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WORLD PUBLIC SECTOR REPORT
Globalization and the State
2001
United Nations
ST/ESA/PAD/SER.26
WORLD PUBLIC
SECTOR REPORT
Globalization and
the State
2001
United Nations
New York, 2001
NOTE
Symbols of the United Nations documents are composed of capital letters combined with
figures. Mention of such a symbol indicates a reference to a United Nations document.
The designations employed and the presentation of the material in this publication do not
imply expression of any opinion whatsoever on the part of the Secretariat of the United
Nations concerning the legal status of any country or territory or of its authorities, or
concerning the delimitation of its frontiers.
PREFACE
The theme that has been chosen for this inaugural issue of the Report
is "Globalization and the State". The choice has been dictated partly
by the controversy which still surrounds this subject, and partly by the
* Pursuant to resolution E/2001/45 of the Economic and Social Council (ECOSOC) dated 20
December 2001, the Group of Experts on the United Nations Programme of Public
Administration and Finance was renamed "Committee of Experts on Public Administration".
iii
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
It is hoped that this Report will enrich the contents of the debate on
globalization, and broaden the range of participants. The discussion
on this crucial issue and its relation with the development process will
continue in the years to come. We believe it is important that in this
debate the relationship between globalization and the action as well
as reaction of the State be seriously evaluated. This Report is therefore
a contribution to this effect.
Nitin Desai
Under-Secretary General
for Economic and Social Affairs
iv
FOREWORD
FOREWORD
v
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Guido Bertucci
Director,
Division for Public Economics
and Public Administration, DESA
vi
ACKNOWLEDGEMENTS
ACKNOWLEDGEMENTS
This first issue of the World Public Sector Report, on Globalization and
the State, was prepared by a team of the Division for Public Economics
and Public Administration (DPEPA) of the Department of Economic
and Social Affairs (DESA). Under the overall responsibility of the Director
of the Division, Mr. Guido Bertucci, Mr. Demetrios Argyriades and Ms.
Adriana Alberti were editor in chief and editor respectively of the
entire Report, and contributed to Part I. A number of staff members of
the Division also contributed in various degrees, including Larry
Willmore who prepared Part II of the Report. The following external
advisors provided valuable material, feedback and advice in the
preparation of this Report: G. Bouckaert, Gerald Caiden, Naomi
Caiden, O.P. Dwivedi, Joachim Hesse, Michael Illner, Moses Kiggundu,
Bernardo Kliksberg, Derry Ormond, José Sulbrandt, and Gérard Timsit.
External editing, and layout and graphic design were provided by
Angel Antonio García and Adolfo I. Vargas respectively.
vii
CONTENTS
CONTENTS
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .v
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix
PART ONE
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1. Globalization: an overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.1. Globalization: a complex phenomenon, involving a variety of
global trends and tendencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
ix
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
1. How is globalization affecting the role and functioning of the State? . . . . . . . . .29
1.1. The role of the State in domestic and international governance . . . .29
1.2. The role of the State in multi-layered governance . . . . . . . . . . . . . . .31
x
CONTENTS
xi
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
3. Making democracy meaningful: the need for a strong, strategic State . . . . . . .122
8. Building networks among public services: the United Nations can help . . . . .125
BOXES
GRAPHS
xii
CONTENTS
PART TWO
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .137
4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159
4.1. How can the size of the public sector be measured in theory? . . . . . . . .159
4.2. How can the size of the public sector be measured in fact? . . . . . . . . . .160
4.3. What accounts for observed variation in the size of the public sector? . .161
FIGURES
1. The public sector in the 1993 System of National Accounts
(SNA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .141
2a. 1990 Ratio of government employment to population . . . . . . . . . . .150
2b. 1997 Ratio of government employment to population . . . . . . . . . . .150
2c. Government employment as % of population . . . . . . . . . . . . . . . . . .150
3a. 1990 Ratio of public sector employment to population . . . . . . . . . . .150
3b. 1997 Ratio of public sector employment to population . . . . . . . . . . .150
3c. Public employment as % of population . . . . . . . . . . . . . . . . . . . . . . .150
xiii
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
TABLES
1. Government and public employment as a percentage of
population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147
2. Government consumption as a percentage of GDP . . . . . . . . . . . . .152
3. Central government expenditure as a percentage of GDP,
domestic prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .154
4. Central government expenditure by type and by function, as
percentage of all central government expenditure, 1997 . . . . . . . .155
5. Central government tax revenue as a percentage of GDP, 1990
and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .157
Technical Appendix
TABLES
xiv
CONTENTS
Statistical Appendix
TABLES
xv
PART ONE
PART ONE
INTRODUCTION
Part One
Introduction
G
lobalization, although not a To be sure, globalization offers many oppor-
new phenomenon, is unques- tunities for people across the world - in par-
tionably of paramount signifi- ticular, greater economic liberalization and
cance for all countries, developed increased social and political interdependence
or developing, rich or poor, large or small. What - but it also implies costs. Economic openness,
is globalization? How is globalization af- foreign direct investment, and transfer of tech-
fecting the role and functions of the nation- nologies promise a number of benefits to
State? Is globalization "good" or "bad"? Is there both developed and developing countries.
a universal understanding of its potential or Free trade promotes specialization among dif-
its costs? Can all societies benefit from glob- ferent regions, allowing them to apply their
alization? Are all States adequately pre- own comparative advantages. It also ex-
pared to enable their people to seize the op- pands the consumption opportunities of coun-
portunities of globalization while minimiz- tries by allowing the efficient interchange of
ing its negative effects? How should public goods and services. Free trade provides op-
administration systems be redesigned in portunities for developing countries in that it
view of the changes occurring at the global opens new markets for export and attracts for-
level? eign capital, which aids development. Foreign
direct investment can lead to a transfer of tech-
Part One of this Report deals with globalization nologies and know-how, increasing domestic
and the State, and comprises five chapters. productivity and employment levels.
This Part attempts to answer the above stat-
ed essential questions, as well as others, in As inferred in chapter I, increased interde-
an objective and clear fashion, based on ob- pendence, which has been made possible in
served experience and the views of prominent part by the advancements in information and
experts on the matter. The following para- communication technologies and the reduc-
graphs present a synthesis of the contents tion of transportation costs, has provided peo-
of Part One. ple with new tools to support and dissemi-
nate the universal values of democracy, hu-
In order to assess the opportunities that man rights, transparency, and alleviation
globalization brings in its trail, chapter I be- of poverty. Information and communication
gins with an overview of the subject. Much technologies are also contributing to the in-
has been written on this complex phenome- tegration of the fastest growing developing
non in recent years, albeit in contrasting terms. countries in the global economy. It remains
Conflicting views have resulted in a dis- to be demonstrated, however, whether in-
cernible trend to demonize or sanctify glob- formation technology has the potential to al-
alization, ascribing to it attributes which it low countries to leapfrog stages of econom-
clearly does not possess. Chapter I analyzes ic growth and to modernize. Finally, chapter
the significance of globalization, which in I highlights the opportunities and costs that
essence is still an ill-defined concept, and de- globalization entails, as well as the chal-
scribes its major facets. lenges that public administration systems are
still facing in a globalizing world.
3
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
4
INTRODUCTION
three interrelated and complementary State erly. Interventions in the market should
dimensions: institution-building; human re- clearly be directed at correcting market fail-
sources development; and technological ad- ures in relation to sound political objectives.
equacy.
Chapter III maintains that an intelligent dem-
As suggested in chapter III, the response to ocratic State and free markets go hand in hand.
globalization resides on many levels. It re- In fact, contrary to what may be the common
volves around the concept of an "intelligent, belief, economic globalization (e.g., free
democratic State", which does not imply "big trade) does not equal a laissez-faire govern-
government" and is clearly antithetical to tra- ment. Nevertheless, some political com-
ditional "bureaucracy", qualified as rigid, mentators take the position that globaliza-
paternalistic, intrusive and authoritarian. It tion is incompatible with the Welfare State.
is fully compatible with the emergence of free Some urge the downsizing of government in
markets and a vibrant civil society, both of order to meet the demands of international
which are predicated on the existence and de- competition, while others decry the "race to
velopment of institutional frameworks that the bottom" that globalization supposedly en-
maintain an enabling environment for pri- tails, and thus oppose globalization. Yet, log-
vate enterprise and other individual or col- ic and evidence suggest that these positions
lective creative pursuits. Intelligent demo- may not be correct for two reasons. First, in-
cratic States, as chapter III and IV show, are ternational trade and investment, unlike
doubly necessary: (a) on the national and sub- oligopolistic rivalry, is not a zero-sum game.
national levels, to secure the rule of law, pro- In effect, trade benefits all countries be-
mote economic development, foster social cause it enhances the choices of the con-
welfare and ensure a more even-handed dis- sumer and the quality of products. All par-
tribution of both the costs and benefits that ties to voluntary exchange gain. Second, the
flow from globalization; and (b) on the inter- assumption that globalization reduces the size
governmental or supra-national level, to se- of government is not supported by evidence.
cure peace and stability, and promote the rule The fact is that open ("globalized") econo-
of law in international relations. Related to mies have larger, not smaller, government ex-
this concept are the needs for strategic re- penditure. However, there might be other rea-
sponses to globalization. These include in- sons that explain the higher government
stitution-building, reinforcement of social expenditure, such as the level of overall de-
policies, and enhancement of professionalism velopment of a country. As shown in Part Two
and ethics. Strengthening state institutions of this Report, the majority of the "globaliz-
and redefining the role of the State is para- ers" actually registered increases in expen-
mount to development and to enabling peo- diture and tax revenue. Therefore, there is
ple to seize the opportunities of globalization. no evidence that globalization weakens the
With or without globalization, the State, es- State. On the contrary, increased globaliza-
pecially in developing countries and countries tion goes hand in hand with higher expen-
with economies in transition, has a very im- diture. As such, globalization should not be
portant role in financing or supplying basic used as an excuse to abandon the role of the
social services, such as health, education government in meeting the basic needs of the
and adequate infrastructure (hospitals, citizens.
schools, roads, etc.). The State should focus
on development and redistribution in order Chapters III and IV maintain that, while glob-
to empower people and to give them the in- alization has great potential, without ap-
struments to live a dignified life. At the propriate domestic conditions the adjust-
same time, the State should refrain from pro- ment costs may be too high for vulnerable
ducing and providing goods and non-social groups in society. Both chapters also under-
services. The State could, in this respect, es- score that weak legitimization and a "dem-
tablish clear rules and solid economic insti- ocratic deficit" coupled with ineffectiveness
tutions that allow the market to function prop- in policy development and implementation
5
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
account to some extent for weak represen- tive States are essential for both tasks, and
tation in global fora, of the rights, needs their capacity for both needs strengthen-
and interests of a large part of humanity who ing" (UN, 2000, Millennium Report, A/54/
live in developing countries. Though fully rec- 2000, para. 15). In fact, "notwithstanding the
ognizing the many limitations imposed by pow- institutional turmoil that is often associat-
er politics coupled with vast disparities in ed with globalization, there exists no other
knowledge and technology, power and entity that competes with or can substitute
wealth, the present Report argues that as- for the State. Successfully managing glob-
sisting developing countries strengthen their alization, therefore, requires first and fore-
capacity could help redress the imbalance most that States act in a manner consistent
which has adversely affected their active with their dual role" – that they are respon-
participation in global fora and in the world sible towards their own society and the plan-
economy. et as a whole (ibid., para. 43).
6
THE MANY FACETS OF GLOBALIZATION
Chapter I
G
lobalization is one of the most de- qualitative change in global economic and po-
bated issues of our times elicit- litical structures. Furthermore, globaliza-
ing both great enthusiasm and tion has often been used as a rhetorical de-
deep concern. It has engen- vice to advance specific interests or agendas
dered images of a peaceful borderless world at the expense of others. That is to say, glob-
characterized by prosperity for all, or it has alization has been invoked by different pres-
been depicted as the progressive advancement sure groups as a concept justifying the ideas
of "frightening" multinational corporations and actions of both its proponents and de-
and their control over world-wide natural re- tractors.
sources, manufacturing, finance and cul-
ture. The image of globalization as a prom- Though there is some agreement among
ise or threat is, in fact, one of the most pow- scholars and experts that globalization is pro-
erful and persuasive images of our times ducing greater interconnections and inter-
(Veseth, 1998). Yet, despite the vast litera- dependence, there seems to be little con-
ture on this subject and the ongoing discus- sensus on the degree of integration it engenders
sion, globalization remains an ill-defined and on its pervasiveness. Different views
concept. have emerged on this issue. As way of sim-
plification, four different positions can be ac-
Some view it as the international system that counted for: "The first identifies globalization
has succeeded the end of the Cold War, while with an increasing homogenization within the
others prefer to continue using the term "in- global system, which would ultimately lead
ternationalization" to describe the current to assimilation. The second – the ‘strong
changes in the international economy. As globalization view’ – contends that homogeneity
the Secretary-General of the United Nations remains highly unlikely within the global sys-
has observed, "some emphasize the in- tem, but that a range of qualitative and
creased mobility of factors of production, quantitative changes have combined to in-
goods and services across borders and the re- troduce a new condition, or set of processes,
sulting emergence of a truly global market. into world affairs that warrant the novel term
Others see primarily the results – and future ‘globalization’. The third position – the
potential – of an explosive progress in in- ‘weak’ globalization perspective – maintains
formation technology, while still others view that many of the undoubtedly important de-
globalization primarily from societal and velopments of recent decades signal a sig-
cultural perspectives" (UN, 1999, A/RES/ nificant increase of internationalization with-
163). It is not clear, therefore, whether the in the international political economy that has
term “globalization” is generally "employed complex but variable consequences for poli-
[to refer to] a historical epoch, a process, a tics, economics and society, but that has not
theory, or a new paradigm" (Reich, 1998, p. 2). ushered in a distinctively new era in human
7
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
8
THE MANY FACETS OF GLOBALIZATION
ly economic, but also political, social and tilateral trading system – the World Trade
cultural. As such, we may speak of different Organization (WTO). The latter has not on-
globalizations or dimensions of globalization. ly led to the reduction of barriers to trade in
goods, but has also proceeded to liberalize serv-
ices and capital flows. The WTO has also fo-
2. What is driving cused more closely on an ever-growing range
globalization? of policy measures affecting the terms and
conditions of market access, such as standards
The forces that lie behind globalization and and regulations, subsidy practices, and in-
which have interacted among them produc- tellectual property rights (WTO, 1998 Annual
ing greater interdependence and integra- Report).
tion, may be summarized as follows:
It is of great importance to underscore the
• Trade and investment liberalization poli- political source of economic globalization in
cies; order to avoid interpreting this phenomenon
as a deterministic force about which little can
• Technological innovation and the reduction be done. Economic globalization is not a
in communication and transportation costs; blind force. It is still individual governments
that are setting the policies and the rules of
• Entrepreneurship; the globalized economy. Thus, we should not
forget that the State has played a pivotal role
• Global social networks in allowing greater interdependence and
economic integration of specific activities
2.1. Trade and investment
liberalization policies
Box I.2
DIFFERENT VIEWS ON GLOBALIZATION
Technological innovation and entrepreneur-
ship cannot alone explain the process of “Globalization is the inexorable integration of markets, nation-states and
technologies to a degree never witnessed before -in a way that is enabling
globalization. We should not forget that the
individuals, corporations and nation-states to reach around the world far-
impetus towards greater economic integra- ther, deeper and cheaper than ever before. Globalization is not simply a
tion has stemmed from the efforts of gov- trend or a fad but it is, rather, an international system.” (Friedman, 2000, p. 9).
ernments to remove barriers to trade and in-
"Globalization is an increase in interconnections, or interdependence, a rise
vestment. Increased global integration in a in international flows, ... such that the world is, in some respects, becoming
number of economic areas began to intensi- a single place." (Mittleman, 2000, p. 3).
fy in the 1980s when many governments
“Globalization is the internationalization of finance and production; accel-
supported economic liberalization. "The lat- erating applications of transformational technologies; and the growing
ter has included financial sector deregulation, interconnections among the people of the world.” (Jones, 2000,
the removal of controls over foreign ex- p. 21).
9
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
through the elaboration and adoption of vances in the past 70 years, transportation
market-oriented policies and regulations, at and communication costs have declined
both the international and local levels. Eco- drastically. The end of State monopolies - where
nomic globalization can be said to result and when it has happened - and thereby the
from policy decisions made by individual introduction of greater competition in the
countries that allow global market forces to telecommunication sector, is also responsi-
operate. ble for a sharp decline in communication costs.
The problem is which countries set the rules, As shown in graph 1 below, the average cost
whom do they favor and how can the least of freight and port charges per ton has de-
powerful also influence policy-making in the creased from over US$ 90 to approximately
international arena, and do it in ways that US$ 30 constant dollars between 1920 and
will benefit them. Some countries do not 1990. The decrease in average revenue per
have as much leverage as others do in set- passenger mile between the years 1920 and
ting the international economic and politi- 1990 has gone from US$ 0.7 to US$ 0.1 as
cal agenda due to significant power imbal- shown in graph 2 below. Moreover, a three-
ances among nations that are reflected in in- minute call between New York and London
ternational institutions. As a consequence, has decreased from almost US$ 300 to less
the present form of globalization is largely than US$ 1 dollar over that period, as shown
shaped by the rules advanced by one part of in graph 3 below, or it can be free over the
the world – namely the most influential – and Internet. The cost of computers has also
these rules do not necessarily favour devel- dramatically decreased over the past years,
oping countries and countries in transition. as well as that of wireless communications.
This implies that many transactions can be
2.2. Technological innovation and processed in no time and at relatively low cost.
the reduction in communication
and transportation costs Indeed, there is no field of technological
progress, which has evolved more rapidly, in
Technological innovation, as well as the con- the past 20 years than information technol-
stant reduction in transportation and com- ogy (IT). Taking shape through the conver-
munication costs is responsible for drastically gence of semiconductors, computers, tele-
transforming the ease, speed, quantity, and communications and software technologies,
quality of international information flows, as the information revolution has produced
well as physical communications (Cable, rapid and sustained falls in the cost of pro-
1995). In particular, information technology cessing, storing and transmitting information.
and multimedia communications are pro- Thus, it promises to make the information
ducing shrinkage of distance and accelera- and knowledge base of humankind avail-
tion of change. Due to technological ad- able anywhere, anytime, in any language.
Businesses and individuals, mainly in the de-
Box I.3
veloped world, can now perform a wide num-
What is Globalization? ber of activities through the information
highways in a matter of seconds. The grow-
• Globalization is increased global integration and interdependence. ing interest in this relatively new channel of
• It is not a totally new phenomenon.
communication is reflected by the number of
Internet sites, which rose by 118% in only two
• It has a multidimensional character: economic, political, social and years, i.e. between 1997 and 1999 (NUA, 1999).
cultural.
• It is characterized by unprecedented rapid flows of goods and During the past decade, two significant de-
services; private capital; circulation of ideas and tendencies; and velopments have greatly accelerated the
the emergence of new social and political movements. globalization of information flows. The first
Source: DPEPA/DESA, 2001. is that computers have invaded millions of
households. The second is the emergence
10
THE MANY FACETS OF GLOBALIZATION
Graph I.2.
It has been estimated that in March 2000 there Declining Air Transportation cost since 1930 in US$
were 400 million personal computers and about (average revenue per passenger mile)
1 billion telephones in the world; 276 million 0.8
Internet users worldwide with a growth rate
0.6
of roughly 150,000 persons per day; 220 mil-
lion devices accessing the World-Wide Web 0.4
with almost 200,000 devices being added 0.2
every day. Total world bandwidth (trans- N/A
0
mission capacity of computer networks or oth-
1920 1930 1940 1950 1960 1970 1980 1990
er telecommunications systems worldwide)
in 1996 amounted to 200 trillion bits per sec- Source: IMF, 1997
ond. In 2001, there will be a bandwidth of
9,000 trillion bits per second. It is also esti-
mated that, 10 years from now, there will be 1 Graph I.3.
billion personal computers and 3 billion tele- Declining Telecommunication costs since 1930 in US$
(3 minutes NY/London)
phones in the world.
300
250
Governments, organizations and business
200
enterprises are seeking to harness the Internet
150
to advertise and disseminate information. 100
There are millions of web-sites, homepages 50
and diverse documents on the Internet, 0
N/A
which cover thousands of subjects. At pres- 1920 1930 1940 1950 1960 1970 1980 1990
ent, web pages total 1.5 billion with almost
2 million pages being added every day. IT has Source: IMF, 1997
The Computer Industry Almanac has re- • By 2010, Chinese online users are ex-
ported that: pected to outnumber US users;
• By the year 2002, 490 million people • NUA reports that 60 per cent of the world
around the world will have Internet access, online population will be outside the US by
that is 79,4 per 1,000 people world-wide; 2003.
11
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
The Internet (see graph I.4 below), as well of the most important policy decisions that
as other communication devices, such as the a State will have to take at the beginning of
cellular phone and fax machines, have con- the new millennium. The so-called digital di-
tributed to shrinking distance and time, and vide is a by-product of underdevelopment, and
have allowed people to connect and com- lack of financial and human resources. It must
municate instantaneously. The option of be- be stressed though that public policy is also
ing able to access the Internet from special instrumental in the present magnitude of this
models of cellular phones may also represent divide and in the pace at which it can be
a breakthrough in the communication sec- bridged.
tor, especially for developing countries that
have not developed an extensive cable sys- IT opens new opportunities for increased
tem and are now able to use cellular phones government transparency, efficiency and ef-
in their daily work activities. fectiveness of its services. It gives the citi-
zens a powerful tool for conducting the pub-
However, as in the case of economic global- lic discourse, organizing themselves and
ization, there is nothing deterministic about challenging, as the case may be, the exist-
globalization via the spread of IT technolo- ing political parties, professional associa-
gies and the Internet. It takes proper pub- tions, non-governmental organizations, and
lic policy frameworks to make it happen. For agencies of State administration – both lo-
example, as mentioned above, States have a cally and globally.
policy choice to make in the area of deregu-
lating their telecommunication sector. And, IT is rapidly transforming all the sectors of
increasingly, geo-locating and firewall tech- the global economy. It helps to redefine such
nologies allow them to shape the freedom of concepts as competitiveness, quality, deliv-
the spread of the Internet. A careful trade- ery, responsiveness and innovation. IT has
off between perceived advantages and dis- opened the way to advances in productivity
advantages is needed here. How to handle by minimizing waste of raw materials,
the IT revolution promises to constitute one labour and time. With modern transporta-
200
180
80
60
40
20
0
United States
Japan
Germany
UK
France
China
Canada
Italy
South Korea
Brazil
Australia
Russia
Spain
Taiwan
Netherlands
United States Japan Germany United France China Canada Italy South Korea Brazil Australia Russia Spain Taiwan Netherlands
Kingdom
12
THE MANY FACETS OF GLOBALIZATION
tion means such as jumbo jets and contain- 2.4. International social networks:
er vessels and computerized reservations increase in number and strength
systems, the globalization of production and
services has become a reality. Global infor- Modern technology, transportation, and
mation networks are rapidly transforming the telecommunications are transforming, in
ways an enterprise operates. In the last 20 many ways, how organizations and people op-
years, both manufacturing and services have erate, cooperate and interface. From a social
become increasingly globalized – a global pro- point of view, new technologies have facili-
duction system has emerged. It goes with- tated greater global integration and aware-
The State is increasingly
out saying that IT is the central driver of this ness through the establishment of worldwide
new world trend. networks. Concern for democracy, human being pulled in different
rights, the environment, and poverty is be- directions, and must
On the negative side, it must be said that the ing enhanced by the birth of cross-border so-
Internet is also being used in detrimental ways. respond to demands,
cial and political networks, whose members
It has become an easy communication device are non-state actors such as non-govern- which come from local,
for all sorts of criminal and terrorist activi- mental organizations (NGOs) as well as pri-
as well as transnational
ties. This shows that the Internet can be used vate persons who want to participate in pub-
both in social and "anti-social" ways. The In- lic matters, locally and globally. groups
ternet in fact, as any other device, is not a
"good" or "bad" tool per se. It is a facilitator. To be sure, the growing role of non-state
Whether it has a positive or negative impact transnational actors adds a novel dimen-
on society depends on how it is used – per- sion to globalization. TNCs are becoming
haps abused – and how its use is regulated. increasingly powerful actors within the in-
ternational arena due to their growing eco-
2.3. The role of entrepreneurship in nomic power. The creation of international
accelerating globalization organizations, such as the WTO, brings
about new influential institutional actors in
Thanks to technological innovations and the global landscape. Furthermore, the
greater economic liberalization, entrepre- greater role of global civil society is anoth-
neurs, especially multinational corporations, er distinctive feature of globalization, par-
have taken full advantage of more open mar- ticularly if we consider its increasing rele-
kets to spread production processes all over vance in the international policy agenda and
the world (WTO, 1999, Annual Report). The process (Ostry, 2000). International NGOs work
opening up of economic opportunities allows to aggregate global values and interests like
the movement of foreign capital, technology the protection of human rights. Some NGOs
and management, largely from transna- work to protect the interests of national
tional corporations (TNCs), to host country groups affected by global forces.
entrepreneurs and corporations. As nation-
al economies open, mergers between businesses The increased relevance of non-state global
from different countries and purchases or in- players, such as TNCs and international so-
vestment in equity of businesses in one cial networks, has set in motion much dis-
country by owners from other countries are cussion about the role of the State and its gov-
becoming more common. Although TNCs are ernance capacity in a globalized world, and
not new economic actors, what has dramat- whether it will be able to manage effective-
ically changed is the way they operate ly a diverse range of pressures. In fact, the
around the world and their increased level State is increasingly being pulled in differ-
of economic power. According to the Com- ent directions, and must respond to de-
mission on Global Governance, the number mands, which come from local, as well as
of TNCs is presently estimated at 37,000 world- transnational groups. Strengthening the
wide (Commission on Global Governance State’s networking capacity will be crucial in
Report, 1995). a complex and interconnected world. Some
see an emerging role for the State as an "or-
13
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
chestrator", catalyst of ad hoc alliances of di- proximately six-fold during this period. In the
verse capacities and of diverse skills possessed case of manufacturers, trade multiplied 30
by these many actors for achieving ad hoc de- times, while GDP grew eight-fold (ibid).
velopmental goals.
• Among rich or developed countries the
share of international trade in total output
3. The global village: (exports plus imports of goods relative to GDP)
Declining transporta- economic and social rose from 27 to 39 per cent between 1987 and
dimensions of globalization 1997. For developing countries it rose from
tion costs have led to 10 to 17 per cent (World Bank, 2000, World
a greater mobility of 3.1. Economic globalization Development Indicators).
14
THE MANY FACETS OF GLOBALIZATION
15
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
tion opportunities and the constitution of trans- ing increasingly invited to many global fora
national networks. Information, which had such as United Nations conferences and
been the monopoly of the few, is becoming ac- meetings and the recent World Economic
cessible to wider and more diverse audi- Forum held in Davos, Switzerland or the re-
ences. The relative ease of accessing infor- cent G8 meeting held in Genoa, 2001. In oth-
mation has increased citizens’ ability to er words, NGOs are becoming actively involved
share views, to become aware of their rights, in policy dialogues.
Four decades ago, to make their demands known and to increase
there were fewer than their influence generally. As a consequence, Although NGOs are generally undertaking
citizens are joining together to demand im- remarkable tasks and advancing relevant world
1,000 NGOs, which
proved levels of services and higher standards causes such as the alleviation of poverty,
operated mostly at the of behaviour from their governments. Pub- the protection of children’s rights, or the
local level. Now ... lic opinion moves to the forefront as a basis protection of the environment, NGOs have
of the legitimacy of governments. also been criticized for a number of reasons.
almost 30,000 NGOs It has been said that some compete against
operate internationally The reduction in transportation costs over re- each other and, once institutionalized, become
cent decades, especially air and train fares, closed to new ideas and positions. It has al-
has significantly facilitated the movement of so been argued that powerful NGOs are
people around the globe and has allowed a mainly based in developed countries and
greater awareness of international issues. Peo- may not be as transparent and accountable
ple nowadays have greater access to and as they expect other public and private agen-
knowledge of other cultures, as well as so- cies to become. But most fundamentally, it
cial problems and issues. Social protest has should not be forgotten that, despite their rel-
also taken on a different form. It is not any evance in articulating and expressing a di-
longer confined to one particular country or versity of interests and concerns, NGOs
to local issues; it transcends national borders. should not be confused with political parties,
The recent events in Genoa at the G8 sum- as they are not democratically elected.
mit, in Prague in September 2000 at the In- Therefore, their opinions and positions re-
ternational Monetary Fund and World Bank garding different social and political issues
meeting, and in Seattle at the World Trade are not representative of the people’s will, as
Organization meeting in 1999, are examples they have not received a mandate to repre-
of these new forms of transnational organ- sent them. However, increased access of its
ized movements and of globalization itself. members to information and networking
creates a pressure for increased relevance and
International and regional organizations, improved internal governance of NGOs. This
such as NGOs and transnational networks, is bound to make them more responsive to
based on shared interests rather than on geo- the changing global circumstances and to the
political similarities have proliferated in the opinion of their constituencies.
late XX century. NGOs, however, are by no
means an "invention" of the past decades (some Social globalization is a phenomenon which
notable NGOs, such as Save the Children, poses new challenges for the nation-State. In
were founded at the beginning of the XX cen- fact, the State becomes increasingly involved
tury, while others even earlier as in the case in a web of intricate interests and needs in
of the International Red Cross, which was order to respond to a growing number of de-
founded in 1868). What has changed is per- mands on issues which are not solely limit-
haps the increasing number of NGOs and their ed to its territory. This requires the State to
growing political leverage. Four decades ago, hone its role as mediator and develop new
there were fewer than 1,000 NGOs, which skills to deal with diversity.
operated mostly at the local level. Now at the
beginning of the XXI century, the United Na-
tions reports that almost 30,000 NGOs op-
erate internationally. Moreover, NGOs are be-
16
THE MANY FACETS OF GLOBALIZATION
17
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
are not subject to control on the part of re- ministration are manifold. Poverty, in-
pressive national governments and act as ad- equality, civil wars, and the spread of dead-
vocates of specific policies. ly diseases, including HIV/AIDS, are com-
promising the prospects of many developing
The new information age is also widening the countries for a better future. It is important
range of information available to anyone to emphasize that all of these problems are
anywhere, enhancing and modernizing the not caused by globalization, as some may ar-
exchange and sharing of information, train- gue, but rather by local under-development
ing and education. The potential of on-line that does not allow people to take full ad-
Integrating into the education for reaching individuals living in vantage of the opportunities of integrating
remote areas is of great importance, especially into the world economy.
world economy has for developing countries. Greater access to
costs, but not integrat- education is in fact a basic prerequisite for Furthermore, while it is true that globalization
people to be able to participate in a well-in- carries many opportunities in its trail, it is
ing has greater costs in
formed way in public life and make informed also true that it has costs for the people
terms of lost opportuni- decisions. Information technology, the satel- who are integrating into the world economy.
ties lite, the cellular phone and the global media Every change has adjustment costs. However,
are also contributing to the integration of the refusing to embark on a process of change
fastest growing developing countries in the on these grounds is short-sighted. Technical
global economy. The future expansion and use change also entails costs, which are even high-
of these technologies may further increase er than those produced by globalization, but
such opportunities. "From struggles around not for this reason has it been or should it
human rights, the environment and workers be rejected. "Modern technology and in-
strikes around the world to genuinely triv- creasing economic integration have been a
ial pursuits, the Internet has emerged as a positive force in eradicating poverty and de-
powerful medium for non-elites to commu- velopment throughout times" (Sen, 2001). Thus,
nicate, support each other’s struggles and cre- "the predicament of the poor across the
ate the equivalent of insider groups at scales world cannot be reversed by withholding
going from the local to the global" (Sassen, from them the great advantages of contem-
1998, p. 12). porary technology, the well established effi-
ciency of international trade and exchange,
and the social as well as economic merits of
5. Current trends and living in open, rather than closed, societies
challenges affecting public – what is needed is a fairer distribution of
administration in a the fruits of globalization" (ibid.). In other
globalizing world words, integrating into the world economy
has costs, but not integrating has greater costs
Despite the immense advancements in all in terms of lost opportunities. The challenge
spheres of human activity, the increased then is how to ensure that people can ben-
global wealth, and the opportunities un- efit from globalization, while minimizing
leashed by globalization, the world today the costs of adjusting to a changing domes-
still faces great challenges. These in turn af- tic and international environment (UN,
fect public administration in a number of ways. 2001, A/56/127-E/2001/101).
The State and its institutions are, in fact, in-
creasingly subject to pressure both from the 5.1. Alleviation of poverty and in-
domestic and international arena. New chal- equality
lenges and old threats suggest that the
State, especially in developing countries, It is becoming increasingly evident that so
needs to be strengthened and to operate dif- far globalization has benefited only a rela-
ferently from the past. The challenges that tively small number of countries and that some
are affecting how the State operates and regions of the world are still not integrated
that call for major innovations in public ad- into the world economy. Moreover, as may be
18
THE MANY FACETS OF GLOBALIZATION
seen in the next chapters, some States have ence its own living environment, let alone the
not yet adapted to increasing interdepend- international political arena. The impressive
ence and as a consequence many have suf- technological advances only benefit a small
fered from the adjustment costs of globalization. proportion of the world’s population. De-
As stated by Helleiner at the 10th Raul Pre- spite globalization, many of the poorest
bisch Lecture organized by the United Na- countries remain marginalized from world
tions Conference on Trade and Development trade and investment. Social and economic
in December 2000: "The challenge – both at polarization is still widely spread. Therefore,
the national and global levels – is, through it may be said that a sophisticated, global-
conscious policy choices, to make the new glob- ized, increasingly affluent world currently co-
alized system ... work for maximum human exists with a marginalized global under-
welfare. The task before us all is to make glob- class (Commission on Global Governance
alization functional, to ‘civilize’ it" (Hellein- Report, 1995, p. 139).
er, 2000, p. 5). In order to turn globalization
into an opportunity for all, we need a new But how is poverty and inequality in the de-
vision for the future, a vision that goes be- veloping world linked to globalization, and
yond what Soros calls "market fundamen- is it a consequence of globalization per se?
talism" (Soros, 2000). In fact, "in recent According to some observers economic glob-
decades an imbalance has emerged between alization leads to a “race to the bottom”
successful efforts to craft strong and well-en- characterized “by the progressive movement
forced rules facilitating the expansion of of capital and technology from countries
global markets, while support for equally valid with relatively high levels of wages, taxation
social objectives, be they labour standards, and regulation to countries with relatively
the environment, human rights or poverty lower levels” (Spar and Yoffe, 2000, p. 37).
reduction, has lagged behind" (UN, 2000, Mil- This is said to force countries to reduce
lennium Report, A/54/2000). It is becoming wages and social spending. However, other
quite clear that, while globalization has observers have maintained that globalization
great potentials, without appropriate do- has favoured higher standards in the protection
mestic conditions it can have negative effects of working conditions and environmental
for many people.
Box I.5
Eradicating poverty and ensuring sustain-
able development should form the raison POVERTY IN AN UNEQUAL WORLD
d’être of public administration. Half the
The world has deep poverty amid plenty. Of the world's 6 billion people, 2.8
world, nearly 3 billion people, lives on less billion - almost half - live on less than $2 a day, and 1.2 billion - a fifth - live on
than US$ 2 a day while the richest 20 per less than $1 a day, with 44 percent living in South Asia. In rich countries, fewer
cent of the global population receive more than than 1 child in 100 does not reach its fifth birthday, while in the poorest coun-
tries as many as a fifth of children do not. And while in rich countries fewer
80 per cent of the global income. Inequality
than 5 percent of all children under five are malnourished, in poor countries as
still persists between countries in the world many as 50 percent are.
at large, while intra-country inequality of-
This destitution persists even though human conditions have improved more in
fers a mixed record, with some countries
the past century than in the rest of history - global wealth, global connections
and regions improving their condition, while and technological capabilities have never been greater. But the distribution
others have fallen into greater inequality. Ac- of these global gains is extraordinarily unequal. The average income in the
tually, whether inequality is increasing or not richest 20 countries is 37 times the average in the poorest 20 - a gap that has
doubled in the past 40 years. And the experience in different parts of the
is besides the point. As stated by Nobel Prize world has been very diverse. In East Asia the number of people living on less
winner Amartya Sen: "the basic concerns than $1 a day fell from around 420 million to 280 million between 1987 and
relate to the massive levels of inequality 1998 - even after the setbacks of the financial crisis. Yet in Latin America, South
Asia, and Sub-Saharan Africa the numbers of poor people have been rising.
and poverty – not whether they are also in-
And in the countries of Europe and Central Asia in transition to market
creasing at the margin" (Sen, 2001). economies, the number of people living on less than $1 a day rose more than
twenty-fold.
It is a fact that a significant part of hu- Source: World Bank, 1999/2000, World Development Report.
manity does not have the capacity to influ-
19
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
60
50
40
30
20
10
0
Czech Republic
Mexico
South Korea
Japan
United States
Australia
Turkey
Ireland
Portugal
Spain
Switzerland
New Zealand
Iceland
Britain
Hungary
Canada
Germany
Poland
Netherlands
Norway
Luxembourg
Italy
Austria
Belgium
France
Finland
Denmark
Sweden
20
THE MANY FACETS OF GLOBALIZATION
of the opportunities of globalization, they need ization should not be made a scapegoat for
access to high quality education, health care, domestic policy failures. The industrialized
information and communication technolo- world must not try to solve its own problems
gies (ICT), social safety nets, and infra- at the expense of the poor. It seldom makes
structure. The role of government is to se- sense to use trade restrictions to tackle prob-
cure for the citizens affordable access to lems whose origins lie in other areas of pol-
these services. icy. By aggravating poverty and obstructing
development, such restrictions often make the
If globalization has exerted negative effects problems even worse. Practical experience has We should be con-
on certain countries, it is because many shown that trade and investment often bring
countries lag in developing a strong insti- not only economic development, but higher
cerned about jobs,
tutional framework, as well as solid social poli- standards of human rights and environ- about human rights,
cies and networks to cope with negative ex- mental protection as well. Indeed, the peo-
about child labour ...
ternalities, as discussed in the following ple in developing countries generally insist
chapters. External factors, such as the glob- on higher standards, once they get the But globalization
al trading environment, are also crucial in chance to do so" (Annan, The Wall Street Jour- should not be made a
creating greater opportunities or in posing nal, Nov. 24, 1999).
scapegoat for domes-
constraints on a country’s economic growth.
Once more, the trading rules have so far ben- 5.2. Advancement of human rights tic policy failures
efited more the industrialized countries than and democracy
Kofi Annan
the less developed ones. For example, the Eu-
United Nations
ropean Union has lifted barriers on import Globalization and greater openness to the world
Secretary-General
of raw materials from Africa, but not on re- economy can benefit fully a country and its
fined products, which would compete with lo- people only in the presence of solid democratic
cal European products. As stated in a institutions, which help redistribute the
keynote address by United Nations Under- gains from open trade and from greater ex-
Secretary-General and Executive Secretary change. However, despite the progress made
of ECA, K.Y. Amoako: "For all the talk on free by many countries in building democratic in-
trade, the World Bank estimates that high stitutions and protecting human rights,
tariffs, anti-dumping regulations and tech- democracies are still fragile in some regions
nical barriers to trade in industrialized of the world and protection of minority
countries cost sub-Saharan African coun- rights is not guaranteed. In some parts of the
tries $20 billion annually in lost exports. In world, civil society at large and especially mi-
other words, we lose more because of trade norities are still not fully integrated into
barriers than we gain because of aid! If rich the social and economic fabric of the coun-
countries want unfettered access to our mar- tries they live in. Many suffer from dis-
kets, we require that they open their mar- crimination, deprivation of basic rights, and
kets to us so that we can earn, rather than abuse from the authorities. Promoting
beg, our way out of poverty. Democratization, democracy and, in many cases, democratization
transparency, accountability and good gov- is a pre-requisite to ensuring the respect of
ernance at the national level must be repli- human rights, but it is not sufficient. Prop-
cated at the international level!" (Amoako, er values and broad encompassing interest
2000, p. 1). of the governments is needed. Freedom of
speech, association, assembly, religion, and
In the words of Secretary-General of the political participation, among others, are
United Nations, "we should be concerned cornerstones of a constitutional democracy.
about jobs, about human rights, about child Freedom from arbitrary arrest, unlawful de-
labour, about the environment, about the com- tention, let alone torture and slavery, are rec-
mercialization of scientific and medical re- ognized as inalienable universal rights.
search. We should also be concerned about
the desperate poverty in which so many peo- Advances have been made in this field in the
ple in developing countries live. But global- past decades especially since the 1980s when
21
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
the so-called "third wave" of democratization sumption patterns, especially in the G-8
spread to many parts of the world. So far an countries, is resulting in increasingly high-
increasing number of countries have ac- er demands of energy. Examples of environ-
knowledged and recognized the rights con- mental degradation can also be found in the
tained in the Universal Declaration of Hu- former centrally planned economies of East-
man Rights adopted by the United Nations ern Europe. The challenge with which States
General Assembly in 1948. Yet, there are still are confronted, in this respect, is to combine
too many cases of human rights violations openness to the world economy with policies
in many parts of the world. This poses a great aimed at protecting the environment.
challenge to national and international gov-
ernance institutions. “Already 20% of the world’s population con-
sumes 86% of its total resources, while the
5.3. Protection of the environment poorest 20% of the population consumes on-
and sustainable development ly 1.3% of these same resources. ... Each
year between 5 and 7 million hectares of agri-
Environmental degradation poses signifi- cultural land are lost as a result of soil
cant challenges to public administrations degradation or urbanization. Another 16 to
world-wide. Economic liberalization and the 20 million hectares of tropical forests are sac-
lifting of barriers to trade and commerce in rificed as a result of inadmissible practices.
many countries around the world has pro- More than 1 billion people have no access to
vided the corporate sector with greater op- clean drinking water. About 2.8 billion people
portunities for investment and profit, as have no access to sanitary facilities. Tangible
well as higher access to new markets, espe- evidence of these problems includes the qual-
cially in the developing countries. The open- ity of our air, the taste of our water, and the
ing up of "new frontiers" has, however, also vast expansion of congested living areas and
accelerated the depletion of natural re- despoiled countryside” (Ospina, 2000, p. 32).
sources and has produced higher levels of in-
dustrial pollution. Although, as is well Though there is still much discussion about
known, environmental degradation is not a the entity of human-induced climate change,
consequence of globalization per se, greater experts agree that industrial pollution and
access to and exploitation of previously pro- the emission of fossil fuels are damaging
tected areas is creating further risks for the our global ecosystem. According to a recent
environment. Worldwide unsustainable con- Report of the United Nations Intergovern-
mental Panel on Climate Change (IPCC)
Graph I.6. Population living below US$1 per day "available observational evidence indicates
in developing countries in 1990 and 1998 that regional changes in climate, particularly
increases in temperature, have already af-
Number of people fected a diverse set of physical and biologi-
below US$1 a day Poverty Rate (%) cal systems in many parts of the world (UN,
(millions)
2001, IPCC, p. 3). The report, to which nu-
1998 1998 merous scientists and a great number of ex-
1990 1990
(estimate) (estimate) perts worldwide contributed, also states that
East Asia 452.4 278.3 27.6 15.3 "climate changes during the 21st century have
Excluding China 92 65.1 18.5 11.3
the potential to lead to future large-scale and
possibly irreversible changes in Earth sys-
South Asia 495.1 522 44 40
tems resulting in impacts at continental and
Sub-Saharan Africa 242.3 290.9 47.7 46.3
global levels" (ibid., p. 6). Events such as
Latin America 73.8 78.2 16.8 15.6
droughts, floods, avalanches, heat waves
Middle East & N.Africa 5.7 5.5 2.4 1.9
and windstorms are subject to increase. Nat-
Europe & Cent Asia 7.1 24 1.6 5.1 ural systems at risk include glaciers, coral
Total 1276.4 1198.9 29 24 reefs and atolls, mangroves, boreal and trop-
Source: OECD, 2000 ical forests, polar and alpine ecosystems.
