Helena Ekelund, University of Nottingham
Paper prepared for the UACES Student Forum 8th Annual Conference, Nottingham 19th-20th of April
Agencification and the EU as a Regulatory State: a Framework for the Study of European Community Agencies
IntroductionIn recent years we have witnessed a number of changes in the institutional structure
and power relations between the various institutions of the European Union (EU).
One notable change is the rapid increase in the number of European Community
Agencies, henceforth referred to as ‘agencies’. Currently, the EU has some twenty
agencies, the majority of which have been established during the 1990s and 2000s. In
my PhD project I aim to explain this development. At the conceptual level, this will
involve dealing with the concepts and misconceptions of the debates on agencies. At
the empirical level, it will involve mapping and comparing of the European
Community Agencies. By studying the establishment of agencies we can gain
important insights into how the EU actually works and, hence, my project will also
contribute to the debates on the transformation of governance in Europe.
One strand of governance research is the study of the rise regulatory policy-
making, which characterizes the EU as a ‘regulatory state’ (c.f. Kohler-Koch and
Rittberger 2006: 35). In this paper, I will review literature on the regulatory state and
agencies. I will elucidate the main components within the regulatory state concept and
relate these to the EU and the study of Community Agencies. Particular attention will
be given to the normative implications of agency establishment and analytical
dimensions to consider in the study of agency creation.
The Regulatory State The rise of the regulatory state refers to a process through which the regulatory
function of the state gain prominence at the expense of redistribution and
macroeconomic stabilization. In Europe we can also see how the traditional European
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model of public ownership have given way for the American model of private
ownership subjected to rules created and upheld by regulatory agencies. Whilst
acknowledging the fact that there are differences between the public administrations
of various European countries, it makes sense to speak of an ideological cleavage
between the United States and the Europe regarding the principles of public sector
management. This cleavage can be attributed to differing ideological views on the
functioning of the market. The traditional American view is that the market normally
functions well, and that it is only justified to interfere with the market in clear cases of
market failure (Majone 1996: 50). Subsequently, the management of public utilities
has been left largely in private hands, and the threat of market failure has been
addressed by subjecting the private owners to regulation, which is developed and
upheld by agencies or commissions (Majone 1996: 15). In Europe, by contrast, there
has been more suspicion against the market. The traditional response has been public
ownership, i.e. that the state manages the provision of public utilities. According to
Majone (1996: 11), it was generally assumed that public ownership gave governments
increased ability to regulate their economies and to protect public interests. However,
the opinion in Europe changed as public ownership did not seem to deliver the
expected benefits, and, in the 1980s, there was a macro-economic paradigm shift from
Keynesianism to more neo-liberal solutions (Műller and Wright 1994: 2). In practical
terms, this led to privatisation of industries, but also “the creation of new instruments
of regulation and the establishment of new regulatory authorities” (Levi-Faur
2005: 19, c.f. Gilardi 2002; Moran 2001; Thatcher 2002a). However, the regulatory
state does not only aim to stop market failure by engaging in economic regulation.
Social regulation, such as worker and consumer protection, has become increasingly
important (c.f. Moran 2002: 394-395).
When studying the regulatory state it may prove useful to break up the
concept into smaller parts, which can be operationalised more easily. Minogue
(2002: 654) reiterates six key variables for the design of an effective regulatory state
that Majone outlines in an article from 1999.1 They are: (i) the extent to which decisions are delegated to an independent agent rather than taken by the political principal(ii) the nature of the structure of governance itself, particularly in determining the agent’s degree of independence from the political process
1 The article is called “The Regulatory State and its Legitimacy Problems” and was published in West European Politics. I am yet to read this article.
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(iii) the rules that specify the procedural framework eg reason giving requirements, consultative processes (sic)(iv) the scope for political principals to overrule agency decisions(v) the relative autonomy of financial resources(vi) the extent of ex post monitoring, eg legislative oversight, judicial review, citizen’s complaints procedure (sic)
The EU as a Regulatory StateIn my PhD thesis I intend to systematically analyse the idea of the EU as a regulatory
state through the application the concept of the regulatory state to the study of
Community Agencies. The idea of the EU as a regulatory state can be attributed to
Majone, at the core of whose vision we find the idea of market regulation being a
more important task than income redistribution and macroeconomic stabilisation.
Majone (1996: 63) argues that it is important to distinguish between regulatory
policies and non-regulatory policies, for example income redistribution. The key
difference between them is that regulatory policy-making is less dependent on
budgetary constraints, and states’ budgets are to a large extent dependent on states’
ability to tax and level of tax revenues. The EU budget is rigid and small in
comparison to the budgets of member states, and the EU has no independent tax
power (Majone 1997: 150). Thus, it is very difficult for the EU to engage in non-
regulatory policies, and if the Commission wishes to increase its competencies, which
Majone (1996; 1997) assumes that it does, it has to do so through increased regulatory
activity. The EU can do so because most of the costs that arise from regulatory policy-
making are borne not by the regulators but by the regulated, wherefore budgetary
considerations only impose soft constraints on regulators (Majone 1996: 64). At EU
level the distinction between regulatory and non-regulatory policies in terms of costs
is further exacerbated by the fact that most costs for implementation of EC rules are
directly or indirectly borne by the member states (Majone 1996: 64).
