The ruses of public power

by Jean-Claude Thoenig

The organisation of democracy takes place within the legal-organisational framework of the state. A weakening of the state and its functioning therefore constitutes a danger for democracy.

When we think about the role of States today, there is a need for vigilance. They tend to switch between affirming their omnipotence and serious weakness. In some cases, their power is strong only on the surface.

If the State appears to be a monolith, whether in controlling its agenda or conducting its policies, it is just one actor among others. These various segments often function in a disjointed way: governance by power poorly co-ordinated between its sections, a fragmented or silo-type administration. More than ever, it is subject to major hollowing-out processes and neo-corporatism.

– An increasing erosion of hegemony

The State finds itself part of and dependent, both in fact and in law, on many multi-level systems and multi-actor arenas addressing agendas, decisions and checks in a wide variety of sectors. This ranges from permanent public bodies at global or inter-state level to time-limited contractual processes involving local public and private actors. These systems of ‘variable geometry’ eat away at the genuine autonomy of State competence and action, both in a legal and practical sense.

– A lasting state of near-bankruptcy

This results from the legacy of the Welfare State; from its less effective policies and massive costs; from the end of combined growth and double-digit inflation; and from the fiscal rebellion of the middle classes.

– The nomad’s overwhelming hold on the sedentary

States have exclusive control over a given territory, which sets the bounds of their jurisdiction, their offering of service and their scope for legitimate action. Public services do not choose their clientele: every citizen-customer has to be satisfied. On the other hand, businesses are not (or are barely) limited by territory. They are mobile and have discretion, in terms of geographical establishment, sectors of activity, legal regimes, property rights, competition and tax. While private companies can select certain segments of the market, the State is by comparison a dwarf. Everything happens as if the margin that public bodies (especially the State) enjoy in defining their choices and actions is restrained, if not strait-jacketed.

– The mirage of mimicry

As the State sees its strategic capacity amputated and its scope for financial freedom removed – two essential elements when running a business – it paradoxically retains the hope of imitating businesses’ management methods. This approach denies (or in any case minimises) any fundamental difference between public and private administration. It favours the emphasis on results, without clarifying whether the efficacy produced is internal (result-cost ratio) or external (reaching desired or unexpected objectives, medium-term societal impacts generated). The citizen is reduced to a customer or consumer who is presumed to possess the financial, cognitive and informational means necessary to acquire the service he or she desires. Executive agencies autonomously take operational decisions set down by the leader (e.g. the political power).

Four factors are weakening the State to the point where they even pose significant obstacles to its modernisation. We may consider them ‘ruses’ that the State itself practices and maintains in order to mask its impotence:

– Public consumerism

The State takes refuge in the fiction of ‘social demand’, which has two consequences: one is the weakening of the principle of representation by casting doubt on the capacity of political intermediaries – legislative and executive – and its role in the identification of key issues and in shaping the policy agenda. The other (assuming payment is not requested by the consumer) is that the State is the recourse for every kind of demand: no limit to its action or the resulting burden on public finances. One must also note the ideology underpinned by the procedure of participatory evaluation. This participatory or deliberative democracy, often employed to bypass the limits of representative democracy, seems to be a means of calling the latter principle (and the assumptions underlying it) into question.

– Clientelism

While corruption is understood as an exchange of favours between incompatible (if not conflicting) interests that is punishable by law, clientelism involving the State takes the form of coalitions of interests, established by policy, that provide satisfaction to a collection of minority groups without any appearance of cost (e.g. diffuse distribution costs), and in consequence provokes a strong reaction from non-beneficiary groups.

– Symbolic use of regulation

The State is regulating less and less, even nothing at all. The most spectacular cases come under the economic sphere, via regulation as well as via incentive.

– The State reduced to public order

There is a sharing of roles between the State and the world of business. Companies endorse it openly via their representatives. They ensure the effective creation of wealth. As for the State, increasingly it finds itself unable (and has tried even less) to ‘alleviate the suffering of the world’ via redistribution, because it hardly has the means to do so. More precisely, the role of the Welfare State, with its redistribution in favour of disadvantaged classes, is being reduced to a kind of ‘State lifeguard’ policy that permits it to guarantee a level of public order necessary for wealth creation.

