Public Policy Making 21-09-2011

Eddie Lewis

Lesson 1

For the last 20 years economics has been dominant. Politics is now returning to the fore.

Post WWII – America believed that prosperity relied on political and economic liberalisation. Different models are coming to the fore. See the prosperity of authoritarian regimes such as Singapore, China and Russia What will be the effect on public policy making on a small open economy like Ireland? Krugman argued that Ireland could be seen as regional economy in a larger global economy. Ireland is insecure about its own capacity in determining policy. Global Competitiveness Report – Ireland is 29th. The main barriers to competitiveness cited by businessmen are: 1. Financial – inability to secure credit 2. Incompetence of the civil service bureaucracy 3. Restrictive labour regulations

Public Policy Membership of the E.U. has compromised Irish sovereignty – the traditional view of the price of the Westphalia model

Where policy comes from – lobbyists, interest groups, public, and insiders. Does the political system understand what is expected of it? The New Right asserts that the power of the state should be reduced to reduce the power of insiders. Public Policy Making is rarely a technocratic exercise. Who makes policy? Oireachtas, senior civil servants

Does the Oireachtas have a real role? Is information vetted by civil servants before reaching the minister? In many countries, the top civil servants are replaced with each new administration – this happens in the U.S. an East European states. Does the Government make policy? Rather than the Oireachtas, is policy a function of the cabinet? How is policy made? Who has the power to influence people? How are decisions made in a system?

Requirements for policy Support – legitimacy, democracy Implemented – how the rules are implemented, governance is important Performance – has the intent of the policy been achieved, are there any unintended consequences Feedback – Is further change in policy required?

Ireland has problems with the implementation of policies – there are institutional constraints

The Capacity of the Political System to deliver. This is a critical issue. What can the state do? The last 4 or 5 years has seen the failure of the markets and Neo-Liberalism.

Public Policy Making 28-09-2011
Part II – The Celtic Tiger

Lesson 2

Themes   Risk and Uncertainty Development Models

Why was Ireland so vulnerable to recession?

Read Governance and Institutions Governance 1st Sense: The exercise of government in a complex society. Complex society – specialisation of structures, many and competing interests, individuals are defined in a range of terms – overlapping allegiances

2nd Sense: Challenges to democracy – weaknesses and current concerns – representative system – citizens tend to be passive. Democracies are not necessarily about equality. There are elites. Democracy is a way of providing government. People have become concerned about the performance of the state and the democratic deficit. Accountability has become an issue. How are decisions accountable? Committees? Ombudsman’s office? Ireland has a vast number of state bodies, some elected and some appointed.

3rd Sense: Governance as network. Decision making within an administration is about the way different groups network with each other. How committees relate, leadership issues, game theory. Examining how decisions are made, who has power.

4th Sense: Governance sits alongside institutions. Institutions are about the rules of the game. The code. Formal and Informal rules. Governance is about tactics and strategy.

Institutions Issues with institutions Points 1 and 2 are constraints 1 Economic institutions – the rules that dictate how a market will operate. Institutional approaches are mainly about information. The purpose of an institution is to create certainty. The level of knowledge available depends on institutions. Institutions are necessary for the enforcement of contracts.

Institutional Economics – Douglas North. There is a challenge to the assumptions of the perfect marketplace, i.e. perfect knowledge.

2 Institutions determine the level of transaction costs in a society. Low transaction costs allow markets to function efficiently. Difficulties arise in the political arena – time issues, complexity. The transaction costs in politics are very high. Institutions in political administration try to keep costs low. Implementing policies – administrations can move from original intent to outcome without incurring extra transaction costs.

3. Institutions are a resource. They give a society the capacity to carry out complex functions e.g. legal system, civil service etc. They allow society to work towards particular outcomes. Institutional infrastructure is necessary to carry out large projects. There are issues – friction between national and local government, existence of corruption. Somalia, Sudan – failed states, cannot deliver political systems. Mexican drug wars – parts of the country are ungovernable. Corruption in Greece.

Change – Can institutions change? Paradigm shift – gave rise to the Celtic Tiger, after the Tallaght Strategy and Social Partnership

4. Uncertainty – Institutions help to reduce uncertainty

The Rise of the Celtic Tiger Irish Political Economy

Why did it happen? Why was it unsustainable?

Did policy makers fail? Was it bad implementation of policy – institutional failure? Or poor choices? Or was it due to factors outside our control? Meaning we had no real choice in how events proceeded? The Bank Guarantee – a judgement call had to be made based on as much information as was available at the time. What policy options are available to Ireland now? Ireland’s development path form the mid 80s to 2000 (The Celtic Tiger Era) is not available any more. Was it a failed experiment, or something that was subsequently messed up? Would it have been possible to sustain it?

Period of Celtic Tiger 1990-2001 A time of dramatic growth No other developed country ever went through an equal level of growth. Things went wrong after the turn of the century. Reductions in taxation helped to kick-start the economy after the heavy burden of taxation in the 70s and 80s. The Celtic Tiger saw a sustained period of economic growth, and a reversal of demographic trends.

Celtic Tiger and Social Development Relative inequality increased, but that’s happened everywhere. Read the NESC reports from this era – documents outlining what the plan was for the economy. What were the NESC reports trying to achieve? Was their a failure of the mode? Implementation? Or was failure caused by outside events?

Demise of the Celtic Tiger What can be done?

Ireland is still in crisis management mode. It can’t recreate the conditions of the Celtic Tiger. What alternatives are available? Can they be implemented? There is a loss of autonomy due to E.U./IMF intervention. Can autonomy be regained? Where can in it be exercised? In what areas, and how can we influence policy?

Fragmentation of the Unitary State – During a crisis there is a tendency to centralise. Ireland is quite centralised. The power of the centre has been fragmented – a large number of agencies exist. This gives mixed messages in terms of capacity to implement – there is less opportunity for command and control. Balance between individual and social risk – what direction for the future of the welfare state?

Challenges to representative democracy – Will our democracy be strengthened or weakened? (Assignment topic) How can democracy be made more accessible? What are the problems faced by a complex society? Are multiple referenda a good idea – as in Switzerland, or a bad idea – as in California? There are big compilations. Multiple referenda – do people know what they’re voting for? In theory, representative democracy removes the burden from citizens, in terms of studying and deciding on issues, and places it on the shoulders of elected representatives. Direct democracy can only work with clear-cut and important decisions. How do people get more involved? Some people don’t want to be involved, so long as society is functioning well. Is local activism a distraction? Does it set regions against each other so that they are unconcerned about larger issues? What is the role of politicians? Is it policy making? Or something else? How does Michael Lowry get elected? Or the 2 Healy Raes? P Flynn? Do local concerns trump ethical issues and other wider concerns?

Risk and Uncertainty Read: Keynes – Return of the Master, Robert Skidelsky Why is Risk important? A sociological approach to economics.

Risk society – has complications for globalisation Management of Risk is important Understanding of Risk and Uncertainty – what can and can’t be managed

Risk Society – Ulrich Beck, Anthony Giddens The Processes of modernisation and globalisation were creating new types of risk. This had implications for how individuals behaved. Individual choice is at the centre of risk society. Certainties are challenged in a post-modern world. Choices involve risk. Choices are often forced on individuals. The Keynesian welfare state emerged after WWII – unemployment benefit, pensions, healthcare, and education. Politics arose over how to allocate resources and risks in society. They were socialised – the state took on the risk. The state collected and spent tax. Risk Society – the issue is not the allocation of resources, it is the distribution of risk. Who will bear risk – individuals take on risk; they set up their own pensions, are responsible for their own education, look after their own health insurance. If things go wrong, individuals are left to bear the burden. This changes individuals’ integration in society. There are many consequences. The state is a facilitator. It encourages entrepreneurialism. It encourages home ownership. There is a move towards individualisation. Modern capitalism and globalisation creates new risks. It results in a world of precarious freedoms. There have been changes to the welfare state. There are issues of democracy and legitimacy. If the state can no longer provide a basic standard of living and welfare, does this undermine the legitimacy of the democratic process?

Managing Risk This is the key for policy makers and implementation of policy. Risk – public-private partnership – This transfers risk from the public to the private sector. Pricing of Risk. Management of Risk is important at enterprise level for outsourcing of risk.

Example: Leasing of housing units – 20% discount on market rate. Council carries out maintenance and absorbs the risk of housing units being empty Public Health/Environment – state and individuals will have different views on what is an appropriate level of risk e.g. vaccinations, closure of hospitals Scenario planning – an aspect of risk management

Risk and Uncertainty What is the difference? Why did economists get the market so wrong? Dealing with uncertainty Probability does not cover all eventualities Risk is quantifiable and therefore insurable Systemic risks occur outside the system and therefore override all assumptions Markets – individuals do not act rationally. Markets are run by institutions. Applying the calculus of probability to markets is limited.

Public Policy Making 12-10-2011
Lesson 3 – Historical Context

Lesson 3

Cyclical nature of history – though the context is always different. Developmental Theories – relevant to the Irish Political Economy:     Dependency theories Conventional economic Development Models Competition State

Pre-Celtic Tiger – was Ireland a developed political economy?

What will make a country underdeveloped? What is meant by development? Institutions, trade, legal framework, developed workforce Economic Growth? – does this mean development? Social development? Modernisation? Development means modernisation for underdeveloped countries. Sustainable development

Socio-economic development What needs to be done to achieve this in Ireland today? Infrastructure – Institutional capacity Education, training Competitiveness – This was the strategy at the start of the Celtic Tiger Era

NESC – Economic and Social development go hand in hand

Development One theory – Ireland is an underdeveloped economy – it is dependent on other economies; UK, US FDI, European Banks and the IMF. Ireland is a regional economy. Critics look at the Celtic Tiger economy as a mirage. Ireland remained dependent on foreign economies, so was underdeveloped. This is the market-based view. The conventional view, which is also market-based, states that the Celtic Tiger was a period of catch up for Ireland, with the country finally becoming involved in globalisation.

Competition State - Cerny This is based on the strategy that a state must intervene to ensure competitiveness. The market will not produce desired developmental goals on its own. Asian Tigers – the state is pro-active in assisting the market. Questions arise as to the long-term effectiveness of this model. Ireland was an active state for the first ten years of the Celtic Tiger.

