The Grand Challenges of Modern (indebted) Governments

Daily we read of the debts that governments have run up, whether Greece, Hungary, UK or elsewhere. How has this come to pass will require all of us to reflect on what we expect from government and indeed what is government for. Folks such as Robert Nozick argued for the minimal state, all the way over to the bankrupted ideology of the collectivist state. In between lies reality.

Therefore, in the spirit of redefining the purpose and function of the modern state, I am asking this question:

what are the Grand Challenges for modern government?

In effect, what is the purpose of government? What is on the list will reflect the current priorities, but also an effort to anticipate the consequences of current actions by public bodies — if governments stop doing some things, what will happen down the road.

Here is some to get us going. I think we need 10 at the most as they must in the be both grand and challenges; my list may in the end be neither, but let’s see.

Boundary value problem for an arbitrary shape

Like any good challenge, one needs to know what is in the problem, what is outside the problem and line that demarcates the two

  1. A challenge is to ensure that governments are subjected to the same rules and regulations as everyone else.  Someone said, it would be a shame to waste a good crisis, so many governments find themselves in a crisis, and in many cases they are part of the problem, not part of the solution. Governments have some role to pay in aligning efforts to solve the crisis, but they are not exempt from the solutions.
  2. A challenge is to design a simple tax system. We don’t need governments to create complex, full of exceptions tax systems. We have complex tax systems that have becomes ends in themselves, inscrutable and reflecting overly bureaucratic approaches. Rebooting our logic of taxation is a non-trivial challenge. The problem though is that governments use financial instruments as carrots and sticks to alter behaviour, whether of individuals or corporations. We need to rethink our use of financial instruments as tools of policy and that these financial instruments must deliver social outcomes, not just be used to fund government programmes.
  3. A challenge is to better control adventuresome, rent-seeking behaviour of civil servants.  Too often, hyperactive civil servants follow a logic of state intervention because in the end it may be easier to do and please political masters, than to do the harder, consultative and more developmental approach which will produce the best outcomes, but with the least amount of government. The problem is that civil servants are rent-seeking, and are rewarded for expansionist activities. We see this with regulators who either do their jobs badly (regulators are after all monopoly suppliers of regulation, so if they do a bad job, we the regulated have little choice), or seek to expand the scope of their mandates, like a gas (there is always some reason to expand a mandate, when there is no one to say no). To be fair, the private sector also has adventuresome corporate executives who need to prove themselves through adventuresome corporate mergers and acquisitions — fortunately they don’t always get their way, such as the shareholder response to the plans of the relatively new CEO at Prudential (on the job only 5 months and he thought this made sense). The challenge here is a general problem, but acute in government.
  4. A challenge is for governments need to know how to recognise market failure, and having identified this, decide what they should do it anything. Is there market failure in funding medical research, is there market failure in higher education? Understanding this will help define the boundaries of the government role, and importantly define the boundary conditions that tell us that different logic and problem solving is needed. At the root, we need to  first decide what the role of government should really be. Integral to this is determining a proportional response — in other words, there is identifying the need for intervention, and there is separately deciding what to do, how much to do, and importantly when to stop.
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