Jean-Claude Thoenig

 

29.8.2018

 

Transparency : undermining or improving democracy ?

By Stefan Schepers

Some non-governmental organisations, for example Corporate Observatory Europe, and some MEPs, are making a habit of calling for ever more transparency in European policy-making. Is this a useful contribution to democracy, or is it part of today’s wave of populism?

Transparency is an essential characteristic of open societies and effective governance: it is the basis for cognitive input from and dialogue with stakeholders, which in turn helps to bring alignment of vision, inclusiveness and coherence in public policies and in resulting regulations and capital allocation. It is also needed to evaluate and supervise the actions and non-actions of those elected and paid to govern. The traditional system of representative democracy assumed that stakeholders’ views and interests were represented in parliament. Today, this is no longer sufficient to ensure effective and democratic governance.

Transparency demands result from the tensions between democratic and technocratic governance which have always existed; today they are rising fast, not least because many citizens feel, often rightly, that their interests are being insufficiently taken into account. The aftershocks of the financial crisis are still continuing, worsened by the poorly-managed consequences of globalisation. A different organisation of democratic processes is required therefore, with more dialogue processes, in line with the connectivity in an economy and society that is radically changing due to digital technologies. Transparency is a tool for such dialogues; it is not an objective.

But transparency for the sake of transparency is pointless and can become an instrument for undermining the legitimacy of public institutions. In the debates in Brussels or Strasbourg about transparency in the EU, the focus is on pusillanimous regulation. Who has met whom and when, how much has been spent on advocacy – as if all this has any relevance.

The key issue is the potential contribution to Europe’s economic and social well-being of the objectives pursued by a particular actor in the democratic debate. This requires attention to evidence and to ethics, not to tabloid-style information. Unfortunately, the way in which many transparency demands are presented shows less concern with better policy-making and suggests a more perfidious goal: to undermine trust in EU institutions and discredit other participants in policy debates. An indication of this is the selectivity of transparency demands and the focus on issues with high populist appeal: policy issues in the agri-food sector receive a lot of attention, but not in the financial sector, which poses far higher risks for societies’ welfare. Despite the claim to be market critical, many non-governmental organisations in practice follow a market logic themselves: issues which allow them to expand their income and clientele receive preferential attention.

An important concern is that one seldom hears the word ‘ethics’. It is perfectly possible to respect bureaucratic transparency rules and pursue socially irresponsible objectives which could do great damage to the economic and social fabric, in Europe or elsewhere. Seeking to undermine intellectual property rights for example, at a time when a shift towards a more sustainable economic model demands a massive research and innovation effort, could cause grave long term damage to our global competitiveness on which our social model depends. Another example: ignoring the collateral effects of European policies in other parts of the globe, causing distress and migration pressures there.

Ethics is more important than regulation. There is enough inspiration to look for, such as Max Weber, with his distinction between the ethics of responsibility (‘Verantwortungsethik’) and the ethics of persuasion (‘Gesinnungsethik’); Raymond Aron and the idea of the ethics of precaution; John Rawls, and his concept of ‘a veil of ignorance’ about alternatives and consequences; or more recently Michael Sandel, who starts from the fact the no-one is unencumbered in the views and positions taken and that pure rationality is impossible in the social realm, not by officials, but also not by civil society representatives or parliamentarians. Less high-mindedness would therefore be a first step towards more reasonable approaches.

The other issue is evidence. Today’s democracy is challenged to design new methods for dialogue and alignment between a variety of interests, to balance rational facts and valid social-cultural views. The traditional parliamentary system is no longer sufficient. Policy-makers have a societal responsibility, therefore they must consider all the facts and potential impacts of their decisions on society at large. Failing to take into account all knowledgeable impacts would be irresponsible. Therefore multiple views and interests need to be balanced and the potential impacts of policy and regulation need to be carefully examined to achieve the best possible results and to cause the least collateral damage. Moreover, they need to be agile, to respond quickly to unintended consequences, or to contextual change. Basing policy on the most solid evidence possible is in fact an ethical obligation. But evidence can only be comprehensive if consultation processes become real dialogues with cognitive stakeholders. This is the purpose of transparency: to improve policy-making at a time of increasing complexity and volatility.

