What future for government?

Government has been on the retreat for the past decade or more. But there are signs it is staging a comeback. This may be a good thing. 

Does government have a future? For a public organisation such as the OECD the question seems purely rhetorical and the answer obvious. Does anyone seriously believe that the world could function without government? Yet, the proposition is far from being fanciful.

Only a decade ago, just as we were being told about the end of history, many voices, including some well-known economic and political thinkers, argued that the end of government would be part of the package. The defeat of communism and the fall of the Berlin Wall in October 1989 symbolised the victory of individual freedom, personal initiative and markets over government interference, oppression and authoritarian planning.

In the aftermath of these historical events, which had been dismissed as unlikely dreams just a few months before they happened, the role and function of public authority, even if democratically elected to rule on behalf of citizens, were scrutinised.

Fundamental issues were raised. Why should people go on trusting the wisdom and judgement of those who claim to be acting in the public interest? Shouldn’t everyone have the right to decide for themselves on social, economic or environmental matters and be free to make full use of their own innate potential? Why tolerate restrictions that only cramp creativity and innovation and hold back progress and development? Surely, the pursuit of individual happiness would boost the welfare of us all.

The size of government and public sector waste were criticised, as were the systemic lack of transparency and the potential for corruption.

The management of government came under the spotlight too. Its taxation, expenditure and debt, its laws and regulations: such areas as these were considered as an obstacle to economic growth, dynamism and development, while private sector solutions for previously publicly-owned services, like telecoms and railways, were considered more efficient and responsive to people’s needs. “Small is beautiful” was the mantra of the day, leading to downsizing and other prescriptions in a well-meaning bid to purge society of “big” government.

The revolution in communications technology, in particular the Internet, added another dimension to the “dream” of a world free of governments, since it opened up an uncontrolled – and virtually uncontrollable – private space in which governments would not be able to apply their policies, rules or broader frameworks, even if they wanted to. In the same vein, as the last century drew to a close, the frantic growth of the stock markets around the world was seen as a sign of an unprecedented growth path to a new economy and proof of the supremacy of the market. There simply seemed to be no space left for government.

These were challenging times for those of us who clung to the view that governments would still be needed to help manage the process of globalisation, who believed that markets could not meet all social, environmental or even economic needs, and that the unlimited exposure of the individual to market forces would not necessarily mean prosperity for all, both within countries and between the industrialised world and the developing economies. But the voices that doubted the perfect rationality of markets were lost in the din of the “money machine”, which spat out more growth and more wealth for some and the prospect, however illusory, of riches for many.

But “many” and “all” are not the same thing. Confrontational language re-emerged, like digital divide and anti-globalisation. In fact, the price of this rather heady period was greater awareness of the risk of exclusion for large parts of the planet. A limited backlash occurred in Asia, then Russia and elsewhere, though these were not described as such at the time. In the OECD world, the end of the speculative “bubble” led to requests for government action from stakeholders who had not been heard of for a while. Government institutions like the WTO and the IMF were solicited to extend financial support or arbitration in cases of economic distress and conflict. Producers and consumers in OECD and non-OECD countries suffered from downturns and cried out for new frameworks to help them improve efficiency and survive. Privatised and deregulated industries showed weaknesses, even becoming liabilities to the functioning of whole economies. Whom better to ask for assistance than the government?

Whether this all adds up to a renewed understanding that, to function properly, markets might need strong frameworks, broad and flexible though they may be, it is too early to say. But there does appear to be recognition that efficiency cannot be the sole objective of economic activities, and that values like welfare and sustainability also count. With large corporate scandals and sagging public faith, we have also been reminded that the market alone is imperfect and cannot guarantee its own survival. Good governance, private and public, though with democracy leading by example, is clearly a key ingredient of economic growth and sustainable development.

By the same token, governments will never go back to being the way they were. Public sector efficiency remains a concern, and working methods and management practices in the private sector should be useful points of reference for the daily operations of the public sector. But there is also a growing emphasis on the importance of functioning markets, in other words, enhancing opportunities for individuals through the creation and enforcement of level playing fields within a transparent framework, which serves economic, social and environmental objectives. While the government as owner of productive assets continues its retreat, new forms of public-private partnerships, for example for investment in infrastructure or service delivery, are being explored. And finally, there is much more attention being paid to the participation of stakeholders and community advocacy in public policymaking and implementation.

Security is another reason why government is back. When it comes to the essential need for individual and collective safety, there seems to be no alternative to a strong and efficient government. Private partnerships will be involved, like insurance, security equipment, even some policing. But whether it concerns the security in airports, transborder flows of merchandise, biotechnology or food safety, the public sector is obviously considered to be the guarantor of last resort. That implies, of course, not only a reinforced responsibility of political players and public administrations, it also calls for even greater respect for the principles of accountability, transparency and the participation of stakeholders. Without proper, open government, these values cannot be guaranteed.

Governments will remain in business if they are smart, responsive and efficient, and maintain public trust. Good public governance will secure that confidence. It is a future’s commodity in high demand. And that applies to organisations like the OECD too.

©OECD Observer No 235, December 2002

Economic data


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