Developmental Models – Ireland 1. Development based on modernisation of activity of firms involved in global activity – FDI to introduce high-tech firms to Ireland. See O’Riain 2. Evans – Embedded autonomy – Political – How the state deals with competing business interests in society. Favouring key industries. The state is open to capture by business interests. Vested interests can wield disproportionate influence. Evans put forward model of development where the state was well informed but not captured by business interests. The question was how to achieve this in Ireland? Social partnership was put forward as a means to manage competing interests. 3. FDS – Flexible Developmental State. The strategy is that the state should have capacity, be flexible, able to respond quickly so that the state can act quickly. This is necessary for a small open economy. Why did FDS fail? It could not cope with external shocks Are competition and social development incompatible?

History of relationship between political and economic development Political Economy of the 20th Century Rise and decline of the nation

The Nation State The modern nation state arose in the 20th Century Is the nation state declining? More states exist now than ever before. There is pressure on some states to split e.g. Belgium State sector – the size of the state sector – is it increasing or decreasing. Through most of the 20th Century the state sector has grown in size – tax collected, laws, administration, controlling means of production There has been a certain levelling off in the last quarter of the 20th century. The size of the state sector reached a peak in 1970. Was this due to the influence of Keynes? It has fallen off since then – was this due to the influence of Thatcher and Reagan? Regional bodies and international bodies – reducing the formal legal power of nation states. Rise in the creation of the welfare state – This was the Keynesian influence period after WWII. Rise of the market and the global economy – This is at a high point today. Has the global economy peaked? Will protectionism return? Political awakening – Increased awareness. Arab spring, Chinese middle class, the lack of participation in the West is being reversed

1st half of the 20th century. Expectation of what the state could achieve. State taking control of commanding heights over the economy. The state saw it as its role; citizens saw it as state’s role. People had confidence in the state. This continued up until the economic decline of the 70s. States couldn’t deal with simultaneous inflation and unemployment.

20th Century – 3 Eras Pre-WWII – Market volatility Inequality, Boom and Bust

Golden Age 1945-75 Keynesian era

3rd Era – Resurgence of Markets This is ending now. Read Kaletsky – Capitalism 3.0

Capitalism is infinitely adaptable – a problem postponed is a problem solved.

The Golden Age This was a rejection of the monopoly capitalism of the pre-WWII era. Pre-war – high unemployment, extreme volatility, massive accumulation of profits and resulting inequality, slow growth in production and trade – contrasted unfavourably with centrally planned economies. American style capitalism was seen as unpopular – viewed as leading to WWII. Capitalism was seen as morally bankrupt, that it had failed people prior to WWII. Post WWII – people were vulnerable and had to cope with rationing, communist parties were becoming popular Prosperity was not seen to have returned until the 1960s. It was seen that the state had guided the return to full employment of the 60s through various economic plans. Marshall Aid, Planning, Welfare, Labour Markets. States had an objective – to provide work. Today the state’s role is seen as facilitating enterprise. Back then the state’s role was seen as providing jobs. Nationalisation was in vogue. It has fallen out of favour, although now states own many formerly private industries. The level of state employment in the UK has fallen from 20% to <5% today. Economic Growth McMIllan’s election slogan in the UK in the early 60s, ‘You never had it so good.’ Economic growth was increasing – trade increased. Basis of prosperity –commanding heights of the state – a reflection of the passive role of states States intervened in a number of ways – nationalisation, planning, subsidies, grants, protectionist barriers, currency manipulation The state increased aggregate demand through direct expenditure. A strong welfare state was not just altruistic – it reduced uncertainty in the market and encouraged consumption by decreasing the need to save. It promoted equality. There was a strong emphasis on planning – scientific and rational thinking was employed to solve problems.

Political Manifestations

Mixed economy model Based on the market system, there was an active role for the state. Was this the Road to Socialism, or a correction of previous imbalances? UK – Nationalisation of industries France – 5 year plans – created optimism US – Regulation of industry, anti-monopolist legislation was introduced, Nixon introduced income and wages policy Italy – Corporate conglomerates, national industries, state had strong influence Germany – social market model. Government owned shares in all major firms. Competition encouraged to discourage monopolies. The state decided on levels of competition that would benefit the state rather than the market or individual players Japan – bureaucracy was tied in with industry India – Introduced a scheme of permits for industry

Ireland 1945 – 1957 – The Irish economy stagnated. Low growth and employment, emigration. Characterised by complacency. 1957 – The Lemass government realised a more active role for government was needed to push the economy forward. 1958 – Whittaker – Program for Economic Expansion was published. It was optimistic – signalled a shift in public mood. However, the economy proved difficult to guide. 2nd Program – recognised the limits of agriculture to fuel growth. 3rd Program – quietly dropped in 1973

Ireland suffered relative to other developed economies – were poor public services a factor? There was a high level of complacency until the end of the 1980s.

1980s until the mid 2000s – 25 years There was an ideological dimension to the changes in society – The collapse of the centrally planned model – This followed the collapse of the Berlin Wall

Political – The rise of the New Right – Thatcher and Reagan. Also, the political centre moved to the right, see New Labour – altered the balance between Market and State. Privatisation of services. The introduction of New Public Management. 2001 – 2008: The dominance of Market Fundamentalism – the Washington Consensus. Globalisation increased the importance of Financial Markets.

Lesson of History We are currently in a period of crisis. The crisis has led to a paradigm shift. People become more receptive to new ideas. As old ideas are discredited, this can lead to a jump in opinions. Significant shifts in ideology can result.

Read: Hobsbawn, The Age of Extremes (Chapter 9) Skidelsky – The Road from Serfdom Adshead, M

Public Policy Making 26-10-2011
Moodle Also important:

Lesson 4

Lesson 4 – The Climate of Ideas Machiavelli – The first commentator on the modern state He identified 3 drivers of political actions Fortuna – accidents happen Necessitas – by necessity Virtua – autonomous actions of the ruler

The Modern View What influences politics/public policy making? 1. Social forces – economics, globalisation, secularisation – grand ideas that drive policy 2. Individual choice – clear decisions made by the elite/ruler 3. Interests – Interest groups 4. Ideas – belief systems, ideologies The belief systems of people in power will help to determine the direction of public policy making. Ideas are always important. Economic ideas are very important. Economists failed to predict the current crisis and disagree as to its solutions. Keynes comment that ‘Policy makers are usually in thrall to some defunct economist’ still holds true.

Ideas and belief systems and their influence on policy Ireland – The political system here is rooted in a fundamental pragmatism – most parties are not following a particular ideology. Most parties are pragmatic and flexible.

Without a belief system, policy-making is subject to fads. Another consequence of pragmatism is that it may expose intellectual dishonesty when it is faced with a real problem. This gives rise to an Irish solution to an Irish problem, when difficult issues are fudged. There seems to be an inability to follow actions through to their logical conclusion. This leads to inconsistency in policy.

Ideas are drawn from:    Philosophy, political philosophy Economics Political Theory – policy analysis, organisational theory, management theory etc. – recurring themes Administration

Important people and Intellectual Traditions Keynes – Post WWII era – The Keynesian welfare state Friedman and Hayek – Influenced the right and the importance of markets in the post-Keynes era

Both schools have been updated to reflect globalisation and the current crisis The ideas that influence the boundary between market and state

Climate of Ideas Individualism vs. Collectivism 1960s – 1980s – State centred vs. Market centred ideologies Political philosophy starts with the role of the individual in the state. U.S. – Strong libertarian philosophy Europe – Society comes first; individuals owe an obligation to society

Economic approaches – Those who favour more or less intervention by the state, economics and politics are closely intertwined.

Analytical Frameworks The choice of methodology is often determined by ideology Administration – There are differences in preference as to how administration is viewed. Incremental – a series of small steps vs. Rationalists – completely re-examining processes, why are things done, start from first principles – Thatcherism. Steering vs. Rowing – should the state direct the economy.

Contested Ideologies

Synthesis Combined Ideologies The current crisis means that new ideologies are probably needed. There are a number of issues – wealth inequalities, lack of control of businesses (regulatory and by shareholders), youth unemployment. Last 200 years – bourgeois revolution. The middle class is now being squeezed. The next generation will be less well off. The last generation of working class people in America have lived middle class lives on credit. Inflation will rise – money will be printed. Pensions are not safe. Pension funds are not generating returns sufficient to provide for future pensioners. Also – calls are now being made to allow people to access their pension funds now, to relieve current financial pressures they may be facing. This can only serve to further weaken pension funds, and means they will be less likely to meet the demands of pensioners in the future.

New ideas are needed to deal with the challenges ahead. Civil society – Scandinavian countries – citizen participation, dense networks of interest groups, volunteerism Environmentalism/anti-consumerism? Prosperity without growth?

Washington Consensus – this has been the dominant ideology of the last age.

Political Analysis Analytical Frameworks    Rationalist Behaviouralist Institutionalist

Rational choice is based on deduction. Deduce what will happen from the theory. Create models of how the economy works and use these to deduce how real actors will operate. Behavioural – Based on the natural sciences. Induction – observe behaviour to determine what is happening in the real world. Laws and probabilities are inferred from these observations. Observe correlations, record regularities. Institutions – This approach does not assume rational behaviour. It bases actions on the context in which a person operates. Relativist – trying to understand what people think they are doing, how they understand their own actions. It is more subjective. People act according to their own belief systems and how they see the world. A comparative approach is often used – comparing countries or eras. The Rationalist Approach is often used by the New Right.

Collective vs. Liberal Approaches Why are laws obeyed? Is it because of a sense of responsibility towards society, or fear? This is a fundamental question Right to act without state interference vs. Obligation to the state

Contracteer – In the absence of society there is anarchy – individuals give up certain rights for security. The individual decides to contract with the state – trading freedom for security. Man is a social/political animal – is born owing an obligation to the state.

Battle between liberalism and collectivism: Provision of public services – provided by the state or by the market. The level of choice available to the consumer.

Public housing – allocation of particular property vs. Paying for accommodation. Role of the welfare state – redistribution and equality vs. a safety net for weaknesses in the market Extent of regulation – Action by the state. Regulation is ‘collectivist creep’ according to Skidelsky

The key issue in the UK and Ireland – How should public services be delivered? Friedman – the job of the state is to provide services, pay for them, and regulate them, but not to deliver.

Regulations – States realised they could save costs by transferring responsibilities through regulation. The battle over centrally-controlled economies is over. There was a failure of regulation in Ireland. Public Goods – Grey area over mixed goods, externalities. The concept of a public good changes with technology Democratic Mandate – Majorities may coerce minorities. Progressive taxation is viewed as a political issue in the U.S. The welfare state is viewed as an imposition. See de Touqueville – The Tyranny of the Majority Economic Management – Laissez-faire vs. More interventionist approach. Corporatism, public sector reform.

