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The New Global Rulers

The New Global Rulers: The Privatization of Regulation in the World Economy

Tim Büthe
Walter Mattli
Copyright Date: 2011
Pages: 320
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  • Book Info
    The New Global Rulers
    Book Description:

    Over the past two decades, governments have delegated extensive regulatory authority to international private-sector organizations. This internationalization and privatization of rule making has been motivated not only by the economic benefits of common rules for global markets, but also by the realization that government regulators often lack the expertise and resources to deal with increasingly complex and urgent regulatory tasks.The New Global Rulersexamines who writes the rules in international private organizations, as well as who wins, who loses--and why.

    Tim Büthe and Walter Mattli examine three powerful global private regulators: the International Accounting Standards Board, which develops financial reporting rules used by corporations in more than a hundred countries; and the International Organization for Standardization and the International Electrotechnical Commission, which account for 85 percent of all international product standards. Büthe and Mattli offer both a new framework for understanding global private regulation and detailed empirical analyses of such regulation based on multi-country, multi-industry business surveys. They find that global rule making by technical experts is highly political, and that even though rule making has shifted to the international level, domestic institutions remain crucial. Influence in this form of global private governance is not a function of the economic power of states, but of the ability of domestic standard-setters to provide timely information and speak with a single voice. Büthe and Mattli show how domestic institutions' abilities differ, particularly between the two main standardization players, the United States and Europe.

    eISBN: 978-1-4008-3879-0
    Subjects: Political Science, Finance, Business

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Illustrations and Tables
    (pp. ix-xii)
  4. List of Acronyms
    (pp. xiii-xiv)
  5. Acknowledgments
    (pp. xv-xviii)
  6. CHAPTER ONE The Rise of Private Regulation in the World Economy
    (pp. 1-17)

    On 28 August 2008, the world financial community awoke to stunning headline news: the Securities and Exchange Commission (SEC), the powerful U.S. financial market regulator, had put forth a timetable for switching to International Financial Reporting Standards (IFRS), produced by the International Accounting Standards Board—a private-sector regulator based in London. SEC-regulated U.S. corporations were to be required to use IFRS, possibly as soon as 2014.¹ Only a decade earlier, the suggestion that the United States might adopt IFRS “would have been laughable,”² as many experts expected U.S. standards to become the de facto global standards.

    The SEC’s decision to...

  7. CHAPTER TWO Private Nonmarket Rule-Making in Context A TYPOLOGY OF GLOBAL REGULATION
    (pp. 18-41)

    How are rules for global markets set? in this book, we focus on rule-making in private bodies, each of which is, in its particular issue area, largely uncontested as the forum for setting international standards—a form of governance that is tremendously important for global product and financial markets but has so far attracted little sustained analytical attention. We take seriously the distinctive institutional features of thisnongovernmentalform of global governance but also recognize, and indeed emphasize, its fundamentally conflictual, and hence political, nature.

    To put this form of private regulation in context, we distinguish four modes of global...

  8. CHAPTER THREE Institutional Complementarity Theory
    (pp. 42-59)

    International standardization almost always entails distributional conflicts. As the examples in the previous chapters illustrate, standardization implies the harmonization of differing prior practices and therefore adjustment costs, at least for some. Consequently, it involves conflicts of interest over the distribution of those adjustment costs—even when the benefits of convergence on a single international standard clearly exceed the adjustment costs for each country or even each affected user.¹ Moreover, standardization can increase or decrease the value of patents and open up profitable business opportunities for some while foreclosing them for others. When the member bodies of ISO voted to adopt...

    (pp. 60-98)

    In April 2009, as the global financial crisis was quickly deepening, the leaders of the G-20 group of industrialized and developing nations met in London to take urgent steps to prevent a further downward spiral of the world economy and avert a new Great Depression. Among the measures on which they agreed at the conclusion of their meeting was to call on the International Accounting Standards Board, IASB, “to improve standards on valuation and provisioning and achieve a single set of high-quality global accounting standards” to bring greater stability to global financial markets and thus lay the foundation for the...

  10. CHAPTER FIVE The Politics of Setting Standards for Financial Reporting
    (pp. 99-125)

    Iasb’s short history provides ample anecdotal evidence for the predominance of U.S. interests and the crucial role of FASB in ensuring U.S. influence in international rule-making. In several recent projects, for instance, the IASB has adopted U.S. standards as international standards virtually without change, even in the face of European opposition. Such U.S. predominance is all the more remarkable since “Realist” scholars have argued that the EU increasingly equals the United States on various measures of raw economic power, such as GDP and market capitalization; some other scholars even argue that the EU has governmental regulatory power over financial markets...

    (pp. 126-161)

    In August 2000, the American National Standards Institute issued a stern warning: “The standardization world has changed. We can’t assume that U.S. technology and practices will automatically be adopted everywhere [anymore].”¹ The concern was in fact not new. A decade earlier, the Office of Technology Assessment of the U.S. Congress had observed: “Many American companies . . . have yet to recognize the implications of international [product] standards in a global economy. By the time they come to appreciate the potential consequences, the damage to the national economy may already have been done.”²

    To illustrate what was at stake, the...

    (pp. 162-191)

    Private rule-making for global product markets has much in common with private rule-making for global financial markets. The process of developing standards in ISO and IEC is in many respects similar to the process in IASB, especially in that ISO/IEC procedures similarly reward early uncontested involvement by a country’s stakeholders. Given these international institutions, the argument that we developed in chapter 3 should also hold for ISO and IEC, the international organizations discussed in chapter 6. The logic of the argument leads us to expect that countries with domestic coordination and institutional hierarchy benefit from greater complementarity and hence have...

  13. CHAPTER EIGHT Contributions to the Theoretical Debates in Political Science, Sociology, Law, and Economics
    (pp. 192-213)

    Our empirical investigation of private rule-making in transnational focal institutions—based on quantitative analyses of hundreds of responses from two multi-industry business surveys, complemented by qualitative analyses of a wealth of additional sources—lends strong support to the institutional complementarity theory that we presented in chapter 3. In this chapter, aimed primarily at readers who are interested in the theoretical issues raised by our argument and analysis, we summarize what is distinct and novel about institutional complementarity, then discuss the contributions of our analytical framework to current scholarly debates in political science, sociology, law, and economics/business studies.

    Throughout this book,...

  14. CHAPTER NINE Conclusions and Implications for Global Governance
    (pp. 214-226)

    We have, in this book, explored a hitherto little studied or understood type of regulation in the world economy: global rule-making by private-sector focal institutions. The prominence and economic significance of this type of regulation has risen sharply over the last decade or two. We have sought to shed light on the global regulatory organizations by asking: Who exactly gets to write the rules in these private bodies? What is the process of rule-writing? Who are the winners and losers in this process, and why?

    To answer these questions and gain a better understanding of the nonmarket type of global...

  15. APPENDIX ONE Financial Reporting Standards Survey ADDITIONAL SURVEY RESULTS
    (pp. 227-233)
    (pp. 234-237)
  17. APPENDIX THREE Survey Methods
    (pp. 238-248)
  18. References
    (pp. 249-288)
  19. Index
    (pp. 289-301)