+

The Policy Context

+ Many of the analytical approaches (ideas) to studying public policy (PP) encompass Institutions and Actors that influence PP.

Analytical Approaches

Institutions Actors

Positivist & Post-positivist

Market mechanism

Individuals

Public choice Neo-liberalism Politicians, Bureaucracy, voters

Class analysis Capitalism Organized groups Pluralism & Corporatism

- Interest groups

Neo-institutionalism

State and Social institutions

Individuals

Statism - State and society !

+Institutions

+ Institutions: Capitalism & Democracy

n These institutions constitute an important part of institutional context within which PP process unfolds in most modern societies.

n These institutions are influential among policy-makers and greatly influence actors in most policy-making processes

+Institutions: Capitalism

n Refers to both market-oriented system of production and exchange and to a society in which control over the property required for production (capital) is concentrated in the hands of a small section of the populace, while most of the rest of the population sells their labour-time in a system of wages.

n Now almost all countries are capitalist, though they vary in degree & approach

+Capitalism Vs Socialism

Refers to both market-o r i e n t e d s y s t e m o f production and exchange and to a society in which c o n t ro l ov e r p ro p e r t y required for production (capital) is concentrated in the hands of a small section of populace, while most of the rest of population sells their labour-time in a system of wages.

A state-oriented political economy in which ‘capital’ is publicly owned and allocated – with expressed intention of working towards establishment o f a c o m m u n i s t p o l i t i c a l economy, in which ‘capital’ would be communally owned and wage labour abolished.

Capitalism Socialism

+ Major characteristics of Capitalism 1)Exchange of goods & services takes place thru. markets.

2) Ownership of Inputs:

n Ownership of means of production (e.g. raw materials & machinery) is largely in private hands.

n This means private sector has exclusive right (guaranteed by state with certain restrictions) to decide on use of means of production

n That is they decide what to produce, in what manner, and in what quantities.

+ Characteristics of Capitalism – Contd.

n This power enjoyed by private sector establishes capitalists as dominant social class since other classes in society – workers, peasants, small shop owners and the like – rely on capitalists for their incomes and well-being.

n That is, to earn a livelihood (i.e. salaries and wages) other classes must work for capitalists (or sell their labour and skill).

+ Characteristics of Capitalism – Contd.

3) Profit Motivation:

n Profit is to capitalism what motion is to bicycles: capitalism, like bicycles, can’t properly function by standing still.

n Firms justify profits, in order for both them and economy to survive.

n  If adequate return on investment is not forthcoming, capitalists will withhold their investment or invest it somewhere else.

n The result can be a decline in economic activity in a society and a general lowering of a society's living standards.

n This imposes enormous pressure on govts. to ensure hospitable conditions for businesses.

+ Characteristics of Capitalism – Contd.

4) Influence over govt.:

n Businesses influence govts./public policy directly and indirectly (i.e. thru trade bodies)

n This is made possible because govts. in capitalist societies rely on businesses for their revenues and for overall levels of social well-being.

n Due to forces of globalization, it is possible for businesses to respond to an unwanted govt. action by moving capital to another location thereby causing loss of employment and revenues at home.

n This way, capitalists have the ability to ‘punish’ the govt. for any actions of which they disapprove.

n Hence, govt. must contend with such threats while making decisions.

+ Characteristics of Capitalism – Contd.

5) Capitalists & Democracy:

n In democratic states, financial contributions of businesses to political parties, afford them control over govt. policy.

n Modern elections can sometimes turn on relatively short-term issues and personalities, which necessitate large budgets for media advertising campaigns to influence voters.

n Businesses can finance these budgets which makes political parties vulnerable to accommodating business interests.

+ Characteristics of Capitalism – Contd.

6) Capitalists influence over policy agenda:

n Financial contributions businesses make to public policy research institutions and individual researchers cement their power.

n Organizations and individuals receiving funds tend to be sympathetic towards business interests and can provide business with intellectual wherewithal often required to prevail in policy debates.

+ Ideology of Liberalism: The Backbone of Capitalism

n Capitalism is a consequence of liberalism

n It refers to a set of beliefs & practices that serve to maintain and promote capitalism.

+ Key teachings of Liberalism

n Individuals are prime players in society.

n They have indisputable economic rights (to own property, to sell the same etc.)

n These rights have to be protected from intrusion by social organizations such as state and trade unions.

n A good society is one that guarantees individuals freedom to selfishly pursue their rights/interests, realize their potential and accumulate wealth, all thru. mkt. mechanism.

+ Key teachings of Liberalism – Contd.

n This freedom should be restricted only when one person's freedom erodes that of another, say thru. theft/violence

n Role of state/govt. is to perform functions that wouldn’t otherwise be performed.

n Role of state can take 2 forms: Supplementary & Corrective

n Supplementary role: Provision of public goods

n Corrective role: Correcting the market failure.

