In 1970s, the all-powerfull state government came under practical and academic attack. The proposed alternative argued for “steering, not rowing”, which consequently opened the political sphere to companies … and ultimately private governance.
As modern societies of the 20th century have become more critical and demanding of the political sphere, the existing traditional model of governing society was challenged. It came “under practical and academic attack as an appropriate means of providing steering for the economy and society” (Peters, 2003: 6). Critics emphasised its lack of public involvement and limited influence of public on decision-making and opposed “the model of integration ‘from above’ associated with ‘Fordist compromises’ to the welfare-state during the years of strong economic growth” (Jouve, 2005: 290; see also Mayer, 1995). Proposed responses put forward the use of societal actors and networks of actors to shape public policies (Marsh and Rhodes, 1992; Kooiman, 1993; Kickert et al., 1997), arguing for “steering, not rowing” (Osborne and Gaebler, 1992), and – in extreme cases – believed in a “governance without government”. Moreover, the delivery of public services was proposed to be altered – by including non-profit and sometimes even for-profit civil society in it (Peters, 2003, 6).
This new division of labour between scales (local, regional, national, transnational, global) led to the transfer of certain elements of political regulation to new political territories – mostly cities (Brenner, 1999). Nevertheless, re-territorialisation (Brenner, 1999) has not only shifted the focus of politics from the state to other levels but has been also accompanied by a shift in the essence of politics. “The appreciation of local contexts represents a major shift away from the model of reform based on mechanisms of centralised, bureaucratic, ‘top-down’ implementation that dominated until the 1970s” (Jouve, 2005: 290). The managerial logic of the Fordist-Keynesian welfare state compromise was supplemented with an entrepreneurial logic (Harvey, 1989a; Hall and Hubbard, 1998), which promised a better delivery of collective services in the times of constraining budgetary policies and a strive for the competitiveness of cities. The new public management (Larbi, 1999) promised to mobilise the civil society and enable a larger number of local actors to participate in this new collective decision-making process. Governance in normative terms thus aims at incorporating civil society in participatory projects of cities, and by this transforming cities into pluralist political spaces within a new political culture (Clark and Hoffmann-Martinot, 1998).
Urban regimes with influential private sector
Nevertheless, as the capacity to govern is not equally distributed in space or in time (Dror, 2000), this governance “appears to enhance public participation in decision-making within the public sector” only on the surface (Peters, 2003: 7). Jouve (2005, 290) lists two reasons: “(i) the opening of urban institutions to civil society was effected through a process of institutionalising public participation, which has had direct effects on the real capacity of all segments of civil society to influence the definition of collective choices. Second, (ii) this institutionalisation has benefitted a particular group of local actors: the business community.” As argued by Jouve (2005), paradoxically, the characteristics of the political system were reinforced by the institutionalised consultation of citizens, leading to a confrontation between elected political representatives and legitimate groups of citizens, in which the first is winning. “Everything is changed (in the discourse) in order that everything remains unchanged in the hierarchy of positions and roles” (Jouve, 2005: 291). Nevertheless, one group is profiting from this illusory change – namely, the business community (Duchastel and Canet, 2005). Once detached, the political sphere is now – through institutionalised consultation and legitimised ad hoc private-public partnerships – easily accessible by companies that have the interest to affect the decision-making processes. This newly established relationship between public and private actors has caught the attention of Marxist analysts (Pickvance, 1995), neo-pluralists (Lindbolm, 1977) and neo-elitists (Bachrach, 1967; Lukes, 1974), and was conceptualised in the theories of growth machines (Logan and Molotch, 1987) and, most popularly, urban regimes (Stone, 1993).
Stone’s (1993) concept of urban regime rejects both pluralist assumptions of powerful government authorities and structuralist assumptions of the determining effect of economic forces, and views power as fragmented. An urban regime is thus an assemblage of public and private actors, each possessing resources needed to govern (legitimacy on the one hand and capital on the other) – but it is only the joint partnership that can gather the capacity to govern (Mossberg and Stoker, 2001: 812). These “regimes overcome problems of collective action and secure participation in the governing coalition through the distribution of selective incentives” (Mossberg and Stoker, 2001: 812), whether it be purposive or material. Urban regimes can take several forms: maintenance or caretaker regimes (focused on routine service delivery and low taxes), development regimes (concerned with changing land use to promote growth), middle-class progressive regimes (focused on inclusion of environmental protection, historic preservation, affordable housing, and linkage funds), and lower-class opportunity expansion regimes (emphasising human investment policy and widened access to employment and ownership) (Mossberg and Stoker, 2001: 813).
Nevarez (2000: 199) lists three domains of this public-private governance regime – political, civil, and economic domain. The political domain entails direct relations between the business community and elected/appointed officials, whether it be by electoral coalitions supporting candidates (see also Ferman 1996; Whelan et al., 1994) or by working together in private-public partnerships that give private actors more autonomy and less political accountability (see also Squires, 1989). The civic domain entails relations between community organizations, the business community, and political actors, either by networking and deal-making opportunities that complement the activities of civic groups (see also Domhoff, 1998; Useem, 1984), by constructing a “we feeling” with financial gifts and personal service, or by empowering favourable civic groups and neglecting controversial groups through philanthropy (see also Silver, 1998; Jenkins, 1998; Haines, 1984; DiMaggio, 1983; Wright, 1985; Powell and Friedkin, 1983; Pertschuk, 1982). The business domain entails the interrelations of firms and business leaders involved in a regime governance, producing shared practices, interorganizational networks, and a common understanding about the nature of community politics.
