Thursday, June 02, 2011

Luc Fransen: "Why Do Private Governance Organizations Not Converge?"

L.W. (Luc) Fransen of the University of Amsterdam has recently published an article well worth reading: "Why Do Private Governance Organizations Not Converge? A Political–Institutional Analysis of Transnational Labor Standards Regulation," Governance: An International Journal of Policy, Administration, and Institutions 24(2)359-387 (April 2011) (Wiley Periodicals).  

 (Dr. Fransen, from

The issue is convergence, the object of study are private governance organizations, and the puzzle is the reasons why there is resistance to convergence (viewed as a negative characteristic).  The abstract nicely describes the approach:
 Voluntary governance arrangements focusing on responsible business behavior have proliferated over the past decades, and in many sectors of industry, different governance organizations now compete for business participation. This private governance competition has negative conse- quences for the effective functioning of these arrangements. In the literature up until now, optimism prevails on how a process of policy convergence between organizations may come about that would solve some of the prob- lems that arise because of this competition. It is remarkable, however, that in one of the key industries referred to in this literature, the garments industry, convergence is virtually absent. This article explains why this is so and suggests that next to three existing approaches to the evolution and possible convergence of private governance organizations, actually a fourth, pessimistic type should be introduced, taking into account the evolution and perseverance of political difference between interest groups creating and supporting private governance arrangements. (Fransen, supra, abstract, 359).
The specific object of study is the garment industry and the conclusion is that convergence is not inevitable where the competitors themselves represent institutional forces with their own autonomous logic and need to preserve their existence and autonomy. Fransen thus seeks to show "through the story of private governance competition in the garments industry how both the differences in the political perspective of rule-making parties and the political implications of policy differences between governance approaches can lead to a fragmented and competitive governance field that hardly converges, despite the efforts of parties inside and outside the governance field to stimulate cooperation" (Fransen, supra, at 360).

Focusing on the recent soft governance history of the global garment industry, Fransen notes the increase rather than the decrease of organizations offering approaches to governance.  "First, the number of governance organizations with different approaches to labor standards has increased from five to seven since the first accounts about the possibility of convergence were written" (id., 362).  In addition, "to date there are no overall observable steps taken to reduce the “undesirable” effects of governance competition by agreeing on common labor standards, publication of factory audits, or mutual recognition of monitoring and redeeming efforts"  (id.). The result is the continued proliferation of standards as organizations and industry participants compete for adherents and for control of standard setting power.  Fransen suggests an analytical framework for this result.  
private governance organizations are a product of political negotiation, their functioning affects the distribution of power among interest groups, and their competition has political consequences as well. Following this line of reasoning the convergence between private governance organizations may be of a different nature than as portrayed by proponents of the discussed economic and idealist– institutional approaches. It is likely that convergence processes are riddled with strategic calculation by both representatives of governance organizations, firms, and societal interest groups. Every possible step of policy adjustment and every effort of policy practitioners to engage may be predated by political strategizing and followed by con- siderations on wins and losses. This dynamic can easily stall efforts at convergence. (Id., 363-64).
Rather than convergence, then, markets for standards, like markets for regulation within globalization, produces diversity of products, all of which compete for market share among critical actors.  "Social interaction processes may very well enhance, instead of counter, differences that are identified through the study of conflicts in interests. They may lead to the established consensus that it is better not to converge, to agree to disagree."  (Id., 364). 

Yet it might be possible to understand Fransen's notion of politics inhibiting convergence, as product differentiation in a market for standards where there is no cultural consensus on a "standard product" or even where in the face of consensus on a "standard product" differences in the ability to service standard's products may contribute to a vibrant and quite differentiated market for standards delivery.    Even small differences in ideas may produce competitive pressure and reinforce competition.  And, of course, where there is little difference in standards, differences in methodology or operation (that is differences in service and expertise on an ongoing basis) may also create incentive toward competition. In a sense, then, the institutionalization of standards producers may not foster divergence in standards so much as competition among standards providers for market share grounded in a variety of factors, only one of which might be the standards themselves.  That, perversely enough, might be institutionally efficient, as firms compete both for the production of the "best" standards and the delivery of the "best" standards of implementation on a going forward basis.  Product delivery and maintenance, then, suggests not merely politics but the development of an industry the product of which needs to be serviced by competing entities.   

Using the garment industry as an example, Fransen suggests the conditions that may produce incentives toward market competition for substantive standards (as a consumable) or competition among providers of standards for clients. This includes a vertically and horizontally fractured industry (id., 365-366; "This industry consists of thousands of companies oper- ating locally, nationally, regionally, and globally, while combining different functions in the value chain to different degrees: buying, marketing, designing, and retailing. The horizontal organization of the industry is fragmented across countries and regions, and often within countries as well, with different business associations tailoring to the needs of different types of companies." id., 365).  Fracture among civil society organizations producing standards or delivering monitoring or enforcement or certification services is also a factor (id., 367-368).
Advocates of private labor standards can be found among global unions, labor activist networks, national trade unions, developmental NGOs, and consumer and/or shareholder movements in North America and Western Europe. These groups vary in significant ways in the depth and width of ties with workers on the ground, as well with regard to overall advocacy goals, organizational agendas, and the support base that these groups are accountable to. (id., 367).
Fransen describes substantive product differentiation among standards (id., 368-374).  Product differentiation is understood as political in the sense of the different stakeholder orientation of the standards producers and their choices among the various aspects of the standards to privilege.   The development of standard setting as an industry in its own right is nicely illustrated as Fransen works through the issues of efforts by competitors to control markets for standards through strategic alliances and initiatives (id., 374-82).  This market behavior suggests  the sort of politicized governance that makes convergence more difficult.  
First, regarding political characteristics of industry, private governance organizations focusing on garments production have tailored to a fragmented market in terms of sectors and geography, with complex power relations between firms, that could affect preferences for different governance setups. A more homogeneous sector with simpler structures of competition might have been easier as a basis for convergence. Similarly, civil society organizations could have been a greater stimulus for convergence had they been less divided among themselves. Regarding the political characteristics of governance, two things became clear through the issue of control of governance dividing different organizations: First, labor standards governance is about governing an unequal power relation between societal and business actors, meaning that who governs (fairness in procedures) may matter as much as how is governed (effectiveness in methodology); second, groups involved in governance may benefit from permanently exercising certain roles in organizations. Both these aspects severely complicate convergence between organizations, compared to a governance issue that is more easily objectifiable and of which the distributional consequences of particular governance setups are smaller. Finally, the history of different governance organizations shows that many of them evolved in opposition to or after conflict with other governance organizations and their supporters, and to date these supporters may use public campaigns to shame the approaches of governance organizations that are not to their liking. These legacies of conflict and repertoires of contention form a further challenge to convergence.  (Id., 383-384).
Fransen does an excellent job of elaborating an institutional structure in which a community of actors has developed around standards production and implementation. But what Fransen has convinced me of is that convergence may not be useful to examine the production of standards or their implementation in terms of convergence or even to hold on to the perhaps ideologically tinged notion that convergence is necessary or appropriate to the business of developing standards.  Rather, it might be most useful to begin to consider the development of standards through private governance organizations the way we consider the development of other commodities in markets driven cultures.   What may important, then is to develop a framework within which standards may be developed and implemented rather than worry about their convergence.  Disclosure and accountability standards applicable to all market participants in these markets for standards may be more important than the form or necessity of convergence of standards.  Fransen has begun to liberate us from an analytical perspective grounded in a particular objective--convergence, a expression of universalism--that appears to have diverted rather than enhanced our ability to understand the way that governance communities relate to the rules under which they might choose to be governed.

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