Democratic governance is deemed superior, because in theory it allows public decision-makers to take into account all rational ideas and interests before making a rule. In reality, today’s technocratic governance systems, such as the EU, tend to focus on aggregate benefits, to side-line impacts on specific groups and undervalue collateral policies. This lack of policy coherence is a big source of discontent and distrust among citizens. There are many reasons for this, but one surely is that EU policy-makers too are not unencumbered in their own views.

A rethink is required. Information (facts and figures), knowledge (their analytical understanding) and real life experiences are not identical, but they are all needed to improve the quality of public policy-making. Transparency about these inputs before and during a policy or rule-making process is necessary for the quality of European decisions; it is equally necessary during their implementation to evaluate effectiveness and make timely modifications.

Sharing evidence-based knowledge and real life experiences makes a lot of sense if done amongst knowledgeable stakeholders accountable for the Common Good. It requires having the proper cognitive frameworks to understand all the known multi-dimensional and interactive aspects of complex issues. Only then can desirable outcomes be achieved and negative collateral effects avoided. It helps to align visions and get maximum public value out of the intended action, public or private. Transparency needs to happen at the right time and in the right measure during a decision-making process.

Providing transparency can only be based on trust among all knowledge and experience owners. It helps to design realistic, flexible and inclusive solutions which allow adjustment processes with a minimum of disruption and a maximum of benefit for the Common Good. But trust will not emerge when large amounts of information are thrown around, without the contextual meaning of the multiple facts which together make up evidence about a given issue.

Not only policy-makers but also those trying to influence them should take into account ethics and evidence. Spreading false or incomplete facts, scientific information which is not peer-reviewed, or promoting a tunnel vision is unethical and should be exposed as such. Many Brussels-based non-governmental organisations are using tactics out of the populist political handbooks to discredit systematically Europe’s political and economic actors. When the European Parliament made a report about the transparency of these non-governmental organisations, this was immediately decried. Transparency is for others. The fact that many of these organisations are in fact undemocratic, corporatist structures with shady legal bases, or none at all, allows for operational methods which law-abiding people would shy away from.

These kinds of transparency demands will only produce negative effects: declining trust among stakeholders, elected politicians and officials, and exploitation of information by non-stakeholders who push themselves into reasonable debate like a drunk at a family reunion.

Politicians should show enough courage to give the EU the right forms of transparency, at the right time, and among relevant stakeholders that can make a real contribution to the Common Good. They should find innovative ways of collaborative governance, adapted to today’s needs. They must bring ethics and evidence to the forefront of the discussion, rather than largely senseless regulation and bureaucracy.

 21.08.2018

Stefan Schepers

More democratic implementation of the EU better regulation agenda

By Andrew Kakabadse

The Communication for Better Regulation and Better Results, published last May, was a real step forward in the European Union. But it needs completion by taking account of the receiving end. Greater attention needs to be given to the corporate requirements and experience of addressing multiple stakeholder agendas in highly competitive markets. Better regulation will be achieved only if one captures also  the nature of business strategy and leadership and the role of regulation in all this. This requires that one starts with innovating the consultation processes.

Better EU regulation requires many things : greater coherence across Member States, more effective scrutiny and coordination across the policy cycle and evidence based, cross-sector impact assessment of regulatory and policy decisions. Equally and aptly it requires stakeholders engagement and following this mechanisms for sensitive and meaningful consultation, to start with for problem definition, because this in turn influences the problem solution development. Over time and with experience, this will lead to effective collaborative governance, a democratic necessity in today’s societies with their complex intertwined problem. From the perspective of EU Institutions, public authorities and civic society share the critical concerns of better regulation which should not only regulate access to and functioning of markets, but also stimulate innovation and development, both not enough emphasized.

However the most glaring deficit, besides the need for culture change to reach all parts of the Commission, is evident – the Commission continues to look, like many governments, at one side only of economic reality : there is no mention of how business strategy is formed and executed. The reactions of the receivers influence whether better results are achieved. Attention needs to be given to the processes of corporate strategy generation and to the leadership of strategy execution so as to ascertain the relevance and attention given to addressing regulatory issues in the boardroom. In effect, the whole point of strategy is to realise competitive advantage and differentiation, for without this the enterprise cannot survive, and regulation affects this directly.