Keynesian Compromise Golden Age – Period of relative prosperity under the watchful gaze of the state. Keynes compromise – reconciled the working classes to the state and the market economy Classical economics held that full employment would prevail – supply creates its own demand

Keynes said that uncertainty and the animal spirits of investors determine whether people will spend or save. Keynes was an advisor to governments. His influence is important to politics as well as economics. His influence on politics arose because the consequence of the active role by the state was for the state to progressively increase in size. Growth in the welfare state – Keynes advocated the welfare state not out of altruism, but to reduce uncertainty, which meant that people would spend more. This would lead to a return to economic equilibrium and a growth in employment.

The growth in the power of interest groups – as the state grew in power, more and more groups formed to obtain services from the welfare state and to influence policy. Keynes believed in the importance of the technocrat – the application of good thinking would solve any problem. The state should be driven by meritocracy. Friedman/Hayek saw the growth of the state and saw the proliferation of insiders that would act in their own interests. By the 1970s Keynesianism was being criticised as problems began to manifest. There was a proliferation of trade unions, bigger state sector and crippling tax burdens. Keynesianism never dealt with the problems of wage restraint at times of full employment. Efforts were made with incomes and prices policies. Ireland had Social Partnership. Keynes ideas were attacked on two fronts – Market and Socialist Market-driven ideology won out. 1976 – James Callahan, British PM, ‘We cannot spend our way out of a recession.’ 1979 – Margaret Thatcher – New Ideology

Opposing ideas to Keynes Hayek – Highlighted the differences between individualism and collectivism. In 1944 he published the Road to Serfdom. He viewed socialism and fascism as two sides of the same collectivist approach to society. He said the opposite to collectivism was individual libertarianism and a market-based approach. Hayek believed that societies were progressively abandoning economic freedom in pursuit of equality. Increased planning, organisation and state direction. He believed state should support competition, markets, and individual choice. Individual liberty should be a central value – democracy was only a means to an end. Hayek opposed totalitarianism and socialist governments. Hayek argued with Keynes, the state would not give back power – it would progressively take more power in society. Hayek was concerned about the collectivist impulse – he believed it should be challenged at every point.

Public Choice Theory A collection of ideas. Belief in application of economic principles to public policy making. Rational individual – The individual is the basic unit of analysis. Look at first instance at the individual.

Interest groups – A conspiracy against the common good. They operate on the free-rider principle. They act against the interest of individuals. Trade unions act for the benefit of the activists in the trade union. Bureaucracy – Budget-maximising bureaucrat. By rational choice they are seeking to increase power, influence and status. Welfare State – Concerns over size. Individual choice – should there be choice available as to how services are delivered? Government Economy – Public choice is strongly aligned to the market. It believes that the market is the most efficient way to allocate resources.

Weaknesses of Public Choice  The New Right ignores the problem of private coercion – companies may have a dominant position in the market place. Inherited wealth gives individuals an advantage Public interest is not acknowledged, society is ignored Ignores the costs of social inequality Democratic safeguards provided by interest groups, have a role in providing protection of minorities from the state Implementation difficulties

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Public Policy Making 09-11-2011
Lesson 5 – Modern State Evolution of the modern state Form of government Future of Capitalism?

Lesson 5

Challenges to modern mature democracies? The decline in participation in elections, increases in activism, the public sector is seen as part of the problem

Is the Irish state too big? Based on the number of public servants? Or the levels of taxation? Or the size of the national debt? The size of the public sector – does this include public services provided by others and paid for by the state? Comparisons with other states are useful in judging the size of the state. Historical comparisons are also relevant – these show the growth in the size of the state over time. Is the size of the state defined by ownership? Or the extent of regulation? Institutional differences mean that it can be difficult to compare countries.

Economist Article – The Future of the State, 1997, Clive Croak – said that the state was holding its own. This year, the state has started to grow again. The 1997 view was that the state had reached its high point. Today, The Economist expects the state to take a more active role in sorting out the problems in the market. The Economist sees political intervention in the marketplace as inevitable, and may be desirable. The concern now is how effective can the state be? The future of the state will dominate politics for the next decade. How can the state be made more efficient? Context – The current Market Collapse The crisis is leading to a paradigm shift Many economists are advocating Keynesian intervention, but question how states will achieve this.

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Weakened institutional capacity – no money to stimulate demand Quantitive easing has not worked Very high levels of personal debt, especially in Ireland

Ireland is the most indebted country in the world – total debt is 450% of GDP. This is the total of high government debt, private debt, banking debt and corporate debt. This makes it very difficult to implement a Keynesian stimulus. Hayek and Friedman both advocate letting a recession run its course. This leads to a waste of resources, and high levels of unemployment. This can currently be seen all over Europe.

Relevance of Themes Problems with the marketplace Issues of inequality and unemployment are becoming bigger problems, with no signs of abating. Policy makers need to set a vision for sustainable development in the medium term. Where will the country be in 10 years time? Is there a vision? Can one be created that will win support? What strategies are in place? Ireland has problems with implementation.

Is the state too large? The coalition government in the UK views the state as being too large and interfering with the marketplace – it should be rolled back to allow the real economy to function freely. The other view – the state is too large because it costs too much. Ireland can’t afford to pay for the state in its current form. The state has become inefficient in a number of respects. Changes to management are required. A refocusing is needed on the role and purpose of government. Openness of the economy – Ireland is one of the most global economies. Does that suggest a need for bigger or smaller state? Some would argue that the state should be bigger to act as a buffer to external shocks.

Ireland – is a member of the E.U. and the euro. This constrains the options available to Ireland. Should we cede control to Europe, where decisions are made? Or should there be more public servants to manage relations? Ireland has a legacy of particular arrangements –     Highly centralised political system Weak regulatory administration Social Partnership Decentralisation – ongoing or abandoned?

The Changing Role of the State The Rise and Fall of big government – the size of the state sector

Evolution of the modern democratic state Power is consolidated centrally Monarchs – administration – tax collectors – army Time of the French Revolution – the notion of the state evolved to include the people, population. Notions of loyalty to the state and national identity emerged. The granting of social rights and welfare led to the nation state. 20th Century – Competing ideas about the state Collapse of planned economies gave rise to a new era. The market economy won out – Bobbit. Hobsbawn – the state peaked in the 1970s and has been in decline since then Fukuyama, The End of History – States had reached a final point of evolution. The economic triumph of liberal market capitalism. Markets allocate resources. Recognition – Each state seeks to be acknowledged and recognised by other states. This evolved into the democratic electoral model. States would recognise the legitimacy of other democratic states. This was very influential on the New Right political ideology:   Bolstered the Neo-Con view in the US Pointed to the linkages between political and economic liberalism

Belief was that liberal democracies would not go to war with each other

Bobbit – The Shield of Achilles Long war in the 20th century changed the nature of the state. Nation State – legitimacy is defined by the ability to provide for its citizens, through a large bureaucracy. The Keynesian view. Market state – legitimacy is achieved through the provision of opportunity. Markets, level playing field, incentives, regulations Nation state: rule of law, bureaucracy Market state: level playing field. Does not guarantee equality of outcome, only of opportunity

Hobsbawn – Age of Extremes Hobsbawn was a neo-Marxist historian. The 20th Century saw the reversal of a centuries-long growth of the nation state. It has been declining since the 1970s. Citizen participation and protection has now declined. Capitalism is inherently extreme, and needs to be checked by the state.

Nation State The number of nation states has increased since the end of the colonial era.

Issues facing autonomy – Fiscal consolidation in the E.U. Globalisation – States becoming more competitive Multiculturalism – Challenging the ethnic homogeneity of nation states. The legitimacy of the state may change from common identity to something else.

States achieve legitimacy through democratic form, though not always adhering to democratic values. Democracy is necessary for external recognition and internal support.

The nature of the modern state – important characteristics:        Formal institutions Administration over territory Legitimate coercive power Sanctioned – sovereign civil service is not above the law Electoral mandate for ruler, even if only in form Recognised as sovereign and distinct by other states Nationality or community – groupings – commonality amongst the population around which political institutions form

State, Democracy and Market Economy Evolution of the three are linked. Political > Economic > Social Rights Democratic maturity leads to economic development. There are strong links from prosperity to democracy – it is hard to determine which leads to which. Barro – democratic government can help lead to prosperity – through the provision of rule of law, education etc. But these things can be produced in a non-democratic society e.g. China.

Nationality, Community, Political Legitimacy Warfare is key to the development of states. This creates a sense of a people and a sense of citizenship. Does legitimacy come from a sense of shared identity and kinship? Or is it from the performance of institutions? Input vs. Output legitimacy Europe is not delivering at the moment – hence the current crisis

Challenges to the modern, democratic nation state   Globalisation Democratic deficit, limits on sovereignty

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Fracturing of states into regions e.g. Spain, Belgium, UK Decentralisation and the fracturing and fragmentation of the power of the central state Multiculturalism

Size of State and Definitions and Measures There is a tendency to look at what can be measured and ignore issues that are difficult to quantify.

Functions of the State Minimalist state – 19th Century: State protected territory, maintained internal order, and collected taxes to pay for these functions.

Modern State – Basic Functions Minimalist state functions, plus infrastructural projects, physical works, plus welfare state, provision of social services and redistribution and social protection. Extended functions – Economic management, ownership (e.g. banks), development support (e.g. subsidies, grants, manpower planning, and employment)

Challenge of New Right Argues that the state should not be involved in certain functions. Infrastructural projects can be carried out by the private sector. Areas such as electricity and telecoms can be privatised. Social needs – private sector can deliver services on behalf of the state in areas such as Health and Education. Economic management and ownership – should be left to the private sector. States should divest themselves of ownership of economic assets. Economic planning – There is still a role for the state in this area Employment and development support – This is better left in the hands of the private sector

Government spending and debt as a percentage of GDP has consistently increased.

Numbers employed by governments as a percentage of the workforce has increased across the OECD.

Privatisation This became the policy in many countries from the 1980s onwards. See

Regulations There are different types of regulation – all mechanisms of state control. The E.U. is often referred to as a regulation state – it makes laws as it does not have control over nations’ budgets. Power is deployed through a regulatory framework, rather than violence or the provision of welfare. Regulation results in compliance costs.

