Race to the bottom

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The term race to the bottom ( English literally race to the dregs ) or undercutting refers to a theory that a continued reduction of social , labor and environmental standards in the global competition and international tax competition includes at ever lower tax rates and explained.

Game theory

In game theory , a race to the bottom can be described as a version of the prisoner's dilemma . It presents all actors with a dilemma insofar as it is only worthwhile for the individual actor to cooperate if he can be sure that everyone else will also cooperate; As soon as an individual assumes that the others do not cooperate - for example because there is no institutionalized pressure to cooperate - it is more worthwhile for him not to cooperate either and instead accelerate the downward race by undercutting standards on his part. In other words, the dilemma is as follows: The individually more advantageous option for action - not cooperating - ultimately produces a result that is less favorable for all those involved: At the end, they meet at the "bottom", with the collectively worst possible result.


The basic prerequisites of the model are that standards (such as the level of protection against dismissal ) are only set for limited areas (e.g. nations ) and the associated economic actors (such as financial investors ) can move freely far beyond these limited areas.

Economic actors can then choose, among the various limited spaces (e.g. nations), the space for their activities (e.g. investment) that offers them the best conditions. Thus, the limited spaces contact each other in competition to the favor of the economic actors. They begin a race to the bottom in undercutting the standards of the others in order to win the favor of economic actors.

A race to the bottom is on different scales occur: Between large economic blocs (about US - EU - China ) as well as between different countries (such as in the EU) or between different regions (eg within. Germany ).

Arms races between states or the spread of private arms possession in a society can also be described as a race to the bottom . Institutionalized cooperation would achieve the best possible result: an arms control agreement prevents ruinous spending on arsenals on both sides, and strict gun laws result in the lowest possible number of deaths from firearms. But if the individual actors are unsure whether the other actors will also cooperate because there is no institutionalized pressure to cooperate, they will also not cooperate with the worst possible result for everyone: the risk of a nuclear holocaust, the ruin of entire economic systems through excessive arms spending or a maximum individual security risk from an epidemic spread of firearms.


Globalization critics accuse neoliberalism of causing a race to the bottom between different (world) regions and nations: The dismantling of trade barriers leads to globally mobile economic actors. The simultaneous demand for internal disempowerment of the nation state (“ lean state ”) leads to its infiltration by lobby groups of the economic actors . The nation states would then be unable to either agree on common social, labor and environmental standards among themselves, or to bind their economic actors back into the national space.

Industry representatives too often base their arguments against strict environmental regulation on assumed comparative disadvantages in global competition. Individual states going it alone are therefore doomed to failure.

Critics of the thesis of the race to the bottom object that state environmental law can, at least de facto, also have an impact on the relationship with foreign trading partners. International competition can then lead to standards being raised in less developed nations. Particularly in the case of product-related regulation, such as emission standards for cars, the standards must be based on the strictest of benchmarks (“Race to the Top”). Due to individual economic considerations, As for multinational companies be economically advantageous in all establishments to apply the same standards worldwide when individual legislators adopted to avert the so-called "dirty industries" higher standards. This is also discussed under the terms California effect and Brussels effect .

See also

Web links

Individual evidence

  1. a b For a comprehensive overview of the literature on race to the bottom theories, see z. B. Hahn, R. (2009): Multinational Enterprises and the 'Base of the Pyramid' - New Perspectives on Corporate Citizenship and Sustainable Development. Gabler, Wiesbaden. ISBN 978-3-8349-1643-3 , especially pp. 118-126.
  2. ^ Joseph Heath & Andrew Potter, (2005): The Rebel Sell. Harper Collins, Toronto. ISBN 1-841-12655-1 , especially p. 100ff.