuania, Romania, Slovakia and Sweden),
in a letter addressed to the Economic Affairs Commissioner and the
President of the European Council, stressed that the co-ordination of
national economic policies should take into account pension reforms.
They demanded the exclusion of the cost of pension reform from
public debt and deficit figures, in order to avoid EU disciplinary actions.
Commissioner Olli Rehn, in a letter to these countries, said that while
the request was “justified”, it was “not possible” to accept it “under the
current accounting system”. The Commission, however, offered these
countries a leniency period if their budget gaps exceeded the EU’s ceiling
of 3 per cent of gross domestic product and/or their debt exceeded a

cap of 60 per cent of the same. Hungary, Poland, Slovakia and the other
countries considered this proposal inadequate and raised the issue again
at the EU summit held on 28–29 October. The October meeting’s conclu-
sions merely invited the EU Council of Ministers to speed up work on
ways to integrate pension reform into the EU’s revised SGP (Angelaki
and Natali 2011).
Hungary then re-nationalized funded pension schemes and excluded
the cost of the reforms from its public debt figures. Many commentators
consider the EU decision to reject the CEE governments’ demand for
special treatment of pension reform costs to be one of the reasons why
the Hungarian government pushed through the new legislation at such
speed. In December 2010, and under the combined pressure of deficit
reduction and electoral promises to decrease taxes and to make no further
cuts in public services, the Hungarian Parliament voted to roll back the
1997 pension reform. In terms of policy goals, the reform effectively
allowed the government to cut the budget deficit, avoid austerity meas-
ures and regain its “financial sovereignty” by ending a €20 billion safety
net deal with the EU and the IMF. This was a case of a “credit claiming”
strategy (political goal) with the parallel shift to IOs of the blame for the
failure of pensions privatisation (Simon and Rozlal 2010).
Between 2011 and 2014, Poland followed a more articulated process
that led to downsizing the second pillar. In 2009, Poland was the only
European country that did not experience a recession, but only a slow-
down in economic growth, also due to the activation of economic stim-
ulus packages. Even though the Polish fiscal position was favourable
compared with other member states, it deteriorated during the crisis:
deficits reached 8 per cent in 2010 and led to an increase of public debt
(up to 55 per cent of GDP in 2012) (Guardiancich 2015). Poland had a
self-imposed constitutional intermediate debt ceiling of 55 per cent of
GDP (Drahokoupil and Domonkos 2012).
National policy-makers reacted through a revision of their policy goals.
The coalition government headed by the Liberal leader Donald Tusk
addressed the issue through two rounds of reforms. The first in 2011
consisted of the reduction of the contributions to mandatory private
pension funds from 7.3 per cent to 2.3 per cent (then to be raised to
3.5 per cent in 2017). The remainder was transferred to the public first
pillar scheme. This measure has increased the public pillar revenues by
around 1 per cent of GDP per year in 2011 and 2012.
In 2013, new measures further restricted the role of second-pillar
pensions. What is more, the mandatory private funds became voluntary
164 David Natali
for new labour-market entrants and old members had to express whether
they wanted to maintain their contributions to funded schemes. At the
end of the reform process, the number of workers covered by the private
pension funds declined to about 80 per cent. As stressed by commenta-
tors, political goals were also important in the government’s strategy:
through the reforms national policy-makers tried to improve its flagging
popularity with voters (Guardiancich 2015).
Slovakia followed a different reform path. Reforms introduced
by the government in 2012/13 maintained the three-pillar system.
Cost-containment measures affected the PAYG first-pillar scheme,
while policy-makers introduced different regulations of fully funded
schemes. Participation to supplementary private funds was compul-
sory for persons who had already joined the scheme. Yet new entrants
to the social security system were (and are) automatically enrolled only
in the first pillar, but can apply for membership in the second pillar up
to age 35. This change followed a short period of “mandatory” partici-
pation for new labour-market entrants in 2012. Mandatory member-
ship for new entrants became optional for the first time in 2008. The
scheme was temporarily opened three times to enable participants to
opt out, the last time from 1 September 2012 to 31 January 2013. The
EU asked for further adjustments to the first pension pillar, and for
measures ensuring the stability and viability of the fully funded second
pillar. The European Commission conditioned its consent to the reduc-
tion of contributions to the latter by the reform of the former. Analysts
have argued that the stability of the Slovak pension system has been
the consequence of the lack of consensus across the political forces in
the Parliament for a more encompassing reform (Vagac 2013). This is
a case of political goals at odds with the reversal of the privatization
trend.
All in all, the new wave of reforms has been interpreted as a reac-
tion to the effects of policy legacy, and to the fiscal circumstances
brought by the crisis. On the one hand, the financial crisis has made the
short-term costs of pensions reform more evident. On the other hand,
national policy-makers learned about the first wave of CEE reforms: data
helped to evaluate the performance of pension funds. As stressed by
Drahokoupil and Domonkos (2012: 284), unresolved problems in the
implementation of earlier reforms became apparent. In many coun-
tries, the plans to finance the transition costs – for instance through
the privatization of public-owned enterprises – proved unrealistic. Debt
financing became a more feasible option among all reform efforts. But
this aggravated budgetary strains. National governments used the new
international context to implement an agenda more consistent with

their own political goals.
7.5 Conclusion
The governance of pension reforms is increasingly complex. In partic-

ular, supranational actors and institutions have an increased role in it.
This is particularly the case in CEE, where three levels of governance
have been crucial in the field: the global level (with the key role of IOs
like the World Bank); the regional level (with the EU); and the national
level (with national governments).
While contemporary literature has stressed that pensions policy-
making is a MLG that has led to the reduced relevance of governments
(in that pensions are nested in a complex set of actors and levels), this
chapter has provided evidence of a more complex story. Two decades of
pension reforms in the countries of CEE prove national governments
have still ample room to manoeuvre to define the reform content. After
a first round of reforms in the 1990s that was very much influenced by
IOs (namely the World Bank and the EU), since 2008 CEE countries have
shown very different reform trends. In some of them, Hungary and to an
extent Poland, the reform has consisted of scaling back private pensions.
Others (e.g. Slovakia) have followed a more conservative path.
While further research is needed to shed light on the causal factors
of actors’ orientations, the actor-centred approach proposed above
have contributed to the analysis of the changing MLG in the field. The
changing pensions governance in CEE and the increased role of national
policy-makers have been explained in terms of the result of the complex
interaction of actors’ strategies. Over time, actors at different levels have
changed their governance strategies. The latter have been influenced by
both political and policy goals. IOs, regional organizations and national
governments have pursued political goals to increase consensus and
legitimacy. They have also changed policy goals to pass effective meas-
ures to address economic and social challenges.
The analysis of the changing pensions governance has shown the
WB – one of the key advocates for private pensions in the 1990s –
has started to abandon the field after having developed a more crit-
ical approach to pension privatization. New policy goals and political
orientations have both led the WB to leave the field and concentrate
on other policy areas. The second factor I have analysed has consisted
of the change of the policy goals and thus of the governance strategy of
the EU. In the wake of the Great Recession, the trade-off between short-
166 David Natali
term costs and long-term benefits of pensions privatization has become

evident. The need to respect the budgetary criteria of the Stability and
Growth Pact has led to an increased attention to the transition costs of
reforms, while the focus on pensions policy per se has become weaker.
Eventually, national policy-makers have also changed their governance
strategy as a consequence of new policy and political goals. In particular,
national governments have substituted the blame shifting strategy (the
shift of the responsibility for cutbacks to the supranational level) used in
the 1990s, with a credit-claiming strategy for the stop to austerity meas-
ures and the (partial or total) roll-back of pensions privatization. All this
confirms the strategic use of governance by the actors involved at all
levels in the policy-making process. The more central role of national
governments as key players has been the result of the complex interac-
tion between IOs and national policy-makers, in a context marked by
weak lock-in institutional mechanisms.
Notes
1. I refer here to governance as “patterns of interaction and coordination of
social and political actors for the purpose of adopting and implementing
collectively ... decisions” (Peters and Pierre 2009: 91).
2. I use the term strategy in terms of a course of action to deal with a situation
(Drucker 1974).
3. In the literature, there is reference to a third type of goals: office goals. They
have to do with the control over political office in the quest for benefits and
private goods (Natali and Rhodes 2008). These goals are in principle consistent
with the concentration of political authority in the actor’s hands and can be
assumed to be constant.
4. See Bonoli (2012) for a more detailed introduction to credit-claiming and
blame-avoidance strategies.
5. Other organizations (e.g. the Organisation for Economic Cooperation
and Development – OECD; the International Labour Office – ILO; and the
International Monetary Fund – IMF) have been part of the process (Casey
2004).
6. Despite the attempts by the Commission to pass new regulation in the field,
political contrasts have prevented any progress in the last decades (Pochet and
Natali 2005).
7. SGP requirements represent a source of indirect pressure on pension institu-
tions. It establishes binding and quantitative policy objectives (the 3 per cent
of public deficit/GDP threshold), while governments are free to choose their
own paths for convergence. Co-ordination is thus established through bench-
marking, peer pressure and the structured process of multi-level surveillance.
In case of non-compliance, sanctions are (or should be) activated.
8. CEE countries show the EU was active since the 1990s through the pre-acces-
sion and accession programmes. A set of instruments (e.g. financial aid, and
fora for discussion) was activated to shape policy reforms in the region.
9. This is the so-called “double-payment” problem (DPP) related to any attempt

to move from a (public) pay-as-you-go (PAYGO) to a (private) fully funded
pension system. As we will see in what follows, a PAYGO system is based on
revenues from taxes and/or social contributions. These resources (paid by
the current working population) are immediately used to provide benefits to
current pensioners. In fully funded systems, by contrast, revenues are saved
or capitalized: they are not used for the elderly, but will serve to pay the
future benefits, “acquired” by current workers. In case of a move from the
former system to the latter, the current working population has to pay twice:
for providing benefits to current pensioners (in line with PAYGO method of
financing), and to collect resources for their own future pensions (according
to capitalization). The shift entails a cost (the so called “double-payment”).
10. According to Drahokoupil and Domonkos (2012), since 2008 Bulgaria,
Estonia, Lithuania, Latvia and Romania hqve maintained the three-pillar
model consistent with the “pension privatisation” paradigm.
11. Moreover, Robert Holzmann, Director of the WB’s Social Protection and Labour
sector and key advocate of “pension privatization”, was replaced by a labour
market policy expert with limited interest in pensions (Orenstein 2011).
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Part IV
The Capacities of Governance
Modes: Explaining Variation in
Modes of Governance
8
Capacity and Autonomy: An
Exploration of Fukuyama’s
Governance Hypothesis
Eduardo Araral, Riccardo Pelizzo, Aziz Burkhanov,
Yu-wen Chen, Saltanat Janenova and Neil Collins
8.1 Introduction
The governance literature has been around for two decades now. A
review of the literature suggests that the term remains largely contested
and, as Fukuyama (2013) argues, is in a state of conceptual confusion.
Others note that the term has been used expansively, as a broad multi-
dimensional concept lacking operational precision and as an umbrella
concept to federate an assortment of different, albeit related ideas
(Quibria 2013).
Among academics, the term governance refers to the modes in which
society and its political processes is organized and steered, that is by
markets, states or hybrids. Several debates and insights have emerged
from this literature including the importance of network governance
and the hollowing and non-hollowing out of the state, among others.
However, because of its largely descriptive approach as well as its weak
theoretical and empirical foundations, a case can be made that this liter-
ature has seen its salad days.
Among practitioners, governance is referred to as the process by which
governments are selected, monitored and replaced; the capacity of the
government to effectively formulate and implement sound policies;
and the respect of citizens and the state for the institutions that govern
economic and social interactions among them (Kaufman 2005). For the
World Bank and Asian Development Bank, the term governance is asso-
ciated with public sector reform, public expenditure management and
civil service reforms as well as deregulation and liberalization. Similarly,
the International Monetary Fund (IMF 1997) defines governance in terms
173
174 Eduardo Araral et al.
of “macroeconomic stability, external viability, and orderly economic

growth in member countries”.
Fukuyama (2013), weighing in on this confused state of the literature,
argues that governance is “the government’s ability to make and enforce
rules, and to deliver services, regardless of whether that government is
democratic or not”. Fukuyama’s focus is not on the political or legal
regime of a country – as is conventionally defined – but on two variables
that he argues (but has not operationally defined) is critical to differen-
tiating performance: government capacity and autonomy.
While governance theorists use the term governance to refer to the
modes of organizing and steering society, Fukuyama equates governance
with government effectiveness. Democratic theorists argue that govern-
ance is about voice and accountability while donors and practitioners
argue that governance is about public sector reforms including control
of corruption.
In this chapter, we build on Fukuyama’s reformulation of the govern-
ance debate by proposing several conceptual and operational measures
of capacity and autonomy. Our central argument is that varieties of
governance can be explained by variations in capacity and autonomy
of governments. We illustrate our argument with comparative data from
27 countries in Asia and stylized comparative country analyses.
The rest of the chapter is structured as follows. The next section
outlines the variables, data and methods for the empirical analysis of
the chapter. The third section provides a discussion of the results of the
analysis. The last section concludes.
8.2 Variables, data and methods
8.2.1 Definition of variables

We define capacity simply as the ability of governments to provide for
public goods and advancing the broader public interest. We suggest that
capacity is a composite measure with different dimensions – political,
economic, financial, technical and managerial/organizational. Political
capacity refers to the capacity of institutions to mediate among various
interest groups as well as the exercise of political will in the face of vested
interests.
Technical capacity refers to the ability to provide for and deliver
public services that require professional technical expertise such educa-
tion, public infrastructure, health care, agriculture and environmental
protection, among others. Financial capacity simply refers to ability to
pay for the provision of public goods. An emerging concept of capacity
Varieties of Governmental Capacity and Autonomy 175
is the capacity for resilience or the ability of an entity – an individual,

community, organization or a natural system – to prepare for disrup-
tions, to recover from shocks and stresses and to adopt and grow from a
disruptive experience (Rodin 2014).
We measure a government’s capacity to provide for public goods in
terms of three indicators. The first is its ability to enforce laws as indicated
by its ability to control corruption. Controlling corruption involves the
exercise of strong and credible political will to uphold the public interest
over narrow vested interests and is therefore a good indication of political
capacity. Likewise, the ability to control corruption – especially systemic
corruption, Clientilism and patronage – is also a good measure of the
autonomy of the government. There is a considerable empirical work on
this that we draw upon such as the World Bank Governance Indicators
(WBGI) and Transparency International Corruption Perception Index,
among others.
A second indicator of capacity is the ability to deliver basic services such
as potable water supply, primary health care and education as reported
in the UNDP Millennium Development Goals. Among poor and devel-
oping countries, this is a salient indicator of capacity – the ability to
plan, finance, implement and evaluate the delivery of basic services that
would benefit a significant segment of the population.
A related indicator is the ability of the state to execute large-scale
complex infrastructure projects in partnership with the private sector. This
is a salient indicator of capacity – the ability to work with the private
sector in identifying projects, assessing its feasibility, structuring project
risks and negotiating how these risks will be allocated among various
parties, and designing the engineering, social, financial, organization
and management dimensions of the project as well as its operation and
maintenance. The ability to execute complex infrastructure projects in
tandem with the private sector is therefore a good barometer of state
capacity. The World Bank’s Public Private Infrastructure Facility is a good
source of data to measure this indicator.
Finally, our third indicator of capacity is the government’s ability to
manage its macro-economy as indicated by IMF assessments. High and
sustained growth rates are a good measure of the ability of a state to
manage its fiscal, monetary and trade policy. Doing this requires a
high level of professional capacity to monitor and assess data, selecting
the appropriate policy instruments, making adjustments to policy,
co-ordinating with various branches of government, reading market
sentiment and mobilizing political support behind difficult policies
(such as devaluation), among many other skills.
Our list of indicators for governance capacity is merely illustrative.

Capacity can also include the ability to collect taxes, collect and proc-
esses reliable statistics, regulate monopolies and enforce competition
policies, maintain political stability, diversify the economy, and design
and execute master plans, among many other indicators of capacity.
We conceive of autonomy along several dimensions: autonomy from
vested interests (avoiding regulatory capture), autonomy of public institu-
tions (parliament, judiciary, civil service, central banks, local govern-
ments, constitutional bodies) to mediate among interest groups and
to make authoritative decisions for the public interest. Then there is
also functional autonomy of public bureaucracies (i.e. budget, personnel,
procurement, operational autonomy, etc.) as mechanisms to make them
more adaptive, responsive and avoid being captured by vested interests.
We recognize that autonomy is a relative and not an absolute measure.
It can be both formally conferred and informally asserted.
8.2.2 Data set

A starting point for the comparative study of capacity and autonomy
in Asia is the World Bank’s Governance Indicators, bearing in mind the
measurement issues involved, Fukyama’s comments and the justifica-
tions of Kaufman et al. (2011). It is composed of six aggregate indicators:
voice and accountability; government effectiveness; political stability
and absence of violence; regulatory quality; rule of law; and control
of corruption. The dataset comprise more than 200 countries over the
period 1996–2011 drawn from 30 data sources based on polls of experts,
businesspeople and citizens. Analysis of the relationship between these
good governance indicators and development has consistently shown
that good governance matters (Kaufmann et al. 1999; Kaufmann and
Kraay 2002; Pelizzo and Stapenhurst 2013).
However, several measurement issues have been raised against the
WBGI. These include issues of: 1) validity, reliability and precision;
2) single number problem; and 3) inter-temporal comparability (see, for
instance, Quibria 2013; Fukuyama 2013. In addition, Fukuyama argues
that the WBGI – being an index measure – cannot be easily mapped into
conceptual measures of capacity and autonomy.
Kaufman et al. (2011), in defending the data and methodology behind
the WBGI, argue that it is transparent in terms of its sources, their quality
and standard errors. However, on purely technical and methodological
grounds, their approach and indicators may not be entirely convincing
to methodologically oriented social science scholars. Despite these
measurement issues, there is as yet no better alternative to the WBGI as
a relative measure of governance, more so in Asia where such empirical

studies are wanting. Moreover, we argue that some measures – such as
government effectiveness and control of corruption – can be used to
operationally measure our indicator of capacity as we will illustrate in
our empirical section.
Our Asian dataset – a subset of the WBGI – comprises countries that
vary widely in terms of policy performance, capacities and demo-
cratic institution and practices. They include China and India, the East
Asian tiger economies (South Korea, Taiwan, Hong Kong, Singapore),
the former Soviet Republics of Central Asia (Kazakhstan, Uzbekistan,
Tajikistan, Kyrgistan, Mongolia), middle-income countries in Southeast
Asia (Thailand, Malaysia, Indonesia and the Philippines), and emerging
economies such as Vietnam, Myanmar, Sri Lanka and Cambodia, among
others.
Studying governance in Asia is both timely and important. First, while
the governance literature has been around for two decades now, surpris-
ingly little is known about comparative governance in Asia. Much of
the academic literature has focused on industrialized, Western econo-
mies (for instance Rhodes 1996; Milward and Provan 2000; Pierre 2005;
Sørensen and Torfing 2007; Bell and Hindmoor 2009; Clunan and
Trinkunas 2010).
Second, in Asia much of the literature has been on individual coun-
tries (see, for instance, Agrawal 1999; Jones Luong 2002; Olcott 2002;
Cummings 2005; Perlman and Gleason 2007; Knox 2008; Liebert 2013).
A large part of the literature deals with thematic issues (Haque 2001;
Ginsburg and Chen 2008), while others have sectoral focus (Araral and
Yu 2013; Wu et al. 2014). Consequently, little is known in the literature
about governance in Asia in a comparative perspective.
8.3 Findings and discussion
Table 8.1 shows the range of scores on the state of governance in Asia;
the higher the score the better is the state of governance, based on a
range of +2.5 to –2.5. We focus only on three indicators, which in the
literature are commonly associated with governance: voice and account-
ability (a proxy measure of democracy), government effectiveness (a
composite of the quality of government, etc.) and control of corruption,
the last two being measures of capacity and autonomy.
Table 8.1 suggests that East Asia (China, Japan, Taiwan, Hong Kong
and South Korea) tops other sub-regions in Asia in terms of govern-
ment effectiveness, regulatory quality and control of corruption but
Table 8.1 Comparison of governance scores in Asia (2011)
Region/ Voice and Political Government Regulatory Rule of Control of

Sub-region Accountability Stability Effectiveness Quality Lww Corruption
Developing –0.63 –0.98 –0.08 –0.32 –0.37 –0.64

Asia
Central Asia –1.48 –0.52 –0.63 –0.87 –1.05 –1.12
East Asia –1.51 –0.63 0.18 –0.13 –0.34 –0.55
Pacific –0.05 –0.58 –0.76 –0.60 –0.79 –0.94
South Asia 0.14 –1.41 –0.23 –0.44 –0.28 –0.67
Southeast –0.53 –0.73 –0.23 –0.40 –0.56 –0.68
Asia
Latin 0.15 –0.29 –0.14 –0.06 –0.33 –0.13
America
and the
Caribbean
Middle East –1.19 –1.20 –0.49 –0.68 –0.57 –0.64
and North
Africa
OECD 0.97 0.46 1.18 1.15 1.14 1.05
Non-OECD –0.49 –0.50 –0.40 –0.21 –0.60 –0.82
Europe
Sub-Saharan –0.70 –1.11 –0.80 –0.66 –0.86 –0.79
Africa
Notes: OECD = Organisation of Economic Co-operation and Development; OECD excludes

