agency

agency, an independent administrative authority that participates in running specific parts of an economy or society.

Agencies undertake analysis and make decisions to regulate economic and social issues for which steering by the “invisible hand” of the market is judged to be either ineffective or inappropriate and where direct governmental intervention is considered undesirable. Indeed, to grasp the importance of agencies within a large number of today’s polities, one must first understand their inextricable link with the growth of regulatory public policies. Only then can one begin to tackle the complex set of challenges created by the establishment and proliferation of agencies.

Agencies and the politics of regulation

Although often considered new phenomena, agencies first came into being in the 1870s in the United Kingdom and the United States as a means to referee and encourage economic competition in sectors such as the railways and electricity. During the next century, agencies grew in piecemeal fashion as quasi-governmental bodies, designed to ensure that laws and rules were respected even in areas such as the quality of broadcasting. However, in the 1980s—a decade marked by fundamental, neoliberal criticism of the role of public authority in the economy and society—agencies were given a new lease on life as a means of promoting the regulation of an ever-extending number of markets and sectors.

At the heart of the diagnoses of the failure of the state to intervene effectively in the economy lay a deep-seated critique of a redistributive type of public policy associated with the interventionist welfare state. Such policies had three principal characteristics. First, they frequently entailed a transfer of ownership of the means of production and the provision of services through the nationalization of industry. Second, economic planning was engaged in by governments to politically direct investment to key sectors or prioritized geographical areas. Third, governments intervened directly, and often heavily, in markets and sectors through systems of subsidies, quotas, and taxes to encourage certain policy outcomes over others. Since 1980, governments inspired instead by neoliberal conceptions of the economy and society have abandoned nationalization and planning while seriously tempering their respective forms of interventionism. Indeed, in many if not most cases, interventions are no longer legitimized by the goal of redistribution but, rather, by highlighting how regulatory-type policies can bring about more efficient policy outcomes.

Agencies have thus been reinvented as a means of implementing a new approach to economic and social governance. This approach depends heavily on faith in the efficiency of markets as a means of distributing wealth and life chances. But it also recognizes that in some issue areas markets fail as a regulatory mechanism, thereby necessitating the intervention of bodies that must be expert in their respective fields and independent from political interference. Three types of market failure have frequently been tackled through the establishment of agencies: the emergence of monopolies (e.g., in the telecommunications sector), negative externalities (e.g., damage to the environment by intensive agriculture), and the production of deficient public goods (e.g., poor public health caused by unscrupulous food manufacturers). Agencies have been devised as an antidote to such problems either by becoming watchdogs that alert governments to the abuse of laws and regulations or by regulating governments themselves in the name of efficiency, consumer protection, and, less frequently, the citizen.

Challenges for governance and democracy

Today, if most public actors either champion agencies enthusiastically as defenders of the public good or at least defend them reluctantly as a necessary evil, it is generally accepted that these bodies pose at least four series of challenges for governance and even for democracy.