Deregulation became a major cross-national trend in the 1980s. Proponents of deregulation have included neoclassicists, pragmatists and certain analysts on the Left and Center-Left. Deregulation has a number of unintended or unforeseen consequences. A major issue is the development of new, market-oriented regulations and regulatory structures – the first category of ‘reregulation’. Another is the cross-national knock-on effect of regulatory changes. And a third is the emergence of new forms of market stabilization and control, whether by the state or at the transnational level. A crucial feature of deregulation is the change in the wider pattern of state intervention from the ‘welfare state’ model to that of the ‘competition state’. A number of competing explanations for deregulation can be identified – market explanations, institutional/technological explanations and political explanations – each of which has significant variants. These explanations can be seen to apply in the real world at four different levels: the ‘global’ level; that of various intermediary transnational political structures; the state level; and the level of ‘self-regulation’ of a neo-corporatist kind.

The role of politics is particularly difficult to discern in the domain of international financial markets, where the state's capacity to control or direct capital flows, without incurring considerable opportunity (and political) costs, appears so limited. In addressing this question, this paper argues that the process of internationalisation is first and foremost the consequence of political decision-making (to create open markets) and that many domestic interests linked to the international market have promoted internationalisation both through their policy preferences and economic activity. The paper will then go on to argue that the threat of financial instability and crisis, a consequence of the increased volatility of relatively unregulated capital flows, has prompted political demands for more concerted inter-state co-operation to maintain stability. Much of this takes place through transnational agreements among state agencies, such as the central banks, and much through ‘reregulation’ in the guise of ‘harmonisation’ of regulatory and prudential supervisory policies.

Some of this process has received considerable publicity, such as the harmonisation of EEC regulations to facilitate freer trade in banking and financial services as part of the preparation for the Single European Market in 1992. Likewise, the current Uruguay Round of GATT trade talks has the liberalisation of trade in financial services on its agenda. Other aspects of the process have been carried on quietly, far from public view, in such forums as the Bank for International Settlements. Such is the case of a recent agreement to harmonise minimum capital adequacy requirements for banks operating in international markets. The paper uses these three cases to support the argument about the role of politics and the state in international finance.

The creation of a common market in capital is a basic component of the European Community's single market programme. This article provides an explanation of the factors which have shaped the single market for capital in terms of three ‘perspectives’ which supplement each other and which collectively provide a substantive explanation. These perspectives include: (i) the policy requirements and politico-economic context of the single market programme; (ii) the complex and multi-faceted nature of regulation in the financial services field; and (iii) the political balance of power between the national, EC and international agencies involved in financial regulation. Each of these three perspectives contributes salient insights unavailable to the other two. Collectively they provide an explanation of how the liberalisation of capital movements and financial services has actually involved creating a more sophisticated regulatory order rather than simply reducing the volume of regulation.

Labour market regulation in the 1980s was subject to transnational pressures for deregulation, especially in the form of ‘flexibilisation’. The ‘Single European Market’ project (SEM) promises further development in this direction. At the same time, proposals for a ‘Social Charter’ are meant to introduce a European level of regulation to counteract the SEM's potential destabilizing consequences. However, regulatory disputes and pressures contrary to convergence are likely to be intensified by the SEM. Still further uncertainty will be created by changes in Eastern Europe, as well as by greater opportunities for cross-border production shifts. Neoliberal and neocorporatist variants of the ‘competition state’ will be increasingly at odds at both state and Community level, with the future of ‘social Europe’ at stake. To the extent that market integration means a globalisation of the European economy, it may effectively disintegrate its component parts, dividing those which have more solid foundations for growth - the well-regulated, high pay/high productivity areas - from those which do not. The market logic of the Single European Market programme will manifestly contradict the efforts of the Community to avoid this future.

Environmental protection is inherently a cross-border issue, which might be thought to create opportunities for transnational regulation. This has significant potential consequences for European integration. However, two contrasting trends can be identified. On the one hand, the increasing magnitude of environmental problems, along with growing public and elite awareness of these issues, are generating responses which put the European Community at the centre of a process of ‘reregulation’. It is intended that this role should grow in the twin contexts of the Single Market and of increasing interaction with Eastern Europe with its vast pollution problems. On the other hand, however, the kind of ‘political’ policy intervention which environmental protection requires has not really developed. EC environmental policies have thus far been rather weak in both formulation and, especially, implementation, and even existing gains are likely to come under increasing pressure from the trend towards economic deregulation characteristic of the Single European Market project. Probably the most significant impact of Community efforts in the environmental field has been to encourage the convergence and strengthening of national regulation among member states, more than to create distinct European policy processes and institutions.

Business interest associations in the European chemical industry have traditionally been well organized and enjoyed a harmonious relationship with governments of various complexions. This very favourable balance for the industry has been disturbed by the salience of the environmental issue. This has led to a certain deregulation, or breakdown of existing regulatory mechanisms. Increasing concentration on the European Community level as the locus of environmental policymaking has led to a dual response on the part of business interest associations, reflecting an older contrast between national styles of government/business relations. The British chemical industry has preferred the national route, is much more hostile to environmental regulation than its German counterpart, and often finds itself isolated, depending on the Department of Trade and Industry to ensure that its viewpoint is articulated by the British Government in EC negotiations. The German industry still clings to self-regulation, but, given the high level of environmental consciousness in the Federal Republic, has developed a reluctant preference for action at the European level. This has been manifested both in the Europeanisation of its links with the German Economics Ministry and in its support for the European Council of Chemical Manufacturers Associations; the latter is well placed to exert influence on both the EC Commission and the European Parliament.

Common elements are recognised across Denmark and the UK in regulation of the pharmaceutical industry, which are attributed to the impact of associational action at the sector level. Our examination of arrangements for regulating medicine prices and information displays many of the hallmarks of neo-corporatism – namely negotiation with state agencies, compliance seeking among members, and policy implementation through acting as a Private Interest Government. During a period of economic internationalisation and directive international agencies, we show how business interests have reformulated to transnational levels, with associations, despite facing a greater complexity of interests to represent, having a strong impact upon regulatory outcomes. These have been neither wholly deregulatory or reregulatory, but partly reflect events at national levels. This may predict regulatory developments at the European level in other sectors.