Republic of North Korea, which is included in East Asia
Source: ADB staff compilation from World Bank: Worldwide Governance Indicators online
database; World Development Indicators online database
performs worst in voice and accountability. East Asian countries are

often associated with highly capable, technocratic and elitist forms of
governance.
Table 8.1 also shows that South Asia performs best in voice and
accountability and rule of law but fares worst in terms of political
stability. Southeast Asia does not top any of other regions on five of
the six governance indicators and it fares worst in terms of political
stability and violence (in part due to conflicts in Thailand, Myanmar,
the Philippines and Cambodia). In addition, Southeast Asia lies in the
middle of the pack of the sub-regions in all other indicators such as
voice and accountability, government effectiveness, regulatory quality,
rule of law and control of corruption. Central Asia tops the criteria of
political stability but is worst in terms voice and accountability. This can
be attributed mainly to long ruling authoritarian regimes in the region.
To appreciate this variability of governance in Asia, it is important to
understand the variability of conditions in the region.
First, Asia is the world’s largest continent with 48 countries and 60

per cent of the world’s population including two of the most populous
countries (China and India).
Second, the size and geography of the region varies widely – from the
tropical Southeast Asia, to the deserts of India, China and Central Asia,
to the temperate climes of Northeast Asia.
Third, legal traditions in Asia vary considerably from countries with
British common-law traditions (Malaysia, Singapore, India, Pakistan, Sri
Lanka) and American civil law (the Philippines), to socialist/home grown
systems (China, Vietnam) and varieties of legal systems in between.
Fourth, Asia is home to some of the richest countries in the world
(Japan, Singapore, South Korea, Brunei, Hong Kong) as well as the
poorest ones (i.e. Myanmar, Laos, Nepal, Bangladesh, etc.). Asia is also
home to some of the fastest growing economies in the world (China,
Mongolia, Vietnam, the Philippines, Indonesia). Governance outcomes
vary considerably amongst rich and poor countries.
Fifth, Asia is also home to the world’s major religions: Islam (Indonesia,
Pakistan, India, Bangladesh, Iran, Central Asia), Buddhism (Thailand,
Myanmar, Sri Lanka, South Korea, Mongolia, Vietnam, Cambodia),
Christianity (the Philippines and South Korea), Taoism (Japan) and
Hinduism (India). Religion plays a key role in shaping a country’s set of
values and institutions and hence the practice of governance.
Sixth, many countries in Asia were (or still are) governed by the mili-
tary. This is or has been the case in Thailand, Indonesia, the Philippines,
Sri Lanka, Democratic People’s Republic of North Korea, Pakistan and
Myanmar. Countries ruled by the military would usually score low in
terms of voice and accountability but tend to score higher in terms of
political stability.
Seventh, and finally, several countries in Asia are also rebuilding their
economies and governance institutions after years of civil war (Sri Lanka,
Nepal, Cambodia, Afghanistan and Myanmar). Governance reforms
in these countries are pretty much a work in progress and hence their
capacity generally tends to be low.
In general, one would expect that variations in the WBGI scores would
be associated with variations in these six factors (civil wars, wealth, legal
origins, religion, geography, demography). What this all suggests is that
it is wrong to conclude that that there is such thing as an Asian model
of governance.
In the next section, we examine with more nuances the intra- and
inter-regional variations in governance capacity in Asia bearing in mind
the measurement caveats we have discussed above. Our focus here is on
measures of government capacity such as 1) government effectiveness,

2) voice and accountability and 3) control of corruption.
8.3.1 Capacity to enforce laws: control of corruption

A good indicator of a government’s capacity is its ability to enforce laws.
One indicator of this is the ability to effectively control corruption.
We argue that enforcement capacity is as much a function of political
will and economic development. Indeed, there is a strong correlation
between perception of corruption and incomes having an R-squared of
0.561 and a coefficient of 0.49. Rich and capable countries in Asia –
Singapore, Hong Kong, Japan – tend to have good scores in terms of
perception for corruption control.
In contrast, poor and politically unstable countries with weak judi-
ciaries and checks and balances such as Afghanistan, Bangladesh,
Cambodia, Nepal, Tajikistan and Cambodia tend to also have poor image
in terms of corruption control. Capacity therefore – at least as measured
by ability to enforce laws – is strongly correlated with a country’s level
of economic development.
As Table 8.1 shows, among sub-regions in Asia, East Asia (China) regis-
ters the best possible score for perception on control of corruption (0.55)
while the worst is in Central Asia (–1.12). South and Southeast Asia have
almost the same scores (i.e. –0.67 and –0.68, respectively). Figure 8.1
provides a snapshot of intra- and inter-regional variations in the percep-
tion on control of corruption.
8.3.2 Controlling corruption in China and India

There are many factors to explain variations in perception of corrup-
tion control between these regions but one factor appears to stand out:
the political will and capacity to enforce anti-corruption laws. This is
appears to be the case for China and India.
Although China’s 2012 scores were low relative to others, the recent
display of political will by President Xi Jinping has resulted in the pros-
ecution of powerful officers in the military, state-owned enterprises,
media, local officials and former high-ranking party leaders. Some
would argue that this vigorous campaign is part of the consolidation of
political power in China while others argue that President Xi is serious
in stamping out corruption because it is a clear threat to the survival of
the Communist Party of China.
In contrast, in India, the main problem is the lack of political will
and capacity to enforce anti-corruption laws. As The Economist reports,
in the past three years only 25 top civil servants have been investigated
Control of Azerbaijan 2002 Control of 2002
Corruption Corruption South Asia
2012 Central Asia 2012 South Asia
Kazakhstan 2002 Bangladesh 2002
2012 2012
Kyrgyz Republic 2002 Bhutan 2002
2012 2012
Tajikistan 2002 India 2002
2012 2012
Turkmenistan 2002 Maldives 2002
2012 2012
Uzbekistan 2002 Nepal 2002
2012 2012
Sri Lanka 2002
2012
Control of Brunei Darussalam 2002 Control of China 2002 East Asia
Corruption 2012 Corruption 2007
Cambodia 2002 2012
2012 S. East Asia Hong Kong SAR, China 2002
Indonesia 2002 2007
2012 2012
Lao PDR 2002 Japan 2002
2012
2007
Malaysia 2002
2012
2012
Korea, Rep. 2002
Philippines 2002
2007
2012
2012
Singapore 2002
Taiwan, China 2002
2012
2002 2007
Thailand
2012 2012
Vietnam 2002
2012
Figure 8.1 Intra- and inter-regional variations in perception on control of corruption in Asia, using normalized scores
and none has lost their jobs. In contrast, in 2013, some 182,000 officials
have been punished in China. In India, prosecution can drag on for at
least a decade. It is estimated that illicit financial outflows from India
to global financial centres has averaged $52 billion a year since 2007,
suggesting weak enforcement capacity. Not surprisingly, a recent survey
revealed that 96 per cent of Indians said corruption was bad for their
country while 92 per cent thought it has become worse in the past five
years (The Economist 2014).
Compared with China, corruption in India appears to be more
systemic and inherently linked to politics, that is on the need to raise
funds for political parties and expensive elections. Seats in parliament
could cost anywhere from $0.3 million to $3 million depending on loca-
tion. The Economist (2014) estimates that the total cost of politics in
India – both local and national – between 2010 and 2015 for all parties
will be in the order of $5 billion. In short, expensive politics and hence
political capture lie at the heart of corruption in India. In contrast, in
China, corruption is not inherently linked to politics but to individual
opportunism.
Likewise, compared with India, monitoring and enforcement of
anti-corruption laws in China is effective because they are centralized
and handled by just two organizations, the Organization Department
of the Communist Party of China and Supreme People’s Procutorate
(Prosecution). The Organization Department keeps dossiers of ranking
officials, is highly secretive and has a vast array of powers. They even
have their own courts and prison system for corrupt party officials.
In contrast, in India there are so many agencies involved that it has
become dysfunctional, involving the police, investigation agencies and
different types of courts at different levels, among others. As a result,
conviction rates in India are low and the whole anti-corruption process
does not serve as a credible deterrent. What the China and India stylized
comparison reveals is that political will and state capacity matters a lot
to governance, regardless of whether the country is democratic or not.
8.3.3 Southeast Asia

In Southeast Asia, variations in the perception of control of corrup-
tion can also be attributed to political will and capacity, among others.
Singapore has been consistently ranked among the least corrupt coun-
tries in Asia and the world in large part because of political will and
capacity of its Corruption Prevention and Investigation Bureau. In the
Philippines, President Aquino has waged a vigorous anti-corruption
crackdown, which saw the prosecution of a former president, a supreme

court chief justice, a former defence secretary, a former senate president
and the head of the anti-graft body, as well as high-profile politicians.
As a result, its ranking in the Transparency International’s Corruption
Perception Index (CPI) has significantly improved from 152nd in 2010
to the current 94th, one of the largest improvements in the TI ranking’s
history in so short a time.
Similarly, Indonesia has seen in recent years an energized campaign
against corruption with some degree of success. The impetus for the crack-
down is a newly empowered, capable and constitutionally independent
anti-corruption agency (KPK) as well as an empowered parliament.
For instance, the parliament has taken steps to keep the government
accountable for the expenditure of public moneys and to minimize
the incidence of political corruption in the country. It has also institu-
tionalized a parliamentary committee that resembles Public Accounts
Committees found in Westminster legislatures. These mechanisms of
autonomy in turn helps build the capacity of the organization.
In Thailand, the 2007 Constitution has sought to institutionalize prin-
ciples of good governance. For instance, it created the Public Account
Committee (PAC) in the Thai Parliament, which has a fairly wide range of
powers, including being autonomous. First, the PAC could scrutinize the
accounts of a wide range of public bodies. Second, it could examine the
compliance of performance audits carried out by the Auditor General.
Third, it could examine the economy, efficiency and effectiveness of
policies and their implementation. Fourth, it could refer matters to
the Auditor General for investigation and it could launch self-initiated
inquiries. In spite of these reforms, Thailand’s results in fighting corrup-
tion have been mixed at best. It experienced a minor improvement in
Transparency International’s CPI score in the 2011–2013 period, but a
marked decline in the rankings (from 80th to 102nd).
Vietnam has introduced constitutional reforms in part in response to
massive corruption in state-owned enterprises. The result of the reform
is a stronger system of checks and balances – a more accountable prime
minister and a stronger (and more autonomous) parliament and presi-
dency. Myanmar, which opened up to the world in 2011, has also intro-
duced a raft of anti-corruption and transparency laws, including media
freedoms and wider role and autonomy for civil society and parliament
and professionalization of the its bureaucracy.
What the case studies from Southeast Asia suggest is, like China, polit-
ical will and capacity are central to fighting corruption.
8.3.4 Central Asia

Corruption in Central Asian countries remains high and systemic but
some countries have recently introduced reforms (Cummings 2005;
Perlman and Gleason 2007). For instance, Kazakhstan has introduced
anti-corruption reforms by adopting a code of ethics for civil servants,
increasing punishments for corruption crimes, arrests of high-level offi-
cials, reaffirming whistle-blower protection and introducing punish-
ment of officials who fail to report corrupt cases. However, despite these
anti-corruption measures, Kazakhstan has not improved much in the
CPI ranking for the last decade, remaining at 140th position in 2013,
among highly corrupt countries in the world. In 2014, it introduced a
new campaign to combat corruption leading to the arrest of a former
prime minister. As a result of these efforts, it ranked 126th in 2014.
Other Central Asian countries such as Kyrgyzstan, a democratic
country, have attempted to adopt Kazakhstan’s experience in civil
service reform and anti-corruption measures. However, these efforts
have fallen short in creating a professional, meritocratic civil service in
large part because of weak capacity in the bureaucracy (Abazov 2006;
Liebert 2013). In authoritarian countries such as Uzbekistan, Azerbaijan
and Tajikistan, patron–client networks and nepotism remain prevalent
(Jones Luong 2004; Collins 2009; Starr 2006) and capacity and state
autonomy are weak.
In summary, we find mixed evidence on the relationship between
capacity and democracy. Table 8.2 provides a summary based on our
highly stylized comparison. Some non-liberal-democratic countries
(China, Vietnam) are capable of fighting corruption while others are not
as capable (Uzbekistan, Tajikistan).
Similarly, some liberal democratic countries (the Philippines and
Indonesia) have shown in recent years that political will and institu-
tional capacity (such as having independent anti-corruption agencies)
are central to controlling corruption. Both countries have signifi-
cantly improved their rankings in the Transparency International
Table 8.2 Stylized Comparison between democracy and capacity
Liberal democracy
Yes No
Capacity to control High Indonesia, Philippines China

corruption Vietnam
Low India, Thailand Uzbekistan
Corruption Perception Index. In contrast, India, Kyrgyzstan and

Thailand (prior to the 2014 military rule) are examples that show that
democratic governments are not necessarily capable of dealing with
corruption despite having formal institutionalized system of checks
and balances.
8.3.5 Government effectiveness

Our second measure of capacity is a composite measure of govern-
ment effectiveness. The WBGI measures government effectiveness as a
composite of the quality of public service, quality of bureaucracy, insu-
lation of the civil service from political pressures, and the credibility of
the government commitments. Of all the six WBGI, government effec-
tiveness had the highest correlation with income per capita (R-Squared
of 0.659).
From Table 8.1, countries in East Asia (China) had the highest scores
in terms of government effectiveness (0.18 out of 2.5) with the lowest
scores for countries in Central Asia (–.76). South and Southeast Asia are
tied at –0.23 each with considerable intra-regional variations. Figure 8.2
provides a snapshot of intra- and inter-regional variations in govern-
ment effectiveness in Asia using normalized scores.
8.3.6 East Asia

East Asia (China, Japan, South Korea, Taiwan and Hong Kong) tops
other countries in Asia in terms of overall government effectiveness,
that is the quality of bureaucracy, quality of public service provision, the
insulation of the civil service from political pressures (autonomy) and
the credibility of the government commitment to policies.
Japan, Taiwan and South Korea have the highest scores with China
having the lowest, in part because of the size and complexity of the
country and its government. East Asian countries have a long tradition
of merit-based selection and promotion of civil servants. Indeed, entry
into the civil service of these East Asian countries is one of the most
competitive in the world.
For instance, the Japanese and South Korean bureaucracies are well
known in terms of their Weberian qualities (meritocracy, cohesion and
professionalism, relative insulation from politics and their abilities to
make credible commitments.
This is not to say that these countries are not captured by vested inter-
ests. In fact, regulatory capture is a central issue in both countries but
this is relatively less so compared with others.
Government Azerbaijan 2002 Government South Asia 2002
Central Asia
Effectiveness Effectiveness 2012
2012 South Asia
Bangladesh 2002
kazakhstan 2002
2012
2012
Bhutan 2002
kyrgyz Republic 2002 2012
2012 India 2002
Tajikistan 2002 2012
2012 Maldives 2002

2012
Turkmenistan 2002
Nepal 2002
2012
2012
Uzbekistan 2002 Srilanka 2002
2012 2012
Government Brunei Darussalam 2002 Government China 2002
Effectiveness 2012 Effectiveness
2007
Cambodia 2002 S. East Asia
2012 2012
Indonesia 2002 Japan 2002
2012
2007
Lao PDR 2002
2012 2012
Malaysia 2002 Korea, Rep. 2002
2012
2007
Philippines 2002
2012 2012
Singapore 2002
Taiwan, China 2002
2012
2007
Thailand 2002
2012 2012
Vietnam 2002
2012 East Asia
Figure 8.2 Inter- and Intra-regional comparison of government effectiveness in Asia, using normalized scores
Government effectiveness is also associated with performance manage-

ment – the ability to manage the implementation of government policies.
For instance, in China it is widely used as the main steering instrument
for all levels of government. First introduced by local governments
in the 1990s, performance management in China became formalized
in 1995 as the “objective responsibility system” (ORS). The ORS is a
command and control mechanism in which targets and accountability
are set at the top of government and cascaded down to the lowest units
of government. It is similar in principle to management by objectives
(MBO). Personnel promotions and rewards are then tied to meeting
these targets.
In many ways, China’s spectacular gross domestic product (GDP)
growth can be attributed to this ORS in a highly decentralized form of
government. The central government, for instance, sets a growth target
of, say, 9 per cent. To ensure that this target is met, provincial officials
then set a target of 10 per cent and, below them, city and county offi-
cials set an 11 per cent target. The promotion and rewards for these
local officials are then pegged to their ability to deliver the targets set
by their superiors. Local officials then have strong incentives to focus
on growth – attracting foreign investment and a frenzy of infrastructure
projects because these easily boost GDP growth.
The ORS system is now widely practised throughout China at all levels
of government. At the national level, ORS was officially introduced
in 2008. Since then, performance management in China has become
nuanced and more sophisticated. Targets have become more specific,
quantifiable and linked to personnel outcomes. However, there tend
to be problems in monitoring and reporting as these are often left to
local governments who have a conflict of interest in reporting excellent
performance.
A third indicator of government effectiveness is the extent to which
governments are able to engage the private sector in terms of public
private partnerships (PPP). It takes a professional and capable bureauc-
racy to effectively deal with the private sector. In many ways, China is a
leader in terms of PPP engagement particularly in terms of infrastructure
development. For instance, China is already a world leader in PPP for
water, airports, railways, seaports, highways and energy infrastructure,
among others, not only in its large domestic market but also in foreign
markets such as Africa, Southeast Asia, South Asia and Latin America.
In contrast in India, much has been talked about PPP but compared
with China there is little to show in terms of widespread success. There
are bits and pieces of successful PPP projects in India (sea and airports,
toll ways, telecoms, metro rail). However, these are not as widespread
as those in China where successful PPPs can be seen in urban water
and sanitation, multi-purpose hydro-power projects, ports, electricity
generation and transmission, railways and metros, toll ways and envi-
ronmental infrastructure, among many others.
The main difference in the outcomes of PPP between China and India,
it appears, is that the former has much stronger capacity in terms of
building a pipeline of bankable PPP projects, being able to identify, plan,
design, evaluate, finance and execute projects in partnership with the
private sector. Moreover, China was able to solve the critical problem
of credible commitment in its relationship with the private sector.
Investors do not have to worry that the government’s promises will not
be kept because of credible guarantees. In contrast, in India, government
commitments are generally not credible because politicians’ promises
are not reliable because of electoral pressures.
Our fourth indictor of capacity is the ability of the national government
to manage macro-economic policy. To do this, highly capable profes-
sional managers and technocrats are needed. In China, this is clearly
indicated in the ability of its national government to manage the recent
the financial crises. In addition, the ability of its local governments to
attract domestic and foreign investments as well as their ability to raise
local revenues and execute projects – all reflected in their GDPs – are also
good indicators of government effectiveness. This is not to say that all
is well in China’s macro-economy given the precarious debt levels of its
local governments but, in relative terms, its ability to manage its large
and complex macro-economy stands out.
8.3.7 Central Asia

As Figure 8.2 shows, in Central Asia, Kazakhstan scored highest in
terms of government effectiveness and capacity (2012) with Uzbekistan,
Turkmenistan and Tajikistan having the lowest scores. Kazakhstan also
had the highest improvement in government effectiveness since 2002,
which is evident in the many administrative and market reforms it has
introduced (Knox 2008). Examples include one-stop shops (Janenova
2010), e-government, corps A, civil service reforms and administrative
decentralization. Standards and regulations have been introduced for
all public services, shared integrated databases have been developed,
and over 500 OSSs are functioning at all levels of the government
across all regions combined with e-service delivery and mobile service
centres (Janenova 2010). PPPs are also better established in Kazakhstan
compared with other countries in the region.
In comparison, neighbouring countries either have been lagging

behind in reforming their respective civil services due to political insta-
bility (Kyrgyzstan, Tajikistan), or due to the fact that the reform meas-
ures they have enacted have been superficial and poorly implemented
because of weak capacity (Uzbekistan and Turkmenistan) (Perlman and
Gleason 2007).
8.3.8 Southeast Asia

