Ratcheting Up and Driving Down Global Regulatory Standards
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Development. Copyright © 1999 The Society for International Development. SAGE Publications (London, Thousand Oaks, CA and New Delhi), 1011-6370 (199912) 42:4; 109–114; 010936.
Governance and Health
Ratcheting Up and Driving Down Global Regulatory Standards JOHN BRAITHWAITE AND PETER DRAHOS
ABSTRACT Based on a large empirical study of the globalization of business regulation, John Braithwaite and Peter Drahos show that both races to the bottom and races to the top are common in the world system. The focus is on understanding ratcheting up mechanisms. Can health NGOs put these to work to lift public health standards globally?
Global business regulation The race to the bottom is a common theme in the globalization literature. It is part of the reality of globalization that competition for investment can include auctions for less costly regulatory standards. For example, in the 1970s quite a lot of asbestos manufacturing shifted to developing countries. According to the race to the bottom analysis, globalization places health standards in a vice. Health services financing is a major victim of global competition to drive down corporate tax rates. The other side of the vice is that regulatory standards are driven down by the race to the bottom. While there is validity to this analysis, in this article we show that there is no inevitability about a race to the bottom. Ratcheting up of regulatory standards is also part of the story of globalization. Standards like capital adequacy for banks were driven down by the Reagan and Thatcher regimes of the early 1980s, then ratcheted up by those same governments later in the decade in response to banking crises. It must be said that not all the ratcheting up dynamics are good for health. The ratcheting up of intellectual property protections has blown out health budgets through longer patent terms. It has rendered some AIDS drugs unaffordable in developing countries which are forbidden from compulsorily licensing of patented life-saving drugs.
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Development 42(4): Governance and Health The macro picture In Global Business Regulation (to be published by Cambridge University Press in 2000), we advance a micro–macro method for an anthropology of global cultures. We seek to understand the most macro of phenomena (globalization of regulation) from the most micro source of data possible – key individual entrepreneurs of global regimes. We have interviewed 500 of these since 1990. We found that regulation of the environment, safety and financial security have ratcheted up more than they have been driven down by globalization. While ratcheting up is more common than races to the bottom in the regulation of safety and environment, the opposite is true of economic regulation. In domains of economic regulation beyond those that anchor financial security (e.g. capital adequacy standards for banks), we find that ratcheting down has been the dominant dynamic, globalizing deregulation. The striking exception to this dynamic in economic regulation h
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