Why do states grow? Economic development Openness of markets Political partisanship – shifts in government will drive growth or decline Market failure – failure of financial markets driving changes in the size of the state Incrementalism – gradual growth in the size of the state Displacement effect – Major events, such as wars or other crises, cause an increase in the size of the state. It doesn’t pull back to pre-crisis levels. Bureaucracies – gradual expansion of state bodies Interest groups

Consequences of State Growth Organisational and economic failures


Bobbit Economist Articles: Failure of the State – September 1997 Taming Leviathan – March 2011

Public Policy Making
The Welfare State


Lesson 6

Course Themes     Governance Institutions Development Risk and uncertainty

History Pre-WWII – Market volatility, high unemployment, boom and bust Golden Age 1945 to 1975 – mixed economies, state control of economies 1975 – 1990 – Market resurgence – New Right, market thinking

Currently – There is a crisis in capitalism

Competing Ideas:   Political – Communal vs. Individual Economic – Keynesian vs. Neo-classical

Evolution of the state State nation – Nation State – Market State

Crisis of Capitalism Global capitalism is putting pressure on the nation state.

Institutions of representative democracy are failing the test of political legitimacy. Decisions are now made by the European elite. This means there is a democratic deficit.

Capacity of the State The Euro crisis is revealing the limitations of the capacity of the states and E.U. – It has highlighted the inability of states to deliver solutions to problems.

Globalisation leads to threats to sovereignty of nation states

Democratic State

Welfare State Civil Society


Globalisation Regulation

Developed State

Public Sector Unitary State

See The Economist Article – Staring Into The Abyss – the Euro Crisis Events now will have long term consequences. It will settle the limits of the welfare state.

What will the welfare state look like in 5 years? Development? Socio-economic development? More regulation, more oversight. More direct state involvement in the economy.

The Welfare State – The Main Issues     Role Types – Can it be chosen? Or is it determined by history? Cost and is it affordable? Delivering an efficient and cost effective service

Is the welfare state politically legitimate? Why is it needed? There are a number of reasons It is Right and Necessary – Social safety net, and it prevents social unrest Legitimacy of modern state depends on the state being responsible for its citizens

The Welfare State in Ireland Ireland is a competition state – Peadar Kirby. Social policy was subsumed to the needs of the competition state. There are 2 streams of thought on changing welfare states: 1. The view – they are very difficult to change due to institutional factors 2. Pressure from social and market forces will lead to the transformation of the welfare state to the workfare state. Workfare – structures put in place to support the demands of industry. Ireland has moved from welfare to workfare over the period 1995 to 2002.

NESC tried to develop a new economic model that would be supportive of the economy, but sympathetic to the liberal views of welfare.    Close integration of social and economic objectives Move away from means testing Emphasis on the quality of public services e.g. social housing should be better than private, as the people who need it needed more that people who can afford to access the private sector Belief in the benefits of employment in addressing social issues

Key social changes of the developmental welfare state  A movement away from means testing – it is tailored to the needs of individuals – tailored universalism Life cycle assessment of need, rather than being based on a point in time Focus on quality of services Focus on training Inequality is addressed through employment

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Can this model be assessed? 1. It attempted to merge economic and social objectives – reconciling the irreconcilable 2. Valid and legitimate welfare model, unique to Ireland, but we ran out of money 3. Poorly implemented effort – we spent the social dividend. This undermined the competitive economy that supported the Celtic Tiger.

The challenges for Irish Social Policy   Can the welfare state be brought in line with the poorer political economy? Access to welfare – people have social rights to housing etc. Is welfare compatible with social rights? The state has thus far attempted to resist recognising social rights. Universality vs. Means testing? The role of choice? Building choice into the system? This was an aspect of the developmental welfare state. Less bureaucracy involved. Balance between social and private risk? The state tries to shift risk to the individual in hard times Affordability and performance – demographics are a factor Delivery – how best to provide services

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History of the Welfare State The workhouse – Safety net

Social rights – integration of state Keynesian welfare Modern systems

Phases of development – History

European Welfare Models There are 4 main schools. Ireland does not correspond directly with any of them.

Costs of the Welfare State The spend as a percentage of GNP has increased substantially in recent years.

Critique – the faults of welfare       Costly Inefficient Ineffective Unintended consequences – poverty trap Undermines individuals and the markets Doesn’t deliver egalitarian outcomes – the gulf in income and wealth is widening

Delivery models Is there a need for a new welfare model in Ireland?

Public Policy Making
Towards associational democracy


Lesson 7

Interest groups and Civil Society

Democratic mandate and the E.U.? Political legitimacy of nation states?

Welfare state links to democratic society    Compact between the nation state and citizens Shift from citizen to consumer of public services Rise in the effectiveness of interest groups, particularly in welfare areas

There is an implicit contract in the evolution of the modern nation state – this culminated in social rights. There was a historic compromise at the end of WWII – the state, through the welfare state, should ensure the welfare of its citizens. There was a shift from citizen to consumer – see Schick – the defining characteristic of the age is the amount of time and resources spent on delivering services. There has been a shift away from the rights and obligations of citizens to the entitlement of consumers/customers. This is a different relationship to the state.

‘Citizenship invests people with a limited voice and virtually no choice to exit’ – Schick As a customer you are armed with both voice and exit. Growth of the welfare state accompanied by a corresponding rise in activity and power of interest groups led to increased lobbying. This gave rise to a reaction against this process from the New Right.

What is the Role of the Welfare State? (EXAM QUESTION!) Cost is linked to :     Role Nature Funding Delivery

The Role – As a Safety Net Nature – Redistribution, labour activation

Associational Democracy Democracy made up of overlapping competing groups. Formal and informal relationships.

Individuals have little power. Influence is exercised through groups – formal and informal. The effectiveness of groups, the extent to which they represent matters, is of concern to political scientists.

The Impact of Groups on Public Policy Making What is the future of social partnership? Associational democracy is aspirational. It is an extension of representative democracy. It allows the state to bring together groups in a way that allows policy to be formulated and implemented. It is a normative, value-driven approach. Associational democracy espouses the devolution of decision-making to groups in society. It allows for new forms of deliberative democracy. Discourse is important. It does not rely on voting or the consumer. The role of the state changes to promoter and facilitator.

Realms in Society

Private sphere – the non-political section of society Social sphere – civil society – groups that seek to influence the political sphere. Public sphere – the move from individual action to social movement – members of groups Political sphere – The decision-making arena Administrative sphere – Responsible for implementing policy e.g. Quangos, non-political bodies

Private Sphere Civil society – interaction of individuals and groups

Subject Matter     Political Legitimacy Types of democracy Civil society and Citizenship Interest groups and the state

Ireland – social partnership and embedded autonomy. Could other approaches have been taken? Could it have been better managed?

Democratic Legitimacy – Political Legitimacy [Process – Form] Democracy provides legitimacy for the political system. It integrates people into the political system. Legitimacy depends on the process or performance of the system. Process – Representative democracy – rightness of elections determines who will govern, the government will respect checks and balances when making law

Democratic Form Governance Citizen Participation

Democracy can be undermined by external factors, such as lobbying, or the national parliament having little control over policy-making.

Political Legitimacy – Performance [Outputs] What functions (elements) must a political system have to perform effectively? Communication – Interest groups can communicate demands to decision makers. Interest Articulation. Decision Making – aggregation of interest. Bring demands together.  This assumes that interest groups correctly represent public demand, in a non-distorted manner.

Democratic Deficit in Europe Increased power of the E.U. Scharpf [1999]: Governing in Europe – Decision making in Europe was only weakly corresponding to democratic processes Leads to a loss of legitimacy Gives rise to extremist anti-European parties

Input Legitimacy [Identity based] – agree with processes, membership of community

Output Legitimacy – Results are important. The E.U. can deal with problems in a way that individual member states cannot. Concerns over the direction that Europe is taking – 2 E.U. states had leaders replaced by non-elected technocrats.

Amartya Sen – Raised concerns about the democratic deficit. Governance by discussion is being displaced by activities of the markets etc. Little regard is being paid to the effects of austerity.

Failure of Representative Democracy Is this a failure of the process or of performance?


Efforts to engage citizenry in participative democracy Efforts to improve the quality of public services – and engage the consumer

Democratic Form Engage people in decision making. More local politics Direct democracy – as in Ancient Greece – Active citizen

Representative Democracy Minimal citizen involvement. Democracy as a mechanism for choosing government (Schumpeter). Liberty is protected through institutional and procedural checks and balances. Competition between parties is important to responsiveness to the demands of the citizens.

Increasing Democracy Referendums – allowing voters to decide on matters Initiatives – Voters can put initiatives on ballots Right of recall – Initiative by people can result in politicians being recalled/retired from office

Decentralisation – Devolution of decision-making to the point where citizens can become involved

Direct Action – protests

Switzerland vs. California – See the Economist article

Deliberative Democracy – Decision making in public, transparent, subject to discourse Arguments must be couched in forms acceptable to others – Rawls – democracy was losing its legitimacy. People should engage in a different way. This could be an extension of representative democracy.

Citizen to Consumer Citizenship has been downgraded to consumers of public service. Read – Bowling Alone People have become isolated from the structures of civil society

David Miller – 3 Variants Liberal – One among many free citizens – tolerance Libertarianism – Citizenship as a check on the power of government Civic republicanism – An obligation to participate in the civic sphere

Citizen to consumer – often favoured by market forces e.g. Charters to determine the quality of public services. Seen as a threat to citizenry. Can a person be a citizen and a consumer – combining the best elements of both?


Assignment – Representative democracy has failed: To deliver political legitimacy (meet democratic objectives) through the democratic process – political sphere To deliver political legitimacy through the performance of the political economy (economic outcome) To ensure the compact between the market and democracy within the modern nation state (within Europe)

How has democracy failed? Are new frameworks needed to address these failings? Is the failure the failure to achieve objectives? Development? Equality? What institutional change is required? At the level of the state, the contract between the masses and political classes has failed – Europe

What do you expect representative democracy to deliver? Has it failed?