In Southeast Asia, Singapore, Brunei and Malaysia have the highest
scores in terms of government effectiveness while Laos and Cambodia,
two countries that went to civil wars in recent years, had the lowest. Not
surprisingly, effective governments are also rich governments (with their
civil servants also highly paid and educated) while weak governments are
also poor in terms of financial resources and training for civil servants.
The Philippines, Indonesia, Thailand and Vietnam have done reason-
ably well in recent years in terms of macro-economic management,
engagement with the private sector and performance management.
However, they have moderate scores in government effectiveness, in part
because of their very large bureaucracies and multiple levels of govern-
ment. It is often the case in these countries that the best civil servants
work for the central government in capital cities while those working in
local governments tend to have lower capacities and compensations.
8.4 Conclusions
We have argued and shown in this chapter that variations in capacity

and organizational autonomy can partly help explain varieties of govern-
ance in Asia. We draw several observations and conclusions.
First, rather than being “hollowed out” as argued in the conventional
governance literature, governments throughout Asia are pretty much
at the centre of governance. As we have argued in this chapter, varia-
tions in the performance of governments in the region can be partly
explained by variations in capacity and autonomy of state agencies.
The discourse on the importance of governments in Asia is in clear
contrast to the society-centric discourse in Europe in which govern-
ments have been “hollowed out” due to advances in neo-liberalism, the
privatization and contracting out of services, the advances of globaliza-
tion, persistent distrust in government institutions and politicians and
the weakening of political parties.
Second, comparing government capacity and autonomy across
countries is not an easy exercise because of their multiple dimensions –
political, managerial, technical and organizational. Capacity and

autonomy can also vary over time, across instrumentalities, size and levels
of government. Thus, an aggregated, single measure of state capacity
across countries – as is conventionally used in the WBGI – would be
controversial.
Finally, despite these challenges, it is still possible to provide some
stylized comparison of capacity and autonomy along the dimensions we
have suggested in this chapter, that is PPP, macro-economic policy and
control of corruption. For instance, China would be assessed as being
more capable than India along these criteria. Kazakhstan would do well
compared with its neighbours in Central Asia. This kind of assessment,
however, would lend itself more to in-depth comparative country anal-
yses. The WBGI dataset, when used with its disaggregated components,
for instance some measure of government effectiveness, could still
provide a useful data source for comparative country analyses.
That said, Fukuyama’s hypotheses on delinking governance capacity
and autonomy from democracy requires more conceptual and empirical
testing. Our chapter has barely scratched the surface. There is more work
ahead for scholars of governance if we are to make the claim that varia-
tions in governance could be explained by variations in autonomy and
capacity regardless of whether or not that country is a democracy.
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9
Governing Health Care in an
Imperfect World: Hierarchy,
Markets and Networks in China
and Thailand
M. Ramesh, Xun Wu and Michael Howlett
9.1 Introduction
“Anything but the government” has been a popular sentiment in

public policy circles for at least two decades. Initially, the sentiment
favoured transitions from governments to market-based governance
regimes but the tilt has shifted towards transition from governments to
network governance in recent years (for discussion of the key relevant
concepts, see Lowndes and Skelcher 1998). Much discussion on the
subject suggests that such shifts from hierarchical to non-hierarchical
governance are both unavoidable and desirable for addressing
contemporary complex multi-actor problems which more traditional
government-based arrangements find difficult to “steer” (Weber et al.
2011; Lange et al. 2013). Many proponents, for example, claim “network
governance” or “collaborative governance” combines the best of both
government- and market-based arrangements by bringing together
key public and private actors in a policy sector in a constructive and
inexpensive way (Rhodes 1997). This claim is no more than an article
of faith, however, as there is little evidence supporting it and a lot of
evidence contradicting this thesis (see Kjær 2004; van Kersbergen and
van Waarden 2004; Adger and Jordan 2009; Howlett et al. 2009, Hysing
2009). It is entirely possible that network governance combines and
indeed compounds the ill-effects of both governments and markets
rather than improves upon them and this is a subject area requiring
further empirical examination.
194
Governing Health Care in an Imperfect World 195
Regardless of the inconclusive intellectual debate on the subject,

however, governments around the world have shown enthusiasm for
non-hierarchical approaches – markets, voluntary organizations and
increasingly networks – to address public problems. This has occurred
for a number of reasons, mainly related to efforts at cost containment,
and this is particularly true for some sectors, such as the health-care
sector in Asia, where the state has retreated from hierarchical govern-
ance arrangements over the past decade. The experience of these coun-
tries provides an excellent set of case studies from which to assess the
merits of the “government to governance” thesis.
The objective of this chapter is to assess the effectiveness of the three
modes of governance in meeting the goal of delivering affordable serv-
ices on the basis of experiences of China and Thailand in providing
health care in recent years. What the experiences of these two govern-
ments suggest is that non-hierarchical governance is more difficult to
implement than often anticipated. Indeed as shown below, they suggest
it may be impossible to substitute non-hierarchical arrangements for
hierarchical ones in the health-care sector without a considerable loss of
both efficiency and equity. This chapter proposes a model and a frame-
work for understanding governance failures that helps explain why this
is the case.
Both case-study countries began the modern period with a dominant
role for the government in health-care provision and both have tried
non-hierarchical governance in recent decades. As is discussed below,
however, their experience with non-hierarchical arrangements has been
largely disappointing in terms of measures such as quality of service
delivery, cost effectiveness or efficiency. As a result, a substantial reversal
of the non-hierarchical governance strategy occurred in Thailand and a
nascent reversal is under way in China in order to reduce rising expend-
iture and improve outcomes. Taken together, the cases provide an
excellent illustratation of the range of options and dynamics between
hierarchical and non-hierarchical modes of health-care governance and
suggest that “governance failures” is a key concept helping to explain
meta-governance dynamics and the transitions between modes of
governance.
9.2 Governance modes and governance failures
Practical experience and ideological predilections have shaped the

substance of the debate on governance, ranging from preference
for democracy, popular participation and consensus to concerns
196 M. Ramesh, Xun Wu and Michael Howlett
about budget deficits and public sector inefficiencies in a hierarchy-

based system. These conditions have fostered a strong preference for
non-hierarchical governance, with countries in the Anglo-American
tradition usually preferring markets while others with more corporatist
traditions often displaying a penchant for networks. Lost in the pursuit
of these preferred alternatives, however, is an understanding of whether
or not a preferred solution can actually address the particular sector’s
problems. Instead of analysing and understanding the specifics of the
sector in question, the protagonists often simply extrapolate from ideal-
ized conceptions of how non-hierarchical modes of governance might
work in practice and then apply them across sectors regardless of the
contexts in which they are being applied and their relevance to the
primary source of the problem in the sector in question. While poli-
cy-makers may find the proclaimed superiority of the market and/or
network alternatives convenient because it allows them to shed respon-
sibility for difficult problems, thus reducing the scope for criticism of
their performance, this short-term gain is offset later when the conse-
quences of governance failures and poor institutional design become
apparent (Weaver 1986; Hood 2010).
While “governance failures” is a new term in the literature, the role of
policy failures of different kinds in affecting choices of governance modes
and their design is well known. It is broadly accepted, for example, that
there is no substitute for government in sectors with large market failures,
effectively ruling out the use of market-based modes of non-hierarchical
governance (Wolf Jr 1987; Le Grand 1991; Weimer and Vining 2011).
Correspondingly, others have argued that hierarchical modes of govern-
ance are problematic in the case of widespread “government failures”
(Weiner and Alexander 1998; Provan and Kenis 2008). What is much
less known in the governance literature, however, is the existence of
“network failures” (Weiner and Alexander 1998; Provan and Kenis 2008;
von Tunzelmann 2010; Uribe, 2012). These include problems such as a
lack of societal leadership, poor associational structures and weak state
steering capacities which make adoption of network governance modes
problematic. As Keast et al. (2006) summarize: “Networks often lack the
accountability mechanisms available to the state, they are difficult to
steer or control, they are difficult to get agreements on outcomes and
actions to be taken, and they can be difficult to understand and deter-
mine who is in charge.” Simply put, establishing and operating networks
in situations of network failures may cost more than they are worth.
While all three modes suffer from severe limitations, they do not all
afford the same level or type of risk. In situations where both market
Table 9.1 Governance tools, problem types and modes of governance
Need for Incentive
High Low
Type 1 Problem: Type 2 Problem: Authority

Transaction costs Appropriate governance
Appropriate governance mode: Market – regulated
High
mode: Hierarchy Impediments: Information
Need for Coercion
Impediments: Information gaps; capture;

gaps; political interference implementation capacity
Type 3 Problem: Persuasion Type 4 Problem: Reconciling

Appropriate governance divergent interests
mode: Market – subsidized Appropriate governance
Low Impediments: Wasteful; mode: Networks
inclusion and exclusion Impediments: Hard to
errors establish; weak steering;
collusion
and network failures are likely and substantial, hierarchical governance

may remain a preferred option even in the face of various government
failures since at least the needed services will be delivered, although
perhaps inefficiently distributed in a technical sense and in all likeli-
hood not as responsive to users’ preferences.
Given that all governance modes are vulnerable to failures of different
kinds, when governments adopt one or the other modes, they need to
understand: (1) the nature of the problem they are trying to address and
the tools they have at their disposal to address it; (2) the innate features
of the different governances mode so that they can match these to the
problem they seek to address; and (3) the capabilities of governments
and societies to successfully implement the first best option. Table 9.1
sets out the basic relationships involved in these decisions.
Assuming only two basic types of tools, coercion and incentives, it can
be seen that different modes of governance – government, market and
network – correspond to specific problem types.
Type 1 policy problems are those whereby the problems and solution
are understood but the transaction costs of leaving the solution to private
agency (for profit or non-profit) are high, requiring the application of a
high level of force and incentives to make private actors accept policy
direction. In such cases, it is efficient for the government to maintain
a monopoly over it and provide it directly, as is the case with policing
or fighting epidemic for example. Type 4 problems are those when it is
difficult to comprehend and reconcile deeply conflicting interests of key

stakeholders. In such instances, as is the case with drug prices or urban
renewal, for example, it would be more effective to leave the solution
to be worked out in negotiation among networks comprising key stake-
holders under varying levels of government oversight. Type 2 and 3 prob-
lems are those where voluntary interaction among producers and users
is the best solution but the process is handicapped by impediments that
can be overcome only through use of state coercion (Type 2) or financial
incentive (Type 3). Hospital care, which like other services is technically
best provided by private providers who are better equipped to address
consumers’ diverse demands but also entail the danger of over-servicing
and over-charging, is an example of Type 2 and 3 failures.
The conceptualization in Table 9.1 is different from the traditional
understanding, which sees problems more prone to market failures
as calling for hierarchical solutions whereas those more vulnerable to
government failure as necessitating market solutions. Networks, on the
other hand, are seen as preferred solutions to problems involving both
market and government failures (Ferlie et al. 2011). This line of anal-
ysis, however, ignores the many kinds of possible failures that network
governance entails (see Davies 2002; Huxham and Vangen 2004; Mann
et al. 2004; Stern and Green 2005). While it is possible to combine the
best of all three arrangements, reconciling their divergent imperatives is
not easy (Meuleman 2008).
The nascent and still small literature on health-care governance
(Boydell 2007; Helderman et al. 2012; Brinkerhoff and Bossert 2013)
points to the difficulties in governing a sector in which multiple govern-
ance failures coexist and undermines the assumption that networks
or markets are more effective than planned efforts carried out by a
single organization in a hierarchical manner in delivering services. Yet,
reformers and commentators continue to make a case for market govern-
ance, regulated or subsidized, on the grounds of the existence of perva-
sive government failures or for network governance on the grounds that
it is best suited for addressing both market and government failures that
afflict the sector. Those seeking alternatives to hierarchical governance
tend to overlook the significant failures inherent to regulated and subsi-
dized markets as well as networks.
The pertinent question in a sector like health care is whether markets
or networks are more effective in meeting the health-care of the popula-
tion at a reasonable cost or if the deep market and network failures char-
acteristic of the sector overwhelm its potential and lead to outcomes
worse than under hierarchical governance. The answer cannot be found
a priori but must follow from analysis of the nature of the problem being
addressed and matching governance arrangements to it. Given the deep
and often zero-sum nature of the conflicts among the stakeholders in
health care – providers, insurers, drug companies, users and different
levels of government – the network mode is not viable unless a country
has a long history with it, as is arguably the case in the Netherlands. As
a result, policy-makers seeking to reform hierarchical governance inad-
vertently turn to markets for solutions. But designing effective regula-
tions and enforcing them diligently is difficult, leading governments
with weak capacity to take the subsidy route, which is a politically easier
option in the short run. However, subsidies in health care are expensive
with a high potential for money being siphoned off to private interests
without a corresponding improvement in care.
The case studies of health-care reforms in China and Thailand in
this chapter show that the existence of multiple failures in the sector
means that the hierarchical mode of governance is the optimal, if
second best, solution. Recent experience in these countries confirm that
hierarchical modes of governance if implemented with due regard to
avoiding government failures are more effective than non-hierarchical
modes in securing health policy goals, the extensive academic literature
promoting alternative modes notwithstanding.
9.3 Health-care reforms: from hierarchy to

market and back
These two Asian countries – China and Thailand – have gone through
divergent patterns of health-care reforms that offer instructive lessons
in the implications of different modes of governance. Broadly speaking,
China and Thailand started with a highly public system which they
privatized in the 1980s and 1990s but which is now undergoing a
reversal towards increased hierarchy. This has occurred as increased
reliance on non-government provision or financing in the first reform
phase was followed by higher total expenditure with no corresponding
improvement in health outcomes. The positive recent experience with
the reassertion of the hierarchical mode of governance in health care
casts serious doubts on the supposed superiority of non-hierarchical
arrangements in this sector.
9.3.1 Pre-1980s: governments in command

The architecture of the health-care systems in China and Thailand was
remarkably similar until the 1980s, in that inpatient care was provided
overwhelmingly by the public sector but financed significantly from

private sources. All hospital beds in China and over 90 per cent in
Thailand were in the public sector.
The financing system for health care in each country was, however, far
less public than the provision system. In China, social insurance rather
than government budgets was the source of the vast bulk of health-care
financing. Different social insurance schemes covered the entire popula-
tion and were financed from members’ premiums, though the amount was
modest. Public financing played an even smaller role in Thailand, forming
only one-third of total expenditure on health (TEH) in the late 1970s with
the remainder paid out of pocket (OOP) (Supasit, 1996: 197). The large
share of OOP financing in Thailand was due to the fact that public facili-
ties recovered nearly 40 per cent of their costs directly from users.
The heavily public health-care system in China and Thailand worked
remarkably well in that total expenditure was low and their population
enjoyed one of the highest health statuses in the developing world. In
1990, the infant mortality rate (IMR) was 39 and 29 per 1000 in China
and Thailand respectively. Yet more remarkably, the accomplishment
was achieved at relatively small cost, as TEH was less than 3.0 per cent
of GDP in China and 3.4 per cent in Thailand during the late 1970s
(Supasit, 1996: 198).
9.3.2 1980s and 1990s: from government to market

The 1980s and, especially, 1990s were a period of rapid transformation
of health-care governance in China and Thailand. Following the success
of economic liberalization in the early 1980s, the Chinese government
turned to applying the same formula to health care. While public hospi-
tals formally remained in the public sector, public funding for them was
drastically reduced at the same time that existing insurance schemes
collapsed, reducing coverage from 70 of the population in 1981 to
20 per cent in 1993 (World Bank 1994).
With dwindling income from insurance payment and government
subsidy, public hospitals were forced to earn income directly from
users, often by prescribing unnecessary and expensive drugs and diag-
nostics (Liu and Hsiao 1995; Xu et al. 2010). Indeed, the government
encouraged revenue maximization from users by allowing hospitals to
generate surpluses and distribute them among staff as bonuses. With
their personal income tied directly to their hospitals’ surplus revenues,
managers and physicians focused effort on generating greater income
from users. Unsurprisingly, OOP’s share of TEH increased from 20 to
60 per cent by the early 1990s.
Similarly to China, the Thai government too began to make efforts to

reduce its role in the health-care sector in the late 1980s. As the health
minister at the time declared: “rather than relying on governments to act
as fathers who know best, people should look for opportunities where
the private sector could be brought in as an alternative or complement
to the public dominated schemes” (Bangkok Post, 19 October 1994). By
the mid-1990s, the public sector’s share of all hospital beds shrank to 75
per cent and of all physicians to 82 per cent. Correspondingly, the public
sector’s share of total health spending declined to around 25 per cent,
with the rest paid largely from OOP.
To reduce the rising unaffordability that occurred as a result of the
privatization of health care, the Thai government expanded health insur-
ance for the working population and public assistance for the poor. The
Free Medical Care for the Low Income programme (originally launched
in 1976) was expanded by tripling spending between 1991 and 1996
(Sanguan and Supasit, 1997: 152). However, the programme did not cover
most of the poor and in fact even the covered faced difficulty accessing
health care as payments did not fully cover costs, making providers reluc-
tant to treat such users. Private sector workers were assisted by the launch
of Social Health Insurance (SHI) in 1992 which compulsorily covered all
workers in firms employing ten or more workers (gradually reduced to
one). SHI was of only little consequence in reality, however, as more than
three-fifths of the Thai labour force was in informal employment and
hence excluded from coverage. In 1992, the government also established
public assistance schemes for the elderly and for children in primary and
lower secondary schools. Despite these expansions, however, the various
insurance and public assistance health financing schemes covered less
than 30 per cent of the population in 2000.
The reduction in public expenditure and, correspondingly, higher
private financing in China and Thailand during the 1980s and 1990s
was followed quickly by increases in both OOP and TEH). In China, TEH
rose from around 3 to 4.5 per cent of GDP at a time when the economy
itself grew at a dizzying pace, while OOP’s share of TEH increased from
20 to 60 per cent. Similarly, TEH in Thailand during the 1980s nearly
doubled to 6.3 per cent of GDP in 1992 and was projected to rise to
8 per cent of GDP by 2000 if the trend continued (Sanguan and Supasit,
1997: 153).
By the late 1990s, these adverse effects of privatized health were
too pronounced to be ignored. The Chinese government’s internal
opinion polls showed that health-care costs was the population’s
number one concern (Chinese Academy of Social Sciences 2007). This
is not surprising given that by 1997 private expenditure on health had

increased rapidly to 56 per cent of TEH, of which 95 per cent came
from OOP. The rising hardships were a major deterrence to accessing
health care: in 2006 more than 35 per cent of urban households and
43 per cent of rural households said they had difficulty in affording
health care (Hu et al. 2008).
The Thai government’s experience in reducing its role in the health-
care sector was similar to China’s, though by the early 1990s it had
already begun to expand financing programmes. This reversal accel-
erated with the onset of the 1997 economic crisis which heightened
the population’s vulnerability to health-care costs. As a result of these
measures, the government’s share of TEH increased from 47 per cent
in 1995 to 55 per cent in 1998, when private spending’s share declined
proportionately. The late 1990s were tough times for Thailand and the
enhanced government financing provided much-needed support for the
vulnerable population.
9.3.3 Recent reforms: retreat from market