Majone’s ideas find their analytical expression in a supply and demand model
of regulation, which borrows from public choice models of bureaucracy and
neofunctionalism (c.f. Majone 1996: 64-68). On the demand side of the model we find
multinational and export-oriented companies, public interest groups and member
states. As predicted by neofunctionalists, the functional needs of the single market
have required substantial transfer of policy-making power to the EU level (Majone
1996: 66). Companies tend to favour EU level regulations over national ones as they
remove the costs resulting from demands to adhere to different national standards.
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Public interest groups also demand EU level regulation when they are unable to make
their national government impose the regulation they wish for. This is typically the
case of interest groups, for example environmentalist and consumer protection groups,
from countries with low health and safety standards (Majone 1996: 67). However,
according to Majone (1996: 67-68) the strongest demands for EU level regulation
come from the member states, which may gain by having their national standards
incorporated into EU law. For example, a country with high standards of health and
safety protection in the work place would see the comparative advantage of countries
with low levels of said protection reduced if the EU decides to adopt their high
standards.
The main role on the supply side is played by the Commission, which is
assumed to have “a utility function, which it attempts to maximize, subject to
constraints” (Majone 1996: 64). It is assumed that the Commission wishes to
maximise its influence, which Majone measures by the scope of Commission
competences. Majone argues that the Commission is still a bureaucratic organisation
under development and, therefore, “the definition of competences” is the key issue for
the Commission (Majone 1996: 65).
Normative ImplicationsThe characterisation of the EU as a regulatory state has significant normative
implications for our conceptualisation of legitimacy and accountability.
Proponents of the regulatory state are likely to argue that the regulatory state
achieves legitimacy through outputs rather than inputs. The difference between input-
oriented and output-oriented ideas of legitimacy can be illustrated by the statements
‘government by the people’ and ‘government for the people’. A political system that
relies on input legitimacy (government by the people) is a political system where the
focus is on participation, and where individuals do not fear majority rule due to the
existence of “a pre-existing collective identity” (Scharpf 1999: 10). Output-oriented
legitimacy, by contrast, can be achieved from a “capacity to solve problems requiring
collective solutions because they could not be solved through individual action,
through market exchanges, or through voluntary cooperation in civil society” (Scharpf
1999: 11). For this to succeed, Scharpf (1999: 11) argues, it is sufficient that
individuals in the political system perceive to have “a range of common interests that
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is sufficiently broad and stable to justify institutional arrangements for collective
action”. If we accept output legitimacy as sufficient for the EU we have also made a
normative stand on the issue of the democratic deficit of the EU.
As Majone (1997: 159) argues, the regulatory state, where “technocratic
experts” employed by various agencies perform a broad variety of tasks, will
undoubtedly suffer from a democratic deficit if democratic legitimacy is defined as
“direct responsibility to the voters or to the government expressing the current
parliamentary majority”. However, the Madisonian model of democracy, the goal of
which is “to protect minorities form the ‘tyranny of the majority’, and the judicial,
executive and administrative functions from representative assemblies and from fickle
mass opinion” provides an alternative model of democracy where delegation is less
problematic from a legitimacy point of view (Majone 1997: 160). Here delegation is
used as a strategy to restrain rule by the majority by giving authority to non-elected
officials, who “have limited or no direct accountability to either political majorities or
minorities” (Majone 1997: 160).
Moreover, agencies can enjoy “[p]rocedural legitimacy”, which means that
they have been created by and following correct procedures (Majone 1997: 160). For
example it can imply that agencies have been created in accordance with existing
rules, that their creation, objectives and legal authority are decided upon by elected
officials and that their activities are open to review (c.f. Thatcher 2002b: 958).
Arguably, the establishment of independent regulatory agencies in many parts of
Europe has lead to “increased openness in the practice of decision-making” as
decision-making concerning utilities now “remain subject to political and
administrative public scrutiny” rather than being “largely closed and private
processes” (Thatcher 2002a:966).
However, delegation at the EU-level may upset the norm of “institutional
balance” and the “reciprocal duty of loyal cooperation” shared by EU institutions and
national authorities (Majone 2002: 327). Delegation to yet other bodies than the ones
created by the Treaties could be perceived as a violation of “fundamental, and
presumably immutable, principles of the communitarian system” (Majone 2002: 321).
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Definitions of “Agencies” and the “Agency Programme”The term “agency” is not easily defined because, as Pollitt et al. (2001: 273) point out,
public law varies between countries, and the institutional design of agencies is
“characterized by extreme empirical heterogeneity” (Gilardi 2002: 874). Therefore, an
important task when developing a framework for the study of Community Agencies is
to identify critical dimensions to the “agency concept”. A review of relevant agency
literature provides the following definitions.
Thatcher (2002b:956) defines an independent regulatory agency as “a body
with its own powers and responsibilities given under public law, which is
organizationally separated from ministries and is neither directly elected nor managed
by elected officials”. Whilst acknowledging that the formal institutional status of an
agency is important, Thatcher (2002b: 955) also clearly points out that they are
incomplete and do not determine everything about an agency’s behaviour; control
mechanisms and powers outlined in the formal documents can be used in a variety of
ways.
