CHAPTER 5

POLITICS AND FISCAL ADMINISTRATION

I. Introduction
A. Fiscal Administration and the General Welfare
B. Relationship
C. A model
II. The System
A. The Process
1.Voting
2. Voting Maximization
B. The Interest Groups
1. The Formal Actors
2. The Informal Actors
C. The Ideology
III. Fiscal Decision
 FISCAL ADMINISTRATION AND
THE GENERAL WELFARE

Ideally, fiscal administration should derive its

substance and meaning from the concept of general
welfare. For developing countries embarking on a
developmental process, the term general welfare
essentially means the welfare of the avowed
beneficiaries of development, the poor.
 RELATIONSHIP
The formulation and execution of fiscal policies have to
contend with the role politics plays in the process. The
relationship between fiscal administration and politics is
dynamic interchange of effects and causes. In other
words, fiscal policies as the end-products of fiscal
administration- influence as much as they are
influenced by the political process. This is because fiscal
administration done within a political system. Others
would go as far as to say that fiscal administration
itself is a political process.
 A MODEL
To understand how the system works, some
assumptions have to be set. First, it is assumed that the
purpose of fiscal administration is to realize desired
objectives through fiscal policies. Second, recognize
that which is obvious: the formulation and execution
of such fiscal policies are done within a political
context. Third, there is a process by which the
politicalization of fiscal policies is done. Fourth, the
process takes place within a system which governs
how the process works and how the actors behave. Fifth,
the system is governed by an ideology which represents
a composite of the economic, political, and social values
of society.
 THE SYSTEM
The system is composed of:
THE PROCESS
Made up of existing institutions (political or non-political)
which serve as mechanisms whereby individual preferences
and views are expressed, deliberated upon, and translated into
the winning combination of issues;
Voting under the theory of representative democracy*, the
individual expresses his preference through his vote. This
vote records his preference during a referendum on issues or
when he elects representative who share his interests.
*Representative Democracy is a system of government in which all
eligible citizens vote on representatives to pass laws for them. A
perfect example is the U.S., where we elect a president and members
of the Congress. We also elect local and state officials. All of these
elected officials supposedly listen to the populace and do whats best
for the nation, state or jurisdiction as a whole.
 Vote Maximization- Based on the theory of vote
maximization which was developed from the concept of the
Economic Man*. Voters will cast their votes in favor of
those who best represent their preferences and interests
while the politician will offer programs and support
legislation which promote the interest of the voters.
* Economic Man refers to a hypothetical individual who acts
rationally and with complete knowledge, but entirely out of self-
interest and the quest to maximize personal utility.
THE INTEREST GROUPS
Consists of various actors
and factors which influence
how individual preferences
are expressed and how fiscal
decisions reflecting the
preferences are reached.
 THE FORMAL ACTORS:
Voters
Represent the consumers and producers of
public goods and services
Politicians
The system requires politicians to facilitate
the translation of individual preferences to
a certain degree of rationality in decision-
making.
Bureaucrats
represents the bureaucracy which
implements or executes the fiscal decisions
arrived at during the policy-determinants.
 THE INFORMAL ACTORS:
Foreign Interest Groups
In terms of their impact on local politics and fiscal
administration, the World Bank-IMF, the
multinational corporations (MNCs) and the foreign
banking groups dominate. In the determination and
execution of local fiscal policies, these interest
groups attempt to protect and promote their own
objectives.
Domestic Interest Groups
A domestic interest group consists of voters who
have a common interest or a sectoral concern in the
economy which they attempt to advance in the
process either by voting or non-voting means. The
interests advanced and the groups representing
such reflect the economic and social structures of
the country.
The Ideology
Authoritarianism may be the ideology of the entire
political process because it determines how
efficiently the voting system will reflect the voters
demands and preferences.

Fiscal Decision
Fiscal Decision is the financial or the monetary plan
or the BUDGET that the government will announce
for the coming year.