Faced with repercussions from earlier reforms, in the late 1990s China
and Thailand launched another wave of reforms. In China, the govern-
ment launched the Urban Employees Basic Medical Insurance (UEBMI)
programme in 1998 for all urban workers – public and private, formal
and informal, current and retired. A decade after its launch, UEBMI
covered only 67 per cent of the target population due to various
exclusions and lax enforcement (Barber and Yao 2010; World Bank
2010: 7–11). Insurance protection was further expanded with the
launch of the New Rural Cooperative Medical Insurance Scheme
(NRCMS) for the rural population in 2003 and Urban Residents
Basic Medical Insurance (URBMI) for the urban migrant workers as
well as non-employed (children, students, elderly, disabled) in 2007.
Participation in both schemes is voluntary, but over 97 per cent of the
rural population has joined NRCMS and over 60 per cent of the target
population has joined URBMI. The premiums and benefits vary greatly
across localities for both schemes, depending on local fiscal capacity
and local leaders’ policy preferences. As a result of the expanded and
new programmes, insurance coverage increased from 15 per cent of the
population in 2003 to 95 per cent in 2012.
Recognizing the hardships caused by private financing of health care,
in 2005 the Chinese government acknowledged that the earlier reforms
had been a failure (Development Research Center 2005), and launched
a yet another wave of reforms.The current Five-Year Plan (2012–2017)
sets out three goals for health-care reform in the near future. First, the
government has committed to increasing the reimbursement rate from
50 to 75 per cent by 2015 by increasing its contributions to NRCMS
and URBMI. It is also trying to standardize premium and benefits across
schemes and regions and adopting fixed payment system (for example
capitation and diagnostic-related groups) to reduce the perverse effects
of fee-for-service payments that lead inexorably to supply-induced
demand. Second, the Plan seeks to rein in drug prices by tightening
regulations while at the same time removing those that are known to
be harmful or ineffective. Third, it aims to improve the performance
of public hospitals by separating regulatory and management functions
and allowing greater autonomy to managers and physicians. To enhance
competition among providers, the plan seeks to increase private hospi-
tals’ share to 20 per cent of hospital beds.
The most comprehensive example occurred in Thailand with the
launch of Universal Health Coverage (UHC) in 2001. The scheme offers
free health care to those not covered by any health scheme, at the
time around 70 per cent of the population. It is an insurance scheme
financed from general tax revenue that pays providers on a capitation
basis (set at THB2,401 in 2110 per person per year). The National Health
Security Office (NHSO) functions as the purchaser of medical services
on the behalf of UHC as well as SHI schemes. As the largest purchaser
of medical services in the country, the NHSO is in a position to impose
prices and service conditions on providers. The launch of UHC dramati-
cally increased the government’s role in financing health care and
further reinforced its already dominant role in provision.
The steep increase in the government’s role in provision and financing
of health care in Thailand did not, however, lead to an increase in TEH
as alleged by proponents of private health care. In fact, Thailand’s TEH
declined from 3.7 per cent of GDP in 2003, when UHC was established,
to 3.5 per cent in 2006. Notably, TEH decline occurred despite large
increase in usage: ambulatory utilization rate increased by 4.3 per cent
annually and hospital admission rate by 2.2 per cent annually between
2002 and 2005. Hospital admissions on average across the country
increased from 6.3 per cent of the population in 2003 to 6.9 per cent in
2004. Infant mortality decreased by 6.5 per 1,000 births following the
launch of UHC (Gruber et al. 2012).
As a result of the recent series of reforms, TEH has stabilized while OOP
payments have declined. At the same time, health outcomes as indicated
in infant mortality rate has continued to decline, reaching 16 and 12 per
1,000 live births in China and Thailand respectively in 2010.
9.4 Discussion
Analysis of the sequence of health-care reforms in China and Thailand

casts valuable light on the implications of governance failures for the
adoption of specific modes of governance. The hierarchical mode
of health-care governance – characterized by public provision and
financing – in China and Thailand until the 1970s produced reason-
ably good health-care status at a modest cost. As a part of broader shift
to privatization during the 1980s, China and Thailand turned to non-
hierarchical governance in the form of increased private provision and
financing. The rhetoric of partnership with private firms and societal
groups that accompanied the reforms barely disguised the emphasis
on private provision and private financing they involved. The govern-
ments responded to the ensuing decline in access to care (and the corre-
sponding increase in providers’ income) by increasing public subsidy
for health insurance. By the 1990s, both countries were thus promoting
private provision and financing of health care, supplemented by insur-
ance, behind the rhetoric of greater partnership with the private sector
and civil society.
The effects of these moves towards private provision and financing of
health care were felt quickly and widely. Instead of increasing efficiency
and reducing costs, as had been expected of the reforms, the privatiza-
tion measures increased costs and reduced access. However, the measures
did broaden choice and improve the quality of services for those who
could afford it. In the face of mounting evidence of the adverse effects
of the reforms, towards the late 1990s governments in the region began
to reassert their role in the health-care sector and to reinstitute aspects
of hierarchical governance. China and, especially, Thailand expanded
insurance coverage and increased government financing of health care
while tightening controls over providers.
The bars in Figure 9.1 show the rise and subsequent decline of private
expenditure in each country. Correspondingly, and curiously though
not unsurprisingly, the rise in private expenditure was mirrored in total
expenditure, contrary to the commonly heard argument that private
expenditure improves efficiency and thus decreases total expenditure.
The increase and then decrease of private expenditure was closely asso-
ciated with OOP spending, which is a crucial indicator of accessibility to
health care. The increase in government expenditure in recent years has
been accompanied by a sharp decline in OOP expenditure, as evident in
Figure 9.2 Thus, OOP’s share of GDP in China declined steadily from the
height of 60 per cent in 2001 to 37 per cent in 2010 and the downward
6
5
4
% of GDP
3
2
1
0
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
20
China Thailand
Figure 9.1 Expenditure on health, total and private

% of Total Exp on Health (TEH)
100
80
60
40
20
0
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20
China Thailand
Figure 9.2 Share of government and out of pocket (OOP) expenditure in total
expenditure on health (TEH)
trend continues. Similarly, OOP’s share in Thailand declined from

34 per cent in 2000 to 14 per cent in 2010. Thus, the increases in public
expenditure reduced OOP and slowed down the increase in TEH while
improving access, undermining the scepticism of the proponents of
private health care towards hierarchical tools.
The stabilization of TEH and improved access following the reasser-
tion of the government’s role are easy to comprehend if the mechanism
underlying it is understood. This is best illustrated by Thailand’s case,
which is characterized by universal insurance financing, public provi-
sion and capitation payment. UHC coverage not only protects those
who would not otherwise be insured but also allows the government to
be a powerful active purchaser which can use its dominant position to
pressure providers to hold down costs and raise service standards.
In addition, the government’s overwhelming ownership of hospitals

in Thailand gives the government a powerful instrument to improve
access and contain costs. While more competition is certainly conducive
for improved services, its absence offers own advantages in the form of
reduction in duplication of equipment and services and emphasis on
frills that are endemic to hospitals in a competitive market. The under-
supply and the consequent implicit rationing of public health care in
developing countries lead hospitals to provide only what users need
rather than what they desire. Unlike other services where wastefulness is
whittled away by competition, in a market-based system the health-care
sector hospitals are able to recover their costs by over-servicing unsus-
pecting customers. It is arguable that the bureaucratic, impersonal serv-
ices provided by public hospitals are an effective rationing mechanism,
in that they keep away those who value frills over clinical services.
The need for strict regulation of public–private partnerships if they
are to succeed is well recognized in the literature (see ADBI 2000). The
government’s capacity to design and enforce contracts and establish
appropriate organizational and management systems for partnerships is
similarly emphasized. There is little evidence that these conditions are
in place in China.
It is arguable that most governments, especially in the developing
world, lack both the technical and political capacity to regulate the
health-care sector. Unfortunately, a government lacking capacity to
regulate private partners is likely to be also limited in its capacity to
provide the services directly. However, in situations of publicly provided
health care, the main problem will be inadequate and poor-quality
services rather than excess supply at inflated prices, as occurs under
poorly regulated public–private arrangements, with massive repercus-
sions for total expenditure. As mentioned earlier, a network governance
arrangement would work the best in such situations, if only one could
be established in sectors like health care, characterized by deep zero-sum
relationships.
9.5 Conclusion
China and Thailand have had three decades of experience with hierar-
chical and non-hierarchical arrangements that offer insights into the
characteristic features and effects of the different modes of governance.
The conclusion to emerge from studying their experience is that non-
hierarchical governance are not a substitute for hierarchical governance
in situations where many market and government failures exist. While a
network mode would be hypothetically superior, the potential is hard to

realize in reality due to pervasive and deep network failures. Establishing
and maintaining networks in the health-care sector involves signifi-
cant costs that potential members would rather not pay. And if they
do establish networks, members may collude to advance their mutual
interests at the expense of those outside the network, such as users. A
recurrent problem faced by efforts to utilize network governance is that
the routines, trust and reciprocity that characterize successful network
governance (cf. Klijn and Koppenjan 2012) take a long time to emerge.
Such relationships cannot simply be established by fiat as in the case with
hierarchy or emerge spontaneously in response to forces of demand and
supply, as in markets. Networks are thus hard to establish where none
exist, which is the case in health-care sectors in much of the world.
So the default reform often adopted, in practice, by governments
seeking to improve upon hierarchical governance is to turn to the market
rather than network. In contrast to networks, the adoption of market
governance arrangements, in at least their simplest form, is relatively
easy because all the government needs to do is reduce its involvement
in the provision of goods and services in question with the expectation
that the market would fill the void. In all likelihood, however, such a
health-care market will be both inefficient and inequitable due to the
many deep market failures that characterize the sector. To function
effectively, health-care markets require tough but sensible regulations
that are diligently implemented, conditions that are difficult to meet for
most governments due to lack of analytical, administrative and political
capacity. Without adequate capacity to regulate the sector, governments
turn to subsidizing users and particularly providers. While subsidy for
health-care improves access and is politically expedient, it is vulnerable
to explosion in costs that will undermine the long-term viability of the
system.
Hierarchical governance of health care need not be as dysfunctional as
stylized descriptions by proponents of market and network governance
may suggest and, in fact, may be superior to the alternatives. A health-
care system characterized by government provision and financing
supplemented by capped payment is an effective means of delivering
health care at an affordable cost, as the case of Thailand shows. There
are of course inherent limitations to command and control, the adverse
effects of which may be contained through offsetting measures in some
instances. Thus, market competition in standardized services (such as
cataract surgery or pathological diagnostics) or when consumer pref-
erences are diverse (such as hospital catering) may improve efficiency
without compromising access. Similarly, network governance may

perform well when dealing with sensitive issues such as HIV/AIDS when
trust and understanding is paramount. For the bulk of health care,
however, hierarchies offer the best opportunity for health-care delivery
in an imperfect world.
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10
Governance Capacities in the
European Union: Normative
Goals and Empirical Evidence
Eva G. Heidbreder
10.1 Introduction: European Union governance

capacities – What is at stake?
This chapter evaluates the governance capacity of a non-state polity,

namely the European Union (EU). Given that the EU does not unam-
biguously qualify as either a state or an international organization
only certain dimensions of the EU but not the polity as such can be
captured by traditional, state-centred concepts. Not least for this reason,
the standard characterization of the EU has become “a system of multi-
level governance” (MLG; the term was branded by Gary Mark’s work on
cohesion policy – see Marks 1996; see also Marks et al. 1996; Scharpf
1997; Bache 1998). If we conceptualize the EU as a MLG system that
is marked by multiple interacting levels of authority, actors in which
policy-making processes transcend not only vertically different levels of
governance but also horizontally different coexisting jurisdictions (cf.
Hooghe and Marks 2003), the question of governance capacity presents
itself as pre-eminent: because the EU has only limited state-like features,
its tool-box of governance modes differs from those of states in which
authority and capacities are monopolized for a given territory.
In the context of this edited volume, the questions this chapter derives
from these defining features of the EU focus on the framing and the
effect of EU governance capacities. First, how do central EU actors deal
with the notion of governance and what are the capacities these actors
aim to realize? Second, how well have these desired capacities been real-
ized, or, on other words, how efficient in achieving specific policy objec-
tives are they? Finally, what do the results tell us, on the one hand,
211
212 Eva G. Heidbreder
about governance in the EU and, on the other hand, about governance

capacities more generally?
Before delving into the analysis, the notion of governance capacity has
to be specified. The definition provided in the introductory chapter of
this volume reads as follows:
the capacity of governance arrangements concerns two fundamental

aspects of the governance game (which are also the drivers of govern-
ance), namely policy and politics. Policy capacity focuses on perform-
ance in the respective policy field […]. Political capacity means the
capacity to maintain the political consensus both of those actors
involved, and of those not involved, and to preserve the general
perception of legitimacy”. (pp. 15–16)
The editors thus define governance capacity as an inherent quality

of governance modes rather than the capacity of (collective public)
actors to steer societies. This definition is challenging to operation-
alize because it suggests that a specific governance arrangement,
that is the combination of different governance modes, produces a
generic capacity function. What is to be analysed is hence not whether
policy-makers have the capacity to select and effectively implement and
enforce specific objectives. The focus in this definition is on whether
these modes themselves and in combination with others “are capable”
of producing an intended effect. To operationalize this definition, I
will refer to the concepts mentioned as policy and politics features in
the given definition. The first, policy-focused element is then policy
effectiveness (performance). This can be observed by juxtaposing
ex post policy outcomes with ex ante expressed policy goals or expecta-
tions. The second, politics-focused element is the perceived legitimacy
of policy outcomes (political consensus). This can be observed by
actual stakeholder involvement rates, citizen perception data and
other indicators that reveal either the actual input of pluralist actors
and the perceived legitimacy of policy outputs. In short, this chapter
does not analyse the capacity of public actors to achieve specific goals;
it focuses on the effectiveness and legitimacy of specific governance
arrangements.
To do so, the chapter answers the above raised questions in three steps.
Section 2 focuses on the linkage between decisive actors and their selec-
tion of a specific notion of governance proper. Spelling out this nexus is
necessary to understand which underlying objectives and motives drive
the selection of specific governance arrangements. Section 3 presents a
Governance Capacities in the European Union 213
number of governance arrangements that have been set up by EU actors,

based on expected efficiency and legitimacy effects these tools ought to
produce. Section 4 follows up on this and offers an empirical overview
of the available results about efficiency and legitimacy effects of the
governance arrangements consciously put in place to create increased
governance capacities. Section 5 closes by summarizing the results the
analysis holds in store for our understanding of governance in the EU
polity and governance capacities as such.
10.2 Setting the scene: governance goals

promoted in the EU
The term governance has proven a roaring success both among policy
analysts and policy-makers. Academia and practice have played an equally
significant role in paving the way for the rapid career of governance as
theoretical and normative approach. As theoretical approach, govern-
ance has enriched the discipline as a key concept to scrutinize different
modes of co-ordination by public and/or private actors, without however
amounting to a fully-fledged causal theory (Benz 2004). The decisive
value added is the identification of different co-ordination mechanisms,
which relate back to different concepts of (legitimate) rule. Governance
hence enriched the analysis of steering mechanisms and the debate
about which tools offer the best fit for particular contexts, resources
available and co-ordination problems. It is in this point that the analyt-
ical governance concept meets the normative expectations about how to
improve legitimate rule and how to increase policy efficiency. Especially
the normative motivation to create good or better governance has been
decisive in the real-life adoption of certain new governance approaches,
for which the promotion of governance has become the rhetorical short-
hand. In particular the European Commission has emerged as a fierce
promoter of this reading, attempting to develop better governance to
increase legitimacy of its own policy-making and that of the EU more
generally. These normative beliefs are directly intertwined with the
theoretical expectations about the functioning and the efficiency- and
legitimacy-enhancing potential of distinct governance modes. Leaving
the elaboration of these modes and their expected effects to others in
this book, I concentrate here on the linkages between the analytical
concept and the hands-on applied understanding of governance in EU
scholarship and day-to-day policy-making.
What do policy analysts and policy-makers mean by governance?
As alluded to above, the underlying claim is that EU scholars and
practitioners have created a specific definition of (better) governance

and, in turn, fed into the conceptual and applied meaning of govern-
ance in and beyond the EU. In policy analysis, the term governance
has replaced earlier debates on traditional public steering to inte-
grate notions of non-hierarchical co-ordination and, more generally,
“different modes of co-ordinating individual actions, or basic forms of
social order” (Mayntz 2003: 28). Governance has been incorporated
into the customary terminology of both international relations, dealing
with “governance without government” (Rosenau and Czempiel 1992),
and in policy analysis that focuses on the “hollowing out of the state”
(Rhodes 1994) by opening the policy process to non-state actors. Both
notions have become regular descriptions when analysing the EU,
precisely because the EU is a polity that lacks a clear centre of authority
and has to involve multiple actors by its very design. Thus, ever since
the so-called governance turn in EU-studies (Kohler-Koch and Rittberger
2006), the notion of the EU as a system of MLG is the standard catego-
rization of the EU polity (Hooghe and Marks 2003; for a recent over-
view on MLG, see Stephenson 2013). In a nutshell, the quarrels about
how to describe the EU that is less than a federation, more than a regime
(Wallace 1983) has been put to rest by moving to the notion of a MLG
system that combines different modes of governance in a multi-layered
system.
Besides the descriptive analytical value added, many academic authors
and policy-makers alike attribute a normative twist to governance.
Accordingly, “MLG implies the exploration of three analytical planes:
political mobilization, policy-making, and state restructuring” (Piattoni
2009: 175). In line with this, better governance entered the agenda as a
means to counter the alleged democratic deficit of the EU. A consider-
able body of literature on “new modes of governance” focused on the
question, whether steering beyond the state offered alternative solutions
(Christiansen et al. 2003; Eberlein and Kerwer 2004; Idema and Kelemen
2006; Citi and Rhodes 2007; Benz 2009; Bellamy et al. 2010; Kassim and
Les Galès 2010; Schout et al. 2010; Smismans 2006; Borrás and Ejrnæs
2011; Føllesdal 2011; Weale 2011). The most impressive document in
which scholarship and policy-making meet (if not merge) is the White
Paper on Governance which, in my view, is an exemplary illustration
of how academic expectations have seemingly directly been copied
into policy programming (Commission of the European Communities
2001). As highlighted by others, the Governance White Paper “is a
telling example of the importance of an epistemic community for a
policy initiative”, which
prompted the demand for direct participation of stakeholders to be

extended to all stages of the political process. The argument was that
the looming crisis of legitimacy would not be met by strengthening
the mechanisms of representative democracy since the multi-level
and functionally segmented decision-making process would still be
too distant from the people and beyond public control. (Kohler-
Koch 2010a, p. 103)
Governance as form of stakeholder participation has accordingly been

promoted to escape the strongly felt legitimacy crisis.
In essence, the understanding with which the Commission embarked
on its governance agenda was directly informed by scholarly descrip-
tion and normative expectations about the delivery of governance – a
decisive, tight link that directed the governance trajectory in academic
thinking and supranational political action, which we will turn to now.
10.3 Governance in EU action: governance as

link between EU policy-makers and EU citizens
Various EU actors have initiated different policies that aim at enacting

central insights of governance scholarship. At the same time, these initi-
atives rest on high expectations that better governance would improve
not only the policy-making quality but also and above all its legitimacy.
The main focus has been on forms of participatory governance, that is
bringing citizens into the policy-making process. Three key initiatives
were brought up in the early 2000s. Almost 15 years later, the evidence
about these initiatives’ success is mostly disillusioning. Yet, before eval-
uating the efficiency and legitimacy enhancing effects (in the words
of the editors, “the governance capacity”), this section introduces the
policy design and intended effect behind the most central initiatives.
Three EU initiatives stick out: the Laeken mandate which initiated
the Convention on the Future of Europe (2001); the introduction of the
Open Method of Coordination (OMC; European Council 2000); and
the already mentioned Governance White Paper.1 Each of the initia-
tives served a different objective but all three were deeply committed to
the ambition of increasing legitimacy through more participatory and
inclusive governance. In addition, the Treaty of Lisbon, which entered
into force in late 2009, further advanced a number of normative govern-
ance ideas that deserve brief mentioning.
The Laeken mandate (European Council 2001a) introduced the
so-called convention method for Treaty reforms. The ultimate goal
was to reduce the distance between EU institutions and citizens, who

were hence to be consulted in an inclusive drafting process. The reform
method itself was included in the text that the Convention on the
Future of Europe (2002–2003) produced as a template for the European
Council (European Convention 2003a), and which – in a modified
form – was ratified as Treaty of Lisbon in 2009. It establishes the conven-
tion method as the ordinary revision procedure for the EU’s constituent
Treaties. Article 48 reads:
2. The Government of any Member State, the European Parliament

or the Commission may submit to the Council proposals for the
amendment of the Treaties […] 3. If the European Council, after
consulting the European Parliament and the Commission, adopts by
a simple majority a decision in favour of examining the proposed
amendments, the President of the European Council shall convene a
Convention composed of representatives of the national Parliaments,
of the Heads of State or Government of the Member States, of the
European Parliament and of the Commission. The European Central
Bank shall also be consulted in the case of institutional changes in
the monetary area. The Convention shall examine the proposals for
amendments and shall adopt by consensus a recommendation to
a conference of representatives of the governments of the Member
States as provided for in paragraph. (European Council 2007)
In order to indeed bring the EU closer to its citizens, the vice president
of the Convention, Jean-Luc Dehaene, was signed responsible for the
dialogue with civil society, which he encouraged on “four levels: on the
internet; in national forums; with observers like the Economic and Social
Committee and Committee of Regions, the social partners and NGOs;
and in the Convention itself” (Kværk 2007: 157). This innovative set-up
for treaty reforms, which delegated a convention with the task to draft a
proposal on the basis of which the European Council was then to decide,
triggered much scholarly debate and normative expectations, in partic-
ular about more deliberative policy-making and a potentially emerging
European public sphere (Closa 2005; Fossum and Trenz 2006; Göler
2006). Letting alone the challenging dispute about deliberative democ-
racy and if the Convention could live up to such demanding goals, on a
lower level it was surely expected to introduce more direct legitimacy to
the treaty reform process by involving into a debate with civil society. In
parallel, efficiency improvements were expected as the previous rounds
of Treaty reforms had painfully shown the limits of intergovernmental
negotiations. Above all, the quarrels about the Treaty of Nice had high-
lighted that the Treaty Reform Summits of the European Council were
not capable of producing strongly needed reform compromises. Hence
the efficiency-enhancing expectation was that proposals prepared by
a convention could help to overcome purely national-interest-based
deadlock (Dinan 2002).
Just shortly before the heads of state and government issued the
Laeken mandate, the European Council inaugurated the Open Method
of Co-ordination in order to promote supranational cooperation
in social policies, areas in which agreement for harmonization and
common EU policy solutions proved impossible (Schäfer 2004). The
inclusion of non-state actors was initially an integral part of the OMC
whose very design reviles on high theoretical expectations about
policy learning, voluntary co-ordination and soft steering. Again, for
the purpose of this chapter we should review the expectations about
the legitimacy and efficiency enhancing potential of the tool. In the
OMC, the different objectives are strongly intertwined (Borrás and
Jacobsson 2004). As the basic co-ordination mechanism is voluntary
co-ordination and mutual learning, inclusiveness and openness of the
process aught to raise its legitimacy and is at the same time a precondi-
tion for the process to work and produce better policy outputs, which
in turn increase the output legitimacy of the policy results. Both its
legitimacy-enhancing (Føllesdal 2011) and its efficiency-enhancing
effect (Idema and Kelemen 2006) were highly disputed in academia
from the start not least because they were underpinned by demanding
normative assumptions.
Unlike the OMC, the White Paper on Governance did not offer
concrete policy measures but a more abstract blueprint. Probably the
most relevant follow-up has been the substantive expansion of the
Commission’s consultation regime. Even if the Commission had long
consulted experts and dialogued with social partners (Quittkat and Finke
2008), the “governance turn” introduced a new purpose to the consulta-
tion approach that is intrinsically motivated by the objective of better
governance through participatory policy-making. Hence,
the White Paper marked a change of paradigm for the European