Talbot (2004: 4) shows that “agency” can be defined “by exclusion”. For
instance, “state-owned enterprises whose primary existence is within the market
(albeit with subsidies) rather than in public services, and which are usually joint stock
companies founded in private law” can be excluded as can “social, charitable and
voluntary organisations even where their primary funding comes from the state”
(Talbot 2004: 4-5).
After having specified these exclusions, Talbot (2004: 5) sets up five criteria
that must be satisfied for an organisation to be considered an “agency”. He specifies
that the organisation ought to be: at arm’s length (or further) from the main hierarchical ‘spine’ of central
ministries/departments of state
carrying out public tasks (service provision, regulation, adjudication, certification) at a
national level
staffed by public servants (not necessarily ‘civil servants’)
financed (in principle) by the state budget (in practice some are financed up to 100 per cent
from their own revenues, but even here the state remains liable for their financial condition)
subject to at least some public/administrative law procedures (i.e. they are not predominantly
or entirely private law bodies).
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Talbot (2004: 6) then continues to discuss what he perceives as central elements to
“the ‘agency’ programme”. The first idea is the idea of “[s]tructural disaggregation
and/or the creation of ‘task specific’ organisations” (Talbot 2004: 6). By this, Talbot
(2004: 7) refers to “the splitting up of larger bodies into a ‘parent’ body and various
subordinate ‘agencies’. The following elements can be identified within this structural
change (Talbot 2004: 8. Creating an identifiable, separate, organisational structure with its own name.
Usually the body is given a single, or small set, of functions.
Usually these functions are primarily about ‘delivery’, ‘execution’ or ‘provision’ and not
about policy-making.
Giving the above body a clear ‘constitution’ – in the form of some sort of legislation, or at
least a formal (if not statutory) ‘framework document’ – which sets out its purpose, powers
and governance arrangements.
Making a single, named individual – usually called a Chief Executive (CE) – responsible for
managing and reporting on the new body. This person I usually appointed – actually or
potentially – through an open process, separate form the normal civil service recruitment.
Making the staff of the new body different in some way from mainstream civil servants,
usually by changing their formal employment status.
Putting in place formal reporting arrangements, including separate accounts, for the new body.
The second idea is the idea of “[p]erformance ‘contracting’ – some form of
performance target setting, monitoring and reporting” (Talbot 2004: 6), which refers
to “any system of setting targets for, and reporting on (non necessarily publicly) the
activities of an agency” (Talbot 2004: 14). The targets may be set by the agencies
themselves (as is often the case in the US), by the government (typical of the UK) or
by the two of them in combination, which is common in Sweden where ministries
draw up the broad guidelines and leave the details to the agencies (Talbot 2004: 15).
The third idea that Talbot (2004: 6) sees as central to agencies is the idea of
“[d]eregulation (or more properly reregulation) of controls over personnel, finance
and other management matters”. Briefly speaking, this refers to the rules that are set
up for how public bodies must function (Talbot 2004: 13). The autonomy of agencies
in this respect may vary over time. As Talbot (2004: 13) writes, one strategy has been
to give agencies a certain level of autonomy once and for all. Another strategy is to
gradually increase an agency’s autonomy over these matters if the agency proves that
it can be trustworthy.
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James (2001: 235) presents an agency model made up of two “core features”
derived from the UK “Next Steps” reform. The first feature is “the use of
organizational units called agencies to handle distinct central government activities on
behalf of ministries” (James 2001: 235). The second feature “is the creation of a
‘regulatory’ framework for each agency”. This framework, James (2001: 235)
continues, consists of “a designated chief executive, who is accountable for
performance, and a framework of performance requirements”. The idea behind having
a chief executive officer is to ensure that there is one individual who assumes
responsibility for the overall performance of the agency (James 2001: 236). The idea
behind the setting of performance targets is to ensure that the interests of those people
who are affected by the performance of the agency are protected (James 2001: 238).
Variation in agency designIn this section I will discuss literature related agency design, with a particular focus
on how different academics have mapped differences in agency design.
Horn (1995: 25-26) lists the following five institutional choices.2 i. the extent to which decisions are delegated to the administrative level rather than taken by the
legislature; especially the degree of legislative vagueness and the extent of ex post legislative direction to administrators;
ii. the governance structure of the administrative agent, especially the way senior personnel are selected, the degree of statutory independence from the legislature, and the jurisdiction of the administrative agent;
iii. the rules that specify the procedures that must be followed in administrative decision making, which typically define the rights that constituents have to participate directly in the administrative decision-making process;
iv. the nature and degree of legislative monitoring of administrative decision making and the ability to use ex post rewards and sanctions;
v. the “rules” governing the allocation and use of capital and labor, in particular, the extent to which agencies are financed by sales revenues rather than taxes and the administrators’ employment conditions.
Other scholars to map agency design are Bouckaert and Peters (2004: 38-43) who
present seven different types of activities that are often delegated to agencies.
Implementation is the first agency activity that Bouckaert and Peters (2004: 38) lists.
Agencies within this category can be involved in “direct service delivery” or they
could be in charge of “the transfer of funds”, which means that they “make decisions
about grants and contracts as a means of insulating these decisions from direct
political control” (Bouckaert and Peters 2004: 39).
