V. Economic Globalization and Organizational Crime
Globalization designates the increasing number and complexity of political-economic relationships that cross national borders. Economic indicators make clear that it is on the march. Old barriers of time and distance have been obliterated, as technology enables conduct of complex commercial transactions almost instantaneously over enormous geographic distance. As the links between national economies strengthen and expand, and “because capital is at once mobile and in short supply, the desire to attract foreign capital makes it difficult to control a nation’s capital” (Best, 2003, p. 97). Globalization of production and markets is a powerful constraint on oversight, and it has set off a vigorous debate over how nations should respond.
A. Competition and Oversight
One of the most important reasons for this is another by-product of globalization: increased governmental and business competition for resources and markets. Growing global competition means that what once was commonplace but largely confined to the competitive dynamics of national economies now is produced on a grander scale. The difficulties of controlling corporations were enormous in a world of national economies and corporate actors, but efforts to impose credible oversight on their activities cause firms to locate elsewhere or to threaten relocation. Concern that jobs are in danger contributes to public reluctance to regulate industries and firms close to home. Corporate executives are astutely aware of pressures on governments caused by global competition. They demand access to state funds and weak oversight in return for favorable sitting decisions and permit requirements. This dynamic is played out across the globe as they negotiate with political leaders also for low taxes, low-cost government services, free infrastructure, and limited restrictions on their autonomy. In return, they promise jobs.
Industries and companies in one nation do not take lightly competitive recruitment by representatives of other nations with promises of largesse and pro-business environments unavailable to them. Nor are they willing to accept easily that because home offices are located within the borders, their operations should be regulated and taxed more stringently than companies that keep parts of the company abroad. As pressure to loosen regulatory requirements and oversight intensifies, the challenge of maintaining levels of oversight comparable to what some nations once exercised domestically becomes greater.
In contemporary cross-border exchanges, the variety, scale, and complexity of transactions also are significant barriers to credible oversight. The technical and administrative capacity to do so effectively is within reach of few, if any, nations. The signatories to international trade agreements typically pledge to adopt and enforce in their home countries elementary regulations for environmental protection, worker rights, and product safety, but police and prosecutors generally lack the budget, expertise, and other resources to pursue cases that arise. It seems clear that as oversight becomes more distant geographically and less certain in application, its efficacy suffers. This dynamic becomes more common in a world where state control increasingly is “bypassed by global flows of capital, goods, services, technology, communication and information” (Best, 2003, p. 97).
B. Self-Regulation and Compliance Assistance
In the closing decades of the 20th century, as economic globalization began increasing rapidly, Western nations witnessed a revolutionary change in the dominant approach to regulatory oversight. Traditionally, regulatory agencies promulgated regulations for their areas of responsibility, maintained an enforcement staff to monitor organizational compliance, imposed small civil fines on organizations found to be in violation, and occasionally referred for possible criminal prosecution cases of egregious and serious offenses. The underlying justification for this approach is grounded in notions of deterrence. Dubbed “command-and-control regulation” by critics, by the beginning of the 1980s it came under increasing attack and eventually was displaced.
In its place, enforced self-regulation and “responsive regulation” deemphasizes direct state oversight of production processes with insistence on organizational self-monitoring of compliance and creation of internal oversight mechanisms to ensure it. Common to nearly all the new programs is increasing trust and reliance upon industries and corporate firms for ensuring compliance with regulatory standards. At the same time, efforts are made to involve other parties in the regulatory process; professional organizations, business groups, and community organizations all are seen as playing roles in efforts to minimize noncompliance by organizations. The growth of the new regulatory style means that the state has shifted the bulk of its regulatory efforts to programs to educate the regulated entities about what is required of them and assist them in developing and operating internal compliance programs. Increased competition caused by rapid globalization of economic production and markets is a major factor contributing to the rapid diffusion of responsive regulation.
There have been remarkably few evaluative studies of the efficiency and effectiveness of organizational self-regulation and even fewer that are methodologically rigorous. Admittedly, the claims are not easy to evaluate. The difficulties start with the diversity of activities and processes to which self-regulation has been applied. Health care, machine parts quality, occupational health and safety, financial transactions, and environmental protection are examples. This variation is reason to believe that a straightforward and broadly applicable verdict on self-regulation will not come quickly, but this almost certainly will depend upon industry characteristics, the nature of organizational variation, and official resolve. The lion’s share of investigations thus far have been focused on (a) differential receptiveness by corporate managers to self-regulation requirements, (b) the process of adoption and implementation by industries and firms, (c) changes by firms in self-reporting of regulatory violations, and (d) changes in the calculus of compliance decision making by corporate managers. The twin explanatory challenges are to identify characteristics of industries, regions, or time periods that are conducive to or limit adoption and use of self-regulation, and to isolate the characteristics or dynamics of organizations that adopt and employ self-regulation more readily than others.