Union, by clearly defining the EU policy process as the result of
different influences and mechanisms of dialogue and participa-
tion which are not limited to the institutional triangle, and also by
acknowledging the need to foster citizens’ involvement in the EU
process. These principles were enshrined in the five key principles
of good governance: openness, participation, accountability,

effectiveness and coherence. (Fazi and Smith 2006: 24, emphasis
in original)
How this relates into concrete goals, both on the legitimacy and effi-
ciency dimension, is accurately summarized in the Commission’s
Communication on its “general principles and minimum standards for
consultation”:
The overall rationale […] is to ensure that all relevant parties are prop-
erly consulted. The principal aims of the approach can be summa-
rised as follows:
● To encourage more involvement of interested parties through a
more transparent consultation process, which will enhance the
Commission’s accountability.
● To provide general principles and standards for consultation that
help the Commission to rationalise its consultation procedures,
and to carry them out in a meaningful and systematic way.
● To build a framework for consultation that is coherent, yet flex-
ible enough to take account of the specific requirements of all the
diverse interests, and of the need to design appropriate consulta-
tion strategies for each policy proposal.
● To promote mutual learning and exchange of good practices within
the Commission. (Commission of the European Communities
2002: 3–4)
The Commission is often perceived as an overly intrusive technocratic

body, which has, however, no options to change either the way it is being
appointed or the basic rules it operates on. Since the Commission can
thus do nothing to improve its input legitimacy – for example having its
President directly elected by citizens – it has strongly promoted govern-
ance tools such as consultations to boost its accountability and legiti-
macy. The
strong incentive to the development of civil dialogue seems to be

its potential as a legitimising factor. This hypothesis is illustrated by
the low level of structured dialogue within those institutions that are
perceived to be the most legitimate (i.e. the Council and the European
Parliament), and it is particularly developed within the two bodies that
face legitimacy shortfalls, namely the Commission and the European
Economic and Social Committee. (Fazi and Smith 2006: 35)
In addition, the Commission openly states the goal to receive better

information and expertise for more efficient policy-making and, as
in the OMC, trigger mutual learning through the mutual exchange.
Relying on non-binding consultations to raise its accountability – and
eventually legitimacy – has been a motivation predominantly for the
Commission. The basic expectations underpinning the consultation
regime hence link accountability (legitimacy) and efficiency (through
expertise, learning and best practice exchange) objectives.
Summarizing the central objectives of these three initiatives, we can
distil the leading expectations behind them. Raising legitimacy and effi-
ciency in policy-making is by and large conceived of as two sides of one
coin. This suggests the underlying logic that if a wide range citizens or
selected stakeholders are involved, this does not only raise the accept-
ance and satisfaction with the process and outcomes but provides also
valuable expertise and input for better results. However, it is noteworthy
that these initiatives and, what we may call a “governance turn in EU
policy-making”, has not at all knocked the core of EU policy-making
on its head. Even though the doctrine of moving to more participa-
tory forms of governance has been firmly anchored in particularly the
Commission’s self-definition, the central decision-making rules persist.
Actually, all three initiatives apply clearly the notion of participatory
governance, but in the end they legally constrain the formal impact of
civil society and other private actors because eventual decision-making
power remains in the hands of the European Council (Treaty reform),
the Council of the EU (OMC) or the Commission (consultation in policy
formulation and implementation). This introduces an unresolvable
contradiction to the whole participatory approach. Legitimacy and effi-
ciency are to increase through citizen involvement, yet-to-be-heard citi-
zens mostly need to voice their concerns through organizations whose
input is not binding on the supranational EU bodies. The strong rhet-
oric but legally non-binding commitment that characterizes all three
initiatives finds continuation in the new participatory instruments the
Treaty of Lisbon introduced. Accordingly, in the general provisions on
the democratic principles of the Union, the Treaty formally recognizes
for the first time the role of a civil dialogue. Article 11 states:
1. The institutions shall, by appropriate means, give citizens and repre-

sentative associations the opportunity to make known and publicly
exchange their views in all areas of Union action. 2. The institutions
shall maintain an open, transparent and regular dialogue with repre-
sentative associations and civil society. 3. The European Commission
shall carry out broad consultations with parties concerned in order

to ensure that the Union’s actions are coherent and transparent.
(European Council 2007)
In addition to the formal recognition of the consultation tool, the fourth

paragraph of Article 11 introduces the new tool of a citizen initiative
that grants citizens to
take the initiative of inviting the European Commission, within

the framework of its powers, to submit any appropriate proposal
on matters where citizens consider that a legal act of the Union is
required for the purpose of implementing the Treaties. (Ibid.)
These innovations evidently follow the same underlying logic of the

three policy initiatives: opening up policy-making for citizens to raise
legitimacy and efficiency, yet without rendering citizens’ contributions
binding on EU bodies in their formal decision-making.
10.4 Scrutinizing the consequences: More governance

capacity?
After almost one and a half decades since the governance turn in EU
policy-making, what does the balance sheet look like? The two central
dimensions introduced above are the legitimacy and efficiency enhancing
capacity of governance. By and large, empirical evidence badly disap-
points the major expectations about more legitimate governance.
Kohler-Koch and collaborators, who have conducted the most in-depth
research on the actual achievements of EU civil society participation,
conclude that “the promise of ‘involving civil society’ has not bridged
the gap between Europe and the people, but rather sponsored a Brussels-
based CSO [civil society organization] elite working in the interest of
deeper integration” (Kohler-Koch 2010b: 335). But also as far as the
efficiency-enhancing potential is concerned, it has not proved easy to
pick governance as an alternative to hierarchical steering. Instead, “new
modes” of governance that rest on other mechanisms have repeatedly
been shown to work only if applied with a shadow of hierarchy looming
in the background (Smismans 2008; Börzel 2010; Héritier and Rhodes
2011). I will again discuss each of the three initiatives in turn.
The benchmark for measuring if the Convention has met its goals
can be directly taken from the Laeken mandate that tasked the
Convention to
resolve three basic challenges: how to bring citizens, and primarily

the young, closer to the European design and the European insti-
tutions, how to organise politics and the European political area in
an enlarged Union and how to develop the Union into a stabilising
factor and a model in the new, multipolar world. (European Council
2001b: Annex)
The legitimacy-enhancing effect was, in the first place, to be achieved

by dialoguing with civil society. However, empirical accounts agree that
instead of offering access to a wide range of citizens, it proved rather “a
model of closed elitist politics which did not communicate sufficiently
with the citizens” (Borragán 2007: 271). Even though “[a]ssessments of
the Convention per se are broadly positive […] the failure to engage
national NGOs or to organise national-level debates meant that there was
a gulf in the perceptions held by those in and those outside of Brussels”
(Fazi and Smith 2006: 50). Thus “the Convention was ‘listening without
committing to an answer’. While a number of civil society organisations
made their arguments available to the Convention members – as well
as to other actors and organisations – the processes were not marked
by a structured participation from civil society” (Kværk 2007: 188,
citing Lombardo 2003: 14). But even if one may argue that inside the
working groups of the Convention deliberation was the predominant
mode of interaction and that the process bore the roots of “a critical
and reflexive approach to constitutionalism” (Shaw 2003), two decisive
points seriously undercut the claim that the Convention has achieved its
legitimacy-enhancing objective. First, the evidence of the Convention’s
ultimate failure in creating a communicative discourse between
decision-makers and EU citizens is the rejection of the Treaty in public
referenda in France and the Netherlands in 2005, and on the Lisbon
Treaty in Ireland in 2008 (O’Brennan 2009). Second, the Convention
drafted a Treaty which, following the regular legal procedure, was passed
on to the European Council in which the heads of state and government
negotiated the final draft behind closed doors (Magnette and Nicolaïdis
2004). Even if the scope for changes was limited in order to preserve
the package deal of the single text, the Council exercised its autono-
mous decision-making power to change sections of the treaty drafted
by the Convention. More so, after the original Convention’s draft for a
Treaty on a Constitution for Europe had failed, the subsequent renego-
tiation was fully in the hands of the Council, which now consisted of
27 members. Actually, the negotiations leading to the Treaty of Lisbon
were not only even less open but also far less intergovernmental than
ever. To produce an agreement, the German presidency did not bet on

negotiations with the whole Council but ensured agreement on basic
points beforehand in separately conducted bilateral talks between the
German Chancellor’s two “sherpas” and the single national govern-
ments. Once having carved out positive responses to the most funda-
mental decisions in the single capitals, the Council convened to finalize
a list of remaining points (Maurer 2007). In addition, national govern-
ments argued consistently against the need for additional referenda on
the Lisbon Treaty (Millward Brown IMS 2008; Reh 2009). The eventual
process that led to the enforcement of the Treaty of Lisbon was not only
as far away from an open and deliberative process as one might imagine.
It even fell behind the accessibility of previous intergovernmental nego-
tiations because the bilateral talks were kept disclosed and on a number
of central decisions this procedure did not even offer an open nego-
tiation between all members of the Council in one, intergovernmental
forum. This procedure also implicitly answers the question about the
efficiency of the process. Both the referenda and the Council negotia-
tion – let alone deliberative – attempts could not produce the desired
output to enforce a reform treaty. The constitutional treaty only hardly
passed the hurdle to be signed by all member states and could not be
ratified. Ratification was ultimately achieved by dropping basically all
the normative governance agenda prescribed. This notwithstanding, the
overall balance is more ambiguous. The Convention indeed achieved to
draft a single reform text, which the intergovernmental conferences had
not been capable of agreeing on. Yet, this single text missed to reach
out to citizens and could eventually only been ratified in a procedure
that was less open and inclusive than any before. The Convention
hence succeeded more internally in delivering a consensus document
the participants – including some organized civil society groups – had
agreed on (but see European Convention 2003b), it failed as inclusive
forum that bridged the gap between EU bodies and single citizens.
The second case regards the open method of co-ordination. Driven
by the “initial optimism that the OMC would broaden participation,
improve transparency and cross-sectoral learning and increase the poten-
tial for experimental governance involving a broad range of stakeholders”
(Michalski 2012: 298), the OMC footed on a decentralized approach that
foresaw that “the Union, the Member States, the regional and local levels,
as well as the social partners and civil society, will be actively involved,
using variable forms of partnership” (European Council 2000). Despite
the intention that participation would be realized at all levels, the actual
involvement concentrated on supranational policy formulation. But in
spite of some positive accounts about the interaction mode and working
practices inside the Brussels processes (Fazi and Smith 2006: 60), the
OMC remains a weak instrument because its success is depends always
“on the political will of national governments” (Fazi and Smith 2006:
58). Besides what has been pointed out as problem above, namely that
civil society actors need a considerable degree of organizational struc-
ture and resources to participate in Brussels-based processes, the OMC
also suffered from the fact that participation has to be tangibly realised
by and within the member states. Yet, precisely in this respect the OMC
did not succeed,
NGOs operating at a local level only and/or those in New Member

States are most likely to be excluded […There is] a problem of ‘the
lack of awareness at national level in some of the countries partic-
ipating in the process. There is not real commitment and there is
no real impact in society’. The primary responsibility for this lack of
awareness lies not with NGOs, but with national authorities. (Fazi
and Smith 2006: 61)
Hence, the OMC suffered from “[c]entralization and bureaucratization,

rather than transparency and inclusiveness, are the rule in many national
contexts” (Michalski 2012: 411; see also Trubek and Trubek 2005; de la
Porte and Pochet 2012). As from 2004, participatory elements in the OMC
have been cut back to an extent that in the currently applicable Agenda
2020 the participatory OMC has been widely replaced by more closed
co-ordination between national governments and the Commission
(Amstrong 2012: 298) that promises more efficient policy-making. Not
only do national governments operate as effective gatekeepers for actual
participatory policy-making, the OMC’s possible legitimacy-enhancing
effect is also limited more generally. In practice, central mechanisms of
voluntary co-ordination have been put into question. Especially “the
dominating ‘deliberative’ mode does not improve accountability” (Benz
2007: 505). We need to tune down the negative account of the OMC a
bit as some authors argue that effects such as political learning might
simply not be measurable yet and will only show in future (Sabel and
Zeitlin 2012). Accordingly, “[m]uch of the work undertaken on the OMC
to date reflects a divide between optimists and pessimists concerning its
effectiveness and legitimacy […] However, the lack of convincing empir-
ical proof of policy learning and problems of definition leaves critics
to stress that claims about learning remain tentative” (Stiller and van
Gerven 2012: 119).
The third case touches on the Commission consultation regime as it

evolved out of earlier initiatives that were substantially redefined in the
Governance White Paper. Critical analysts see already in the approach of
the White Paper some crucial limitations.
Although the Governance White Paper marked a step beyond expert

consultation, the acknowledgement of civil dialogue is once more
enshrined as much in a technocratic and functionalist approach as
in the need to develop participatory democracy, and is justified by
three principles: expertise, good management practices (testing the
impact of Commission’s proposals) and participation (of civil society
organisation’s constituency in the policy process). (Fazi and Smith
2006: 24–25)
These principles reflect the intertwined efficiency (focusing on proce-

dural output) and legitimacy (focusing on procedural input) under-
standing. This understanding is central for the extension of the
consultation regime, in particular the opening up of the phase of legis-
lative proposal drafting in online consultations. On the website “your
voice in Europe” the Commission invites citizens and organized civil
society groups to provide their input to legislatory proposals in the
making from all policy fields. Even though offering the possibility to
participate online reduces the resource-dependency and even though
total participatory numbers have increased, the evidence collected so
far indicates that certain representative biases persist and that the goals
of inclusiveness and transparency have not been met (Quittkat 2011).
Shortcomings in transparency derive also from the formal status of
consultations, which remain unbinding on the Commission. In other
words, inputs received may be published after a consultation has been
closed but there is no binding procedure or even mandate on how and
whether the Commission reacts to or even incorporates them. It has
therefore been concluded that “the use of this new tool in practice does
not achieve the aims of a stronger involvement of (organized) European
civil society and the resulting strengthening of European democracy”
(Quittkat 2013: 110). Whether the consultations allow the Commission
to act more efficiently because it “takes advantage of the private actor
resources to increase its action capacity” (Börzel 2011: 54) is hard to
judge given the lack of transparency. Yet, as expert committees and
other forums with expertise in the policy-making process existed long
before, it may be questioned if extending the system to open online
consultations has dramatically increased efficiency.
Summarizing the stocktaking of the different explicit governance-

based initiatives realized in the EU, the capacity they have shown in
terms of performance and political consensus has not met the initial
elevated intentions. As far as efficiency-enhancing effects are concerned,
the participatory elements have been promoted as informal tools. As
such, inputs from organized civil society may contribute, be it to draft
consensus-oriented documents related to primary, secondary law or in
implementing acts. Yet, central public national or EU actors remain gate-
keepers that filter what is eventually incorporated. What appears from
the different accounts is that, very much in line with the Commission’s
idealistic understanding of governance, the consensus-oriented direc-
tion of impact is crucial. It reflects that there is an implicit underlying
assumption that one solution for better governance should and could
be realized to the benefit of all. Thus, participatory forums work well
if they serve to create consensus. Due to the informal character of the
tools, these forums are, however, very ill equipped to deal with zero-sum
games in which positions that cannot be reconciled clash. Short of
any rules about how external inputs have to be included in EU policy-
making, participation runs the danger of being perceived as a charade
rather than a mode to influence policy decisions. Therefore, regarding
the legitimacy-enhancing effects, the balance sheet is arguably even less
satisfactory than the efficiency-enhancing effect that depends on a poten-
tial consensus. A crucial element also in this seems to be Commission’s
perception of civil society itself, which relies almost fully on organized
civil society based in Brussels and partly Commission supported – which
contradicts the bottom-up logic of civil society activism for which this
mode of participation has failed to serve as transmission belt between
Brussels and citizens (Kohler-Koch and Buth 2013). Accordingly, this has
made
NGOs feel that leadership by the Commission risks repeating, not

resolving, the gap to citizens that the Convention suffered from and
that the Commission is itself an institution from which citizens have
become alienated. Its thinking tends towards the assumption that its
proposals are rejected only because they are poorly communicated
and citizens have misunderstood; solutions are believed to be needed
only at the level of communication and not of content. But with
citizens, as with civil society groups, the issue is not the number of
communication mechanisms and fora, but the quality of debate and
the extent to which their input is taken heed of. (Fazi and Smith
2006: 52–53)
Kohler-Koch extends this judgement to the innovations introduced in

the Treaty of Lisbon because it “rather underscored a mainstream view
that had emerged in the preceding decade and resulted in a changing
perception of associations and their role in the EU system” (2011: 18–19),
which leads the author “to conclude that civil society contributes little
to the democratic legitimacy of the EU just because it does not bring
about the democratic empowerment of citizens” (2011: 20).
10.5 Conclusions: lessons about EU governance and

governance capacities
This chapter has reviewed the governance capacity of EU’s governance

agenda, defined as efficiency- and legitimacy-enhancing impacts of the
most prominent policies that carry the governance label. To this end,
the chapter first highlighted how strongly the theoretical academic and
real-life normative expectations about governance overlap in the EU.
In conclusion, I argue that the basic understanding of governance that
underpins the EU actions is crucial for the actual performance of the
central initiatives, as well as the rather disappointing empirical delivery
academics have attested them.
The supranational actor with the weakest legitimacy base, namely
the European Commission, has most open-heartedly embraced funda-
mental ideas about better governance. Yet, the initiatives put forward
have not delivered the ideal type of efficiency and legitimacy effects
expected from them. Why is this the case? Recent work on how the
Commission uses external experts’ inputs is most enlightening (Hartlapp
et al. 2014: 217). Hartlapp and colleagues identify three such uses. First,
the Commission acts according to a technocratic logic; external inputs
serve in a functional way for problem solving. This logic is in line with
what has been reviewed here as efficiency-enhancing. The second logic
the authors trace relates to political considerations; expert positions
are used to create consensus around a proposal. As the analysis of the
empirical evidence illustrated in this chapter, the creation of consensus
is actually at the heart of the legitimacy-enhancing mechanism of EU
governance modes. Yet, the legitimacy-enhancing effect is – at best –
limited to the participants that are included into a process while the
processes as such are not open and inclusive across the board. In addi-
tion to this, Hartlapp et al. identify a third logic that uncovers a strategic
use of external inputs; they are referred to as evidence to substantiate
the Commission’s own position, especially in the inter-institutional
competition. Contributing stakeholders are hence stated as supporters

of a particular position.
Obviously, all three logics have fundamental flaws. First, efficiency-
enhancing effects assume that there are unambiguously “better” options
to pick from. As pointed out before, this will not be the case in zero-sum
games. If applied to distributive issues, the soft steering that character-
izes governance does not deliver – even if in the EU these are the areas in
which due to a lack of consensus among the member states governance is
often promoted as an alternative co-ordination option. This means, that
from an efficiency-enhancing perspective, “[t]he dilemma of European
governance may be that ‘soft’ forms appear to require a shadow of supra-
national hierarchy to address policy problems, which the Member States
refuse to make subject to ‘hard’ supranational forms of governance in the
first place” (Börzel 2010: 210–211). Second, consensus-building inside EU
policy-making suffers from the fundamental flaw that consensus is limited
to the participating, usually elite circle. Simply because of the complex
rules of EU policy-making and the immense multitude of positions across
28 member states, processes need a certain level of expertise and aggre-
gate interest representation – which inevitably implies that the processes
as such are not open, and that the ultimate responsibility for decision-
making rests on the bodies elected and appointed according to the rules
of representative democracy. Third, the use of external input to politically
substantiate policy-makers’ positions is maybe most questionable as long
as inputs are being delivered in a rather unstructured and informal way.
In essence, if the decision over the use of external input in participatory
processes remains solely in the hands of the decision-makers, it does not
increase democratic control or legitimacy because whether it is being used
in an efficiency-enhancing, consensus-building or political-substantiating
way (or not at all) remains out of any democratic control. This has led to
a more general theoretical conclusion: “Civil society participation is not
an ideal path to democratization. A greater openness of EU policy-making
is desirable under the condition that standards of democratic representa-
tion and responsibility are ensured. Even then, openness and participa-
tion foster democracy only when they are in public” (Kohler-Koch and
Quittkat 2013: 191). The crux is that governance cannot serve as an alter-
native but only as an addition to a functioning system of representative
democracy. The theoretical lesson beyond governance in the EU is hence
that governance cannot remedy perceived shortcomings in democratic
representation; it can even exacerbate them if not embedded into a strong
framework of representative democracy that constrains its applicability.
Note
1. The following elaborations on the OMC and the Commission’s consultation
regime draw in large parts on earlier publications of mine (Heidbreder 2014;
for a summary on civil society participation see Heidbreder 2012).
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Part V
Conclusion: Moving Forward
in Studies of Governance
Arrangements
11
The Past and Future of
Governance Studies: From
Governance to Meta-governance?
Jeremy Rayner
11.1 Introduction
This collection is informed by an understanding of the concept of

