Ice – 6 th June 2014 The changing role of The State in Development

What’s been happening? We need a ‘balanced’ view increasing and intensified flows between countries of goods, services, capital, ideas, information and people, which produce cross border trade integration of a number of economic, social and cultural activities. It creates both opportunities and costs and for this reason it should not be demonised nor sanctified, nor should it be used as a scapegoat for the major problems that are affecting the world today.

The drivers – follows on from last meeting (a) trade and investment liberalization; (b) technological innovation and the reduction of communication costs; (c) entrepreneurship; and (d) global social networks. BUT don’t ignore the role of the State and governments - governments have played a pivotal role in allowing greater interdependence and economic integration of specific activities through the elaboration and adoption of market-oriented policies and regulations, at both the international and local levels

In what ways has The State and other organisations driven the globalisation increase? Financial de-regulation, removal of foreign exchange controls, elimination of capital controls, removals of barriers to entry into banking and its offspring ‘ financial services’. WTO and EU have driven the pace of standardisation of products, subsidies and intellectual property rights. Economic globalization is, in other words, the result of policy decisions made by Individual countries that allow global market forces to operate Governments have driven the factors which are responsible for drastically transforming the ease, speed, quantity, and quality of international information flows, as well as physical communications

Other drivers Increasing access to computers and the development of associated technologies Business can now operate across continents (MNC’s), change capital flows quickly and inexpensively, use technology to drive costs down and consolidate through mergers and acquisitions. Comparative/competitive advantage determined FDI flows Knowledge based industries are increasingly influential Gaining influence in developing countries

What has globalisation meant for the workings of The State? Issues now spill over borders, cultures and nationalities Decision-making is less nation state focused A loss of sovereignty – how do we guarantee external security, are laws and customs universal, who provides public goods ( defence is one area of interest) Despite a probable cultural convergence local ways are still important and borders are porous and mean little to ethnic traditions. Is it allowing some States to have increased leverage over others? Will it lead to smaller of bigger government and may be more global organisations – can one country be trusted to manage its environmental policies, or should their be a global monitoring agency? What of social spending – can the richer countries remain competitive if they tax and spend?

Are there issues that affect us all, or just the chattering classes? Free access to markets – EU – yes to most raw materials and no to majority of refined/processed products Can larger countries still dump excesses on poorer countries – who protects who and how? Is democracy, transparency, accountability and good governance the only way forward? Why are we so concerned with human rights, child labour, the environment and scientific and medical research? Does free trade weaken the role/power of The State

Problems Weak States – lack of strong institutions – independent judiciaries, strong parliaments, accountable executives, lack of capacity, lack of social policies – health, education, social security ( social protection) How does the State balance efficiency with equity – if the economy is open what happens to those employed in jobs adversely affected by change? What is the democratic process – what institutions does it rely on? What of social policies, effective public administration, social capital, resource mobilisation, tax collection, the creation of knowledge and its distribution

Will the role of the State have to change? Move away from hands-on and direct production to creating the environment for private enterprise to flourish. The State now acts more as a connector of different ‘ interest’ and provides the environment within which ‘partnerships’ can grow Open to diversity, less worried about uncertainty, optimism about the future, building the institutions that attract highly mobile capital flows, Freedom to experiment but what of those who fail – social protection? Giddens – ‘our runaway world does not need less but more government and this is only democratic institutions can provide’.

What will the modern State look like? Strong institutions of government – credible and independent judiciary – effective legal frameworks for economic activity – open and competitive business environment – equitable and open tax system – competitive labour, financial and capital markets – adequate steering, regulatory and enforcement capacities, judicious privatisation and outsourcing of services – public and private partnerships – emphasis on small and medium-scale business units – access to information – technological and infrastructure development Quality of government, not quantity – ‘ an intelligent democratic State – one which assists in its citizens being able to carry out effectively the tasks incumbent of the State, in the international, national and sub-national level.’ They can do too much of some things and not enough of others and the State will have to re-direct its efforts – Joe Stiglitz.

How will the State assist? Intervenes strategically to creating conducive conditions, may be non- social services should be outside the provision of the State? Will the welfare state become the Minimal State? Efficiency now rules and governments have not always been known for this – the ‘market’ is King – BUT what of 2008 – what of development does it come from the market or the State working with, monitoring and complementing the market? The private sector – it will provide rules, regulations, regulatory framework, private property rights, competition policies, monitoring of corporate behaviour and encourage any business operating on its soil to be transparent and efficient

What else will the State need to provide? A stable economic and political environment Engage local communities and indigenous people – the SME revolution Watch environmental and ethical standards Independent judiciary should monitor corporate behaviour Develop a vibrant civil society – address social problems and build capacity This is best addressed – institutional reforms, strengthen laws, democracy, make certain elections reflect the opinion of the majority.

More …. Develop human resources – skills, inclusive education, based on proven ability etc. Mobilise resources – physical and human, engage people in the process of decision-making, processes of law and order and the democratic process Encourage innovation and the development of information technology, better management within government, better access to information, more accurate delivery of services Let’s develop these!