Involvement of companies in politics
From the firm’s perspective, we can distinguish two fundamental corporate political behaviours (Meznar and Nigh, 1995): “political ‘buffering’ behaviours include proactive political actions on the part of firms, such as informing government decision makers about the impact of possible legislation, trying to actively reduce government regulation of the firm, and working alone or in trade associations to make campaign contributions, lobby, or otherwise influence legislative/regulatory processes”, while “bridging, on the other hand, is a more reactive form of behaviour. It includes such activities as tracking the development of legislation/regulation so to have compliance in place when passed and exceeding compliance levels for regulation”( Meznar and Nigh, 1995).
Nevertheless, not all companies are equally active in political activities and a wide variety of scholars has tried to research this topic. While economists typically study industry factors, political scientists focus on institutional and political factors. However, an interdisciplinary approach to researching CPA (Corporate Political Activity, defined as “firms’ efforts to influence or manage political entities” (Hillman et al., 2004) adds further complexity (Lux et al., 2011). A recent meta-analysis of 78 studies with a sample size of 72,265 (Lux et al., 2011) “indicate[s] that antecedents at the institutional level (i.e., incumbent politicians, ideology, political competition, government regulation, government sales, and dependent politicians), market and industry level (i.e., industry concentration), and firm level (i.e., firm size and competitive strategy) have positive and significant relationships with CPA”. Lux et al. (2011) thus conclude that the biggest drivers of CPA are, not surprisingly, politician incumbency (as often suggested by political scientists), government regulation, and firm size (as advocated by economists, see Salamon and Siegfried, 1977). Scholars suggest that firms involved in CPA have several motives for engaging in political behaviour: a desire to pursue the firm’s private interest (i.e. domain advantage), to manage public policy that might be at odds with the firm’s strategic goals (i.e. domain defence), or to influence public policy that might threaten the means by which a firm achieves it goals (i.e. domain maintenance) (Baines and Viney, 2010). Benefits of these activities can include reduced environmental uncertainty, reduced transaction costs, and increased long-term sustainability (Hillman et al., 1999). One of the key assumptions in many theoretical perspectives is also that firms engage in CPA in order to obtain and/or maintain economic returns, but empirical evidence shows that “economic opportunities are not significantly related to CPA” (Lux et al., 2011: 237).
This can be explained by the inclusion of CPA in the firm’s non-market strategy that is understood as “the firm’s efforts to manage the institutional or societal context of economic competition” (Boddewyn, 2003) and through which a firm can influence the extent to which it obtains or maintains economic advantages. A non-market strategy is especially needed in companies with greater social exposure (the ones that come into contact with a greater number and diversity of social groups) (Pfeffer and Salancik, 1978) due to the firm’s market strategy, as it “enables firms to better manage their social exposure by countering constituent and special interest political actions, not in the interest of the firm” (Lux et al., 2011: 231). Similarly, “firms pursuing diversification strategies are more likely to engage in CPA” (Lux et al., 2011: 231; see also Hillman et al., 2004).
Company-led governance and private governance
With the global growth and diversification of companies’ portfolios, corporate political activities are increasing (as argued above) and several companies are assuming primal positions within urban regimes (see discussion on “pro-growth governance model” by Pierre, 1999), a result of the changing nature of urban governance under neoliberalism. Moreover, three substantive shifts (((1) absence of problem-solving powers with governments; (2) complementation of confrontation between companies, governments and civil society with partnerships; and (3) institutionalized cooperation) are leading to the emergence of private governance) are leading to the emergence of private governance (Haufler, 1993; Pattberg, 2005). For Pattberg (2005: 592), private governance consists of three analytical dimensions: “first, the procedural dimension of governance, which emphasizes the activities of private transnational actors; second, the structural dimension of governance, which highlights the distinct ‘architecture’ of a governance arrangement, including norms and rules, networks and actor constellations, as well as formal or informal links to other areas of governance; and third, the functional dimension of governance, which focuses on the material and ideational outcome of a private governance arrangement as a functional equivalent to forms of national or international public governance.” This conceptualisation goes beyond privatisation of provisions of public services and includes “new actor constellations and uncommon alliances between a wide range of actors that go beyond coordination or cooperation” (Pattberg, 2005: 592). Private governance thus does not necessarily mean a takeover of public (or public-private) governance structure, but rather a different approach to governing, springing from “a mismatch between markets and politics in terms of governance,” in which the “demand for rules to govern commerce has given rise to a variety of sources of supply, and one of the most significant […] is the private sector itself” (Haufler, 2000: 121). These private governance regimes might – similarly to public regimes – provide collective goods, reduce transaction costs, decrease uncertainty (Keohane, 1984), incorporate all elements of urban governance (articulating a common set of priorities for society, coherence, goal achievement, feedback and accountability (Peters, 2003: 3), and in some cases achieve a hegemonic position over public regime.
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