“governance” as a heuristic lens through which the contextual realities
of the co-ordination of multiple actors and institutions in the policy
system can be reconstructed in detail. The governance lens is presented
as trifocal, its three distinctive facets focusing attention respectively on
the dynamics of governance or the sense in which governance arrange-
ments can be observed changing over time; on the strategies that actors
use to achieve or avoid particular kinds of governance arrangements in
the policy realm; and on the “dual capacity” of governance arrangements
to achieve (or fail to achieve) concrete policy outcomes and sustain
(or fail to sustain) their own legitimacy with respect to co-ordination.
This chapter assesses the broader implications of this complex picture
of governance as dynamic, strategic and effective for the increasingly
popular concept of metagovernance or the governance of governance
arrangements and the extent to which the case studies in this volume
support the emerging findings of the metagovernance literature. It
does so by delineating three main schools of governance studies and
demonstrating how they each converged on a concept of second-order
or metagovernance. While convergence and the reasons behind it are
clear, each has a slightly different concern that colours its conception
of metagovernance. I begin, however, by locating the emergence of the
metagovernance concept in terms of the trifocal lens.
Changing relationships between state and society were clearly central
to the emergence of the contemporary concept of governance. Many
235
236 Jeremy Rayner
early writers on the governance phenomenon were convinced that they

were observing something new in this respect and that the most impor-
tant feature of what was originally referred to as “the new governance”
is a diminished role for traditional state institutions and actors. Later
commentary produced a more nuanced account, in which the changes
subsumed under the governance concept create new challenges and
opportunities for governments, but on both accounts it made sense to
talk about a shift from government to governance. In the earliest litera-
ture, “governance” was originally a shorthand expression for “govern-
ance change”. This change may have been welcomed or decried, the
progress of the governance shift regarded as misunderstood or exag-
gerated, but there was a shared assumption that a shift had, in fact,
taken place. The problems of governance were fundamentally those of
dynamics and change – how much, how far, how quickly, in what direc-
tion and so on.
Of course, there were sceptics, those who felt that the phenomenon
of governance change has been exaggerated or even completely miscon-
ceived. Amongst their number were those who had such an obvious
distaste (or affection) for traditional institutions of government and
public administration, often on ideological grounds, that it was difficult
to disentangle the normative from the empirical in these controversies,
a problem that is clearly related to the strategic facet of the govern-
ance lens. A real political battle was taking place where the defenders
of a more robust role for the state as traditionally conceived, for policy
designs that involved significant reliance on regulatory instruments and
direct government provision of services, squared off against those who
saw “government” of this kind as the problem rather than the solution
and countered with a preference for incentive and information-based
policy designs. While central to understanding the impetus for govern-
ance shifts themselves, this ideological battle significantly confused the
conceptual understanding of governance change by reinforcing the idea
of governance dynamics as taking place on a simple continuum from
(old) government to (new) governance.
Ironically, perhaps, the corrective to this early and very misleading
picture of governance dynamics as strategically driven change along
a single “government to governance” dimension came from interna-
tional relations. First, international relations scholars were noticing the
struggle to provide some kind of co-ordination for very complex prob-
lems such as the governance of international trade or the conservation of
biological diversity, where the absence of any kind of global government
made the “government to governance” narrative completely irrelevant.
The Past and Future of Governance Studies 237
Second, tracing the effects of globalization and internationalization of

policy issues into domestic policy-making inevitably highlighted the
phenomenon of multilevel governance in many policy subsectors that
had hitherto been handled by single jurisdictions, whether national or
subnational. The discovery of private governments in international rela-
tions, the well-documented desire for more participatory policy-making
around many of these issues, and the growing practice of governing
through networks of public and private actors were clearly related to the
ideologically motivated literature on governance but they all seemed
to call for a concept of governance that was more nuanced and sophis-
ticated than the original one-dimensional picture. In particular, the
international relations and global governance literature popularized the
idea that more complex policy problems require more complex govern-
ance solutions generating the capacity to solve particularly difficult or
even apparently intractable problems that defied older, more simplistic
approaches. More complex and intractable policy problems, including
the second and third order problems of “reflexive modernity”, are
powerful drivers of new approaches to co-ordination.
Thus, the impact of international relations and global governance
scholarship was to move discussions about governance dynamics
away from the idea of a one-time shift from government to govern-
ance. In some contexts, it may still make sense to pose the question of
whether traditional governing institutions and practices are making a
comeback – or, indeed, whether they never really went away but were
simply going about their regular business under cover of the “rhetorical
afflatus” (Capano et al. 2012) about governance – but, as the case studies
in this volume clearly demonstrate, many other kinds of governance
arrangements and governance dynamics are possible. The main theo-
retical developments of the idea of governance are all attempts to do
justice to the multi-dimensional character of governance in order better
to understand both governance dynamics and governance effects.
In section 2, I outline three responses to the challenge of govern-
ance as a multi-dimensional concept. The first involves a “top-down”
construction of ideal typical governance modes and the effort to iden-
tify their comparative strengths and weaknesses. The second is a more
“bottom-up” approach that begins with the dimensions of governance
and change along these dimensions. The third approach is more difficult
to characterize but is built on detecting relationships between the char-
acterization of problems and the creation of governance arrangements
that seem best adapted to solve them. Section 3 begins from the obser-
vation that all three approaches problematize governance relationships
238 Jeremy Rayner
in a way that introduces the possibility of a strategic activity called

the governance of governance or metagovernance. In terms of the
trifocal lens employed in this volume, governance dynamics can be
managed, the attempt to manage them is clearly strategic in the sense
of actors seeking some preferred governance arrangements over others
and attending to governance arrangements in order to increase their
capacity to solve problems becomes a key focus of public management,
especially in the problem-focused approach to governance. This section
notes the importance of the distinction made by Jessop between the
tinkering kind of metagovernance that seeks to make a particular set
of governance arrangements more effective and the architectural kind
of metagovernance that seeks to address the general weaknesses of one
kind of governance arrangements with the strengths of another. The
concluding section assesses the contribution of this volume for devel-
oping an understanding of metagovernance.
11.2 Conceptualizing governance and

governance change
The conceptual basis for the interest in governance change, governance

strategies and governance capacities that had come to prominence in the
late 1990s is clearly set out in a number of early works, for example in
Stoker (1998). Beginning with Rhodes’ almost canonical statement that
governance signifies a change – “a change in the meaning of govern-
ment referring to a new process of governing; or a changed condition of
ordered rule; or the new method by which society is governed” (Rhodes
1996: 652–653, emphasis added) – Stoker went on to cite Rosenau’s
(1992) international relations account of governance as a very general
process of state–society co-ordination to achieve desirable outcomes. He
concluded that what had changed were the processes by which these
outcomes are now being achieved. Nonetheless, Stoker then plunged
straight into the classic elision found in this early governance literature
between the general processes of governance as co-ordination described
by Rosenau and governance (or “new governance”) as a novel mode of
co-ordination along the lines suggested by Rhodes’ usage. Thus Stoker
proposed five theses about governance that included the ideas that
“governance” entails a blurring of boundaries between state and society,
that it identifies a “power dependence” amongst the various institu-
tions involved in collective action, that it involves autonomous, self-
regulating networks of actors, and that it recognizes new tools available
to governments to steer and guide these networks (1998: 18).
11.2.1 Modes of governance

Stoker’s five theses provide an excellent guide to some of the central
themes that were to preoccupy governance theorists over the next decade,
including the important idea of network governance. However, the use
of governance to mean both the general practice of social co-ordination
and, at the same time, a changed way in which governments are engaged
in producing the outcomes of governance is obviously problematic.
This ambiguity about the meaning of governance was addressed in the
“modes of governance” literature (Considine and Lewis 1999), which
sought to differentiate a traditional mode of co-ordination by govern-
ments exercising authority (in the Anglo-Weberian sense of “imperative
co-ordination”) from other modes. The number of modes vary (and it
is hard not to conclude that the number was sometimes chosen with a
view to the possibilities of the arresting graphical presentation) but, at a
minimum, there are usually three: co-ordination by hierarchies, markets
and networks. Political economists often add “corporatist governance”
as an observable mode that seems different from the other three, while
those influenced by cultural anthropology add governance based on
“solidarity”, as in Table 11.1 derived from Jessop (2002).
As Table 11.1 suggests, a great deal of ingenuity can be devoted to
elaborating the dimensions along which the modes can be distinguished
Table 11.1 “Modalities” of governance (Jessop 2002)
Exchange Command Dialogue Solidarity
Rationality Formal and Substantive and Reflexive and Unreflexive and

procedural goal-oriented procedural value-oriented
Criterion of Efficient Effective goal- Negotiated Requited
success allocation of attainment consent commitment
resources
Typical Market State Network Love
example
Stylized Homo Homo Homo Homo
mode of economicus hierarchicus politicus fidelis
calculation
Spatio- World market, Organizational Re-scaling, Any time,
temporal reversible time space, planning path-shaping any where
horizons
Primary Economic Ineffectiveness “Noise”, Betrayal,
criterion of inefficiency “talking shop” mistrust
failure
Secondary Market Bureaucratism, Secrecy, Co-dependency
criterion of inadequacies red tape distorted asymmetry
failure communication
240 Jeremy Rayner
from one another, and it is not always clear why or how these dimen-
sions have been chosen. However, one of the main outcomes of all
this ingenuity has been the conclusion that modes of co-ordination are
ideal types and that all or most real world governance arrangements are
likely to be a combination of modes. This conclusion has usefully been
taken in two related directions. First, there is now a growing literature
on hybrid modes of co-ordination. One such hybrid mode – govern-
ance “in the shadow of hierarchy” (Héritier and Lehmkuhl 2008) – has
been so commonly observed that it has sometimes been promoted into
an ideal type in its own right, though this seems to defy the logic of
the modes of co-ordination approach. Second, discussions of hybridity,
some theoretical and others based on empirical observation of hybrids,
have given rise to a theory of governance dynamics. It proposes that
each mode suffers from distinctive governance failures (for example
those noted in Table 11.1) so that hybridity arises as the character-
istic oversights and failures of one governance mode are attempted to
be addressed by the introduction of aspects of the others. From here
it is a short step to the concept of the governance of governance or
metagovernance.
On the role of the state or “government”, the modes of governance
approach has tended to treat the key challenge as determining the
extent to which the hierarchical mode can intervene in the other modes
without overwhelming them and creating (or recreating) a simple hier-
archical governance mode, by definition one unfit for the new world of
complex policy problems and contested legitimacy. It is manifested in
the ongoing dispute between “society-centric” (Sorenson and Torfing
2006) and “state-centric” (Bell and Hindmoor 2009) approaches to
network governance and, again, creates space for the concept of metago-
vernance. For the moment, it is only necessary to note a welcome shift
in these disputes from apriorism to comparative empirical studies of
metagovernance in policy subsectors.
11.2.2 Dimensions of governance

It has already been noted that international relations provided an
important impetus for ideas about governance. Arguably, equally
important is a tradition of comparative politics that focused particu-
larly on the emerging governance structures of the European Union
(EU) as a novelty requiring distinctive conceptual tools that cannot
be provided by an older tradition of institutional analysis (e.g. feder-
alism). While the idea of hybridity found in the modes of governance
State intervention Societal autonomy
Policy legal non-institutionalized

bindingness interactions
rigid approach to dispersed loci
implementation of authority
presence of market
sanctions
material only private
regulation actors involved
fixed malleable
norms norms
only public procedural

actors involved regulation
absence of
hierarchy sanctions
central locus flexible approach

Politics of authority to implementation
institutionalized soft law
interactions
Polity
Figure 11.1 The dimensions approach (Treib et al. 2007: 6)
approach found some purchase here, the topic of governance in the

EU was attacked from the opposite direction, that is by cataloguing
the dimensions along which governance change is said to take place
without generalizing about characteristic associations between the
dimensions that form the basis for constructing ideal typical govern-
ance modes. The locus classicus of this approach is Treib et al. (2007),
which argues that an integrated theory of governance must attend to
three key sets of dimensions of governance: politics, policy and polity.
At first sight, this approach is much more promising for elucidating
both the dynamic and strategic aspects of governance because Treib
et al. go on to develop several metrics that can be used to track change
along each of the dimensions. Along the political dimensions atten-
tion focuses on the identity and influence of key actors and policy
networks. For the policy dimensions, factors would include the extent
to which the instrument mixes rely on legal sanctions, are procedural
or substantive in nature and the extent to which implementation is
shared with non-state actors. And finally, within the polity dimensions.
Treib and his co-authors pay particular attention to the nature of the
institutional arrangements, notably whether institutions are organized
242 Jeremy Rayner
on hierarchical or on market lines, and where, within these arrange-

ments, the locus of authority lies.
Once the key elements of each dimension have been specified, Treib
et al. argue that it becomes possible to explore interactions between the
various dimensions as a means of understanding governance change.
In fact, the analysis of governance dynamics is notably undeveloped in
their own work but is the focus of a research programme that began with
the attempt to understand “new governance” in resource policy, subse-
quently extended to other policy areas (Tollefson et al. 2008; Howlett
et al. 2009; Capano et al. 2012). The major contribution of this literature
derives from a key finding in Tollefson et al. (2008), a study of the evolu-
tion of the global forest certification scheme developed by the NGO-led
Forest Stewardship Council (FSC). By disaggregating the dimensions of
governance and avoiding premature conclusions about idealized govern-
ance modes, this multi-dimensional approach to governance revealed a
dense, substantive and hard law-like regulatory arrangement embedded
within the FSC. This choice of hard law and substantive regulation
stands in apparent contradiction to the fact that, as a private govern-
ance arrangement, FSC certification is designed to be almost entirely
beyond the state. In the FSC case, a polycentric architecture is combined
with instruments usually associated with state sovereignty and hierar-
chical co-ordination.
Although network governance is not a foundational concept in the
dimensions approach, as it is in the modes approach, Howlett et al. (2009)
did attempt to operationalize the policy dimensions by determining the
extent to which power in policy networks favoured state or civil society
network members. In doing so, they moved from an emphasis on the
broad and sometimes rather abstract theories of network governance
familiar from the modes of governance literature to draw on the tradi-
tion of policy network analysis (Fawcett and Daubjerg 2012; McNutt and
Rayner 2014). Combined with Capano et al.’s (2012) claim that the various
dimensions of governance are independent of one another rather than
nested or otherwise causally connected, the introduction of the possibility
that governance arrangements may be changes by organizing and reorgan-
izing different kinds of policy networks puts the kinds of empirical ques-
tions that are raised by the idea of metagovernance in a rather different
light. State-directed networks, for example, might turn out to be capable
of operating through soft law and non-hierarchical institutional arrange-
ments as the mirror image of the standards-based regulatory instrument
produced by the impeccably society-centric networks fostered by the FSC.
11.2.3 A problems-based approach

The third approach to governance change, the problems approach, is in
many ways the youngest, though it traces its distant ancestry back to the
work on inter-organizational networks that flourished in the early 1990s
(Kooiman 1993; Provan and Milward 1995). Noting these networks as
a novel phenomenon – and feeding from there into the general litera-
ture on governance dynamics – the inter-organizational network writers
often identified the occasion for the new network structures as the
appearance of new policy problems that crossed traditional organiza-
tional boundaries, both within state structures and beyond. In the latter
case, this literature connects with an even older one on implementa-
tion networks, which were, again, often focused on the implementation
challenges of particularly intractable problems. The real impetus to the
problem approach to governance, however, came from efforts to clas-
sify and distinguish different problem structures in a way that moved
beyond the rather vague quality of “tractability”.
Here, there is an important intermediate literature on so-called wicked
problems, a class of especially intractable and challenging policy issues
made famous in Rittel and Webber’s (1973) discussion of the great policy
failures of the 1960s. Their work languished in relative obscurity for a
while before being rescued by writers concerned with the new envi-
ronmental conflicts that erupted in many developed countries during
the 1980s and into the 1990s (Nie 2003). The spectacle of complacent
professional communities of resource managers and planners utterly
confounded by a whole new way of framing and thinking about the
problems of their field and beset on all sides by vigorous new social
movements proposing what appeared to professional communities as
totally implausible solutions seemed classic examples of “wickedness”
in the Rittel and Webber sense.
Nonetheless, the “wicked problem” designation undoubtedly suffered
from overstretch – leading in due course to efforts to characterise the
truly wicked as “super wicked” problems (Levin et al. 2012). The key
move for governance studies came in efforts to contrast wicked problems
with more tractable kinds and to understand how problems that were
once treated as relatively straightforward objects of policy, to be tackled
by familiar policy instruments and implemented by cosy professional
communities of practice, could lose their tractability and become so chal-
lenging. This effort led in turn to the resurrection of a useful typology
developed in the planning literature in a famous piece by Herbert Simon
(1973) that distinguished between two kinds of disagreements about
244 Jeremy Rayner
Table 11.2 Four types of problem structures (Hoppe 2010: 73)
Agreement on norms and values
Far from Close to

agreement agreement
Far from certainty Unstructured Moderately

problem structured problem
Certainty (goals)
on means to Close to certainty Moderately Well-structured
achieve goals structured problem problem
(means)
problems: disagreements about the goals being sought and disagree-

ments over the means to achieve them. These distinctions were worked
up by Meuleman (2013) and by Hoppe (2010) into four classic problem
types.
Simon’s original piece had stressed the extent to which most real world
problems originally confront us as unstructured, with multiple goals
that could be pursued and multiple ways of achieving them. His first
example of designing a new warship may be unfamiliar to most readers
but his second example of building a house will doubtless strike a chord
with many. On Simon’s view the key to successful problem solving is
to try to impose structure in various ways, often by decomposing the
original unstructured problem into a series of bounded, more structured
problems. The question of the new house, for example, is rapidly struc-
tured by considerations of budget, site influence, local zoning regula-
tions and so on. Meuleman and Hoppe added a moderate constructivism
to Simon’s approach, arguing that policy problems are not structured by
nature, but enter and persist in the policy realm framed by competing
interests in ways from which actors seek to sustain advantage. This may
seem an innocuous move but it serves to sharply differentiate the prob-
lems approach from the “interactive governance” approach of Kooiman,
which takes a realist line about “the system to be governed” (Kooiman
et al. 2008). As was becoming very clear from studies of the supposedly
intractable problems of the last decade, from climate change to the risks
posed by novel agricultural biotechnologies, many policy actors have
a strong interest in maintaining the status quo by representing their
problems as deeply unstructured and hence incapable of being solved by
public policy. Meanwhile, others have struggled, often successfully, to
impose some structure by achieving a measure of agreement on at least
one or other of the dimensions of disagreement, goals and means. From
Table 11.3 Problem structure and “policy-politics” typology (adapted from

Hoppe 2010: 142)
Agreement on norms and values
Far from agreement Close to agreement
Far from Unstructured problem Moderately

certainty Agenda-changing populist structured problem
politics (goals)
crisis management Advocacy coalition
politics
deliberation and reflexive
learning in issue networks Problem-driven
Certainty learning in policy
on means to subsystems
achieve goals Close to Moderately structured Well-structured
certainty problem (means) problem
Transformative discourse- “Normal” regulatory
coalition politics politics
State directed and Professional/
clientelist networks technical networks
here it is a short step to the conclusion that problems are the object of
governance and that the governance of problems involves the interac-
tion of characteristic assemblages of problem types (a version of which
is presented in Table 11.3).
Thus, unlike the modes and dimensions approaches, which proceeded
largely from an original interest in the dynamics of governance, the
problems approach began with a consideration of capacities and adds to
that an interest in strategy. Nonetheless, these governance assemblages
(Hoppe calls them, rather awkwardly, “problem type–policy politics
type couplings”) are obviously subject to change over time. Changing
governance structures are especially important in the governance of
problems approach precisely because how a problem is structured
largely explains policy outputs and, to a lesser extent, outcomes. Based
on an admittedly small number of case studies, Hoppe comes to two key
conclusions. First, there is no necessary connection between “problem
type–policy politics type” couplings such that we could speak of them
as “stable configurations”. Not only are these couplings subject to “drift
and dynamics” but as his cases demonstrate there is a wide variety of
pathways between the four problem types driven by a similar variety of
changes in policy network structure and institutions. Although Hoppe
calls this conclusion “surprising”, it is very similar to the conclusions
246 Jeremy Rayner
reached by the dimensions approach. It strongly suggests that, unless

the real focus is on hybridity, the modes approach is in danger of
reifying their modes of governance and obscuring empirical patterns
of hybridity and governance change with profound implications for
understanding (or misunderstanding) the role of governing institutions
and practices.
Second, Hoppe raises the question of agency in governance change,
albeit in the same somewhat obscure terms of “drift and dynamics”. In
his cases, shifting patterns of governance were clearly driven by political
agency. As he puts it, the “gear shifts” between one kind of problem type
and another or one kind of policy-politics type and another occurred at
the interface of problems and “policy-politics” and involved entrepre-
neurship by identifiable individuals:
Although the spur for problem reframing and policy innovation

came from inside the standing policy networks, the challenge was
successful due to support from agents working at the interstices
between the policy network and higher administrative and political
governance levels. (2010: 164).
In describing the activities of these entrepreneurs, Hoppe passes rapidly

through a series of suggestive theoretical connections. The entrepre-
neurs are successful because they are outsiders and not only see that
existing network structures cannot be improved through “repair work”
but bring from their own experiences new problem framings and policy-
politics logics that can be “translated” into the old context. The effect
is to “nudge” the governance assemblage towards a new coupling, an
activity that Hoppe identifies as the “metagovernance of problems”.
Although he does not rule out the possibility that these entrepreneurial
individuals could be drawn from civil society organizations, he strongly
suggests that the kinds of resources that they will need are found
within government itself. Although this account is suggestive rather
than definitive, it provides the outline of a problem-based account of
metagovernance that appears on the surface to be very different from
the account of metagovernance proposed by either the modes or the
dimensions approaches. Stressing agency and even identifying agents,
it most clearly connects metagovernance with the themes of this book.
The activity of metagovernance explain the dynamics of governance. It
is driven by strategic considerations and is bounded by considerations
of capacity, both of the metagovernance agents and the target policy
networks.
11.3 Metagovernance
All three approaches to governance have thus converged on the idea of

