Notes on Public Policy Making
Transcript of 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
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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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Public Policy Making 28-09-2011 Lesson 2
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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Public Policy Making 12-10-2011 Lesson 3
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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Public Policy Making 26-10-2011 Lesson 4
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.
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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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Public Policy Making 09-11-2011 Lesson 5
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:
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Bobbit
Economist Articles:
Failure of the State September 1997
Taming Leviathan March 2011
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Public Policy Making 23-11-2011 Lesson 6
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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Public Policy Making 07-12-2011 Lesson 7
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