Market power and government capacity

Abstract

Current concern, especially from those on the ‘left’, is that governments have been ‘marketised’. · “marketisation of government represents a form of cultural imperialism by a group of economists pushing a particular and no economic dogma” · Globalisation is also often viewed as the culprit, with governments being dictated to by international financial markets · Hence the desire of the protestors to in some unspecified way limit the power of those markets By contrast those on the ‘right’ are often critical that governments have not deregulated further · For example, unemployment and the inequality associated with unemployment, are attributed to the lack of labour market flexibility, and especially to a failure of relative wages to adjust to shifts in supply and demand Although they draw very different conclusions about the desirability of marketising government, both the left and the right tend to view markets as limiting the power of governments. What I want to suggest today is that the shift to marketisation often represents an attempt by governments to enhance or restore their power. Why is this so? The starting point is that the power of governments is being limited by multiple causes, but particularly by the unwillingness of the electorate to allow governments to rule by fiat. Governments have lost respect, trust and authority. More and more governments have been finding that regulations have presented an invitation to avoidance or evasion; and/or that the perverse incentives that regulations create means that they are not achieving their intended purpose, or at least are not efficiently achieving that purpose..... In effect, my contention is that the marketisation of government is for the most part a pragmatic response to changing conditions. The means by which governments are seeking to achieve their objectives are changing, but the objectives and most importantly the values that underpin them are not changing radically.... In sum, the marketisation of government should be seen as a pragmatic response by government, involving a change in the means of government intervention rather than in the amount or the intent. I will illustrate this thesis by referring to the changes that have been occurring in three areas of policy: · Macroeconomic policy · Microeconomic policy · Service delivery The questions we need to focus on are: 1. Where have governments made greater use of markets 2. Why 3. Has the marketisation of government increased or reduced their capacity to set and achieve their policy goals Show more