“the governance of governance” and for all three the occasion for raising
the question of metagovernance is governance failure. For the modes
approach, there is often a suggestion of the inevitability of governance
failure. Jessop, perhaps the most distinguished exponent both of the
modes approach itself and of the inevitability of metagovernance (1997,
1998, 2003, 2011), softens this suggestion by taking a historical view of
governance and metagovernance debates. He notes their origins in the
1970s, when the key question appeared to be the breakdown of hierar-
chical modes of governance highlighted by the literature on “overload”
and “legitimacy deficits” (Offe 1975) and the pressing problem of how
to productively combine hierarchies and markets in policy subsystems
with long histories of hierarchical governance. More recently, metago-
vernance has arisen again in the context of the evidently misplaced
enthusiasm for self-organizing networks as a desirable “third way” that
avoids a straight choice between markets and hierarchies. Faced with an
abundance of examples in which networks either did not self-organize
in response to problems or provided manifestly suboptimal solutions to
them, the question of how to compensate for over-reliance on networks
has taken the form of a metagovernance debate.
In this context, Jessop makes a useful distinction, followed by
Meuleman, on two kinds of metagovernance. At one level, there is a
suggestion that every governance mode or governance arrangement has
its characteristic strengths and weaknesses and will find different kinds
of problems more or less tractable. Governments, markets and networks
can each be modified and redesigned on the basis of lessons learned
from the experience of failure. Much of what the earliest theorists of
governance change were observing turned out to be this kind of metago-
vernance. Markets were redesigned, with the lessons of the early priva-
tizations, for example, absorbed and translated into more sophisticated
attempts to subject the provision of services to market incentives. Jessop
usefully cites one of the early enthusiasts for networked governance:
the networked polity is a structure of governance in which both state

and societal organization is vertically and horizontally disaggre-
gated (as in pluralism) but linked together by cooperative exchange
(as in pluralism). Organizational structures in the networked
polity are organic rather than mechanistic, which means that both
knowledge and initiative are decentralized and widely distributed.
248 Jeremy Rayner
Horizontal relationships within and across organizations are at least

as important as vertical relationships, and organizational relation-
ships in general follow a pattern of many-to-many (heterarchy)
rather than many-to-one (hierarchy). Exchange is diffuse and/or
social rather [than] discrete and/or impersonal. The logic of govern-
ance emphasizes the bringing together of unique configurations of
actors around specific projects oriented toward integrative solutions
rather than dedicated programs. These project teams will criss-cross
organizational turf and the boundary between public and private.
State actors with a high degree of centrality in the web of inter-
organizational linkages will be in a position to provide facilitative
leadership in constructing or steering these project teams. (Ansell
2000: 311).
The failure of such networks to emerge in key contexts or to encourage

diffuse exchange and learning where necessary or to “criss-cross organi-
zational turf” with any effectiveness at all are all problems that can be
addressed as modifications to network governance itself. In fact these
latter kinds of adjustments are so common that they are generally
subsumed under the heading of “network management” as opposed
to the rather clumsy titles of “metaexchange” or “metaorganization”
reserved for the other kinds of reflexive tinkering with governance
modes that Jessop (2011) calls first-order metagovernance.
First-order metagovernance or tinkering with governance modes is a
well-established practice and referred to in many of the chapters in this
book, most often in connection with well-developed policy subsystems
in stable polities. It is striking, however, how often the case studies also
provide evidence for a different kind of metagovernance. Referred to as
“second-order metagovernance” (Jessop has failed to bring into general
usage Dunsire’s (1996) idea of “collibration” although he continues to use
it himself), this involves the balancing or rebalancing of different modes
or dimensions of governance to address a problem that has emerged in
a set of existing governance arrangements. Hoppe provides an example
that pulls together all three approaches to governance. Drawing on
the cultural anthropological dimensions of the modes, he argues that
contemporary complex problems cannot be successfully tackled by one
mode of governance alone. In his example, the complexities of modern
health care require interventions from hierarchies, markets, networks
and solidarities (such as families). The key to success is to keep these
modes of governance in some workable relationship such that one
does not crowd out another, thereby losing the characteristic and vital
contribution of the now excluded mode to the solution of the problem.

The second-order metagovernance of problems is a goal-directed exer-
cise aimed at maintaining a “requisite variety” (Jessop 2003) of govern-
ance modes.
The case studies provide two contributions to the emerging debates
around second-order metagovernance, both of which tend to emphasize
the importance of state institutions and state actors. First, the sugges-
tion in some of the cases is that “requisite variety” has usually been lost
because of over-enthusiasm for markets and networks at the expense of
hierarchical co-ordination and the policy instruments and implementa-
tion styles associated with it. Re-establishing a workable relationship is a
matter of tempering enthusiasm with experience. Second, and perhaps
more important, the case studies generally provide support for the view
that states play a key role in both first and second order metagovernance
but particularly in the latter. As Jessop argues, there is no a priori neces-
sity for the importance of state actors in metagovernance but “now and
for the foreseeable future” they do in fact take a leading role. While other
actors have strategic objectives, state actors usually have the capacity to
perform the key roles of second-order metagovernance:
They get involved in redesigning markets, in constitutional change

and the juridical re-regulation of organizational forms and objec-
tives, in organizing the conditions for networked self-organization,
in promoting social capital and the self-regulation of the professions
and other forms of expertise, and, most importantly, in the collibra-
tion (sic) of different forms of first-order governance and metagov-
ernance. (Jessop 2011: 116)
In particular, the case studies provide examples of governments setting

the ground rules for strategic engagement in the form of regulatory frame-
works, defining stakeholders and structuring policy networks to address
power differentials, trying to maintain coherence between different
governance schemes and managing multilevel governance interactions,
and, above all, attempting “to modify the self-understanding of identi-
ties, strategic capacities, and interests of individual and collective actors
in different strategic contexts and hence alter their implications for
preferred strategies and tactics” (Jessop 2011: 116). Moreover, the case
study chapters provide evidence of this kind of activity by governments
operating in a wide range of different governance contexts.
While Jessop is, of course, a well-known state theorist, this recogni-
tion of the role of governments in governance and metagovernance is
250 Jeremy Rayner
a theme being sounded by even some of the original enthusiasts for

network governance:
we are convinced that governments at different levels will continue

to play a crucial role in governance, both as a central and resourceful
participant and as a metagovernor that facilitates manages, and
directs the various governance arenas. As such, governance is offering
a new perspective on the emerging reality that recognizes the central
influence of government in and over governance. Governments are
gradually transformed by their participation in and metagovernance
of governance, as they must learn to participate in complex policy
interaction, develop their reflexive and monitoring capacities and
find ways of governing governance that do not rely on brute force
and imperative command. (Torfing et al. 2012: 13)
The idea that governments are transformed as a result of their involve-

ment in governance and both orders of metagovernance is a very
insightful comment on the implications of governance dynamics for
governments but it should not be taken too far. Whether governments
are actually engaging in these kinds of activities and with what success
is surely an open question to be answered by empirical research. And,
as both the dimensions and the problems approach to governance
strongly suggest, there will not be a single answer to the question. It
will depend on the nature of the problem presented to policy-makers
in more or less well-defined sectoral and subsectoral contexts – the
“problem type–policy politics type couplings” described by Hoppe.
As some research, ironically again in the field of global governance
studies, suggests, private metagovernance is not only perfectly possible
but actually in evidence (Steurer 2013). The claim, in fact, suggests
a programme of comparative sectoral governance studies that will be
able to answer, not only the question of the extent to which govern-
ments are actually attempting to bring about governance change, but
also the tools that are available and the prospects for success. Such
comparative studies are already emerging in the literature based on a
variety of approaches to governance and, hence, a variety of different
foci for the key relationships under study, for example the traditional
governing instruments transposed to the context of the metagovern-
ance of nuclear energy (Baker and Stoker 2012) or the relationship
between “steering capacity” and network structure in organic agricul-
ture (Fawcett and Daugbjerg 2012) and the role of standard settings
(Auld 2010).
11.4 Conclusion
This chapter has reviewed two familiar approaches to governance

studies, the “modes of governance” and the “dimensions of govern-
ance” literatures in light of the trifocal governance lens presented in
this collection. The two original approaches were presented as at least
in part complementary, with the modes decomposable into dimensions
and the dimensions often aggregated into what look suspiciously like
modes. Their shared concern with governance dynamics and actors
strategies tend to be developed at the expense of a discussion of capaci-
ties. The two approaches do, however, have different implications for
the possibility of steering governance change or metagovernance. The
modes approach introduced the fundamental idea of metagovernance
as a problem of preventing one mode from dominating at the expense of
the others. The dimensions approach, on the other hand, tends to take
a more empirical, less a priori, stance on metagovernance. Particular
governance architectures have evolved over long periods of time and
are more or less state- or society-centric along the different dimensions
of governance. Change can proceed at different speeds and even in
different directions along the different dimensions, making generaliza-
tions difficult. The dimensions approach, in particular, favours sectoral
studies of governance over broad-brush statements about governance
modes in different countries or jurisdictions.
The chapter noted the emergence of a third approach to governance,
labelled the “problems approach”. While the earlier approaches tend to
take the objects of governance as given or at least not difficult to iden-
tify, the problems approach argues that governance is the effort to solve
problems whose identity is in part created by the governance context
itself. Building on the literature on “wicked” problems, the problems
approach argues that problem structuring, or the extent to which prob-
lems emerge with agreement on the goals being pursued and the best
means to achieve them, will tend to be associated with particular styles
of politics and policy-making. However, those who are disadvantaged by
that style, for example loose issue networks in a policy style that favours
closed epistemic communities, will try to restructure the problem to
their own advantage. While the logic of the problems approach seems
to suggest that metagovernance is just this activity of changing problem
structures and policy styles or first-order metagovernance, the example
of Hoppe’s work on governance shows that a problems approach is also
compatible with a concept of second-order metagovernance, attempting
to maintain some balance or “requisite variety” amongst and between
252 Jeremy Rayner
the governance modes that emerge from the contest over problem
structures.
Metagovernance, and particularly second-order metagovernance, add a
concern with capacities to the original focus on dynamics and strategies.
The case studies presented in this volume strongly reinforce the sugges-
tions in the theoretical literature that states have unique capacities to
engage in the balancing and accommodating involved in metagovern-
ance. Nevertheless, different states have different capacities with respect
to these activities and in some contexts, for example, well-developed
efforts at global governance, those capacities may be exceeded by the
capacities of other actors. The feasibility of these interventions by states
will continue to depend on matching the ambition of metagovernance
activities to their empirical capacities to remodel particular governance
arrangements, and well-developed understanding of the varieties of
governance arrangements will be essential to their success.
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Index
2004 Act, 64–67 government effectiveness in Central

Asia, 188–189
actors, 10, 12, 75, 153 government effectiveness in East
business, 82–83 Asia, 185–188
domestic, 160 government effectiveness in
governmental, 108 Southeast Asia, 189
medical, 57–63 see also autonomy; capacity
multi-level governance (MLG), Asian crisis, 37–38, 46n12
152–155 assisted reproduction, 53–54, 57–58,
non-medical, 61, 63 66–69
non-state, 21, 30, 214, 217, 241 see also assisted reproductive
policy, 5–6, 9, 11, 13–14, 28, 35, 41, technology (ART)
45, 78, 104, 105 assisted reproductive technology
political, 5, 16, 63, 64, 104, 153, (ART), 58–63, 65–66, 68
166n1 Australia, 108, 109
private/private-sector, 7, 39, 40, NPM in, 134
47n16, 60–63, 79, 91, 194, 197, performance-based research
213, 237 assessment systems in, 138–139
public, 7, 60–63, 78, 79, 88, 91, 194, performance-based research funding
213, 237 systems in, 137–139
religious, 53, 63–67 research collaboration in, 141
secular, 53, 63–67 University of Melbourne, 143–147
social, 63, 64, 166n1 see also Australia, environmental
societal/civil society, 78, 79, 80, policies in; Australia, higher
91, 94 education governance in
state, 21, 76, 77, 248–249 Australia, environmental policies in
subnational, 153 frames, 82–83
supranational, 151, 165, 226 goals, 83
Articles of Agreement, 33, 37, 47n19 instruments, 83–84
see also International Monetary structures, 81–82
Fund (IMF) Australia, higher education
Arts and Humanities Research Council governance in
(AHRC), 141 constitutional provisions for higher
Asia, governance in education, 110–111
comparison of governance scores in, point of departures for, 111–112
177–180 policy development in, 114–116
control of corruption in Central policy dynamics in, 120–121
Asia, 184–185 time-frames and critical junctures,
control of corruption in China and 112–113
India, 180–182 Australia University Commission, 112
control of corruption in Southeast Australian Research Council (ARC),
Asia, 182–183 139, 148
255
256 Index
autonomy, 174–175, 183, 184, 185, capital controls, 27–28, 32–35, 37 40,
189–190 42–45, 47n19
dataset for study of, 176–177 capital inflows, 31, 42, 43, 47n18
dimensions of, 176 capital outflows, 32, 41
Averting the old age crisis, 155, 159 carbon tax, 84, 86
Central Eastern Europe (CEE)/ Central
Basel Committee on Banking Eastern Europe (CEE) countries,
Supervision (BCBS), 38, 46n14 151, 156, 165–166
Baumgartner F. R., 11 first wave of pension reforms
best available technology (BAT), (1990s–early 2000s), 158–161
88–89, 95 last wave of pension reforms since
Börzel T. A., 7 2008, 161–165
Brazil, 41, 43, 108 pension reforms in Hungary, 158,
Bretton Woods system, 31–34 161–163, 165
Brown, L., 55 pension reforms in Poland,158–159,
161–163, 165
Canada, 108, 109 pension reforms in Slovakia,
see also Canada, environmental 159–160, 162–165
policies in; Canada, higher Centres d’étude et de conservation
education governance in des oeufs et du sperme humains
Canada, environmental policies in (CECOS), 61–62, 65–66
frames, 85–86 China, 137, 177, 179–187, 190
goals, 86 control of corruption in, 180–182
instruments, 86–87 government effectiveness in, 185–188
structures, 84–85 see also China, health-care reforms in
Canada, higher education China, health-care reforms in, 195, 199
governance in financing system for health care in,
constitutional provisions for higher 200
education, 110–111 pre-1980s, governments in
point of departures for, 111–112 command of, 199–200
policy development in, 116–117 privatization in 1980s and 1990s,
policy dynamics in, 121 200–202
time-frames and critical junctures, 113 recent reforms, retreat from market,
Canadian Ministers of Education 202–203
Council (CMEC), 111 rise and decline of private
capacity expenditure in, 204–206
dataset for study of, 176–177 Christian Democrats (CDU/CSU),
definition of, 174 67, 68, 69, 90, 92
democracy versus, 184–185 Clark, B., 112, 132
financial, 174–175 cloning, 52, 55, 62–63, 71n1
indicators of, 175–176 collaboration, 53, 57–60
political, 174, see also political see also research collaboration
capacity command-and-control governance
technical, 174 mode, 6, 19, 34, 39, 40, 43, 51,
see also corruption, control of; 58, 60, 62–64, 67–70, 79, 83, 86,
government effectiveness; voice 88–91, 93, 132, 151, 187, 207
and accountability Commonwealth, 81–84, 92, 94, 96,
capital account policies, 27–33, 41 111, 113, 115–116, 121, 123, 125,
see also cross-border capital flows 127n3, 138, 142
Index 257
competition and contention, 53, 57, sperm, 60, 61, 62, 71n1
60–70 “double-payment” problem (DPP),
Conservative government, 86, 113, 167n9
115, 120
Considine M., 7 ecological modernization, 88, 90,
Convention on the Future of Europe, 93, 95
215–216 education policy, 8, 111, 113 119,
cooperative decentralization, 31–34 123, 124
“corporate federalism”, 113, 114 “embedded liberalism”, 32
corruption, control of, 175–178, 180 embryo protection, 67–70
in Central Asia, 184–185 Embryo Protection Act (EschG), 67, 69
in China and India, 180–182 emissions trading scheme, 80–81,
in Southeast Asia, 182–183 86, 92
Council for Economic and Financial Environment Choice Scheme, 87
Affairs (Ecofin), 156–157 environmental policies
Council of Australian Governments in Australia, 81–84
(COAG), 82, 84, 114 in Canada, 84–87
Country Assistance Strategy (CAS), 159 comparative multivariate
credit-claiming strategies, 19, conclusions, 92–97
152, 166 dimensions of governance, 75–80
cross-border capital flows in Germany, 87–89
and financial instability, 30, 32, government versus governance
36–38, 40, 44 framework, 76–80
governance after the global ideational paradigms of governance,
financial crisis of 2007–2008, 78–80
40–44 in Netherlands, 89–92
governance at time 0, Bretton Environmental Protection and
Woods system, 31–34 Biodiversity Conservation
governance at time 1, from the Act, 81
1970s to 2007, 34–40 Environmental Protection (Impact of
governance modes of, 27–31 Proposals) Act 1974, 81, 83
governance through codes of environmental taxes, 83, 84, 86, 87,
conduct, 38–40 88, 89, 91–92
and ideational environment euro-dollar markets, 35
changes, 28, 30, 33, 35–37, 41, Europe 2020, 157, 162
43–44, 46n10 European Commission, 160, 162, 164,
impact of financial integration on, 166n6, 213, 215–220, 223–226
36–37 European Convention, 220–222, 225
European Council, 160, 162, 215–217,
Dehaene, J-L., 216 219, 221
“demise of the state”, 9 European Semester, 157, 162
democracy, 19, 63, 177, 184–185, 190, European Union (EU), 17, 19–21
195, 215, 216, 224, 227 consequences of governance,
directionality and temporality, 10–11, 220–226
54–55 dimensions approach to
Donaldson, M., 60 governance, 240–241
donation governance as link between EU
egg, 60, 61, 62 policy-makers and EU citizens,
embryo, 62 215–220
258 Index
European Union (EU) – Continued financial instability, 30, 32, 36–38,

governance capacities, 211–213, 40, 44
226–227 financial integration, 29–31, 36–38,
governance goals promoted in the, 40, 45
213–215 financial liberalization, 29–30, 32–33,
governance of Dutch environmental 35–38, 40, 45, 46n2, 46n8,
policies, 90–93 173, 200
governance of Germany’s financial stability, 32, 37–39, 42
environmental policies, 88–89 see also financial instability
governing instruments of the, 79 Financial Stability Forum (FSF), 38–39
as an MLG system, 211, 214 fiscal incentives, 6, 86, 87, 160
pension policy goals of, 151–152, fixed exchange rates/fixed exchange
154, 156–157, 160–165, 166n8 regime, 32–35
research collaboration in the, 141–142 floating rate regime, 35–36
role in shaping environmental Forest Stewardship Council (FSC), 242
regulations in EU member states, France, 17, 53–55, 58, 60–63
74, 76, 80–81, 94, 96–97 free capital flows, 31–34
universities, 140 Fukuyama, F., 173–174, 176, 190
see also Convention on the Future funding, 111–115, 117–119, 120–122,
of Europe; European Commission; 125, 135, 136
European Convention; European see also grants; research
Council; Laeken mandate; Treaty collaboration incentives
of Lisbon; White Paper (on
Governance) German Medical Association, 67–68
Excellence in Research for Australia Germany, 17, 53–54, 58, 67–70,
(ERA), 138–139, 140, 145, 146 80–81, 108, 109
external environment relations, see also Germany, environmental
11, 55–56 policies in; Germany, higher
education governance in
Falkner G., 7, 76 Germany, environmental policies in
Federal Ministry of Education and frames, 87–88
Research (BMBF), 112 goals, 88–89
federalism instruments, 89
accommodating, 108–109 structures, 87
Australian, 123–124 Germany, higher education
balanced, 108 governance in
Canadian, 123 constitutional provisions for higher
Colino typology of, 107–109 education, 110–111
German, 124 point of departures for, 112
segmented, 108 policy development in, 117–119
unitary, 108 policy dynamics in, 122–123
see also higher education time-frames and critical
governance, strategy of federal junctures, 114
governments governance, 3, 235–238
financial crises, 37, 40–44, 188 in Asia, 177, see also autonomy;
financial governance, 29–33, 39, 41, 43 Asia, governance in; capacity
see also capital account policies; command and control mode
capital controls; cross-border of, see command-and-control
capital flows governance mode
Index 259
governance – Continued problems-based approach to,

