World Library  
Flag as Inappropriate
Email this Article
 

Race to the bottom

The race to the bottom is a socio-economic phrase which is used to describe government deregulation of the business environment or taxes in order to attract or retain economic activity in their jurisdictions, resulting in lower wages, worse working conditions and fewer environmental protections. An outcome of globalization and free trade, the phenomenon may occur when competition increases between geographic areas over a particular sector of trade and production.

The incentive to deregulate comes from the consumer who wishes to pay a competitive rate for items or services, rather than one set by the government often at the behest of businesses or unions.

Contents

  • History and usage 1
  • See also 2
  • Notes 3
  • Further reading 4
  • External links 5

History and usage

The concept of a regulatory "race to the bottom" emerged in the United States during the late 19th and early 20th century, when there was charter competition among states to attract corporations to domicile in their jurisdiction. Some described the concept as the "race to efficiency", and others, such as Justice Louis Brandeis, as the "race to the bottom".[1]

In the late 19th century, joint-stock company control was being liberalised in Europe, where countries were engaged in competitive liberal legislation to allow local companies to compete. This liberalization reached Spain in 1869, Germany in 1870, Belgium in 1873, and Italy in 1883. In 1890, New Jersey enacted a liberal corporation charter, which charged low fees for company registration and lower franchise taxes than other states. Delaware attempted to copy the law to attract companies to its own state. This competition ended when Governor Woodrow Wilson tightened New Jersey's laws through a series of seven statutes.

In academic literature, the phenomenon of regulatory competition reducing standards overall was argued for by A.A. Berle and G.C. Means in The Modern Corporation and Private Property (1932), while the concept received formal recognition by the US Supreme Court in a decision of Justice Louis Brandeis in the 1933 case Ligget Co. v. Lee (288 U.S. 517, 558–559).[1][2][3]

Brandeis's "race to the bottom" metaphor was updated in 1974 by William Cary, in an article in the Yale Law Journal, "Federalism and Corporate Law: Reflections Upon Delaware," in which Carey argued for the imposition of national standards for corporate governance.

Sanford F. Schram explained in 2000 that the term "race to the bottom":

The term has also been used to describe a similar type of competition between corporations.[4] In 2003, in response to reports that British supermarkets had cut the price of bananas, and by implication had squeezed revenues of banana-growing developing nations. Alistair Smith, international co-coordinator of Banana Link, said "The British supermarkets are leading a race to the bottom. Jobs are being lost and producers are having to pay less attention to social and environmental agreements."[5]

Another example is the cruise industry, which registers its ship with flags of convenience, circumventing wage requirements, and other expenses required by developed countries, thus providing the business model for the industry.[6]

See also

Notes

  1. ^ a b Meisel, Nicolas (2004). Governance Culture and Development: A Different Perspective on Corporate Governance. Organisation for Economic Co-operation and Development.   p. 41
  2. ^ Kelly, John E. (2002). Industrial Relations: critical perspectives on business and management. UK: Routledge.  p. 192
  3. ^ a b Schram, Sanford F. (2000). After Welfare: The Culture of Postindustrial Social Policy. NYU Press.   p. 91
  4. ^ See, e.g., Popular Resistance, "Walmart Creates A Race To The Bottom Throughout The Economy"; Huffington Post, "How The Uber Economy Can Become A Race To The Bottom."
  5. ^ The Times Business Section, 7 December 2003
  6. ^ [2]

Further reading

  • Grandy, C. (1989). "New Jersey Corporate Chartermongering, 1875-1929". The Journal of Economic History 49 (3): 677–92.  
  • Kocaoglu, Kagan (March 2008). "A Comparative Bibliography: Regulatory Competition on Corporate Law". Georgetown University Law Center Working Paper.  
  •  
  • Vogel, David. 1995. Trading Up: Consumer and Environmental Regulation in a Global Economy. Cambridge, MA: Harvard University Press. ISBN 0-674-90084-7

External links

  • Definition from the Financial Times Lexicon
  • "Racing to the bottom" in The Economist
  • Bacon, David (February 3, 2003). "Anti-China Campaign Hides Maquiladora Wage Cuts". Zmag.org. 
  • Hahnel, Robin (March 2000). "Houston, we have a problem: Challenging globalization". Z Magazine. 
  • McClear, Sheila (March 2005). "Race to Bottom for Garment Workers". Z magazine. 
  • Yablon, Charles M., "The Historical Race Competition for Corporate Charters and the Rise and Decline of New Jersey: 1880-1910", The Journal of Corporation Law (2007)
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and USA.gov, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for USA.gov and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
 
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
 
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.
 


Copyright © World Library Foundation. All rights reserved. eBooks from Project Gutenberg are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.