The Impact of the Fiscal Crisis on Public Administration Reforms: Comparison of 14 European Countries

Abstract

This study aims to empirically test a widespread assumption that fiscal crises instigate administrative reforms. The empirical analysis relies upon an international comparative study of the responses of 14 European governments to the fiscal crisis of 2008–2013. It is found that fiscal crisis and public administration reforms are not necessarily closely connected. In the majority of cases, the fiscal crisis did not have an instant effect of triggering structural public administration reforms or substantial shifts in existing reform trajectories. The crisis intensified the pressure to reform public administration to some extent, but the European governments’ responses predominantly followed a combination of straightforward cutbacks and incremental change. More substantial reforms were carried out in countries most severely hit by the crisis and/or where administrative reforms were conditioned by international financial assistance.     

Understanding the changing role of public sector performance measurement in less developed countries

This article develops a framework for understanding changes in the demand for and supply of performance information in public sector organizations in less developed countries (LDCs). New Institutional Sociology (NIS) is used to argue that pressures from specific stakeholders stimulate organizations to produce particular performance information. The article distinguishes three groups of stakeholders (i.e. funding bodies, statutory boards and purchasers), and elaborates on the performance dimensions these stakeholders are interested in. The group of funding bodies, with their interest in financial performance information, used to be the most important group of stakeholders. However, statutory boards and purchasers are gaining importance as a result of recent public sector reforms, which include decentralization, marketization and the implementation of anti‐corruption programs. As a consequence of pressures coming from these stakeholders, new performance dimensions, such as the quality and quantity of services and the political governance structure, will be added to organizations' performance measurement (PM) systems. Whether these and other—often more traditional financial—performance dimensions will be balanced and integrated throughout organizations depends on the power positions of the various stakeholders. The arguments presented in this article intend to stimulate public sector organizations in LDCs to design and redesign PM systems as a response to changing stakeholder interests. Copyright © 2010 John Wiley & Sons, Ltd.     

Economic Reforms and Their Impacts on Informal Payments for Government Services in Transition Countries

This article examines whether economic reforms in transition countries reduce the incidence of informal payments to government officials. Using the 2009 EBRD-World Bank Business Environment and Enterprise Performance Survey (BEEPS) data, empirical models of the likelihood and frequency that firms are asked to make informal payments are estimated. Eight measures of economic reform developed by the European Bank for Reconstruction and Development (EBRD) are also included in the analysis, both individually and as a combined index of overall reform, to test whether reforms reduce informal payments. Firm, country, and economic reform factors are all found to have an impact. In particular, the overall reform index and all but one of the eight EBRD reform indices are found to significantly reduce informal payments. The marginal effect of a one-standard-deviation increase in the overall reform index is to reduce the probability of a firm reporting that it gives a gift by 2.5% and reduce the probability that the firm reports that gift giving is a usual practice in its industry by 4%. Enterprise reforms, markets and trade reforms, financial sector reforms, and infrastructure reforms all have the effect of reducing the likelihood and frequency of informal payments.     

The Bureaucratic Approach to the Financial Revolution: Japan's Ministry of Finance and Financial System Reform

While all industrialized countries have enacted financial reforms over the past decade, Japan's Ministry of Finance (MoF) officials have crafted a distinctive approach to reform. They have managed to pursue their own agenda while at the same time responding to international market pressures and domestic political demands. This article examines Japan's "financial system reform," the process by which the MoF has recast the regulatory barriers between different types of financial institutions, such as banks and securities houses. Financial system reform represents an extreme case of a common Japanese policy pattern—the bureaucratic-led bargain—in which Japan's bureaucrats, rather than its politicians, organize the bargains that eventually emerge as policy. Two ministry policy councils deliberated for seven years before the Diet passed comprehensive reform legislation in 1992, and the ministry continues to redefine the reform at the stage of implementation today. While MoF officials have been forced to make concessions to industry groups and to adjust to unforeseen developments along the way, they have maintained overall control of the reform process. In fact, this article suggests that they have been remarkably successful in promoting their own peculiar interpretation of the public interest and in preserving and, in some cases, enhancing their own power.     

