notes on public policy making

8/2/2019 Notes on Public Policy Making

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Public Policy Making 21-09-2011 Lesson 1

Eddie [email protected]

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 credit2. Incompetence of the civil service bureaucracy3. 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
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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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.


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Part II The Celtic Tiger

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 definedin 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? Ombudsmans 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.


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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.


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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


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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 wasavailable at the time.

What policy options are available to Ireland now?

Irelands 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 thats 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?


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Ireland is still in crisis management mode. It cant 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 theyre voting for? In theory,

representative democracy removes the burden from citizens, in terms of studying and deciding onissues, 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 dont 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 getelected? 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.


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Risk society has complications for globalisation

Management of Risk is important

Understanding of Risk and Uncertaintywhat can and cant 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.


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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.


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Lesson 3 Historical Context

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


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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 Tigereconomy 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 willnot 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 tointroduce high-tech firms to Ireland. See ORiain

2. Evans Embedded autonomy Political How the state deals with competing businessinterests 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, beflexible, 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


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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 states role.

People had confidence in the state. This continued up until the economic decline of the 70s. States

couldnt 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


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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 states role is seen as facilitating enterprise. Back then the states 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


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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


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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


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Moodle

Also important:

www.evernote.com/pub/ewl/ipastuff

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 policy2. Individual choice clear decisions made by the elite/ruler3. Interests Interest groups4. 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.
http://www.evernote.com/pub/ewl/ipastuffhttp://www.evernote.com/pub/ewl/ipastuffhttp://www.evernote.com/pub/ewl/ipastuff


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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 inter-

twined.


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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 generationwill 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.


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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.


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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 regulationAction 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 spendor 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 economicequilibrium and a growth in employment.


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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-basedapproach.

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 everypoint.

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.


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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 dominantposition 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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Lesson 5 Modern State

Evolution of the modern state

Form of government

Future of Capitalism?

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 viewthe state is too large because it costs too much. Ireland cant 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.


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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


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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.


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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.


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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.

Seewww.privatisationbarometer.net

Regulations

There are different types of regulation all mechanisms of state control. The E.U. is often referred to

as a regulation stateit 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 doesnt pull back to pre-crisis levels.

Bureaucracies gradual expansion of state bodies

Interest groups

Consequences of State Growth

Organisational and economic failures

Read:
http://www.privatisationbarometer.net/http://www.privatisationbarometer.net/http://www.privatisationbarometer.net/http://www.privatisationbarometer.net/


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Bobbit

Economist Articles:

Failure of the State September 1997

Taming Leviathan March 2011


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The Welfare State

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.


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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

Market 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.


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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 factors2. 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


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Key social changes of the developmental welfare state

A movement away from means testing it is tailored to the needs of individuals tailoreduniversalism

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

Can this model be assessed?

1. It attempted to merge economic and social objectives reconciling the irreconcilable2. Valid and legitimate welfare model, unique to Ireland, but we ran out of money3. 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 hardtimes

Affordability and performance demographics are a factor Delivery how best to provide services

History of the Welfare State

The workhouse Safety net


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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 Doesnt deliver egalitarian outcomes the gulf in income and wealth is widening

Delivery models

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


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Towards associational democracy

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 socialrights.

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.


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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


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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


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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-distortedmanner.

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?


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- 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.


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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?


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Exam

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


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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


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Public Policy Making 04-01-2012 Lesson 7b

Associational Democracy II

Interest Groups and the State

The Irish Experience

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 isnt 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


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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

Downsides:


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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


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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?


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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. Canit 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 toglobalisation

3. Negotiated Governance Decentralisation of decision-making. A recognition that centralisedadministrations 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 collectivebargaining

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 processand broad objectives


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Government had a central role there was a recognition that if it was to work, all partieswould 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

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.


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Whats to come? Whats 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?


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Outsourcing of public services?

There are a lot of groups in IrelandODonoghue 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 toUniversity of Limerick, Summer School [June 2011]


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Public Policy Making 18-1-12

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 RiskPessimistic 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. Structuralimbalances. Debts are growing.

2.

Environmental greenhouse gases, global warming


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3. Geo-political governance failures, Dysfunctional governments, inadequate response tocrises

4. Societal unsustainable population growth5. 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. Were all in it together. E.U. small group of rich countries is unable to deal with a crisis2. 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


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Assignment

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 Callanans 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?


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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 fordemocracy? 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 Dil 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.


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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


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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 formany 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?


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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 decision-

making.

Power exercised through networks rather than command and control increases complexity andfragmentation. This is known as the Hollowing Out Thesis.

Rory ODonnell 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. Therehas 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


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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?


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Public Policy Making 01-02-2012

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?


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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


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1. Traditional Neo-Classical addressing market failures2. Public Choice Market failure, and it must be obvious that the state can do better3. 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.

Bobbit:

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


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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 worlds 10 biggest companies are state owned

Often large infrastructure companies or sovereign wealth funds


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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 peoples 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 cons

notes on public policy making

Documents