Hence it is necessary to show the link (or not) between strategic understanding and regulation and from this creating the mechanisms to harness regulation and strategic thinking and execution. Is regulation an integral element of corporate strategy or not ? This critical relationship requires scrutiny as well thought through strategy and effectively led strategy execution are the fundamental building blocks of sustainably realising competitive advantage. In so doing attention must be given to examining the soft side to strategy and coming to an understanding of the executive capability to focus on soft strategy as a lever of differentiation.

Therefore, examination of regulation is needed in conjunction with the board room mindset toward the significance of soft strategy. In contrast to hard strategy, product and service enhancement, merger and acquisition considerations and generally tangible asset based decisions, soft strategy focuses on the non-tangible aspects determining the corporate future. Included are reputational enhancement, brand development and risk minimisation. In mature and ever more competitive markets, it is soft strategy that is shaping the boardroom debate. The particular relevance of public policy and regulation considerations, the degree of alignment of thinking on competitive advantage and differentiation at senior levels, the level of dynamism in markets which require a reshaping of the elements of competitive advantage and the degree to which government and regulation are sensitive to such dynamism, require simultaneous scrutiny.

This is absent in Commission efforts till now. In effect it captures the better regulation issues from the perspective of government but not from the corporate point of view. But it takes two to tango and to work towards better regulation. Needed is to study both view points to ascertain the relevance of regulation in strategy consideration, the operational and opportunity costs of not doing so and what would then be recommended as ways of realising collaborative governance. This how competitive advantage and economic growth can be stimulated in Europe.

21.07.2017

Andrew Kakabadse

 

A way to improve European democracy and governance efficacy

By Andrew Kakabadse, Klaus Gretschmann, Stefan Schepers

There is today more need than ever for effective collaboration among the Member States within the EU political and legal framework. But the operating systems of the latter are falling behind the requirements of a connected economy (and society) driven by rapid developments in digital technology. These force a departure from path dependent policy thinking and from traditional methods of operations. European public sector innovation should be therefore a priority and go far beyond the current policy of better regulation. In fact, it is a pre-condition.

Multi-layered and experimental governance systems, such as the EU, are even more challenged than national ones when seeking to innovate their public sector. National economic and social interests require innovative multi-layered collaborative management methods, to permit regular adaptation of framework conditions to the rapidly changing technological and social conditions. However, strategy agility in the public sector sits uneasily with the dominant legalistic paradigms inherited from the industrial age, even more so in a supra-national system based on a partial transfer and collective management of sovereign powers.

Everyone recognises that complexity of issues is continuously increasing. Not everyone draws the practical consequences that, in order to deal with complexity, a cultural change towards open innovation methods, based on regular dialogue processes, is needed, in order to collaboratively create agile policy and regulatory architectures (instead of the static legalistic ones of the industrial age). Without these, the transformation towards the twin objectives of a competitive and sustainable economy will be impossible. Complexity cannot can only be managed collaboratively. Therefore, several reforms should be considered.

In the institutions and in some governments of the European Union one often hears ‘that the EU has again the wind in the sails’. But as Seneca said ‘ignoranti quem portum petat nullus suus ventus est’ (the wind in the sails means nothing if one does not know to which port one is sailing).

The EU has a double systemic problem, one of efficiency, and one of democracy. Their combination is always a challenge, and even more so in a supra-national structure of states, all legally sovereign according to international public law, but which have transferred some powers to a new, collective governance structure. By doing so, they have limited their citizens democratic rights; no matter how they are exercised, if they are shared, the peoples are no longer individually sovereign.

The current EU is based on governance concepts conceived after the 1930s depression and influenced by the immediate post-war, historic, socio-cultural and political context of only six countries in Western Europe, which aimed to manage collectively a limited number of mutual economic interests. To serve these, they designed a so-called ‘Community Method’ to develop a common and a single market and to set common standards for industry and services. It is now under pressure as a consequence of three developments.

First, the enlargement of the EU to countries from the so-called ‘Mitteleuropa’ and from the former Byzantine-orthodox Europe, each with a different contextual background, requires to move beyond the ‘Europe of Charlemagne’ towards a more inclusive narrative in order to remain attractive to all citizens and to respond to current, more diverse geopolitical, economic, social and cultural conditions.