22
THE MANY FACETS OF GLOBALIZATION
Because of their vulnerability, it is the poor- pervasive effects of poverty on a large pro-
est and least adaptable parts of the world that portion of the Earth’s inhabitants, juxta-
will suffer most from climate change in the posed with excessive and wasteful con-
next 100 years. "Most less-developed regions sumption and inefficient resource use that
are especially vulnerable because a larger share perpetuates the vicious circle of environ-
of their economies are in climate-sensitive sec- mental degradation and people’s impover-
tors and their adaptive capacity is low due ishment" (UNEP, 2000, Annual Report, p.5).
to low levels of human, financial and natu- The "Malmö Declaration", which resulted
ral resources, as well as limited institution- from UNEP’s First Global Ministerial Envi-
al and technological capability" (ibid.). Ac- ronment Forum in Sweden in May 2000,
cording to the IPCC report, the damages stated that: "We can decrease poverty by
that could derive from climate change are man- half by 2015 without degrading the envi- It is known that global-
ifold, including: ronment, we can ensure environmental se- ization has produced
curity through early warning, we can better
greater economic
• Decreased water availability for populations integrate environmental consideration in
in water-scarce regions; economic policy, we can better coordinate insecurity ... It is also
legal instruments and we can realize a vi- important to keep in
• Dangers for human health, i.e. increase in sion of a world without slums" (UNEP, 2000,
mind that in the long
vector-borne diseases such as malaria in First Global Ministerial Environmental Fo-
tropical countries, or heat stress morbidity rum). However, whether these goals will be run the benefits deriv-
and mortality in North America; achieved or not largely depends on the po-
ing from restructuring
litical leadership and will of the developed
• Decrease in agricultural production, es- countries – who are the greatest consumers the economy more
pecially in Africa and Latin America; of energy and polluters – as well as of the de- than compensate for
veloping world.
the costs of transition.
• Widespread increase of flooding for many
human settlements; 5.4. Mobility of workers and
migration
• Rising sea levels, which will affect partic-
ularly Small Island States resulting in the The increase in migration of workers, espe-
displacement of millions of people; cially from developing countries to the de-
veloped world, is posing serious challenges
• Collapse of many eco-systems (ibid.). to public administration systems around the
globe. Although migration is by no means a
The IPCC report concludes that, despite new phenomenon and is actually less extensive
these negative previsions, there is hope for than in the past, it should not be underes-
the future provided that environmental poli- timated and deserves to be addressed from
cies are sustained. In particular, it is strong- a developmental approach. States must be-
ly recommended that climatic risks be included come more attuned to these new realities and
in the design and implementation of na- find incentives to retain skilled workers
tional and international development ini- within their borders, while also ensuring
tiatives. Countries have the capacity to re- that social networks are in place to support
duce global warming and to reverse envi- workers who suffer sudden unemployment.
ronmental degradation. But it is essential that It is known that globalization has produced
all countries uphold the commitments made greater economic insecurity, especially
at summits in Rio and Kyoto. In this respect, among vulnerable groups of society in both
"the ten-year review of the decisions of the developed and developing countries. People
Rio Summit in 2002 will provide an histor- fear losing their jobs as companies can eas-
ical opportunity to the global community to ily relocate to regions of the world where wages
reinvigorate the spirit of Rio. This 2002 are lower. Although this is a serious social
Summit must address the major challenges problem in the short-run, governments can
to sustainable development, particularly the play a significant role in providing relocation
23
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
grants and in promoting re-training pro- uation in many developing countries and
grammes for the unemployed. It is also im- need for high-level skills constitute a press-
portant to keep in mind that in the long run ing problem, to which the countries affect-
the benefits deriving from restructuring the ed and the international community must turn
economy more than compensate for the costs their attention; both are vitally concerned with
of transition. these questions. Another critical question
in many developing countries, but also in the
It is also worthwhile noting that although cap- western world, is related to the working
ital crosses borders rapidly, the same cannot conditions in many multinational corporations
be said for labour. In fact, even though and local firms.
labour has become more mobile, it is only the
skilled workers who have legal access to 5.5. Demographic trends: ageing
Migration and brain- and can benefit from a globalized economy. population and impact of HIV/AIDS
The migration of skilled workers represents
drain have taken on a problem because of its "brain-drain" effect It is crucial that public administration remains
proportions which on developing countries, whereas the mi- very aware of what is taking place on the de-
gration of unskilled workers is a quite con- mographic sphere so as to adjust itself and
compromise the
troversial issue in political and social terms. its services accordingly. In mid 2000 the
prospects of many As indicated by the Executive Secretary of world population reached 6.1 billion and is
developing countries ECA: "Several hundred thousand highly ed- currently growing at the annual rate of 1.2
ucated Africans live and work abroad, while per cent or an increase of 77 million people
to build a better future
Africa spends $4 billion of its Overseas De- per year. Particularly rapid growth is expected
velopment Assistance (ODA) per annum on among the group of 48 countries classified
buying foreign expertise. Over 100,000 ex- as least developed.
perts from developed countries are current-
ly employed in Africa. The brain drain is de- One of the most alarming health crises is re-
stroying the core of Africa’s knowledge-pro- lated to HIV/AIDS, which is threatening to
ducing institutions and universities. Very few reverse a generation of accomplishments in
of these academic refugees are going to the human development. Some 50 million peo-
more flourishing countries within the conti- ple have been infected with HIV since the ear-
nent, most of which have adopted restrictive ly 1970s; 16 million have died. The impact
approaches to immigration at times border- of the HIV/AIDS epidemic is worsening in
ing on xenophobia” (Amoako, 2000). In some terms of increased morbidity, mortality, and
countries, high unemployment rates and population loss.
pessimism regarding the prospects for im-
provement in the foreseeable future have ac- Globally, the number of elder persons (60 years
celerated a wave of emigration, which is cre- and older) will more than triple, increasing
ating problems at both the country of origin from 606 million today to nearly 2 billion by
and destination. 2050. At the same time, international migration
is projected to remain high during the XXI
Migration and brain-drain have taken on pro- century with the more developed regions
portions which compromise the prospects of expected to continue as net receivers of in-
many developing countries to build a better ternational migrants on an average gain of
future, and also victimize the individuals con- about 2 million per year over the next 50 years.
cerned. The countries witness the loss of Because of low fertility, this migration has
scarce high-level skills developed at high a significant impact on population growth in
cost. For migrants themselves, the time-con- the more developed regions.
suming process of trying to obtain a visa may
only be the start of a protracted journey These demographic trends are posing a se-
through the uncharted seas of an informal rious challenge to national and internation-
job market, in which they are all too often al governance systems. In developing coun-
victims of exploitation. The employment sit- tries, governments will have to deal with a
24
THE MANY FACETS OF GLOBALIZATION
wide range of problems related to the expo- employment opportunities. Recent surveys
nential increase in population and the prop- indicate that, in the industrialized world, typ-
agation of deadly diseases. In the developed ical network users are middle-class, young
world, administrative systems will have to adult or adolescent, and male. The poor, dis-
undertake a number of reforms in order to abled, older or poorly educated have not been
meet the needs of the increasing number of introduced into the new technology and may
elderly and an increasingly diverse society. continue to be excluded from it. In many de-
veloping countries, access to the Internet re-
5.6. Bridging the digital divide mains a distant dream. Knowing how to ac-
cess the Internet, as well as to master computer
Information technology opens new vistas for softwares and other communication devices,
humankind. IT promises to improve our is today a must in the skilled work place. We
study, work and leisure. IT offers possibili- live in a society in which information is pow-
ties to broaden and accelerate the global in- er and wealth is based on knowledge. The unequal access to
tegration of information networks, of economic IT is creating what is
activities, and of social, political and cultural On a more positive note, modern information
pursuits. Currently, however, many developing technology offers both countries and individuals
known as the digital
countries and countries with economies in tran- dramatic opportunities to leapfrog into the divide generally
sition are only passively integrated, if at future, speeding up their economic and so-
between rich and poor
all, into the global economy. The unequal ac- cial development. While many developed
cess to IT is creating what is known as the countries have spent enormous sums in- countries and also with-
digital divide generally between rich and vesting in IT, many of the resulting IT prod- in countries
poor countries and also within countries. ucts and services have now become available
at prices that may soon be affordable to en-
Technological penetration is still very low in terprises and households in the developing
developing countries and in recent democracies countries. The current trend of IT towards
if compared to the developed world. In this distributed processing and network com-
respect, only those who have access to the In- puting is also very much in favour of devel-
ternet and a variety of communication devices oping countries because it provides them
are globally connected, whereas a great part with low cost and low risk – as well as high
of the world cannot reap the benefits of glob- benefit – strategies to develop their information
alization and are left at its margins. Many capacity and thus participate in the global
developing countries are still struggling to information society.
have nation-wide electricity, and infra-
structures are still inadequate. In addition, With rapidly declining costs for both computers
the cost of computers is, in relative terms, and telecommunications, it has been possi-
very high for many inhabitants of the de- ble to place computer power on the desktops
veloping world. Most enterprises in these coun- of individuals and to communicate with any-
tries have neither the capacity nor the one anywhere. This has given rise to a trend
means to be active players in the globaliza- of end-user and network computing, which
tion process. allows an organization to take an evolu-
tionary instead of revolutionary strategy.
The digital divide, however, is not a phe- By means of wireless technology, developing
nomenon which characterizes exclusively countries are now able to quickly build up
developing countries. An increasing gap in basic data-communication networks and in-
opportunities is also being witnessed in formation infrastructures with less invest-
many industrialized countries due to this di- ment, without having to wire thousands of
vide. It is mostly the young middle class miles of cables.
who have access to information technology,
whereas the poor as well as the older gen- Because of the shift from mainframe to per-
erations are being left out of the information sonal computers and networking (access to
revolution with great repercussions on their the Internet), IT can now provide more off-
25
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
26
THE MANY FACETS OF GLOBALIZATION
vance broader and more inclusive social pur- and that its effects vary according to domestic
poses" (UN, 2000, Millennium Report, conditions, in particular to whether a coun-
A/54/2000, p. 3). try has in place adequate institutions.
Therefore, to label globalization in absolute
As emphasized in the Bangkok Declaration terms as either a totally positive or negative
of February 2000, "globalization can be a pow- phenomenon is a reductive approach. It
erful and dynamic force for growth and de- should not be demonized nor sanctified, nor
velopment. If it is properly managed, the foun- should it be used as a scapegoat or a panacea Globalization ... should
dations for enduring and equitable growth for all the major problems that are affecting not be demonized nor
at the international level can be laid. For that, the world today.
it is essential to persevere in the search for
sanctified, nor should it
consensual solutions through open and direct In this context, "what we need is a better un- be used as a scape-
dialogue that takes account of the fundamental derstanding of how to translate our values
goat or a panacea for
interests of all (UNCTAD X, 2000, Bangkok into practice, and how to make new instru-
Declaration). ments and institutions work more effective- all the major problems
ly" (UNEP, 2000, Annual Report, p. 1). This that are affecting the
“With globalization there is a growing need now brings to the fore important questions.
world today
for binding international regulations, a need What is the role of the State in a globaliz-
for international conventions and institu- ing economy? How is globalization affecting
tions that cover cross-border transactions” the role and functioning of the State? Have
(Beck, 2000, p. 130). Appropriate regula- the reforms aimed at reducing the role of gov-
tions and conventions should ensure that glob- ernment and reshaping State bureaucracy in
alization does not limit the freedom of peo- many developing countries helped them to
ple around the globe, but rather empower them seize the benefits of globalization? What in-
to unleash their creative forces. But for peo- stitutional structures and policies are best
ple to be able to seize the benefits of global- suited to cope with globalization? What are
ization another set of conditions should be the responses that States, as well as re-
met, i.e. basic needs must be satisfied. gional and inter-governmental organizations
have provided and can provide for the future
This is especially true in developing countries in order to cope with the many challenges glob-
where people can actively take part in the alization is posing? These issues are ad-
world trading system and benefit from the dressed in the following chapters.
rapid transformations that mark the begin-
ning of this millennium, but only if the qual-
ity and access to education and health are
ensured; if physical infrastructures, includ-
ing transport and communication networks,
hospitals and water systems are built or im-
proved; if poverty amidst plenty is reduced;
and if the technology gap is narrowed – that
is to say, if people have greater opportuni-
ties to make choices. As argued by Sen,
"what people can positively achieve is in-
fluenced by economic opportunities, political
liberties, social powers, and the enabling
conditions of good health, basic education, and
the encouragement and cultivation of ini-
tiatives" (Sen, 1999/a, p. 5). In this respect,
the State has a very important role to play.
27
THE IMPACT OF GLOBALIZATION ON THE STATE
Chapter II
The impact of
globalization on the
State
1. How is globalization setting and regulation and, therefore, con-
affecting the role and sultation and formal negotiations on a glob-
functioning of the State? al or regional scale. Many of the problems af-
flicting the world today - such as poverty, en-
M
uch discussion and debate in vironmental pollution, economic crises, or-
today’s policy fora are being ganized crime and terrorism - are in effect
devoted to the theme of glob- transnational in nature, and cannot be dealt
alization and its impact on the with only at the national level, nor by State
State. Scholars and policy makers have ex- to State negotiations. As the Secretary-Gen-
pressed concern regarding the role of the na- eral of the United Nations, Kofi Annan, de-
tion-State in the new millennium, and its ca- clared: "No State and no organization can solve
pacity to adapt to and manage effectively rap- all these problems by acting alone. Nor how-
id change as well as to respond to the many ever, should any State imagine that others
challenges of economic and social interde- will solve them for it, if its own government
pendence. In particular, two issues are be- and citizens do not apply themselves whole-
ing increasingly addressed: whether global- heartedly to the task. Building a twenty-first
ization is weakening the role of the State and century safer and more equitable than the
whether it will eventually lead to the end of twentieth is a task that requires the deter-
State sovereignty. This chapter explores mined efforts of every State and every indi-
both topics, and analyzes why some countries vidual" (UN, 2000, Millennium Report, A/54/
have benefited from globalization while oth- 2000, para. 369).
ers have lagged behind.
Greater economic and social interdependence
1.1. The role of the State in seems to affect national decision-making
domestic and international processes in two fundamental ways. It calls
governance for a transfer of decisions to the international
level and, due to an increase in the demand
The lifting of trade barriers, liberalization of for participation, it also requires many de-
world capital markets, and swift technolog- cisions to be transferred to local levels of gov-
ical progress especially in the fields of in- ernment. "This implies that public policies
formation technology, transportation and are undertaken at different levels" (Sul-
telecommunications, have vastly increased brandt, 2000, p. 3). Thereby, globalization en-
and accelerated the movement of people, in- tails complex decision-making processes,
formation, commodities and capital. Corre- which take place at different levels, name-
spondingly, they have also broadened the range ly sub-national, national and global, paving
of issues which spill over the borders of na- the way to a growing multi-layered system
tion-States requiring international norm- of governance.
29
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
The fact that cooperation and regulation are functions include safeguarding peace and
required on many levels as a consequence of security within and outside national bor-
the complexities and transnational nature of ders; providing justice; ensuring the respect
present world issues has led a number of schol- of minority rights; formulating and imple-
ars to predict the "end" of state power. Some menting policies; providing public goods; en-
argue that the State may only adjust to suring social stability and welfare; and reg-
The popular globalization, but not have an active role in ulating and arbitrating the market.
it. Some believe that the State will become
assumption that the
obsolete. Ohmae, for example, suggests that Since its birth, the State has guaranteed in-
emergence of global "nation-States are no longer meaningful ternal and external security; underpinned the
civil society, and units in which to think about economic ac- law; funded national welfare systems; pro-
tivity ... In a borderless economy, the units vided the structures for popular representation;
increasing levels of
that do make sense are ... region states" instituted public accountability; and built the
cross-border trade, (Ohmae, 1995, p. 132). framework for economic and social activities
(compromise between the public and pri-
finance and
Despite the many concerns about the loss of vate sectors). During the last century, the re-
investment flows turns sovereignty, the State remains the key actor sponsibilities of the State have expanded in
the nation-State into in the domestic as well as international are- all these areas. "The need to supply collec-
nas. The popular assumption that the emer- tive public goods, to manage externalities and
an anachronism is
gence of global civil society, and increasing to provide for minority needs will persist even
wrong levels of cross-border trade, finance and in- in a world of expanded globalization" (Jones,
vestment flows turns the nation-State into 2000, p. 268). There is no evidence that glob-
an anachronism is wrong. In the international alization will reduce the relevance of such func-
arena, closer cooperation and concerted ac- tions. If anything, it makes them even more
tion among States represent an exercise of necessary.
State sovereignty. Such concerted action
does not necessarily weaken States; rather, Thus, the image of a borderless world in which
it can strengthen them by making the external the State has little or no relevance is in
environment more stable and by giving them many ways misleading. As a matter of fact,
greater scope to expand their exchanges in two realities co-exist. One is the so called bor-
a variety of fields. Moreover, globalization with- derless virtual world where geography does
out effective and robust multilateralism is not count, and communication and business
bound to lead to crisis because markets are transactions can occur in a matter of seconds.
neither inherently stable nor equitable. The The other world is that of the everyday life
many "challenges that we confront today of people in which borders still count, local
are beyond the reach of any State to meet realities are still complex and very different
on its own. At the national level we must gov- among themselves, and most fundamental-
ern better, and at the international level we ly where social and economic problems still
must learn to govern better together. Effec- need to be addressed. "The State will persist
tive States are essential for both tasks, and because the need for the State has grown, but
their capacity for both needs strengthen- also because the local resource pools and so-
ing" (UN, 2000, Millennium Report, A/54/ cioeconomic problems on which States are
2000, para. 15). We need to remember and based are undiminished" (ibid., 2000).
fully appreciate that the entire edifice set up
for global governance is currently under- Only the State can guarantee, through in-
pinned by nation-States and driven by the dependent courts, the respect of human
initiatives which they undertake. rights and justice, promote - in tandem with
other actors - the national welfare, and pro-
In the domestic arena, the State assumes a tect the general interest. Its role is also fun-
great number of functions which cannot be damental in operating the intricate web of
performed by any other actor and will not be multi-lateral arrangements and inter-gov-
less relevant in a globalized world. Such ernmental regimes. It is still States, collec-
30
THE IMPACT OF GLOBALIZATION ON THE STATE
tively or singly, that set the rules of the if it is true, for instance, that the negative
game, that enter into agreements with oth- externalities of a financial crisis in one re-
er States, and that make policies which gion of the world affect other regions around
shape national and global activities, and the the globe, it is also true that some countries
agenda of integration; though this is true in suffer more than others because they lack the
principle, in reality the problem of inadequacy capacity to contain the adjustment costs of
in capacity of individual States has become globalization. In order to understand what Increasingly, the State
clearly pronounced. This means that some accounts for these differences, it is crucial to
is called upon to act as
States have more political leverage in shap- explore what administrative reforms have been
ing the international agenda whereas others implemented around the world in recent "linking pin" of
have a less active role, as is the case for many years, and whether they have strengthened processes of planning,
developing countries. state capacity to ensure that the benefits of
globalization are evenly spread among the
consultation,
Moreover, as pointed out in Part Two of this population. negotiation and
Report, globalization does not reduce the
decision-making
size of the State in terms of expenditure. Ev- 1.2. The role of the State in
idence suggests that the countries that have multi-layered governance involving diverse
embraced globalization, are also those which players, State and non-
register higher rates of public expenditure. "Globalization pressures, including economic
State, at different levels
The argument that globalization produces a integration, fiscal discipline and democrat-
reduction of the Welfare State and therefore ic governance, have forced governance in- of governance
a cut in social spending is not supported by stitutions to redefine their role of universal
evidence. On the contrary, as discussed fur- provider as one that encompasses the roles
ther on, an intelligent, democratic State is of catalyst, enabler, gatekeeper, consensus-
needed to redistribute the benefits of glob- builder, mediator and negotiator. As such, glob-
alization and to minimize the costs that alization has led to the development of new
some segments of the population may bear. roles, relationships and partnerships among
government, citizens and business, and
To put it more simply, globalization may re- heightened the influence of the public on gov-
quire that the State improve its capacity to ernance policies and institutions. Citizens are
deal with greater openness, but it does not achieving greater input into government de-
seem to undermine its sovereignty or its cision-making; central governments are de-
fundamental role within the national and in- centralizing to local government levels; and
ternational landscapes. To be sure, the State governments are partnering with civil soci-
remains central to the well-being of its citi- ety and the private sector in the delivery of
zens and to the proper management of so- programmes and services. Many examples in-
cial and economic development. The State is clude: government-sponsored national poli-
also responsible for adopting policies which cy consultations, local service delivery
are conducive to greater economic integra- schemes, joint decision-making councils, and
tion. We should not forget that further glob- other innovative partnership arrangements"
al integration can be reversed by state poli- (UN, 2000, ST/SG/AC.6/2000/L.6).
cies inimical to openness, as occurred between
the two World Wars. Globalization does not Increasingly, the State is called upon to act
reduce the role of the nation-State, but re- as linking pin of processes of planning, con-
defines it given the pressures and respons- sultation, negotiation and decision-making
es it must give at the local, national and in- involving diverse players, State and non-
ternational levels. It has modified the mean- State, at different levels of governance. It is
ing of sovereignty but not undermined it. the hub of activities connecting multiple
partners and stakeholders from very varied
Experience shows, however, that globaliza- fields, activities, regions, cultures, professions
tion does not affect all countries in the same and interests. Adding to the complexities of
way. In general, and as recently experienced, bringing these together, is what may be de-
31
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
scribed as the decline of traditional author- State capacity have not received the same at-
ity structures and the decreased effectiveness tention as economic liberalization.
of the old top-down command. The differen-
tiation of needs, technologies, skills, ideolo- The reforms initiated in the mid 1980s with
gies and interests has carried in its trail a the support and leadership of the Bretton
wide diffusion of power on almost every lev- Woods institutions introduced a new public
el. The compact, monocratic pyramidal administration paradigm and macro-eco-
The underlying structures, which constitute the legacy of nomic policy framework. These reforms
indispensable element XVIII century thought no longer represent sought to reduce the role of the State in pro-
the prevalent reality of the contemporary world duction, as well as in service delivery and to
of improving human
of public administration. These structures cer- encourage the deregulation of public enter-
resources and tainly do not sufficiently respond to its con- prises. The emphasis was on maintaining
strengthening State cerns and cannot meet its needs in an effective, macro-economic stability, lowering inflation,
timely and user-friendly fashion. cutting deficit spending, and reducing the scope
capacity have not and cost of government. The reforms relat-
received the same Moreover, as already stated, the State will ed to the functioning and role of the State
increasingly need to function on three lev- in the economic sphere, have in many in-
attention as economic
els: stances, produced positive results. The pri-
liberalization vatization of public enterprises producing goods
• The sub-national level, as a result of a process and services has reduced the role of the
of devolution of functions to local level gov- State in areas where the private sector has
ernment structures, or even non-State actors often shown to be a better alternative, with
operating within bounds established by the the exception perhaps of basic services of in-
State and under its supervision; frastructure where the State has an intrin-
sic responsibility and interest (e.g. law and
• The national, or central government lev- order, including prisons, courts, public safe-
el; and ty, among others). In the developed world, the
end of State monopolies in many areas has
• The international level, where an entire ed- resulted in greater competition, lower prices
ifice set up for global governance is slowly and wider choices to the consumer.
taking shape, but is clearly underpinned by
nation-States and driven by the initiatives On the administrative side, New Public
which they undertake. Management (NPM) and reinventing gov-
ernment have been effective tools in im-
In this respect, the State will need to establish proving the efficiency of the public sector and
specific bodies, which can be entrusted with in reducing costs. Notwithstanding some of
ensuring an effective network among these the positive results derived from these reforms,
different levels, and to possess the necessary the retreat of the State in social areas
skills for multi-layered governance. (health care, education, housing) has been detri-
mental for many developing countries. Un-
der pressure from structural adjustment
2. Redesigning the State in programmes, which were aimed at achiev-
the 1980s and 1990s ing economic stability (by reducing hyper-in-
flation, reducing the budget deficit, etc.),
In recent years several countries have im- many States chose to cut back programmes
plemented a number of reforms in their pub- particularly in the social area. Perhaps a bet-
lic administration which, in many cases, ter solution would have been to seek to im-
have improved their position to properly prove tax collection or increase sources of in-
function in a global context as indicated in come through equitable taxation. Just by at-
the regional perspectives. Nonetheless, the tacking non-compliance and fraud in tax
underlying indispensable element of im- collections, many developing countries could
proving human resources and strengthening have dramatically increased their income. How-
32
THE IMPACT OF GLOBALIZATION ON THE STATE
ever, that would have implied a strong po- past two decades originated in the West-
litical will in favour of such measures and minster-system countries (Australia, New
also the existence of effective public admin- Zealand, the United Kingdom and Canada)
istration systems, as well as greater capac- and the United States, which may rightly be
ity which many countries lacked. considered as the foremost exponents of
NPM. This wave of reforms first started in
The lessons of experience have shown the lim- the UK in 1979 with the electoral victory of
itations of the structural adjustment pro- the Conservative Party, which produced a ma-
grammes and pointed to the need of broad- jor agenda shift towards reducing the role of
ening the agenda of public sector reform. It government in the economic life. The elec-
has become apparent that macro-economic tion greatly altered the status and range of
adjustment and stabilization were not suf- items on the government agenda and this,
ficient to address the fundamental problems in turn, forcefully brought public management
in governance and public management, issues onto the governmental agenda
which were of a political and institutional na- (Barzelay, 1998).
ture. What is more, the net effect of these ad-
justment policies has been a regrettable neg- Because of their importance, capacity for
lect and further serious weakening of strate- outreach and technological prominence, the
gic institutions, notably the civil service, in Westminster-system countries have exerted
countries where the process of "building the collectively a considerable influence on ad-
State" was still incomplete. The errors of these ministrative developments worldwide.
ways are currently, if belatedly, gaining in- These countries are exceptional in many
creased recognition. ways. They are all highly developed, demo-
cratic, stable and prosperous. They share a
To make globalization fully viable and accepted common language and, in spite of their dif-
world-wide the drawbacks in the social area ferences, a core of common values and tra-
must be corrected, and this implies rein- ditions, which have profoundly marked their
forcing state capacity. Opening up to the administrative systems. They also share a com-
global economy brings costs and benefits. Some bination of attributes and benefits that
gain and some lose by either improving their many other countries still manifestly lack.
lot or losing their jobs. The more effective and Home-grown in this environment, the pop-
confident a State, the more it can focus on ular "New Zealand" model was soon adopt-
compensating losses caused by globalization ed widely in this group of countries and has
and technical change. The absence of an ef- since been exported to other parts of the world
fective public administration can often con- with varying degrees of success. There is no
strain States from participating in the glob-
al economy because they fear the adverse ef-
fects of globalization on vulnerable segments Graph II.1. Taxes as share of GDP (%), 1994-98
of the population. The reform of public serv-
ice would give States a better opportunity to
Low-income
globalize. A strong, democratic State and countries
globalization go hand in hand.
33
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
denying the merits and the considerable in- pant inflation during the 1980s developed in-
fluence of this model during the past two to a campaign "to roll back the State". This
decades. To a greater or lesser extent, all of was defended on moral and ideological, as well
the countries concerned experienced an ero- as pragmatic grounds. The mounting costs
sion of confidence in government during the of social programmes in Western European
1980s and early 1990s. Where once the pub- and other industrialized countries led to
lic welcomed or at least acquiesced in gov- doubts on the wisdom and sustainability of
ernment initiatives, the mood gradually post Second World War welfare pro-
swung in the opposite direction. A number grammes.
of factors accounted for this change of atti-
Remarkably, what tude towards government and its role in the The need to enhance efficiency in the pub-
started as a policy to economic and social sphere. The first was a lic sector and to cut public costs was ac-
response to the global recession, which be- companied by a series of measures, includ-
cope with growing gan in the mid 1970s, and was predicated on ing privatization, deregulation, and the in-
budget deficits and ideas fundamentally hostile towards the troduction of market-like mechanisms in
State (Sulbrandt, 2000, p. 34). The second fac- the public sector. The broad appeal of these
cure rampant inflation
tor, which was related to the first, was the concepts is nothing less than staggering,
during the 1980s need to reduce unnecessary costs and ineffi- and although, to be sure, the measure of suc-
developed into a ciencies. cess varies from country to country, the ex-
tent to which the principles themselves have
campaign "to roll back
The rising costs of government and of the pub- been accepted may be taken as indicative of
the State" lic budget coupled with inefficient services, a worldwide trend. This trend may have
led to strong criticism of the State as producer been influenced by the convergence of val-
of goods and services. The burden of social ues in which multilateral agencies, the me-
welfare, as the population aged, produced a dia and civil society have played a part. It
transformation in attitudes. This was artic- has been manifested in the uneven but ob-
ulated by the New Zealand Minister of Fi- servable decline of traditional authority
nance in her 1991 budget speech: "The re- structures; the flattening of hierarchies; and
design of the welfare state is integral to our the pressure from the people to have a voice
strategy for growth ... The only sustainable and for that voice to count.
welfare state is one that is fair and afford-
able. Our current system is neither. Real wel- Four very common targets of reorganiza-
fare is created by people and families tion of the State have been implemented in
through their own efforts. Our redesigned wel- many countries and advocated around the
fare state will support those efforts and as- world: privatization and deregulation, mar-
sist those who cannot assist themselves" ket-like mechanisms, decentralization, and
(Boston, Dalziel and St. John, 1999). debureaucratization.
34
THE IMPACT OF GLOBALIZATION ON THE STATE
to reduce public employment and, in this man- represented conditions of survival, or key con-
ner also, the burden of taxation. "Privatiza- stituent elements of their ideological basis.
tion included both industries previously seen In these countries, the quest for more
as 'strategic' (such as steel, coal or airways) democracy has been coupled with attempts
and utilities where there was previously a to abandon a highly centralized, tightly con-
presumption of natural monopoly (such as gas, trolled, often paternalistic and authoritari-
electricity and telephones). The privatization an bureaucratic system in favor of one ex-
of the water companies and of the railways emplifying the merits of individual initiative
marked the high water mark of this process and citizen participation in the affairs of
in the UK" (Ferlie, 1998, p. 6). government. "Almost by definition, a high-
ly centralized system of government is less
Potentially far-reaching have been reform pro- democratic than one in which there is a net-
"Debureaucratization",
posals developed under the label "law and eco- work of local and regional authorities com- often through re-
nomics". The overriding purpose is to promote plementing the national authority with
engineering and
efficiency and maximize the creation of clearly delineated powers and responsibili-
wealth. This is pursued by eliminating laws ties" (UNDP, 1997, Regional Bureau for Eu- deregulation, has been
imposing restrictions on business and by re- rope and the CIS, p. 23). a preferred strategy in
ducing the penalties that corporations pay
pursuit of efficiency
for negligent behaviour. Inspired, to a large In Western Europe, specifically, the tenden-
extent, by lawyers and economists of the cy away from centralized control received a
University of Chicago, the thrust of these pro- powerful boost from the process of integra-
posals has been to circumscribe the role of tion into the European Union. In an attempt
government, restrict government spending, to address and resolve the problem of dis-
replace progressive income tax with a flat rate tribution of functions and resources among
tax, and otherwise arrest and/or reverse a trend the several layers of government, the Euro-
that neo-liberal economists - otherwise pean Union elaborated a principle which is
called "supply-siders" - trace to the Great De- very simple but clear. The principle of sub-
pression, the New Deal and the effects of two sidiarity plainly states that every function
World Wars (Clark, 1998). must be assigned to the lowest level at which
it can be discharged effectively. This means
2.2. Market-like mechanisms in practice that any decision to allocate a func-
tion or responsibility at a higher level must
"Where core functions (often social policy be capable of being defended or explained on
functions) were not privatized, a range of mar- grounds that it could not be done effective-
ket-like mechanisms were introduced to ly at a lower level.
mimic the effects of the market. This would
include periodic market testing of services (such 2.4. Debureaucratization
as groups within the civil service) against in-
vitations to bid from outside contractors. It "Debureaucratization", often through re-en-
would also include attempts to set up inter- gineering and deregulation, has been a pre-
nal market mechanisms within health care, ferred strategy in pursuit of efficiency. Con-
social care, education and even university set- cerned with promoting cost-consciousness, ef-
tings, although these experiments reported ficiency and effectiveness in the public serv-
mixed success" (Ferlie, 1998, p. 6). ice, NPM was also geared to affirm the
rights of private citizens as consumers and
2.3. Decentralization clients vis-à-vis state organizations, which
too often have been marked by closure, out-
Decentralization has been another very sig- datedness and paternalistic indifference to
nificant reform of the State which received the wishes of the public. In all the countries
a boost from the decline and fall of military concerned, transparency, accountability and
dictatorships and totalitarian regimes, for public service integrity have made a power-
which centralization and tight controls had ful comeback. In part, this has been due to
35
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
pressures from the public to put an end to a trends were criticized “for opening the door
tradition of secretiveness and obscurantism, to the re-politicization of public administra-
which has long been associated with the tion, retreating from the traditional norms
ethos and the practice of bureaucracy. The of public accountability by impeding politi-
stress on accountability has been linked to cal oversight of the bureaucracy, and allow-
an effort to bring policy and administration ing the possible incursion of administrative
back to the source - the citizen - to whom it corruption, should public managers realize
belongs, and to account for efficient expen- ... that they could secrete their own wrong-
diture of public funds. In other words, there doing. Public propriety should not be sacri-
The right of the public has been an effort to bring government clos- ficed on the altar of economic efficiency, nor
to know and even to er to the individual citizens, making it more should more businesslike public adminis-
intelligible, as well as more accessible, clip- tration be allowed to breach the common law
be involved in the ping away its prerogatives, cutting its staff duty to act fairly in making administrative
design and practice of down to size, empowering the public and widen- decisions which affect legitimate rights, in-
ing the latter’s choices. The right of the pub- terests and expectations" (Caiden, 2000, p.
public policy has been
lic to know and even to be involved in the de- 12).
reaffirmed sign and practice of public policy has been
reaffirmed. This is a development whose im-
plications have only been apparent in recent 3. New Public Management
decades. Such also is the objective of the re- and its main tenets
lated re-engineering. Its quintessential
method has been defined as follows: "Ques- The outcome and legacy of New Public Man-
tion everything; throw out all perceived as- agement or "reinventing government" - its
sumptions and conventional wisdom; look for Northern American variant - have been
breakthrough strategies; focus on customers, rather mixed, but its influence persists. This
radical change, nimble organizations and has been demonstrated at several global fo-
information technology" (Kettl, 1995, p. 41). ra, where it has been accorded considerable
salience. Thus, in its invitation to the 2001
The focus on radical change, nimble organ- Annual Conference in Athens, the Interna-
izations, as well as customers’ preference is tional Association of Schools and Institutes
unmistakable. It must be emphasized, how- of Administration introduced the Confer-
ever, that some of these approaches have al- ence theme "New Trends and New Tech-
so been embraced by movements of reform, niques: Implications for Education and
in several parts of the world, which have been Training" with the following commentary
left untouched by the reinvention tide. on the role of NPM: "The New Public Man-
agement is an example of globalization at work.
This development, however, not unlike the It has promoted a powerful technological
parallel trend towards privatization and out- revolution, and diffused a set of values
sourcing, did not come without its risks. among the public services of nation-States,
There is some reason to fear that merging sub-national units, international and supra-
the two spheres - private and public - might national bodies. Across all these spheres of
help create a world in which the public good governance, it has re-vitalized the identity
might no longer remain the paramount ob- of public administration as a profession and
jective. Allied to this consideration was con- scholarly discipline. It has helped to alter the
cern over what NPM, with its accent on re- balance of power within administration, as
duction of centralized procedures, might well as between officials and civil society. It
bring in its wake: greater emphasis on out- provides an object lesson about the nature
puts, separation of purchasing and and effects of globalization on governance in
providers' roles, the development of con- the opening decade of the twenty-first cen-
tractual mechanisms of accountability and tury" (IASIA, 2001, Annual Conference).
departure from lifetime career employment
(Hood, 1991). For a time, some of those
36
THE IMPACT OF GLOBALIZATION ON THE STATE
37
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
• Focus on core competencies and top priority omissions as well as commissions, i.e., fail-
tasks; ure to act in order to stop a wrongdoing. “A
whole new range of mechanisms has come
• Devolution of decisional responsibilities, as into force to review and correct the deci-
far as possible closer to the end user; sions of public administrators, thereby end-
ing the defence of compliance with instruc-
• Partiality not only for practices and meth- tions or merely ‘following orders’. Indeed, this
ods, but also for the language and values of newly emerging doctrine of administrative
The premise that all
the private sector, partly in an attempt to "de- responsibility goes well beyond the bounds
management is bureaucratize" public administration, but of public administration to the broad field of
grounded in economics mostly on the assumption that, in some cas- governance” (ibid, 1999, p. 9).
es, the private sector can provide cost-effec-
has also tive services and enhance competition; 3.4. Introducing business principles
correspondingly into public affairs
• Consistent with that theory, "client- ori-
obscured the important
entation" and designation of citizens as "val- The underlying assumption that "manage-
role that law, ued customers"; ment is management" casts doubt on the va-
psychology, political lidity of any major difference in the manner
• Emphasis on "empowerment" of users and in which public affairs and private enterprise
theory, ethics and other
stakeholders, and "participative management". ought to be run. Where a parting of ways has
social sciences must been perceived as plausible, the "manageri-
play in both the study 3.2. Empowering citizens alists" suggest that public affairs be conducted,
as far as possible, on business principles. The
and practice of public "Empowerment" of the citizen also forms a premise that all management is grounded in
administration/manage major plank in the managerialist platform. economics has also correspondingly obscured
It is hypothesized that citizens around the the important role that law, psychology, po-
ment
world are chafing under burdensome bu- litical theory, ethics and other social sci-
reaucratic rules, which restrict their range ences must play in both the study and prac-
of options and access to quality services tice of public administration/management. A
(Frederickson, 1996). It is assumed, accord- focus on the evils of government monopoly
ingly, that privatization, outsourcing of pub- combined with "bureaucracy bashing" have
lic services and debureaucratization are av- signalled the transition from public admin-
enues that lead not only to greater citi- istration to public management. A senior
zen/consumer satisfaction, but also to more research fellow of the Cardiff Business
freedom and more complete democracy. In oth- School explained the change of paradigm in
er words, "managerialism" has pitted "rules- the following terms: "In contrast to public ad-
bound administration" against the more ef- ministration, the new paradigm is concerned
ficient entrepreneurial, "results-oriented" with the economics rather than the politics
management. "Public administration" is of service provision, emphasizes government
swiftly being replaced by the more trendy failure rather than market failure, and is skep-
"management" in many schools’ curricula tical about the capacity of bureaucracy to pro-
and even the vocabulary of public organiza- vide services efficiently and effectively"
tions (e.g., human resources management). (Boyne, 1996, p.679).
38
THE IMPACT OF GLOBALIZATION ON THE STATE
the reinvention movement have carried this sults-oriented (Caiden, 2000). To achieve
idea one step further, arguing "that govern- these goals, the Government in the UK adopt-
ment should not only adopt the techniques ed a strategy whose keystones were inclu-
of business administration, but ... also adopt siveness and integration. Its programme has
the values of business" (DeLeon and Dern- been centered on five commitments:
hardt, 2000).
• “Policymaking: we will be forward-looking in
3.5. Downplaying the concept of developing policies to deliver results that mat-
"public service" ter, not simply reacting to short- term pres- The agenda for reform
sures.
Drawn to their logical conclusion, public purported to recast the
choice and its derivatives "have tended to re- • Responsive public services: we will deliv- mould of public
ject concepts like ‘public spirit’, ‘public serv- er public services to meet the needs of citi-
officialdom, "putting the
ice’ and so forth" (Kamensky, 1996). The im- zens, not the convenience of service
plications are far-reaching. On the prag- providers. people first", and to
matic level, this has led to major reforms in radically transform the
New Zealand, the UK, the USA and other coun- • Quality public service: we will deliver ef-
style of public
tries. The thrust of these reforms has been ficient, high quality public services and not
to separate political advice from policy im- tolerate mediocrity. management
plementation, thus also re-establishing the
old and much maligned policy administration • Information-age government: we will use
dichotomy. However, more fundamentally, new technology to meet the needs of citizens
these measures have purported not only to and business, and not trail behind techno-
redraw the boundaries, but also to alter the logical developments.
purposes of the civil service profession. In-
deed, it might be fair to ask whether the very • Public service: we will value public serv-
concept of a "public service profession" ice, not denigrate it” (ibid.).
makes any sense to the advocates and dis-
ciples of public choice. 3.7. Performance management
39
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
40
THE IMPACT OF GLOBALIZATION ON THE STATE
41
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
There can be little doubt that national ad- State actors, including private firms and
ministrative and civic cultures in Western Eu- other civil society entities.
rope have been profoundly marked by
shared traditions, legacies and institutions, In the process of reform and the means em-
some indeed going far back to the days of the ployed for this purpose there is pronounced
Roman Empire. Of these, the Etat de droit, convergence. This has been especially sig-
the bureaucratic model and a penchant for nificant in budgetary processes and the re-
legalism and centralization, more pro- orientation of civil service policies, chiefly in
nounced in some countries than in others, stand the direction of mobility, performance pay and
Western Europe has out. These are now called into question in the incentives for efficiency and effectiveness.
form of ongoing reforms, which, predictably, There has been renewed emphasis on the im-
been trying to reconcile
present commonalities and differences. portance of professionalism and profession-
their pro-active social Strategies for reform try to avoid the errors al ethics, and measures have been taken to
policies and strategies of the past, leading governments to take a safeguard the citizen/consumer from mal-
segmented approach to reform, that is to say administration and the abuse of power.
(namely, "the what-
to attempt the change of institutions in rel-
should-the-State-do"), ative isolation instead of seeking to address Such convergence of residual differences
with new ways to the modernization of public administration among the several partners of the European
from a global perspective. Excessive reliance Union is noteworthy. These differences are
implement these on form, and the letter of the law, and a cor- apparent on at least two levels: approaches
policies (namely, "the responding failure to address the substance to globalization and administrative culture.
in order to produce effective change in prac- More than their opposite numbers in the "an-
how-to-do-it")
tice, may represent another legacy which Eu- glo-saxon" countries, the governments and
ropean Union countries share and which peoples of continental Western Europe are
they now endeavour to correct. conscious of the adjustment costs related to
globalization. The problems and the down-
This shift away from the past is not unre- sides of these trends and developments
lated to the influence of managerial think- should not be overlooked: they include job in-
ing on policy development and administra- security, and for some groups, feared dete-
tive practice in most Western European rioration of the physical environment. Such
countries. It has been manifested in the dangers and such challenges point clearly to
adoption of new practices, but also in a the importance, the core functions and the
change of values. Everywhere, increasing leading role of the State through its public
reliance on "outsourcing" goes in tandem administration.
with rethinking of past methods of recruit-
ment, administration and career development It is interesting to note that while the Eu-
of public servants. Everywhere, there is ropean Union predates the recent spread of
more emphasis on "output over process", globalization, its institutions and policies
"lean government", "value for money" and "cus- have been an excellent tool in taking advantage
tomer orientation" (Timsit, 2000). of the opportunities of globalization. The
European Union is the most elaborate regional
This shift in orientation has been accompa- system of transnational integration. For
nied by parallel moves in the direction of de- some observers, the variety of economic and
centralization, deconcentration, and priva- security arrangements represent an ad-
tization, as well as other forms of devolution vanced form of globalization, but for others,
of power which, taken collectively, repre- they represent a way to limit the effects of
sent a marked departure from the strongly globalization, i.e., a way of combining pow-
centralized, and rather paternalistic State ad- er and authority to contain and manage
ministration of former days. An increasing global forces through cooperation, which
emphasis on openness has also come with more would be impossible to do for individual States.
reliance on networks, both national and in- Some believe that such integration weakens
ternational, and partnerships with non- national sovereignty, while others see the Eu-
42
THE IMPACT OF GLOBALIZATION ON THE STATE
ropean Union as the rescuer of the nation- • Modernization: the quest and need to
State, particularly the smaller ones, for adopt "best practices" characterized this
which it is difficult to survive in a world of stage; and
large groupings and organizations.