2 For Horn’s explanation of variation, see section on drivers behind agency creation.
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Regulation of the economy and of society is another agency activity
(Bouckaert and Peters 2004: 39). A perceived advantage of this type of agency is the
possibility to isolate or distance regulatory functions from political pressures. An
added advantage is that a regulatory agency may involve the interests of those
affected by the regulation in its regulatory activities (Bouckaert and Peters 2004: 40).
Obviously also governments can do this, but the interests affected might liaise more
closely with an agency actively working in their field than a government that has their
field as one area to regulate among many.
A third task often delegated to agencies is to provide advice and assist in the
development of policies related to the agency’s area of expertise. The idea here is that
these agencies are capable of giving unbiased suggestions on policy issues of major
concern, and they involve experts in their policy-making (Bouckaert and
Peters 2004: 40). The fourth task mentioned by Bouckaert and Peters (2004: 41) is
information gathering and dissemination, which they argue is delegated for two
reasons. Firstly, delegation would mean that the gathering of data is at least partially
insulated from direct political pressures. Secondly, and this concerns particularly
collection and dissemination of important socio-economic data such as criminality,
poverty and unemployment, there are situations where it is of uttermost importance
that objectivity is maintained.
Research is the fifth type of agency activity discussed by Bouckaert and Peters
(2004: 41-42). The rationale behind delegating research tasks to independent agencies
is the wish for objectivity as regards results, but also a desire to give research
organisations the opportunity to decide themselves what to research. As Bouckaert
and Peters (2004: 41) writes, governments want to “prevent the formation of some
form of official science”. However, this is not without problems as ultimately the
governments are most often in charge of the money, and hence are able to influence
the research agenda.
Furthermore, Bouckaert and Peters (2004: 42) mention agencies functioning as
tribunals and public enquiries. These agencies perform tasks of a judicial nature, such
as assessing the legality of activities and actions within a specific policy area. It has
been suggested that these agencies can be very powerful. Indeed, Braithwaite
(2000: 229) argues that business regulatory agencies have grown to be “more
significant law enforcers than the police”. A reason behind the creation of these
agencies could be that the regular court system in welfare states simply cannot cope
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with the adjudication required for all the many government programmes devised
(Bouckaert and Peters 2004: 42).
Finally, Bouckaert and Peters (2004: 43) argue that there are agencies created to
provide “representational and participatory opportunities for segments of the civil society”. As
an extreme example of the latter they mention the Norwegian Sami Parliament (Sámediggi),
which, Bouckaert and Peters (2004: 43) argue has been “described as an affiliated organization
of the Department of Local Government and Regional Development in Norway”. However,
this description is inaccurate as the overarching responsibility for Sami politics in Norway
comes under the Ministry of Labour and Social Inclusion with other departments responsible
for the implementation of Sami politics within their field of work (c.f. Arbeids- og
Inkluderingsdepartmentet 2007, http://odin.dep.no/aid/norsk/tema/same/p30003434/nn.html).
Bouckaert and Peters (2004) also mention some other dimensions along which agencies
may vary in practice. Firstly, there are differences between agencies as regards “their
relationships with ministerial authority” (Bouckaert and Peters 2004: 29). There can also be
differences as regards legal status, “the degree of managerial involvement of ministries and
other political entities or officials” and the financial relationship between the agency and the
government (Bouckaert and Peters 2004: 37). The concept of autonomy is central to all these
dimensions, and agency autonomy over issues such as financial matters, appointments of
personnel and policy decisions may vary substantially (Bouckaert and Peters 2004: 29). As
stated by Bouckaert and Peters (2004: 29), a simple conclusion that an agency is autonomous
“may disguise substantial variation in their ability to act on their own and their capacity to
influence public policy”.
Difference in legal status can be illustrated by Gains (2004) and McCubbins
and Page (1987). Gains (2004: 56-58) outlines how political administration in the UK
traditionally has worked following the so-called “Whitehall model”, which can be
described as a model of non-statutory political administration organisations in which
involved actors respect formal and informal rules, in particular the sovereignty of the
Parliament and the importance of ministerial responsibility. In contrast, the American
Congress draws up legal documents where scope, regulatory instruments delegated
and procedures for the use of these instruments are seriously considered (McCubbins
and Page 1987). Bans, quotas and taxes are a few of the legal instruments that may be
assigned to agencies (McCubbins and Page 1987: 415). As suggested by the name,
“scope” refers to the specification of what the agency may address, and it includes
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“the statement of the purpose of the act” of delegation (McCubbins and Page
1987: 412).
In their explanations of variation in agency design Levy and Spiller (1996: 1)
stress the interaction between political and social institutions, economic conditions
and regulatory processes. Levy and Spiller’s (1996: 7-9) analysis centres on how to
match regulatory systems to the institutions of a political setting. To facilitate the
mapping of the choices involved they construct a “decision tree”. Firstly, Levy and
Spiller (1996: 7) argue that there is a distinction between “countries that have
domestic institutions capable of credibly refraining from arbitrary administrative
action and those that do not”. Here they suggest that countries with independent
judiciaries whose decisions are enforced and regarded as impartial have better
chances of achieving credible commitment. Countries that can achieve credible
commitment can then be divided into two groups, those that use legislation to achieve
credible commitment successfully, and those that “best achieve such commitment by
embedding their regulatory systems in the operating licenses of private companies”
(Levy and Spiller 1996: 7). Thirdly, Levy and Spiller (1996: 9) argue that there is a
distinction between countries in which credibility can be achieved by specific,
substantive rules and countries in which more flexible regulatory processes can be
used. The fourth distinction mentioned by Levy and Spiller (1996: 9) is the one
between countries with “strong administrative capabilities and those without”.