continental type of, 112 243–246
definitions of, 173–174 see also meta-governance/
elements of, 7–9 metagovernance
as a heuristic means, 4–7 governance dynamics, 3, 8–11
hybrid mode of, 54, 55, 56, 67, of capital account policies, see
69–70, 173, 240, see also hybridity capital account policies
non-hierarchical forms of, 112 of cross-border capital flows, see
partial delegation mode of, 67–70 cross-border capital flows
strategic nature of, 11–14 directionality of, 10, 54–55
see also governance arrangements; initial equilibrium, 9–10, 17, 27–28,
governance battle; governance 43, 45, 54, 56–57
capacity; governance change; and relations with the external
governance dynamics; environment, 11, 55–56
governance equilibrium; temporal dimension of, 10–11, 54–55
governance strategy; governance governance equilibrium, 4, 11, 14–16,
thinking; meta-governance/ 27–28, 43
metagovernance governance failures, 195, 204, 240
governance arrangements, 3–4 governance modes and, 195–199
and capacity of governance, 14–16, governance strategy, 4, 9, 11–14,
see also governance capacity 165–166, 195
co-ordinating principles of, 8 bottom-up imposed
of cross-border capital flows, 27–31 collaborative, 105
dimensions of, 7 contingent, 105
dynamic nature of, 9–11 enforced, 106
and environmental policies, see negotiated, 105
environmental policies reactive, 105
features of, 6–7 types of, 105–106
in higher education, see higher governance thinking, 4–5
education governance governing frames, 78
in human biotechnology, 51–53, in Australia, 82–83
see also human biotechnology in Canada, 85–86
and policy capacity, 15–16 in Germany, 87–88
and political capacity, 16 in Netherlands, 90
and political power, 13–14 governing goals, 78
typologies of, 7–8 in Australia, 83
see also health-care governance; in Canada, 86
multi-level pensions governance in in Germany, 88–89
Europe; research policy governance in Netherlands, 90–91
governance battle, 12–14 governing instruments, 78–79
governance capacity, 4, 9, 14–16, 20, in Australia, 83–84
56–57, 176, 179, 190, 211–212, in Canada, 86–87
215, 220, 226–227 in Germany, 89
governance change, 9, 12, 15, 103, in Netherlands, 91–92
105, 106, 116, 127n2, 236, governing structures, 76–78
238–247, 250, 251 in Australia, 81–82
dimensions approach to, 240–242 in Canada, 84–85
modes/modalities of governance, in Germany, 87
239–240 in Netherlands, 89–90
260 Index
government capacity, see capacity and strategy of federal governments,

government effectiveness, 174, 107–110, 124–126
176–178, 180 see also research policy governance
in Central Asia, 188–189 Hogwood B. W., 9
in East Asia, 185–188 Hoppe, R., 244–246, 248, 250, 251
in Southeast Asia, 189 Howlett M., 7, 76
grants, 111, 112, 121, 135, 137–142, human biotechnology
145, 147 collaboration, the United Kingdom
case, 58–60
Hall, P. A., 76–79, 97 competition between physicians
governance framework, 76–80 and scientists in Germany,
Hawke, R. (Prime Minister), 113, 114, 67–70
120, 125 competition between private and
health-care governance, 194–195 public actors in France, 60–63
financing system for health care in competition between religious and
China and Thailand, 200 secular sectors in Italy, 63–67
governance modes and, 195–199 dynamics in governance modes
pre-1980s, governments in over time, 53–56
command of, 199–200 dynamics of interaction between
privatization in 1980s and 1990s, stakeholders, 56–58
200–202 self-governance of, 51, 53–54,
recent reforms, retreat from market, 56–58, 60, 68, see also self-
202–203 regulation
rise and decline of private see also assisted reproductive
expenditure in, 204–206 technology (ART); cloning;
hierarchy/hierarchical governance, in vitro fertilization (IVF);
5–8, 10, 21, 30, 34, 106, 134, preimplantation diagnostics;
194–199, 206–208 stem-cell research
see also command-and-control Human Fertilisation and Embryology
governance mode; health-care Act (1990), 59
governance Human Fertilisation and Licensing
higher education governance, Authority (HEFA), 59–60
103–104 Human Reproductive Cloning Act
in Australia, see Australia, higher (2001), 59
education governance in Hungary, 152, 158–159, 161–163, 165
in Canada, see Canada, higher hybridity, 75–76, 92, 94, 240, 246
education governance in
constitutional provisions for higher incentives, 10, 18, 38, 40, 84, 106,
education, 110–111 131, 187, 197, 247
and fees, 115, 116, 119, 123 see also fiscal incentives; regulatory
and funding, see funding incentives; research collaboration
in Germany, see Germany, higher incentives
education governance in India, 109, 177, 179, 184, 190
governmental strategies in, 104–107 control of corruption in, 180–182
the Nelson Report, 120–121 government effectiveness in,
points of departure, time-frames 185–188
and critical junctures, 111–114 initial equilibrium, 9–10, 17, 27–28,
policy developments in, 114–119 43, 45, 54, 56–57
policy dynamics in, 119–123 internalization, 90–91, 93, 95
Index 261
International Association of Insurance see also euro-dollar markets;

Supervisors (IAIS), 38, 46n14 financial integration; health-care
International Labour Office (ILO), governance
155, 166n5 market actors, 38, 39, 43, 45, 94
International Monetary Fund (IMF), market-based instruments (MBIs),
28, 33–34, 37–39, 42, 44, 46n6, 83, 86, 92, 95
46n8, 46n14, 47n19, 156, 161, market discipline, 27–28, 31, 39–41,
163, 166n5, 173, 175 43–44
International Organization of market failures, 30, 40–41, 82,
Securities Commission (IOSCO), 196–198, 207
38, 46n14 medical associations, 54, 56, 67–68
international organizations (IOs), 151, medical community, 57–63, 65,
152, 154–156, 159–161, 67, 69–70
163, 165–166 Medical Research Council, 59, 141
see also International Monetary meta-governance/metagovernance,
Fund (IMF); World Bank (WB) 12, 21, 195, 235, 238, 240, 242,
international standard-setter bodies, 246–252
38–40, 46n14 first-order, 248–249
in vitro fertilization (IVF), 52, 55, 58, second-order, 249–250, 252
64, 69 Meuleman, L., 244, 247
Italy, 17, 53–55, 58, 63–67 Ministerial Council of Education,
Employment, Training, and Youth
Jessop, B., 238, 239, 247–249 (MCEETYA), 114
Jones B., 11 multi-level governance (MLG), 152–155
see also multi-level pensions
Kazakhstan, 177, 181, 184, 186, governance in Europe
188, 190 multi-level pensions governance in
Keynes, Maynard J., 32–33 Europe
KMK (Kulturminister Konferenz), 118, first wave of pension reforms in CEE
119, 122 countries (1990s–early 2000s),
Kohler-Koch, B., 220, 226 158–161
in Hungary, 158, 161–163, 165
Labour Party, 111, 112, 113, last wave of pension reforms since
115, 120 2008, 161–165
Laeken mandate, 215–217, 220–221 pension policy goals of the EU,
Länder, 68, 87, 89, 111, 112, 114, 151–152, 154, 156–157, 160–165,
118–119, 122–124, 126 166n8
Lewis J. M., 7 in Poland,158–159, 161–163, 165
Liberals (FDP), 67, 69 role of IOs at the global level, 155–156
Liberals (VVD), 90 role of the EU at regional level,
loans, 30, 115, 155, 156 156–157
lock-in mechanisms, 19, 154, 155, 166 in Slovakia, 159–160, 162–165
three-pillar pension model, 158–161
Majone, G., 79 MutzurVeranderung (Courage to
managerialism (or corporate Change), 123
management), 116, 134
market/market governance/markets, National Academy of Medicine, 61–62
5, 7–8, 12, 30, 34, 36–37, 106, National Health and Medical Research
196, 198, 206, 207 Council (NHMRC), 141
262 Index
National Health Security Office objective responsibility system

(NHSO), 203 (ORS), 187
National Order of Physicians, 61–62 OECD, 17, 46n8, 74, 84, 166n5, 178
National Parks and Wildlife old/traditional governance, 6, 9, 76,
Conservation Act 1975, 83 78, 83, 236
National Research Council, 138 see also command-and-control
Netherlands, 74, 75, 93–96, 199, 221 governance mode
see also Netherlands, environmental open method of coordination (OMC),
policies in, 80–81 157, 215, 217, 219, 222–223
Netherlands, environmental policies out of pocket (OOP), 200–205
in, 80–81
frames, 90 pay-as-you-go (PAYGO) principle, 158,
goals, 90–91 159, 164, 167n9
instruments, 91–92 pension governance, 151–152
structures, 89–90 see also multi-level pensions
network/networks, 5, 7–8, 10, 106, governance in Europe
136, 196, 198, 248 pension privatization, 151, 155–158,
see also network failures; network 160, 162, 165, 167n10, 167n11
governance (NG) pension privatization paradigm, see
network failures, 196–198, 207 pension privatization
network governance (NG), 54, 131, pension reforms, 19, 151, 158,
134–137, 147–148, 173, 194, 196, 165–166
198, 206–208, 239, 240, 242, 248, first wave in CEE countries (1990s–
250 early 2000s), 158–161
new environmental policy instruments in Hungary, 158, 161–163, 165
(NEPIs), 92–93, 95–96 last wave since 2008, 161–165
new governance, 4, 6, 27, 35, 45, 76, in Poland,158–159, 161–163, 165
125, 153, 213, 214, 236, 238, 242 in Slovakia, 159–160, 162–165
new public management (NPM), 9, Pensions Administration and Health
12, 18, 123, 125, 131, 134–137, Insurance Project (PAHIP), 159
147–148 performance-based research
New Rural Cooperative Medical assessment systems, 134–135,
Insurance Scheme (NRCMS), 138–139, 142
202–203 see also publications, research
New Zealand Performance-Based Research Fund
NPM in, 134 (PBRF), 139, 143, 145
performance-based research performance-based research funding
assessment systems in, 138–139 systems, 137–139
performance-based research funding Peters B. G., 9
systems in, 137–139 Poland, 152, 158, 161–163, 165
research collaboration in, 141 policy capacity, 15–16, 120, 212
University of Auckland, 143–147 policy dynamics, 14, 110, 113,
Nixon, R. (President), 35 119–123
nodality, 10 policy field/fields, 8, 10–12, 14–15,
non-governmental organizations 17, 28–29, 36, 44, 52, 109–110,
(NGOs), 5, 216, 221, 223, 225 212, 224
non-hierarchical governance, 112, 153, policy goals, 13, 19, 32, 34, 52, 76, 78,
155, 194–196, 199, 206, 214, 242 79, 80, 86, 90, 92, 152, 154, 160,
see also health-care governance 162, 163, 165, 199, 212
Index 263
policy instruments, 6, 8–12, 17, Rehn, O., 162

27–28, 33–34, 38–39, 42, 44–45, Reports on the Observance of
51, 57, 74, 78–79, 89–92, 106, Standards and Codes (ROSCs), 39
117, 175, 243, 249 reproductive technologies, 58,
policy-makers, 29, 42, 47n20, 78, 83, 64–65, 68
159, 196, 199, 212–214, 227, 250 see also assisted reproduction;
domestic, 31–33, 160 assisted reproductive technology
EU, 162, 215 (ART)
national, 19, 152–154, 156, 163–166 Research Assessment Exercise (RAE),
New Zealand, 139 138–139, 145–146
state, 154 research collaboration, 18, 135–137,
supra-national, 151–152 144, 146
policy-making, 3–6, 8, 10, 12–13, see also research collaboration
18–20, 35, 44, 76, 82, 85, 87, 109, incentives
117, 126, 152, 160, 213–220, 223, research collaboration incentives,
227, 237, 251 135–137, 139–142, 147–148
see also policy-making processes Research Excellence Framework (REF),
policy-making processes, 5, 20, 53–56, 115, 138, 140, 145–146
151, 166, 211, 215, 224 research outputs, 131, 133, 134,
policy performance, 16, 29, 177 136–139, 143, 145–148
policy tools/policy tool-kits, 3, 6, 9, research policy governance
18, 32, 42, 45, 103, 131 carrots and sticks approach to, 131,
political capacity, 16, 174–175, 137, 142, 148
206–207, 212 higher education and 132–133
political goals, 154, 160, 162, 163, individuals and, 143–147
164, 165, 166 and NPM and NG, 134–137, 147–148
political processes, steering of, 5–6, 173 and perceptions of the research
polity, 7, 20, 211, 213, 214, 241, 247 assessment system, 144–145
Pontifical Academy for Life, 66, 71n3 and performance-based research
precautionary principles, 88–89 assessment systems, 134–135,
preimplantation diagnostics, 55, 66, 138–139, 142
67, 69–70 and performance-based research
Preimplantation Diagnostics Act funding systems, 137–139
(PräimpG), 67, 69 and research collaboration, 18,
principles of co-ordination, 5, 7–12, 135–137, 139–142, 144, 146–148
88, 90 and research collaboration
problem structures, 243–244 incentives, 135–137, 139–142,
and and “policy-politics” typology, 147–148
245–246 universities and government policy
Public Account Committee (PAC), 183 changes, 145–147
public private partnerships (PPP), “return of the state”, 9
187–188 Royal College of Obstetricians and
publications, research, 134, 138, 139, Gynecologists, 59
144–145, 147 Royal Society of New Zealand, 141
Quebec, 121, 124 scientific community, 51–52, 57–63,

65–66, 70
Reagan, R. (President), 35 “Security through Diversity” reform
regulatory incentives, 84, 88 plan, 158–159
264 Index
self-regulation, 47n16, 53, 56–58, total expenditure on health (TEH),

60–71, 249 200–203, 205
“shadow of hierarchy”, 8, 34, 46n7, Transparency International’s
80, 220, 240 Corruption Perception Index
Simon, H., 243–244 (CPI), 175, 183, 184–185
Slovakia, 152, 158–159, 162–165 Treaty of Lisbon, 215–216, 219–220,
Social Health Insurance (SHI), 221–222, 226
201, 203 Treib O., 7, 76, 241–242
Social Security Pension Scheme, 158 “trilemma” logic, 32, 36, 46n4
Stability and Growth Pact (SGP), Tusk, D., 163
156–157, 160, 163, 166, 166n7
stakeholders, 8, 17, 51, 53–57, 62, 77, United Kingdom (UK), 10, 17, 18, 35,
105–107, 110, 122, 125, 198–199, 53–55, 58–61, 69, 70, 85, 86, 133,
215, 219, 222, 227, 249 143, 147
state–society relations, 74, 76, 92–93, NG in, 136
96, 238 NPM in, 134
Stem Cell Act (StzG), 67 performance-based research
stem-cell research, 52, 55, 62, 66–67, assessment systems in, 138–139
69–70, 71n2 performance-based research funding
Stoker, G., 238–239 systems in, 137–139
Strauss-Khan, D., 42 research collaboration in, 141
surrogacy, 52, 61, 62, 65, 71n1 University of Birmingham, 143–147
United States (US), 33, 35, 86, 87,
Technical and Further Education 142, 159
sector (TAFE), 115 Universal Health Coverage (UHC),
Tertiary Education Quality and 203, 205
Standards Agency (TEQSA), 115 University/universities, 18,
Thailand, 177, 178, 179, 181, 106–107, 110
183–186, 189 of Auckland, 143–147
see also Thailand, health-care Australian, 112, 115–116, 120–121
reforms in of Birmingham, 143–147
Thailand, health-care reforms in, Canadian, 111, 112, 116, 117, 121,
195, 199 123, 125–126
financing system for health care in, conception of, 132–133
200 enrollment in, 106, 115
pre-1980s, governments in and funding, 111–115, 117–119,
command of, 199–200 120–122, 125, 135, 136, see also
privatization in 1980s and 1990s, grants; research collaboration
200–202 incentives
recent reforms, retreat from market, German, 111, 112, 118–119, 122,
202–203 125–126
rise and decline of private and government policy changes,
expenditure in, 204–206 145–147
Thatcher, M. (Prime Minister), 35 Group of Eight (Go8), 120
three-pillar pension model, 158–161 of Melbourne, 143–147
Times Higher Education Supplement, and NG, 135
138, 139 U15, 121
Tollefson C., 7, 242 see also research policy governance
Index 265
Urban Employees Basic Medical White, Dexter H., 33

Insurance (UEBMI), 202 White Paper (on Governance), 84,
Urban Residents Basic Medical 214–215, 217–218, 224
Insurance (URBMI), 202–203 World Bank (WB), 39, 46n14, 151,
152, 155–156, 159, 162, 165,
Vichy regime, 62, 70 167n11, 173, 175–176
voice and accountability, 174, “wicked problems”, 243, 251
176–180 World Bank Governance Indicator
voluntary agreements (covenants), 80, (WBGI), 19, 175–177, 179,
83, 84, 86, 87, 88, 91 185, 190
Voluntary Licensing Authority for World Trade Organization
Human in vitro Fertilisation and (WTO), 36
Embryology (VLA/ILA), 59–60
Xi, Jinping (President), 180
Warnock Committee, 59–60
Washington consensus, 35–36, 46n10, Zito A. R., 7
46n11, 159 Zoellick, R., 162

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Studies in the Political Economy of Public Policy

International Advisory Board

Studies in the Political Economy of Public Policy

1. Comparative government. 2. Policy sciences. I. Capano, Giliberto,

List of Figures vii

List of Tables viii

Part I Introduction: Varieties of Governance as a

Part II Governance Dynamics

3 Similar Regulatory Challenges but Contrasting Modes of

4 Environmental Policy and Governance: Bringing the

Part III Governance Strategies

6 Research Policy as “Carrots and Sticks”: Governance

7 Changing Multi-level Governance: The Regained

Part IV The Capacities of Governance Modes:

9 Governing Health Care in an Imperfect World: Hierarchy,

10 Governance Capacities in the European Union: Normative

Part V Conclusion: Moving Forward in Studies of

3.1 Dynamics in modes of governance over time 54

2.1 Governance modes of cross-border capital flows 28

This book is the culmination of several years of effort by an accom-

Christine Rothmayr Allison is a professor in the Department of

Eduardo Araral is an assistant professor at the Lee Kuan Yew School

Aziz Burkhanov is an assistant professor at the Graduate School of

Giliberto Capano is Professor of Political Science and Public Policy at

Yu-wen Chen is an associate professor at the Graduate School of Public

Neil Collins is Dean of the Graduate School of Public Policy at the

Isabelle Engeli is an associate professor at the Graduate School of Public

Eva G. Heidbreder is Junior Professor of Political Science/EU Integration

Michael Howlett is Burnaby Mountain Chair in the Department of

Saltanat Janenova is an instructor at the Graduate School of Public

Manuela Moschella is an associate professor at the Scuola Normale

David Natali is an associate professor at the University of Bologna in

M. Ramesh is Professor of Public Policy at the Lee Kuan Yew School

on the subject. He has also published extensively in reputed interna-

Jeremy Rayner is a professor and Centennial Research Chair at the

Xun Wu is Professor of Public Policy at the Lee Kuan Yew School of

Anthony R. Zito is Professor of European Public Policy at Newcastle

Governance is not a fashion, but a firmly established lens through which

Governance strategy is a concept that reflects this ability of govern-

1.2 Governance as a heuristic means

Following 20 years of enthusiastic discussion as a theoretical panacea

know perfectly well that in order to answer this question we need to

that the traditional command and control approach to steering was

So while some of the ingredients have changed in contemporary

1.3 Elements of governance: beyond the

Political scientists use typologies as a methodological tool with which

fundamental co-ordinating logic of a governance arrangement, but

1.4 Governance dynamics

Governance arrangements are dynamic, and thus – paraphrasing

closely related to any given general principle of co-ordination. For

here with regard to this point. Governance dynamics can develop in a

1.5 The strategic nature of governance

Very often, governance arrangements are viewed from a functionalist

which certain systemic functional requirements are met and structural-

faced with the problem of having to legitimize their decisions outside

Furthermore, observation of the strategic behaviour of policy actors in

1.6 Governance capacity

Thirdly, we need to focus on governance capacity in order to get a better