解决"三农"问题与深化体制改革

"三农"问题说到底是农民收入问题.农民收入增加难,源于体制性障碍.为了实现农民增收减负的目标,必须深化体制改革,包括城乡二元制度改革、农村税制改革、财政投资体制改革、粮食流通体制改革、土地征用制度改革.     

Administrative reform in a changing political environment: The case of Hong Kong

Since 1989, the Hong Kong government has implemented a programme of public sector reform that is based on the principles of ‘new public management’. The reforms initially focused mainly on financial management reform, including delegating responsibilities for resource allocation; re-defining the roles of the central resource branches; setting up trading funds in departments that provide services directly to the public; and instilling a new corporate culture of service throughout the government. Some progress has been made in implementing the reforms. In 1993, the government realized that further civil service reform was necessary to support the reforms. The government proposed to delegate more authority to department heads on personnel matters; give managers more freedom to manage personnel; and simplify personnel regulations and procedures. These ‘new public management’-type reforms are usually associated with stable, relatively unchanging environments. In Hong Kong, however, the reforms have been proposed and carried out in an environment of considerable political turbulence which has both facilitated and hindered their implementation. Because of the declining legitimacy of the colonial government, British authorities may not have the political capacity to implement the reforms. Opposition from both department heads and civil service unions to aspects of the reforms has already emerged.     

The Asian financial crisis and financial reforms in China

Abstract

Although China has avoided the direct attack of the Asian financial crisis, it has suffered secondary consequences leading to an economic slowdown. More importantly, the plight of its neighboring countries has driven home the urgency of financial reforms as China shares many of the problems at the root of the crisis in Thailand, Indonesia, Malaysia, and Korea. This article reviews the reform measures adopted by the Chinese government since the crisis. It analyzes the political dynamics of financial reforms in terms of state preferences and state capacities. In retrospect, the Asian financial crisis may well be seen as a turning point in reforming China's financial system.     

政府改革困境的制度结构性视角分析

目前,政府改革已成为我国经济改革和社会改革的关键,迫切需要我们深刻把握政府改革的规律.然而在现实中,政府改革面临着严重的实施困难,政府职能转变与政府机构改革双重不到位.从"国家悖论"与"政府失灵"理论出发,一般认为,政府改革面临的困境往往是由于政府制度变迁中制度供给主体缺失造成的,在理论上形成了难以深入分析的死结,也无助于政府改革的推进.认为,政府的角色冲突不是政府改革困境的根源和本质,而只是在考虑整体制度间均衡时的结果,忽略了政府的结构性特征;借鉴了公共管理理论中的政治家-官僚分析范式,以结构性分析的思路为主线,拓展了政府改革的两方博弈框架.从而认为政府改革困境的本质是政治家与官僚间在政府改革中的目标冲突与信息不对称;并分析了阻碍政府改革顺利推进的路径依赖效应与改革激励不足的问题.指出,要打破政府改革面临的困境,可以从改革的社会沟通与激励,财政约束,官僚机构的偏好与理念,以及全面长效监督等方面着手.     

Explaining the Reform of Banking Supervision in Europe: An Integrative Approach

National frameworks for banking and, more generally, financial supervision in various European countries have undergone significant changes in the last decade or so. What explains these supervisory reforms? This work addresses this question by examining the recent reforms in the United Kingdom, Germany, and Italy, engaging in a structured, focused comparison, mainly using process tracing and adopting an analytical framework articulated across three levels of analysis. It is argued that while international and EU factors acted as antecedent variables, establishing the background for the reforms, they were mediated by national factors—to be precise, by two independent variables—that account for distinctive modes and outcomes of reforms. In addition, the institutional strength of the central bank—the intervening variable—can make a difference to the process of reform by either inhibiting or catalyzing change.     

International Institutions and Domestic Compensation: The IMF and the Politics of Capital Account Liberalization

Certain governments have been faster than others in relaxing their restrictions on the cross‐border movement of capital. How can we explain the timing and extent of financial liberalization across countries since the 1970s? We argue that IMF stabilization programs provide a window of opportunity for governments to initiate financial reforms, but that policy makers are more likely to seize this opportunity when welfare expenditures are high. Large loans from the IMF shield policy makers from the costs of financial reform, while welfare expenditures provide credibility to the government's ex ante promises of compensation to individuals who are harmed by the reforms. We test this hypothesis on data for 87 countries from 1975 to 2002. We employ a spatial autoregressive error sample selection model which accounts for the nonrandom participation of countries in IMF programs as well as the processes of international policy diffusion. The results provide strong support for the interactive effect of IMF programs and domestic welfare expenditures on financial liberalization.     