• Adaptation to the standards and practices
4.2. Eastern and Central Europe of the world community, and adoption of the
tenets of the acquis communautaire, for
In barely a decade, the countries of this re- those countries which aspire to join the Eu-
gion have attempted a triple transforma- ropean Union.
tion from a single-party State to a pluralist
While, in the initial
democracy; from a centrally planned econo- While, in the initial period, the overall con-
my to a free market economy, and from sub- ditions were characterized by volatility, the period, the overall
ordination to independent statehood. Few had end of the decade brought with it indications conditions were
the wherewithal or an "institutional memo- of growing consolidation in most of the coun-
characterized by
ry" commensurate to this task. Not surpris- tries concerned. This was especially true of
ingly, the pace and particular modalities of the political sphere, where the process of in- volatility, the end of the
this transition process have differed from coun- stitutionalization of a framework for demo- decade brought with it
try to country. Significantly, however, one is cratic governance may be considered almost
able to detect many shared characteristics, complete, and the outline of a new pluralis- indications of growing
which suggest a common pattern of political tic political order is becoming increasingly ev- consolidation in most of
and social change. These features include far- ident.
the countries
reaching deconcentration and decentraliza-
tion, and the emergence of distinct spheres A similar assertion may be applicable to the concerned
of economic and political life and privatiza- economic sphere. While the economic policies
tion. Related to the above, was the overall still face numerous hurdles, the structural
purpose to restore and to reinforce respect foundations of the new market economies have
for the rule of law. slowly begun to emerge. After nearly a
decade of experimentation, the countries of
This was no easy task. Reform had to con- the region are still searching for a model of
tend with understandable, but still damag- economic development. Most of them are
ing anti-State attitudes. The transforma- grappling with economic stabilization and re-
tion process depended for success on support structuring. Significantly, however, the ear-
from the public sector, which was at once the lier unconditional support for neo-liberal
target and agent of reform. This called for principles has been replaced by more dif-
careful strategies combining structure with ferentiated and cautious approaches. For
flexibility, continuity with change. In spite the public sector at large, in the new mar-
of the complexity of the process and the dis- ket economies, the prospects for reform on
tinctive patterns which emerged in particu- the basis of pragmatic and realistic objectives
lar countries, it is possible to distinguish four appear substantially improved. “However, the
major phases in the transition process: tasks ahead are demanding, particularly in
light of conditions for accession to the European
• Transformation: overhauling the old struc- Union and the Council of Europe, which re-
tures; mains a major goal for several regional
States” (Palankai, 1995).
• Consolidation: in the measure that the
"shock therapies" and "big bang" approach- Far more than the political and economic con-
es lost their appeal, design for the long- texts, the overall social predicament con-
term, capacity reinforcement and imple- tinues to be problematic. Continued unem-
mentation of critical policies became in- ployment on a substantial scale, increase of
creasingly important; absolute poverty, crime and widening in-
come disparities are some of the downsides
which the transition process has carried in
43
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
its trail. Cutbacks in social expenditures, and In all too many cases, uncritical adoption of
privatization have meant that social bene- "Western" forms and standards has clearly
fits have either been scaled down or have dis- not availed the countries of Eastern and
appeared altogether. With social safety nets Central Europe, and the Commonwealth of
visibly disintegrating in many countries, in- Independent States (CIS). This was exemplified
dividuals are confronted with the pressing by decentralization and deregulation re-
need to make major personal adjustments in forms, which resulted in confusion, over-
A difficult transition [in an environment which is rapidly changing lapping jurisdictions and fragmentation of the
Eastern European in fundamental ways. On the positive side, local government landscape. When the
by contrast, one can emphasize the emergence dearth of professional competence at the lo-
countries] has
of a new triangular relationship between cal level especially is also taken into ac-
demonstrated the State, society and the individual, together with count, it should be easy to surmise why re-
critical the rise of an active civil society. ality lags behind the normative ideal. Another
case in point is the tacit, unavowed, yet
interdependence of A difficult transition has demonstrated the widespread "one-size-fits-all" concept that
economic critical interdependence of economic per- often went together with the notion of "glob-
formance, institutional stability and social- al convergence" (Hesse, 2000, p. 19).
performance,
ly sensitive policies; all three are very im-
institutional stability and portant, though it might well be argued that "Only now is it being recognized that, with-
socially sensitive economic performance conditions the success in the environments of Central and Eastern
of the other two. In the last analysis, how- Europe, ‘rowing’, as well as ‘steering’ is need-
policies
ever, one-sided reform processes can be ed to keep the boat afloat, as even the most
counterproductive. Experience shows the attentive steering is conditional upon the day-
dangers of top-down shock treatments and to-day success of those implementing public
"big bangs" as ways of bringing change. "Ex- policy. To go even further, the rigid introduction
ternally-induced" reforms likewise have of business approaches in public adminis-
proven risky. Such was the case, for in- tration, as advocated by New Public Man-
stance, of the "supply-led" approaches pro- agement, may well prove disastrous in [still
moted by some international lending insti- unstable] systems based on a continental Eu-
tutions, which focused on economics but ropean tradition, where either the preconditions
tended to neglect the social, institutional may not be in place yet, or where they are
and legal dimensions of change. rejected due to the inherent logic of the ap-
proach. Particularly problematic is the all too
Countries are now beginning to rely more on limited ability of over-rigid management
"internally-induced reforms", in the measure systems to cushion the impact of unre-
that they have come to recognize and develop strained market behaviour. To copy specific
their potential for reform in this particular administrative cultures seems no answer to
domain. This, of course, does not rule out for- the problems at hand" (ibid., p. 20). In ad-
eign advice and assistance, but puts them in dition, only recently the need for civil serv-
a new perspective. One of the limitations of ice legislation has begun to receive the at-
foreign assistance, which soon became ap- tention which it deserves. This is one area
parent, was that it overlooked the problems where the requirements of EU accession
and complexities of implementation, especially have helped and where external assistance
in a turbulent context. Experience demon- could prove especially helpful.
strates the importance and priority of build-
ing domestic capacity. Progressive rein- 4.3. Asia
forcement of the necessary legal and insti-
tutional bases, modes and forms of public ac- Attempting to condense, in a few pages, the
tivity, as well as human resources, may be administrative experience and history of re-
the better way to proceed and to accommo- form in Asia is an impossible task. Of all the
date the criteria of the acquis communautaire, world’s regions, Asia is at once the largest,
for those countries who wish to do so. most populous and most diverse. Accord-
44
THE IMPACT OF GLOBALIZATION ON THE STATE
ingly, the quest for overall patterns and gen- In this process of reconstruction and socio-
eralizations is often fraught with dangers. Com- economic development, varying models were
monalities and differences exist, but must be applied. In India and Pakistan, a federal struc-
viewed with caution and interpreted with care. ture of government and parliamentary
democracy with commitment to the Welfare
Perhaps one commonality of East and South State were preferred. In China, Vietnam, Cam-
Asia that singles these sub-regions out is a bodia and Laos, by contrast, communist vic-
long and strong tradition of government au- tories took these countries to the path of so- Perhaps one
thority and state administration. Both regions cialist construction. Still, in almost every case,
commonality of East
also, but China especially, have known the the State and central government were
negative outcomes of the collapse of gov- called upon to play a very major part in the and South Asia that
ernment. In China, the country with the development effort. Pervasive intervention singles these sub-
oldest administrative heritage, a bureau- through central planning mechanisms (e.g.
cratic culture goes back, almost without in- five year plans) became the accepted strat- regions out is a long
terruption, to the Qin dynasty (221-206 BC). egy for modernization and agro-industrial and strong tradition of
Competitive examinations tied to the merit growth.
government authority
principle represent the legacy of the Han dy-
nasty, which reigned from 206 BC to 220 AD. Overall, the results of this drive were im- and state
It gave birth to the idea of a bureaucratic elite pressive, but the benefits to people in the coun- administration
- the mandarin class - in the service of the tries concerned uneven. South Asia, on the
Emperor and of the State. Over time, this con- whole, performed less well than East or
cept exerted a strong catalytic influence in South East Asia. During the last three
the region and beyond. decades of the XX century, the per capita in-
come of East Asian nations, excluding
British-governed India exemplified the suc- Japan, increased about four times compared
cessful application of this "elite" idea in ad- to South Asian countries. With an average in-
ministrative reform, which in the XIX cen- come per capita of only US$ 309, the latter con-
tury produced the Indian Civil Service in tan- stituted, in 1993, the poorest sub-region on earth,
dem with a centralized, monolithic, stratified the comparable figure for Sub-Saharan
and strictly hierarchical administrative African being US$ 555 (Haq, 1997, p. 33).
structure. In spite of profound transforma-
tions after the Second World War, some of these Though progress has been made on some fronts
traits and institutional legacies survive, and in a number of countries, this has seldom been
have been replicated in many of the countries the case of public administration where,
of South Asia. generally speaking, Western solutions have
proved counterproductive or have not produced
East, South and Southeast Asia emerged the hoped-for results. The latest of these at-
from the Second World War and its tumultuous tempts at "externally-induced moderniza-
aftermath deeply changed. East Asia and tion" is NPM. The main planks on its plat-
Southeast Asia were the scene of costly and form, according to Dwivedi, are sound: accent
protracted civil strife or wars of national lib- on results; service to the public; delegation
eration. In South Asia, independence came, of authority; greater attention to cost and the
almost overnight, with a massive flow of quest for efficiency, notably through the
refugees, perhaps the largest exodus of peo- adoption of private sector practices, such as
ple the world has ever seen. The difficult "contracting out", and merit pay. What he ques-
tasks of rehabilitation and nation-building were tions, however, is the NPM's market-driven
further complicated by manifold divides of lan- rhetoric and "reductionist approach": "This
guage, caste, religion and creed. In spite of all paradigm is based on the premise that, by
these problems, Asia as a whole experienced reducing the opportunities for incompetence
in the 1950s, 1960s and 1970s a veritable trans- and corruption, through narrowing down
formation, on a monumental scale, affecting the scope of government activities, a competent,
the lives of close to a half of humankind. transparent, effective and accountable gov-
45
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
ernance would emerge. The rationale ap- (where the States’ proactive role helped the
pears to be that, with less bureaucratic Asian Tigers achieve a remarkable econom-
structures, there would be only a few bu- ic progress), the State is popularly viewed as
reaucratic problems. Thus Asian nations, as having a major responsibility for socio-eco-
well as other developing nations are being nomic development. The Western approach
urged to have market-friendly governance and for a leaner, meaner and market-friendly
administration. And since the field of de- state administration may be given lip-serv-
velopment administration is posited more as ice; however, the state apparatus is not go-
a problem than a solution, New Public Man- ing to be downsized and emaciated, as hap-
agement, in the garb of development man- pened in parts of "the West";
agement, is recommended as a cure-all med-
Though progress has icine" (Dwivedi, 2000, p. 9). • Second, there are some countries in the re-
gion that view Western culture as based on
been made on some
Of course, this does not mean, for Asia or oth- an extreme form of individualism; thus var-
fronts in a number of er regions, wholesale rejection of the prem- ious attempts by the West to impose its val-
countries, this has ises or precepts of NPM. Such a course, ac- ues, in the name of liberal democracy and su-
cording to Dwivedi, would be not only unwise, premacy of the market are seen as yet an-
seldom been the case
but also impractical. We live in an age of in- other neo-colonial attempt to "modernize"
of public administration ternationalization and global interdependence. Asians. From their perspective, the values
For the developing countries, including which seem most important to "the West" are
many in Asia, this means continued reliance, less momentous worldwide. By contrast, the
to a large extent at any rate, on methods and notion of duty and community supporting fam-
technologies developed in the West. It can- ily needs, respect for authority, and consen-
not be overlooked, on the other hand, that sual decision-making (specially in East Asia)
reform approaches are seldom value-free. are rooted in Asian culture; and
"Thus one emerging pattern, with global im-
plications, is centered on the ideas of efficiency, • Third, despite the display of Western-ori-
the market and the myth of achievement, ented formal bureaucratic and political fea-
which are hallmarks of the Western, specif- tures of governance, the style of doing busi-
ically American administrative culture" ness will probably remain at variance with
(ibid, p. 20). Its merits notwithstanding, this Western models of governance.
administrative culture tends to neglect im-
portant political, social and legal dimen- 4.4. Arab States
sions. Its solutions are limited in face of the
critical concerns, which continue to bedevil A somewhat specific situation developed in
many developing countries. the Arab States of Western Asia and in the
North–African part of the Arab region. In mod-
In Asia overall, but in the larger countries ern history, the Arab States, with the exception
especially, a strong State has been able to har- of Morocco, was a part of the Ottoman Em-
ness to its advantage the winds of change, pire for more than four centuries. The
diminish the costs of adversity and steer French and the British colonial powers, un-
the course of reform. Although it is an over- der whose hegemony the geo-political borders
simplification to talk about a set of distinc- of most Arab countries were drawn, suc-
tive Asian values, certain traits and mental ceeded the Ottoman rulers. Most of the Arab
attitudes have helped in this regard: countries achieved independence after the Sec-
ond World War, although the struggle con-
• First, in Asia there is less mental resist- tinued until 1962 in the case of Algeria and
ance to State intervention compared to parts 1967 in the case of Aden. This sequence of
of "the West", because Asia has a long posi- events has had a substantial impact on the
tive experience of the administrative State. political, economic and cultural life in the Arab
Whether in South Asia (where the State is societies. The concept of the State and the
viewed as Ma-Baap - parents), or in East Asia role of the state institutions (legislative and
46
THE IMPACT OF GLOBALIZATION ON THE STATE
executive bodies, the judiciary, and military arrangements are leading people to question
and security forces) were influenced by the some features of this situation. Participation
Ottoman and colonial experiences. in the community is becoming a value in it-
self, regardless of the role it plays in the
At the moment of independence, the state struc- greater scheme of things.
tures in some Arab countries embraced the
republican form of government. This happened However, finding a remedy in such situations
in Algeria, Egypt, Lebanon, Sudan, Syria, is neither quick nor easy. Since the 1970s,
Tunisia, Yemen, and later in Iraq and Libya, the course of events has brought adjustment
where republics emerged. In other Arab to the functioning of many Arab govern-
countries the traditional forms of government ments. The political systems began to open
- monarchies - persisted. Very different ide- up in a way that has appeared to promise a
ologies underpinned these systems of gov- significant revival or introduction of demo- While the process of
ernance. None has delivered all the basic hu- cratic practices. Whether this has happened reform is progressing
man capabilities, though no one denies huge in the form of increased political participa-
slowly and has
progress in several basic social development tion and alteration of power within the gov-
indicators throughout the region. ernance institutions, or in the form of an in- problems of its own,
creasingly active civil society working to en-
government reform has
One of the hallmarks of the situation in the large the public space and defend basic free-
Arab States is that by and large, the preferred doms – all these events have been most en- appeared on the
method of attracting support from the peo- couraging steps. agenda of many Arab
ple that has been practiced for decades by the
countries
governments is not through expansion of While the process of reform is progressing slow-
political participation, but rather by distri- ly and has problems of its own, government
bution of rewards. External sources of income reform has appeared on the agenda of many
controlled by the governments (i.e. in the form Arab countries. However, in view of the tra-
of oil revenues, deposits of remittances, in- dition of a ubiquitous State, a weak private
come from tourism, foreign aid, borrowings, sector and the existing backlog of human ca-
and fees imposed on the transport of oil) en- pabilities (e.g. education), especially in the
abled them to make available to the key less affluent Arab countries, the State does
groups of population a vast array of servic- not appear to be stepping back from its tra-
es and benefits, at little or no cost. The same ditional role. In these circumstances, the
external income sources allowed the Arab gov- emphasis in these countries is on increasing
ernments not to pursue vigorously the col- the efficiency and effectiveness of its opera-
lection of taxes from citizens. Indeed, direct tions.
taxes on incomes, profits, and capital gains
in the Arab States were among the lowest in 4.5. Africa
the world.
It has been rightly said that, for Africa as a
The outside boundaries of this arrangement whole, the 1950s and 1960s were years of po-
are becoming more and more visible. With litical and economic advances, the 1970s
the end of the Cold War, some external years of relative stagnation, and the 1980s
sources of income have dried up. The real price were years of decline or the “lost decade”. The
of oil is not necessarily increasing, at least, 1990s have been a mixed bag. (Kiggundu,
by far not at the rate that is able to meet the 2000). Gains in Uganda, Ghana, South
growing expenditure bill. Increased internal Africa and Mozambique were largely offset
taxation, reduction of public employment as by losses in the form of civil wars, human rights
well as curtailment of basic services and abuses and state disintegration in Somalia,
subsidies is starting to hit the urban middle Angola, Liberia, Sierra Leone, Rwanda and
class – by far the most vocal group of the pop- the Congos (ibid.).
ulation. Higher levels of education and the
demonstration effect of different political
47
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
coordination of macro-
A negative approach, which viewed the pub- A few countries have taken initial steps and
economic lic service chiefly as an impediment to pub- moved towards the concept of "smart gov-
lic sector reform, had prompted the downsizing ernment" by beginning a consultative
management with
of both its staff and scope in country after process, articulating a national long-term vi-
public sector reform; country. This tendency has been arrested. The sion and strategic framework for development.
and the involvement of focus has now shifted from retrenchment It appears, however, that for most of Sub-Sa-
and downsizing to capacity-building for ef- haran Africa, the promise of public sector re-
civil society in this
fective resource management and quality form remains largely unfulfilled. Indeed, it
process represent the service delivery, financial accountability and is difficult to imagine how the public serv-
common traits of new efficient government. This new emphasis on ice will be reformed on a lasting basis with-
capacity throws light on the paradox of re- out substantial improvements in governance
constructive form. The greater its complexity and scale, at large: integrity, accountability, trans-
approaches the more demanding the claims for individ- parency and adherence to the rule of law, as
ual skills and institutional strengths which well as the capacities and competencies
are required to make reform effective. Added needed to sustain them (ibid.).
to the issue of competencies of public insti-
tutions is that of legitimation, which to this Adoption of holistic, multi-faceted reform
day remains particularly real in several strategies; closer coordination of macro-eco-
African countries. It is against a background nomic management with public sector reform;
of very mixed results of past reforms that re- and the involvement of civil society in this
cently demands have been advanced for a process represent the common traits of new
"smart-government" approach to public sec- constructive approaches, which reflect some
tor reform. According to Moses Kiggundu, the of the lessons learned as a result of the
key components of "smart government" in- SAPs pursued during the 1980s.
clude the following:
It cannot be overstressed that credible reforms,
• “Introducing a broader and long-term ap- and programmes that galvanize broad-based
proach to reform relating it to the role of the support, must visibly address the really crit-
State; ical problems, which touch the lives of mil-
lions. In Sub-Saharan Africa, such burning is-
• Linking civil service reforms to such com- sues include: how to cope with the AIDS epi-
ponents as financial management, decen- demic; the deficit in health care, education and
tralization, sector-wide approaches, etc.; social welfare services; and an inadequate or
deteriorating physical infrastructure of roads,
• Adopting a long-term, system-wide pro- transportation and communication networks,
gramme approach to civil service and pub- electricity supply, sanitation and clean water.
lic sector reform;
48
THE IMPACT OF GLOBALIZATION ON THE STATE
Yet another set of problems represents the tries concerned were found to be overstaffed.
tragic legacy of years of civil strife, the de- The vast majority of public servants were en-
cline of law and order, even the collapse of gaged in trying to meet the above essential
States, which characterized the 1980s and requirements. Significantly, moreover, their
1990s. Most problems have a human face: mil- numbers had not grown since 1980.
lions of refugees and internally displaced per-
sons; half a million or more child soldiers, phys- The study also found that, in the majority
ical insecurity, and rampant crime and oth- of cases, public servants did not earn a liv-
er forms of anti-social behaviour. ing wage. Accordingly, the government was
unable to compete on the market for high lev-
It is futile to expect efficient markets, let alone el skills, and equally incapable of enforcing
healthy societies, to emerge where such con- the requisite performance standards at the It cannot be
ditions prevail. Redressing this situation other end of the scale, even though there was overstressed that
calls for concerted action of the State and civ- no shortage of the relevant skills. In sever-
credible reforms, and
il society on many areas. It calls for demo- al African countries, governments were con-
bilization, demilitarization, re-education and fronted with the difficult challenge of a pub- programmes that
training of former fighters and other victims lic service at once understaffed and overstaffed: galvanize broad-based
of war; post-conflict confidence-building in mul- understaffed on the top management and pol-
ti-ethnic or otherwise heterogeneous societies; icy-advisory levels; overstaffed as regards mes- support, must visibly
support for restoration of regional security sengers and lower level clerks (ibid., 2000, address the really
and conflict management systems; and the p. 9). The study recommended that public sec-
critical problems, which
overall reinforcement of institutions (Kaldor, tor reform should concentrate on quality
1995). All of the above demand initiative and focus on profiling and planning for the touch the lives of
and leadership, policy-planning, design and needs of the XXI century, rather than per- millions
skillful implementation on an extensive petuate the legacy of a distant colonial past.
scale. In turn, these call for strengthening Capacity reinforcement is the common
the core of the State, as well as the difficult thread that runs through current pro-
task of reinforcing, modernizing and re- grammes of public service reforms in a num-
forming the public service. ber of African countries. Other than train-
ing activities, these programmes have en-
As pointed out already, retrenchment and compassed a number of initiatives ranging
downsizing had been the goals of reforms dur- from administrative records-keeping - which
ing the 1980s and early 1990s. The outcome seek to eliminate ghost workers - to per-
sought, was to reduce the government’s formance bonus payment, and making civil
wage bill which, in a number of countries, servants more responsive to citizens’ needs.
represented as much as 75 per cent of the op-
erating budget. This was no easy task, con- Democratization, decentralization, devolution
sidering the importance of government em- of responsibility, service delivery improvement
ployment for most African countries, where and local government reform have been ma-
government remains the single largest em- jor components of the public service reform
ployer. This notwithstanding, a longitudinal drive undertaken by governments. Other
study prepared by the Department of Eco- important dimensions have been: a ma-
nomic and Social Affairs of the United Na- chinery for the redress of grievances and han-
tions in 1992 cast a very different light on dling of complaints, and the promotion of best
the issue of public employment. This study practices, professionalism and ethics, job
of civil services in 10 African countries re- classification and grading, staff perform-
vealed that cost and size are labels for deep- ance appraisal, human resources development,
er concern, which barely address the issue and leadership development. Priorities have
of public sector effectiveness. When set differed and the degree of success has obvi-
against the need to offer basic services, en- ously not been the same in all the countries
sure law and order, collect revenue and concerned. Available evidence indicates that
maintain the infrastructure, few of the coun- the results of reform are mixed at best.
49
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Though economy and efficiency have osten- in the right direction is the relative weak-
sibly been in the forefront of public service ness of Sub-Saharan Africa in relation to the
reform, such broader considerations as hu- rest of the world. "Its share of global trade,
man rights, the rule of law and citizen par- capital flows, investments, technology,
ticipation have recently made headway on the knowledge employment, and overall influence
agendas of reform. These concerns go to the is declining or stagnant. Individual SSA
core of the nation-State idea, the concept of countries have practically no voice in or-
sound governance, and the role of civil soci- ganizations such as the World Trade Orga-
ety, among others. Ideally, the objective is help- nization. No SSA country is a member of G8,
ing to create an enabling environment of re- and apart from South Africa, none was in-
spect for private property, entrepreneurship vited to join the newly-formed G20. "Fur-
development and democratic government to thermore, Africa’s diplomatic institutions
Though economy and allow people to take advantage of globaliza- are so under-resourced and badly organized
efficiency have tion. that they are not in a position to defend the
region’s interests in the complex and fast chang-
ostensibly been in the
As a process, democratization implied polit- ing globalization" (Kiggundu, 2000, p. 34).
forefront of public ical, constitutional and administrative reforms.
service reform, such To those ends, many francophone African coun- Continuing dependence of many LDCs in Sub-
tries convened national conferences with a Saharan Africa on foreign multi-lateral and
broader considerations view to discussing constitutional reforms bilateral assistance is one of the visible man-
as human rights, the leading to multi-party elections. Constitution- ifestations of a pervasive weakness, which
al commissions were established in some cannot go away overnight. The real challenge
rule of law and citizen
countries, paving the way to pluralistic elec- will be that of developing institutional and
participation have tions. Experience demonstrates the com- strategic capacities, not only for today’s but
recently made plexity of the process of democratization, also future needs. However, important as those
highlighting the critical role that national his- needs are, capacity reinforcement means
headway on the tory, culture and institutional infrastruc- more than technical training and modern-
agendas of reform ture play. Hence the importance of activities ization of equipment. Developing the re-
and projects designed to develop institu- quired core entails enhancing skills, as well
tional capacity and competencies in the as cultivating new attitudes, beliefs and
management and operation of democratic struc- habits, and the institutional frameworks
tures (e.g. national assemblies, political par- that make them come alive. Governments
ties, the administration of justice, and audit should focus on strengthening public ad-
institutions). The role of civil society has ministration, leadership skills, strategic
been highlighted in sector-wide approaches management, operational efficiency and rap-
to public sector reform. id response to the stimuli of a complex and
dynamic external environment.
Looking to the future, the experience of re-
form in Sub-Saharan Africa (SSA) points to 4.6. Latin America and the
the many complexities of what visibly remains Caribbean
a risky undertaking. It also has been made
apparent that there are no shortcuts, no A region of stark contrasts, Latin America and
quick fixes, no magic blanket formulas. In Sub- the Caribbean shared with Africa the ef-
Saharan countries, current prevailing con- fects of the slump in the world economy,
ditions are seldom conducive to effective re- which began in the mid 1970s. For Latin Amer-
form. In some cases, institutional weakness ica, as well as for the African continent, the
compounded by poverty, unemployment, cor- 1980s have aptly been described as the "lost
ruption, low levels of education, and religious decade". Massive debt, increasing poverty and
or ethnic divisions can effectively under- the growth of unemployment, informal sec-
mine the best intentions and derail the en- tor employment, corruption and organized
tire process of reform. One of the most dis- crime were phenomena that often marked it,
turbing factors militating against progress and have not gone away (Sulbrandt, 2000,
50
THE IMPACT OF GLOBALIZATION ON THE STATE
p. 4). Thus, the Economic Commission for Latin replaced military dictatorships from Guate-
America and the Caribbean reported in 1980 mala and El Salvador to Chile and Argenti-
that 35 per cent of the people in the region na. Concurrently, growing distrust in the
lived below the poverty line. Only 10 years models of development of the early post Sec-
later, the proportion had increased to 41 per ond World War produced a revolution in
cent, with 18 per cent below the absolute pover- statecraft and public management. Thro-
ty level. By 1997, a slight improvement could ughout Latin America, the prolonged economic
be reported, with 36 per cent of the popula- recession brought to the fore new doctrines
tion below the poverty line (ECLAC, 1998). which substantially transformed the hitherto
Poverty is multi-faceted. It comes with un- generally accepted objectives and modali-
employment, which in the 1980s exceeded 10 ties of state intervention. The role of central
per cent of the active population. Its effects government increasingly underscored the
are often compounded by the deterioration need for the maintenance of macroeconom- Poverty is multi-
of basic social services. Both health and ed- ic stability, the process of deregulation, trade
faceted. It comes with
ucation suffered a major decline in that liberalization and reduction of the scope of
decade overall.The impact of these trends has public administration. To some extent, those unemployment, which
been unequally felt in the region. In some coun- shifts and policy reforms reflected a con- in the 1980s exceeded
tries the aged, women, children and the na- scious attempt to adjust and to respond to
10 per cent of the
tive populations, in general, were among perceived conditions in a globalized econo-
those worst hit. Although an upward move- my. active population
ment began in the mid 1990s, it has not
touched appreciably the lives of the most vul- Deregulation and debureaucratization went
nerable. Besides, in the field of employment, hand in hand with a process of decentralization,
more than half of the new jobs have been in and the devolution of power to lower levels
the informal sector, a pattern also observable of government and actors in civil society.
in Africa. As in Africa, responses to these trends Debureaucratization has taken many forms.
in Latin America have featured the divesti- Though traditional practices and norms die
ture and downsizing of the State. Not sur- hard in many places, a paradigmatic shift is
prisingly, however, the practices have differed gradually transforming a hitherto closed,
from country to country, as has their degree inward-looking, rules-bound and formalistic
of success. administration into a more open system,
that seeks to be responsive to citizens’ demands,
In the Latin American region as a whole, the accepts the current challenges of globaliza-
1990s have been marked by substantial re- tion and technological progress, actively
forms of the State, in the following directions: looks for partnerships to accomplish its ob-
jectives in close collaboration with private sec-
• Democratization; tor groups or other non-State actors, and aims
at value-for-money.
• Debureaucratization;
It is needless to emphasize that such a
• Reduction of the scope of State interven- transformation is still more in the making
tion; than palpable reality, more potential than ac-
tual. One of the greatest obstacles in the re-
• Privatization and "marketization". quired transition from closed to open systems,
in response to globalization and technologi-
At the height of the Cold War, in the 1960s, cal progress, lies in the continuing difficul-
1970s and even part of the 1980s, few would ty of governments to attract, retain and de-
consider the Latin American region as a velop the new profile of manager and policy
haven of democracy and freedom. What fol- adviser, in short the new public servants that
lowed in the past decade has been nothing new conditions call for.
short of a sea change. Pluralistic regimes and
governments resulting from free elections
51
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Significant, in light of these conditions, is the they have another type of paradise available,
practice of developing Units of Policy Analy- the world’s tax havens, which constitute
sis in the Office of the President or similar genuine safe deposit boxes for the wealthy.
establishments, like the Secretariat of the Pres- In other areas, well-differentiated and with-
idency in some countries. Their task has out contact with the previous world, the
been defined as that of analyzing and mak- mass of the population survives, living in fave-
ing recommendations for action in the different las, tugurios or barrios populares, with ba-
sectors of policy, weighing in this regard sic shortages, where informality predominates,
suggestions that may come either from civ- drug addiction and crime proliferate, and the
One of the greatest
il society or the line Ministries. family disintegrates. Informality in the area
obstacles in the of the work force generates isolation and
required transition from It may be pointed out that, as in other re- competitiveness in the struggle for an always
gions, retreat of the State has been held in precarious subsistence. The effect is the loss
closed to open part responsible for not shielding people of the worker’s traditional dignity. The or-
systems, in response to from the negative effects that accompany glob- ganizations that previously provided identity
alization. The Chilean sociologist Andrés and self-esteem to those workers have declined
globalization and
Opazo summed up the negative aspects of the quantitatively and qualitatively" (Opazo,
technological progress, situation in Latin America in a UNDP report: 1997, pp. 103-104).
lies in the continuing
• Concentration of knowledge and wealth in the This creates a chasm and a disconnection be-
difficulty of hand of small elites, whose priorities take of- tween two worlds: one of the super-rich; the
governments to attract, ten little cognizance of "the plight of the millions"; other of precariousness, poverty, exclusion and
ignorance is seen by many critics as essen-
retain and develop the
• Continuing growth of spending for military tially the product of a reductionist vision which
new profile of manager purposes and "privatization of weapons", potentially is destructive of culture, social cap-
and policy adviser corruption, and drug trafficking; ital and democracy itself.
• Deterioration of the environment; and Some observers maintain that the Anglophone
Caribbean countries are faced with a para-
• Economic growth unaccompanied by a dox; while some celebrate the triumph of
growth of employment; thus adding to dis- democracy, others, by contrast, lament a
parities in developed and developing coun- sharp decline in governance. The sustainability
tries alike (UNDP, 1997, Bureau for Latin of good governance in the region was raised
America and the Caribbean). in 1992 by the West Indian Commission on
"Social discontent"; it noted that, "in the
Opazo concluded that the economic growth wake of structural adjustment programmes,
of Latin America not only lacked the "capacity no sense could be made of the democratic tra-
to distribute", but also failed to generate ditions West Indian societies have zealous-
sufficient accumulation. The effects of those ly cultivated" (West Indian Commission,
trends, in his view, were apparent on the po- 1992, pp. 493-494). In this regard, the Com-
litical, social and administrative levels. "The mission drew attention to the mood of grow-
social abyss which fragments the region is ing cynicism, normlessness and powerless-
particularly clear in the large urban centers. ness among the youth of the region. The
The organization of the habitat is a faithful Commission concluded: "It is perhaps time
reflection of the trend toward the disintegration that we went a step beyond platitudinous state-
of society. The minority that concentrates the ments to the effect that youth represent the
wealth is secluded in veritable paradises ... future of the Caribbean." (ibid., pp. 378-
Their gardens are well protected by private 379).
security, their social life takes place there,
they go to their own supermarkets, and they One may conclude that there are now no
go to equally conditioned and protected lo- threats to democracy. However, the "credibility
cations on vacation. Perhaps more significantly, gap" that afflicts the institutions of govern-
52
THE IMPACT OF GLOBALIZATION ON THE STATE
ment in much of Latin America and the agenda of the Third United Nations Conference
Caribbean has its source in their failure to on Least Developed Countries held in May
meet people’s aspirations and to respond to 2001, which linked the eradication of pover-
new expectations. Perceptions of such rele- ty to the promotion of good governance. How
vance, integrity and effectiveness, and the pub- inequality of power and wealth impacts on
lic sector’s capacity to deliver public servic- the prospects for democratic governance is
es of an acceptable quality form a necessary a related problem that must also be ad-
basis of government legitimation on which dressed. Polarization between the extremes
the vitality of democracy depends. of poverty and wealth, power and power-
lessness does not create conditions in which
Integrity and
Nevertheless, it can be recognized that the convergence of values becomes a possibility.
overall picture is not entirely negative. De- A shared-values system underpinning the effectiveness, and the
mocratically elected governments are now the process of governance and administration, na- public sector’s
rule in the region, and a process of regional tionally and internationally, also becomes prob-
integration and greater economic openness lematical. In the absence of such underpin- capacity to deliver
is taking place, real or perceived shortcom- nings, extremes may drift apart. Slowly but public services of an
ings notwithstanding. surely, a process of vilification of the "other
acceptable quality
side" begins, preempting all meaningful di-
alogue. Gradually, coercion and repression be- form a necessary basis
5. Lessons Learned come the rulers’ response to what they per- of government
ceive as a threat and define as lawlessness.
What lessons can one learn from progress and
legitimation
success recorded in some countries, but al- This may be already happening in a num-
so admitted failures experienced in others? ber of countries. The trend has been de-
What can one do to avoid repeating past mis- scribed in by Loic Wacquant as the passage
takes? And lastly, can one pull the threads from the Welfare State to the "Penitentiary
of experience together and try to understand State" (Le Monde, 7 December 1999). Such
what countries need to do in order to bene- perils notwithstanding, tolerance of in-
fit from globalization? equality has been a signal feature of policies
pursued in several parts of the world during
A systematic review and comparative analy- the past two decades.
sis of lessons learned from the experience of
the past two decades is long overdue. This In barely two decades, the "reinvention"
systematic review and performance evalua- movement and NPM have set the tone and
tion of policies and programmes should cov- contents of the discourse on administration
er both the substance of the proposed reforms and government in ways that sharply con-
and the methods or modalities of their im- trast with the course of its development dur-
plementation, as well as both the principles ing the major part of the XX century. The pro-
and strategies of recommended actions and ponents of these tenets were able to carry their
the delivery systems employed by donor message literally throughout the world.
agencies. There can be little doubt that this measure
of success is due, to some extent, to the con-
Mostly in the 1980s, but also in the early 1990s, gruence of their postulates with some of the
"cutback management" was offered as the uni- critical issues facing a number of governments
versal remedy and the market was advocated in the wake of a global recession. It is equal-
as the better way. Outsourcing, privatization ly certain, however, that this measure of
and partnerships were actively promoted success owes much to the English language,
and implemented. These approaches did lit- in which the message was couched, and to
tle to make a dent in the poverty and inequality the messengers’ capacity for outreach. The
that persist in many developing countries. thrust of their advocacy has underscored
A growing sense of the urgency to address the importance of the three E’s of manage-
the issue of poverty has been reflected on the ment: economy, efficiency and effectiveness
53
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
(Harlow, 2000, p. 3). The butt of their critique at large into a more acute awareness of their
has been the world of "bureaucracy" but, in responsibility for the proper deployment and
the last analysis, government intervention use of resources in their care. On the down-
predicated on Keynesian economics and the side however, there may be a certain danger
New Deal ideology. of sacrificing quality and equity to expedi-
ency, and of seeking short-term gains at the
Nevertheless, there is something to be said expense of long-term losses in the strength
in favour of this new approach. It has reaf- and credibility of vital institutions. There is
firmed the rights of the individual citizen a latent risk of fostering an attitude of mind
against a paternalistic and often overbear- according to which the ends justify the
In spite of limitations ing, invasive State; a role for civil society, in means. In the words of the former Director of
the broad scheme of governance; decentral- the Royal Institute of Public Administration
that have become ization and devolution of power against the of the United Kingdom, "to misquote Oscar Wilde,
apparent over the opposite tendencies of control and command it looks as though tomorrow’s Whitehall man-
from the top; latitude for initiative and ex- ager will know the cost of everything, but the
years, NPM and
perimentation; and freedom to move without value of nothing" (Plowden, 1985, p. 408).
"reinvention" produced preemptive barriers. In spite of limitations
some "value added" in that have become apparent over the years, The dominance of economics in both the lan-
NPM and "reinvention" produced some "val- guage and logic of NPM has been manifest
several parts of the
ue added" in several parts of the world, in- and pervasive. It is best exemplified by the
world cluding developing countries. On the opera- prominence accorded to the market paradigm.
tional level, their distinctive contribution Thus, the State must "steer not row"; gov-
has challenged one to question many tradi- ernment administration is "lean and mean"
tional practices and modify old ways. The at best; citizens are consumers. The market
strength of the proponents, it might well be metaphor has value insofar as it draws at-
said, has lain in the simplicity of their ap- tention to the limits of State intervention, re-
proach and message. The approach has been spect for the taxpayer and responsiveness to
direct, intentionally practical and cost-ef- citizens. But the analogy stops there. Con-
fective. The focus on economy, efficiency and temporary democracy is hardly a marketplace
effectiveness has been of help. These values in any sense of the term. Citizenship is a
have been widely diffused through the tech- birthright or is acquired through a legal
niques of audit, which also opened ways for process of naturalization. Equal participation
a broader, more pervasive and radical approach in democratic processes is predicated on in-
to the appraisal of performance in public or- dividual rights enshrined in the constitution
ganizations, the quest for alternative meth- or other legal enactments. In theory, at any
ods of public service delivery, as well as rate, no distinctions in this respect can be coun-
tighter controls intended to promote and tenanced. By contrast, the cash nexus gov-
safeguard integrity. erns a customer’s access and relation to the
market. The measure of his or her worth is
Many best-known reforms and innovations, strictly purchasing power. While both buy-
which broadened the diversity of organiza- ers and sellers may select one another ac-
tional structures, can arguably be traced to cordingly, by contrast a citizen’s access to serv-
an all-encompassing concern for cost-effec- ices provided by the government is based on
tiveness. "Off-loading" and "outsourcing", rights and needs. An intelligent democratic
"re-engineering" and "performance con- State is clearly not at liberty to favour or dis-
tracting" are terms which represent a new criminate. It would be fair to argue, thus, that
problématique, and, in a number of ways, a whatever its other merits, the market par-
radical new approach toward the public sec- adigm has serious limitations when it comes
tor. Not surprisingly, the "pluses" are often to public management in democratic societies.
coupled with "minuses". On the upside, the The paradigm does little to highlight two of
new stress on "financial management initiative" the cardinal values of democratic gover-
may jolt senior executives and civil servants nance: equality and inclusiveness.
54
THE IMPACT OF GLOBALIZATION ON THE STATE
Notwithstanding the merits, what has become normative ideal was the market and the
apparent is the manifest disparity and strik- measures taken should include outright pri-
ing disconnect between "working reality and vatization, and, where that was not feasible,
formal doctrine" of NPM and related ap- the creation of markets or market-like con-
proaches (Barberis, 1998, p. 451 et seq.). ditions as an operative context for [almost]
The disconnect is traceable to inherent con- all public organizations" (Premfors, 1998,
tradictions between professed objectives and p. 143).
an eclectic creed which formed the under-
pinnings of NPM. It would be fair to argue While granting certain merits in the New
that, contrary to claims advanced on its be- Zealand approach, Professor Premfors
half, NPM is not so new, and not so public- doubted its ready exportability to other
oriented, and is so riveted on economics (and parts of the world. He also questioned the ten- In spite of the belief
the 3 E’s) as to frequently lose sight of the dency of some international agencies to as- implicit in the assertion
rich contextual substance and cultural di- sume a "linear homogeneous trend" in pub-
that "management is
mension, which give the practice of man- lic service developments , "to interpret such
agement distinct characteristics in each par- developments solely in terms of conver- management", such
ticular case. gence" and to show "a corresponding incli- practice differs widely
nation against identifying and discussing
5.1. Failure to take into account any signs of divergence" (ibid.). Quoting F. according to the
history, local institutions and Naschold and others, Premfors concluded environment within
cultural variables that "plurality of ... regimes makes it impossible
which it is set
to derive and justify an immanent ranking
In spite of the belief implicit in the assertion of these regimes, or to presuppose that one
that "management is management", such such regime ... is necessarily more efficient
practice differs widely according to the en- than others" (ibid., p. 145).
vironment within which it is set. Failure to
accord such differences due weight con- Belatedly, some organizations and experts grav-
tributed substantially to erroneous policy itate towards the view quoted by Premfors.
transfers and "supply-led" reforms, often by Thus, two recent articles purporting to re-
international organizations, which "were ... flect the views of the World Bank and Sig-
unduly biased towards the economic ration- ma/OECD respectively cautioned against in-
ale of the reform and overlooked basic legal vesting in NPM reforms. The former warned
and institutional adaptations" (Hesse, 2000, that countries characterized by informal
p. 15). markets and ineffective legal frameworks were
ill-equipped to attempt such ambitious reforms.
