Privatization and the democracy problem in globalization: making markets more accountable through administrative law.

• Author: Aman, Alfred C., Jr.

INTRODUCTION

In this article I will analyze the privatization of traditional government services by placing such changes in governance in a global context. The connections between, for example, private prisons and globalization may appear, at first, somewhat tenuous. What, after all, do such intensely domestic institutions as prisons have to do with the global economy? I address this question in a three-part discussion. I will argue in Part I that the privatization of governmental services is very much of a piece with deregulatory trends in the United States and elsewhere in which state-centered approaches to a variety of regulatory problems increasingly have given way to markets and market discourses at all levels of government. (1)

The reasons for the shift from states to markets are many and complex. (2) They involve much more than simply a cyclical swing of the regulatory pendulum from liberal to conservative. Rather, this shift in perspective and the fundamental ways in which government conceives of and then carries out its responsibilities is closely tied to how decision makers at all levels of the public and private sectors conceptualize globalization. The privatization of governmental services resonates with primarily an economic conception of globalization based on markets and the competition they engender. These markets differ and often can be seen as more metaphorical than real. They are more often an alternative form of regulation than a substitution of something "wholly private" for what once was "wholly public."

Part II will consider the effects of such privatization trends on the public/private distinction itself, and its implications for democracy in general. The "democracy problem" under globalization involves the diminishment of transparency, public participation, and the information flows necessary to make public participation influential. This problem arises from the disjunction between global economic and political processes on the one hand, and local processes of democratic participation on the other. The global economy and the competition it engenders encourage cost-cutting on the part of both private and public sectors. When cost-cutting occurs by way of privatization in the public sector, however, the democracy problem can intensify, particularly when some approaches that delegate regulation to markets treat these markets as essentially "private," and the actions individuals take pursuant to market forces as voluntary or, in effect, merely administrative. Such an approach can undercut substantially public involvement in various policy-making processes. (3) Even more important, the information that can make public participation meaningful no longer may be available when government services are privatized. (4)

As I also note in Part II, there are many types of markets and various forms of democracy. New procedural approaches to decision making are necessary to make different kinds of markets appropriately accountable to citizens. To this end, I discuss various forms of public participation or democracy, including shareholder democracy, consumer democracy, and administrative democracy. To help explain how certain markets and forms of democracy are best matched, I develop the concept of "global currency." I argue that the more metaphorical the markets involved are, the more need there may be for public participation in decision making, lest illegitimate forms of currency be used in the various global economic competitions now underway.

Finally, in conclusion, I suggest that two related ideas are significant to understand fully the relationship of globalization to democracy: global citizenship and a global public interest. Making some domestic markets more accountable to the public can mitigate a significant externality of globalization--the "democracy deficit"--but global processes also can help shape and influence domestic law trends as well. Processes that are linked to a politics that transcends our own local views offer the possibility of new ideas and new avenues of change. Processes at the local level can link up with networks and political movements that transcend the local and introduce new ideas as well as external sources of political pressure on local majorities. New networks and new ideas can enrich as well as engender a more globally conscious discourse at the local level.

1. GLOBALIZATION AND MARKETS

   "Globalization" is a term of art used to mean many things--from traditional notions of internationalization, (5) to Americanization, (6) to an all encompassing notion of "world-wide." (7) My own reference is to dynamic and highly concrete legal, economic, and social processes that, in effect, denationalize public and private approaches to the conception and resolution of problems and the advancement of economic opportunities. (8) Whether the issue is environmental pollution or the most efficient manner of manufacturing and distributing automobiles or running shoes, governmental boundary lines at all levels are decreasing in importance in terms of the way such problems and their profit-making possibilities are conceptualized and carried out. (9) Traditional, nation-state centered regulation is often in conflict with this way of doing business and resolving problems. When this occurs, globalization almost invariably is associated with private markets and market-based approaches. (10) In and of itself, however, globalization does not necessarily militate totally in favor of markets or a hands-off governmental approach to the externalities of globalization. The state can play a role; however, for many reasons, that role cannot result in traditional command-control regulation. Indeed, the multiplicity of jurisdictions involved, the inability of any one governmental unit to solve global problems on its own, as well as the incentives to retain current industry and attract new investment and jobs are all significant factors in fueling competition in state-centered regulation itself, whether it is regulatory, (11) economic, (12) or cultural. (13) The various forms in which these competitions occur are what I call "global currencies." Competition in these arenas yields, at best, a cost-effective approach to the issue at hand and, at worst, a least common denominator resolution of the issue involved. Races to the top, middle, and the bottom are all possible (14) and new mixes of public and private power emerge. Different kinds of markets or market approaches thus result, raising different problems concerning fairness, transparency, and the creation of legitimate and illegitimate forms of global currency. Indeed, how one conceptualizes and applies the public/private distinction can have a great deal to do with the extent to which the public has a role in deciding what kinds of currencies are available for use in competitions in various economic, regulatory, or cultural arenas.

   1. Defining Global Currency

      The idea of "global currency" is helpful in defining when activities might best be viewed as public, no matter the identity of the actors involved. Global currency is, in effect, the price government is willing to pay to remain economically competitive on behalf of the residents already living and investing within its jurisdiction, as well as to be attractive to new investors of all kinds. The most common form of currency is money, generated from the provision of fewer or more efficiently provided governmental services or both, lower taxes, and lower regulatory costs, as well as investments in the infrastructures and human capital necessary to create, stimulate, and sustain economic growth. (15)

      Not all forms of global currency are legitimate. If, for example, a competitive edge for a particular governmental/economic unit includes money saved on privatizing prisons and those savings flow, in part, from the fact that private prisoners effectively are deprived of their constitutional rights, such a competitive edge would be illegitimate. (16) Similarly, if global currency is generated by economic decisions with short-term gain, but foreseeable, long-term costs, and information about these trade-offs was not given in a useful way to the affected public, legitimacy problems may arise. (17) Child labor, (18) poor wages, (19) and unsafe working conditions (20) also are arguably illegitimate forms of global currency. They all provide a competitive advantage to a particular location and individuals associated with it, but at a cost borne by people unable to choose fully for themselves or unaware of the true costs of the "bargain" being struck. For example, the costs of a toxic dump may not be fully apparent to those likely to bear them, or those individuals may have little or no effective power to resist them. (21)

      Conceptualizing globalization primarily in economic, competitive terms can easily reinforce domestic political discourses that favor markets over government intervention, individualism over more communitarian approaches to issues, and an increasing skepticism (often unhealthy) of government in general. (22) It encourages the management of development through global currency. But the move to privatization can be disentangled from political rhetoric and ideological goals and beliefs. To explain more fully how the public/private distinction can be applied in new and more democratic ways, I shall differentiate among various kinds of markets and the politics that might best accompany them.

   2. Differentiating and Matching Markets and Politics

      Governments, at every level, can be viewed as territorially bounded, economic units attempting to maximize their resources and compete effectively with other economic units, whether they be the state, municipality, or county next door, or jurisdictions located halfway around the world. (23) It does not always follow that the scale of governmentally run services is efficient. At times, it may be more efficient to provide certain services (24)...