Agency design can also be explained by the perceived risk of “capture”, which
refers to situations in which regulatory agencies get captured by the regulated interests
(c.f. Thatcher 2002b: 958). A plausible idea related to this has come from “Chicago
school” scholars who argue that there is a greater risk of regulatory agencies being
captured by producers than by consumers. The reason for this is that producers, who
are few and easily organised, often benefit significantly from regulation. Collective
action is harder to achieve for consumers who, in contrast to producers, are numerous
and dispersed (c.f. Thatcher 2002b: 956-958, Moran 2002: 394).3
Thatcher (2002b: 963) examines the risk of “capture” of agencies by firms
with help of three indicators. Firstly, he considers “the extent of the ‘revolving door’”,
which refers to the possibilities of individuals to move between employment by a
regulated firm to a regulatory agency, and back again. This, Thatcher (2002b: 963)
3 As examples of members of the Chicago school Thatcher (2002b: 958) mentions Stigler, Peltzman and Becker.
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maintains, gives “an indication of the ‘relation distance’” between the regulatory
agency and the regulated firms. Secondly, he considers how many mergers have been
blocked or have been subjected to conditions. This indicator aims to highlight
relations between regulated firms and regulatory agencies in the competition field
(Thatcher 2002b: 964). As a third indicator, Thatcher uses the number of times
decisions made by regulatory agencies have been legally challenged. This, Thatcher
(2002b: 963) argues, shows us whether or not there is a high level of conflict between
the regulatory agencies and the regulated firms. A high number of legal cases against
a particular regulatory agency would suggest that that agency has not been captured as
“legal action represents a public and hostile challenge” (Thatcher 2002b: 963).
Thatcher (2002b) also examines the relationship between independent
regulatory agencies (IRAs) and elected politicians. He lists the following five
indicators of how elected politicians can control agencies (Thatcher 2002b: 959): party politicization of appointments: the greater the politicization of regulators, the
lower the likely independence of regulators and the greater control by elected
politicians;
departures (dismissals and resignations) of IRA members before the end of their term
(. . .): the lower the level of early departures, the more likely IRA independence;
the tenure of IRA members: the longer their tenure, the greater their likely
independence from elected politicians;
the financial and staffing resources of IRAs;
the use of powers to overturn the decisions of IRAs by elected politicians.
To conclude, it can never be sufficient to focus on formal definitions when studying
agencies. This is particularly true as regards Community Agencies as the EU have
chosen to give them all the same broad definition.4 Legal status, functions,
governance structures, finance and personnel matters must be considered, and the
concept of autonomy is central to all these aspects.
Drivers behind agency creation An early contribution to the delegation literature is made by McCubbins and Page
(1987), who in their analysis of delegation from the American Congress argue that 4 EU definition of Community Agencies: “A Community agency is a body governed by European public law; it is distinct from the Community Institutions (Council, Parliament, Commission, etc.) and has its own legal personality. It is set up by an act of secondary legislation in order to accomplish a very specific technical, scientific or managerial task, in the framework of the European Union’s ‘first pillar’.” (http://europa.eu/agencies/community_agencies/index_en.htm, accessed 2007-04-03).
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delegation is perhaps most often explained by complexity arguments. By this they
mean that the complexity of many problems faced by legislators requires considerable
resources, and as resources are scarce, legislators decide to delegate legislative
powers to agencies (McCubbins and Page 1987: 409). Degrees of complexity vary,
and a logical assumption would be that we could expect more delegation in policy
areas where there is a high degree of complexity. However, as we witness delegation
in fields not normally deemed as enormously complex, it seems that complexity
arguments cannot explain all different forms of regulation. McCubbins and Page
(1987: 409) acknowledge this, and argue that delegation can also be explained by the
“shift-the-responsibility” model, which they accredit to Fiorina. This model predicts
that “the legislative choice to delegate authority to an administrative agency in
preference to judicial enforcement of a legislative enactment follows when the act of
delegating disguises the costs of the regulation to a larger extent than it disguises the
benefits” (McCubbins and Page 1987: 410).
McCubbins and Page (1987: 414) also argue that “the degree of conflict and
amount of uncertainty are the principal determinants of what form of delegation
Congress chooses”. They suggest that:with greater uncertainty and greater conflict there is a stronger incentive for Congress to pass
the hot potato to the agency by broadening the scope and instruments of delegated authority.
But while passing on the hot potato, there is no need to send over a loose cannon. With one
hand, Congress broadens the scope and instruments; with the other, Congress tightens the
procedural requirements. (McCubbins and Page 1987: 419).
Bawn (1995) puts forward a similar argument. Her central hypothesis is that “the
degree of agency independence on any particular policy reflects the legislature’s
willingness to trade uncertainty about policy consequences for uncertainty about
agency behavior” (Bawn 1995: 63). Applied to Community Agencies Bawn’s (1995)
and McCubbins’ and Page’s hypotheses would imply that a wide scope of activity and
a large number of legal instruments would be given to agencies that operate in areas
where there is considerable conflict and/or high degree of uncertainty. At the same
time we could expect said agencies to be restricted by tight procedural requirements.