Compounding the proclivity to underesti- Addressing itself more specifically to Central
mate the diversity and complexity of na- and Eastern Europe, the latter cautioned
tional conditions was what Professor Hesse against too hasty an application of NPM
described as the "illusion of global convergence" principles in the region (Allen, 1999). A dis-
(ibid., p. 19). There was failure to see that tinguished American scholar stated that
convergence in some important areas (e.g., "Western devaluation of government dur-
technologies and methods) may well go hand ing this historic era has contributed to ma-
in hand with growing divergence in others jor problems in the redesign of States in
(e.g., belief or value systems). Curiously, in Central and Eastern Europe" (Newland,
light of the current emphasis on respect for 1996).
diversity, globalization has often been por-
trayed, in deterministic terms, as a one-way Given the gravity of the crisis with which the
street. Likewise global society is often shown world is faced, it may be time to address this
as invested with a hierarchy of cultures, of paradox and arguably revise the policies
which one culture is destined to triumph. Pro- pursued during the past decades. Though they
fessor Rune Premfors of Stockholm Univer- provide a contrast to the prevailing views,
sity critiqued this misconception: "The basic voices from the developing countries and
55
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
the poor everywhere also deserve a careful progress in the latter. What has also tran-
hearing. The world as a whole would ignore spired from the experience of the past two
them at its peril. The United Nations, the most decades is that moves in the direction of de-
truly representative of humankind, can play bureaucratization, deregulation, decentral-
a leading role in sponsoring and facilitating ization and even deconcentration are sel-
the dialogue from which a greater convergence dom the result of purely technocratic
of views on this subject can emerge. processes, thoroughly studied decisions or ra-
tional actors’ choices. Rather, they flow from
The Fifteeth Meeting of the Group of Experts conflicts among concerned stakeholders over
on Public Administration and Finance, in its the distribution of functions, allocation of re-
most recent report, took a first step in this sources and the division of power. The out-
direction. It disclaimed the possibility or in- come, in most cases, reflects a shift of influ-
An overly technocratic
tention to "give a one-size-fits-all solution or ence and decision-making power, which de-
or purely economic any magic formula", preferring instead to pro- termines the thrust of reform. Thus, decen-
pose "potential strategies and reform paths tralization cannot succeed and work unless
growth approach to
through methodological tools that seek to un- a transfer of responsibilities comes with
institutional cover what are the essential functions that commensurate powers and adequate re-
development divorces the State needs to fulfill, at what level, and sources, both human and material. This has
to what extent" (UN, 2000, E/2000/66). The rarely been the case.
the institutional strategy
report also noted that: "an overly technocratic
from the socio- or purely economic growth approach to in- Likewise with deregulation and debureau-
economic and political stitutional development divorces the insti- cratization, the centrality of power and pow-
tutional strategy from the socio-economic er distribution come into sharp relief as the
environment, which it is and political environment, which it is meant principal factors of progress. Deregulation,
meant to serve to serve. Such approaches divest the state in- for instance, has practical significance only
stitutions of the contextual elements of their in the measure that service delivery sys-
relationship to the most vital social issues of tems conform as much as possible to the needs,
human degradation, poverty and widening interests and wishes of diverse clienteles, and,
social and economic inequality, which press moreover, that such needs and wishes are as-
especially on developing countries and which certained periodically through genuinely
States must address concurrently” (ibid.). The participatory processes. Creating and main-
report acknowledged that “such strategies will taining a business-friendly environment,
not solve problems of poverty and, in fact, may through either deregulation or privatiza-
exacerbate inequality, making it ever more tion, should be balanced with provisions
essential to invest in education, health, the safeguarding citizens’ rights to effective and
reinforcement of social capital and enhanc- affordable options. This is especially impor-
ing governance capacities” (ibid.). Similarly, tant when it comes to vital services like
a caveat was expressed regarding “the un- health care, education and housing. Public
dermining of the States’ moral and legal au- well-being, safety and interest must come first.
thority by the unquestioned ascendance of the
market economy and, more dangerously, It takes more than rhetoric to make the em-
prevailing attitudes towards this ascendan- powerment of citizens a palpable reality. It
cy which has legitimized the abdication of the takes transparent processes and calls for
State in crucial areas from which the State information dissemination and sharing that
should not retreat" (ibid., p. 11). truly minimize that secrecy and opaque-
ness, which may be described as sources of
With respect to decentralization, it is worth- bureaucratic power (Timsit and Wiener,
while noting that, after a number of failures, 1980). According to Wildavsky, talking of
it has become apparent that "beefing up the the USA, this bureaucratic power is rapid-
centre" is certainly not incompatible with de- ly waning. Monopoly of information is driv-
centralization but that, quite on the con- en out by the development of policy analy-
trary, the former must precede sound sis. "All around the country, in think-tanks,
56
THE IMPACT OF GLOBALIZATION ON THE STATE
57
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
limelight, the problem was approached, in dis- so stands to reason that such normative en-
ciplinarian terms, as soluble essentially actments and codes of ethical conduct do
through "anti-corruption strategies". not or cannot operate in a socio-cultural vac-
uum. Amartya Sen expressed this thought
Once again, consideration of a complex, cru- in discussing social choice and individual be-
cial question has been "driven by practi- haviour: "A basic code of good business be-
tioners and private sector consultants rather haviour is a bit like oxygen: we take an in-
than academics and theoreticians" (Kamen- terest in its presence only when it is absent
sky, 1996, p. 251). The net result has arguably ... What may not cause wonder or surprise
been a segmented, reductionist and instru- in Zurich or London or Paris may, however,
mental approach to the multi-faceted issue be quite problematic in Cairo or Bombay or
of public service ethics. Ethics has been Lagos (or Moscow), in their challenging
Evaluating outcomes
"reinvented", as if Immanuel Kant and Aris- struggle to establish the norms and institu-
has never been as easy totle had never lived. Three millennia of tions of a functioning market economy"
discourse and the wealth of global literature (ibid., p. 264).
as the professed
on ethics, moral conduct, civic rights and ob-
objective of making ligations, justice and human rights, from To produce the hoped-for impact, and to in-
things work better and Confucius and Ashoka to John Rawls (Sen, duce behavioural change in the required di-
1999/a) somehow escaped the purview of rection, codes of conduct must appeal to val-
cost less might suggest
private sector "specialists" on ethics and ues deeply ingrained in the environment or
ethics infrastructures. All too frequently, the widely shared. It follows from this premise
outcome has been a view of ethics, in essentially that the process of creating a code or set of
instrumental, utilitarian terms, as sub- rules must go in tandem with the appropri-
sidiary to economy, efficiency and effective- ate public service reforms, but also must be
ness. Human solidarity and cosmopolitan sustained by a broad societal dialogue, with
plurality, two values crucial to the future glob- at least two aims in view: to elicit a consen-
al order have never been written into this equa- sus on public expectations of employee behaviour
tion. and to "indigenize" the code which, in all too
many cases, is of distant foreign extraction.
Abstracted from social reality, devoid of his- The following conclusions on the lessons of
torical depth, bereft of conceptual analysis, the experience of the past 20 years flow from
such "ethics" have also been decoupled from the observations made in this chapter, from
professionalism. The need to match the the findings in the literature consulted and
quest for rigorous ethical standards with from the pertinent regional studies.
that of enhancing the status, learning, per-
formance standards, competence and skills First that there is a need to restore and to
of public servants was not internalized. Nor reinforce a truly inter-disciplinary approach
was it fully accepted that ethics, loyalty and to development assistance in public admin-
merit are conditional on attitudes which ac- istration and governance. Particular atten-
cord the public service the role, considera- tion should be paid to the political, legal
tion, rewards and prestige it deserves. As sub- and socio-cultural context of projected in-
sequently shown in the present Report, this terventions and reforms. There are sub-
reductionist approach has, in the past few stantial differences between the common
years, gradually given way to a more balanced law and civil law traditions, with far-reach-
view of ethics and professionalism in the pub- ing repercussions on administrative structures
lic service. and the way they operate. Celebration of di-
versity, moreover, does imply that the cultural
Most people would agree that "ethics infra- dimension should be accorded its due
structures", like any system of rules, de- weight. Lip service has been paid to the
pend for their effectiveness on the leadership need of building a culture of dialogue and re-
example and competence of those assigned spect. But it would be fair to say that, in this
the task of putting them into practice. It al- regard at any rate, working reality has be-
58
THE IMPACT OF GLOBALIZATION ON THE STATE
lied the formal theory. Notwithstanding ex- Fifth, that rebuilding national ownership of
tensive research on the impact of the envi- reforms and public trust, which drastically
ronment and the range of management cul- declined in the past two decades, is urgent-
tures, the findings in the literature, includ- ly needed. One of the major strategies, with
ing the regional studies cited, do suggest that this objective in view, consists in reinforcing
interventions have often proceeded on the un- performance and professionalism in the pub-
spoken assumption that one-size-fits-all; lic service. This entails a combination of
competence, integrity, responsiveness to
Second, that attempts at policy transfers needs and dedication to duty; it also pre-
should proceed with caution. Proponents of supposes capacity to monitor and evaluate
"best practices" frequently overlook the fact performance throughout; and
that what works in one country may not nec-
essarily work in another. It is relevant, to note Sixth, that reinforcing the capacity of mul-
Proponents of "best
in this regard that NPM-type reforms suc- ti-lateral agencies for policy advisory serv-
ceeded best in countries with broadly congruent ices and technical backstopping is required. practices" frequently
cultures and institutional frameworks pro- Both undertakings should be highly profes- overlook the fact that
pitious for the task, but also with affinity to sional and truly client-oriented. Though this
those of the country of origin (e.g. Anglo-Sax- appears self-evident, much of the criticism
what works in one
on countries). Where these conditions were levelled against the donor countries and country may not
absent or minimally present, as in parts of agencies has emphasized the point that, con-
necessarily work in
Eastern Europe and countries in transition, trary to generally-accepted theory, many
the results have been unfortunate. A typical programmes have not been demand-orient- another
example is privatization in countries where ed, but rather supply-driven, that is to say
a formal private sector was nonexistent or more responsive to the agencies, their part-
still in its infancy. The damage, in such in- ners and associates than to the recipient
stances, has been compounded by strategies governments. Furthermore, they have been
and methods, which gave rise to such char- predicated on premises and principles some-
acterizations as "shock therapies" and "big what removed from the needs and realities
bangs"; of the countries which they were supposed
to serve. Donor agencies should view them-
Third, that incrementalism may be the bet- selves as providers to and trustees of the coun-
ter way. Attention should be paid to fashioning tries concerned, and their role as that of
the tools, appropriate methods, strategies and safeguarding these countries’ long-term in-
technologies that will, in due course, produce terests.
sustainable outcomes. This entails capacity-
building as a priority task. A primary con- 5.2. Why have some States not been
cern should be to nurture skills and build the able to seize the benefits of
essential structures which make effective globalization?
choices and ownership of change feasible on
the national level; The lessons from the experience of the past
two decades contain important messages
Fourth, that governments of countries recipient particularly relevant to the developing coun-
of international aid programmes assisted tries and countries with economies in tran-
by civil society must be in control of the sition, confronted as they are with the chal-
process of change. Making governments ir- lenging environment of a globalized society
relevant or, though involuntarily, creating an and economy.
impression that others occupy the driver’s seat
has all too often served to undermine democ- If, as some say, for many developing coun-
racy and strengthen the prevalent mood of tries the 1980s were "the lost decade" and the
disaffection and cynicism which has been ob- 1990s a "mixed bag", at best, one may pre-
served in several regions; sume that something went terribly wrong de-
spite the good intentions and programmat-
59
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
ic efforts spread over the last twenty years. States with weak institutions are also more
Reducing the role of government in key so- vulnerable to the upsurge of deadly con-
cial areas and downsizing public services in flicts, which in turn hinder economic and so-
many developing countries, especially in the cial development and the integration of a coun-
South and East of the world, as well as ne- try into the world economy. As the Secretary-
glecting the important task of reinforcing po- General of the United Nations has recently
litical and economic institutions, left many underscored at the Cyrus Vance Lecture Se-
countries unprepared to meet the challenges ries on the Prevention of Deadly Conflict:
and rapid transformations of globalization. "There is abundant evidence that war is less
The "hasty retreat of the State" in the social likely to happen in a country - even a poor
It is now being area pursued during the 1980s and even country - which is well governed and has trans-
acknowledged that the early 1990s has weakened States which parent, accountable institutions" (Annan,
were already fragile. 2001). In fact, the absence of strong demo-
States with weak
cratic institutions and adequate social poli-
institutions are not well It is now being acknowledged that States with cies, especially in countries marked by social
prepared to face the weak institutions are not well prepared to and ethnic cleavages, may lead to severe
face the adjustment costs of globalization, conflicts over the distribution of resources and
adjustment costs of
whereas States with strong institutions political, as well as social unrest.
globalization have the capacity to channel globalization to
their own advantage. As stated by Keohane It is generally recognized that the mainte-
and Nye, "globalization shrinks distance, nance of peace and security are closely
but it does not make distance irrelevant. linked - both in positive and negative ways
And the filters provided by domestic politics - to economic and social development. Pover-
and political institutions play a major role ty, especially amidst plenty, is a major cause
in determining what effects globalization of violence, crime and social disintegration.
really has and how well various countries adapt The disparities between rich and poor in
to it" (Keohane and Nye, 2000, p.117). In many parts of the world are creating societies
essence, the capacity of the State to respond characterized by huge imbalances in terms
to external negative shocks largely depends of distribution of resources and power. These
on the degree of economic and social devel- imbalances, in turn, engender among the un-
opment, as well as political institutional- der-privileged population a deep sense of
ization of a specific country. resentment, injustice, hatred and alienation.
This is not only unacceptable per se. It is al-
As recent experience has shown, States with so very dangerous in terms of social cohesion
weak institutions are also vulnerable in the since it can lead to the upsurge of religious
face of rapid change, and the uncertainty that fundamentalism, to ethnically or racially-based
globalization engenders. Without building political movements, and this, in turn, to State-
strong institutions at the national level, in- engineered repression. Poverty and social ex-
cluding independent and effective judiciar- clusion may also lead to anti-democratic
ies, strong parliaments, accountable execu- sentiments, a loss of trust in government in-
tives, and without strong social policies, in- stitutions and political alienation, which
cluding those on health, education, and so- may pose serious threats to the longevity of
cial security systems, there are too many risks a democracy.
that the benefits of globalization will be un-
equally distributed among the population. In other words, governments with weak in-
Without complementarity between domestic stitutions are much more vulnerable to in-
strategies for institutional reform and ternal conflict and strife, which as experience
strategies for opening to global market has shown may degenerate into devastating
forces, developing countries may risk ex- civil wars or international conflicts. In this
posing themselves to the kinds of protract- respect, it may be said that institution-build-
ed crises from which some have just begun ing, or creating institutions that ensure a peace-
to recover (Raghavan, 2000). ful co-existence of all social forces within a
60
THE IMPACT OF GLOBALIZATION ON THE STATE
61
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
tures, which are able to command and receive bers of inter-governmental regimes, as well
individual allegiance and enjoin individual as main stakeholders in the maintenance of
commitment of effort and resources towards peace and international order;
a higher purpose. Failure or inability to ad-
dress, let alone resolve, this issue may, to a • Accordingly, it highlights the roles that States
large extent, account for the questionable record can play as counterweights in minimizing the
of reforms in the 1980s. The story of transi- costs of globalization, in enlisting the sup-
tion in parts of Eastern Europe and the CIS port of local and transnational companies, and
A true measure of the
would also justify a similar remark. in establishing partnerships in creative en-
State is not its "size", but terprises, while also protecting citizens
rather the nature of the How the State adapts to the new global en- against the possibility of exploitation and abuse.
vironment, how it strikes a balance between
functions it performs, greater efficiency and equity, and how it Two decades of trial and error, in several parts
and the efficiency and manages greater openness and loss of em- of the world, have amply demonstrated the
ployment for certain sectors of society, just fragility of reforms, which took insufficient
effectiveness with
to mention a few, are all critical issues which cognizance of the socio-political context and
which it performs them deserve great attention. However these chal- cultural dimensions, and also underrated
lenges will be met, one lesson is clearly the importance of adequate strategies and in-
emerging: weak States are not the answer. stitutional tools in carrying out reforms.
A true measure of the State is not its "size",
but rather the nature of the functions it per- Many of the economic reforms undertaken
forms, and the efficiency and effectiveness with in developing countries in the past decade,
which it performs them. although costly in social terms, may have been
necessary for economic stabilization, and have
It may be safely affirmed that, more than any- been an important step towards recovery. How-
thing else, it was the vacuum left by the re- ever, they only represent the first step towards
treat of the State, coupled in several in- general prosperity; much more has to be
stances with the absence of a civic culture done in terms of institution building, ca-
and public trust, that brought about the pacity building and social reform, including
emergence of soft States and kleptocracies the provision of basic social services to all,
during the 1990s especially. With many trag- and of safety nets to the most vulnerable. The
ic cases of human rights abuses, informali- next two chapters analyze these issues in more
ty, corruption, social disintegration and civ- detail.
il strife, the record of the 1990s has lessons
for the future, which must not be overlooked:
62
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
Chapter III
Reinforcing state
institutions and
social policies
1. Making globalization work country to mediate the impact of globaliza-
for all tion and even to thrive in the global envi-
ronment" (UN, 2000, ST/SG/AC.6/2000/L.6).
N
ot all countries have been able Thus, it is essential to start by re-examin-
to benefit from globalization. To ing the role of the State.
do so, they must strengthen
their public sector and enhance This chapter explores the complex issue of
their capacity for policy analysis, policy for- redesigning the State, its institutions and poli-
mulation and implementation. In fact, "the cies in a globalizing world. Rethinking the
Governments that seem to be ‘riding the role of the State in the XXI century is of great
wave of globalization’ are those that have importance to shape the grounds for inclu-
opened their [policy] analysis to uncertain- sive globalization, one that is geared to-
ty, ambiguity and change. In these globally wards redistributing its benefits among the
aware Governments, institutions have been population, while minimizing the costs and
created or altered to scan the rapidly chang- losses of affected groups.
ing environment, to promote policy invention
and policy dialogue, to speed up decision-mak-
ing in order to take advantage of emerging 2. New global dynamics
opportunities, and to embrace short-term require a fresh approach to
failures in favour of creating long-term sus- the State
tainable strategies. National governance in-
stitutions are faced with dynamic transfor- In the 1980s, the discussion of the role of the
mations at the global level and the [local] lev- State appeared to have been closed. Points
el. Governments without adequate capacity of view predominated which considered that
to recognize and respond to change are des- the State, in almost all its facets, was a
tined to be forever behind the ‘waves of market "impediment" and that the market
change’. The ability to embrace change is re- alone would solve the problems. Conse-
lated to an attitude of openness to diversi- quently, the conclusion reached was that
ty, comfort with uncertainty, and optimism the State should be dismantled and reduced
about the future. Globally aware leaders to the bare minimum. These views had re-
seek to build institutions that can embody placed the notion that the State alone could
these attitudes and inspire citizens to par- generate development, views which were
ticipate in the emerging aspects of globalization, characteristic of previous decades. Today
while at the same time attracting global both extremes of the pendulum have been giv-
forces to participate in national develop- en the lie by concrete facts. So, just as the
ment. Strategic participation by both inter- concept centering on the omnipotence of the
national and citizen organizations enables a State was erroneous, reality has proven that
63
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
the market has a great productive potential zations, on which the emerging new world
but that without regulations it can generate order depends. It has changed and it is
far-reaching imbalances. A 1999 UNDP re- changing in response to a changing envi-
port focuses on some of them: "When the mar- ronment and the rise of institutions with a
ket goes too far in controlling social and po- major regional role like the EU or ASEAN.
litical effects, the opportunities and benefits In spite of its limitations, constitutional
of internationalization are distributed un- democracy is still the best system of gover-
equally and iniquitously, concentrating pow- nance, as it is the best guarantor of freedom,
er and wealth among a select group of per- human rights and social development.
sons, countries and companies, while by-
passing everyone else. When the market What the experience of the 1990s has made
gets out of control, instabilities in "boom apparent is that turning "globalization into
and bust" economies surface, as for example an instrument of opportunity and inclusion"
the financial crisis in Eastern Asia and its cannot be accomplished overnight, through
It is an incontrovertible repercussions on a worldwide scale. When the "big bangs" and "quick fixes". This undertaking
desire for profits by market participants calls for systematic, consistent, long-term ef-
fact that the
gets out of control, it challenges the ethics forts at the sub-national, national, and in-
democratic State of countries and sacrifices the respect for jus- ternational levels, involving many players,
remains the major tice and human rights" (UNDP, 1999, Human both State and non-state actors. In turn, to
Development Report). be constructive, these efforts require solid in-
actor on the
stitutional frameworks and sound gover-
international scene Both extremes have produced very debatable nance, which the World Bank has defined as
and the most reliable results and, today, a new wave of question- ‘the manner in which power is exercised in
ing begins on how to achieve a different bal- the management of a country's economic
force for freedom and ance among the State, market and the oth- and social resources for development” (World
self-governance er important actor, civil society, as well as what Bank, 1994, p. vii).
role the State could play in this search. The
rhetoric is changing. In its special report on Building effective constitutional democra-
the State, the World Bank maintains that ef- cies and reinforcing State institutions is
ficient development is very difficult without therefore a theme of great relevance in an
the State. The report states: "there can be era of globalization. We cannot escape the con-
neither economic nor social development clusion that, by and large, the countries that
without a good government" (World Bank, fared best through the crises of the tumul-
1997). The notion of a Welfare State appar- tuous 1990s were those whose national gov-
ently completely stripped of legitimacy dur- ernments remained fully in command and
ing the heyday of the market is being reex- made their own decisions on major issues of
amined from other angles. The idea of the pro- policy. Experience demonstrates that as a rule
ductive State is being postulated and the ex- intelligent, democratic States have so far
periences of countries, such as the Nordic coun- coped much better with the effects of glob-
tries and the Netherlands, that have alization. They have been able to turn op-
achieved progress in that direction while at portunities to advantage; to circumscribe
the same time obtaining good economic re- the effects of downturns; to play their part
sults and maintaining elevated social balances, in global governance in a responsible man-
are being examined (Kliksberg, 2000; see al- ner; and manage to protect their citizens from
so Kliksberg, 2001). the vagaries of adverse contingencies. An in-
telligent, democratic State is needed to po-
It is an incontrovertible fact that the demo- sition a country in such a way that it can cope
cratic State remains the major actor on the effectively with rapidly changing contin-
international scene and the most reliable force gencies and harness to its advantage the winds
for freedom and self-governance. It is the fore- of change (UN, 2000, E/2000/66, p. 8).
most mover in the complex global network
of inter-governmental regimes and organi-
64
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
65
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
quality is a composite of several different at- institutions besides the executive, namely the
tributes: appropriateness, effectiveness, vi- legislature, the judiciary and the local au-
ability or sustainability, timeliness, equity, thorities. It also entails a strong capacity of
and acceptability. the State to develop social and economic
policies and strategies; strong commitment
It is also predicated on many factors, notably: backed by appropriate resource outlays to re-
dress social inequalities, and to protect and
An intelligent, • Thorough knowledge or expertise; increase social human capital. The public sec-
democratic State is tor should have a clear mission, with clear
• Skill in decision-making; goals and objectives. "What is needed is a vi-
one which promotes
sionary administration" that is capable to ad-
social justice, ensures • Sense of responsibility; dress the complexity of the issues and prob-
universal access to lems confronting the State at the threshold
• Respect for due process and the rights of of the XXI century (UN, 2000, E/2000/66).
quality services and all stakeholders;
productive assets, and Although experience varies, it may be said
• Integrity and command of public trust; and that the hallmarks of an intelligent, demo-
creates an enabling
cratic State can be summarized as follows:
environment for • Ability to capture and reconcile convergent
people-centred or divergent group interests. • Strong institutions of governance and the
rule of law;
development
All of the above attributes and factors are cru-
cial. Few policy decisions are made by experts • Credible judicial and legal institutions;
alone or taken in a social or political vacu-
um. Most are the product of inputs of very • Effective legal frameworks for economic ac-
different types, the synthesis of many fields tivity;
of specialization, and representative voices
from segments of society affected by these de- • An open and competitive economic envi-
cisions. The quality of the outputs, accord- ronment;
ingly, is a function of two important variables:
• Price stability and fiscal responsibility;
• Level of individual inputs;
• An equitable tax system;
• Capacity of the institutional framework or
decision-making structures and processes • Developed and competitive labour, finan-
to weave these inputs together into a coherent cial and capital markets;
whole and a workable project, in a timely fash-
ion. • Adequate steering, regulatory and en-
forcement capacities, together with judicious
Thus, an intelligent, democratic State is one privatization and outsourcing of services to
which "promotes social justice, ensures uni- private providers;
versal access to quality services and productive
assets, and creates an enabling environment • Public and private sector partnerships in
for sustainable people-centred develop- the promotion of business, with emphasis on
ment", in the terms of General Assembly res- micro-industries and small and medium-
olution 50/225/1996. Greater human devel- size enterprises;
opment and prosperity can be achieved on-
ly if certain fundamental conditions are met. • Access to information;
These include the existence of a basic dem-
ocratic system; a commitment of the politi- • Promotion of technological and infra-
cal leadership to work towards a more equitable structure development.
distribution of wealth; strong, healthy State
66
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
67
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
agreement on the fact that economic reforms erate into instruments of exploitation, mar-
need to be complemented by better social poli- ginalization, corruption and social exclu-
cies. sion. Poorly managed States and exclusion-
ary politics contribute to holding back eco-
It is erroneous to think that markets should nomic and social development. To be sure, eco-
be weakened or that the State should replace nomic growth alone is not sufficient to sus-
the market in its fundamental functions. tain equitable human development. Provid-
However, it is important to underline that ing health care and education, public infra-
not every aspect of public life should be left structure, safety nets for the unemployed, equal
to market forces or be guided by corporate opportunities for all and the respect of ba-
It is erroneous to think methods. Rather, markets should be cou- sic human rights is a fundamental respon-
that markets should be pled with "intelligent" States. In fact, mar- sibility of the State, which is not unrelated
kets and States should not be seen as ad- to the goal of economic prosperity for all
weakened or that the versarial forces, but as truly complementa- and to the enhancement of people's free-
State should replace ry. That is because markets can flourish and doms and quality of life. Poverty is reduced
sustainable economic prosperity can be and development is more easily achieved
the market in its
achieved only if there is a democratic and ef- when the State has a larger redistributive
fundamental functions. fective State that provides, through rules and role. In the words of Secretary-General Kofi
However ... not every institutions, an enabling environment for Annan, speaking at the Global Compact
private sector development and economic meeting, in July 2000, "... let's choose to
aspect of public life
growth. In the absence of appropriate insti- unite the powers of markets with the authority
should be left to tutions, competition is stifled and lawlessness of universal ideas. Let us choose to reconcile
prevails leading to instability, chaos and of- the creative forces of private entrepreneur-
market forces
ten to the emergence of kleptocracies. ship with the needs of the disadvantaged and
the requirements of the future genera-
Experience has shown that Governments tions..." (UN, 2000, Global Compact Meeting).
can continue to play a vital role in creating
an effective legal and regulatory framework Although markets perform invaluable func-
in which the private sector is enabled to op- tions within an economy, not all aspects of
erate. As those in countries moving towards public life are best served by market prin-
a market economy keep pointing out, the pri- ciples. On the one hand, States remain im-
vate sector cannot develop fully unless the portant actors because their actions help
Government institutes a legal framework determine the extent to which economic and
that guarantees and protects private prop- social prosperity occur within their own bor-
erty, govern business relationships and en- ders, as well as the extent to which prosperity
forces the commitments involved in busi- is widely spread among the population. On
ness contracts. Suitable enforceable legisla- the other hand, a free market and policies
tion is needed as related to the personal li- to promote a vibrant private sector are in-
abilities of owners and the bankruptcy of busi- dispensable if a country wishes to increase
nesses as well as the obligations of those in- its living standards and seize the opportu-
volved. An adequate legal framework is vi- nities of integration into the global market.
tal in developing an enabling environment
in which business creation and operation 2.3. The role of the State in creating
can function successfully. Therefore, the role an enabling environment for the
of the State in this respect is to establish the private sector
rules of the game for the operation of the mar-
ket and at the same time to perform the role Governments have a crucial role in creating
of arbitrator. an enabling environment for the development
and/or reinforcement of the private sector, and
Experience also demonstrates that, without the institutional and regulatory capacities of
proper structures, enforceable laws and so- governments to interact with the private
cially sensitive policies, markets can degen- sector should be enhanced. However, creat-
68
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
ing an enabling environment involves more ulations for the registration and licensing of
than removing obstacles. Governments must businesses. Without simplifying bureau-
perform a dual task. First, to create a polit- cratic procedures and rules to set up a busi-
ical and economic system in which entre- ness, entrepreneurial initiative will be sti-
preneurship can flourish; second, to facilitate fled. A study conducted by Hernando De So-
entrepreneurial undertakings. The first task to shows how red tape and byzantine pro-
requires a stable and secure political order cedures pose a serious hurdle to people's
in which contracts are enforced, necessary entrepreneurial capacities. To open a small
adjudicating machinery exists for resolution business in Lima and get it registered takes
of disputes, and the social order is backed by 289 days, and the cost of legal registration
democratic institutions. The second task in- is $1,231 - thirty one times the monthly
volves the establishment of financial, legal minimum wage. "To obtain legal authoriza-
and market institutions, and of a regulato- tion to build a house on State-owned land takes
ry apparatus that enables people to open a six years and eleven months, requiring 207
business without too much difficulty, to have administrative steps in 52 government offices.
access to affordable credit, and to invest in To obtain a legal title for that piece of land
productive activities. takes 728 steps. ... In Egypt, the person who
69
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
wants to acquire and legally register a lot on to facilitate the transfer of environmentally
State-owned desert land must wend his way sound technologies (UNEP, 2000, Annual
through at least 77 bureaucratic procedures Report). National and trans-national corpo-
at 31 public and private agencies. ... This ex- rations can play an important role in upholding
plains why 4.7 million Egyptians have cho- social and environmental values, as well as
sen to build their dwellings illegally (De So- respecting human rights.
to, 2000, p. 20).
Voluntary commitments are important but,
Additionally, there needs to be a permanent in general, insufficient to curb pollution of
mechanism for consultation with represen- the environment and corrupt practices. Gov-
Today, as many as 250
tatives of the private sector on the formula- ernments can play a crucial role in this re-
million children tion of relevant policies and the monitoring spect. Often, it is weak government that in-
throughout the world of their impact. Collaboration is needed in directly bears ultimate responsibility for not
ways that safeguard the interests of consumers preventing inhumane working conditions,
work in appalling
and small enterprises from cozy, at times of- pollution, deforestation, depletion of natural
conditions both in ten corrupt, coalitions of government and big resources and other transgressions. This is
business, or vice versa. Corporations and so because they do not ensure that appropriate
multinationals and local
companies should be encouraged to adopt a laws and regulations are in place to protect
businesses new relationship with the environment and workers and the environment. However, it
society. In this respect, one of the most must be said that even countries that have
alarming issues is related to child abuse good labour laws might fail to curb the abuse
and labor exploitation. Both the Director-Gen- of human rights in the workplace if their ju-
eral of the International Labour Organiza- dicial systems are ineffective.
tion, Juan Somavia and several participants
at the Global Compact Meeting, called for 2.4. Fostering partnerships between
strong action to stop the current pandemic the State and civil society
of child abuse. Today, as many as 250 mil-
lion children throughout the world work in An era of globalization calls for building ro-
appalling conditions both in multinationals bust partnerships between the State and
and local businesses. civil society. Such partnerships, however,
can only emerge between a intelligent, dem-
The OECD recently elaborated new standards ocratic State, on the one hand, and a vibrant
on corporate governance, workplace conditions, civil society, on the other. Their nature and
environmental safeguards, bribery and pro- importance were recently highlighted by the
tection for whistleblowers. The rules, how- Secretary-General of the United Nations,
ever, are not legally binding, although gov- who put them in perspective in his address
ernments are expected to promote compliance. to the opening ceremony of the Forum Gene-
In a more general manner, it is essential to va 2000 on 25 June 2000: "I remain convinced
have national legislation in place that sets that globalization can benefit humankind as
clear security and health standards in the a whole. But clearly at the moment millions
workplace, which corporations should re- of people - perhaps even the majority of the
spect. This represents an urgent yet difficult human race - are being denied those bene-
task ahead. Moreover, a greater commit- fits. They are poor not because they have too
ment by the private sector should be pursued much globalization, but too little or none at
to engender a new culture of environmental all. And many people are actually suffering
accountability, environmental performance in different ways - I would say not from
indicators and reporting, and the establish- globalization itself, but from the failure to man-
ment of a precautionary approach in in- age its adverse effects. Some have lost their
vestment and technology decisions. This ap- jobs, others see their communities disinte-
proach must be linked to the development of grating, some feel that their very identity is
cleaner and more resource-efficient tech- at stake. Even in the richest and most dem-
nologies for a life-cycle economy and efforts ocratic countries, people wonder if the lead-
70
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
ers they elect have any real control over soning is "at this time the State cannot par-
events. I think these fears can be answered, ticipate because ...", or "we can't rely on the
but not by any one nation alone, and not by NGOs because at one time they ..." etc. The
governments alone either. The State and social reality is so difficult and complex that
civil society should not see each other as en- it first and foremost imperatively demands
emies, but as allies. The strongest State is responsibility from all social actors. As
one that listens to civil society, and explains Wolfenshon, among others, stresses, "all must
itself to civil society in a way that encour- cooperate" because what will happen is in every- I remain convinced that
ages people to work with the State, of their one's interest. However, it is also necessary
globalization can
own free will. When I speak about civil so- to capitalize on what each party can con-
ciety, I do not mean only non-governmental tribute. Skills that might be utilized cannot benefit humankind as a
organizations, though they are a very im- be overlooked. The culture of "false competi-
whole. But clearly at
portant part of it. I also mean universities, tion" should be replaced by one policy of "let's
foundations, labour unions and - yes - pri- use the best of each and let's complement each the moment millions of
vate corporations" (UN, 2000, General As- other" (Wolfenshon, 2000). people - perhaps even
sembly Twenty-fourth Special Session,
the majority of the
Geneva). Inter-social networks geared to solving im-
portant social problems need to be built. In human race - are
The emergence of a vibrant and assertive civ- this context public policy should play the en- being denied those
il society, notably in those countries where ergetic role of calling for the establishment
it had been virtually absent, may rightly be of a network, and of being an ongoing stim- benefits. They are poor
considered as a most welcome feature of the ulus for and a relevant actor in the network. not because they have
trends of the past twenty years. However, its But it should also actively attempt to unite
too much globalization,
effectiveness critically depends on the es- as many diverse actors as possible in that net-
tablishment and maintenance of an enabling work. Civil society can make valuable con- but too little or none at
framework of laws, regulations and rules safe- tributions to solving social problems. Religious all
guarding not only the independence of communities, labour unions, universities,
NGOs and other civil society organizations neighbourhood associations, and the NGOs Kofi Annan
but also the transparency and accountabil- set up to work in the social service area, and United Nations
ity of their acts. Such conditions are predi- many other actors of a similar nature can con- Secretary-General
cated on a proactive State, a democratic cul- tribute ideas and invaluable human and fi-
ture receptive to diversity and which values nancial resources. The power of volunteers
public service and, last but not least, an in- in the different developing countries and in
stitutional framework for effective inter-gov- small countries is very important. Concert-
ernmental cooperation. ed efforts to mobilize the social responsibil-
ity of the business world should also be tak-
Globalization also requires improved chan- en in order to directly involve it as an actor
nels of participation. There is a growing in large-scale social undertakings.
need for greater citizen participation and new The inter-social networks are a complex
participatory policy-making processes. In web. They require diverse actors with different
particular, the State could greatly benefit from experience, languages, little practice in
weaving inter-social networks. It has been working together and mutual biases. In or-
common practice in developing countries to der to set up these networks and make them
see important problems, among them social function, systematic and laborious action is
problems, as an exclusive undertaking from required. The intelligent, democratic State
the organizational point of view. These prob- ought to develop the needed capacities, in-
lems would correspond to either the State, cluding the ability for concentration, nego-
civil society or the market, but only to one tiation, joint planning, and creation of very
of the aforementioned. In this type of logic, flexible and open organizational designs.
the weak points of each of the actors are em-
phasized and the stress is placed on histor- In order to foster a new relationship be-
ical and potential conflicts. This type of rea- tween civil servants and citizens, State in-
71
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
stitutions ought to be more open, flexible in economies in transition, the number of civ-
the face of change, and especially more ac- il society organizations has grown by leaps
countable to the public at large. There is a and bounds. Precisely on this account, how-
great need to counteract the tendency, which ever, this old/new phenomenon is still the cause
is present in many countries, to a powerful of much controversy and exaggerated claims.
and pervasive state machinery, which main-
ly favours the rich and influential at the ex- One of the many fallacies born in the 1980s
One of the many pense of the poor. State institutions should and 1990s was the belief that the retreat of
be made to work for all and should not be seen, the State could somehow be matched by cor-
fallacies born in the nor act as repressive or "unfriendly" to the responding advances from both civil society
1980s and 1990s was majority of citizens. State institutions and the private sector, which between them
should not be "abusive" in the way they deal would be able to close the ensuing gap. This
the belief that the
with citizens, but should be more open, has not come about. “In quantitative terms,
retreat of the State transparent and work for and with, rather the collective contribution generated by pri-
could somehow be than against citizens. Therefore, greater em- vate philanthropy remains infinitesimal
phasis should be set on ethics and profes- compared to government programmes in
matched by
sionalism in government, as well as on an- most Western industrialized societies, at
corresponding ti-corruption measures. Greater attention any rate” (O'Connell, 1996). In qualitative
ought to be given to developing a more serv- terms also, the lessons of experience suggest
advances from both
ice-oriented spirit among civil servants, and a cautious approach. A partnership with
civil society and the to ensure effective and transparent mecha- government entails responsibilities and, in
private sector nisms for citizens to channel their com- the last analysis, the claim and obligation to
plaints concerning poor, inefficient or de- speak and to decide for the country as a whole
nied access to public services. Ombudsman belongs to elected governments and them alone.
mechanisms should be reinforced or set in
place where they do not exist. It is a fact that Properly exercised, supervision by the State
in many developing countries, but also in the could exert a salutary influence on NGOs/
developed world, access to public services is CSOs. It would keep them on the right track.
made very difficult for those who lack per- The State needs NGOs as an important out-
sonal influence or money. In other words, what let for outsourcing government services, at
is a right becomes a privilege that only the the national and sub-national levels. In our
few are able to "buy". For the rest of the pop- globalized economy, inter-governmental or-
ulation getting a passport, renewing a license, ganizations (IGOs) engage in similar part-
or having a fair trial becomes a bureaucrat- nerships with international and local NGOs.
ic "nightmare". In brief, there is a compelling Both governments and IGOs should know that
need for state institutions to operate in a more there is a fine line between accountability and
democratic and accountable way in many coun- total control. This fine line must be observed
tries. and respected. It has not always been so.
The role of social dialogue in institution- These dangers are avoidable, but only
building also highlights the growing impor- through the establishment of legislative and
tance of organized civil society. On the sub- regulatory frameworks which enforce ac-
national, national, and international levels countability and oblige CSOs/NGOs to prove
active participation by groups of informed cit- their worth and democratic credentials as well
izens, such as at the global summits during as their ability to raise a substantial part of
the past decade, has modified the process of their revenue from sources other than the gov-
decision-making, profoundly influenced out- ernment in a transparent way. Paradoxical-
comes and more than anything else added ly, the virtue, utility and credibility of
new meaning to "governance", a concept NGOs/CSOs, especially in an era of global-
which, in truth, goes back to the XVII cen- ization, are largely predicated on the pres-
tury, or earlier. Throughout the world, including ence and affirmative action of a strong State.
developing countries and countries with Because until they prove ability to escape the
72
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
73
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
sentation of diverse interests, constitution- ment, which in turn are essential for the in-
al supremacy, the rule of law, and the con- tegration of countries into the world econo-
straint of executive authority" (Diamond, my. Of the needed institutions, the basic in-
1999). stitutions, arguably, are:
74
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
regard appropriated, directly or indirectly, by In the foreseeable future, the dangers for
special interest groups. democracy will come arguably less from dic-
tators, though there may still be a few in the
In the diversified and highly complex soci- world at large. The massive intervention of
eties in which we live, diffusion and disper- major power-holders, either through control
sion of decision-making power are both in- of the mass media and electoral campaign fi-
evitable and desirable, but only up to a nancing or through systematic corruption of
point. Given the considerably uneven dis- officials, has devastating effects on the cred-
tribution of power and wealth, with staggering ibility of democratic institutions and the le-
inequalities in these regards, this diffusion gitimization of their outcomes. "There is in-
and dispersion also carries dangers which can- creasing evidence that corruption under-
not be overlooked. While the orderly devo- mines development. It also hampers the ef-
Democracies survive
lution of power, through decentralization or fectiveness with which domestic savings and
other means, keeps people in control and has external aid are used in many developing coun- and thrive by
the added merit of leaving the decisions to tries, and this in turn threatens to undermine empowering their
those directly concerned (e.g., the local com- grassroots support for foreign assistance"
citizens
munity or the end-users), appropriation of de- (World Bank, 1997, World Development Re-
cision-making power, when it happens by de- port).
fault, inevitably entails surrender of the
public space to special interest groups. This Democracies are not immune to the corrosive
need not happen. Nationally and interna- influence of unaccountable forces, which can
tionally, experiments with partnerships in- turn democratic regimes into oligarchies of
volving public sector and private sector wealth or kleptocracies at worst. When this
agencies or NGO's, both state and non-state happens, a spirit of venality slowly pervades
actors have amply demonstrated how, the system, as citizens lose interest, becom-
through performance contracting and other ing the passive onlookers of a game played
means, it is possible to ensure a win-win sit- out by only a few. Democracies survive and
uation, one that accommodates the special thrive by empowering their citizens. Much
interest groups, but also, and above all, safe- of late has been made of this term, but of-
guards accountability and the primacy of ten the reality belies the current rhetoric. As
the public interest. commonly understood, empowerment im-
plies having meaningful options, but also tak-
One of the critical challenges which con- ing part in making important decisions
fronts political leadership as we enter the XXI which affect people's lives. To make it real,
century is the pressing task of building, or it demands of all citizens and groups in civ-
overhauling, the structures that will permit il society that they claim their rights and call
such partnerships of state and non-state ac- the agents of government to account, as re-
tors, to combine respect for democratic val- quired in a democracy. A proactive civil so-
ues, transparency and accountability with the ciety is crucial to the vitality of democratic
pursuit of efficiency and effectiveness. In- governance, whose pillars are none other
creasingly, such structures and institutions than freedom, equality of opportunities and
will be required on the international level to solidarity. The three pillars are indivisible,
design and to implement global policies and but while it may be true that freedom may
programmes. have spread during the past decade, the ob-
stacles (such as poverty and illiteracy) to equal
3.2. Making democracy meaningful opportunities have not, so far, been removed
in many cases. Carried too far, poverty and
Paradoxically, on the morrow of the fall of dic- inequality, whether in the East, West, North
tatorships and authoritarian regimes, the or South, can undermine the solidity of the
greatest challenge before us, as we enter the social fabric, creating the phenomena of
XXI century, may be precisely this: to make marginalization and social exclusion, com-
democracy meaningful to citizens at large. pounded by alienation, that already exist
75
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
around us. Ignoring such social problems is The current pandemic of corruption, often tied
a recipe for failure. to organized crime, is a disturbing phenom-
enon of universal dimensions. Its worst
3.3. The rule of law and public trust manifestations have been the collapse of
States, where social disintegration and in-
The issue of what is needed most, good lead- formality prevail. In an era of globalization,
ers or good laws, goes back to the beginnings such kleptocracies can serve as launching pads
of political discourse. Although both are es- or havens for various illegal activities (for in-
sential and indeed complementary, few peo- stance, money laundering). Very often, klep-
Labyrinthine provisions ple would dispute that, under present con- tocracies condemn their own peoples to a fate
ditions, given the scale and complexity of so- of destitution and total insecurity at the
and legislative
cial, economic and political transactions, on margins of the global economy. However,
loopholes both serve to the global and national levels, sound legal they may also pose a threat to neighbouring
exacerbate the and regulatory frameworks are sine qua non countries, as recent experience in several parts
conditions for the prevalence and sustenance of the world has demonstrated.
practice of rewarding
of a culture of trust and respect for the rule
the least deserving, of law. Since 1996, several global fora and major in-
and of defrauding the ternational and national reports have
Governments need to build effective regulatory sounded the alarm, warning against the per-
public and institutional frameworks, which include ils of corruption and organized crime, whose
an efficient legal system that secures the rule outreach has expanded with globalization.
of law; an independent judiciary that ensures Among the earlier studies, the World De-
reliable processes for resolving disputes; a velopment Report of 1997 on the "State in a
strong parliament to counterbalance powerful Changing World" explored the many facets
executives; an efficient tax system that pro- of this old/new phenomenon, its causes and
vides the necessary resources for social pol- impact on the effectiveness of institutions and
icy reforms and other legitimate state activities; thus on public trust (World Bank, 1997, pp.
a financial system that is modern, ade- 99-101). Significantly, the study reached the
quately supervised and transparent; and a conclusion that corruption cannot be effec-
political system that ensures widespread tively tackled in isolation from other prob-
participation. Equitable, transparent and lems, of which it is often a mere symptom.
consistent legal systems are needed to pro-
vide solid foundations and structures for so- The problem can only be treated by ad-
cial institutions where initiative can thrive dressing its root causes, especially the flaws
and collective pursuits, in both the public and in the organization and management of the
business sectors, promote the general in- public service profession, and by promoting
terest. professionalism, performance, ethical val-
ues and standards in public life at large.
