: Achievements and Lackings Changeing Role of the State István Stumpf, Ph.D. President of the Századvég Foundation Associate Professor of ELTE Law School „Regime Change and Transition arcross the Danubian Region: ” 6 th Danube Rectors’ Conference Summer Schooé on Regional Co-operation 5-12 July 2009 Budapest, Hungary

Importance of the State in CEE Countries Common heritage of Communist Party State New challenge of market economy with dominance of neoliberal ideas Introduction of Rule of Law and New Judical System Competitive multiparty system Transformation of post-communist public administration system Professionalisation of public service

20 Years After the Regime Change in Global Financial Crisis

Both the diagnosis of market logic and the therapy failed Failed on the level of principles Failed in practice, because the economic world crisis has shown the fall of the neo- liberal principles.

Why we need a stronger state? The representations of the society’s welfare Reinventing government, rethinking of the state’s functions Equilibrium did not exist between the pillars of the welfare state: markets- families-government The lack of equilibrium has resulted in a series of social and fiscal crisis.

Needing an active, intelligent and strong state: What do we have instead? Instead: we have the crises of the traditional role of the state: the liberalization, deregulation, and privatization procedures radically reduced the capacity of the state for influencing economic processes; The political neoliberalism contributed to the dismantling of public services and resulted in the spread of the minimal-functioning state concept, The overburdened state cannot fulfill its own obligations, financial crises, growing national debt, further restrictions; The collision of public trust in relation to the traditional organizational ability of the state; the breakdown of state legitimacy; The deterioration of the state is the necessary consequence of a bad governing

Improving Capacity to Govern Hungarian Case

Nation and public administration in transition In the 1990’s: Internal (social) and external (EU) requirements for modernisation. In the 2000’s: Worsening macroeconomic indicators – a salient need for reducing central budgetary expenses. Declining efficiency. From 2006: Pseudo-solutions: Privatised and outsourced public services and delegated responsibilities under the disguise of economic and modern service state. The agenda of governance by communication.

Political background 1998 Socalist-liberal coalition replaced by three party center-right coalition Formulation of New Public Management reform New recruitment strategy of state secretaries and ministerial beaurocracy

Improving efficiency of Public Service I. harmonization of strong constitutional position of Prime Minister and the government structure strenghtening the PMO as a strategic center of government activity establishing a portfolio referential system in the PMO to enhance the operational efficiency of the line ministries

Improving efficiency of Public Service II. to apply preliminary efficiency studies in policy making to use modern management methods to improve professionalism sought to revise the functional divison clear commitment to elevate the prestige of public administration

Enhancing the performance of civil service making civil service career attractive to young professionals introducing performance-based salaries of civil servants establishing adequate training system setting up life long career modell taking measures against corruption compulsory property declaration of key- employees Drawing up a „Code of Ethics”

New Approach How to Improve Capacity to Govern  further centralization of center-government machinery  effective coordination of government policy  preparation of government strategies  securing proactivity of government communication  strenghtening the preparatory role of administrative state secretaries

Main features of PMO’s organizational reform 1.Establishment of cabinet responsible for direct advice to the PM 2.Head of PMO: first in the rank of ministers 3.Forming of Political State Secretariats responsible of strategic planning and management of gov.policy 4.Forming of „mirror structures” (Ministers Desks) to supervise government policy 5.Setting up a Governmental Communication Unit 6.Organizing regular preparatory meeting for coalition fraction leaders in PMO

Key role of Public Administration Unit Civil Service reform prepared by PA Unit Introducing new Senior Civil Service Corp - extending the recruitment basis - creating a network of experinced and well-trained sen.civil servant - providing a 5-year-long job security - new training system - clearifying professional and political criteria of recruitment

After the elections of 2002  Reform slowed down…  Re-politicisation under way….  However,new government not only kept the reorganized system of the PMO but expended it as well….  And set up the State Reform Committee, but different philosophy…

A ”business method” of centralisation The state as a new ”national public service company”. The PM is the CEO who bears absolute authority. Public servants are forced to become managers, public administration is encouraged to adopt criteria applied by business sector. Loyal business partners occupy former political positions of strategic importance.