+ Institutions: Democracy n Democracy is a contentious concept. One survey in late

1980s found 311 definitions of 'democracy'

n Example 1:

Democracy is a plan of political organization, a political decision-making system, which involves structuring the mechanisms of day-to-day control of state through representative institutions staffed through periodic elections.

n Example 2:

‘Democracy is a representative govt. elected by an electorate consisting of entire adult population, whose votes carry equal weight, and who are allowed to vote for any opinion without intimidation by state apparatus'

+ Characteristics of Democracy

n Democracy confers entitlements on citizens to choose, thru elections, who they want to have represent them in govt.

n Representatives are held directly/indirectly accountable to citizens

n Those who don’t own means of production (say weaker sections of society) can exercise their numerical superiority to vote in govt. that addresses adverse effects of capitalism.

n Example: Influenced by democratic politics in most c o u n t r i e s gov t . h a s i n t ro d u c e d i n c o m e redistribution measures defying capitalist tenet that market alone can determine this.

+ Relationship between capitalism/liberalism and democracy

n They are fundamentally contradictory because capitalism is about individual rights while democracy is about collective rights.

n Thus, democracy poses fundamental threat to liberal order because it gives majority the capacity to erode individual (capitalists’) rights.

n In other words, opportunities for political control that democracy offers to economically weak groups sit uneasily with basic tenets of capitalism.

n Democracy is often needed to diffuse tensions generated by capitalism so as to avoid revolution and rebellions.

+ What determines govts.’ capacity to implement policies independently and effectively in a liberal capitalist democracy?

(a) Organisation of the state:

n State needs to be well organised and supported by prominent social actors.

n When state is weak, policy effectiveness is lowest

n Fragmentation within and among prominent social groups undermines state’s policy capacity by

(i) Limiting its ability to mobilize social actors towards resolution of societal problems.

(ii) Limiting its capacity to implement policies effectively.

+ Determinants of Govt. Capacity – Contd.

(b) Strong partnership between state & society:

n If both state & society maintain close partnership, then policy making and implementation would be effective.

n Such an institutional arrangement is called ‘embedded autonomy’.

+ Determinants of Govt. Capacity – Contd.

(c) Political system:

n Most significant aspects of political system affecting PP is whether it is Federal or unitary. Characteristics of Unitary

system Characteristics of Federal

system National govt. retains all decision making powers. Its role is legally unchallenged.

Existence of at least two autonomous levels or orders of govt. within a country.

It can choose to delegate decision making powers to lower levels of govt. or dictate to them

Two levels of govt. enjoy more or less complete discretion in matters under their jurisdiction and guaranteed by constitution. This is distinct from unitary system where lower level govts. owe their existence to national govt. rather than to constitution

Examples: Britain, France, Japan, and Thailand

Examples: Australia, India, Brazil, Nigeria, and the United States

!

+ Determinants of Govt. Capacity – Political System Contd.

n Under federalism govts. find it difficult to develop fast, consistent and coherent policies because:

(a) National policies in most areas require intergovernmental agreement, which involves complex, extensive, and time-consuming negotiations among govts. that don’t always succeed.

n Examples: Delay in introducing GST in India; Difficulty in preventing hoarding to fight against rising food prices

(b) Different govts. may make contradictory decisions that may weaken or nullify effects of a policy.

n Examples: Stand of Indian states on allowing FDI in retail sector.

+ Determinants of Govt. Capacity – Contd.

(d) Relationship between executive and legislature:

n In parliamentary systems (e.g. India, UK), executive is chosen by legislature from among its members and remains in office only as long as it enjoys majority support from legislators.

n In presidential systems (e.g. USA), executive is separate from legislature and is usually elected directly by voters, and need not enjoy majority support in legislature.

n It is argued that policy process is easier under parliamentary system compared to presidential system. How?

Presidential+System+ Parliamentary+System+Division'of'powers'promotes'difficulties'for'policy4makers.''Individual'members'and'committees'of'legislature'play'active'role'in'designing'policies,'including'those'proposed'by'president.'''Here'local'and'partisan'concerns'often'motivate'legislators''To'ensure'majority'support'for'policy'measures'requiring'legislative'approval,'president'have'to'bargain'with'members'of'legislature''In'doing'so,'he/she'may'offer'administrative'&'budgetary'concessions'in'return'for'support.''Consequences'of'this'power'separation'&'bargaining'are:'(a)'multiple'points'of'conflict'with'executive,'(b)'greater'chances'for'interest'group'&'voter'to'influence'policy'process,'(c)'diluted'or'even'conflicting'policies'

Executive'can'more'often'than'not'take'legislative'support'for'its'measures'for'granted.''This'is'due'to'strict'party'discipline'enforced'on'individual'members'of'the'parliament.'''There'may'be'some'bargaining'over'policy'within'a'party'group.'But'there'is'little'chance'of'changing'a'bill'once'it'has'been'introduced'in'Parliament.'''The'only'time'when'this'may'not'be'the'case'is'when'governing'party'does'not'have'an'outright'majority'in'legislature'and'governs'in'coalition'with'other'parties.''Thus,'in'general,'this'system'enables'govt.'to'take'decisive'action'if'it'so'chooses'

''!

+ Determinants of Govt. Capacity – Contd.

(e) Nature of interest groups:

n If society is characterized by umbrella groups consisting of variety of similar interests then policy making and implementation would be effective.

n On the other hand, in the presence of narrow interest groups policy making would be difficult as groups pressure the state to serve their members’ interests only.