By contrast, nothing saps the public trust more
quickly than the confusion resulting from in- 3.4. Strengthening and modernizing
applicable, vague, conflicting and forever national judicial systems
changing legal provisions, which compound
the costs of business, discourage enterprise With the increase in complexity and type of
or, worse still, afford knaves and villains cross-border activities, as well as with the grow-
windows of opportunity at public expense. ing number of actors at the national, re-
Labyrinthine provisions and legislative loop- gional and global levels, there is a parallel
holes both serve to exacerbate the practice increase in the need for regulation and en-
of rewarding the least deserving, and of de- forcement mechanisms. Sound legal frame-
frauding the public, thus slowly but surely, works, as well as an effective and inde-
creating a climate of collective alienation, cyn- pendent judiciary is a crucial pre-condition
icism and greed. for a country's success in a globalized world.
76
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
Globalization demands strong and effective world they have the whole globe to choose from,
judicial systems for a number of reasons. First legal stability is a must not only to attract
and most importantly, a strong judiciary is foreign investment, but also to promote the
a key factor in creating a stable environment development of a strong domestic market.
for investments and entrepreneurship. It is "There is a growing awareness that a judi-
also essential to ensure that democracies ciary able to resolve cases in a fair and time-
function properly through a system of checks ly manner is an important prerequisite for
and balances. The crucial role of the judici- economic development. In many developing
ary, especially in relatively new democracies, countries, the judiciary is not consistent in
is increasingly being recognized and the is- its conflict resolution, and carries a large back-
sue of "horizontal accountability" seems to log of cases, stifling private-sector growth and For a country to attract
be gaining a central relevance. O'Donnell de- causing the erosion of individual and prop- foreign capital and to
scribes it as "the existence of state agencies erty rights" (Buscaglia and Dakalios, 1999,
be a desirable place
that are legally enabled and empowered, p. 1). "While globalization has spurred eco-
and factually willing and capable, to take ac- nomic development, its benefits have un- for investment, it is of
tions or omissions by other agents of the State evenly impacted different segments of soci- utmost importance that
that may, in principle or presumably, be ety. The poor often lack legal rights to em-
qualified as unlawful" (O'Donnell, 1997, p. power them to take advantage of opportunities the rule of law is upheld
15). Without a proper system of checks and and provide them with security against ar-
balances, the separation of powers could be bitrary and inequitable treatment. Dis-
jeopardized leading to a concentration of criminatory laws and arbitrary enforcement
power in one of the branches of government, of the laws deprive protection of individual
thus undermining the constitutional basis of and property rights, raise barriers to justice
a democracy. The task of the judiciary in con- and keep the poor poor" (World Bank, 2001,
temporary democracies is not only to solve p. 2). Inadequate access to justice is there-
conflicts among contending parties, but al- fore one of the major obstacles to development.
so to check governmental actions and to pro-
tect minority rights. The fundamental pre- Also, courts of justice increasingly have to deal
requisite is that the judiciary be independ- with cases related to transnational illegal ac-
ent not only from the parties involved, but tivities. Criminal justice increasingly being
also from political pressure. Without a tru- involved in cases of transnational crime,
ly independent judiciary there is no rule of corruption, trafficking in human beings and
law and, under such conditions, a demo- drugs, money laundering, and terrorism.
cratic free society is in danger. This requires not only a more effective judicial
system at the national level, but also greater
A strong and efficient judiciary is also essential cooperation at the international level. The Unit-
in providing a stable environment for the ed Nations Convention against Transna-
growth of investments and economic activi- tional Organized Crime, which was adopted
ty. For a country to attract foreign capital and by the General Assembly at its Millennium
to be a desirable place for investment, it is meeting in 2000, is an example of interna-
of utmost importance that the rule of law is tional cooperation in this regard. It is the first
upheld. Potential investors will invest only legally binding UN instrument in the field
if they perceive that a country is politically of crime, which must be signed and ratified
stable and especially if they feel that their by 40 countries before it comes into force. States
business transactions are backed up by a well party to the Convention would be required
functioning legal and judicial system. The to establish in their domestic laws four crim-
courts of justice have a very important role inal offences:
to play in guaranteeing that property rights
are respected, that contracts are legally • participation in an organized criminal
binding and that transactions occur in an at- group;
mosphere of legality. Given that investors can
choose where to invest, and in a globalized • money laundering;
77
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
78
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
the judicature itself, to receive, investigate ments can play a vital role in setting out leg-
and determine complaints of corruption al- islation for the establishment of social safe-
legedly involving judicial officers and court ty nets (e.g., unemployment benefits, re-
staff ... ; training, relocation benefits). Legislation on
such compelling social and economic problems
• Judicial appointments: There is a need to is greatly needed in many countries world-
institute more transparent procedures for ju- wide.
dicial appointments to combat the actuality
or perception of corruption in judicial ap- Thus, strengthening parliament's opera-
pointments (including nepotism and politi- tional and organizational functions is of ut-
cization) ... ; most importance as part of a strategy of in-
stitutional reforms and as condition for suc-
• Codes of conduct: There is a need for the cessful economic integration. It is also a nec-
adoption of judicial codes of conduct, for the essary device to ensure that a country can
inclusion of instruction of such codes in the effectively regulate through its own legisla-
education of new judicial officers and for in- tion the increasingly complex areas, partic-
formation to the public about the existence ularly those related to globalization, that are
and provision of such codes against which the in need of change. Furthermore, we should
conduct of judicial officers may be meas- not forget that more democracy, more par-
ured; ticipation, and greater openness and trans-
parency begin with a strong parliament.
• Adherence: There is a need to enhance re-
quirements for newly appointed judicial of- The Legislative Power plays a central role
ficers to subscribe to such a judicial code of in democratic regimes, especially within the
conduct and to agree, in the case of a seri- division of powers framework, and represents
ous breach ... to resign from judicial or re- a fundamental institution of constitutional
lated office; democracies. Yet, its centrality and rele-
vance depend to a great extent on how its leg-
• Delay: There is a need to ensure reason- islative and representational functions are
ably rapid trials as justice delayed is justice
denied ..." (UN, 2000, Office for Drug Con-
trol and Crime Prevention). Box III.4
79
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
performed. As is well known, the main prob- The role of the Legislative Power has become
lems that affect parliaments in a number of an issue of great relevance not only in young
developing countries are their - real or per- democracies but also in consolidated ones.
ceived - poor functioning, and lack of credi- Democracy could, indeed, be reinforced with
bility and legitimacy. A weak Legislative an efficient, participatory and transparent
Power, without credibility and legitimacy institution, i.e. a strengthened parliament
may pave the way to authoritarianism and which adequately performs its functions,
to an unchecked Executive, leading to what and becomes the forum of strategic thinking
The Legislative Power O’Donnell has called "delegative democracies"; and cooperation, as well as the focal point of
that is to say, democracies that are hollow all sectors of the country, and the consensus
plays a central role in and emptied of their true meaning once elec- center for fundamental decisions. Parlia-
democratic regimes, tions have taken place (O’Donnell, 1994). This ments should be reinforced so as to allow all
is especially true in presidential systems in groups and interests to be articulated and rep-
especially within the
which the mechanisms of checks and balances resented in a fair and equal manner. A par-
division of powers in place are weak, and the Executive can rule liament with transparent procedures, that en-
framework, and with almost unlimited power. The separation sures the full participation in debates and vot-
of powers, as well as the principle of checks ing for both the majority and minority rep-
represents a
and balances, are the fundamental basis of resents an essential factor in ensuring the
fundamental institution a constitutional democracy. As such, its vi- proper functioning of a system of checks and
of constitutional ability and strength depend, to a large ex- balances. A parliament where the majority
tent, on the capacity of the Legislative Pow- can resolve problems while the minority is
democracies er to perform its functions. Strengthening the empowered to express its opinions freely
legislative body is extremely important to coun- and vote in an environment of ongoing dia-
terbalance and ensure appropriate political logue is of utmost importance for political sta-
control over the often excessive prerogatives bility.
of the Executive. In other words, it is a pow-
erful tool to reinforce democracy. Parliaments in many regions of the world have
great challenges ahead: to ensure that all sec-
Parliaments perform a crucial role also in oth- tors of society will be represented, that de-
er respects, primarily to represent all polit- cisions will be taken in an open way, and that
ical forces of society and to act as a legitimate demands from civil society will be dealt with
centre for consensus building in fundamen- efficiently.
tal decision-making processes. In fact, par-
liaments are the principal political locus of 3.6. Promoting effective
dialogue, confrontation and mediation in a decentralization
democracy. Inasmuch as parliament allows
both the majority and the minority to enjoy Promoting decentralization and broad par-
freedom of expression, its members will be ticipation of ordinary citizens in democrat-
able to exercise steadily a representative ic processes is being recognized as an important
and critical role. Parliaments also play a vi- ingredient of contemporary democracies.
tal role in guaranteeing political stability, and Resolution 50/225/1996 of the General As-
legal security, and in promoting economic and sembly of the United Nations called for "de-
social development. centralization of public institutions and
services", often as a condition of "enhanced
In many parts of the world where a parlia- efficiency and productivity, accountability
mentary culture has not yet developed, par- and responsiveness". More than just in-
liaments have been rather weak vis-à-vis the creasing efficiency, decentralization and peo-
Executive Power. It is therefore crucial to un- ple participation seek to bring government
dertake major efforts in order to reinforce par- closer to the citizen, where it belongs. This
liaments' capacity to carry out its many func- is one feature that became a critical objec-
tions in an efficient and transparent way. tive in the transition process in the countries
of Eastern Europe and beyond. A proactive
80
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
State is needed to provide a solid counter- ket. Others thought that civil society alone
weight to the dispersion of power but also of could find solutions to the problems. This ap-
responsibility that may be the concommitants pears to be a very promising and interest-
of decentralization and devolution of functions ing path, but experience shows that civil so-
to civil society groups. Under appropriate safe- cieties, in many cases seriously weakened by
guards securing the requisite measure of the social problems characteristic of the de-
transparency and accountability, such de- veloping world, have significant limitations
volution of functions is known to have pro- when it comes to confronting those problems.
duced beneficial outcomes in terms of mus-
tering support and mobilizing resources, A special study by Katzman on the topic
both human and material, towards creative maintains that: "It is therefore paradoxical
ends. However, experience demonstrates
that this is only possible given a solid basis
in the constitution and other relevant texts,
Box III.5
a clear and consistent legislative framework,
and financial resource allocations commen- YEREVAN DECLARATION ON DECENTRALIZATION
surate to the tasks. To be sure, decentralization
remains very high on the priority list of re- The United Nations Conference on Decentralization held in Yerevan, Armenia,
from 26 to 28 April 1999, focused on Eastern Europe and the CIS. It looked to
form of many developing countries. the practical facets of policy implementation and sought to elicit lessons from
experience in these countries. In light of the mixed record and oscillating
fortunes of decentralization in the region as a whole, the Conference
explored what, in its view, was needed for the success of reform. The
4. The importance of Conference identified four such sets of conditions:
strengthening social policies
in an era of globalization • “First, the critical role that legislative bodies perform as prompters, initiators,
monitors and guides of the process of decentralization; the part they play in
shaping "an enabling institutional framework" and setting it in motion;
As mentioned earlier, globalization as tech-
nical change not only brings opportunities, • Second, financial decentralization and creation, for local government, of
but also social costs. It is precisely in the so- an adequate resource base;
cial area where the State can play a vital role • Third, the human factor, which brings institutions to life. By common accord,
and needs greater reinforcement. The un- human resources management and human resources development
derstanding that the State is essential in re- represent a critical need, but also a field of activity, which offers great
potential for regional cooperation. This includes in-service training, but also
dressing the adjustment costs of globaliza-
personnel systems, which must be put in place so that capacity-building may
tion is becoming more widely accepted. In the yield all its potential benefits; and
past decades, however, more attention was
• Fourth, civil society, to mobilize support for local self-government and help
given to economic imperatives than to social
the body of citizens to internalize their role as clients, prompters, advocates,
considerations. A number of countries and ma- agenda-setters, monitors and evaluators of local government services.”
jor international organizations have set
great emphasis on efficiency, economic The Conference unanimously adopted a Declaration which underlined the
importance of the following:
growth, and market competitiveness over-
shadowing, to some extent, the intrinsic val- • “The catalytic role of decentralization in the transition process and
ues of democracy, equity, human rights and democratization;
the quality of life. That is to say, too much
• The need to pay attention to the specific circumstances of each particular
attention was focused on markets and how country; the problem may be common, but the solutions vary widely from
they perform rather than on people. As a con- place to place. One-size-does-not-fit-all;
sequence, the debate concerning the devel-
• Common to all countries is the need for a strong supportive centre with a
opment and the reform of the State has view to decentralization. Based on the constitution and other relevant texts,
overwhelmingly focused on economic effi- a clear and consistent legislative framework should establish the foundations
ciency and technocratic solutions to political for the distribution of functions and competencies both between the State
and local self-government and among the various levels of local self-
problems, whereas social matters have not government. Such a division of functions does not preclude a close
been given enough consideration. Some cooperation among them.”
thought that social problems could be solved
Source: UN, 2000, ST/ESA/PAD/SER.E/7.
by delegating a good part of them to the mar-
81
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
that while a policy takes root that aims to concepts. Without economic prosperity, no coun-
reduce the functions of the State in the area try can provide for all the social needs of its
of protection and social security, in order to citizens. But nor can any country be called
transfer them to civil society or to solidari- truly prosperous so long as many of its citi-
ty institutions created within the community, zens are left to fend for themselves against
the family - as a primordial institution - ignorance, hardship and disease. Nor yet
shows signs of being unable to sustain even can any country achieve prosperity by sub-
the most elemental functions" (Katzman, ordinating all social concerns to the achieve-
Although economic 1999). Accordingly, while "the 1990s began ment of a few quantitative benchmarks.
growth is an essential with the widespread expectation that What matters in the last resort is the qual-
achieving sound, market-oriented, macro- ity of life - a big part of which is the feeling
part of development, it economic fundamentals was the ticket to that you belong freely to your society, and that
does not by itself lead the prosperity that had long eluded poor it also belongs to you" (UN, 2000, General
countries, the decade has ended with the more Assembly Twenty-fourth Special Session,
to human development
frustrating but also more realistic under- A/55/344).
or an improvement in standing that sound macroeconomics is not
people's living a goal but just a precondition" (Naím, 2000, As argued by Sen, "development can be seen
p. 97). as a process of expanding the real freedoms
conditions
that people enjoy. Development requires the
By the end of the 1990s new trends emerged removal of major sources of non-freedom: pover-
and new evidence suggested that economic ty as well as tyranny, poor economic oppor-
and social development are strictly intertwined, tunities as well as systematic social depri-
and that both affect the quality of a democ- vation, neglect of public facilities as well as
racy and the well-being of its citizens. Ever intolerance or over-activity of repressive
since there has been a growing awareness that States" (Sen, 1999/a, p. 3). Expanding per-
economic development is a necessary, but not sonal freedoms implies that people have
a sufficient condition for long-term equi- greater opportunities to make choices in
table growth on which human prosperity every field, and to participate in every
and progress depend. Although economic sphere of public life. To enjoy such freedoms,
growth is an essential part of development, people must be free from avoidable illness,
it does not by itself lead to human develop- free from ignorance, and have reasonably ad-
ment or an improvement in people's living equate living conditions. As emphasized in
conditions. the Declaration of Human Rights, article
22: "everyone, as a member of society, has the
It is widely recognized that an increase in right to social security and is entitled to re-
GDP does not automatically translate into alization - through national effort and in-
greater well-being for all. There may well be ternational cooperation and in accordance with
economic growth, but if its benefits are unequally the organization and resources of each State
distributed it means very little to the vast ma- - of the economic, social and cultural rights
jority of people in a given country. The persisting indispensable for his [or her] dignity and the
disparities in developing regions of the world free development of his [or her] personality".
indicate that inequities in income distribution
have not been mitigated by economic growth. The problem which confronts many developing
countries is that until now macro-economic
Needless to say, a high concentration of pow- policies, deregulation, and privatization
er and wealth in the hands of a few people have not been coupled with similar reforms
translates into unequal access to political pow- in political and social areas. In many cases,
er and critical resources, to health care and low consideration has been given to im-
education, and to employment opportuni- proving health care, education, and public in-
ties (Griffin and Khan, 1992, p. 1). There is frastructures. This, in turn, has made it dif-
growing consensus around the idea that "... ficult for many countries to elude the social
social and economic welfare are not separate costs of globalization, including the reper-
82
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
cussions of economic and financial instabil- the disparity of income is based, and that salary
ity. In some developed countries, cutting dispersion among the skill levels has be-
back on social expenditure has also meant come quite significant.
more insecurity in the face of change en-
gendered by globalization. • To make sure that clean water, health
services and housing are accessible to the poor.
There would seem to be ample space for a
reassessment of the role that public policies • To make available more financial assets and
can play in the developing world in dealing productive resources to the poor and gener- The problem which
with social problems. It is not simply a case ate productive and remunerative employ-
confronts many
of returning to the omnipotent view of the ment for them.
State, but of thinking about a different state developing countries is
model: a State which is articulated into pro- • To reduce inequality by progressive taxa- that until now macro-
ductive networks with civil society in all its tion of income and other redistributive poli-
manifestations, and with the same poor com- cies.
economic policies,
munities all together trying to find really valid deregulation, and
solutions to problems. UNDP has outlined a • To transfer income and adopt other protective
privatization have not
broad plan involving lines of action that gov- measures for society during periods of ad-
ernments ought to promote and among justment and crises and implement pro- been coupled with
which are the following: grammes to fight poverty and for the bene- similar reforms in
fit of the poorest members of society" (Mc-
political and social
• "To ... increase opportunities as a priority Govern, 2000).
of economic policy. areas
A State with renewed organizational lines is
• To eliminate biases against the poor in the needed to put into practice policies with the
macroeconomic framework. above characteristics. The experience of the
last decades has shown the need for public
• To invest in the capacity of the poor by re- policies, but has also brought to light the ur-
structuring public spending and taxation. gency of updating government executory
structures and of overcoming their inflexibility
• To make sure the poor have access to pro- and inefficiency in many cases.
ductive resources, including loans.
States need to address the many social prob-
• To increase the productivity of small-scale lems that are arising as a result of global-
agriculture. ization. Stronger institutions and more eq-
uitable social policies are greatly needed in
• To promote micro-enterprises and the non- developing countries not only because they
structured sector. will enable the market to flourish and will
reduce the effects of global instability, but al-
• To emphasize industrialization ... to increase so because they will lead to an improvement
employment opportunities" (UNDP, 1999, Hu- of people's living conditions. "It is now wide-
man Development Report). ly recognized that market-driven globaliza-
tion by itself will ensure neither fairness nor
In order to reduce inequality in developing social progress ... The asymmetric distribu-
countries, McGovern proposes implementing tion of benefits and risks arising from glob-
the following measures through alliances alization warrants a global 'social contract'
among governments, companies and NGOs: between developing and developed coun-
tries, based on genuine solidarity and shared
• "To build up human capital through edu- responsibility" (UN, 2000, Millennium Report,
cation and by ensuring that the poor have A/54/2000, p. 9).
access to education. It has been shown that
education is the most important asset on which
83
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
84
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
efits of globalization. Accordingly, education cies (under the "banner" of governance), al-
may be said to be one of the most significant though funds have not been added. ... Hu-
factors in determining a country's capacity man or social conditions could also be added.
to participate in the new global economy, as Indeed, it can be argued that these should
well as a tool for people to obtain higher lev- have higher priority, because the effects of
els of quality of life. Only if people have ad- economic variables are not a matter of sci-
equate levels of education, access to health entific certainty but the obligation to reduce
care, and adequate living conditions can human misery is a moral certainty"
there be a vibrant society and economy. (Streeten, 1996, p. 32). Whether recipient coun-
There can be no true development without tries would see this as an infringement on
Societies must be
social development. their sovereignty and object to such condi-
tionality is a matter for concern, but one ready for change, and
Developing social capital is also indispensable that must be addressed. education
to create or reinforce domestic market
economies. Fostering policies aimed at en- Finally, education, especially civic educa- programmes can play
hancing the level of education and techno- tion, is a fundamental pre-requisite in any a major role in
logical knowledge of citizens is of paramount country in order to enhance citizen's partic-
responding to the
importance in creating a workforce that is ipation at all levels. Education and training
up-to-date, prepared for change and capable deserve special consideration since they are challenges of
of seizing the many new opportunities of a invaluable instruments in building self-re- globalization
globalizing world. Combating poverty and po- liance in the face of the economic turmoil that
larization in terms of power and wealth is globalization can engender, particularly in cer-
extremely important. In the absence of a well- tain parts of the world. In other words, so-
developed middle class, the entrepreneurial cieties must be ready for change, and edu-
forces will be limited, as will the rate of con- cation programmes can play a major role in
sumption and savings, hindering economic responding to the challenges of globalization.
progress. This means that "for the many
emerging countries that already have the in- 4.2. Public services for everyone: a
stitutions and income levels to attract pri- desirable goal
vate capital and the education levels to pros-
per in the new information age, the private Poverty is not simply related to employment
sector will fuel continued economic devel- or the income of a family group. A core com-
opment" (Cutter, Spero and D’Andrea Tyson, ponent is the actual access to basic public serv-
2000, p. 93). For those countries that lack cer- ices. For example, a key risk factor in pub-
tain fundamental conditions, such as basic ed- lic health in developing countries is the lack
ucation for all, training opportunities, adequate of access by the poor to services that should
pension systems, health care benefits and be guaranteed for the entire population,
safety nets, people-centred economic growth such as sanitation, electricity and potable wa-
- essential for prosperity - will lag behind. ter. The same occurs in the vital field of ed-
ucation. If public policies do not actively in-
Official development assistance (ODA) could tervene to facilitate universal access to
play a significant role in this respect. Funds grammar and highschool education, there will
could be directed towards critical social ar- be significant imbalances among the differ-
eas and building public infrastructure. ent social sectors that will strengthen the re-
Loans from major international financial in- production of the "perverse circles of in-
stitutions could also include human or social equality". Also, without active public policies,
conditions. Until now, conditionality has only children from the upper and middle
been imposed to monetary, fiscal, exchange- classes will be able to attend pre-school - to-
rate, and trade policies. As argued by day considered to be an imperative and vi-
Streeten, "it has more recently been applied tal step in the educational process - while the
to environmental, political and human importance of access to education will pro-
rights policies and international reform poli- gressively increase. An Uruguayan research
85
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
study (Katzman, 1999) concluded that, in Mon- These and many other key questions for the ad-
tevideo, in 1981, young people between 20 and equate formulation of social policy are difficult
30 years old needed 9 years of schooling to to answer in many developing countries because
maintain a family, without sinking into of the lack of organic systems for generating
poverty. At present that figure has risen to specialized information about the social area.
17 years of education. This leaves all social decision makers in a sit-
uation where they must use information gen-
The notion of public services should also in- erated for other purposes, as well as data that
clude the progressive idea, present in the in- has not been updated or of doubtful quality, along
dustrialized world, of the necessity of guar- with the fundamental problem of monitoring.
One of the central anteeing the so-called caregiver services, Efficient social management requires the gen-
missions of a such as day care for children, care for the eld- eration of information in real time, on the ba-
erly, nursing care, support for the family in sis of which the results and concrete impacts
democratic and
general, and protection in the event of a cri- are being produced. Unplanned effects often ap-
effective State is to sis. In different countries some of these serv- pear in the social sphere, some of which may
ensure that everyone ices are provided by women, who already have be negative and others positive. This is high-
a seriously overloaded workday without ly unpredictable ground and monitoring satisfies
has access to basic
recognition or remuneration, resulting in essential functions.
services of appropriate significant gender-linked inequalities.
The establishment of social information sys-
quality
One of the central missions of a democratic tems with modern methodologies, data pro-
and effective State is to ensure that every- cessing and ongoing contact with reality
one has access to basic services of appropri- should be one of the axes of social institutional
ate quality. Most importantly, States need to renewal.
adopt an integrated holistic approach to de-
velopment and to focus on inclusion policies 4.4. Inter-organizational
- starting with education for all, especially management of social programmes
women and marginalized groups. Universal
access to health care, and social protection Poverty and vulnerability derive from sets
for the unemployed, elderly and those with of mutually interacting problems. The de-
disabilities should be a priority not only in termining factors of deprivation, which af-
developing countries, but in any democrat- fects vast sectors of society, act by reinforc-
ic country as well. ing each other. Thus, families in crisis because
of the burden of poverty, will lead to low per-
formance at school by children or cause them
4.3. Establishment of an to drop out. This in turn will make it diffi-
information system to design and cult for these children, when they grow up,
monitor social policies to obtain stable employment and raise sound
families. Public policies must be adapted to
What are the poverty levels distributed by the structural nature of poverty if they are
regions and districts in a country? What are to really impact it. If they act in isolated man-
the diverse forms of poverty? What is the of- ner, focusing on a specific factor, the possi-
fering of social services available in each bility of these policies exerting any type of
district in comparison with the magnitude influence will be severely limited. The great-
of the demand? How are the basic social est productivity and impact of social policies
variables evolving from the employment lev- and programmes is found in the organizational
els, the types of employment, all the way integration of efforts. Comparative experience
through to the costs of the staples of daily clearly indicates that the most successful so-
living. What are the social impacts of the di- cial programmes are those that have targeted
verse economic policy alternatives? What this substantive combination of different
economic effects can the different social poli- types of efforts. Thus, for example, the pro-
cies, in turn, have on production? grammes with the greatest impact in re-
86
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
ducing the grade school drop-out rate, are nev- because of economic restructuring caused
er those programmes whose focus is strict- by greater economic openness, will be more
ly limited to "education", to acting only in the in tune with reality if such action takes
classroom. Successful programmes combine place at the local level. It will no longer be
actions focusing on family groups, nutrition, a question of long-distance decisions emanating
and other dimensions, and the most useful from large urban centers, but of actions that
preventive health programmes are those local institutions will take on a daily basis,
with an approach that is not exclusively bearing in mind the variations in the reali-
medical, but rather actively incorporate ed- ty of each area. Decentralized social action
ucational, cultural and psycho-social variables. will make it easier for "face-to-face" contact,
which is very relevant in the social field. Con- Decentralized social
In many developing countries, the government ditions will also be created that are the most
action will make it
structures are designed and geared almost conducive to citizen participation in social pro-
counter to what has been recommended. grammes, and there will be increased viability easier for "face-to-
Everything is set up for isolated sector ac- for an effective social monitoring of such face" contact, which is
tion. Much work goes into carefully tracing programmes. The inter-organizational inte-
the boundaries among the different min- gration mentioned earlier will be easier to very relevant in the
istries. The spheres of influence of the Min- implement on the more limited municipal lev- social field
istry of Health, or Education, or those deal- el.
ing with gender, youth, families, or housing,
are formally delimited with great detail. However, international experience has
Each ministry zealously defends its jurisdiction shown that all these virtues may not be
and tries to keep the others from invading present in their entirety or even partially, if
its territory. An infinity of "towers and bu- careful attention is not paid to certain risks
reaucratic drawbridges" are raised to prevent inherent to the decentralization processes in
access by strangers. In the social area, this the developing world. In many cases, there
is contrary to the basic logic of social poli- are marked asymmetries among municipal-
cies. Coordination is not only desirable; it is ities. If measures are not taken in the resource-
indispensable so that serious action can be transfer processes to ensure regional balance,
taken with respect to the multiple manifes- with a positive bias in favour of the weak-
tations of poverty and vulnerability. If the min- est, decentralization could worsen the pre-
istries and agencies do not integrate actions existing situation. Central government must
through inter-organizational formulas, there guarantee equity. The delegation, for exam-
will be a deficient use of resources and very ple, of taxation powers to finance healthcare
lean results. Systematic work is imperative or education could have very different results
so that the transition can be made from a cul- depending on the actual capacity of the dif-
ture of "bureaucratic castles" to one of "or- ferent types of municipalities to collect tax-
ganizational networks". es. A different risk is one derived from an-
other type of asymmetry or the degree of so-
4.5. Toward decentralizing social cial polarization toward the interior of the
services regional jurisdictions and municipalities. In
many cases there are small, local "oli-
Decentralization of functions, responsibilities, garchies" that from time immemorial have
and resources toward levels that are closer controlled the functioning of local society. If
to the citizens appears to be the route to or- democratizing conditions are not achieved,
ganizational renewal of the traditional State it is most probable that decentralization will
with multiple virtues. Many of its advantages be "taken over" by those minorities for their
appear to lie in the social field. Action in ar- own interests. Another problem is the degree
eas such as health, education, the fight of actual capacity of the municipalities to im-
against poverty, strengthening of the fami- plement social policies. The intention of the
ly, preventing delinquency, and ensuring central government and of the municipal
compensation for people who are displaced mayors to decentralize, is insufficient. A lo-
87
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
cal, social, institutional framework must al- ever, among the projects with a low rate of
so be developed. Numerous municipalities in community participation, only 2.7 per cent
the developing world either have no insti- recorded a high yield; 40 per cent recorded
tutional area specializing in social matters, an average yield; and 57.3 per cent a low yield.
or else it is part of another area. It is nec- The most successful projects of recent
essary to begin social "institution building" decades, such as those of the Grameen Bank
on the municipal level and to provide up-to- in Bangladesh, the EUUCO schools in Cen-
date training to local human resources to man- tral America and Villa El Salvador in Peru,
Social programmes with age the programmes. all are eminently participatory (Narayan, 1994).
active community
In a recent study, ECLAC included warnings Participation contributes very specific elements
participation in their
regarding some of the risks identified above to the organizational process, which influence
design, management in the case of Latin America. ECLAC stress- the differences cited. Among others, the co-
es a point that can also be applied to other design of projects with the poor community
and evaluation have
regional realities: "Theoretically, decentral- allows it to incorporate its true priorities. The
better results than ization offers advantages derived from a lo- community's participation in managing the
programmes of a cal provision of services that promotes project also gives it a singular strength.
greater responsibility and better control by When the community feels that it owns a proj-
vertical bureaucratic
users and by the respective communities, which ect it also takes the initiative, contributes ideas,
nature can translate into more efficient social man- and takes an interest in each detail of the
agement. In view of the disparity of income project. The community's integration into
and availability of human capital in rural ar- monitoring and evaluating the project gives
eas of the countries of the region, this trans- that project a permanent "base" in reality.
fer of social responsibilities could have a se- Those benefiting from the project will con-
rious impact in terms of territorial equity" sistently provide feedback as to whether or
(ECLAC, 1999). not targeted goals have been reached and to
what degree, as well as what modifications
Steps should be taken to advance along the or corrections need to be made. Community
road to decentralization, but it is also nec- participation ensures the transparency of
essary to adopt policies to confront the risks the project and perhaps, above all, ownership
in question. by the community generates an increased im-
portance of such ownership. The communi-
ty learns and its self-esteem grows as the
4.6. Community participation: a groundwork is laid for the sustainability of
strategic key for renewing the the project once external aid is withdrawn.
social institutional framework
However, despite the noteworthy managerial
Comparative results are conclusive. Social pro- advantages added to the already important
grammes with active community participa- positive consequences of democratization,
tion in their design, management and eval- in developing countries participation in so-
uation have better results than programmes cial projects is advancing in limited fashion.
of a vertical bureaucratic nature. Among Government spokespersons often claim to agree
others, a study by the World Bank analyzed with democratization and numerous public
the performance, under different organiza- policies proclaim it, but in practice there
tional modalities, of 121 projects for supplying are strong impediments to and difficulties in
potable water to groups of poor farmers in achieving democratization and the accumu-
49 countries in Africa, Asia and Latin Amer- lated frustrations of poor communities are
ica. Those projects with a high rate of com- uncountable.
munity participation also had a high return
in 80 per cent of the cases, and an average One of the most important organizational
return in 20 per cent of the cases; that is, none changes needed in the transformation of the
of these projects recorded a low yield. How- State is to replace the current underhandedly
88
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
89
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
ganization had withdrawn, the flow of ben- What basic conditions are needed to steer re-
efits to the community was interrupted be- forms in this direction and transform the State
cause the strengths needed for the self-sus- into the kind that is required to implement
tainability of the programmes had not been innovative public policies, much like those
developed. listed above, and that will make it possible
to confront the extremely serious problems
However, the dynamics of social pro- of exclusion that are rampant today in de-
grammes in progress appear to differ veloping countries? (UNDP, 1999, Human De-
markedly from what happens in other or- velopment Report). Following are some final
An in-depth reform of ganizational fields. The programmes are comments on this problem.
the State in developing characterized by a high degree of volatility.
Multiple actors participate in them, pa- An essential underlying condition for mak-
countries is essential for
tronage as well as economic and political in- ing progress in directions of this type of
development terests come into play, and the poor com- management is the requirement that the
munities have basic instabilities. All these, reform in the roles and characteristics of the
plus other factors, contribute to the contin- State have the solid backing of society. In-
ual appearance of variations, some of which sofar as the reform of the State is concerned,
pose heretofore unforeseen obstacles while experience has repeatedly shown that
others generate opportunities from which changes introduced by just technical ra-
benefit can be obtained. Describing the sit- tionality "come up short". It is possible to eas-
uation, Dennis Rondinelli observes, after ily prevent or reverse them. In-depth re-
analyzing numerous programmes imple- forms require active social and political sup-
mented by international organizations in port. In this case the support can be convened,
developing countries: "Regardless of how given the objectives, which are to have a gov-
comprehensive the planning of a project, or ernment that can actively and efficiently
the way in which the technical analysis was help to confront poverty, the gaps in health
carried out, rarely is there a comment that care, inequality, differential access to tech-
the problems encountered could not have been nologies, vulnerability and other alarming so-
predicted" (Rondinelli, 1983). cial phenomena such as the vertiginous in-
crease in criminality. However, in many de-
States need a social managerial approach to veloping countries, a broad debate regarding
address all these details: the specific mission very relevant aspects of the problem must be
of social programmes, high volatility dy- opened up and promoted. There appears to
namics, orientation to participation, decen- be a consistent tendency to see social deficits
tralization, and the establishment of networks. as lamentable but postponable problems
This would presuppose the specialized train- that will automatically be resolved by "a
ing of social managers with the skills to see flow of benefits" which will occur when the
to such details, and a general organization- economic recipes, favoured in recent
al culture that gives priority and is ready to decades, are adopted. From this point of
confront them. view, the social is seen to be basically an ex-
pense that is necessary primarily for politi-
An in-depth reform of the State in develop- cal reasons, but which should be limited be-
ing countries is essential for development. Re- cause it diverts resources from the economy.
forms should encompass a clear orientation
toward basic public services for everyone; the Progress has been made in recent years in
creation of a strong and efficient institu- this debate, but there is still a long way to
tional framework; the establishment of an in- go. It has been demonstrated that social
formation system to design and monitor so- problems cannot be resolved by means of a
cial policies; safety nets; inter-organization- "flow". The losers continue to increase and
al links; decentralization; broad community the winners expand the gap between them-
participation; inter-social networks; trans- selves and others. A typical case is Latin Amer-
parency; and a social managerial approach. ica. Birdsall and Londoño have demon-
90
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
strated that such is the weight of inequali- (Touraine, 1997). It is necessary to promote
ty in social development that the high rate this great debate in developing countries
of poverty would be half of what it is if the because it will create a firm support base
inequality levels (likewise high) of the ear- among citizens for the extremely necessary
ly 1970s had been maintained and if they had social reform of the State.
not risen as fast as they did. Therefore, the
suggestion is that if the efforts that are in- Another fundamental condition for progress
dispensable for ensuring that an economy in this reform is to confront another type of
grows, and has stability, technological powerful reasoning that may be found in de-
progress and competitiveness are not ac- veloping countries. One often hears the
companied by energetic social public policies, claim that it is impossible to do anything of
What needs to be
the social deficits will not be resolved (Bird- importance in the social area because of the discussed is basically
sall and Londoño, 1997). Social policies are severe restriction of resources. Developing coun-
that social expenditure
not stopgap measures while waiting for the tries have scant resources and are con-
"flow" to begin, but are a fundamental com- demned, according to this line of reasoning, is not just a cost, but
ponent for balanced development. to having a significant part of their popula- also an investment
tion live in poverty.
However, the debate to be initiated in the de-
veloping world must go further. What needs Without a doubt, the topic of resources is fun-
to be discussed is basically that social ex- damental. Absolutely everything possible
penditure is not just a cost, but also an in- should be done so that developing countries
vestment. To consistently earmark resources can grow at the highest possible rates, have
over time for the development of education, economic stability, attract investments, and
to increase the number of years of schooling advance technologically. However, Sen pos-
and the quality of the curriculum, to improve es a structural question in this regard: how
public health rates and expand the areas where can we explain that certain countries with
potable water and sanitation services are avail- per capita gross products lower than those
able, is to strengthen the most valuable re- of other countries, nonetheless have a bet-
source of any economy in the XXI century: ter life expectancy, which is a decisive indi-
the quality of the population. In other areas, cator? (Sen, 1998). The Nobel Laureate in Eco-
as was already mentioned, access to basic con- nomics maintains that life expectancy
ditions for competitiveness is strongly linked should be considered a very important indi-
with the average level of the labour force in cator of economic success or failure.
a country. In recent years, diverse "hi-tech"
investors selected a Latin American country A condition for progressing toward the type
for their businesses; specifically Costa Rica, of State required now has nothing to do with
small and with limited natural resources. A the discussion of the overall environment, but
decisive factor in making this selection was with the direction reform takes. Reform
that it is one of the few countries which has must respect the diversity of national con-
systematically invested over the decades in ditions. The strategy should be selective and
health and education, has a well qualified pop- gradual. Reform styles should not be elitist,
ulation and a solid sanitation system. nor vertical, and it is necessary to involve pub-
lic officials in the reform. The State, with its
Social policies, besides being indispensable participatory attitude regarding what it
to confront the deficits in this area are, in wants to achieve, should be participatory not
accordance with modern development views, only from the inside out, but also from the
a powerful lever for healthy growth and in- outside in.
tegration in the world economy. As Alain
Touraine points out: "Instead of compensat- A very crucial aspect of reform is to resume
ing the effects of economic logic, social poli- the ethical discussion of the public function,
cies should be perceived as an indispensable which has been relegated to the sideline in
condition for economic development" purely technocratic reforms.
91
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Who should public policies serve? What eth- corruption is on the rise. As Sen points out,
ical dilemmas have been posed? What one of the consequences of democracy is that
should the code of ethics of the civil servant it generates "political incentives for deci-
encompass? The fact that the civic servant sion makers to respond positively to the
needs to feel that his or her work has the po- needs and demands of society" (Sen, 1999/b).
tential of serving the community and take The more active democracy is the greater and
pride in the work being done, should be top- more effective will be the pressure of these
ics of discussion. incentives on the decision makers. Sen's ex-
ample is well known.
What could be the stimulus for creating con-
ditions, such as those mentioned above, that The vast contingents of people living in
might favour reform? How to promote an im- poverty, the extensive sectors of the population
portant public debate about the priorities of that are being left out of the virtual world
society, the role of the social sphere, the al- and which are therefore forming a new dis-
lotment of scarce resources, participatory advantaged group or the "cybernetic illiter-
reforms toward the outside and also inside ates" who cannot take full advantage of glob-
the civil service framework, ethics and ad- alization, the people affected easily by eco-
ditional related topics? nomic and natural crises, demand immedi-
ate answers because they embody immense
It would seem that much can be expected from social suffering. As Pope John Paul II said
the ongoing strengthening of democratizing in 1999: "the problem of poverty is urgent and
processes, with respect to which important cannot be left for tomorrow".
progress has already been made in develop-
ing countries. The call for genuine partici- A more socially proactive State, supported by
pation has grown increasingly, and slowly but democratization processes, can play a very
surely the fundamental conditions for important role in the face of the countless prob-
democracy are improving. Civil societies are lems that afflict developing countries. The les-
becoming stronger and their role in decen- sons and warnings that can be gleaned, par-
tralized entities such as municipalities is grow- ticularly from world experiences in the last
ing. There is ever closer monitoring of pub- decade, are that the development of capabilities,
lic actions, more vigorous demands for the in terms of institutions and high level gov-
efficient functioning of the justice system and ernment skills and leadership, have rarely
of other key institutions, and repudiation of been important for everyone.
92
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
we must put people at the centre of every- al level" (Helleiner, 2000, p. 5). This implies
thing we do" (UN, 2000, Millennium Re- that inter-governmental institutions will
port, A/54/2000). We need this vision to cope play an increasingly vital role in these and
with the challenges of globalization and to other areas that were previously the do-
tackle the social issues that undermine hu- main of individual governments. For exam-
man development and prosperity both in ple, there is no doubt that prevention, con-
developed and developing countries. trol and repression of cross-border organized
crime can be dealt with only at the interna-
A more socially
Social, ethical and environmental values tional level. Only concerted action among States
ought to be included in our economic calcu- can effectively curb such illegal activities as proactive State,
lus if we want to preserve the earth for fu- trade of body organs or of children and supported by
ture generations and if we want globaliza- women. Poverty, violations of human rights,
democratization
tion to bring prosperity for all. This implies social degradation, the spread of diseases such
rethinking the role of the State in develop- as HIV/AIDS, just to mention a few, also de- processes, can play a
ment and in social policy. The latter, in turn, mand global responses since they have glob- very important role in
entails strengthening State institutions, al implications.
rather than "shrinking" the State. the face of the
It is increasingly evident that social policies countless problems that
are no longer only a matter for national con-
afflict developing
5. The case for robust sideration, but also for global governance. "Dif-
multilateralism ferent societies have different preferences for countries
- among other things - income distribution,
In a rapidly integrating world, cooperation welfare provision, cultural diversity, work-
among nation-States is increasingly needed er protection, and structures of education.
to confront complex world issues. Many of the Nonetheless, societies increasingly interact
problems afflicting the world today (such as and cannot function in isolation. Failures of
poverty, environmental pollution, economic social development resulting, for example, in
crises, international organized crime) are involuntary mass migration cannot be con-
transnational in nature, and cannot be dealt fined within national boundaries" (Com-
with exclusively at the national level, nor by mission on Global Governance, 1995, p. 143).
State to State negotiations (Meny, 1999). Similarly, global warming, massive defor-
The Millennium Assembly stated: "If we are estation, and depletion of natural resources
to capture the promise of globalization, while are phenomena which also require multilateral
managing its adverse effects, we must learn solutions because their negative effects are
to govern better, and govern together" (UN, not confined to one region or State.
