Governance
Description
By Andrej Zwitter and Jilles Hazenberg:
"Governance itself is an elusive concept, highly complex and contested in literature (Kooiman, 2003; Van Kersbergen and Van Waarden, 2004; Levi-Faur, 2012; Colombi-Ciacchi, 2014). In our study, we use a unifying conception of governance based on Levi-Faur (2012). Levi-Faur (2012, p. 7–8) defines governance as “signifier of change” in policy-making. By signifying different changes in policy-making, governance opens up “new ways, new concepts, and new issues for research” (Levi-Faur, 2012, p. 7–8). This conception of governance as a signifier of change offers a comprehensive perspective on policy-making as subject to “continuous change of patterns of interaction and relations among actors” (Sand, 2004).
Governance is often depicted by distinguishing between “old” and “new” governance (Rhodes, 1996, 1997; Mayntz, 2003; Bevir, 2010; Lobel, 2012). “Old” refers to hierarchical structures, mostly of state institutions. “New” refers to the emergence of more horizontal modes of policy-making, which have arisen due to the pressures of globalization and the functional differentiation of sectors of society. However, given that neither old nor new types exclude each other, they often co-exist in practice and a clear temporal distinction between them cannot be located. We refer to these types of governance as Mode 1 and Mode 2 governance. The current assessment focuses on two aspects of Mode 1 and Mode 2 governance: roles and power relationships. Governance roles are understood as the ability to participate in policy-making at any stage. Power relationships refer to the relative power that an actor, or a certain role, has over other actors within policy-making and its enforcement. Within different modes of governance, different aspects of power relationships are deemed relevant. A useful analogy of this is the power that a policeman has standing at an intersection commanding traffic: power can be derived from his uniform, the perception of the drivers, or of him blocking the road (Dahl, 1957). Similarly, modes of governance regulate or coordinate different aspects of power relationships based on what is deemed the relevant aspect of power."
(https://www.frontiersin.org/journals/blockchain/articles/10.3389/fbloc.2020.00012/full)
Typology
By Andrej Zwitter and Jilles Hazenberg:
Mode 1 Governance: "governance carried out primarily via the hierarchical command-and-control structures of the state and other public hierarchies"
Mode 1 governance, or “old” governance in the literature, refers to governance carried out primarily via the hierarchical command-and-control structures of the state and other public hierarchies. This means that it relies on authoritative institutions to make policies through the enforcement of hard law. Rooted in Westphalian notions of nation-states, this mode of governance is often legitimized through justificatory strategies resting on public sovereignty and public input in political decision-making (Scharpf, 1999). Therefore, Mode 1 governance is inherently political and institutional.
Hierarchical command-and-control policy-making via the state. Within Mode 1, the state is sovereign and legitimate in commanding and controlling societal actors (both public and private; among private actors, for example, social groups and small and medium enterprises, SMEs). The identity of actors is perceived as the relevant aspect of power. Power relationships are vertical because they base themselves on the identity of the state as sovereign and legitimate.
Furthermore, this mode of governance can be interpreted as identity-based. Within identity-based governance, roles are assigned to and/or performed by actors based on who these actors are, i.e., their identity. For example, Mode 1 governance locates the authority to perform tasks of policy-making, or the delegation thereof, with state organs because of who the state is. This means that the state’s identity is seen as being an authoritative and legitimate public body, acting as sovereign over a territory and as the source of law and policy. Intermediary institutions perform governance roles only through delegated authority by the state.
Given the relative clarity of governance structures within Mode 1, the relevant aspects of power relations are equally clear. The authority to make, implement, and enforce policies lies with the state or those that it delegates to do so. Power is static because authority is permanently assigned to an actor, based on its identity. The relevant aspect of a power relationship is thus the identity of the actor capable of commanding others. Moreover, power relationships are governed via structured governance mechanisms, by predominantly assigning rights to weaker parties and duties to stronger parties. The static nature of power and structured conception of power relationships are explained by the fact that relationships between individuals, organizations, societal actors, corporations, etc. are mediated and governed via the state as the dominant hierarchical authority in policy-making. A good example of this is the relationship between human rights and the duty of the state to protect them.
Mode 2 Governance: "a move away from the vertical command-and-control structures of the state toward more horizontal modes of policy-making
Mode 2 governance, or “new” governance, contrasts with these distinct Westphalian structures of policy-making. It represents a move away from the vertical command-and-control structures of the state toward more horizontal modes of policy-making. This approach creates a more level playing field between societal actors, both private and public. Authority is not necessarily acquired by identity but rather through performance, knowledge, and expertise. Public–private partnerships, policy networks, and private governance all reflect the nature of a world in which the state is arguably no longer the central governing authority (Rhodes, 1997; Van Kersbergen and Van Waarden, 2004). Examples of Mode 2 governance are diverse, but include public–private partnerships working toward the achievement of policy goals that private sector agents are trying to realize more effectively and efficiently through self-regulation. Other examples of areas where Mode 2 governance mechanisms apply are soft law, negotiation, compromise, competition, codes of conduct, and other corporate sectoral agreements on standards of production or quality. As such, Mode 2 governance changes the roles and power relationships of and between actors involved in policy-making or subject to these policies. While not being necessarily unified, different forms of Mode 2 governance are role-based in the distribution of governance tasks, as opposed to identity-based.