Horn (1995: 24) argues that explanations for variation in agency design can be
explained by examining transaction costs, and his overarching argument is that “legislators
choose those administrative arrangements that best address the transaction problems they
encounter”. Transaction costs can be determined by “constitutional differences among
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countries” (Horn 1995: 9) and the level of uncertainty and conflict in a given policy area (Horn
1995: 15). High levels of uncertainty and conflict increases the legislators costs of adopting
detailed, refined legislation wherefore high levels of conflict and uncertainty tend to lead to
vague legislation, Horn (1995: 15) argues. Furthermore, Horn (1995: 11) maintains that “the
institutional arrangements faced by administrators are likely to have a systematic influence on
the type of person who seeks public sector employment, the type of employee who ends up
being promoted to a position of responsibility, and the incentives he or she faces once
appointed”.
Huber and Shipan (2002) takes a different view and argue that legislators tend
to devise precise legislation when there is a high level of policy conflict, when
legislative capacity is high, when there is no conflict between the two chambers in a
bicameral system, and when “the political system does not allow the legislative
majority to rely on nonstatutory factors to influence policy implementation” (Huber
and Shipan 2002: 215). Hence, it follows that great discretion in delegation ought to
be commonplace when the opposite is true. As regards operationalisation of
“conflict”, Huber and Shipan (2002: 217) point out that it is necessary to consider the
workings of the political system under study.
The starting point for Epstein and O’Halloran’s (1999: 9) analysis is an
assumption that decisions about delegation are taken in order to maximise the political
goals of legislators. Thus, delegation will take place when the benefits of delegation
are perceived to outweigh the costs of delegation. After having reviewed previous
literature on delegation, Epstein and O’Halloran (1999) concludes that there are three
broad sets of explanations for delegation. The first one is “reasons of constituency
relations”, which Epstein and O’Halloran (1999: 30) argue can come in three
varieties. The first variety, and, according to Epstein and O’Halloran (1999: 30), the
most benign, is that “legislators may wish to free up time to spend on constituency
service, simultaneously taking advantage of agency expertise”. This argument can be
found in a number of other texts on delegation (c.f. Pollack 2003; Pollitt et al. 2001).
The second variety supposes that “legislators may gain by exposing their constituents
to the vagaries of administrative regulation, content to play the role of ombudsmen
who intervene if this process goes awry” (Epstein and O’Halloran 1999: 30). Finally,
the third variety of constituency relations explanations “cast[s] legislators in the role
of leading an organized ‘protection racket,’ threatening uncooperative constituents
with harmful regulation if they do not contribute to legislators’ coffers” (Epstein and
14
O’Halloran 1999: 30-31). The second set of explanations can be related to a notion
that Epstein and O’Halloran (1999: 31) terms “regulatory lottery”, which supposes
that interest groups that cannot agree in the legislative process may prefer delegation
to agencies and a following regulatory uncertainty to a certain outcome that contradict
their interests. Expressed in terms of a concrete hypothesis this would mean that the
higher the level of uncertainty, the more delegation. Thirdly, Epstein and O’Halloran
(1999: 32) argue that delegation to bureaucrats is often a preferred choice when “the
policy in question has concentrated benefits and dispersed costs”. If this is true we
could expect the extent of delegation to co-vary with the extent of benefit
concentration and cost dispersion.
The wish to organise the public sector along market lines to force public sector
organisations to be more efficient is another driver behind agency creation (Bouckaert
and Peters 2004: 29). It has been argued that unbundling of the public sector into
“distinct, single-purpose organizations will make it easier for key stakeholders to
identify, participate in, and be consulted about the work of the organization” (Pollitt et
al. (2001: 277). It could also improve “rank-and-file motivation” of agency staff,
allow for more professional management, and improve various aspects of personnel
management (Pollitt et al. 2001: 277).
A well-spread hypothesis concerning agency creation is the so-called
credibility hypothesis, which stipulates that governments delegate powers to
independent agencies in order to increase the credibility of their commitment to
particular policies (c.f. Gilardi (2002). Credibility is a problem for elected politicians
as their commitment to a particular policy tends to change over time due to the
pressure of public opinion and the democratic process. With other words, policies are
time inconsistent (c.f. Epstein and O’Halloran 1999; Gilardi 2002; Pollack 2003).
How significant a problem this is depends on the policy area in question and on the
level of impact the delegated activity has on society. However, on a general note
Gilardi (2002: 876) concludes that “a lack of credibility is problematic because
rational actors can anticipate future policy changes and thereby prevent the
government from attaining its objectives”. This problem is exacerbated when the
government cannot implement its policies through coercion (Gilardi 2002: 876).
Given the EU’s lack of coercive powers, and the at times slow implementation of EC
directives into national law, one could hypothesise that credibility is of significant
importance for the EU, and, subsequently, that this is a common driver behind the
15
establishment of Community Agencies. The more important credibility is perceived to
be in a policy area, the more autonomous we could expect agencies in that policy area
to be.