2000, Millennium Report, A/54/2000). Pro-
tectionism is not a viable option. As inter- In order to respond to globalization, nation-
connections increase and decisions taken in al economic governance regimes must be
one country have lasting effects on other supplemented by regional and global economic
parts of the world, cooperation and policy co- governance regimes. The management of
ordination among States is increasingly cru- the global economy requires complex global
cial to manage effectively global issues. governance systems. The global governance
framework entails a number of basic op-
With globalization there is a growing need tions, namely:
for international agreements and standards
•Creation of a world government, which
in a number of relevant areas, such as the
would establish legal and institutional
environment, labour rights and human
frameworks for global economic governance.
rights, as well as the fight against organized
This extremely controversial option is high-
crime. Thus, "many functions of govern-
ly unrealistic in the foreseeable future;
ment, in particular the supply of public
goods and the pursuit of social objectives, will •Creation of international institutions,
somehow have to be undertaken at the glob-
93
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
which are based on the pooling and delega- regimes on international investments and com-
tion of national sovereignty rights in certain petition are also still lacking. Increased ef-
functional policy areas. At present, this ap- forts are required to build a global econom-
proach is encountered only in economic in- ic governance system, which is adequate to
tegration processes, notably within the Eu- managing a globalized economy.
ropean Union;
The governance of the global economy is
•Global economic governance without a largely predicated on national economic poli-
The establishment of
global government. This option is based on cies supplemented by regional and global eco-
principles, norms and voluntary agreements between sovereign nomic governance regimes, for different
rules ... is greatly nation-States, which create international functional policy areas such as trade and fi-
economic regimes (global economic gover- nance. Arrangements at the regional level al-
needed in an nance regimes) for specific policy areas, such so attempt to respond to the pressures of eco-
increasingly as international trade, international finance, nomic globalization; these arrangements
as well as international investment and need to be linked with compatible global
interdependent world
competition. These global regulatory regulatory regimes. The complexity of the glob-
regimes establish relevant principles, norms al economy creates equally complex problems
and rules for international transactions; and of global economic governance. The link be-
tween different functional regimes (hori-
• International coordination of national eco- zontal link) is not often well established.
nomic policies. This option is limited at pres- The same concerns arise with regard to the
ent to certain policy areas and a small group links between bilateral, regional and global
of countries. In light of present realities, the economic governance regimes (vertical link).
development of international economic Global competition exerts pressure in the di-
regimes seems to be the most promising op- rection of increasing convergence of different
tion in dealing with economic globalization. national regulatory and institutional sys-
Such global economic systems are based on tems, but significant differences remain.
inter-governmental agreements and admin-
istered by inter-governmental economic or- To be sure, there is an institutional and reg-
ganizations based on international econom- ulatory deficit on the global level, which
ic law. calls for new governance structures; it relates
to norm-setting and policy coordination. A bet-
The establishment of principles, norms and ter defined multilateral approach and the
rules, which guide the actions of economic strengthening of functional regimes is nec-
agents in international transactions (cross- essary. The system of global governance, in
border policies) is greatly needed in an in- the measure that it has emerged in a some-
creasingly interdependent world. Global eco- what ad hoc way, is characterized by in-
nomic governance regimes include mechanisms creased complexity manifested in a web of
for supervision of policy implementation and bilateral, regional and global regimes. It has
the settlement of disputes. Despite their also been marked by the emergence of new
fragmented nature and lack of comprehen- issues, which are associated with the liber-
sive and consistent global regimes, these alization of trade and capital flows.
global regulatory regimes form the back-
bone of an emerging basic global economic Technological developments and economic
legal framework. To be sure, the present liberalization have often run ahead of the need-
global economic governance system consists ed adaptation of principles, norms and rules
of a loose set of functional regimes with gaps as elements of economic governance. This is
and missing links. Despite its limitations, the particularly pronounced on the internation-
functional system in international trade is al level.
now the most advanced, whereas the inter-
national regime related to capital flows is cur- Coping with international economic and fi-
rently the subject of debate. Comprehensive nancial instability is one of the many press-
94
REINFORCING STATE INSTITUTIONS AND SOCIAL POLICIES
ing challenges of our times calling for more al trade arrangements compatible with the
effective partnerships among States on the multilateral regimes.
one hand, and financial institutions on the
other. National responses are not sufficiently The linkages between international trade,
adequate to deal with possible crises. In the labour and environmental standards must be
absence of a strong international regulato- considered in the framework of the trade
ry system coupled with strong national in- regime. There is also the need for more
stitutions, local financial crises often de- transparency in the decision-making con-
generate into severe crises provoking mas- ducted in the framework of such regimes. More-
There is an urgent need
sive loss of employment and resources as it over, the monetary and financial regimes
happened not so long ago in South-East need to be closely coordinated with the trade to establish global rules
Asia. Such crises were so intense that not on- regime. Surveillance mechanisms must be ad- on issues associated
ly did they affect the countries in which justed and institutional arrangements for
with deep economic
they originated, but also quickly reverberated norm-setting and controls need also to be im-
in other parts of the world. proved. The existing regimes have obvious- integration
ly not kept up with the range of hazards in-
In other words, "the pace of globalization of volved in international finance, including
financial and other markets is currently out- important investments, risks in raising cap-
stripping the capacity of governments to ital and volatility of short-term flows. New
provide the necessary frameworks of rules regulatory systems and institutions at the in-
and co-operative arrangements to ensure ternational level are necessary to cope with
stability and prevent abuses of monopoly economic globalization in this policy area.
and other market failures" (ibid., p. 137).
Another policy area which requires greater
There is an urgent need to establish global regulation at the international level is en-
rules on issues associated with deep eco- vironmental protection. Due to the delicate
nomic integration. These issues concern in- balance of the global ecosystem and to the
ternational competition policies, harmo- spill-over effects of pollution from one part
nization of corporate taxation, standards of of the world to other parts, it is increasing-
corporate governance and the national treat- ly evident that protecting the environment
ment of foreign investment. Overall, it may is a matter which cannot be dealt with at the
be argued that the present system of global national level alone. Furthermore, "although
economic governance is untidy, burdened industrial countries, including the United
with overlapping jurisdictions and incom- States, are disproportionately responsible
patibilities between different functional for most of the environmental problems, de-
regimes. veloping countries are also rapidly damag-
ing common environmental resources. Solu-
The rules-based international trade system, tions, therefore, require the participation of
administered by the World Trade Organiza- both developed and developing nations"
tion, has made progress in liberalizing mar- (Cutter, Spero and D’Andrea Tyson, 2000, p.94).
ket access and reducing both tariff and non- There is also a growing need to hold multi-
tariff trade barriers. The system is based on national corporations and local businesses ac-
the principles of non-discrimination, and countable for their actions not only regard-
reciprocity. A detailed system of norms and ing environmental pollution, but also work-
rules has been established for different sec- ing conditions.
tors. While some progress has been made, a
number of issues require further considera- In summary, inter-governmental institu-
tion. These concern non-tariff barriers, the tions play an increasingly vital role in what
use of export subsidies, anti-dumping, the ex- was previously the domain of individual gov-
clusion of certain sectors, such as agriculture ernments. They have helped to forge wide-
and textiles, and a weak sanctions mecha- spread commitment to agreed-upon objectives,
nism. There is also a need to make region- such as the aspirations set out by the vari-
95
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
ous UN Global Conferences. These conferences One thing is clear: democratic and flexible
have encouraged the development of new na- institutions are needed in order to promote
tional governmental and inter-governmental an enabling environment for economic
machinery. Such bodies have been instrumental growth and to enhance the quality of life of
in promoting the advancement of women, reg- people, making them active participants in
ulating international activities, ensuring the process of globalization.
compliance with human rights standards, and
Inter-governmental
coordinating the actions of the internation- The challenge that we face lies in the press-
institutions play an al community towards progress in poverty erad- ing need to refashion or refine the tools and
increasingly vital role in ication and sustainable development. Yet, in- institutions of governance and public ad-
ter-governmental institutions still need to be ministration, so that they apply the knowl-
what was previously the refined to reflect a more integrated global econ- edge, technologies and skills available to
domain of individual omy. humankind for the greater good of all and
not, as may have happened in the past twen-
governments
ty years, mostly for the greater wealth of 20
6. The need for a balanced per cent of the world. This is precisely a task
approach to globalization in which inputs and process largely determine
the outcome of reform and where, on that ac-
At the beginning of the XXI century there is count, the values of democracy and human
a compelling need to uphold a new approach rights must be accorded precedence over the
to globalization, which should be predicat- famous triptych - economy, efficiency and ef-
ed on such values as responsibility, sus- fectiveness - important as it is.
tainability and respect for human rights.
What is most required is a shift to a people- Two fundamental factors will determine
centered approach to globalization. Too whether nations will be able to prosper from
much attention has been paid to producers, globalization. First, how each nation-State
and too little to consumers. responds to globalization at the national
level and, second, how they act together to
The lessons of experience point to a bal- shape international rules and processes for
anced approach, one that neither demonizes a more open trading system, for better gov-
globalization nor builds it into a force setting ernance and enhanced social responsibility.
the course of humanity in a predetermined
direction. In our age of globalization, as in
the past, the destinies of people can still be
mostly shaped not by impersonal forces ful-
ly beyond their control, but through collec-
tive efforts of groups and individuals, living
and operating in democratic societies, under
the rule of law.
96
STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
Chapter IV
Strengthening the
administrative capacity
of the State
1. The management of time. The world was entering what later
change: the State as a was to be recognized as virtually a perma-
“learning organization” nent state of turbulence. The natural pace
of change would so accelerate that soon
T
he proliferation of actors on the everybody would be suffering from future shock
political scene and great diver- as their abilities to accommodate to change
sification of interests and pursuits would be overtaxed" (Caiden, 1991).
in society at large vastly adds to
the complexity of the tasks of modern gov- By the late 1990s, the context for most gov-
ernance. This has been further compound- ernments and many organizations had been
ed by the progress of globalization and mod- transformed so radically that their tradi-
ern technology, that have radically lowered tional structures and modes of operation
or indeed eliminated some of the protective had slipped into obsolescence. The fused py-
barriers which sheltered the operations of gov- ramidal structures, hallmark of state bu-
ernments in the past. A world of public au- reaucracies, could still perform effectively con-
thorities dealing with limited numbers of clients ducting routine tasks in closeted environments,
and stakeholders and able to control events but they proved increasingly inept in inter-
within their borders is swiftly giving way to acting creatively with a diversified, de-
a more complex world; a world in which the manding clientele or in responding swiftly to
range of clients and stakeholders is vastly more shifting opportunities and new constraints.
diverse, and in which numerous factors, im- Likewise, the five-year plans, pillars, until
perfectly understood, loom on the receding quite recently of the command economies but
horizons of decision-makers. also, mutatis mutandis, a feature of policy-
making in many other countries were losing
As governments pass, in most fields of activity, credibility as both a tool and process.
from a relatively homogeneous and stable en-
vironment to one that is unstable, complex, In a significant study of planning, which al-
heterogeneous and multi-faceted, they need though chiefly inspired from private sector
to learn to cope with unpredictability, un- practices has relevance to government,
certainty and randomness. Another major chal- Canadian author Mintzberg argued that,
lenge to governments and managers comes given the conditions of rapid change, plan-
from the accelerating pace and the very na- ning must be continuous and incremental
ture of change. Describing this development, (Mintzberg, 1994). Although it seeks to in-
Gerald Caiden observed: "What adminis- corporate competent policy-analysis and ex-
trative reformers in the early 1960s did not pert advice, current strategic planning is
anticipate was that they would not be able not viewed as an essentially technocratic
to proceed at their own pace in their own good process. It also seeks to build on clients’ ex-
97
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
pectations, as well as intuition and aspira- the concept of people as citizens must mark
tion (vision of future States). Precisely on this the end of the authoritarian approach to
account, it needs to avoid the pitfalls of bu- power and the bureaucratic, technocratic
reaucratic closure and a top-down approach, and feudalistic style of management. This de-
which tend to stifle initiative and limit par- velopment, which goes beyond the conven-
ticipation. tional form of hierarchy, calls for a new style
of action and conduct in the exercise of au-
Success in modern government largely de- thority" (Sedjari, 2000, p. 5).
pends on widening the basis of citizen par-
ticipation and galvanizing support for broad- Contemporary management theory high-
Success in modern
ly-shared objectives. This, in turn, is predi- lights the value and role of learning organ-
government largely cated on building and maintaining an insti- izations in trying to reconcile these difficult
depends on widening tutional framework as open to diversity as dilemmas which government must face and,
it facilitates stakeholders’ contributions to pol- furthermore, equip them to manage change
the basis of citizen
icy-making and evaluation processes. This is effectively. In relation to developing countries
participation and not always easy. Not all groups of stakeholders and countries in transition, attention should
galvanizing support for are readily amenable to cooperation and be drawn to four areas of need, all of particular
compromise. Not all are public-spirited. moment to the steering tasks of the State:
broadly-shared Seeking to muster support and developing
objectives consensus for a given goal or vision is a • Management of change: The State must be
most challenging task. As a process, it may in the forefront of implementing change and
prove both costly and time-consuming, even smoothing the path for progress. This entails
though its long-term yield may be broadly ben- proactive measures to develop enabling pol-
eficial. icy frameworks, promote the use of new
technologies, set up performance measure-
Flexible structures and processes are then ment and evaluation systems, overhaul ad-
increasingly favored over the more tradi- ministrative structures and design adequate
tional and bureaucratic patterns. This is so patterns for the collection of international-
not merely on account of the nature and fre- ly comparable, reliable and accurate data for
quency of change in a highly volatile and tur- policy-making purposes;
bulent global environment, but also as a re-
sult of the cumulative pressures from diverse • Administrative reform: In the light of cur-
citizens’ groups, which demand to be heard. rent trends, bureaucratic structures no
Ability to include and synergize, as well as longer work effectively. Debureaucratization
disposition to listen and respond, are al- and decentralization must go in tandem
most universally accepted as an important with new approaches to management, ex-
source of policy legitimation. Neither comes emplifying openness, adaptability, participation,
easily, as most critiques of government and flexibility, diversity and responsiveness.
organizations amply show. They call for reaf- Many new tasks of governance require pub-
firming a unity of direction amidst many di- lic authorities to act as mediators, advo-
verse and often conflicting purposes: reinforcing cates or promoters, actively seeking part-
institutional memory. They also call for fos- nerships with business and non-govern-
tering a sense of continuity, consistency, sta- mental organizations, or otherwise endeav-
bility and predictability, which structures strive ouring to engage civil society in the pursuit
to inject into the fluid, uncertain conditions of developmental objectives;
in which numerous countries in today’s glob-
al society live. "Applying democracy to ad- • Human resources development: skills con-
ministration cannot fail to consolidate the stantly upgraded, leadership qualities de-
State’s public image by improving function- veloped, facilitation of change and fostering
al and communication channels. In this of a new image for the public service that call
quest for democracy, citizens must be placed for new career structures that emphasize mo-
at the centre of public action. The return to bility, integrity and professionalism and the
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STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
• Careful scanning of the environment for pos- • Flexibility consistent with a rapid, non- lin-
sible constraints or emerging opportunities; ear change process in an age of discontinu-
ity.
• Ability to galvanize and mobilize support
for both the goals and course of organizational Swift progress and great uncertainty add an
change; important dimension to managing change and
to capacity-building, requiring leaders and
• Building of the structures and culture of managers to plan and steer the course with
dialogue and mutual accommodation; people, not without them, let alone in spite
of them. Learning from the mistakes and les-
• Encompassing diversity, reconciliation of sons of past failures, there is need to address
differences, promotion of consensus; and the question of what essential structures
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WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
and core competencies all countries, but es- The two principal dimensions are comple-
pecially developing countries and countries mentary and mutually reinforcing. A sound
with economies in transition, need to build institutional framework integrates and syn-
or reinforce in order to secure sustainable ergizes organizational members towards the
progress and growth. Although much of accomplishment of the set goals. To be sure,
what follows flows from what has been said, the best institutional framework with lim-
we need to be reminded that sustainable re- ited human capacity is of as little use as a
form and capacity-building encompass far more million dollar racing car with a timid, in-
than personnel training or human resources competent driver at the wheel. However, the
Capacity-building ... development. Both call for the reinforce- reverse is probably even worse. Nothing is
ment of institutions and their adjustment to more conducive to disaffection among po-
denotes an effort to
the demands of the times in a globalizing world. tentially promising and competent staff than
expand the existing a convoluted administrative structure,
capabilities of an which frustrates the best designs and corrupts
3. Fostering capacity-building the most efficient and best intentioned per-
organization or of the sonnel. The recent rediscovery of the comple-
State qualitatively and Like the concept of "empowerment", the mentarity of human resources development
term "capacity-building" has gained a lot of and institution-building has lent capacity-build-
quantitatively
currency in recent years. It is, to say the least, ing its current importance, but also, to an ex-
a very elusive concept: the composite of sev- tent, has shaped the ways and methods of seek-
eral elements. For the purposes of this Re- ing to implement it in learning organizations.
port, attention is drawn to three inter-related
facets of this multi-dimensional issue which, Capacity-building concerns have recently
aside from its importance, has acquired grown largely on account of:
much topical relevance.
• Increasing resource scarcity; and
Capacity-building has been defined in many
ways and it encompasses various dimen- • Rapid, unanticipated changes in the external
sions. In organizational terms, one of the pos- environment, occasionally leading to sys-
sible definitions of capacity is the volume and tems’ breakdown, when action to adjust and
complexity of the inputs and activities which modernize these systems is not initiated in
an organization is able to handle effective- a timely fashion and pursued effectively.
ly in any given time. Capacity-building, ac-
cordingly, denotes an effort to expand the ex- During the 1980s and early 1990s, accord-
isting capabilities of an organization or of the ingly, "downsizing" or "rightsizing" and "do-
State qualitatively and quantitatively. In ing more with less" became the standard mot-
other words, capacity-building may be defined tos of reorganization. Consistent with the crit-
as the co-efficient of human resources de- icism that faulted previous practices there
velopment and institution-building. Two was also a shift of focus from the centre to
principal dimensions may be distinguished. the periphery and from the top to the grass-
One is a process involving the establish- roots, through a process of devolution and de-
ment, reinforcement or reform of an organi- centralization. This carried in its trail em-
zational framework for the conduct of human phasis on outsourcing, reliance on NGOs
activities. The other is human resources de- and other non-state actors for public service
velopment, which includes human capital for- delivery, stress on priority tasks and corre-
mation, the enrichment and refinement of es- sponding emphasis on what were designat-
sential management skills and requisite ed as an organization’s core competencies.
technical aptitudes and support for value sys-
tems conducive to the goals of cost-effective Emphasis on core competencies and ways in
management in organizations. which these competencies must be deployed
and leveraged to maximum effect has often
been accompanied by a process of selective
100
STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
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WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
102
STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
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WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
The formulation of performance standards like In light of these perspectives and the ongo-
the development and articulation of policy rep- ing pursuit of subsidiarity through decen-
resent essential functions of the State, which tralization, deconcentration, devolution of
cannot be surrendered or "outsourced". To be responsibility and offloading or outsourcing,
sure, under conditions of globalization, the one must incorporate performance indicators
exchange of information among govern- in the formulation of policies and pro-
ments will lead them, in some cases, to align grammes, which serve to mobilize stake-
methods and practices in the quest of shared holders’ support and involvement, but also
objectives. However, it is incumbent on gov- help to structure and guide the evaluation
The formulation of ernments to establish standard setting, per- of progress and results. Seen in this light, per-
performance formance indicators and the practice of formance measurement, monitoring and
benchmarking on an institutional basis, as evaluation represent a necessary compass in
standards like the
part of their core functions. the quest of complex objectives involving
development and contributions from the several partners un-
articulation of policy Though stress on performance standards der conditions of democratic and accountable
has been with us for some time, it has tak- governance.
represent essential en on great salience in the past two decades,
functions of the State, in part due to the effect of the new trends in 4.1. Purposes of performance
management and the emphasis they have measures
which cannot be
placed on results orientation. Mindful of res-
surrendered or olution 50/225 of the United Nations General The fundamental purpose of instituting per-
"outsourced" Assembly, which in paras. 7 and 9 called for formance measures in an organization is to
enhanced effectiveness of public adminis- evaluate its performance. Briefly, they may
tration systems worldwide (UN, 1996, A/ be used in accounting for past activities,
RES/50/225), the Fourteenth Meeting of the managing current operations and assessing
Group of Experts made performance moni- progress toward planned objectives. One of
toring and evaluation one of the major top- the oldest uses of performance measures
ics of its agenda. Its report (UN, 1998, was for purposes of accountability, specifically
E/1998/77, paras. 44-46) explores in some de- related to the budget process. Performance
tail the issues in performance monitoring and measures were to be incorporated in agency
evaluation, and underscores their impor- budget presentations in an effort to replace:
tance. The Fourteenth Meeting of the Group
of Experts viewed this new significance in light • Workload or activity levels, such as appli-
of four perspectives: cations processed, inventory levels, inspec-
tions carried out, students in class;
• The changing role of government from sole
provider of services to one of founder, lender, • Outputs, such as the number of children
contractor, purchaser and regulator; vaccinated, miles of road built, tons of trash
picked up, students graduated;
• The public’s right to know;
• Outcomes of products or services, such as
• The need to measure the outcomes of poli- illnesses prevented, percentage of taxes col-
cies and programmes, and thus to act as cat- lected, clean air levels achieved, accident-free
alyst for periodic reviews, possible recon- workplaces attained, poverty alleviated;
sideration of resource allocation and the
quest for performance improvements; and • Productivity, such as cases investigated per
detective, applications processed per per-
• The need to go beyond the traditional son, emergency calls handled per dispatcher;
forms of accountability to ensure value for
money and the cost-effective pursuit of the • Costs, such as coverage costs to build one
public interest. mile of highway, educate one child, maintain
one swimming pool;
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STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
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WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
trend, but also of the formation and opera- nance systems (policies and institutions) in
tion of international regimes in many fields response to globalization. This includes sup-
of activities. All depend for their effectiveness port for policy development and implemen-
on an elaborate framework of rules, process- tation capacities in developing and transition
es and practices, which determine how pow- economies" (ibid., Recommendation, No. 16).
er is exercised and governance conducted with
consistency, transparency, coherence and ac- The Fifteenth Meeting of the Group of Experts
countability, as well as on a cadre of top-lev- drew attention to the weaknesses of the de-
Attention ought to be el managers from the governments of Mem- veloping countries and countries with
ber States, who can bring this framework to economies in transition resulting from "the
focused on
life and operate effectively in the new glob- scarcity of world-wide economists and specialists
competencies needed al environment. with knowledge of the working of international
to operate effectively agreements, treaties and regimes, as well as
Attention ought to be focused on competen- technical skills" (ibid., p. 14). Significantly, how-
on the supra-national
cies needed to operate effectively on the ever, the Meeting took the view that analo-
level, and on ways of supra-national level, and on ways of build- gous shortcomings could be observed in the
building capacity on ing capacity on the national level. It should operation of States at the national and sub-
be pointed out that the ability to field such national levels. Everywhere, it may be argued,
the national level a cadre of top managers and leaders condi- globalization and democratization have in-
tions a country’s effectiveness as an actor in creased the pace of change, complexity and
inter-governmental negotiations and global ambiguity, making demands on cadres for which
regimes. With such individuals, Member they are ill-prepared.
States are effectively "in the loop" and have
the possibility to promote their country’s in-
terests. Dearth of such people, by contrast, 6. Competencies needed to
may consign States to the margins and to the meet the challenges of
role of spectators of the progress accom- globalization
plished by others.
The competencies needed to meet the criti-
"Tell me and I’ll forget. cal challenges of contemporary governance
Show me and I’ll remember. refer to a combination of knowledge, skills,
Involve me and I’ll understand." behaviours and attitudes, which often goes
Chinese proverb beyond what was required of "bureaucrats",
or officials operating in traditional, closed-
In view of the pressures that globalization system work environments. No two countries
create, "public servants should be trained to need to agree on the desired profile of a sen-
operate on the national, sub-national and in- ior public manager or on the relative weight
ternational levels and participate in leader- and indeed precise definition of the most of-
ship training. Governments should build a ten-mentioned competencies, some of which
framework of public personnel structure, are described in the following paragraphs.
policies and career paths able to attract, re-
tain, develop and motivate the right people Knowledge, a hard substantive core, is part
and to direct their energies towards the pub- of the competencies that senior profession-
lic good" (ibid., Recommendation No. 19). al managers need to bring into their office
as a basic precondition of being able to ex-
Furthermore, "the United Nations should as- ercise effective guidance and leadership.
sist national governments in acquiring the
necessary negotiating capacities to prepare A component of technical knowledge will al-
for negotiations of global economic governance ways be required. Though this may vary
regimes" (ibid., Recommendation No. 15), widely depending on a manager’s assigned
and it "should assist national governments responsibilities, substantive knowledge is
in adjusting their national economic gover- needed to grasp the issues involved in the ex-
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STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
ercise of one’s duties to make intelligent cellence, innovative ideas and actions or be-
choices. Traditionally, the study of law pro- haviour, which seek constructive ways to
vided a common core of required technical establish and secure a country’s or organi-
knowledge for top public managers in many zation’s competitive edge. Within the or-
of the foremost administrative cultures. ganization, leadership is demonstrated
Though this remains the case in several through building trust, communicating vision,
parts of the world, now law is complement- empowering colleagues, serving as a role
ed by the study of social sciences, especial- model and managing performance effec-
ly economics. Knowledge of economics is ba- tively.
sic not merely to the management of any giv-
en field, but also to interacting effectively with Decision-making skills include the effective
Leadership calls for
other public managers on the sub-national, use of information, data, technologies and ideas;
national, and international levels. a clear sense of direction, priorities and vision, ability to identify
needs; sound planning and good timing; and and seize an
Another core component of the substantive client orientation, which also means re-
opportunity, anticipate
knowledge required of an effective professional sponsiveness to changes and developments
public manager is, what may be described as in the organization’s external environment. a crisis and cope with
the management of the resources assigned They call for critical judgment, sagacity and constraints effectively
to his or her care. These preeminently include: discernment, courage and intuition, but al-
so uncommon capacity to cope with ambiguity,
• Human resources; diversity, complexity and turbulence.
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WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
108
STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
(f) the legitimate use of power and authori- State in the social area transparent to citi-
ty. zens. Information concerning social pro-
grammes must be complete, ongoing and to-
7.1. Transparency: a generalized tally accessible. The purpose of the pro-
demand grammes, the resources to be used, sources
of financing and implementation processes
One of the main criticisms leveled at the State must constitute information that is as ac-
in recent decades has been the fact that cor- cessible as any other elemental administra-
rupt practices often exist and such practices tive data, and this is precisely where IT and
are not punished. This is a very widespread the Internet can make valuable contributions.
problem that does not exclusively affect the At the same time, channels should be set up Corruption must be
developing world. These practices are not sole- so that social control of public administra-
transformed into an
ly confined to social areas. Modern research tion can make itself felt. The entire system
into corruption points out that whenever should also contain clear and indisputable exceptional
there is a corrupt person in the public sec- measures for penalizing and punishing cor- occurrence, morally
tor, there is someone who does the corrupt- ruption.
penalized; but the risk
ing from the private sector. Corruption has
to do with intra-social combinations that Corruption must be transformed into an ex- of criminal prosecution
are often of vast scope. Some episodes of the ceptional occurrence, morally penalized; but should also exist
most blatant corruption in Latin America in the risk of criminal prosecution should also
recent years did not occur in the public sec- exist. In summary, it should be difficult and
tor. The embezzlement that took place in a dangerous to engage in corrupt practices, be-
number of large banks in the area a few years cause of permanent controls by the preven-
ago, which translated into a sizable loss of tive systems in place and monitoring by the
resources for the countries involved, was citizens themselves, as well as by the threat
spurred by the corrupt practices of important of punishment.
private bankers, often aided and abetted by
the ineptitude of some public regulating bod- 7.2. Managing diversity
ies. The episodes of corruption that accom-
panied privatization processes in certain de- Diversity takes on many forms. Globalization
veloping countries were connected to pub- and progress bring in their wake the prolif-
lic/private interest arrangements. eration of preferences, sub-cultures, interest
groups, religions, cults, ideologies and
Today, worldwide, there is a generalized de- groups demanding recognition and protection
mand to put an end to corruption. Its costs of their identity or indeed representation in
for the economies of developing countries are decision-making processes which impact on
extremely high and the moral consequences their status and rights.
are even worse. In the social sphere, corruption
in the guise of skimming resources from Repression of such groups is not a viable op-
policies and programmes set up to help the tion. It has proved counter-productive and,
poorest members of society, is a true ethical as experience shows, is costly economically
crime. The State must undergo a radical and politically. Experience demonstrates a
transformation in this area. All anti-cor- pressing need to strengthen the capacity of
ruption strategies that could be effective States both in accommodating and manag-
should be brought into play, among which, ing diversity and change. It comes as no
the first should be the monumental task of surprise that the greater the diversity, the
educating people about corruption. Spaces must faster the process of change and the more vi-
systematically be created to discuss the tally important the role of the State becomes
problem in all educational venues for civil ser- in managing this process. International co-
vants; clear cut codes of ethics that can be operation and the force of global example may
strictly enforced must be devised. It is also help in building up the State’s much-need-
necessary to make all actions taken by the ed capacity to serve as guarantor, time-keep-
109
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
er, moderator and manager of a process of One cannot over-emphasize the urgency and
change involving multiple partners and complexity of gender mainstreaming, on the
stakeholders, while all along safeguarding the one hand, and progressive integration of
interests and rights of all concerned. A dy- hitherto underprivileged and under-repre-
namic market economy requires an effective sented categories of citizens, on the other. This
State, where the instruments for strength- has seldom proved an easy task. Not only spe-
ening the nation-State obviously needed, for cial measures and facilities may be required,
instance in some of the former Republics of but also language and culture have proved
the former Soviet Union, have to be bal- in some cases to be steep barriers to surmount.
Accommodating anced with adequate decentralized policies.
diversity makes good This is needed partly in response to the ex- One of the many effects of globalization has
pectations of groups aspiring to administer been to ease the movement of peoples across
business sense in any
their own cultures and traditions as part of borders and bring them closer together.
organization the newly formed national entities. The Proximity, however, has not invariably
greatest challenge, while moving into the new helped to combat or assuage stereotyping, let
millennium, will prove to be the building of alone eliminate prejudice and discrimination.
viable political institutions for the new na- Recent events in the world have brought
tion-States of the region. Institutions should home to some governments a sense of the di-
be capable of respecting the aspirations of mi- versity of their respective countries and the
norities that are part of these nations, and dangers of exclusion. Still, it would be an er-
of establishing a balance between what is dic- ror to view the current stress on diversity man-
tated by economic logic and clamoured for in agement purely in terms of "affirmative ac-
political expectations. The political process tion", equalizing opportunities or righting his-
of the breaking up of the Soviet Union has torical wrongs, important though these may
been remarkably peaceful. However, in its af- be.
termath, the forces of ethnicity and minor-
ity and of the periphery in relation to the cen- Accommodating diversity makes good busi-
tre demand political leadership to promote ness sense in any organization. It repre-
policies that are all inclusive, a commodity sents a necessity primarily on account of the
rare even in normal times and certainly process of diversification present in all soci-
harder to come by when the economic and eties and all organizations. Such growing het-
social indicators are worsening. erogeneity reflects more than plurality and
visibility of cultures, which must be accom-
“Those who applauded the lifting of the ‘Iron modated in any one workplace. On a more
Curtain’, which separated people between coun- basic level, heterogeneity springs from the
tries, never expected ‘Glass Curtains’ to de- diversity of occupational groups, the product
scend separating people within countries. The of specialization, which rapid advances in sci-
challenge now is to achieve political rights ence and technology have carried in their trail.
in an environment of growing economic in- Today, very few policies or programmes, de-
security. Human insecurity breeds human vi- cisions or operations can either be designed
olence, making it even more necessary for eco- or implemented without the cooperation of
nomic growth to aim at enriching human de- many different specialties and sub-special-
velopment” (UNDP, 1999, Human Develop- ties. Bringing them together into a cohesive
ment Report, p. 11). Training programmes on group, building them into a team, is hardly
diversity and "conflict resolution" have mul- an easy task. Distinct occupational groups
tiplied and spread, in several parts of the world, have often different values, divergent
both in the public service and academic es- methodologies or problem-solving tech-
tablishments. Still, it should be noted that niques, let alone competing interests. Occa-
the scope of such departures is, in some sionally, they exhibit what others may con-
countries, limited to three main target sider an exaggerated sense of their own rel-
groups: women, minorities and people with ative importance. Building a balanced syn-
special needs. thesis of many complementary but still dis-
110
STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
111
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
ject to public accountability for their ac- Accordingly, many governments and inter-
tions" (UN, 1999, ST/ESA/PAD/SER.E/3, p. governmental organizations are currently
80). experimenting with innovative approaches
which seek to redefine the scope of the pub-
How governments recruit and under what con- lic sector, change the traditional structures
ditions they employ their personnel are in- of public organizations and introduce more
stitutional issues, where wide diversity of prac- flexible, often private-sector-inspired modal-
tice may be observed. Obviously, there is no ities for the employment of personnel in the
Cross-cultural one-best-way, and "no-one-size-fits-all." In public sector. It should be pointed out that
many parts of the world, patterns in public success of such experiments in one country
comparisons should
employment have long been bound with does not necessarily mean they would work
explore the factors tenure and the concept of careers. The in others. Uncritical acceptance of foreign pol-
growth of political pluralism during the XIX icy transfers, as we have seen, has often led
which contributed to
and XX centuries reinforced this trend. For to unhappy consequences. There are, nev-
the success of policies reasons related as much to political probity ertheless, important ways in which com-
and shaped ... final as to the proper working of the administra- parison of civil service reforms in different
tive system, civil service reforms have pro- parts of the world could prove extremely
outcomes
moted the separation between political func- useful by shedding light on factors which con-
tions and civil service posts. The latter were tributed to the success of reforms. Such fac-
progressively brought into career structures, tors are, for instance, the presence of a well-
one of whose main objectives was to buffer organized market for high-level skills, a de-
public servants from external political pres- veloped and expanding private sector, a cul-
sures and to safeguard their "neutrality". ture of respect for the rule of law and a gen-
erally supportive legal and institutional
To be sure, respect for this neutrality and lack framework. With the analysis of outcomes,
of political tampering with the public serv- cross-cultural comparisons should explore
ice have been variously observed in different the factors which contributed to the success
parts of the world. More recently, however, of policies and shaped these final outcomes.
both "career" and "permanence" have come
under attack from several quarters. Among After more than two decades of experiments
the arguments put forward in favour of the with change, it would be very useful to pro-
abandonment of this traditional doctrine, ceed with an objective analysis of benefits and
the diversification and changing configura- costs and try to demonstrate the strengths
tion of personnel requirements in the pub- and weaknesses, advantages and disadvan-
lic sector stand out as incontrovertible. The tages of the policies pursued: what worked
civil service profile in most countries today and what did not; where, how and, most im-
bears no relation to its counterpart before the portantly, why.
Second World War. What is more, it is con-
stantly changing. With efforts on the way to States’ responses to the challenge of global-
curb public expenditures and calls to priva- ization ought to accord priority to the en-
tize or outsource large sectors of activity, sev- richment of the stock of competencies avail-
eral governments and public organizations able to governments for purposes of man-
have come to regard permanent contracts or agement and policy-making. However, the val-
"tenure" as an obstacle to change, or as an ue of a structured institutionalized approach
obstruction to rapid response. At times of re- should not be overlooked. Governments need
source scarcity, constraints on "trimming to build "a framework of public personnel struc-
down" redundant personnel are both found tures, policies and career paths able to at-
unacceptable to some and accentuate the tract, retain, develop and motivate the right
feeling that permanent appointments provide people and motivate their energies towards
strong disincentives to work hard and to the public good" (UN, 2000, E/2000/66, Rec-
adjustment. ommendation No. 19). Furthermore, "gov-
ernments should take urgent concerted
112
STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
measures to reinforce the ethics infrastruc- demands concerted action. In turn, such ac-
ture of their respective countries and to in- tion demands a truly professional manage-
troduce a comprehensive set of mechanisms, ment of public sector human resources and
including merit pay and performance bench- a holistic approach to their sustained de-
marks, to deal with corruption and generally velopment. The former would require build-
raise the standards of public life, national- ing a cadre of top-level professionals. The lat-
ly and globally" (ibid., Recommendation No. ter would entail well-coordinated action
20). through (a) pre- and in-service training; (b)
mobility and rotation; (c) ending the pa- For too long and in too
The role of infrastructures and institution- tronage system, where it exists; and (d) re-
al frameworks is to act as the key determi- cruitment, posting and promotion strictly
many countries, public
nant of the nature and levels of the compe- on the basis of merit (with allowances for af- employment has been
tencies and values that a country wants to firmative action). In this regard, it would be
viewed as instrumental
foster both in the public service and public advisable that "the State stop being an em-
life in general. Notwithstanding cultural dif- ployer of last resort" (ibid., p. 14). to extraneous ends and
ferences, most countries would agree in in- human resource
cluding, in the latter, objectivity, equity, tol- To give substance to this approach in concrete
management
erance, intellectual courage, integrity and, terms, the Meeting of the Group of Experts
even more importantly today, commitment recommended “the proclamation of a Unit-
to democracy, and respect for human rights ed Nations Public Service Day, which would
and for the rule of law. Although it would be celebrate the value and the virtue of service
risky to generalize, it may be fair to argue to the community on the local, national and
that countries find it hard to nurture and sus- global levels, with prizes to be awarded by
tain such values and competencies in the pub- the Secretary-General for contributions
lic service in the absence of certain conditions, made to the cause of enhancing the role, pres-
which need to be highlighted: tige and visibility of public service" (ibid., Rec-
ommendation No. 3).
• An institutional framework and a profes-
sional cadre for human resources manage- It may be worth exploring, in the framework
ment and development ensuring for the of the United Nations Programme in Public
service a measure of coherence, consistency, Administration and Finance, other meas-
transparency, credibility and predictability; ures to enhance the prestige accorded to
public service worldwide and the relative au-
• A culture of respect for service to society and tonomy of the public service profession. For
to the State, and for recognition of merit. too long and in too many countries, public em-
ployment has been viewed as instrumental
Many developing countries and countries to extraneous ends and human resource
with economies in transition are facing se- management subordinated to short-term
rious problems in this regard. For example, considerations unrelated to the goal of sound
due to the paucity of pay, which is so low in overall performance in the public service.
some countries and so rarely disbursed, pub-
lic servants are forced to choose between Specifically, in several countries, a spoils
service to their country and meeting their fam- system still prevails. Positions at all levels,
ily’s basic needs. Experience throughout the though paid from public funds, are virtual-
world corroborates the dictum that a "cheap ly appropriated by the political leadership and
public servant can cost the State a lot". used for electoral purposes or the exercise of
patronage. The effects of "clientelism" are com-
However increasing salary levels of public of- pounded, in most cases, by the tendency to
ficers would not yield proper results and use the public service as a means or as an
might be counterproductive if it were not ac- instrument to combat or conceal unemploy-
companied by a commensurate rise in per- ment. The negative effects of such practices
formance levels. Raising performance levels have been manifold and visible. Not only have
113
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
they contributed to inflating staff costs and fronts, major strides have been made in re-
adding to tax burdens on citizen taxpayers, cent years. Most governments now welcome
but they have also tended to "debase the civ- an exchange of information and some indeed
il service coin". A once prestigious profession, accept a measure of convergence of admin-
it has gradually become the butt of attacks istrative practice, notably as a prerequisite
and derision from many quarters. of their accession to wider regional groups
(e.g., the acquis communautaire, required for
Efforts to enhance the role, professionalism, future membership of the European Union).
performance, ethical values and standards
in the public service ought to begin by ad- Reflective of the effects of technological
dressing this issue. Whatever must be done progress in accelerating the transition from
Capacity-
to further job creation, using the public serv- a closed to an open systems approach and in
reinforcement must ... ice is not the way. Staffing, recruitment, promoting transparency of government op-
be understood in posting, promotion, career development and erations, this new exposure of national ad-
remuneration practices must follow objective ministration to domestic civil society and in-
broad strategic terms principles with only the prestige, perform- ternational scrutiny is welcome on the
as a ... continual task ance and integrity of the service in mind. whole. It fosters sensitivity to public expec-
tations and may serve to reinforce greater re-
of shaping, redefining
Though policies will vary from one country spect for professionalism in the public serv-
and revamping to another, one thing seems certain: that ice. There are nevertheless also potential down-
institutions with the policies and practices of human resources man- sides. One is a certain risk that the respon-
agement and development must rest in pro- sibility for administrative action may be
help of evolving fessional hands. How to recruit, retain, de- dangerously diffracted and that accountability
technologies and velop and motivate professionals, at various may suffer, as a result. The other is the ten-
levels, is an issue that must be addressed. dency to exaggerate the scope for meaning-
refining human
A complex of activities which seeks to apply ful comparisons and policy transfers.
competencies in this the lessons of international practice, inter-
light national cooperation in institution-building Capacity-reinforcement must therefore be
and human resources development conveys understood in broad strategic terms as a
a powerful message. The means available, in long-term endeavour, indeed a continual
terms of knowledge, science, technology and task of shaping, redefining and revamping
know-how open immense possibilities for institutions with the help of evolving tech-
the world as a whole. Building a public serv- nologies and refining human competencies
ice worthy of a democracy is well within the in this light. The potential is enormous. But
reach of most governments. Will the deter- how to ensure that progress driven by mod-
mination to use these possibilities prove ern technologies follows the paths of reason
commensurate to the challenge of the times? and serves the public interest is the challenge
that public institutions at the national, sub-
national and international levels must face.
9. Technology and reform
9.1. Information technology: its
It has become apparent that globalization has promise and potential for reform
invested reform with new meaning. Once an
occasional task of bureaucrats and politicians, IT carries in it the prospect of major re-
it is fast becoming a recurrent event and a forms in the whole field of governance and
facet of the process of modernization. In- public administration. These could take
creasingly, however, two new dimensions shape and form in any of the following ways:
are added. One dimension is the progressive
exposure of previously veiled structures to • More efficient and effective public man-
public view and growing public scrutiny; the agement;
other may be termed the "internationaliza-
tion" of administrative change. On both
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STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
• More accessible and better information quently the only producer and manager of rel-
for the public; evant economic and social data.
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WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Box IV.2
The Internet began as a government project, more specifically, as a project of the Advanced Research Projects
Agency (ARPA) of the United States Department of Defence. The Pentagon asked ARPA to design a computer network
that would be secure and resist attack in the event of war. Researchers at ARPA developed the concept of packet-
switching, in which data is split into tiny packets that may take different routes to arrive at a final destination, where
they are re-assembled. From a military point of view, such a network is secure for two reasons. First, it is difficult for an
enemy to make sense of intercepted, unassembled packets. Second, since there is more than one route to a
destination, if one node is destroyed by enemy action, the packets can travel by an alternative route.
ARPANET, precursor of today’s Internet, linked four research centres in 1969, and 15 by the year 1971. In 1973 ARPANET
went international, with links to University College of London and the Royal Radar Establishment in Norway. The
developers of ARPANET had in mind communication between machines (long distance computing and file transfers)
rather than communication between persons (electronic mail and discussion groups). It turned out that, contrary to
expectations, communication between people became much more popular than communication between
machines. In 1971, Ray Tomlinson of ARPANET invented e-mail, and it was an instant success. Various discussion groups
sprang up, where a person asks to receive all posts on a particular topic, and the volume of e-mail in ARPANET
accelerated. To the dismay of the Pentagon, which was financing the network, the most popular discussion group was
one on science fiction.
The first step toward extending this new tool of communication beyond the small group of ARPA subcontractors
occurred in 1974, with the creation of Telnet, a public version of ARPANET. In 1979, two graduate students made use of
Telnet to establish USENET "newsgroups" that exist to this day, and continue to grow. Newsgroups differ from the
discussion groups of ARPA in that, instead of signing up for receipt of all posted messages, a member accesses an
electronic bulletin board where the messages are temporarily stored. Various other networks, such as BITNET and CSNET,
were established to provide services (especially e-mail) to university researchers with no access to ARPANET.
On January 1, 1983 ARPANET adopted Transmission Control Protocol/Internet Protocol (TCP/IP), a date that, for many,
marks the birth of the Internet. The Internet is the global interconnection of millions of otherwise independent computers
and information systems. TCP/IP makes this interconnection possible. The Internet Protocol (IP) provides an address for
each tiny packet of data, which can then be transmitted by any of a number of routes, using otherwise incompatible
computers of different makes and models. The next higher layer of protocol, the TCP, handles the re-sending of any
packets that might have been lost, and reassembles the packets at their destination. The authors of TCP/IP use the
analogy of “electronic postcards” to explain how the Internet is able to transmit packets (Kahn and Cerf, 1999).
After TCP/IP, the most important development to date for the Internet was the release in 1991 of the World Wide Web
(WWW), which was developed by Tim Berners-Lee at CERN (Switzerland). The WWW "browser/editor" gave anyone with
a modem and a computer access to documents throughout the world. Users of the browser do not have to know this,
but it functions thanks to a special protocol known as Hypertext Transfer Protocol (HTTP), and, for fast retrieval,
documents can be written in Hypertext Markup Language (HTML). The first browser did not support graphics, but this
changed in 1993 with the release of Mosaic (which developed into Netscape) and the WWW revolution truly began.
Business and media began for the first time to take notice of the Internet, and the number of web sites mushroomed
from 623 in December 1993 to 100,000 in January 1996, one million in April 1997, 3.7 million by year-end 1998 and 9.5
million by year-end 1999.
As of November 2000, an estimated 407 million persons worldwide were accessing the Internet, more than twice the
201 million of September 1999, and more than 15 times the 26 million estimated to have been online in 1995 (Nua, 2001).
As impressive as such growth is, it implies that the Internet still reaches fewer than 7 percent of the world’s population.
