On Different Tracks: Institutions and Railway Regulation in Britain and Germany Martin CE Lodge London School of Economics Submitted for PhD Government February 2000 UMI Number: U148805 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Disscrrlation Publishing UMI U148805 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 71U c 71 Abstract 'On Different Tracks: Institutions and Railway Regulation in Britain and Germany' This study analyses how institutional factors impact on processes of isomorphism in the design of regulatory regimes. It does so through a comparative examination of regulatory reform in the railway domain in Britain and Germany in three time periods, the post-First World War and the post-Second World War periods as weU as the 1990s. It is argued that pressures for isomorphism, defined as the increasing homogenisation of a unit with other units in its policy environment, are exerted by several policy environments. These pressures can be distinguished in their degree of domain- and paradigm-orientation. Domain-orientation consists of regulatory change which is based on sector-specific sources, whereas paradigm-orientation involves the application of supposedly universal 'policy recipes' across policy domains. The study questions whether three institutional factors - the insulation of the regulatory space from coercive pressures, the insulation of the political- administrative nexus in the regulatory space and the insulation of the regulatory space from societal forces - can explain why in some cases reforms are domain- oriented, but, in other cases, reforms are paradigm-oriented. The comparative analysis of reform in British and German railway regulation provides three conclusions. First, in all cases, pressures for isomorphism emerging from different poHcy environments provided competing 'templates' for regulatory design ideas. Second, among the institutional factors, the insulation of the political- administrative nexus in the regulatory space was identified as the most important factor for explaining the orientation of the selected regulatory instruments. Third, in the light of the study's historical and institutional perspective, this thesis critically evaluates arguments proclaiming the emergence of a 'regulatory state' in contemporary Europe. II Table of Contents Abstract p. II Table of Contents p. Ill Acknowledgements p. IV Abbreviations p. V Section I Chapter One: Introduction p. 1 Chapter Two: Isomorphism in Regulatory Choice p. 20 Section II: Regulatory Change after the First World War p. 48 Chapter Three: Institutional Weakness and Domain Orientation in Britain p. 51 Chapter Four: Minimum Insulation and Persistence in Germany p. 89 Section III: The Age of Public Ownership p. 127 Chapter Five: The 'Socialisation of Transport' and the search for efficiency in Britain p. 129 Chapter Six: Choosing between domestic 'paths' in Germany p. 166 Section IV: Regulatory Reform and Forms of Privatisation p. 206 Chapter Seven: 'Regulation by Competition' as switchman for the traffic of regulatory design ideas in Britain p. 211 Chapter Eight: Domain-oriented Isomorphism and Institutional Compromise in Germany p. 261 Section V: Conclusion Chapter Nine: Conclusion p. 314 Appendix 1: Interviews p. 338 Appendix 2 p. 339 Bibhography p. 358 III Acknowledgements Many a daydream has been spent on writing this section. During this long journey of research, I have incurred many debts. Most of all, I am most grateful for the generous support offered by Christopher Hood and Mark Thatcher throughout the last few years. Klaus Goetz and Howard Machin have also been most supportive, helpful and understanding. This thesis would never have been written without the stimulating LSE environment. I am grateful to my undergraduate tutors Peter Dawson, Kenneth Minogue and Alain Guyomarch for keeping me on the right track. I have also greatly benefited from advice from Ira Denkhaus (Max Planck Institute, Cologne), Colin Divall (University of York), Roxanne Powell (Dutch Transport Ministry) and Colin Thain (University of Ulster). The research would have been impossible without the numerous officials, politicians, managers and journalists who were willing to give generously of their time for interviews and who, by convention, have to remain anonymous. I am also grateful for the support at the British Library for Political and Economic Science, the Pubhc Records Office in Kew, the House of Lords Record Office and the Bundesarchive in Koblenz and Berlin. The ESRC has