The Political Economy of Social Markets: How Voluntary Standards Emerge, Compete, and Segment International Policy-making.

Abstract

How do we make sense of the tangled web of voluntary standards that have recently proliferated across the globe? There are over 430 different social and environmental voluntary standards in the world today. Prior to 1990 there were twelve. Most of these voluntary standards exist within industries that contain several other standards and ecolabels. Behind the scenes of this veritable industry of industry standards, we observe a vibrant and yet faintly understood political landscape. In some markets, as in the forest industry, industry actors revolt against NGO-initiated standards to form competing standards. In other markets, as in the diamonds industry, industry actors, advocacy groups and even states align to create the dominant voluntary standard system for the planet. While still in others, as in the coffee industry, there is such a diversity of standards originating from a variety of actors that few patterns have yet to be discovered. This research explores the logic behind voluntary standards, and proposes a framework to explain and predict the pattern of emergence and competition of standards within an industry. Drawing from existing research in norms evolution, non-state market drive governance, voluntary clubs and corporate social responsibility, I develop two principle arguments. The first, the logic of market integration, suggests that when social movement norms are increasingly institutionalized within markets, the movement itself will gradually take on the forms, character and procedures of market actors. The second extends this logic in order to understand how, why and when multiple voluntary standards emerge, and seemingly compete, within the same industries. Based on the in-depth case analysis of the coffee market, as well as an extended analysis of ten other markets, I highlight how this phenomenon of multiple standards may be understood by examining change along two factors: Industry Political Centralization and Differentiation. The overarching thesis is that standards proliferate where power is more decentralized, and opportunities for differentiation along market segments are highest. Further, that differentiation also follows a pattern: higher, more stringent standards, will occupy higher end market segments, while lower, less stringent standards occupy mainstream market segments.