Assignment Reading: Krasner, S [1999] Governing in Europe, Oxford Scharp, F [1999] Governing in Europe, Oxford Heater, D [2004] Citizenship, Manchester Sen, A [2009] Idea of Justice Wilkinson & Pickett [2009] The Spirit Level

Exam Structure See Moodle – Tutorial 2 8 Questions – Answer 4 All essay type questions Ireland is the only country mentioned, although examples from other countries can be given Comparative – Compare against elsewhere of against theory Structure of Topics – Overlap of Ideas Q1. Nation State – Democracy, Globalisation Q2. Market and State – Global Economic Crisis, Market/State, Development Q3. Public Policy Making – Ideas, Global Economic Crisis, Administration Q4. Welfare State – Welfare State, Global Economic Crisis Q5. E.U. and Ireland – Global Economic Crisis, Democracy, Administration Q6. Development – Governance, Institutions, Development, Democracy Q7. Local Government – Unitary State, Democracy Q8. Regulation – Market/State

Public Policy Making
Associational Democracy II Interest Groups and the State The Irish Experience


Lesson 7b

Citizen v Consumer

Citizen – quite passive in modern democracies, not very engaged in politics, particularly in good times. For the most part have a passive and dependent relationship with the state

New forms of democracy are needed that will engage and involve citizens Direct democracy – A political system where decisions are made by the people, rather than by representatives. E.g. Referendums They are a mechanism that may exist in a representative framework that would allow for more participation, although this is not easy to achieve. The process would probably work better at a local rather than a national level – decentralisation is the route taken by many countries to involve citizens. Last area – moving away from ideas of majority votes to areas of deliberation – compromise, rational arguments as a means of deciding policy and making decisions. Examples of engaging citizens, often have the trappings of democracy, but give different results. E.g. California is now ungovernable in terms of financial matters. Switzerland – consults citizens on a wide range of matters, and it seems to work. It isn’t a formula that produces results, rather the approaches that are used in a political culture.

Relationship of the individual to the state What about the intermediaries between individuals and the state? The groups that people interact with? Interface between interest groups and the state Civil society – the network of groups in society

Ireland – Social Partnership Associational Democracy – Participation of the individual is tied in with the operation of groups

Interest Aggregation Number of forms of relationships between interest groups and the state There is nothing in the constitution about interest groups and lobbying – very few countries have laws in this area

This is categorised into 3 areas: Pluralism – American Term Interest groups are a means to allow an individual to make demands on the political system

Neo-Corporatism The state is involved in managing the relationships between interest groups and the state

Associational Democracy The political aspects of civil society

Effective Interest Groups Good for the political system Benefits:     Articulate interests – interest articulation Interest aggregation Provide expertise in particular areas Act as a bulwark between the state and the individual – prevents mob rule or dictatorial democracy


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Special pleading can work against the general interest Can act as a bulwark between citizen and state Can overload government – single issue candidates Interest groups can be conservative – fighting over pieces of the pie puts a brake on innovation and change

Benefits:      Articulation of interest Protection against mass democracy Communications/enhanced responses of the state Expert opinion/better decision making Implementation [sell policies to members]

Weaknesses      Special interests work against the common weal Insider conspiracy can work against their own members’ interests Overloaded government [competing demands on democracy] Democratic deficit [decisions behind closed doors] Conservative – lower economic growth over the long term

Pluralism as a defence of democracy What does the state expect interest groups to do for it?   Stability e.g. Unions Articulation and aggregation of interests

What do interest groups expect?  To be listened to

To be able to influence

Pluralistic Politics – emerged after WWII Politics arises through free competition of ideas and interests – Power is dispersed through society. Interest groups reflect this and represent different sectors. In an ideal pluralist model, participation is open to all. Interests formed a political market (like economics) However, interests are shaped by opinion formers. There is recognition that power is not spread equally. Democracy secures stable government that is responsive to the demands and interests of the people. Policymaking is managed. Individual rights are protected. Democracy secured fair elections. Exchange of ideas. Freedom of participation. The elite are also made up of competing groups. Pluralistic politics relies on the notion of equality of opportunity.

In the 1970s there was an attack on pluralism – democratic elitism Special interests can be too hard to govern Overload of government Brake on innovation Pluralism does not account for the role of the state – it implies that the state acts as an umpire between competing interest groups.

The other extreme is Neo-Corporatism – The state manages relationship between itself and interest groups. This approach can be seen in Europe.

Common strands between Pluralism and Neo-Corporatism   Acknowledge that groups are the building blocks of modern democracy Society is becoming more specialised, there are more complex industries in society. There are more specialised roles in society Technical expertise is important Territorial, partisan representation will decline in importance

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Long term expansion in role of public policy State intervention will continue and expand

Neo Corporatism Came from fascist Europe Hierarchical corporate body where everybody has a place Fascist Italy – Catholic Hierarchy – Medieval Guilds It is an attempt to refashion corporatism in a democratic framework. There has been a push to ensure that citizens are members of appropriate representative groups. Interest groups represent members and attempt to control the actions of their members. The state attempts to define the arena of interest group activity. Interest groups are partially responsible for policy-making.

Civil Society: ‘A space of popular social movements and collective mobilisation and informal networks, civic associations and community solidarity, oriented towards sustaining a participatory public life’ Somers Group activity engaging individuals with society Voluntary sector Social Capital

Informal groups are very important

Read ‘Bowling Alone’ by Puttnam. People are leaving traditional structures of society. Isolation is being caused by the failure of civil society. Voluntary Sector – a mechanism to respond to the out-sourcing of public services Social Capital – Institutional and organisational capacity. This is linked to legitimacy. There must be support within society for the state so it can implement policies. How can a state grow social capital?

Interest groups and the Irish Political Economy   Ireland is interesting because it is unusual Hybrid approaches

How do interest groups work in Ireland? 1. Social partnership – an institutional arrangement between interest groups and the state. Can it be broadened out? Can it evolve into something positive? What is the future for it? 2. Embedded autonomy – Globalisation – Interest groups reflect part of our own response to globalisation 3. Negotiated Governance – Decentralisation of decision-making. A recognition that centralised administrations had weaknesses that could only be addressed through decentralisation of decision-making

Social partnership as Neo-Corporatism Ireland viewed as a weak corporatist Neo-corporatism as emerged in Europe was concerned with structure of industry and collective bargaining Neo-corporatism has evolved in Europe Sweden – traditional neo-corporatist model – reducing uncertainty in industry to cope with economic shocks – centralised wage bargaining, solidarity, equality, active labour policy Netherlands – Much greater focus on economic growth and full employment Ireland – Hybrid between Sweden and Netherlands. Broader than Netherlands, more interest groups. More economically focussed than Sweden. Ireland – Social partnership was designed to increase competitiveness – dropping taxes to increase take home pay

The Social Partnership Process   Consultation, negotiation and bargaining Did not try to standardise goals in society, tried to create a shared understanding of process and broad objectives

Government had a central role – there was a recognition that if it was to work, all parties would have to work together – an acknowledgement of interdependence Problem-solving approach – flexibility Trade-offs between groups Different participants – different issues Different groups could create niches e.g. trade unions wanted affordable housing, much of social housing was left to the voluntary sector

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An evolving process There were 7 agreements over the period of social partnership. Its ability to change made it successful over time Why is it not being used in response to the current crisis?

Why did it start? The economy needed it at the time. The economy started to recover soon after the process began – the beginning of the Celtic Tiger. Was social partnership responsible, or lucky to be in place at the right time? There was a change in union leadership and attitudes. They did not want Thatcherite policies adopted in Ireland. The process was involved – the scope of issues increased. More people, more groups, more issues. Deeper involvement in all areas of policy formation and implementation. Towards 2016 – Shows extent to which social partnership had evolved – development of the welfare state, public sector reform and institutional reform. Social Partnership – dormant for last 2 years.

Is there anything of residual value in the process? NESC – Reform and retrenchment paper – crisis management is the focus, social partnership not considered as relevant

Main political backers – Bertie Ahern, Dermot McCarthy, Paddy Teehan – All are gone.

What’s to come? What’s next? Why does social partnership have bad press? Fatigue? Is it associated with failure to maintain the good times? Were there fundamental problems with the process? Where do interest groups fit into the process at the moment? Can social partnership address the current problems?

Limitations of Social Partnership Consensus broke down Too many groups Democratic deficit Leadership divorced from local reality

Negotiated Governance Partnership Networked decision-making

Embedded Autonomy How interest groups politically interface with the system Bureaucracy and state capacity – see the Far East – Bureaucracy driven economies e.g. Japan Ireland used social partnership to provide a co-ordinated response to enable economic development to take place.

State of Civil Society in Ireland Does Ireland have a strong civil society? Do we mean people acting in groups for voluntary or sporting activities? Or do we mean being politically active?

Outsourcing of public services?

There are a lot of groups in Ireland – O’Donoghue estimates 24,000 – up to 1.5 million people in voluntary groups. The government supports the voluntary sector. There has been a decline in voluntarism – there is less interest in younger age groups.

Civil society is broadly defined in Ireland. Read for assignment: Callaghan, M [2011] ‘Participation and Civil Engagement, Challenges for Public Officials’ Paper to University of Limerick, Summer School [June 2011]

Public Policy Making
Lesson 8 Globalisation


The importance of globalisation for the management of a political economy, particularly a small open economy

Main interest – impact on public policy making in nation state

Global Risks Report – World Economic Forum Davos 3 Constellations of Risk

1. Dystopian Risk Pessimistic view – Chronic unemployment, an ageing population dependent on a fiscally declining state. This applies to the developed and developing world. The income and skills gap could threaten political and social stability.

2. Growing perceptions governments are unable to manage the systems that underpin society. Vote of no confidence in modern governments. Governments could be unable to manage resources and ensure orderly markets and public. 3. Impacts of crime, terrorism and war in the virtual world

Centres of Gravity for 2012 Main Risks: 1. Economic – Chronic fiscal imbalances, between economies and within economies. Structural imbalances. Debts are growing. 2. Environmental – greenhouse gases, global warming

3. Geo-political – governance failures, Dysfunctional governments, inadequate response to crises 4. Societal – unsustainable population growth 5. Technological – systems failures – inability to deal with complexity

Report captures the mood of the key players in world finance. Shows how risks are currently perceived.

Certain patterns in globalisation have emerged in the reports over the years in Global Risk reports. 2007 – The perceived risk was asset price collapses 2011 – Natural disaster 2012 – Severe economic disparity – could lead to social and political unrest – impact of risks will be economic

Interdependence of societies and economies

Population growth – 1950 was 2.5bn 2050 will be 9bn Population increase is mainly in urban areas. Demographic changes % of over 65s. 8% in 1950, 25% in 2050

Lesson s for policy makers 1. We’re all in it together. E.U. – small group of rich countries is unable to deal with a crisis 2. Adaptable political and economic systems are a must. There is stasis in organisations, resistance to change 3. Need to be better at identifying complex systemic risk

Moodle – Bibliography Economist article on California Representative democracy has failed? Are there credible alternatives? Disengagement of citizens. Why does participation matter – social solidarity in times of crisis

National and local level See Callanan’s paper re: local initiatives Outline argument early on

Sense of citizenship – participation in politics – disengagement is undermining the system Citizen perception of the political system Expectations

Responsive government? Engagement of citizens? Accountability? Can they be improved by participation? Do people care? Do they need to? Has government been replaced by governance?