Moreover, it tends to reach the wealthiest and most educated of this population, for the Internet, like earlier ICT, has
spread unevenly. (It is said that half the inhabitants of our planet have never used a telephone and, more than five
centuries after Gutenberg, illiteracy continues to block the access of many to both books and the Internet.) There are
more users of the Internet in affluent Sweden than in the entire continent of Africa, more in Britain than in Latin America
and the Caribbean. The number of unique documents on the World Wide Web, as of January 2000, is estimated at
more than one billion, posted on 4.2 million unique servers, and additional documents are being posted at a rate of
more than 20 million a month. Not surprisingly, English is the language of preference on the web, for 86.55% of all pages
are written in this language, and an additional 2.36% in the French language (Inktomi, 2001).
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STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
countability in government. In the past two and ways of doing business, but also forms
decades, IT has also played a major role in and structures in organizations. For exam-
helping to spread the concept of a more ef- ple, with the Internet and on-line databas-
ficient and responsive public sector, based on es, all kinds of information text, graphics, im-
"service management". Emphasis on this ages, voice or video can be accessed and
concept has also led to extensive use of IT handled by many individuals concurrently.
tools for measuring the effectiveness and Accordingly, it is possible to carry out activ-
efficiency of public services. ities and workflows at different posts si-
multaneously if computers and information
IT has made a start at changing the modal- networks are in place. Knowledge manage-
ities of public service delivery. For centuries, ment systems, with the help of a search en-
the notion that citizens might actively par- gine on the Internet can capture the knowl- Traditional hierarchical
ticipate in all public affairs and make sub- edge of specialists and non-specialists for rou- organizational
stantive inputs in policy decisions remained tine decision-making. Delegation of author-
structures based on
a distant prospect. Now government websites, ity to lower levels of responsibility within an
e-mail and other means could turn such par- organization thus becomes a distinct possi- pyramidal flows of
ticipation into a reality. Electronic polling, bility. Traditional hierarchical organiza-
information could be
for instance, by either public or private in- tional structures based on pyramidal flows
stitutions, will probably take place in the very of information could be rendered obsolete. IT rendered obsolete
near future. If family computers are connected has the potential to bring about significant-
to a national or local information infra- ly altered organizational structures previously
structure and wired up to government web- based on hierarchical distribution of infor-
sites, a two-way communication system will mation, diminish the value of departmental
have been established. At the local commu- boundaries, and change the way decisions are
nity level, an Intranet may also be set up. taken and communicated.
This Intranet may be used to sample opin-
ions in a quick and painless fashion. Ques- Since the mid 1980s, accordingly, the focus
tions put on an administration’s website of IT has shifted, from the quest for efficiency
would appear on the computer screens of all and productivity by automating routine
the households connected to it. Viewers tasks, to the achievement of effectiveness in
could click the icon which they select on the terms of new approaches to traditional tasks
screen, and thus a poll is taken. Each house- and solutions to new tasks. State agencies
hold on the network could then be briefly and enterprises in many countries are cur-
scanned; the choices and results accumulated rently engaged in restructuring their or-
would appear in a matter of a few seconds. ganizations in manners more appropriate to
the new IT environment. In this process, they
Electronic referenda and electronic voting may are removing layers of traditional manage-
also happen eventually. An on-line voter ment, compressing job categories, creating work
guide could provide the public with current teams, training employees in multi-level
information about elections. Consultation on skills, simplifying business processes and
national issues may take place and elections, streamlining administration. The outcomes
either local or national, could be conducted of this re-engineering have demonstrated
through the Internet. The voting can take place the scope for administrative reform as well
wherever the voter is, provided that elec- as shown that, ultimately, decisions on the
tronic votes are properly designed. It goes with- pace and extent of such reform depend on the
out saying that such electronic polls, referenda quality of top management.
and voting systems must meet political as well
as technical requirements of accuracy, relia- 9.2. Delivering on promises: coping
bility and eligibility, when required. with the digital divide
In the public and private sectors, IT is rap- The paradigm of a knowledge-based econo-
idly changing not merely work processes my is not an impossible dream for the de-
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WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
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STRENGTHENING THE ADMINISTRATIVE CAPACITY OF THE STATE
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WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Footnotes - Chapter IV
1 See also Yehezkel Dror, "Workshop on Governance for the 21st Century: Upgrading Capacities
to Govern," unpublished report submitted to UNDESA/DPEPA, 1997; report to the Director of
DPEPA/DESA, in preparation of the Fourteenth Meeting of the Group of Experts on the United
Nations Programme in Public Administration and Finance.
4 A regional initiative in this direction was taken by the Second Pan-African Conference of
Ministers of Civil Service. A Ministers’ task force, broadly representative of the main groups
and traditions on the Continent, was set up to design a code of ethics for African public
servants. It reported on its findings to an Experts Meeting convened at United Nations
Headquarters in New York, on 24-26 November 1999 under the joint auspices of the United
Nations and CAFRAD. The Meeting approved a draft, which was submitted at a meeting of
Ministers in Rabat, Morocco (17-19 January 2000). It was presented at the Fifteenth Meeting
of the Group of Experts, held in New York (8-12 May 2000). It was adopted at the Third Pan-
African Conference of Ministers of Civil Service in Windhoek, Namibia (5-6 February 2001).
This public service code might serve as a model for similar codes on public service
professionalism and ethics of a regional scope. Other related conferences on this theme include
the International Seminar on Ethics and Public Administration in Latin American Countries,
cosponsored by UNDESA, at Isla Margarita, Venezuela (October 1997) and a Symposium on
Ethics in the Public Service: Challenges and Opportunities for OECD Countries, organized by
the Public Management Service (PUMA) of OECD (November 1997). This was followed by a
Multi-Country Seminar on Normative and Institutional Structures Supporting Public Service
Ethics organized by Support for Improvement in Governance and Management (SIGMA) in
Central and Eastern European Countries, at OECD Headquarters in Paris. Their findings were
fed into the proceedings of yet another conference held in Thessaloniki, Greece (November
1997). The subject of that conference was Public Service in Transition: Enhancing its Role,
Professionalism, Ethical Values and Standards. Other subsequent events included the
Colloquium on Promoting Ethics in the Public Service, co-organized by UN/DESA, the Federal
Government of Brazil and the Hyundai Corporation in Brasilia (8-10 December 1997).
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LOOKING TOWARDS THE FUTURE
Chapter V
T
his Report embraces the opin- centralization, deregulation and privatization
ion, put forward by the Secretary- were also accorded prominence. What can we
General of the United Nations, say of the outcomes? There have been reported
that globalization must be prop- successes, mostly in the North and West, but
erly understood as a complex phenomenon, also stories of failures in many developing
as well as a source of opportunities which can countries and countries in transition. The char-
be widely spread, but which so far have acterization of the 1980s as “the lost decade”
touched and benefited only a few. The chal- and of the 1990s as a “mixed bag at best” gives
lenge that confronts us is to ensure that the measure of the distance between expec-
more people around the world can benefit tations and outcomes.
from globalization.
2. Reforms must be
1. What went wrong? home-grown and made to fit
real needs
The weight of the available evidence strong-
ly suggests that, in the past two decades, many Preliminary findings embodied in this doc-
developing countries and countries in tran- ument give only a partial picture of what clear-
sition were victims of advice on policy deci- ly is a highly complex, prismatic situation
sions which, in the last analysis, not always worldwide. A systematic study of past pro-
bore relevance to their particular circumstances grammes and policies would greatly assist
and needs. In contrast to the strategies pur- the quest for more appropriate strategies and
sued in prior years, such policy prescrip- methods of reform than those already tried
tions de-emphasized the role of the institu- in the past two decades. It must be carried
tions of government, which they portrayed out, and the United Nations, first in the
in essentially negative terms, as obstacles to field and sponsor of arguably the oldest pro-
growth and the progress of globalization. gramme of technical cooperation in public ad-
This negative view of the State went in tan- ministration and governance, is well positioned
dem with attacks against the public service to put it into effect. However, the weight of
and the glorification of private sector ways available evidence, as shown in this Report,
over the public sector. points to a convergence of views on certain
salient features of past approaches and
Experience demonstrates that States with measures:
weak institutions have not been able to em-
power their citizens to take part in global- • A rather dogmatic and technocratic approach,
ization or to fend off the implied social costs. which failed to take account of the com-
The language of discourse and measures ad- plexities of particular national circum-
vocated reflected the ideology which held stances and overemphasized one facet of re-
sway in the West, during the 1980s and ear- form (e.g., cutback management) over all
ly 1990s. Devolution of responsibility, de- others. Now widely criticized as “reduction-
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WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
ist”, this approach took for granted a meas- that their elected government has lost con-
ure of convergence of managerial cultures trol of events.
which appears, in retrospect, as somewhat
unrealistic. It correspondingly pressed for “one
best way” solutions which earned it the de- 3. Making democracy
scription: “one-size-fits-all”. What is needed meaningful: the need for a
are customized approaches to meet the di- strong, strategic State
verse needs of individual countries” (UN,
The State is 2000, E/2000/66, p. 15). In fact, “an overly Experience demonstrates that the failure of
technocratic or purely economic growth ap- democracies to make any meaningful
indispensable to
proach to institutional development divorces changes in the social and economic conditions
democratic the institutional strategy from the socio-eco- of their citizens, lead to public cynicism, ap-
nomic strategy and political environment athy and alienation. What we call “the na-
governance ...
which it is meant to serve.” (ibid., p. 11) tion-State” which, needless to point out, is
however ... several of different today than half a century ago, is the
its tasks cannot be • A related criticism has faulted the rela- best instrumentality we have at our dispos-
tionship between recipient and donor. Con- al in order to accomplish our purposes in dem-
carried out, as in the
trary to officially accepted doctrine, too ocratic ways.
past, in centripetal many programmes proved to have been sup-
fashion out of the ply-driven. In many cases, accordingly, reforms The State is indispensable to democratic
have been externally induced. Too often, as governance. It has been pointed out, however,
national capital a result, style has invaded substance and pro- that several of its tasks cannot be carried out,
grammes were concerned with “quick fixes” as in the past, in centripetal fashion out of
rather than long-term progress. the national capital. Important functions of
government have been devolved on the sub-
The lessons of experience strongly point to the national level and, more significantly, major
conclusion that reforms to be successful and, decisions of government are taken in the frame-
accordingly, aid programmes to produce work, or subject to provisions of inter-gov-
“user-friendly” results, must clearly be: ernmental regimes (e.g. World Trade Orga-
nization) and supra-national bodies (e.g. Eu-
• Home-grown; ropean Union). As the Fifteenth Meeting of
the Group of Experts has aptly pointed out,
• Demand-driven; and this situation makes major new demands on
Member States of the United Nations, for
• Internally consistent and duly coordinat- which developing countries and countries
ed on the national policy level. in transition are often ill prepared. Indeed,
it may be argued that the capacity deficit, that
It has become apparent that the design and is to say the distance between what countries
conduct of programmes of reform require have and what it takes to make them well-
the steady involvement of competent na- functioning democracies, as well as effective
tional teams, which must be in the driver’s players on the international scene, is one of
seat. Main policy decisions cannot be “out- the main causes of the crises plaguing the
sourced” to consultants, however good. How- world.
ever well-intentioned and technically ac-
complished, foreign advice must stay with-
in the bounds of counselling and guidance. 4. The State as linking pin: a
Overstepping that limit is both counter-pro- strong supportive centre
ductive and dangerously shortsighted. Car-
ried too far, it undermines the confidence of One of the principal findings and messages
peoples in their respective governments and of this Report is that we need the State, and
institutions. Democracy is “hollowed-out” that the State, increasingly, will function
and accountability lost when citizens conclude on three levels:
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LOOKING TOWARDS THE FUTURE
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WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
• Professionalism in human resources man- • Growing sensitivity towards and respect for
agement and development; the citizens’ needs;
Assisting developing As pointed out in a recent report of the Unit- • Increasing recognition of the value of neu-
ed Nations: trality of civil servants and of the need to se-
countries and
cure a degree of autonomy of public person-
countries with “Professionalism in government, or any oth- nel management from extraneous pressures
economies in transition er field, rests on two foundations: one is a com- in order to safeguard high quality perform-
petence base, a special body of knowledge or ance, motivation, integrity and professionalism
in building or refining ...
a definable skill acquired through study and in the public service;
structures and policy practice. The concept of professionalism,
however, also suggests a shared values sys- • Increasing recognition of the value of
frameworks represents
tem, a code of ethical conduct that manifest cross-cultural and international links as
an urgent priority themselves in the application of knowledge, means towards the improvement of the pro-
the use of particular skills, and in the exer- fessional image and performance of the pub-
cise of control over practice” (UN, 1999, lic service (ibid., p. 24)
ST/ESA/PAD/SER.E./3, p. 97).
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LOOKING TOWARDS THE FUTURE
not fit all. Nevertheless, experience strong- term issues, including global agendas, may
ly suggests the need to professionalize hu- not receive the attention which they de-
man resources management and develop- serve.
ment in the public service sector. It seems
rather incongruous that a large body of There is no easy solution to this difficult
knowledge and accumulated experience on predicament of small developing countries and
these subjects has yet to make its mark on countries in transition. However, there are
civil service reform and public administra- ways in which the international communi-
tion, in all too many countries. It is even more ty could facilitate a more active and effective
regrettable that public service employment participation of the developing countries in
remains, in several countries, a haven of international governance. One obvious
Globalization and
clientelism, patronage and partisanship. Not modality is policy advice and briefing on
surprisingly, in such countries, the State is emerging major issues of policy; another is rapid change trigger
also regarded as the employer of last resort. assistance in coping with the deficit in di- two antithetical
We must revaluate public service as a nec- agnostic, negotiating and related skills; a third
although concurrent
essary prerequisite to reinforcing democra- could take the form of online networks pro-
cy, the State and sustainable development. viding up-to-date and comparable data in read- trends: convergence in
Whatever measures are needed to combat un- ily usable form. The United Nations Online
some aspects, but also
employment, using the public sector as Public Administration Network (UNPAN)
refuge for the jobless is certainly not the way. affords an illustration of what advanced divergence and
technology can do to bring policy advice, in- diversification in others
formation and training within the reach of
8. Building networks among officers in the developing countries.
public services: the United
Nations can help Globalization and rapid change trigger two
antithetical although concurrent trends:
One of the visible outcomes of globalization convergence in some aspects, but also di-
is that it has expanded the range of contacts vergence and diversification in others. There
among senior civil servants and government exists today an infinitely greater variety of
officials from different parts of the world. Del- specializations, group interests, ideologies,
egates and representatives from North and and points of view than fifty years ago. This
South periodically meet at international con- growing differentiation poses a challenge to
ferences, which are convened for purposes of managers that goes beyond the need for tol-
trade negotiations or to develop the basis of erance of diversity. It calls for listening
international cooperation in any of a num- skills, capacity to mediate and arbitrate,
ber of major policy areas. At meetings of finding a common ground between opposing
this nature, national representatives from the views, turning potential conflicts into win-
developing countries suffer from many draw- win situations, and sources of opportunity for
backs, which cannot be readily remedied. Not the greater good of all.
only are they required to bargain from a weak-
er negotiating position, but in so doing they
may also compete unfavourably in terms of 9. Helping developing
information, degree of specialization and countries to cope with
time they may devote to mastering a subject. complexity and change
They often lack the equipment, databases,
and support staff, which are not as readily Helping developing countries and countries
available in the South and East as in the North in transition confront the pressing chal-
and West. They live from hand to mouth, cop- lenges of globalization must also encompass
ing with emerging crises, dealing with top programmes designed to enhance capacity in
priorities but, for that very reason, also coping with diversity, complexity and
tempted on occasions to leave other matters change. The need is institutional, in other
aside. Under such conditions, the broader long- words, it requires the crafting or fine-tuning
125
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
of structures for consultation, mediation and governance, but also will enable them to be
policy coordination, but also manifests itself more active players on the international
in the new required profile for senior policy scene;
advisers and senior public managers. At the
national, sub-national and international lev- • On the international level, it needs to co-
els, both policy advisers and senior public man- operate with all the States, as well as NGOs
agers are increasingly faced with the de- and other non-state actors in improving,
manding tasks of reconciling differences, modernizing and fine-tuning the machinery
mediating disputes, resolving thorny con- for global governance.
flicts, negotiating agreements and trying to
Mobilizing world build consensus in a volatile environment
opinion for where differentiation takes on a variety of 10. Making globalization an
forms: instrument of inclusion
international action on
issues of global • Diversity of cultures, ethnicity, language, To turn globalization into an effective in-
religion or ideology; strument of inclusion and opportunity, not
concern is our best
fear, we should endeavour to make it work
chance [for success] • Diversity of political, legal and economic for the good of all and of the future; not just
systems; and for the short-term and for the good of a few.
This is no easy task, given the vast dispar-
• Diversity of conditions, interests and view- ities of power and wealth and the realities
points. of global power politics. Still, even within these
constraints, possibilities do exist; we must
The above are all compounded by an enor- seize these opportunities. Mobilizing world
mous range of fields of specializations that opinion for international action on issues of
go into policy-making and policy-implemen- global concern is our best chance. Success is
tation. Tackling complex issues effectively calls predicated on democratic States shouldering
for substantial knowledge of economics, pol- their responsibilities and playing an active
itics, psychology and law, as well as other dis- part in global governance. Reinforcing state
ciplines depending on the nature of the prob- capacity, as well as making the global insti-
lem at hand. It calls for historical depth and tutional framework more democratic, are
comparative perspective, and uncommon necessary conditions for people to enjoy the
sensitivity to the dynamics of human inter- benefits of globalization and to protect and
action. There is a pressing need for proper promote the interests of vulnerable groups
responses to globalization, which can bring in society. In fact, globalization is an oppor-
many opportunities to developing countries. tunity and a challenge. Working together it
Nevertheless, as indicated in the Report, it can be made into a formidable tool for the
also has social adjustment costs which re- progress of all humanity.
quire both States and other players on the
international scene to strengthen their ca-
pacity for long-term policy planning. They call
for institutions and competencies needed to
handle consultations on multi-faceted issues
of considerable complexity. The interna-
tional community can play a major role in
this respect through policy advisory servic-
es, targeted training programmes, and in-
formation exchanges. Its task is really twofold:
• On the level of the States, it needs to co-
operate with the developing countries and coun-
tries in transition in building the capacity
which makes for democratic and more effective
126
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Clark, Barry (1998). Political Economy: A Comparative Approach, Praeger, Westport, CT,
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134
PART TWO
PART TWO
INTRODUCTION
Part Two
Introduction
P
art Two of this Report is meant ment statistics are available for govern-
to be a constant feature of all fu- ments or less frequently for the entire pub-
ture issues. It will present data lic sector, but only for a limited number of
on the public sector, measure- countries and years. The employment figures
ment tools and relevant statistical informa- suffer from lack of comparability in addition
tion. Its goal will be to provide a meaning- to their limited availability. Statistics on
ful indication on how quantitatively the pub- government consumption expenditure (but not
lic sector changes along the years, and pos- actual final consumption) are widely avail-
sibly to make some connection between able. However, these also suffer from poor in-
these changes and its functioning. In this in- ter-country comparability, primarily because
agural issue of the Report a first methodological governments sometimes choose to record
analysis is carried out, aimed at answering public spending on health and education as
three basic questions: (a) How can the size government consumption (transfers in kind),
of the public sector be measured in theory? sometimes as subsidies (negative taxes), and
(b) How can it be measured in fact, given the sometimes as cash transfers to households.
constraints of existing data? (c) What accounts Expenditure data are available in most cas-
for observed variation in the size of the pub- es only for central governments, without
lic sector? any estimate of the value of tax expenditures,
much less the value of implicit subsidies
The first question is extremely difficult. To given to producers.
measure the total impact of the State on so-
ciety is a very complex task, in part because For the third question, despite these theo-
the impact of government regulations can- retical ambiguities and the poor quality of
not be quantified in any meaningful way. available data, it is possible to provide some
Nonetheless, it is possible to measure spe- surprisingly robust answers. When govern-
cific aspects of the size of the public sector. ment is measured by employment or by con-
There are three broad approaches: produc- sumption expenditure, there is strong evidence
tion, consumption and expenditure. The pro- of economies of scale in the provision of serv-
duction and consumption approaches rely on ices, but no evidence that the size of gov-
information from basic national accounts, ernment is reduced by globalization. When
whereas the expenditure approach requires government is measured by central govern-
knowledge of government taxation and out- ment expenditure, it is globalization that de-
lays; expenditure is the most comprehensive termines its size, with no evidence of
of the three approaches, in that it focuses on economies of scale. In sum, there are
government, but includes public and pri- economies of scale in the provision of gov-
vate corporations to the extent that govern- ernment services such as defense, health
ment subsidizes goods and services sold in and education, but a government’s budget is
the market. driven by globalization, not by the land area
or population of a country.
The second question presents another set of
problems dealing with actual measurement.
For the production approach, output statis-
tics are not generally available. Employ-
137
DEFINING AND MEASURING THE SIZE OF THE STATE
Part Two
W
hat does it mean to say that pose regulations on and collect taxes from oth-
the public sector of one coun- er sectors of the economy, (b) produce goods
try is larger than that of an- and services that it can either sell in the mar-
other, or that the public sec- ket or supply free of charge to individuals and
tor in a particular country has increased in the community, and (c) distribute funds
size over time? Since the public sector is the through transfers. We examine each of these
embodiment of the State, to answer this forms of State intervention under five head-
question one must first clarify the meaning ings: regulation, taxation, production, con-
of the word “State”. sumption and cash transfers.
139
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
allow one to rank countries by degree of reg- cash subsidy, it does not show up as in-
ulation nor measure changes in the extent creased government expenditure or taxa-
of regulation over time. Indeed, the rela- tion. Other examples are the tax conces-
tionship between regulation and formality is sions granted to firms that locate in a spe-
not necessarily positive, for onerous regula- cific area, export certain products, or be-
tions encourage growth of the informal sec- have in other ways desired by the State.
tor.
Without tax revenue, a It would be informative to sum all tax ex-
State cannot survive. It In sum, even though regulation is an important penditures in each country for purposes of
function of the State, it is virtually impos- comparison. Unfortunately such data are
can order its central
sible to measure in any meaningful way, collected in few countries. Tax expenditure,
bank to print money, and thus will be ignored in the remainder of unlike regulation, is simple to measure;
but that is a form of this Part. nonetheless it is seldom done.
taxation 1.2. The State as tax collector 1.3. The State as producer
Without tax revenue, a State cannot survive. A third function of the State is the produc-
It can order its central bank to print mon- tion of goods and services. Those destined for
ey, but that is a form of taxation since the final consumption are either sold or distrib-
resulting inflation erodes the real value of uted without charge to residents. The Sys-
cash balances held by the public. The State tem of National Accounts (SNA)1 distin-
can also finance its expenditures by bor- guishes between these two types of produc-
rowing, but it is the capacity to collect tax- tion, and refers to them as market and non-
es in the future that gives it access to capi- market activities (see figure 1 below). Goods
tal markets today. and services sold on the market are regard-
ed as output of public corporations, not gov-
The amount of taxes collected is determined ernment. They are valued at market prices,
by expenditure requirements, at least in the even if these prices are less than cost. Ex-
long-run. But the State affects profoundly the amples are publicly-owned telecommunica-
economy and the distribution of income by tions, railways, electric utilities, and postal
the way in which it collects taxes. Groups of services. Goods and services which are pro-
citizens or particular activities are favoured duced by employees of the State and distributed
when they are exempted from payment of tax- without charge (or at prices which are not
es. These “tax expenditures” give the illusion economically significant) are deemed to be
that the State is smaller in terms of revenue the output of general government. This in-
or expenditure, and distort inter-country cludes the activities of government min-
comparisons. To cite a simple example, gov- istries, but it also includes activities of pub-
ernments typically allow taxpayers an income lic non-market institutions such as schools,
tax deduction for each dependent child. A num- provided they are both controlled and fi-
ber of European countries provide in addi- nanced by government. “Government” in the
tion generous monthly payments to the fam- SNA refers to activities of the central gov-
ily of each child, with the result that gov- ernment and all lower levels of government,
ernment expenditure and taxation is larger such as municipalities.
than it would be if the State relied solely on
income tax deductions. Another example is An institution that is not controlled by the
subsidies given to homeowners by allowing government, regardless of the extent of pub-
deduction of mortgage interest payments. Oth- lic financial support, is deemed to be private.
er things being equal, one would like to con- This is true for public universities that en-
clude that the State is larger with this pref- joy considerable autonomy and for schools and
erential treatment of homeowners over hospitals that are wholly or partially fi-
renters. Yet, because the mortgage interest nanced by government but run by religious
deduction is tax expenditure rather than a orders or other non-profit institutions.
140
DEFINING AND MEASURING THE SIZE OF THE STATE
Figure 1. The Public Sector in the 1993 System of National Accounts (SNA)
PUBLIC
SECTOR
PRIVATE
SECTOR
Source: Adapted from OECD, Statistical Sources on Public Sector Employment (Paris, 1994), p. 38.
Other definitions of public sector produc- ket. But this is rare. In nearly all cases, the
tion are possible. Discussion is limited here value of non-marketed goods and services is
to the SNA because it is a system that was assumed to equal their cost of production.
prepared under the auspices of an Inter-
Secretariat Working Group drawn from five It should be straightforward to measure the
organizations: the European Commission size of the public sector by summing the
(Eurostat), the International Monetary output of the general government (which is
Fund (IMF), the Organisation for Econom- not sold on the market) and the output of the
ic Co-operation and Development (OECD), the public corporate sector (which is). To avoid
United Nations (DESA’s Statistics Division double counting, this would have to be done
and regional commissions) and the World as value-added, that is, as the value of pro-
Bank2. Moreover, it is a system accepted, even duction less the cost of intermediate inputs.
if not fully implemented, by the vast major- Value-added comprises depreciation and the
ity of countries today. cost of capital as well as the cost of labour.
When goods and services are distributed Unfortunately, public production statistics are
free of charge, or are sold for low, non-mar- not generally available. What is available, for
ket prices, national income accountants typ- some countries and some years, are esti-
ically value the output at cost rather than mates of the number of persons employed by
at market price. The value of the output of the central government or by the entire pub-
public schools, for example, is assumed to equal lic sector. Estimates of government employ-
the sum of salaries paid, plus textbooks and ment are thought to be more reliable, or at
other purchased materials, plus depreciation least more comparable, than estimates of em-
and maintenance of buildings, grounds, fur- ployment in public corporations, largely be-
niture and equipment. Occasionally, goods and cause of problems in the definition of what
services similar to those distributed for free constitutes a public as opposed to a private
are offered for sale at market prices, providing corporation.
useful information that can be used to im-
pute the value of the output of public or pri- Estimates of government employment suffer
vate institutions operating outside the mar- from problems of inter-country comparabil-
141
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
ity as well. Some countries report the total port facilities and equipment. Construction
number of employees (both full-and part- is often shown separately from expenditure
time), whereas others report only the num- on capital equipment.
ber of full-time workers. Few countries fol-
low the SNA recommendation of reporting full- There is no term in the accounting identity
time or equivalent employees. A more seri- for corporate or business consumption. The
ous problem is that some countries include SNA assumes that all private consumption
military personnel, whereas others exclude of final goods and services is by households.
them. Furthermore, some of these statistics Corporations consume only intermediate
There is no term in the
include military conscripts, even though the goods, inputs into the production process. Work-
accounting identity for SNA stipulates that labour that is not paid ers, managers and stockholders consume fi-
corporate or business an economically significant wage be exclud- nal goods and services, but corporations do
ed from national accounts. Another serious not.
consumption. The SNA problem is the occasional inclusion of mar-
assumes that all ket activities in figures for government em- Why, then, is there a term for government
ployment. Italy, for example, until 1993 in- consumption? Is it not true that all govern-
private consumption of
cluded postal and telecommunications em- ment output intended for final consumption
final goods and ployees in total government employment. is distributed to the public either free of
services is by These individuals were excluded in 1994, but charge or for a nominal fee? A case can be
previous data were not corrected, and so made that government consumption of final
households Italy reported a large drop in government em- goods and services, like corporate consump-
ployment in that year because of this re- tion, is in all instances equal to zero. Much
classification of public employees. However, of the output of government, such as school-
even close adherence to SNA guidelines can ing, health services and defence, could eas-
create problems for analysis. Austria, for ily be classified as final consumption of
example, registered a 13.5 per cent fall in gov- households. Government output that is not
ernment employment in 1997, which was not capital formation and does not benefit con-
the result of any contraction of government sumers directly could be classified as an in-
spending, but rather as a reform of the termediate input into final production. Pub-
health sector, with more autonomy given to lic highways, for example, are used to trans-
public hospitals and clinics, and their sub- port goods as well as people, and delivery is
sequent reclassification as private institutions. part of the cost of production. The justice sys-
tem benefits parties to a business contract,
1.4. The State as consumer who otherwise would have to hire someone
as an intermediary in the event of disputes.
It is said that the State participates in the Also, agricultural extension services are in-
economy as a consumer as well as a producer. termediate inputs into food production.
The famous accounting identity of elemen-
tary macroeconomics is: The SNA does not take this approach. It as-
sumes that all government output other
GDP = C + I + G + (X-M), than capital formation is for final consump-
tion and defines actual final consumption of
i.e., gross domestic product is the sum of pri- government to be equal to its consumption
vate consumption plus gross investment3 expenditure on collective services. “Although
plus government consumption plus net ex- collective services benefit the community,
ports. Private consumption is of final goods or certain sections of the community, rather
and services only. Intermediate goods, which than the government, the actual consump-
are inputs into the production of final goods, tion of these services cannot be distributed
are not counted separately since their val- among individual households, or even
ue is already included in the price of final goods. among groups of households such as subsectors
Investment includes public as well as private of the household sector”4. This limits gov-
expenditure on new buildings, highways, ernment consumption to general adminis-
142
DEFINING AND MEASURING THE SIZE OF THE STATE
tration and other collective consumption bursements for) goods and services that are
goods such as defence. Since there is no pro- distributed without charge to individuals
vision for government production of inter- and to the community at large. Government
mediate goods, the remainder of govern- consumption expenditure is often abbreviated
ment output is allocated to capital formation as “government consumption”, and is typical-
(investment) and private consumption. ly much larger than government production.
143
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
144
DEFINING AND MEASURING THE SIZE OF THE STATE
Suppose that the State wants to improve air the private production of catalytic convert-
quality through generalized use of catalytic ers so that their price is close to zero. Sub-
converters on motor vehicles. There are a num- sidies are not part of government consump-
ber of ways to accomplish this goal. The tion, and so government expenditure is the
State may simply use its power to regulate, only measure that will capture this increase
that is, decree that each motor vehicle sold in the size of government.
in the country be equipped with a catalytic
converter. A cost is imposed on the consumer, In any of these scenarios, the costs to socie-
which shows up in the national accounts as ty are the same: the resources needed to pro-
private consumption expenditure. There is duce the required number of catalytic con-
no change in the size of the public sector, at verters. And the benefits to society are also Subsidies are not part of
least in so far as we are able to measure it. the same: improved air quality. But effects
on measured size of the public sector vary
government
Alternatively, the State may choose to pro- greatly, as do effects on household budgets. consumption, and so
duce catalytic converters in publicly owned With pure regulation, costs of cleaner air are
government
plants, then sell them to consumers, who are borne proportionately by those contributing
required to install them on their vehicles. This to pollution. With free government provi- expenditure is the only
policy increases the size of the public corpo- sion of catalytic converters, costs are borne measure that will
rate sector, but it has no effect on government by taxpayers in general, irrespective of their
capture this increase in
production or consumption. contribution to air pollution.
the size of government
Rather than sell the catalytic converters it In this particular example, countries every-
produces, the State might choose to give where rely solely on regulation to mandate
them away (or charge an economically in- the use of catalytic converters. But policy-mak-
significant price) to all owners of motor ve- ers by no means pursue all goals in this
hicles. With this policy, the cost of produc- manner. In the above discussion, substitute
tion of catalytic converters is registered in “primary education” for “catalytic converters”
national accounts as government produc- and “households with children” for “owners
tion, and consumption of catalytic convert- of motor vehicles”. All of the options are
ers is registered as government consumption again equally plausible, yet countries
expenditure. By either measure, the size of around the world do not stop with regulation
government increases. If instead of giving the (requiring each child to attend school); they
product away, the State subsidizes pur- almost invariably offer residents free public
chasers by granting them an income tax schooling or, at the very least, provide gen-
credit, there would be no measurable effect erous subsidies and tax credits for inde-
on government production (since the cat- pendent schools.
alytic converters are sold in the first in-
stance) or consumption (for the same reason).
2. Measures of the size of
Now suppose that the State chooses not to government
produce catalytic converters, but rather to pur-
chase them from the private sector and dis- Rather than focus on a single measure of the
tribute them free of charge to owners of ve- size of the public sector, this Part of the Re-
hicles. The result (compared to the situation port presents available data for a variety of
prior to mandated catalytic converters) is an measures: government and public sector em-
increase in government consumption ex- ployment, government consumption expen-
penditure, with no change in government pro- ditures, central government expenditure
duction. and central government tax revenue. This Part
ends with a discussion of possible determi-
Finally, suppose that the State decides, nants of the size of the public sector and a
rather than provide each owner of a motor brief conclusion. The emphasis throughout
vehicle with a transfer in kind, to subsidize is on differences between countries and re-
145
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
gions of the world at the beginning of the The second type of diagram provides a quick
decade and in the latest available year, overview of trends. It consists of a square with
which is usually the year 1997. a diagonal line running from the lower left
hand side to the upper right hand side cor-
2.1. Government and public sector ner. For each country, a single point is en-
employment, 1990 and 1997 tered into the box. The vertical axis meas-
ures the statistic for 1997 and the horizon-
Table 1 below reports data on government tal axis the same statistic for 1990. If an ob-
and public sector employment for the years servation lies below the diagonal line, this
1990 and 1997 or closest to those two years means that employment is falling as a pro-
Estimates of that are available. The main source of in- portion of population. If it lies above the
formation is a Survey on public sector em- line, this indicates that employment is ris-
government
ployment statistics that the International ing.
employment exist for Labour Organization carried out in October
51 countries in 1990 of 19989. This was supplemented with data Figures 2a and 2b below contain the bar di-
from the OECD for eight countries. In all cas- agrams for government employment in five
and 54 in 1997 ... but
es the data are comprehensive, in that they regions of the world; three features are strik-
only for 47 countries include employment at all levels of govern- ing. First, government, as measured by the
are there estimates for ment. share of government employees in the total
population, is surprisingly large in the de-
both years To facilitate comparisons, the number of per- veloped and transitional economies com-
sons employed is shown for each country as pared to developing countries. Second, by this
a percentage of the total population. The ILO measure, governments are smallest in
reports government employment as a per- Africa, followed by Asia and Latin America,
centage of total employment. This is not in that order. Third, there is an impressive
done here because “total employment” miss- diversity of government sizes in all regions,
es a large percentage of workers in some coun- especially for the transitional and developed
tries10. Calculations were also made for the countries, and this seems more important than
total population aged 15 through 59; these any measure of central tendency such as
are not reported because this alternative the mean or the median.
measure did not affect comparisons of regions,
nor the statistical results for determinants Estimates of government employment exist
of the size of the public sector. for 51 countries in 1990 and 54 in 1997 (or
proximate years), but only for 47 countries
Detailed results can be seen in table 1 above, are there estimates for both years. Figure 2c
while figures 2a through 3c below provide a below illustrates the trend in government em-
quick overview. Two types of diagrams are ployment for these 47 countries. Most of the
used in the figures of this and subsequent observations are close to the diagonal, an in-
sections. The first type of diagram contains dication that there was little change in gov-
bars, one for each region of the world. The ernment size. But two economies in transi-
bottom of the bar is the minimum value reg- tion (Azerbaijan and Kazakhstan) register im-
istered by countries in the region, and the pressive reductions in the ratio of government
top is the maximum value. In other words, employment to total population.
the bar represents the range of observations
that are observed. The solid horizontal line Figures 3a and 3b below show the same sta-
represents the median, or midpoint, of the tistics for employment in the public sector (gen-
distribution. One-half of all observations lie eral government plus public corporations). The
below, and one-half above the median. Un- public sector, as is the case with govern-
less a distribution is very symmetrical, the ment narrowly defined, tends to be larger in
median is not equal to the simple average developed and transitional economies com-
(mean) reported in table 1 below. pared to developing countries. Observations
for Latin America and the Caribbean are
146
DEFINING AND MEASURING THE SIZE OF THE STATE
147
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Table 1. (concluded)
Latin America
Americaand
& Caribbean
CarIbbean 5.4 7.0 4.8 6.1
Barbados 1991 9.5 1997 9.4
Belize 1997 2.6 4.4
Brazil 1992 3.8 4.9 1996 3.9 4.9
Cayman Islands 1991 7.2 7.8 1996 6.3 7.0
Costa Rica 1990 6.5 1997 5.4
Dominican Republic 1998 3.5
Ecuador 1990 4.0 1997 3.5
Mexico 1990 4.5 5.6 1996 4.4 5.0
Panama 1990 3.3 5.7 1997 3.4 5.7
Puerto Rico 1991 8.0 1997 8.2
Trinidad and Tobago 1990 8.3 10.5 1997 8.2 10.2
Source: Government and public sector employment data are from ILO, Survey on public sector employment statistics, October 1998, except for Australia,
Austria, France, Italy, Luxembourg, Netherlands, Sweden and the United Kingdom, where the source is OECD. Population estimates are those of
United Nations DESA, Statistics Division.
148
DEFINING AND MEASURING THE SIZE OF THE STATE
surprisingly compressed (the bar has a short sumption, so division of government con-
height). The vast majority of the 38 countries sumption expenditure (in local prices) by
for which we have data for both years show GDP (also in local prices) biases downwards
little change in the ratio of public employ- the estimates of the share of government con-
ment to population: nearly all observations sumption in the GDP of low-income countries.
lie on or close to the diagonal line of figure Similar biases apply to comparisons over
3c. Seven “outliers” show a large drop in pub- long periods of time because productivity in
lic sector employment; all of these are tran- services lags behind productivity in goods, caus-
sition economies that experienced massive pri- ing the relative price of services to in-
vatization of State enterprises (see also fig- crease11.
ure 3c below). Consumption is an
The International Comparison Programme
alternative way to
2.2. Government consumption, 1990 (ICP) of the United Nations attempts to
and 1997 solve this problem by estimating the GDP of measure the size of
each economy not in domestic prices, but in government, and
Consumption is an alternative way to meas- prices of a numéraire country, the United
ure the size of government, and government States. These prices are known as purchas- government
consumption is typically expressed as a ing power parity (PPP) prices because with consumption is
share of GDP. Note that this is a measure of them one US dollar has the same purchas-
typically expressed as
the size of government, not of the entire ing power everywhere in the world for a
public sector. In national accounts, govern- uniform basket of goods and services. It is a share of GDP
ment consumption is the sum of all goods and not enough to know prices in the United States;
services provided without charge to indi- prices in each economy must also be known
vidual households and collectively to the in order to transform the GDP components
community. It includes goods and services pur- from domestic to PPP prices. The most re-
chased from the private sector as well as those cent PPP estimates are for the year 1985 and
produced by government, so is not directly cover 64 countries12; the ICP is currently
related to government employment. It is preparing estimates for 1993 covering a larg-
perfectly possible for a country with low gov- er set of countries.
ernment employment to have high govern-
ment consumption if government purchases A group of researchers noted certain regu-
large amounts of schooling, health care and larities between shares of major expenditure
other services from private institutions. components of GDP measured in domestic
prices and shares of the same components
One problem affecting the comparability of measured in PPP prices. They used statis-
these statistics between countries, as has been tical techniques to extrapolate the PPP es-
shown above, is the fact that national accounts timates to years and to countries not in-
sometimes disguise transfers in kind as cash cluded in the ICP. The results are known as
transfers or subsidies that are excluded from the Penn World Tables. The latest version con-
government consumption expenditure. Another tains statistics for 152 countries, in most cas-
serious problem is that, at prevailing exchange es for the years from 1950 through 1991 or
rates, the cost of government consumption 199213.
varies widely among countries. Services,
such as schooling, nursing or general ad- The Statistical Appendix comprises tables B1
ministration, are seldom traded interna- to B3. Table B1 reports government con-
tionally, so their cost is much lower in coun- sumption as a share of GDP in 1990 (PPP
tries with low wages. Goods tend to be ex- prices and domestic prices) and 1997 (only
ported and imported, so the cost and prices domestic prices). The 1990 government con-
of goods tend to be similar regardless of the sumption shares in domestic prices were
level of wages. In other words, the relative transformed to government consumption
price of services is low in low-wage countries. shares in PPP prices, using estimates of
Services weigh heavily in government con- price levels of GDP and price levels of gov-
149
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Figure 2a. 1990 Ratio of Government Employment to Population Figure 2b. 1997 Ratio of Government Employment to Population
(percentages) (percentages)
25 25
20 20
15 15
10 10
5 5
0 0
Developed Transition Africa (7) Latin America Asia (12) Developed Transition Africa (7) Latin Asia (11)
Countries Economies (9) (5) Countries Economies America (6)
(18) (18) (12)
35
20
30
15 25
20
10 15
10
5
5
0
0 Developed Transition Africa (8) Latin Asia (8)
0 5 10 15 20 25 Countries (5) Economies America (9)
(9)
1990
40 40
35
30 30
25
20 20
15
10 10
0 0
Developed Transition Africa (10) Latin America Asia (10) 0 10 20 30 40
Countries Economies (11)
(10) (15) 1990
150
DEFINING AND MEASURING THE SIZE OF THE STATE
ernment consumption reported in the Penn collectors in the United States. Is the qual-
World Table (Mark 5.6)14. ity of their work and their productivity iden-
tical? PPP estimates assume that they are,
Table 2 below summarizes these data with provided they have identical years of train-
simple averages for the complete sample ing, so adjust only for differences in the
and for the five main regions of interest. The amount of education that such workers
second and third columns of the table refer bring to their jobs.
to the same statistic: 1990 government con-
sumption in domestic prices; they differ be- Third, by using this measure, a reduction re-
cause the sample of countries in the second sulted in the average size of government
column is constrained in order to equal the over the decade in Africa and Asia. In con-
countries for which PPP price data are avail- trast, there was little change in the average A third measure of
able. In other words, the first and second ratio of government consumption to GDP in government size is
columns differ only because prices differ the developed countries or in Latin Ameri-
(PPP versus domestic), not because the sam- ca and the Caribbean. Surprisingly, the central government
ples differ. economies in transition registered an in- expenditure, which
crease in government consumption, from an
includes cash transfers
In comparing the PPP ratios to those for do- average of 16 per cent of GDP in 1990 to 17
mestic prices, three results deserve men- per cent in 1997. and subsidies as well as
tion. outlays for consumption
These same data are summarized in a dif-
First, government consumption as a share ferent way in figures 4a, 4b and 4c below. What
and investment
of GDP is much smaller measured in PPP is striking about these graphs is the fact that
prices than in domestic prices for developed in every case a very large range (long bar)
countries, but it is much larger in PPP prices overshadows the measures of central tendency.
for the developing countries. This pattern is In other words, there appears to be more vari-
to be expected, since PPP prices are much high- ation within regions than between regions,
er than domestic prices for services in low- with the possible exception of the PPP esti-
income countries. For the very small sample mates for developed countries shown in fig-
(four countries) of economies in transition, ure 4a below.
there is little difference on average between
government consumption as a share of GDP 2.3. Central government
in PPP prices and the same statistic in do- expenditure, 1990 and 1997
mestic prices.
A third measure of government size is cen-
Second, government size, as measured by con- tral government expenditure, which in-
sumption with domestic prices, is larger in cludes cash transfers and subsidies as well
the developed than in the developing coun- as outlays for consumption and investment.
tries; this is reversed with PPP prices, which These statistics, which are almost as wide-
show developing countries to have far larg- ly used as government consumption statis-
er governments. While there is no doubt tics, have two unfortunate drawbacks. First,
that domestic prices understate the impor- they record investment expenditure rather
tance of government consumption in low-in- than depreciation of capital, and conse-
come countries, it may well be that PPP quently all the outlay for a large highway or
prices create a bias in the opposite direction. a new port, for example, shows up in the year
Services provided by government are not of construction and not in subsequent years
sold on domestic markets, much less inter- when it is actually in use. Second, the sta-
national markets, so output is assumed to equal tistics include only transfers to lower levels
the sum of inputs and it is very difficult to of government, and thus ignore self-financed
correct for differences in quality. School- expenditures of provincial and municipal
teachers and tax collectors in Ghana are governments.
paid much less than schoolteachers and tax
151
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Note: PPP refers to "purchasing power parity" prices. The countries averaged in the second column are restricted
to match those in the first column.
