Regulatory Agencies: Between Party Politics and Independence

VIENNA, AUSTRIA, April 25, 2016 (Newswire.com) - Telecommunications, utilities and public transport are three former government monopolies that have been privatised in many countries in the course of market liberalisation over the past 20 years. The control function of the state was taken over by independent regulatory bodies operating beyond the reach of government bureaucracy.

Regulatory agencies under the magnifying glass

We found that governments did not just accept the loss of control that comes with the establishment of such regulatory agencies. They sought alternative ways of influencing matters instead.

Laurenz Ennser-Jedenastik, political scientist

How independent the regulators are in practice was recently analysed from a pan-European perspective in a study conducted for an FWF project. "We found that governments did not just accept the loss of control that comes with the establishment of such regulatory agencies. They sought alternative ways of influencing matters instead", explained political scientist Laurenz Ennser-Jedenastik from the University of Vienna. To this effect, more candidates with a political or partisan affinity were chosen to fill top-level positions in these regulatory agencies as a result. "Any perceptive Austrian would have been aware of the phenomenon but there was hardly any sound empirical research on the subject", noted Ennser-Jedenastik. His study is the first to offer a comprehensive analysis of the relationship between the institutional independence of regulators and party-political influence in Austria and across Europe as a whole.

Susceptible to politicisation

Ennser-Jedenastik studied about 700 posts filled between 1996 and 2013 at the head of some 100 regulatory agencies in 16 Western European countries. He looked at whether the individuals appointed had previously held a political office, campaigned in elections or previously worked in government ministers' offices. Extensive research on the basis of official curricula vitae, election lists and media archives provided the answers to these questions. One of the key findings is that the more formally independent the regulator, the greater the share of managerial staff affiliated with the ruling parties. "The share of top officials with a connection to a governing party rises from 14% in the regulatory agencies with the least formal independence to 35% in those with the greatest formal independence. In short, being formally independent makes regulatory bodies more susceptible to politicisation", explained Ennser-Jedenastik.

Austria as a prime example in Europe

The study shows Austria leading the pack when it comes to partisan individuals holding top posts in regulatory bodies. In 9 of the 18 cases examined, top officials were party affiliates in the period under consideration. "One example is legal expert Theodor Thanner, who has worked for many different ministers in the Austrian People's Party and was appointed to lead the Federal Competition Authority. And then there is Heinrich Traumüller, formerly the chief of staff to Karl-Heinz Grasser, who was named Chairman of the Austrian Financial Market Authority FMA. However, it must be said that regulatory agencies in Austria are relatively lean in terms of their organisational structures, which means there are very few management positions to be filled compared with the situation in other countries", said Ennser-Jedenastik, by way of qualification. The political scientist explained that, in an all-Europe comparison, France and Belgium are other countries with a high share of partisan appointments. At the other end of the scale, Finland, Denmark and Ireland come in with a low share.

Party membership safeguards the job

The study found that, on average, CEOs in regulatory agencies who are affiliates of ruling parties stay in office longer than their colleagues from opposition parties. "This effect is a result of the fact that anybody who is affiliated to the opposition and working for regulators that are largely non-independent are usually asked to stand down within a short space of time. Those in very independent regulatory agencies, on the other hand, keep their jobs longer. The difference between government and opposition in non-independent authorities is therefore very clear, whereas it is practically non-existent in very independent authorities", explained Ennser-Jedenastik.

All in all, the insight produced in the FWF project demonstrates that regulatory agencies are political constructs that are neither founded nor do they act in an impartial space where efficiency and expertise are the only criteria. Political actors thus make strategic attempts to compensate for their formal loss of control through informal means, such as making partisan appointments. 

Source: Austrian Science Fund FWF