Horizontal policy-making in which societal actors have greater independence in commanding their spheres of influence and/or making and implementing policies. Coinciding with this, the state takes on a role of “steering” rather than “rowing.” The state regulates societal actors by incorporating them into the policy-making process. The role they can play therefore becomes the relevant aspect of power, and the power relationships become the relevant focus of governance. Oversight is performed by non-majoritarian institutions such as central banks that guard the boundaries set by the state.
Role-based governance implies that governance tasks and mechanisms are assigned to and/or performed by actors because of the role they can perform, to achieve a desired policy goal within a specific domain. Policy goals and corresponding benchmarks become prominent tools in steering policy-making in specific directions. For instance, a public institution sets goals in a specific policy domain and delegates the achievement thereof to private or corporate actors. These actors are perceived as being more capable of efficiently and expertly delivering the desired goal in this domain. In other domains, the roles of the same private and corporate actors might be completely different. This explains why Mode 2 is not identity but role-based, as the examples below illustrate:
It should be noted that the distinction between Modes 1 and 2 governance is not always clear in practice. Many hybrid forms exist that borrow elements from both modes. The most prominent is multi-level governance, predominantly employed to describe policy-making within the European Union. It relies on both Mode 1, i.e., hierarchical commands from a public authority, and Mode 2, policy networks and the involvement of private actors (Mayntz, 1998). Mode 1 governance is increasingly dismantled at the level of the state, while simultaneously reconstructed at the regional and international level in combination with Mode 2 governance (Van Kersbergen and Van Waarden, 2004).
With a view to Mode 2 governance, one can see that actors who are frequently engaged in the field of blockchain and DLT take on a variety of different roles. An interesting case that illustrates this is the call for regulation of initial coin offerings (ICOs) and similar crypto-securities. These ICOs can be described as cryptographically secured tokens that represent a token owner’s bundle of rights and obligations vis-à-vis a token provider. They are issued by a token provider and registered on the blockchain as a source of income for their projects. In the last few years, such ICOs have come under increasing public scrutiny as concerning their role as financial securities under US and EU regulations. There have also been frequent fraudulent uses of ICOs, and these have become a contested issue in policy and academic debates (Hacker and Thomale, 2018). In terms of our typology, this shifted the debate around ICOs from being an unregulated space into the realm of Mode 2 governance, with governance ranging from moderate self-regulation to non-autonomous self-governance. It remains to be seen whether states deem it necessary to enforce governance in the field of crypto-securities, even by means of Mode 1 governance.
Mode 3: Decentralized Network Governance and Blockchain Technology
Constructing the governance of the digital domain requires conceptualizing the relevant aspects of power relationships within this domain vis-à-vis Mode 1 and 2 governance. It is not surprising that the digital domain, and especially blockchain technology, cannot be effectively governed through either mode of governance. This is firstly because the emergent new roles and power relationships in the digital domain are neither hierarchical nor horizontal. Instead, they are fluid, with different roles and power relationships often residing in a single, anonymous, actor. Secondly, blockchain technology enables trustlessness, whereas trust is fundamental to the functioning of both Mode 1 and 2 governance. This section will address the first consequence briefly, before providing the stepping stones for the conceptualization of decentralized network governance (Mode 3).
Modes of governance rely on conceptions of the relevant aspects of power relationships to be governed. In relation to the digital domain and blockchain in particular, power must be conceptualized as fluid, as different actors perform different governance roles within different contexts. Also, there are times when the networks through which roles are distributed operate as governance actors themselves. As identities and roles are no longer central to the exertion of power in social coordination, their place has been taken by new forms of power and hence require new forms of governance. Castells’s writing on network power (mentioned previously) notes that there are four forms of power specifically related to networks: networking power, network power, networked power, and network-making power.
We can see that these relate closely to the digital domain and blockchain technology (Castells, 2011) :
• Networking power: the power that actors and organizations have that constitutes the core of the network. This power pertains to the ability to include and exclude others, and thereby controls the makeup of the network.
• Network power: the power that results from the standards required to coordinate interactions. This primarily concerns the imposition of rules within a network.
• Networked power: the power that actors have over one another within a network. This power mimics traditional conceptions of power but the way in which it is exerted differs per network.
• Network-making power: the power of an actor or organization to constitute or re-program a network according to its values and specific interests.
The employment of traditional modes of governance threatens to undermine the benefits of technological innovations such as blockchain and DLT. In particular, overregulation or the application of inadequate mechanisms often reduces the potential benefits of digital technologies. Consequently, this might produce more negative outcomes than positive ones, seeing as a mismatch between regulations and intended governance norms of technological solutions could produce the appearance of regulation without actually having adequate substance. Alternatively, overregulation might be obsolete when trust is not an issue, as is the case with blockchain-enforced governance."
(https://www.frontiersin.org/journals/blockchain/articles/10.3389/fbloc.2020.00012/full)