Table 3 below reports the available data on deal of diversity in styles of government
central government expenditure for 1990 within regions.
and 1997 (or proximate years) as published
in the IMF annual Government Finance Table 4 below summarizes, for the entire sam-
Statistics. The figures are expressed as a share ple and for regions, the distribution of cen-
of GDP. It should be noted, however, that ex- tral government expenditures by type of ex-
penditure, unlike consumption, is not a com- penditure and by function. The basic data are
ponent of GDP, and so it is possible for gov- not included in this report, but are available
ernment expenditure to exceed GDP. from the IMF publication Government Finance
Statistics. Looking first at type of expendi-
The simple averages of these statistics are ture, for the developed and transitional
reported for groups of countries also in table economies “subsidies and cash transfers” is
3 below. The sample size is not the same in by far the most important category of ex-
the two years, so not too much importance penditure. This is not true for developing coun-
should be given to comparisons of 1990 with tries, where wage payments exceed subsidies
1997. Note, however, that central government and cash transfers, unless one includes in-
expenditures of the developed countries, terest payments, which are a form of cash
which average 37 per cent of GDP, are much transfer.
larger than those of the developing countries.
Latin America and the Caribbean is a region Expenditures by function are grouped under
with low central government expenditure, four main headings: traditional State func-
amounting on average to less than 23 per cent tions, modern State functions, interest pay-
of GDP in 1997. ments and other expenditures. Traditional
expenditures are those for general adminis-
These same data are displayed in graphic form tration, justice, police and defence. For the
in figures 5a and 5b below. Note that the range most part these are expenditures on collec-
of observed ratios is extremely large (the bars tive consumption goods. Modern State func-
are very long) in both years. In each of the tions refer to transfers in kind, largely edu-
five regions there are countries with very low cation and heath care, plus cash transfers and
and countries with very high government ex- subsidies. Modern expenditures are thus di-
penditures. This indicates that there is a great rected to individual households and pro-
152
DEFINING AND MEASURING THE SIZE OF THE STATE
25
2.4. Central government tax
revenue, 1990 and 1997 20
15
Table 5 below reports information for groups 10
of countries on central government tax rev-
5
enue. It is interesting to note that informa-
0
tion is available for more countries on tax- Developed Transition Africa (36) Latin Asia (30)
ation than on expenditure: over 100 countries Countries Economies America (28)
(24) (14)
as compared to about 80 countries respectively.
153
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Tax revenue tends to be lower than expen- “dummies” because they take values of zero
diture because governments have sources of and one, control for independent effects com-
revenue other than taxes: they charge fees mon to a particular group of countries (de-
for licenses and for use of public property, they veloped, transitional, African, Asian or Latin
collect royalties on the extraction of oil and American). The statistical technique ap-
minerals, and they borrow money. Nonethe- plied, which is a known as ordinary least
less, the pattern of tax revenue as a share squares regression, involves fitting an equa-
of GDP is similar to that of expenditure: high- tion that minimizes the sum of the squared
est in the developed and transitional distances between each data point and the
economies, lowest in the developing countries. regression equation. Readers familiar with
this type of analysis may want to examine
Table 5 also reports ratios for four broad types the detailed results in the technical appen-
of taxes: taxes on international trade, taxes dix tables. What follows is a non-technical
on retail sales (including value-added taxes), overview of those tables.
taxes on wages and direct taxes on income
and wealth. Over the decade, there was in- To summarize briefly the statistical find-
creased taxation of sales and modest de- ings: there is a dichotomy. There are two dis-
creases in revenue from trade taxes almost tinct types of regression equations that have
everywhere, but little change in other types only the control variable “income per capi-
of taxes. Trade taxes remain quite important ta” in common. When government size is meas-
in the developing countries, particularly in ured by employment or by consumption ex-
Africa, whereas developed countries rely penditure, the variables that “explain” gov-
more on other taxes. ernment size are population and land area.
But, when government size is measured by
central government expenditure, globaliza-
3. Determinants of the size of tion is a significant explanatory variable,
government though not population or land area.
1990 1997
154
DEFINING AND MEASURING THE SIZE OF THE STATE
Table 4. Central Government Expenditure by Type and by Function, as Percentage of All Central Government
Expenditure, 1997 (simple averages for groups of countries in sample)
Complete Latin
Sample Developed Transition Developing Africa America Asia
BY TYPE OF EXPENDITURE
No. of observations 75 18 10 47 8 18 21
BY FUNCTION
No. of observations 81 19 12 50 11 16 23
Traditional state functions 22.7 13.9 17.4 27.3 27.7 21.5 31.2
Modern state functions 60.6 69.2 64.4 56.5 51.9 63.6 53.7
GDP (table A4), the population variable has words, high population density facilitates
a highly significant and negative coefficient, provision of defence, highways, schools, med-
while the land area variable has an equally ical care and other government services.
significant but positive coefficient. Global-
ization, measured as openness to trade, is nev- The regression results using the govern-
er significant. This is true for the year 1990 ment employment/population equation for 1997
as well as 1997, and for consumption meas- are illustrated in figure 6a below for a small
ured in PPP prices as well as in domestic prices, country the size of Belgium and in figure 6b
and thus constitutes strong evidence of below for a large country the size of the
economies of scale in the provision of gov- United States. Income per capita is also a vari-
ernment services. If there are economies of able in the equation, and is assumed to
scale in provision of government services, costs equal the actual income of each respective
(and presumably expenditures) are lower in country in the year 1997. Government em-
countries with large populations (holding ployment is not known for Belgium, but the
territorial size constant) or small territories equation depicted in figure 6a below predicts
(holding population constant). In other that this would amount to approximately 5.9
155
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Figure 5a. 1990 Ratio of Central Government Expenditure to GDP Figure 5b. 1997 Ratio of Central Government Expenditure to GDP
(domestic prices, percentages) (domestic prices, percentages)
70 70
60 60
50 50
40 40
30 30
20 20
10 10
0 0
Developed Transition Africa (20) Latin America Asia (26) Developed Transition Africa (20) Latin America Asia (26)
Countries (25) Economies (8) (23) Countries Economies (21)
(19) (12)
per cent of Belgium’s population of 10.1 mil- tries in southern Europe. But the statistics
lion persons. Reading down the curve, a used are crude and may require some ad-
country with Belgium’s income per capita and justment for quality of land. It is easier to
land area but twice its population would re- police frozen tundra or desert wasteland
quire less than twice the number of govern- than to administer areas that are actually
ment employees, 4.8 per cent of the 20.2 inhabited by people spread over large distances.
million residents, to be precise.
3.2. Income per capita
Government provided jobs for approximate-
ly 7.3 per cent of the 270 million residents One of the best-known stylized facts of pub-
of the United States in 1997. The equation lic economics is “Wagner’s Law,” formulated
depicted in figure 6b below, predicts gov- more than a hundred years ago by Adolph
ernment employment/ population ratio of Wagner, a leading German economist of his
only 5.7 per cent, so by this measure, gov- day. It asserts that there is a long-run ten-
ernment in the United States is larger than dency for government activity to grow faster
expected. Canada, with more land and a than the economy16. In a cross-section of
population of only 30 million, is expected, from countries, the law predicts a positive rela-
our regression equation, to suffer “disec- tionship between income per capita and all
onomies” of scale and employ 10.3 per cent measures of government size.
of its population at all levels of government.
Actual government employment amounts to The income variable is, indeed, statistically
only 8.4 per cent of population. Thus, from significant in most of the regression equations.
the raw statistics, Canada appears to have But there is one problem. Its coefficient,
larger government for its population than the though highly significant in each instance,
United States. Taking into account the “dis- is negative in the equation for government
economies” of serving a small population consumption in PPP prices, but positive in
dispersed over a wide area, Canada actual- the equation for government consumption
ly has a rather small government compared measured in domestic prices. The coefficient
to that of the United States. Similar con- is also positive in the regression equations
siderations help to explain the large size of for government employment and central
government in countries of northern Eu- government expenditure, and so it is difficult
rope, especially Finland, Norway and Swe- to interpret the PPP result as a refutation
den, compared to more densely populated coun- of Wagner’s Law. It more likely reflects a fail-
156
DEFINING AND MEASURING THE SIZE OF THE STATE
ure to adjust adequately for differences in the the ratio of trade to GDP or as the presence
quality and productivity of employees in the of foreign direct investment. It was not pos-
service sector of low-income countries com- sible to distinguish between effects of trade
pared to their counterparts in developed and effects of foreign direct investment be-
countries. In other words, this finding con- cause of strong collinearity: transnationals
stitutes evidence that the PPP estimates of are known to be effective conduits for both
government consumption in low-income exports and imports18.
countries are biased upwards.
The positive relationship between openness
3.3. Globalization and size of and central government expenditure and
government taxation is evident, though not as strongly,
even without controlling for the effect of in-
The second type of regression equation is that come per capita and regional dummies. This
for central government expenditures (table is shown in figures 7, 8 and 9 below for to-
A5) and tax revenue (table A6), each ex- tal expenditure, expenditure on modern
pressed as a share of GDP. Globalization is State functions and tax revenue, respec-
a significant explanatory variable in all tively (data in all cases are for the year
these regressions, but population and land 1997). The fit is not quite as good for taxa-
area are not. The fit of the equation is some- tion as for expenditure because some gov-
what better for expenditure on modern State ernments are able to combine high expenditure
functions than for total expenditure. These with low taxation thanks to revenue from roy-
results are consistent with the recent work alties on the extraction of oil and other min-
of Alberto Alesina and Romain Wacziarg, erals.
who report similar findings in a cross-coun-
try comparison of government consumption Income per capita is not a significant deter-
and expenditure17. And it is true regardless minant of tax revenue in the regressions re-
of whether one measures “globalization” as ported in table A6. In regressions of compo-
Table 5. Central Government Tax Revenue as a Percentage of GDP, 1990 and 1997 (simple averages)
1997
Complete Sample 109 21.0 2.9 7.2 3.9 6.6
Developed Countries 24 30.6 0.2 9.9 8.8 11.3
Transition Economies 12 27.3 1.6 11.1 9.3 5.1
Developing Countries 73 16.8 4.0 5.7 1.3 5.3
Africa 21 19.9 6.5 5.5 1.0 6.5
Latin America 24 17.5 3.6 6.7 2.2 4.4
Asia 28 14.0 2.5 4.9 0.9 5.2
Note: Components do not add to total tax revenue because of the exclusion of "other taxes".
Source: Statistical Appendix Table B3.
157
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
nents of tax revenue, it is positive and sig- cant in the regression of total tax revenue,
nificant only for payroll taxes, not for trade is not significant in the regressions of any of
taxes, sales taxes or direct taxes on income the components of tax revenue. The coeffi-
and wealth (see tables A7 and A8). Since in- cient of openness in fact takes a positive, though
come per capita is measured in PPP prices, insignificant, sign in 10 of the 12 regressions
this might reflect to some extent the poor qual- for components of central government tax-
ity of the underlying statistics. It also reflects es. One might have expected reduced revenue
the fact that some high-income countries from trade taxes to be offset with revenue from
enjoy considerable revenue from royalties on sales taxes or direct taxes. There is no evi-
oil and other minerals, and thus have little dence of this, and thus it appears that gov-
need to impose taxes on their population. ernments with relatively open economies
are better at collecting all types of tax, even
From a policy perspective, it is remarkable taxes on trade.
that openness, though positive and signifi-
In any case, revenue needs are no reason to
impose discriminatory taxes on interna-
tional trade. If government wants to tax the
Figure 6a. Small Territory: Economies of Scale in Government consumption of a luxury good, such as tele-
24
vision sets or passenger automobiles, it can
impose a selective consumption tax, and col-
20 lect it at the customs house, in the case of
imports, and at the factory, in the case of do-
16 mestic production. Discriminatory taxation
of imported goods encourages expansion of
12 untaxed domestic production behind tariff
walls, with a consequent loss of tax rev-
8 enue.
4
3.4. Changes in the size of
government
0
0 20 40 60 80
Population (millions) The cross-section evidence on the relation-
ship between openness and the size of cen-
tral governments, as measured by expendi-
ture and taxation, is evidence that in the long-
run there is no conflict between openness and
Figure 6b. Large Territory: Economies of Scale in Government government expenditure. Open economies
24 are not laissez-faire economies. Indeed, on
average, governments of open economies
20 spend a significantly larger portion of GDP
and collect the additional taxes needed
16 therefore.
158
DEFINING AND MEASURING THE SIZE OF THE STATE
159
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
160
DEFINING AND MEASURING THE SIZE OF THE STATE
countries and years, are often available for Future research would benefit greatly from
government but, less often, for the entire pub- improvement in both the quantity and the
lic sector. The employment figures suffer quality of data. First priority should to be giv-
from lack of comparability in addition to en to expenditure by all levels of government.
their limited availability. Statistics on gov- In many countries, lower levels of government
ernment consumption expenditure (but not are responsible for education and health,
actual final consumption) are widely avail- with the result that these social expenditures
able. These also suffer from poor inter-coun- are missing from central government statistics.
try comparability, primarily because gov- Second priority could be given to collection Despite the poor quality
ernments sometimes choose to record pub- of data on government employment, in
of available data,
lic spending on health and education as gov- terms of full-time equivalent workers and ex-
ernment consumption (transfers in kind), cluding conscript labour in order to facilitate statistical tests on
sometimes as subsidies (negative taxes), and inter-country comparisons. Third priority
determinants of
sometimes as cash transfers to households. could be given to the estimation of the val-
Expenditure data are available in most cas- ue of tax expenditures, including the value government size
es only for central governments, without of implicit subsidies provided to producers produce interesting and
any estimate of the value of tax expenditures, through protective tariffs and quotas.
surprisingly robust
much less the value of implicit subsidies
given to producers. results
161
TECHNICAL APPENDIX • MEASURING THE SIZE OF THE STATE
Technical Appendix
Sample
Year Size Mean
163
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Sample
Year Size Mean
164
TECHNICAL APPENDIX • MEASURING THE SIZE OF THE STATE
TableA3.
Table A3. Regression
Regression of government
of government employment/population
employment/population ratios size
ratios on country on country size
and other and other variables.
variables
Regression Coefficients
Independent variable 1990 1990 1997 1997
165
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Regression Coefficients
Independent variable PPP 1990 PPP 1990 1990 1990 1997 1997
Note: Note:
Numbers in brackets
Numbers in are heteroscedasticity-consistent
brackets standard errors.standard
are heteroscedasticity-consistent Estimation is by OLS.
errors. Estimation is by OLS.
Results reported in first two columns refer to government consumption in international prices
Results
(purchasing reported
power parity); in firstreported
results two columns referfour
in the other to government
columns referconsumption
to governmentinconsumption
international (purchasing
in domestic prices. Except for the dummies, all variables enter regressions in logs, so the estimated coefficients are
power parity) prices; results reported in the other four columns refer to government consumption
elasticities.
in domestic prices.Except for the dummies, all variables enter regressions in logs, so the estimated
coefficients are elasticities.
166
TECHNICAL APPENDIX • MEASURING THE SIZE OF THE STATE
are elasticities.
167
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Regression Coefficients
Independent variable 1990 1990 1990 1997 1997 1997
168
TECHNICAL APPENDIX • MEASURING THE SIZE OF THE STATE
Tablevariables, 1990.
A7. Regression of components of central government taxes/GDP ratios on openness and other variables, 1990
Regression Coefficients
Independent variable Trade Taxes Sales Tax Payroll Taxes Direct Taxes
169
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Table A8. Regression of components of central government taxes/GDP ratios on openness and other
Table A8. Regression of components of central government taxes/GDP ratios on openness and other variables, 1997
variables, 1997.
Regression Coefficients
Independent variable Trade Taxes Sales Tax Payroll Taxes Direct Taxes
170
TECHNICAL APPENDIX • MEASURING THE SIZE OF THE STATE
Table A9. Regression of changes in central government expenditure/GDP and taxes/GDP ratios on
Table A9. Regression of changes in central government expenditure/GDP and taxes/GDP ratios on changes in openness,
changes in openness, incomeincome
and other variables,
and other 1990-1997.
variables, 1990-1997
Regression Coefficients
Independent variable Expenditure/GDP Tax Revenue/GDP Direct Taxes/GDP
171
STATISTICAL APPENDIX • MEASURING THE SIZE OF THE STATE
Statistical Appendix
Appendix table 1. Government Consumption as a Percentage of GDP, 1990 and 1997.
Table B1. Government Consumption as a Percentage of GDP, 1990 and 1997
Purchasing Power
Parity Prices Domestic Prices
1990 1990 1997
Developed Countries
Developed Countries
Australia 12.4 17.2 1) 16.8 1)
Austria 13.0 18.6 19.0
Belgium 10.1 14.0 14.4
Canada 12.0 20.2 1) 19.6 1)
Denmark 19.8 25.6 25.3
Finland 15.2 21.1 20.9
France 15.4 19.3 1) 19.6 1)
Germany 13.2 18.3 1) 19.3 1)
Greece 10.0 15.3 14.8
Iceland 17.5 19.2 20.5 2)
Ireland 11.0 15.0 13.8
Italy 11.4 17.6 1) 16.6 1)
Japan 7.4 9.1 1) 9.6 1)
Luxembourg 9.0 16.4 14.5 7)
Malta 17.6 21.0
Netherlands 11.1 14.5 1) 13.8 1)
New Zealand 14.0 17.1 1) 15.2 1)
Norway 18.0 20.8 20.2
Portugal 21.0 16.3 19.4
Spain 12.3 15.2 16.4
Sweden 21.9 27.4 25.8
Switzerland 9.2 13.7 1) 15.0 1)
UK
United Kingdom 16.6 20.5 1) 20.1 1)
US
United States 12.8 17.7 1) 15.3 1) 6)
Transitional Economies
Transition Economies
Armenia 17.7 1) 5) 11.8
Belarus 15.4 1) 4) 20.3
Bulgaria 14.5 19.0 1) 3) 12.4
Czech Republic 31.0 22.1 1) 5) 20.2
Estonia 13.1 1) 3) 24.1
Hungary 12.6 10.6 10.1
Kyrgyzstan 9.2 1) 4) 15.2
Moldova 17.8 1) 3) 27.1
Poland 10.0 18.7 17.3
Romania 13.3 10.1
Russia 13.9 1) 4) 20.8
Slovakia 25.0 1) 5) 22.4
Slovenia 21.1 1) 5) 20.4
Ukraine 7.4 1) 4) 9.1
173
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Purchasing Power
Parity Prices Domestic Prices
1990 1990 1997
Developing Countries
Developing Countries
Africa
Algeria 22.5 14.9 15.8 1) 6)
Benin 23.2 13.2 9.1 2)
Botswana 22.0 26.8
Burkina+A95 Faso 19.7 15.4 11.0
Burundi 33.8 19.5 16.5
Cameroon 27.9 12.8 6.6
Cote d'Ivoire 21.2 18.5 10.6
Democratic Republic of the Congo 11.5 4.9 6)
Egypt 30.5 11.3 10.2
Ethiopia 19.2 11.1
Ghana
Gha 18.0 10.9 12.4
Guinea-Bissau 14.9 11.4
Kenya 22.4 18.7 16.9
Lesotho 19.6 14.6 16.6 7)
Madagascar 18.7 8.0 7.6 2)
Malawi 30.0 15.2 12.6
Mali 27.2 14.2 15.1
Mauritania 25.0 17.2 3) 21.9 6)
Mauritius 14.8 11.8 11.9
Morocco 23.1 15.4 17.9
Mozambique 31.1 20.2 12.5 6)
Namibia 31.1 29.1 29.9 7)
Niger 17.0 16.0
Nigeria 9.5 4.4 5.8 2)
Rwanda 28.3 13.6 8.9
Senegal 24.7 14.7 10.2
Seychelles 34.0 27.7 28.7
Sierra Leone 32.9 7.8 8.8 6)
South Africa
Afri 23.1 19.1 1) 21.3 1)
Swaziland 18.5 27.1
Togo 18.3 12.6 11.2
Tunisia 18.6 16.4 15.7
Uganda 19.1 8.0 10.0 7)
United Republic of Tanzania 18.9 8.8
Zambia 56.0 19.0 15.4
Zimbabwe 30.3 19.5 17.1
174
STATISTICAL APPENDIX • MEASURING THE SIZE OF THE STATE
Purchasing Power
Parity Prices Domestic Prices
1990 1990 1997
Latin
Latin America
Americaand Caribbean
& Caribbean
Antigua and Barbuda 18.0 20.6
Bahamas 13.6 15.8 6)
Barbados 20.2 21.4
Belize 18.7 14.4 16.9
Bolivia 16.2 11.8 13.7
Brazil 16.9 19.1 18.1
Chile 16.4 9.8 10.0
Colombia 13.5 10.3 16.1 7)
Costa Rica 19.4 18.2 16.7
Dominican Republic 3.0 2.9 7.7
Ecuador 16.1 8.6 11.6
El Salvador 24.1 9.9 9.1
Grenada 11.4 21.6 16.0 2)
Guatemala 11.1 6.8 5.1
Guyana 24.7 13.6 20.5
Honduras 16.2 12.9 8.3
Jamaica 14.5 14.0 14.4 7)
Mexico 9.8 9.1 1) 3) 8.4
Nicaragua 33.9 32.5 14.6
Panama [exc. Canal Zone] 25.5 18.1 16.1
Paraguay 12.3 6.2 8.1 2)
Peru 17.4 6.1 8.4
St. Kitts-Nevis-Anguilla 21.6 18.4 18.2 7)
Saint Vincent and the Grenadines 17.5 26.3 7)
Suriname 25.2 16.9 1) 5)
Trinidad and Tobago 14.9 16.2 14.6
Uruguay 17.4 13.9 13.7
Venezuela 16.2 8.4 6.4 2)
175
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Purchasing Power
Parity Prices Domestic Prices
1990 1990 1997
Asia
Asia and Oceania
& Oceania
Bahrain 24.2 20.3
Bangladesh 40.7 14.0 14.1
Bhutan 15.7 29.4 7)
China 25.8 12.3 11.4
China, Hong Kong SpecialAdmin.
Administrative 5.6 7.4 8.5
Cyprus 17.7 17.4 18.0 7)
Fiji 19.8 16.9 15.0
India 30.0 11.5 10.4 7)
Indonesia 14.6 9.0 6.9
Iran (Islamic Republic of) 10.6 11.1 14.1 2)
Israel 29.2 30.0 29.4
Jordan 28.2 24.9 25.0
Kuwait 38.6 27.6
Malaysia 14.8 14.0 11.1
Nepal 8.7 9.1
Oman 38.1 21.5
Pakistan 20.8 15.1 12.4
Papua New Guinea 32.1 24.8 24.4 1) 5)
Philippines 15.8 10.1 13.0
Qatar 32.9 32.9 6)
Republic of Korea 7.8 10.1 11.1
Saudi Arabia 30.6 27.4 2)
Singapore 7.6 10.0 9.4
Sri Lanka 18.8 9.8 10.4
Syrian Arab Republic 13.1 14.3 11.7 2)
Thailand 13.8 9.4 10.3
Turkey 8.7 11.0 12.1
United Arab Emirates 16.3 16.0 7)
Vanuatu 32.0 28.2 26.0 6)
Yemen 17.9 16.2
Source: Statistics
Source: Statisticsinindomestic prices
domestic estimated
prices from
estimated UNESIS
from data base
UNESIS data of United
base NationsNations
of United DESA unless
DESA unless
otherwise noted.noted.
otherwise Statistics in PPPinprices
Statistics PPP estimated by adjusted
prices estimated domesticdomestic
by adjusted price data by the
price data by the
relative price of government consumption, as reported in Penn World Table, version 5.6a.
relative price of government consumpiton,.as reported in Penn World Table, version 5.6a.
Notes:
Notes: 1)1) from
From IMF,
IMF, International
International Financial
Financial Statistics,
Statistics, February
February 1999.1999.
2) Provisional or preliminary estimate.
2) Provisional or preliminary estimate.
3) 1991.
3) 1991.
4) 1992.
4) 1992.
5) 1993.
5) 1993.
6) 1995.
6) 1995.
7) 1997.
7) 1997
176
STATISTICAL APPENDIX • MEASURING THE SIZE OF THE STATE
Developed Countries
Developed Countries
2) 5)
Australia 1990 24.3 1997 25.3
Austria 1990 38.1 1996 41.8
Belgium 1988 49.2
4)
Canada 1990 23.8 1994 24.0
Denmark 1990 39.0 1995 41.4
Finland 1990 30.8 1996 40.3
France 1990 45.0 1993 53.5
Germany 1990 29.5
Greece 1991 35.9 1996 32.7
Iceland 1990 32.3 1996 32.2
Ireland 1990 40.1 1995 39.0
Italy 1988 46.2
4)
Japan 1991 14.9
Luxembourg 1990 46.3 1995 41.4
Malta 1990 44.5 1996 41.4
Netherlands 1990 51.6 1997 48.0
2) 3) 5)
New Zealand 1991 40.4 1997 32.1
Norway 1990 41.3 1996 36.8
Portugal 1988 54.1
Spain 1990 33.8 1995 36.8
8)
Sweden 1990 39.5 1997 44.3
Switzerland 1991 23.5 1996 26.3
United Kingdom 1990 37.6 1995 41.6
6)
United States 1990 23.9 1997 21.2
Transitional Economies
Transition Economies
1)
Albania 1995 31.0
Belarus 1992 37.6 1996 33.9
Bulgaria 1990 55.1 1997 33.5
Czech Republic 1993 38.2 1997 35.9
Estonia 1991 22.1 1997 31.6
1) 3)
Georgia 1997 10.4
Hungary 1990 52.1 1997 42.7
Latvia 1997 32.0
Lithuania 1993 21.4 1997 27.4
Poland 1994 44.2 1997 41.2
Romania 1990 33.8 1996 31.4
Russia 1995 24.7
177
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
LatinAmerica
Latin America&and Caribbean
Caribbean
Argentina 1990 10.6 1996 14.1
Bahamas 1990 18.3 1993 20.5
Barbados 1989 33.2
Bolivia 1990 16.4 1997 23.1
Brazil 1990 35.0 1994 33.8
2) 3) 4)
Belize 1991 31.4 1997 29.2
Chile 1990 20.4 1997 20.7
Colombia 1990 11.6 1993 8.8
Costa Rica 1990 25.6 1996 30.1
Dominican Republic 1990 11.7 1996 15.6
Ecuador 1990 14.5 1994 15.7
3)
El Salvador 1990 10.9 1997 12.3
3)
Grenada 1991 30.7 1995 28.1
Guatemala 1990 10.0 1997 9.7
Mexico 1990 19.2 1996 15.5
1)
Netherlands Antilles 1990 16.7 1995 15.4
Nicaragua 1990 7.2 1994 32.3
Panama [exc. Canal Zone] 1990 23.7 1996 27.7
Paraguay 1990 9.4
St. Kitts-Nevis-Anguilla
178
STATISTICAL APPENDIX • MEASURING THE SIZE OF THE STATE
Asia
Asia&and
Oceania
Oceania
Bahrain 1997 27.0
5)
Bhutan 1990 33.9 1996 32.4
China 1990 10.2 1996 7.8
Cyprus 1990 32.8 1995 32.9
Fiji 1990 26.7 1996 29.5
4)
India 1990 16.6 1996 15.0
4)
Indonesia 1996 14.0
2) 4)
Iran (Islamic Republic of) 1991 17.6 1997 25.6
7)
Israel 1993 44.0 1997 48.3
3)
Jordan 1990 35.8 1996 35.0
2) 5)
Kuwait 1990 69.3 1997 42.0
1)
Lebanon 1993 23.4 1996 37.9
Malaysia 1990 30.1 1997 20.1
Mongolia 1993 26.9
4)
Myanmar 1990 15.2 1996 9.3
2) 5)
Nepal 1990 15.9 1997 16.6
3)
Oman 1990 39.5 1997 29.8
5)
Pakistan 1990 17.5 1995 17.9
Papua New Guinea 1990 34.7
3)
Philippines 1990 19.6 1997 19.3
Republic of Korea 1990 16.2 1997 18.8
5)
Singapore 1990 19.8 1996 20.0
Sri Lanka 1990 28.4 1997 25.7
Syrian Arab Republic 1990 21.8 1996 23.0
6)
Thailand 1990 14.6 1997 18.8
Turkey 1990 17.4 1996 27.6
United Arab Emirates 1990 11.7 1994 11.7
Yemen 1990 28.5 1997 39.2
Notes:
1) GDP source: UNDESA, based on national statistical information
2) 1997 value based on estimated GDP figures
3) Budgetary Central Government expenditures
4) Fiscal year ending March, GDP accordingly adjusted
5) Fiscal year ending June, GDP accordingly adjusted
6) Fiscal year ending September, GDP accordingly adjusted
7) Fiscal year ending March for 1990 figure, and December for 1997 figure, GDP adj.
8) Fiscal year ending June for 1990 figure, and December for 1997 figure, GDP adj.
179
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
Transition Countries
Transitional Economies
1)
Albania 1995 16.64 2.96 8.39 3.22 2.00 0.07
1)
Belarus 1992 1996 30.64 29.45 1.42 1.72 12.54 11.91 12.76 12.51 3.93 2.94 0.00 0.37
Bulgaria 1990 1997 34.51 25.16 0.86 2.13 8.54 8.33 10.82 7.53 14.00 7.14 0.30 0.03
Croatia 1997 41.53 3.93 17.22 15.02 5.15 0.21
Czech Republic 1993 1997 35.70 32.74 1.51 0.91 12.12 11.79 13.42 15.15 7.30 4.88 1.35 0.01
Estonia 1991 1997 23.88 30.10 0.20 0.00 9.95 14.11 6.84 10.55 6.56 5.45 0.32 0.00
1) 3)
Georgia 1997 5.52 0.92 3.94 0.00 0.66 0.00
Hungary 1990 1997 44.71 32.55 3.07 1.89 16.58 12.11 15.55 10.83 9.51 7.27 0.00 0.44
Latvia 1997 29.19 0.69 13.72 10.70 4.06 0.02
Lithuania 1993 1997 20.16 25.43 0.86 0.71 7.00 13.19 6.18 6.97 6.09 4.51 0.03 0.06
Poland 1988 1997 35.13 35.18 2.30 1.58 11.26 12.48 8.40 11.31 12.01 9.75 1.15 0.05
Romania 1990 1996 30.93 24.38 0.19 1.71 11.24 6.46 13.00 7.57 6.51 7.57 0.00 1.08
180
STATISTICAL APPENDIX • MEASURING THE SIZE OF THE STATE
LatinAmerica
Latin America&and Caribbean
Caribb.
Argentina 1990 1996 9.37 11.05 1.48 0.78 2.06 4.69 4.53 3.57 0.77 1.98 0.53 0.03
Bahamas 1990 1993 14.63 17.02 10.57 11.11 2.08 2.18 0.00 0.00 0.63 0.70 1.34 3.04
2) 3) 4)
Belize 1991 1997 20.67 20.23 12.67 7.17 2.25 8.15 0.00 0.00 5.31 4.33 0.44 0.58
Bolivia 1990 1997 8.60 15.98 0.94 1.15 4.30 8.95 1.20 3.18 1.68 2.65 0.49 0.05
Brazil 1990 1994 19.11 20.12 0.48 0.52 5.54 6.57 8.41 9.38 4.69 3.65 0.00 0.00
Chile 1990 1997 16.26 18.94 2.41 1.87 8.95 10.45 1.73 1.39 2.57 4.03 0.60 1.20
Colombia 1990 1994 10.24 13.63 2.51 1.40 3.84 6.65 0.00 0.00 3.73 5.57 0.17 0.02
Costa Rica 1990 1996 20.81 23.12 5.30 2.22 6.29 10.51 6.62 7.14 2.40 2.84 0.20 0.40
Dominican Republic 1990 1996 10.84 13.88 4.86 5.55 2.71 5.09 0.54 0.62 2.67 2.58 0.06 0.03
budgetary
Ecuador 1990 1994 17.80 13.87 2.41 1.77 3.94 4.05 0.00 0.00 11.36 8.05 0.09 0.00
3)
El Salvador 1990 1997 8.90 10.51 2.00 1.34 4.16 6.03 0.00 0.00 2.62 3.10 0.12 0.04
3)
Grenada 1991 1995 23.05 23.08 6.22 4.61 11.67 11.43 0.00 0.00 4.69 6.38 0.46 0.66
3)
Guatemala 1990 1997 6.87 8.69 1.54 1.42 3.31 4.97 0.00 0.00 1.61 2.14 0.40 0.16
Mexico 1990 1996 17.72 15.64 1.03 0.59 9.25 8.73 2.19 1.93 5.05 4.08 0.20 0.32
1)
Netherlands Antilles 1990 1995 10.78 7.62 3.44 4.26 3.20 2.84 3.64 0.00 0.19 0.39 0.31 0.14
Nicaragua 1990 1995 2.93 23.88 0.62 5.31 1.16 10.89 0.30 3.30 0.70 2.81 0.14 1.56
Panama [exc. Canal Zone] 1990 1994 17.72 17.96 3.07 2.71 4.38 4.37 5.11 5.53 4.85 4.88 0.31 0.47
Paraguay 1990 1993 9.17 9.08 2.46 1.75 2.60 5.03 0.11 0.16 2.21 2.00 1.78 0.13
Peru 1990 1997 10.49 14.83 1.77 1.35 5.34 7.79 0.78 1.94 1.35 3.29 1.24 0.46
181
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
St. Kitts-Nevis-Anguilla 1990 1994 22.52 23.57 12.58 11.21 1.48 3.32 2.85 3.25 5.12 4.81 0.48 0.98
1) 4)
St. Lucia 1990 27.72 8.74 10.56 0.00 7.87 0.55
St. Vincent and the Grenadines 1991 1997 25.03 28.16 11.99 13.32 3.05 3.78 1.52 1.83 7.77 7.81 0.70 1.42
Trinidad and Tobago 1993 1995 24.00 23.34 2.57 1.56 8.63 7.13 0.74 0.57 11.93 13.91 0.14 0.18
Uruguay 1990 1997 24.20 26.84 2.60 1.15 9.53 10.35 7.30 7.99 3.19 5.56 1.59 1.79
Venezuela 1990 1997 18.41 18.34 1.61 1.61 0.75 7.16 0.89 0.37 15.16 9.20 0.00 0.00
Asia&and
Asia Oceania
Oceania
Bahrain 1990 1997 7.55 6.75 2.29 2.42 1.05 0.85 2.53 1.90 1.69 1.57 0.00 0.00
Bhutan 1990 1996 4.42 6.59 0.06 0.24 2.90 2.98 0.00 0.00 1.44 3.37 0.02 0.00
3)
China 1990 1996 4.01 4.83 0.88 0.44 1.13 3.65 0.00 0.00 2.00 0.65 0.00 0.09
Cyprus 1990 1995 22.36 25.71 4.35 2.55 4.69 8.97 4.74 5.06 6.75 6.73 1.82 2.41
3)
Fiji 1990 1996 23.08 21.23 8.74 5.27 3.97 7.99 0.00 0.00 10.11 7.92 0.27 0.06
4)
India 1990 1996 10.36 9.81 3.71 3.27 4.65 3.56 0.00 0.00 1.98 2.97 0.01 0.01
4)
Indonesia 1990 1996 18.42 14.08 1.25 0.52 4.62 4.80 0.00 0.44 12.44 8.31 0.12 0.00
2) 4)
Iran (Islamic Rep. of) 1991 1997 7.55 9.25 2.62 1.71 0.82 2.40 1.87 1.82 2.17 3.26 0.09 0.07
Israel 1993 1997 31.95 36.81 0.38 0.18 13.47 13.59 3.39 7.00 14.46 15.81 0.24 0.22
3)
Jordan 1990 1996 18.63 22.38 7.01 7.46 5.45 8.66 0.17 0.11 5.08 4.97 0.93 1.19
2) 5)
Kuwait 1990 1996 1.94 0.98 1.49 0.78 0.02 0.00 0.00 0.00 0.43 0.21 0.00 0.00
1)
Lebanon 1993 1996 9.21 14.05 5.05 7.99 0.80 0.68 0.00 0.00 2.84 2.84 0.51 2.54
Malaysia 1990 1997 19.63 19.38 4.85 2.99 5.50 6.24 0.21 0.29 8.42 8.75 0.65 1.11
Mongolia 1992 1996 15.64 17.03 3.06 2.37 5.67 4.60 2.49 4.95 4.42 4.97 0.00 0.14
4)
Myanmar 1990 1996 5.86 3.65 1.37 0.93 2.75 1.64 0.00 0.00 1.75 1.07 0.00 0.00
2) 5)
Nepal 1990 1997 6.47 8.69 2.42 2.99 2.79 3.99 0.00 0.00 1.25 1.71 0.01 0.00
3)
Oman 1990 1997 10.38 8.59 0.80 0.71 0.27 0.38 0.14 0.49 9.16 7.01 0.00 0.00
5)
Pakistan 1990 1995 12.15 14.11 5.40 4.49 5.16 6.59 0.00 0.00 1.59 3.02 0.00 0.00
3)
Papua New Guinea 1990 1994 20.07 19.52 6.35 5.39 3.53 2.37 0.00 0.00 9.44 11.38 0.76 0.37
3)
Philippines 1990 1997 14.08 17.01 4.06 3.93 4.98 5.50 0.00 0.00 4.68 6.81 0.37 0.76
Republic of Korea 1990 1997 15.79 18.63 2.05 1.38 6.06 7.28 0.81 2.02 6.30 6.15 0.57 1.80
5)
Singapore 1990 1996 14.30 15.77 0.50 0.33 3.99 4.71 0.00 0.00 8.03 7.96 1.79 2.77
Sri Lanka 1990 1997 19.02 16.17 6.01 2.99 9.75 9.97 0.00 0.00 3.26 3.21 0.00 0.00
Syrian Arab Republic 1990 1996 16.71 15.98 1.62 2.78 6.88 6.50 0.67 0.72 7.06 5.37 0.49 0.59
6)
Thailand 1990 1997 17.72 16.22 4.25 2.20 7.98 7.69 0.02 0.27 5.29 5.96 0.18 0.10
Turkey 1990 1996 11.57 15.65 0.85 0.44 4.39 8.75 0.00 0.00 5.95 6.06 0.38 0.40
3)
United Arab Emirates 1990 1994 0.61 0.61 0.00 0.00 0.57 0.57 0.04 0.04 0.00 0.00 0.00 0.00
Yemen 1990 1997 11.13 13.31 3.25 3.92 1.98 2.04 0.00 0.00 5.04 6.85 0.86 0.51
182
MEASURING THE SIZE OF THE STATE
2 The OECD considers employment data for public corporations to be so poor that it reports
on a regular basis only employment for general government in member countries. See OECD,
Trends in Public Sector Pay in OECD Countries (Paris, 1997) and Statistical Sources on Pub-
lic Sector Employment (Paris, 1994).
4 System of National Accounts 1993 (United Nations Sales No. E.94.XVII.4), para. 9.91, p. 215.
5 “Whereas the recipients of current cash transfers may dispose of them as they wish, the re-
cipients of social transfers in kind have little or no choice.”, System of National Accounts 1993
(United Nations Sales No. E.94.XVII.4), para. 8.100, p. 201. Note however that the authors of
the SNA do not allow for the fact that social transfers are fungible. Recipients of free schooling,
for example, would spend at least part of their income on schooling were it not provided by gov-
ernment, so government expenditures on schooling ultimately finance household savings and
consumption of other goods and services.
7 SNA treatment of indirect taxes differs markedly from that of subsidies. Sales taxes always
increase the price of goods or services and are never recorded as a negative ‘transfer in kind’ to
households.
8 This is also the approach of the World Bank in The State in a Changing World (World De-
velopment Report, Oxford University Press, New York, 1997), chap. 1.
10 Agricultural workers, for example, are excluded from “total employment” in India and four
other countries. And statistics for Egypt exclude workers in private establishments with fewer
than ten employees. It is somewhat misleading, then, to report that the public sector accounts
for 70 per cent of “total employment” in Egypt and India, the highest figure of all countries sur-
veyed. See Messaoud Hammouya, op cit, notes to table 1, p. 13.
11 This has come to be known as “Baumol’s Disease” after the economist who first drew atten-
tion to it. See William J. Baumol, “Containing medical costs: Why price controls won’t work”,
Public Interest, No. 93 (Fall 1988), pp. 37-53.
12 See World Comparisons of Real Gross Domestic Product and Purchasing Power, 1985: Phase
V of the International Comparison Programme, Series F, No. 64 (United Nations publication,
Sales No. E.94.XVII.7 and Corr.1).
13 See Robert Summers and Alan Heston, “The Penn World Table (Mark 5): An expanded set
of international comparisons, 1950-1988”, Quarterly Journal of Economics, vol. 106, No. 2 (May
1991), pp. 327-368. The current version (Mark 5.6) was released in January 1995 and can be
downloaded from The Center for International Comparisons at the University of Pennsylvania
(http://pwt.econ.upenn.edu) or accessed online from the University of Toronto (http://datacen-
tre.chass.utoronto.ca/pwt/index.html).
183
WORLD PUBLIC SECTOR REPORT: GLOBALIZATION AND THE STATE
14 Government consumption shares of GDP in PPP prices reported in the Penn World Table nec-
essarily ignore subsequent revisions to national accounts. For this reason, the figures of Sta-
tistical Appendix table B1 were calculated by applying PPP price indexes to the latest SNA es-
timates of shares. For countries that have not revised their national accounts, the resulting PPP
share of government consumption in GDP is identical to that reported in the Penn World Table.
A careful reader will note that in the numéraire country (the United States) 1990 government
consumption is 12.8 per cent of GDP in PPP prices and 17.7 per cent in domestic prices. The
two figures are surprisingly different. They differ because price levels in the Penn World Tables
are expressed relative to the world rather than relative to the United States. Thus, price in-
dexes for components of GDP for the United States are not equal to one, even though the price
index for overall GDP is. More precisely, the price index for government consumption in the Unit-
ed States is equal to 1.38, the price index for GDP is equal to one, and 12.8 is equal to 17.7 di-
vided by 1.38.
15 Suppose a government has to service a debt of 1 million pesos, prices are stable and the an-
nual interest rate is 10 per cent. With interest payments of 100,000 pesos the value of the out-
standing debt would remain unchanged. Now suppose that there is price inflation of 10 per cent
a year, and that the interest rate is 20 per cent per year. Interest payments would now double,
to 200,000 pesos. But the burden of the debt is unchanged, for if the government were to issue
new nominal debt in the amount of 100,000 pesos, the real (constant peso) value of the debt would
remain unchanged.
16 See Adolph Wagner, “Three extracts on public finance”, originally published in German in
1883 and included in English translation in R.A. Musgrave and A.T. Peacock (eds.), Classics in
the Theory of Public Finance (London, Macmillan, 1958).
17 Alberto Alesina and Romain Wacziarg, “Openness, country size and the government,” Jour-
nal of Public Economics, vol. 69, No. 3 (September 1998), pp. 305-321. See also David R.
Cameron, “The expansion of the public economy: A comparative analysis,” American Political
Science Review, vol. 72, No. 4 (December 1978), pp. 1243-1261; Peter Saunders, “Explaining in-
ternational differences in public expenditure: An empirical study,” Public Finance, vol. 43, No.
2 (1988), pp. 271-294; and Dani Rodrik, “Why do more open economies have bigger governments?”
Journal of Political Economy, vol. 106, No. 5 (1998), pp. 997-1032.
18 Larry Willmore, “Transnationals and foreign trade: Evidence from Brazil,” Journal of Development
Studies, vol. 28, No. 2 (January 1992), pp. 314-335. See also United Nations, World Investment
Report 1999 (New York and Geneva, Sales No. E.99.II.D.3), pp. 229-255. Not all regressions us-
ing the foreign direct investment variable are reported in the appendix tables.
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