As a first step of an empirical assessment of the credibility hypothesis Gilardi
(2002: 876-878) presents three related hypotheses. Firstly, Gilardi (2002: 877)
hypothesises that “the more an economy is subject to ‘international interdependence’,
the more delegation there should be”. International interdependence is measured “by
the sum of trade, foreign direct investment (FDI) and international portfolio
investment as a share of gross domestic product (GDP)” (Gilardi 2002: 880). The
second hypothesis is that “delegation is more likely in sectors that have been recently
subject to market opening” (Gilardi 2002: 877), and, thirdly, Gilardi (2002: 878)
suggests the hypothesis that “there is a significant link between veto players and
delegation”. Veto players is measured by a proxy variable “based on the number of
parties in the executive and in the legislature, taking into account divided government
and coalitional heterogeneity” (Gilardi 2002: 880). The dependent variable of
Gilardi’s (2002) study is agency independence, which is measured by an index
focused on formal independence. The index takes the following aspects into account:
“the agency head status, the management board members’ status, the general frame of
the relationships with the government and the parliament, financial and organizational
autonomy, and the extent of delegated regulatory competencies” (Gilardi 2002: 880).5
Gilardi (2002: 884-888) concludes that there is a positive link between market
opening and agency creation, but economic interdependence is not proven to have any
significant impact. An intriguing result of the study is that veto players are relevant
for the institutional design of agencies, but, contrary to what one might assume, there
is a negative association between veto players and agency independence.
Blame-shifting is another potential driver behind delegation. The core idea
behind blame-shifting as a driver behind agency creation “is that politicians seeking to
claim credit and avoid blame from voters face a choice of direction or delegation
within any policy domain, while voters or citizens choose between praising or
blaming those who have direct responsibility in public policy” (Hood 2002: 17). One
way for politicians to manage blame is blame avoidance through “agency strategies”,
5 For details of the weighing and coding of the variables in the index, see Gilardi (2002: 880).
16
i.e. “the selection of institutional arrangements to minimize or avoid blame, for
example in choosing between direct control and delegation” (Hood 2002: 16-17).6
Hood (2002: 28) outlines three different blame-shifting strategies through
delegation. Politicians may avoid blame for financial failure through privatisation.
Operational and organisational problems can be avoided through managerialisation,
and, blame for “judgemental failures” such as “false assumptions, faulty forecasts,
technical errors or ignorance” can be avoided by “expertization”. The intensity of the
wish to shift blame may vary between policy areas and subsequently this will be
reflected in agency autonomy.
Agency creation can also be explained by historical institutionalism and the
idea of path dependency. In her study of ‘Next Steps’ agencies in the UK, Gains
(2004) argues that the new rules and norms that came about through agencification in
the UK had to be developed alongside already existing rules. Gains (2004) maintains
that the pre-‘Next Steps’ organisation of certain British departments has influenced
what agencies were set up in connection to the unbundling of these departments and
how the agencies came to operate; the UK’s choice to establish agencies on an
administrative rather than a legal basis reflects a historical preference for non-
statutory organisations. The Community Agencies, by contrast, have a clear legal
foundation. Thus, a framework for the study of Community Agencies ought to
consider whether a legal preference has led to the EU following a “legal path” in its
agency creation. Previous EU work in the areas where Community Agencies have
been established must also be considered.
Perceived benefits of a particular institutional form can also explain delegation
to agencies (c.f. James 2001; McNamara 1998; 2002). The notion of ideas as a potent
force is particularly relevant when considering the spread of an agency model from
one country to another, and we can hypothesise that the degree of preference for an
institutional form determines the likelihood of its spreading. “Policy-transfer”, which
refers to “voluntary” as well as “coerced” adoption of policies, and “lesson-drawing”,
which “includes most observation of an reflection on other countries’ experiences in
order to draw positive and negative lessons” are two related terms used to describe
processes through which policy ideas or tools developed in one political setting are
exported to other political settings (James 2001: 241; cf. Dolowitz and March 1996;
6 Blame-shifting through agency creation does not always work; sometimes politicians are blamed for events and situations over which they have no control (Hood 2002: 24).
17
Rose 1993). Thus, interdependencies between countries and the ability and/or wish of
international organisations to promote the spread of agencies are potential drivers
behind agency creation (Gilardi 2005: 85).
DiMaggio and Powell (1991: 64, 66) argue that the fact that some
organisational forms are “normatively sanctioned” makes it more likely that these
forms are going to be adopted and that this homogenization of “organizational forms
and practices” is best captured by the concept of institutional isomorphism. DiMaggio
and Powell (1991: 67) discuss three types of isomorphism: coercive isomorphism,
mimetic isomorphism and normative isomorphism. Coercive isomorphism “results
from both formal and informal pressures exerted on organizations by other
organizations upon which they are dependent and by cultural expectations in the
society within which organizations function” (DiMaggio and Powell 1991: 67).
Mimetic isomorphism occurs when organisations in times of uncertainty model
themselves on other organisations (DiMaggio and Powell 1991: 69). Interestingly,
“[t]he modelled organization may be unaware of the modelling or may have no desire
to be copied; it merely serves as a convenient source of practices that the borrowing
organization may use” (DiMaggio and Powell 1991: 69). Normative isomorphism
refers to the diffusion of normative rules about the behaviour of professionals and
organisations through similar education and the development of professional networks
(DiMaggio and Powell 1991: 71). DiMaggio and Powell (1991: 74-77) suggest the
following hypotheses concerning institutional change: The greater the dependence of an organization on another organization, the more
similar it will become to that organization in structure, climate, and behavioural focus.