Trends in the Higher Civil Services of Anglo-American Systems

The managerial reforms that have been implemented in the public sectors of many countries over the past decade are part of an international trend (Aucoin 1990, 134). Managerial reform in public administration can be seen as a Zeitgeist , a pervasive idea whose time has come. As Caiden (1988, 354) points out, effective administrative reform can be sustained only by a "crusading spirit" or the burning flame of idealism, and such a flame has blazed up in the past ten years. History may well show that the managerial reforms of the late 20th century had as dramatic an impact on public administration as the merit reforms of the late 19th century.
These managerial reforms have invariably involved an emphasis on giving the public better value for money, and have usually included the introduction of efficiency measures and corporate planning techniques, the improvement of financial management procedures, the assessment of performance in terms of results against goals, the adoption of private sector human resource management practices, and the use of management information systems and other management tools. The implementation of such managerial reforms has typically been heralded by the establishment of a unified elite group of senior executives in the higher civil service. This paper reviews the recent trends in the higher civil services of America, Canada, Britain and Australia, and considers how they exemplify the managerial approach to administrative reform.¹     

Performance and Accountability: Budget Reform in New Zealand

Since 1984, New Zealand has made major changes in public sector management. This article describes the perceived problems with the previous New Zealand system and discusses the reforms designed to address these problems. The changes attempt to increase efficiency by: (1) separating commercial functions from other government operations; (2) strengthening lines of ministerial and executive accountability; and (3) designing budget and financial management systems to improve measurement of public sector performance. This last reform includes shifting from an input to an output-based system, changing from cash to accrual accounting, and creating different forms of appropriations for different types of government activities. While it is too early to assess whether the reforms are successful, we note potential problems.     

IMF Conditionality,Government Partisanship,and the Progress of Economic Reforms

The International Monetary Fund (IMF) often seeks to influence countries' domestic public policy via varying levels of conditionality—linking financial support to borrowing governments' commitment to policy reforms. When does extensive conditionality encourage domestic economic reforms and when does it impede them? We argue that, rather than universally benefiting or harming reforms, the effects of stricter IMF conditionality depend on domestic partisan politics. More IMF conditions can pressure left‐wing governments into undertaking more ambitious reforms with little resistance from partisan rivals on the right; under right governments, however, more conditions hinder reform implementation by heightening resistance from the left while simultaneously reducing leaders' ability to win their support through concessions or compromise. Using data on post‐communist IMF programs for the period 1994–2010, we find robust evidence supporting these claims, even after addressing the endogeneity of IMF programs via instrumental variables analysis.     

Urban government and market reforms in China

Chinese reformers wish through their economic programme to create a new form of developmental state in China and a new relationship between state and economy. This paper examines these issues through a study of the impact of Chinese economic reforms on the structure and behaviour of local government, focusing on urban government at the district level. It looks at three aspects of the issue—the trend towards financial decentralization, institutional changes in district administration and changes in the relationship between local government and the urban economy. It concludes (contrary to arguments which regard bureaucratic response to the reforms as one of pure inertia and obstruction) that urban local government has changed in several major ways, the most obvious being a trend towards institutional expansion and proliferation. From the point of view of the reform process, some institutional changes have been positive, others negative, resulting in a ‘dualistic’ state which contains elements of both old and new forms of developmental state. There is a need for systematic analysis of the specific future needs and evolution of China's urban government which would guide a process of politico-administrative reform comparable to the current economic reform.     

Crises and Paradigm Shift: A Response to Critics

International financial and regulatory reform continues in 2014, building upon the burst of crisis‐induced institutional and regulatory reforms begun in 2008. In particular, the Financial Stability Board is an element and an agent of reform and this paradigm shift. The leap taken was and remains a predominantly technocratic central banking macroprudential narrative and process, controlled by this elite epistemic community. As the new regulatory normal evolves in 2014, it now does so at a slower pace, as the crisis appears to abate. Today elements of paradigm defence, maintenance and resilience are seen.     