There was a lower level of participation in Ireland when things were going well Engagement through civil society or direct action Freedoms can exist without democracy – as in Singapore Purpose of government? Performance or representation?

Has it evolved – was representative democracy based around political parties? There are new fora for participation and deliberation Consider citizen vs. Consumer and impact on democracy Does democracy require likeminded people – does a multi-cultural society create difficulties for democracy? Does this make democracy less relevant? Less cohesive society. People do not have strictly defined roles in society as they did in the past e.g. majority democracy will not solve problems in a society polarised by ethnic or religious differences – preservation of minority rights are important

Pakistan has a youth parliament – helps the younger people to understand the role and functioning of parliament and democracy – gives them training and experience in the political system

Ireland – party system developed in the past – it has not evolved to new realities in society and the economy. Independent TDs are ineffective in the Dáil at a policy level – very effective at securing funding for their areas, but have little to no influence in shaping policy. They may be able to wield the threat of voting against the government in particular areas, usually in exchange for deals that will financially benefit their local area, but for the most part can not shape policy.

Globalisation Impact on Nation state and policy making How does it affect national political economies? Where does Ireland stand? What can we do? Membership of E.U. – impact?

Global Economy – What is distinctive about it? Ireland is very globalised.

Integration of politics and economics on world stage has happened before:   Roman Empire 19th Century – close political and economic ties – British empire

Today – differences to previous global economy Size of economy and inclusiveness – almost all nations are part of the world economy. It is likely to grow from €30tn in 1980 to €90tn in 2015.

Countries with a lower proportion of external trade (such as the U.S.) are still far more open than they used to be, in terms of tariffs, barriers etc.

Changes in business models – new ways of providing services e.g. software development carried out in co-operation between different countries, call centres, cloud computing. Manufacturing – supply chain is multi-national, manufacture and assembly carried out in different countries New production methods – designing to meet prices that the market will support

Integration of capital markets – means that failures are contagious. Potentially Greece could bring down world capital markets

Communications – Cheap and available Cultural hegemonies – Proliferation of the same brands globally, global culture in terms of film and music

Global imbalances – between countries, regions and types of economies

Economies built on debt – a lot of it external. Everyone owes other countries money – governments, households, businesses.

2002 – 2008 – 85% of developing nations grew faster than the U.S.

Globalisation Thesis: Philip Cerny: ‘A critical threshold may be crossed when the cumulative effect of globalisation in strategically decisive issue-areas undermines the general capacity of the state to pursue the common good or the capacity of the state to be a true civil association’ The state is losing capacity to pursue its objectives. Ireland has become an ideal testing ground for many theories on the impact of globalisation.

Globalisation and the Nation State Led to the demise of the Keynesian mixed state. Affects institutions in the state. Is it benign or not? Anti-globalisation vs. Washington consensus

Does globalisation undermine the nation state? Or rely on the nation state to under-write it? Sovereignty? Washington consensus? Hyper-globalists – Extreme proponents?

Autonomy of Nation State Globalisation downplays the role of government – markets are more powerful than the state. States can enter into agreements that curtail their sovereignty. States have now given up elements of sovereignty e.g. joining the E.U. Globalisation curtails the ability to act independently. There has been a transfer of power to bodies like the E.U. in a number of areas. The Nation state has been weakened by the demand for regional and local autonomy and decisionmaking. Power exercised through networks rather than command and control increases complexity and fragmentation. This is known as the Hollowing Out Thesis. Rory O’Donnell – The issue is not the amount of national autonomy, but patterns of national policy making and supportive institutions e.g. corporate governance and investment strategies, labour market policies

Regulatory Capitalism Markets have liberalised – the failure of regulation has been a key factor in the recent crash. There has been a move towards regulatory controls.

Globalisation and Risk – Globalisations impact in terms of the management of risk Globalisation and the Welfare State Why would globalisation impact here? Competition – low taxes to increase competitiveness will lead to a reduced welfare spend. Sweden – has strong welfare state and internationally competitive and successful Different arguments: Globalisation leads to lower social spending or Leads to higher social spending in open economies or Depends on the nation state and its domestic institutions

It is difficult to find evidence that globalisation directly impacts on nation states.

Important factors to determine the effect on the welfare state – representation, legacy of previous welfare programs, extent of centralisation of decision making

Globalisation and Democracy ‘That to expect the kind of fragmented, disarticulated international and trans-national governance structures which are emerging from the processes of globalisation to maintain, expand or even defend gains of existing democracy is simply not credible’ Philip Cerny

Where to place the Irish Economy     Regional or national economy Peripheral E.U. Perform well on global tables

What does it mean to be a member of the E.U.? This extends issues of a lack of power and autonomy. It does give scope for international influence, if we can regain influence in Europe. Currently, Irish credibility has been squandered.

What now?    Rely on the markets? Depend on other countries? Reassert our sovereignty?

Public Policy Making
Lesson 9A – Market and State State intervention in a market economy


Boundaries between market and state Justification for state intervention in markets

Methods of intervention – Regulation On what basis do states intervene?

Market and state issues:      Strength of markets Justification for state intervention Marketisation of public services – often carried out by private sector State as market player (state capitalism) – state owned companies Boundaries between market, state and communities – voluntary sector

Regulatory State

Market In Ireland Attitude to the market Strongly market oriented? Anglo Saxon model? (Yes) Or Continental?

State intervention?

What is an acceptable basis for state intervention? Unemployment? - create conditions for employment Poverty? – Safety net Inequality? – promote equality and inclusiveness Promotion of particular industries? – Subsidies?

Outsourcing? What parts of the public sector is it reasonable to outsource? Is there a distinction between a private company and a not-for-profit company?

Intervention by:     Tax and spend Economic management policy? Ownership? Regulation?

Public Policy Pressure for change can come from a number of sources Pressures within political system – interest groups, politicians

Drivers within the system – efficiency, effectiveness

Market failures – operation of market determines the level of state intervention – if the market is functioning well the state will not intervene. 50 years ago the role of the state was to manage the market

Economic approaches

1. Traditional Neo-Classical – addressing market failures 2. Public Choice – Market failure, and it must be obvious that the state can do better 3. Institutional Economics – Justification for intervention – can the state make markets run more efficiently? Can it reduce transaction costs? Market and State   Boundaries Market Mechanisms

The Market State The nation state is being replaced by the market state. Unlike the nation state, the market state will not see itself as more than a minimal provider or redistributor.


‘The grail of an absolutely pure market, disembodied from political interference or from historical time, is not just a fantasy, but a dangerous and self-defeating one’, Kuttner

Economic Basis for State Intervention Market efficiencies Market Failures Market Assumptions Market Consequences

Efficiencies Market works to allocate resources in society

Market Mechanism

‘The market mechanism is a form of economic organisation in which individual consumers and businesses interact through markets to determine the central problems of economic organisation. The market is a process by which ....’ Samuelson

Attractions Basis for calculation of price and cost Costless management Flexibility – responsiveness to change Complements individual freedom of choice

Market Failure – Operation and Outcomes See notes on Moodle Operations Lumpy – trade unions – markets should react to events – this does not happen due to institutional arrangements Second Best – Not always a good idea to introduce policies to move towards the market – adjusting one part of an irregular market may cause more problems

Government Intervention – When and how are important Free market – little intervention Imperfect market – market tools as policy instruments Regulated market – regulate, rather than direct intervention e.g. the taxi market

State Capitalism China, Russia, Asian Tigers Developing Economies [BRICS] 4 of the world’s 10 biggest companies are state owned Often large infrastructure companies or sovereign wealth funds

They tend to be politically corrupting Distorts investment Boundaries between sectors Market and state – simple view State capitalism – boundaries are being blurred Voluntary sector – viewed like normal companies

See readings on moodle – Bobbit, Kuttner

Stigler and Samuelson

Nasar – Grand Pursuit – Hodges and Figgis

Sample Question from class

Question: Increased citizen involvement in decisions affecting people’s lives leads to an improvement in policy making at local or national level. Citizen involvement in the form of consultation, engagement with the political process and the opportunity to influence decision making has become an important part of policy formation. Policy is no longer formed without some form of consultative process. This process is intended to engage the electorate and legitimise the political process. Issues to address in the answer:    Consultation means that a broader range of issues will be considered It will lead to increased responsiveness of the political system Politicians will feel more secure in making a decision if there has been consultation with stakeholders Amendments to bills can be introduced as a result of pressure from protest groups, to protect special interests.

Give examples of effective protests or citizen intervention, such as the recent Clontarf seawall protests. Increased citizen participation can give legitimacy to politics. The quality of policy can be hard to determine. The legitimacy of policy decisions is important.

Public Policy Making

11-02-2012 Seminar

Special Interest Topics – The following areas will be of special interest and can be used as themes when preparing answers:     Democratic Legitimacy and the E.U. Globalisation and State Capitalism Institutional Capacity Economic and Social Inequality

Democratic Legitimacy and the E.U.
The Fiscal Compact – Future of the E.U.

Professor Lane, Trinity College – Article on the Fiscal Compact: Argues that it is nothing new, and asks why a referendum is necessary.

Democratic politics – The electoral system leads to parties promising benefits to the electorate. This reflects a poor view of the electorate.

Is a referendum a suitable means of deciding a complex issue like the fiscal pact? Is the issue too complex? Will people vote on other issues, and use the referendum to voice disapproval of other issues not directly connected to the pact itself. A referendum has a yes/no answer – it may not be suitable mechanism, no bargaining is possible, there is a lack of compromise. Does this have implications for democracy? Look at the attitude of other countries to Greece – the E.U. is telling a member state what to do. Will this cause difficulties for countries, citizens and nation states. Local democracy is often seen as a means of implementing representative democracy.

Globalisation and State Capitalism
Questions now being suggested The Economist is much less optimistic about the future of globalisation. Is globalisation in decline? Over the past 50 years, globalisation has steadily progressed. Is that process now at an end? Will we see a return to protectionism? The U.S. is protecting its market. It has created barriers to Chinese imports. No champions of free trade. France is due to have a new president; will this lead to new policies?

The current recession is the worst since the 1930s. It is a global recession. There are extreme structural imbalances. This is manifesting itself in challenges to the Washington consensus. The IMF provides loans in exchange for the introduction of a suite of measures to liberalise an economy – removing barriers to trade. Ireland is already doing all of this – it is conforming to the liberal agenda of the World Bank/IMF. This isn’t the answer to Ireland’s current problems. So what is?