made this research possible with its Research Studentship and I am grateful to LSE for providing me with financial assistance via the Acworth Scholarship and the Rosebery Studentship. Many people have born the brunt of my indulgence in academic research, in particular I would like to thank: Michael Bacon, David Bakstein, Michal Bartek, Ingo Birkholzer, Justin and Xanthe Cross, Martina Drechsler, Steve John, Don McCarthy, Fabian Richter, Oliver Rieckenbrauk, Nick Sitter, Lindsay Stirton and Stefan Zeitlinger. Karen Clements at the CBl and Richard Blackmann and Andrew Duff at the Federal Trust kept me in touch with 'real life'. I had the privilege to spend three months at the Humboldt-University in Berlin. Eckhard Schroter, Kai Wegrich, Helmut WoUmarm and Ralf Clasen were and continue to be very generous in their support. My parents, Christa and Roger Lodge, have shown more help, encouragement and forbearance than any son can hope for. I thank Shelley Deane for tolerating at close range the many mood swings this work has produced. Without all this support, the last years of research would have been less bearable and the result poorer. I would like to dedicate this thesis, however, to two people who have shaped and influenced my life substantially and who act as permanent reminder of the preciousness of life far beyond academic endeavour. These are Ariane Klein and the late Sven Klamann, IV Abbreviations ABCC Association of the British Chambers of Commerce ASLEF The Associated Society of Locomotive Engineers & Firemen BDI Bimdesverband der Deutschen Industrie BR British Rail BTC British Transport Commission CDU Christlich Demokratische Union CSU Chris tlich Soziale Union DB Deutsche Bundesbahn DNVP Deutsche National Volkspartei DR Deutsche Reichsbahn DRG Deutsche Reichsbahn Gesellschaft DTI Department of Trade and Industry FDP Freie Demokratische Partei FBI Federation of British Industry GdED Gewerkschaft der Eisenbahner Deutschlands GNER Great North Eastern Railways GWR Great Western Railways ICI Imperial Chemical Industries pic LMS London, Midland and Scottish railways MP Member of Parliament NRW North Rhine Westphalia NSDAP Nationalsozialistische Deutsche Arbeiterpartei NTA National Transport Authority NTC National Transport Commission NUR National Union of Railwayman ÔTV Gewerkschaft Offentlicher Dienst, Transport imd Verkehr RDI Reichsverband der Deutschen Industrie SPD Sozialdemokratische Partei Deutschlands SR Southern Railways TUG Trades Union Congress UIC Union International des Chemins de fer VI Introduction The Problematic of this Study The study of regulation and the 'regulatory state' has enjoyed increased attention in contemporary public policy. The perceived failure of previous systems of control over economic activities and policy delivery is said to have led to a shift from the 'positive' or 'welfare' state towards the 'regulatory state' (Majone 1997). This shift has been characterised by an increased emphasis on competition and indirect market-correcting measures, free-standing regulatory bodies, changes in service delivery and an increased formality of regulatory relationships (Loughlin and Scott 1997: 205-7). At the same time, the public policy literature has shown a growing interest in institutional approaches towards regulation; for example, Leigh Hancher and Michael Moran (1989) have coined the term 'regulatory space' to emphasise the importance of inter- organisational relationships as well as formal and informal rules for the exercise of regulatory activities. The present study shares this institutional approach. It builds on concerns in the institutional literature with questions of institutional design. Most prominently. Max Weber (1972: 825-37) proposed a tendency towards convergent forms of bureaucracy on a legal-rational basis. DiMaggio and Powell (1991a) similarly stressed the phenomenon of increasing homogenisation of organisational forms within an organisational field. This study argues that regulatory reform can be conceptualised as a process of isomorphism. Isomorphism is defined as the constraining process which forces one unit to become increasingly homogeneous with other units in its policy environment. The thesis argues that social life is diverse and therefore does not offer one single dominant policy environment but numerous ones which provide different sources of isomorphism. These can be distinguished in the extent of their paradigm- or domain-orientation. Paradigm-orientation is defined by the application of supposedly