Public Governance of the Economy

One of the most discernible trends in contemporary society is the acceptance of politics, society and the economy as separate spheres. Increasingly, economic discourse is perceived as having nothing to do with politics. Neither is the phrase “political economy” commonly used in policy debates. The economy is generally free from political direction and left to find its own devices, driven by a self regulating free market, which is assumed to be beneficial. Social policy becomes unhinged from economic policy.

The removal of decision-making for the economy from the political sphere is reflected in efforts to keep areas such as public expenditure, tax increases, state supported enterprise etc outside public debate. This is the new “unaccountable” economics: an economics that regards the public as a mere component of a self-regulating economic system. However, this strict division between government policy and economic policy has become blurred over the past few months. National governments can generate policies that do not interfere in the market during good times, but this becomes impossible during the bad times. This raises bigger questions in relation to how we should govern the economy. How do we bring public decision making back into economic policy?

The erosion of the states capacity to govern the economy is the result of 15 years of irresponsible decision making. An short sighted belief in the self regulating capacity of markets. Most developed economies converged on this market oriented belief. It produced a short burst of growth but the long term effects of short term planning are gradually emerging. We need to build non-market institutions for governing our economies. Building these non market supportive institutions are the necessary social conditions required to bring about ‘competitive advantage’ in a small open economy.Markets alone will not foster the so called ‘entrepreneurial’ culture of post-industrial capital. Networks, ideas and cooperation bring about innovation not cut throat competition.

Public governance of the private economy is a must, the difficult question is what type of public governance?

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