Risk Regulation, Accountability and Development

University of Manchester
June 2003

Joint Workshop organised by ESRC Centre for Analysis of Risk and Regulation, LSE; Centre for Regulation and Competition, University of Manchester, and Aston Business School.

This conference was an attempt to bring together cross-disciplinary perspectives on risk regulation - financial, social and economic - particularly with reference to the developing world. As part of the ESRC's Social Science week, a public session was held in which panellists from within the development studies community responded to the points made in earlier sessions on Governance; Accounting; and Economic and Social Regulation

Key insights:

  • Using examples from Australia, John Braithwaite (Australian National University) highlighted the empirical case for 'responsive regulation' or 'meta risk management' - that compliance may be easier to secure where procedures are devolved to regulatees, especially where the threat of tighter oversight can be used as a motivation for compliance; in short where the regulator has poor information but high 'leverage'.
  • John Stern (London Business School) argued that utilities regulation - here focussing on electricity supply - involves high fixed and level costs, which are regressive in relation to developing countries. The correct response may be the cultivation of economies of scale through cross-sectoral or supra-national regulation.

  • Christopher May (University of the West of England) suggested that the history of intellectual property (IP) is one of balancing public access to innovation with the private rewards necessary to allow it to flourish. By contrast, a growing tendency to see IP solely in terms of knowledge owners' rights may prevent developing countries from successfully exploiting ideas, in order to build their domestic industries up to the level of the West.
  • Trevor Hopper (University of Manchester) presented research undertaken with Shazad Uddin (Queen's University, Belfast) on Bangladesh which contradicted the World Bank's claims for privatisation. These - it was argued - rely on a 'trickledown' theory to bring social benefits. In Bangladesh, not only did firms perform badly in profitability terms, post-privatisation, but social returns, transparency and employment conditions also suffered.
  • The case of Jamaican telecommunications was highlighted in two papers, by Martin Lodge and Lindsay Stirton (CARR/LSE), and by the Jamaican Cabinet Secretary Carlton Davis. In Jamaica, where liberalisation had followed privatisation by about 10 years, time to allow regulatory commitment to bed down, had forestalled concerns about the 'predatory state' once liberalisation began.

Key messages for policy-makers

  • While World Trade Organisation procedures may be used to benefit the interests of developed countries, they can also act as a brake against the economic power, which such countries could exploit if acting unilaterally. Developing countries therefore have much to gain from free trade enforcement, even if they do not face a 'level playing field'.
  • There is only a weak relationship between regulatory structures and corruption reduction, because for each potential positive consequence of regulation or deregulation, there is a countervailing negative. Instead of seeking to alter regulatory structures to reduce corruption, therefore, there is an argument for seeking to mitigate the effects of corruption, the social and economic costs that arise from it (Anthony Ogus, University of Manchester).
  • Since institutions and path-dependency shape behaviour, observers such as David Wield (Open University) made the point that regulation must be tailored to take account of a state's particular political and administrative legacy. While this does not preclude learning and policy transfer, it does argue against a 'one size fits all' assumption.
  • Indeed - according to Helen O'Neill (University College, Dublin) - instead of seeing developing countries as a problem to be addressed, they might also be seen as providing a rich source of novel regulatory solutions in their own right.

Key research questions

  • What regulatory solutions can be found in the indigenous regulatory arrangements of developing nations?
  • How can governments in developing countries strike a balance between the need to take account of existing institutions and arrangements and the danger of becoming hidebound by inappropriate or inefficient political structures?
  • Under what circumstances do anti-corruption strategies work?
  • How might meta risk strategies be used in states with low leverage and low regulatory capacity?