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The Big Failure of Small Government

Summary:
It is no coincidence that countries with mission-driven governments have fared better in the COVID-19 crisis than have countries beholden to the cult of efficiency. Effective governance, it turns out, cannot be conjured up at will, because it requires investment in state capacity. LONDON – Decades of privatization, outsourcing, and budget cuts in the name of “efficiency” have significantly hampered many governments’ responses to the COVID-19 crisis. At the same time, successful responses by other governments have shown that investments in core public-sector capabilities make all the difference in times of emergency. The countries that have handled the crisis well are those where the state maintains a productive

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It is no coincidence that countries with mission-driven governments have fared better in the COVID-19 crisis than have countries beholden to the cult of efficiency. Effective governance, it turns out, cannot be conjured up at will, because it requires investment in state capacity.

LONDON – Decades of privatization, outsourcing, and budget cuts in the name of “efficiency” have significantly hampered many governments’ responses to the COVID-19 crisis. At the same time, successful responses by other governments have shown that investments in core public-sector capabilities make all the difference in times of emergency. The countries that have handled the crisis well are those where the state maintains a productive relationship with value creators in society, by investing in critical capacities and designing private-sector contracts to serve the public interest.

From the United States and the United Kingdom to Europe, Japan, and South Africa, governments are investing billions – and, in some cases, trillions – of dollars to shore up national economies. Yet, if there is one thing we learned from the 2008 financial crisis, it is that quality matters at least as much as quantity. If the money falls on empty, weak, or poorly managed structures, it will have little effect, and may simply be sucked into the financial sector. Too many lives are at stake to repeat past errors.

Unfortunately, for the last half-century, the prevailing political message in many countries has been that governments cannot – and therefore should not – actually govern. Politicians, business leaders, and pundits have long relied on a management creed that focuses obsessively on static measures of efficiency to justify spending cuts, privatization, and outsourcing.

As a result, governments now have fewer options for responding to the crisis, which may be why some are now desperately clinging to the unrealistic hope of technological panaceas such as artificial intelligence or contact-tracing apps. With less investment in public capacity has come a loss of institutional memory (as the UK’s government has discovered) and increased dependence on private consulting firms, which have...

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