A hard nut to crack : regulatory failure shows how rating really works

Credit rating agencies such as Moody’s and Standard & Poor’s are key players in the governance of global financial markets. Given the very strong criticism the rating agencies faced in the wake of the global financial crisis 2008, how can we explain the puzzle of their survival? Market and regulatory reliance on ratings continues, despite the shift from a light-touch to a mandatory system of agency regulation and supervision. Drawing on the analysis of rating agency regulation in the US and the EU before and after the financial crisis, we argue that a pervasive, persistent and, in our view, erroneous understanding of rating has supported the never-ending story of rating agency authority. We show how treating ratings as metrics, private goods, and independent and neutral third-party opinions contributes to the ineffectiveness of rating agency regulation and supports the continuing authoritative standing of the credit rating agencies in market and regulatory practices

Governing differentiation : on standardisation as political steering

The introduction of Luhmann’s System Theory to International Relations has been long overdue. In the last few years, articles by Donnelly (2012) and Buzan and Albert (2010) have started to discuss the application of the concept of differentiation to International Relations theory, and an edited book by Albert et al. (2010) has examined how systemic thought can reinvigorate the study of world politics. This article welcomes and continues these developments by proposing a Luhmannian reinterpretation of the evolution and functioning of governance via standards. The article argues that standardisation — involving the proliferation of standards but also of standardised instruments such as rankings, indicators and benchmarks — can be understood as a mechanism of political steering in a growingly differentiated (world) society. By considering standardisation as a systemic adaptation of the political system to a multifunctional environment, this article contests conventional economistic and power-based explanations where the ‘standardisation turn’ in global governance is a mere consequence of neoliberal globalisation, power struggles among states or some type of hegemonic logic. In this manner, the article suggests that Luhmann’s Systems Theory can provide a more encompassing framework to understand the operation of standards as an extension of politics beyond territory, and to frame the challenges of governing an increasingly complex world

Standardizing as governance: the case of credit rating agencies

The global integration of financial markets has been accompanied by a transformation of their governance structures. Private intermediary organisations now play a more important role than in the past. A prominent example is provided by the commercial credit rating agencies that have established themselves as influential gatekeepers of the international credit market. A problem with this form of intermediation is that when there are errors rating agencies can do considerable damage to borrowers and investors alike. Still, it is very difficult to hold rating agencies accountable. This paper proposes comparing the activity of credit rating agencies with standard setting in order to explain this accountability gap. The argument is that the standards of credit-worthiness established by the rating agencies are difficult to challenge because they are based on neutral expertise, on the one hand, but are subject to mandatory enforcement by financial market regulation, on the other. The resulting compliance without complaints reduces the possibilities for learning. This perspective leads to a research agenda in which the preconditions and institutional remedies for accountability problems of global governance by private intermediary organisations can be comparatively explored

Elusive Europeanisation - Liberalising Road Haulage in the European Union

Having established itself as a robust level of governance, the European Union now potentially affects its member states in more ways than ever before. Road haulage policy is an area in which a strong impact of European Union policy-making can be expected. Liberalisation at the European level contradicts widespread interventionist transport policy traditions of the member states. In this article we ask how France, Germany, and Italy, three countries with an interventionist transport policy tradition, are affected by European liberalisation. We find that all of the three countries have abandoned their policy traditions. However, domestic factors were more important than European factors in bringing about this change. European influence did not severely curtail national policy-making autonomy. In transport policy, Europeanisation is elusive because national institutional intermediation largely muffled the impact of European policy-making