State Capitalism – more private companies are owned by states. 3 of the largest companies in the world are state-owned. Russia taxed non-state-owned petrol companies out of business, using the pretext that the companies were breaking environmental rules. This cleared the way for the state-owned company. This shows the potentially corrupting effect of state owned businesses. New World Order – Mapping the Future. The future of globalisation Tribal identities Paradigm shift due to the recession

Institutional Capacity
Fukuyama, 2005 – a strong administrative state capacity is more important than state size.

Failed states – Somalia etc. A New Issue: The Failure of developed states to deal with the complex socio-economic issues facing them. Japan had its lost decade. The U.S. is suffering increasing partisanship. As a result it is becoming ungovernable. It has lost its triple-A rating. The E.U. is incapable of delivering a unified message. The complexity of issues arising from globalisation is not being met by the nation state today. The issue facing modern states is not democracy, or market-state balance; it is the failure to manage themselves. Government spending as a percentage of GDP in OECD countries has grown consistently since 1870.

Economic and Social Inequality
Social and economic inequality has increased after a decade of strong market-led growth, followed by a crash and a long recession. Major shifts in macro-economic policy. The theory that a rising tide lifts all boats was a mantra of the new right. Relative poverty increases but absolute poverty declines.

The World Economic Forum has assessed Global Risks. It identifies the top 5 global risks in terms of likelihood. Extreme Economic Disparity is now seen as a major risk – potentially leading to social unrest. The rich have done very well over the last decade. The middle classes have fared poorly. The squeezed middle, as they are called in the U.S., or the coping classes, are finding life increasingly difficult. There is a lack of social mobility. Median household income declined by 7% adjusted for inflation. Incomes are back at 1970 level. The top 1% of incomes increased by 250% in the last decade. The top 1% in America owns as much wealth as the bottom 90%. Prosperity without growth Read: D Kahneman – Thinking Fast and Slow Exams Support arguments with quotes, references and facts.

Question 1 – Nation State
Objectives of the nation state? To ensure freedom, security, welfare, rights Is globalisation putting pressure on these objectives? What has Ireland’s experience been? Read David Held, Roderick, O’Riain, Kirby – the chapter on globalisation

Question 2 – Market and State
The balance between market and state. Irish Problem – The unhealthy dominance of the state pre-Celtic Tiger. Post-Celtic Tiger, we are in an era of market failure What is your assessment? Is it that: The state has too many grants and too much involvement? OR There is too little regulation? OR The state is working in the wrong areas? Is there an appearance only of state control? For example, there are lots of regulators who don’t regulate.

Question 3 – Public Policy Making
The current crisis in Capitalism – what ideas are out there? What options? The E.U. austerity package – what effects will this have? Mixed messages from the UK – controlling, counter-cyclical, quantitive easing U.S. – postponing decisions until after the next election NESC ESRI Proposals for the future: Krugman’s articles – he states that austerity won’t work, and that spending should be ramped up. Read Skidelsky

Marketeers –The Chicago School. Their approach is to let markets work out the problem. Capitalism 4.0 – a measured view that markets will sort themselves out, with a little assistance

Question 4 – The Welfare State
The advantages and disadvantages The issues facing it How can they be addressed? Present a coherent position

The main challenges are:    Fairness Finance Demography

Is the welfare state efficient? Look at the position in the UK – The NHS is inefficient and needs reform. The focus is on delivering welfare effectively and efficiently. There is no question about whether or not the NHS should exist; the questions are only about its effectiveness.

Question 5 – The E.U. and Ireland
Read the NESC report on issues facing Ireland and Europe at the moment. Challenges facing Ireland:    Autonomy Influence in the E.U. Reduced Public Service

Question 6 – Development
Institutional Capacity Governance Refer to World Bank and IMF reports Fukuyama is relevant to this topic

Question 7 – Local Government
Reforms are often proposed in this area – but never implemented. Is this due to the embedded culture? Are there inherent problems of administration in a small country? Is it due to the political culture?

Read about the various efforts or reform. See Local Government in Ireland – Inside Out – Mark Callanan and Justin Keogan for chapters on attempts at reform

Question 8 - Regulation
This is a theory question. What is the purpose of regulation? Read the Pat Nolan IPA book.

Public Policy Making
Lesson 9B – Regulation Regulatory Capitalism The Regulatory State in Ireland


The process of regulation of markets in modern developed economies The liberalisation of markets and the level of regulation that appeared in Ireland

Markets – The government can use a range of tools to meet incentives – up to now we’ve focussed on market measures. The control of behaviour through money is done through the use of market incentives.

Choice – Choice architecture (Nudge) – Libertarian Paternalism – a means of influencing behaviour without interfering with individual choice


Thatcher – Public interest is an aggregation of individual interest

Regulation – Restricting choice. This is the most obvious area of state intervention, and as such is the most controversial.

The state can manipulate choice in the public interest. Assumptions:   There is a public interest Individuals will sometimes work against it

Public policy is often related to how choice is structured.

Regulation Regulations are not simply a form of administration. They are about politics. Regulation involves the setting up of special agencies, technical rules and the functioning of markets. Regulation can impact on democratic transparency.

Regulation is a new form of governance. It creates new agencies of the state. This raises questions of democratic legitimacy.

The rule of law is acted through independent commissions – regulatory agencies. This means that the state can ensure that principles are adhered to in particular areas – the implementation of politics.

The main tool of the European Commission began in the U.S. – the management of markets. In Europe, this grew out of the liberalisation of markets. This led to the setting up of Quangos – individual regulators or whole agencies. There has been an expansion of self-regulation by professional bodies. Selznick looked on regulation as ‘sustained and focused control by a public agency on the basis of a legislative mandate, over activities that are generally regarded as desirable to society’ Regulation - Continued enforcement is necessary. And regulation is about civil market ideas, not criminal areas.

Institutional Capacity Regulation takes power away from governments and elected bodies. Regulation deals with Risk.

Limits of Regulation Regulation moves decisions away from the electoral cycle and into the hands of experts – is this a good way of dealing with complexity? Representative democracy has problems dealing with complex problems – so other modes of resolving complex issues are necessary

Regulation lite – non-interference, non-intrusive. This approach led to the banking crisis in Ireland Regulatory capture – This causes issues for governance and economic development Agentisation – the breakup of the political system into quasi-autonomous bodies

Regulation Lite Pat Nolan’s Book – Do Least Harm Look at the most effective way of addressing a problem. Impose the minimum burden on the regulated. Regulation should impose the minimum amount of collateral damage. This presumption may be inadequate, and maybe sometimes heavy-handed regulation is required. One should not assume that minimalist regulation is good.

Regulatory Capture Interest groups exerting undue influence on the state. Embedded autonomy – the state and business does enough to communicate. Business captures the regulator e.g. Dept. Of Agriculture represents farmers rather than regulating them. See also the Irish Banking crisis.

Democratic Credibility – Undermined when decisions are made by unaccountable regulatory bodies. This allows politicians to avoid unpopular decisions, or creates the belief that the credibility of decisions will be improved when they are made by experts, e.g. Central Bank and Honohan. Or to protect a future decision from being interfered with by a future government e.g. privatise water, set up a body to oversee this – it is more difficult to dismantle an agency than to overturn a decision e.g. Bord Pleanála could not be reversed once it was set up.

Why Regulate? Politically it is easier to regulate than taxing and spending. Economically, it is geared towards efficient operation of markets. Socially – people trust experts.

Purpose of Regulation In the best cases it should strengthen market principles by making markets work better.

If it is done right, it should help markets to operate competitively – regulations to prevent monopoly dominance of markets – allows a more dynamic market to operate Should protect the consumer

Types of regulation Can be used for different objectives Administrative – minimise transaction costs – creates an orderly market, but creates red tape Health and safety/Environmental – High costs associated with heavy, overbearing regulations Market Regulation – Liberalisation of markets. De-regulation. Regulation affects owner rights, how assets can be used

A government that wishes to control without being seen to do unpopular things, such as taxation, will regulate. Skidelsky – Regulation is socialist creep

How to get regulation right? Regulatory reform process – regulation must change to match circumstances

Regulatory state in Ireland Ireland has moved from a mixed economy model There has been privatisation of state services in some areas Liberalisation of state sectors – market-driven reforms e.g. taxis, pharmacies Outsourcing Specialist agencies International Treaties Single market – regulatory framework

Palcic and Reeves – Read articles about privatisation – they have an agenda, very critical of privatisation Privatisation – withdrawal of services, transfer of assets or outsourcing It is done for efficiency gains. Cash from sale. Encourage competition. Ideology. Can be forced on the government by globalisation or E.U. directives. It can be done to increase the number of shareholding citizens/stakeholders in society Ireland – privatisation was often ad hoc, or pragmatic fashion Palcic and Reeves – Privatisation does not necessarily lead to efficiencies. They give examples of Irish public sector companies that made substantial improvements in efficiency in the run-up to privatisation.

Liberalisation of Markets Telecoms, taxis, pharmacies, medical insurance, energy, bus services

Outsourcing of Services Control is exercised through contracts between the state body and the private company e.g. waste collection, roads (tolls), public building, social housing, road maintenance, recreational facilities Public Private Partnerships UK – Some local authorities contract out all their services – staff in L.A.s have to compete against private sector providers to win contracts.

Regulatory agencies Large number of regulatory bodies. Monitoring, inspection, enforcement, consumer protection

Look at UCD Geary Institute website – articles on agencies in Ireland

Regulatory Agencies – Paradox – They possess too much power to be legitimate, but not enough to be effective

Key Regulatory Agencies Assessment of regulation in Ireland

Too much light regulation Too much self-regulation Weak enforcement Poor governance Limited resources and expertise

Impact on local government – fragmentation and undermining of the role of local government Reform? Regulation a failure in Ireland? Due to principled regulation?

Readings: Nolan, P – Dynamics of Regulation in Ireland, IPA, 2008 Palcic and Reeves – Privatisation and Productivity performance in Ireland

In class exercises based on Autumn 2009 paper Answers suggested in class Q1. Need checks and balances to ensure power is divided properly, Governance issues between the centre and local/regional tiers

Q2. This question is related to modes of government. Discuss what can be done. Or the impact of the regulatory state, democratic deficit etc. Q3. Context – recession/collapse. Ironic that markets are seen as a failure and the solution to crisis. Belief in markets over time, see China etc. The market is changing in form/adapting

Q4. Celtic Tiger – Employment – rising tide raises all boats. NESC developmental model – what is it? Why move from competition state to flexible development state – why was it abandoned? Not enough time to succeed? Welfare state became too expensive? Q5. Representative democracy – Participation – inclusion. What is civil society? Why is it important? This is the context for the answer. Avoid just giving a list, make it meaningful Representative democracy is failing – voters not engaged. There needs to be a positive role for citizens

Public Policy Making
The Administrative State Public Administration Public Sector Management Public Sector Reform


Traditional Division of Powers:    Political System – Policy Making Administration System – Implementation of Policy Courts and Enforcement Agencies – Dispute resolution

Separation of powers – leads to checks and balances Administrative – Bureaucratic, hierarchical state Meritocracy – evidence-based decision making

Modern focus has turned to performance, particularly in the management of the economy. This highlighted the weaknesses of bureaucracy.