The greater the centralization of organization A’s resource supply, the greater the extent to which organization A will change isomorphically to resemble the organizations on which it depends for resources.
The more uncertain the relationship between means and ends, the greater the extent to which an organization will model itself after organizations it perceives as successful.
The more ambiguous the goals of an organization, the greater the extent to which the organization will model itself after organizations that it perceives as successful.
The greater the reliance on academic credentials in choosing managerial and staff personnel, the greater the extent to which an organization will become like other organizations in its field.
The greater the participation of organizational managers in trade and professional associations, the more likely the organization will be, or will become, like other organizations in its field.
The greater the extent to which an organizational field is dependent upon a single (or several similar) source(s) of support for vital resources, the higher the level of isomorphism.
The greater the extent to which the organizations in a field transact with agencies of the state, the greater the extent of isomorphism in the field as a whole.
18
The fewer the number of visible alternative organizational models in the field, the faster the rate of isomorphism in that field.
The greater the extent to which technologies are uncertain or goals are ambiguous within a field, the greater the rate of isomorphic change.
The greater the extent of professionalization in a field, the greater the amount of institutional isomorphic change.
The greater the extent of structuration of a field, the greater the degree of isomorphism.
ConclusionAs delegation to agencies is a key aspect of the regulatory state, the literature on the
regulatory state is a logical starting point when devising a framework for the study of
Community Agencies. In contrast to the Keynesian welfare state, which places a
significant focus on redistribution, the focus of the regulatory state is on regulatory
policy-making. As the EU appears more geared towards regulatory policy-making
than redistribution, a case could be made for considering the EU a regulatory state.
However, this has significant implications for conceptualisation of the legitimacy of
the EU political system. This is so because legitimacy in the regulatory state tends to
be focused more on output-oriented legitimacy (government for the people) than
input-oriented legitimacy (government by the people). One could also argue that
delegation to Community Agencies upsets the delicate inter-institutional balance in
the EU.
My literature review reveals that due to varying terminology and legal
traditions between countries there is no single definition of what exactly an agency is.
However, as all Community Agencies by nature is part of the same political system,
that of the EC/EU, finding a definition to be used within my thesis ought not to be a
significant problem. Rather the challenge is to what extent findings on agencies in
other contexts, perhaps defined by other parameters, can be applied to the Community
Agencies and vice versa.
A key part of my PhD project is to map the Community Agencies with regards
to their functions, organisations, powers and so on. A number of relevant issues have
been identified in the literature. For instance, it is important to consider the legal
status of an agency and its relationship with central decision-making institutions. It is
also important to consider financial, staffing, management and performance issues.
For the mapping of the agencies to be useful it is essential to seek to explain this
variation. Existing literature suggests that the functions an agency is expected to carry
out has an impact on the design on the agency. The relationship between agencies,
19
decision-making bodies and judicial bodies can also explain differences. Important
factors to consider here are the level of outside influence on the agency as regards
personnel, management and finance. The legal status of an agency, how well defined
its mandate is, and what control mechanisms are imposed on the agency are other
issues also of central importance that can explain agency operations. Variations in
agency design could also be explained by the level of uncertainty and political
conflict in the area that the agency is going to operate in as well as by the perceived
risk of capture. As regards the impact of uncertainty and political conflict on agency
design, somewhat contradictory hypotheses can be derived from the literature, which
indicates that more research is clearly needed in this area.
Finally, this paper has sought to identify drivers behind agency creation.
Different authors term their identified drivers somewhat differently, but there are
certain ideas that recur. Delegation as a response to the wish to lower political
transaction costs is one such idea. Political transaction costs can be lowered through
increased efficiency in decision-making and the use of developed agency expertise.
Efficiency can be gained if delegation of detailed policy-making to agencies leave
decision-makers more time to deal with broader issues, and if the relevant policy-
making expertise is present amongst agencies, these agency experts might be able to
take complicated decisions faster than a non-expert politician. Another “version” of
the expertise argument claims that as society has become more complex, decision-
makers cannot have all expertise required wherefore delegation is the best way to
ensure informed regulation in complex matters. Blame-shifting is another way to
lower political costs. This means that decision-makers delegate with an intention to
blame failed and/or unpopular decisions on the agency. This may be particularly
attractive to politicians in policy areas where benefits of particular legislation are
concentrated and costs dispersed. The need for credible commitment, particularly in
areas where policy choices may not be consistent over time, is another often cited
reason behind delegation. The essence of this argument is that by delegating
responsibility for a particular policy to an agency, decision-makers cannot back down
from their policy choice.
Other explanations for delegation are provided by sociological and
constructivist perspectives. Authors from this tradition suggest that delegation to
agencies take place because of a normative constructed belief of the superiority of this
particular form of organisation. The concepts of policy transfer and isomorphism are
20
central to this idea, wherefore constructivist explanations may prove particularly
useful for the explanation of the rapid spread of agencies.
21
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