Prime Ministerial authority over public administration I. Ministers can be appointed or made to resign only by the PM. (The president’s agreement is a mere formality). New act on the PM’s personal right to command ministers and chief officers. Personal agreement and control on ministerial responsibilities and operational conditions.

Prime Ministerial authority over public administration II. Regulation of the number of under-secretaries of state working for public administration at ministries. Obtaining the right to modify the remuneration of under-secretaries. Acquiring the right to appoint government commissioners to manage affairs of key importance. Personal authority to decide about the remuneration of certain state officials.

Organisational control and centralisation I. The operational and organisational code of ministries has to be admitted by the PM. The Prime Minister’s Office (MeH) gains authority to check and validate the government’s agenda. Governmental communication became integrated into the work of the MeH (a group of acknowledged experts on communication and marketing start to work for the PM).

Organisational control and centralisation II. Stabilizing the hierarchy within the MeH; creating a clear scope of dependence on the Prime Minister and the head of the MeH. Strengthening the strategic executive functions of the MeH by launching supplementary institutions of administration: e.g. State Reform Committee; Government Commission for Development Policy, National Development Agency. Installing centralised ”back-office organisations” in the MeH for assisting ministerial work: e.g.: Central Service Directorate.

A ”colonised” sector - threats and malfunctions I. The PM was not able to manage the whole system of public administration alone. Professionalism of traditional public administration and commitment to public policy matters were overwritten by actual politics, temporary interests and political loyalty. Operational and functional, contradictions, anomalies and inefficiency.

A ”colonised” sector - threats and malfunctions II. The deterioration of the public administration system can lead to: –Squandering important human resources and accumulated national know-how. –Reinforcing the success of PR-politics and governance by communication. –The destruction of the strong public service mission of the state. –A widening representational gap between the political elite and the society. –Growing structural, social and economic tensions.

Foreign evaluations: International press The Socialist-liberal coalition has presided over the worst mismanagement of public finances anywhere in post- communist Europe. Officially, the budget deficit is 8% of GDP. Including off-balance- sheet financing, it is more like 10%. Economist,

Foreign evaluations: OECD OECD Country report elaborated on the mandate of the Hungarian government: „Lack of strategic governance”

What Could Be the Answer for the Global Challenge and the Bad Governance: Build the Neoweberian State

Building Governmental Capacity With the expectation of the future we have to develop a new content to the operation of democratic institutions, and we have to restructure governmental functions. Capacity building can help to avoid the drawbacks of globalization and to benefit from its advantages; In reality neither the market nor the civil society is capable of self-regulation and self-organization;

Francis Fukuyma 2004 ”... I argue that state-building is one of the most important issues for the world community because weak or failed states are the source of many of the world’s most serious problems, from poverty to AIDS to drugs to terrorism.”

Milton Friedman 2002 ”A decade ago, I had three words for countries making the transition from socialism: privatize, privatize, privatize, but now, it turns out that the rule of law is probably more basic than privatization”

State Building for Competitiveness and Social Cohesion Restoring the moral content of normative regulations: anti-corruption, party financing, public procurement system, rigorous sanctions; Clarifying the new role of the state: moving from the „good governance” towards the „good government” approach; Resource-mobilizing, ability-improving government vision and behavior: Rethinking and boosting government functions;

State Building for Competitiveness and Social Cohesion Comprehensive reform of the central governance and the public administration including the electoral system and E- governance. Acting according to the long term interests of the professional civil service and creating the high quality of its operation.

State Building for Competitiveness and Social Cohesion Establishing the cooperation between the policy institutions and the think-tank network; Developing governmental capacity: using strategic governace and public initiations, utilizing the results of professional debates and criticism, political courage and commitment

Summary and Recommendations 1.The New World Order under preparation 2.We need an active, intelligent, strong but limited state: neo-weberian state 3.We should improve the Professionalism and Accountability of Public Sevice 4.We need a new „social contract” to support the reforms 5.We shold promote the „Good Government” 6.We should educate the new generation of public managers