Business and Governance in Areas of Limited Statehood

Abstract

Conventional wisdom holds that economic globalization leads to a regulatory ‘race to the bottom’ among countries. Global competition allows firms to invest in areas of limited statehood where governments lack the capacities to set and enforce regulations and generally refrain from measures affecting the costs of production. Likewise, firms will press governments of highly regulating countries to lower regulatory standards in order to avoid competitive disadvantages. The competition of states for economic growth and foreign investments results in the degradation of natural resources and the compromising of social standards. From this perspective, firms are unlikely to provide governance in areas of limited statehood. Rather, they are presumed to drive states into a ‘regulatory race to the bottom’. Yet this book finds a number of instances where business contributes to governance in South Africa. Mining firms adhere to strict environmental and social standards. Multinational car companies are among those leading the fight against HIV/AIDS in the country, and provide employees with comprehensive health care services on a level high above what hospitals, clinics and other health care institutions offer to the general public. In some cases, corporations even put pressure on governments to adopt stricter public regulations.