The Club Rules in Global Financial Governance

Though the list of reforms following the onset of the financial crisis is long, we should resist the temptation to view the emerging regulatory framework in terms of a paradigm shift. Many key features of the system, including the privileged position of financial institutions, remain unchanged. This is not merely due to obstruction or capacity shortcomings but can be explained by considering the sources of ideas and the governance setting. Ideas and policy programmes for reform were generated by a policy community also responsible for shaping the pre‐crisis governance framework. Moreover, the ideas and preferences of these players are moulded by their transnational interactions and the club‐like mechanisms in place for determining what (and who) is to be included in discussions. These settings have produced policy programmes that helped address the immediate, ‘fast‐burning’ elements of the crisis, but have so far failed to put together a comprehensive reform programme.     

Once more into surplus: Reforming expenditure management in Australia and Canada

Canadian and Australian federal government budgets have returned to surplus. Over the past two decades both countries have undertaken financial management and budgetary reforms in an effort to control expenditure growth and public debt. They exchanged ideas, borrowed techniques, and shared reform experiences. Yet during the mid-1980s and early 1990s they displayed markedly different levels of success in expenditure control. This article explains why relatively similar instruments of expenditure control and financial management produced different outcomes in Australia and Canada. The analysis suggests that budgetary techniques will have marginal impact unless they are congruent with broader policy management systems and administrative cultures. The comparative analysis provides important lessons for budget reformers in all jurisdictions.     

Next generation of individual account pension reforms in Latin America

Latin America led the world in introducing individual retirement accounts intended to complement or replace defined benefit state-sponsored, pay-as-you-go systems. After Chile implemented the first system in 1981, a number of other Latin American countries incorporated privately managed individual accounts as part of their retirement income systems beginning in the 1990s. This article examines the subsequent "reform of the reform" of these pension systems, with a focus on the recent overhaul of the Chilean system and major reforms in Mexico, Peru, and Colombia. The authors analyze key elements of pension reform in the region relating to individual accounts: system coverage, fees, competition, investment, the impact of gender on benefits, financial education, voluntary savings, and payouts.     

Altered Europeanisation of Pension Reform in the Context of the Great Recession: Denmark and Italy Compared

This article analyses the Europeanisation of national pension systems in Denmark and Italy. Through the analytical framework of a ‘two-level’ game, it analyses pension reforms in the two countries, which, in the wake of the crisis, breached EU budgetary requirements, and shortly after reformed their pension systems. The EU affects pension reform in both cases, but in distinct ways. When Denmark’s economy was financially vulnerable, the EU’s excessive deficit procedure affected the decision to reform pensions indirectly, by triggering a rapid political decision to speed up a pension reform. By contrast, the Italian economy’s critical vulnerability and the consequent risk for the whole Eurozone led to a situation whereby the European actors entered the domestic political scene and thereafter more forcefully induced reforms. The findings from the two cases show that the EU’s role in pension reform has been significant during crises, but through interaction with domestic actors. Furthermore, from a theoretical perspective, the intervening variables – domestic and EMU vulnerability as well as EU and domestic politics – are crucial to understanding the reform decisions through two-level games.     

The impact of public sector accounting reform on corruption: Causal evidence from subnational Indonesia

It is widely believed that the adoption of quality public sector accounting practices can assist in reducing corruption. In theory, accounting reform, especially the shift from cash-to accrual-based methods, leads to the production of much improved financial information, which ultimately can be used by citizens to hold government more accountable and limit corruption. Empirical evidence from cross-country analyses appears to support the theoretical predictions. We investigate the impact of accounting practices on corruption among districts in Indonesia. We use external financial audits to measure the adoption of reforms and the number of corruption case court convictions as our proxy for corruption. We estimate Poisson regression models using instrumental variable techniques to identify the causal effects of adopting accrual-based accounting procedures on corruption. We show that the employment of improved accounting methods is strongly associated with declining corruption. However, after accommodating the endogeneity of accounting practices, we determine that reform adoption has no effect on corruption.