State-Company Analogy The board sets the strategic direction. Management carries out general direction of policy, with discretion as to implementation – broad direction is given, policy is made by management. Employees and out-source bodies provide services – enforcement is seen as a service.

4 Key activities of the state:   Power of influence Management Efficiency

 

Choice architecture – nudge politics, paternalistic state Provision of services

The Study of Public Administration - Different Schools

Power and influence Where does it reside? Is it the power to make decisions on issues? Or is it the ability to control an agenda? This can be done to reduce the scope of the political process to avoid particular areas.

Policy Analysis: Classical This approach evolved in the post WWII era. There was a belief that the political system would process problems. Governments were seen as problem solvers.

Larold Laswell – Break decision making down to discrete stages. Herbert Simon – Bounded Rationality – Assumptions are made based on the concept of rational man, and assumptions are bound by this concept Charles Lindblom – Incrementalism, path dependency. Also referred to as muddling through Davis Easton – Black Box political system. The inputs and outputs can be measured, but the processes involved are not studied.

Organisational Theory Bureaucracy – rule governed Models:    Hierarchy Community Market

Theories of the Firm – Market/Management theorists, such as Drucker Parkinson’s Law – Work expands to fill the time available for its completion Institutional Capacity Can a state implement public policy?     Resources Linkages Organisational Form Performance Management

Read Richard Boyle’s Public Sector Trends - look at the charts

Re-inventing Government Osbourne and Gaebler – Entrepreneurial Government Government is essential, but should operate more like a private company. Government, from the Greek, means to steer. See the principles for re-inventing government – how do they apply to Ireland?

Managerial Revolution Public Sector reform in Ireland How did reform take place in Ireland? Was it cosmetic?

Perception during the Celtic Tiger Era: The public sector had performed well, and had been a key factor in economic growth. Reform was politically right-wing driven – it was seen as a technocratic process of reform – management driven. There was a problem-solving mentality

Legacy of recession – Consequences of Reform     Results A failure of legitimacy and trust Strained relationships with the E.U. – Ireland is now unsure of its role in the E.U. Poor regulatory regime – ineffective structurally Centralised decision-making, doing deals at the highest table Failure to take on board changes in the E.U. Confused approach to agentisation

Reform Strategies     Minimise change Modernise through regulatory reform and public participation Marketisation – liberalisation of markets, competition for services Reduce role of government

Ireland has no over-arching strategy to solve its problems

New Public Management The main intellectual influence on public sector reform in Ireland Waste management services privatisation – this happened not for policy reasons, but due to the unaffordability of providing services

Ireland complies with the principles of New Public Management in some areas, but not in many others.

Critiques of NPM Over-emphasises the importance of planning in an unpredictable world. The public sector should focus on scenario rather than target-oriented planning.

High transaction costs due to agentisation. Focus on meaningless target lists – e.g. management of targets rather than provision of services. This can mean that hospital waiting lists receive more attention than the quality of care that a person will receive when they enter hospital.

OECD Report [2008] – Ireland Towards an Integrated Public Service Report Read this report carefully to get the nuanced criticisms. E.g. Decentralisation – the report said it was not sure if this will work – translated this reads as “The idea is insane”

OECD – Modernisation

Look at the Notes on Moodle *

Ireland and the E.U. There has been a failure to manage changing relations with the E.U. Ireland stopped engaging with the E.U. when it stopped giving us money. We lost power, influence and friends. Ireland lost out in areas where it is traditionally strong – soft power, influence and networking.

Conclusion Re-assess public sector reform. Move to more entrepreneurialism. Move away from target focus.

Read – Pollitt and Bouchart [2004] Public Management Reform – A comparative analysis

Public Policy Making
Lesson 11 – Challenges to the Unitary State Decentralisation and Local Government


What is involved in the decentralisation of decision making? Where does Ireland stand?

Ireland – one of the most centralised administrative systems in the Western World

Ireland has a long history of failed devolution – it is not a big issue in Ireland. There is pressure of nation states to break up in a number of areas e.g. Ethnic groups –   Belgium – Has been 1 and ½ years without government UK – potential referendum on Scottish independence, Wales, Northern Ireland, Regional Assemblies for shires mooted Spain – Divide between Castilian Spain, Catalonia and other regions Italy – North vs. South

 

E.U. has sued regional divisions as a means of fighting proxy wars with nation states – the E.U. highlights the importance of regions at the expense of states

State – outsourcing of functions, agentisation, decentralisation of power and decision-making to local authorities – this all takes power from the nation state Direct action politics – an alternative to administrative centralised decision-making

This is a challenge to centralised administrative structures. Concentration of state power continued up to the 2nd half of the 20th Century. Movement is now away form centralisation.

Fukuyama: ‘Delegation of authority to local and regional government means inevitably that there will be greater variance in government performance’

Government performance – Important for legitimacy Rights – Is it an issue if people are treated differently in different parts of the country? Is Ireland too small a country and economy to break down to decentralised decision making? Ireland has a large number of TDs – they are easily accessible – does this mean that the system here is already partially decentralised?

Is there an impact on overall government performance? Is Ireland too small to gain improvements in service levels from economies of scale and competing authorities? Delegating authority means delegating risk. Delegation of authority and risk is relevant to all organisations. It is a problem in political terms. Devolution is frequently seen as a zero sum game – power given to local authorities is lost by central government.

Read – Short History of Devolution on evernote

1933 Memo for Government – saw local authorities as an expensive anachronism, as improvements in technology meant that the central government would soon be able to deal with all important matters.

The Centralised Nation State The process of centralisation is coming to a stop due to    Decentralisation Agentisation Private and voluntary bodies

Has a reduction in the capacity of the state come about from conscious decision-making, or is it the unintended consequence of recent events, such as the recession?

Capacity of the State State capacity is important. National competence. State – is important as a source of legitimacy. 25 years of New Right policies and globalisation have under-mined confidence in the state as a decision-maker.

Unitary State – Centralised administration has been challenged. Problem – how to manage delegated authority? The E.U. and the western world have moved to decentralisation.

Federal and Unitary States – 2 sources of authority Regional Autonomy – Impedes implementation of national policy. Creates competition between cities and regions E.U. vs. National government – has created a greater role for regional governments

Ireland – The role of local government is important – Renewal of citizenship – allows people to participate in the political system Are better decisions made at local government level because people have more in-depth knowledge of the issues? Is anonymity of the citizen necessary to ensure government is impartial in decision making and service provision? Is NIMBY-ism a serious issue? Agentisation – a common feature of modern governments and governance. Is it a good idea? Network society – interdependence of different interests, complex interactions – network management

Difference between central and local government – implementation – central government has difficulty implementing policy through all levels of society

Challenges:   Democratic deficit Principal agent weakness

 

Centre-periphery balance – where should it lie? What areas should be devolved? Network management

Democratic deficit Groups not accountable to the electorate or the public. Governance issue – how to make quasi-independent bodies accountable to the political system? How to judge the quality of decisions? Imposing ethical standards? There is difficulty in creating relationships between multi-level agencies – this can contribute to the democratic deficit.

Principal Agent Weaknesses People who own a business may have interests and objectives that do not coincide with those who run the business. How to ensure interests of multiple agencies align with the common interests of the state? Monitoring? Penalties? Incentives? This leads to a complex and expensive regime, which leads to an increase in transaction costs.

Agentisation This is a political philosophy – transfer decision-making away from elected politicians. Move power outside of the electoral process and away from interest groups. This has an unintended consequence – the breaking up of power of central government.

Central-Periphery Balance It is difficult to get the right balance between centre and local government. Ireland has had problems – the framework applied has been to devolve or not to devolve. The institutional framework should be designed to ensure the correct relationship between the centre and the periphery.

Network Society Management of relationships.

Game theory – creating relationships e.g. prisoners dilemma – structuring decisions between multiple groups.

Network Management Leadership – how to manage the interaction between a number of groups. How to influence people.

Ireland Highly centralised political system. Strong localism. This is the contradiction at the heart of Irish Politics. Ireland ranked 2nd, after Australia, of 21 OECD countries, in terms of lowest local government capacity.

National Supervision – To what extent does central government supervise local government? Central government has influence over appointment of local government officials. Central control over levels of local government borrowing. Nearly half of revenue comes from central government. The level of discretionary spending is low. The proportion of revenue from central government has increased.

There is no linkage between the electoral system and taxation for local government. Commercial rate payers, businesses, have no vote. There is a large amount of exchequer funding but very little discretion on how it is spent. New charges will merely replace existing exchequer funding.

Potential Functions of local government:    Environmental services [water/waste] Planning Housing

       

Roads Public transport Social services Education Policing Public health Energy Recreation

Should the function and provision of the above be devolved to local government?

Should water be centralised or regionalised due to the amount of infrastructure involved? Waste collection – can be outsourced Water – being centralised in Ireland Planning – currently an issue The list of potential functions raises questions of fiscal empowerment and responsibility Ireland has high levels of centralisation, as illustrated by the functions of local government, compared to many other countries.

Centre-periphery Relations Devolution may not be the solution – too simplistic an answer to an overly centralised state. Solution – Look at areas where different types of relationship may be relevant. Hierarchy – command and control – enforcing laws Agencies – Principal Agent – Funding of programs e.g. infrastructure, long-term programs – the main thing is to ensure that the agent (L.A.) acts in a manner aligned with the principal (Central government) Network Government – Look at issues like Moyross – cannot be solved by command and control – multiple agencies must work together to create a solution

Franchises – It is important that local governments provide a standardised service, but they must have operational independence. Working in their own way to deliver to a certain standard. There must be certain agreed upon parameters.

The right people and structures are essential to maintain these types of relationships.

Drivers of local and regional government in Ireland      E.U. Belief in devolution Democratic renewal – increasing participation Network – Multi-level approaches to problems Exchequer – Passing problems on to local government

Conclusion Where are we going? Decentralisation Developing a multi-level approach? Continuing with the existing centralised approach? Yes

See the readings on slides on moodle

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