Secondly, the new and greater diversity as well as social and cultural changes resulting from widespread education and from information technologies require deep thinking about the difference and the linkage between technocratic governance, required to create the infrastructures for economic growth and welfare distribution, and democratic governance, required to respond to different peoples’ aspirations and perceptions.

Thirdly, governance methods have always been function of economic conditions. The current deep economic shifts towards a digital economy demand a re-thinking of governance methods developed for the bygone industrial age. In particular, there is a need to maintain appropriate state income to finance its education and welfare state systems, on which social stability, national identities and economic competitiveness are based, to modernise infrastructures and to ensure security.

The EU is therefore now in need of more diversity and more responsiveness vis-à-vis the multiple and complex challenges, and opportunities, and the diversified preferences of citizens and their governments. There is a need for better alignment processes between individual and national views, perceptions and interests, which are and will remain more diverse than ever. Evidently, the current centralising model of EU integration is unsuitable for building an additional European civic identity among its peoples, as was shown clearly in recent years when the effect of its post-war narrative has withered away. It antagonises ever more democratic legitimacy and accountability.

The most recent reforms, by the Lisbon Treaty, were path dependent and did insufficiently include the new economic and societal realities. The multiple policy making problems of the EU and its declining legitimacy result from this inadaptation of its governance system to new realities. It will require both operational and deep democratic reforms to solve the basic fault lines in the current system and to avoid its breakdown over time. How to better combine liberal democracy and technocratic efficacy in the EU ?

In order to manage the spill-over effects of market integration, the economic and social consequences of digitalisation, new issues not envisaged in original Treaties (such as climate change, migration and refugees, or cyber security) and the uncertainties of new geo-political conditions, restoration of checks and balances between the Member States and the EU institutions is required in order to improve its democratic accountability and its managerial efficacy. In order to deal with a different civic culture than the one of the post-war period, one will have to re-invent democracy, go beyond the current formalistic procedures and include the opportunities of new technologies for consultation and participation. People in future need to be convinced, not told from high on.

On the substance of democratic governance in Europe, there is greater alignment of interests needed through streamlining them and through better governance. How to realise greater engagement with an electorate already disenfranchised because of the shift of power from national parties and parliaments to the executive ? And further then from their national executives to a European one, basically supported, not controlled, by a European Parliament whose main target seems to be even more centralisation and top-down decision making from Brussels ? One should realise that democratic accountability and legitimacy are not improved in a supra-national system by trying to copy parliamentary systems dating from and appropriate for the industrial age. The new digital age requires more radical rethinking.

A new trans-European consensus to work together on common problems cannot be achieved only through greater connectivity amongst elites and some fiddling with current structures and procedures. We need to start looking again through the lens of greater engagement with the citizen. This is what the great inventors of modern democracy in Europe and America did in the 18-19th century. Realising engagement with the electorate across Europe, identifying points of tension and designing ways to align interests will help much more against the growing negativity across Europe than institutional re-design and fake consultations.

On the formal, institutional side of democratic governance, the original supra-national governance methods are unsuitable to deal with new common engagements, with increased diversity, rapid change, or to fill the democratic gap between national aspirations and European technocracy. The EU needs more strategic agility and bottom-up democratic legitimacy : a new balance is required between the popular will and technocratic implementation. But also new ways to identify and align views and interests of citizens, because too many single interests claim to speak for the popular will, unproven. And respect for minorities remains a key characteristic of true democracy; this is even a matter of efficacy, because too often minority views appear to be right, much later (see the list of modern policy disasters).

New information and communication technologies can help to regularly organise preferenda on issues of strategic importance for citizens : allowing citizens to express preferences for objectives to be achieved, based on alternative, evidence based scenarios designed by a neutral body. They would not have binding effects, but they could help those sensitive about and responsible for the Common Good to follow-up with public alignment processes, explaining options and potential consequences of outcomes. Over time, preferenda would surely have a civic educational effect.

They are not the only improvement to be made, but others depend on whether the parliamentary system as such can be made again a more responsive instrument of citizens’ preferences, more respective of increasing diversities in modern societies, and more accountable through better control of the inevitable technocracy of governance systems, whether national or European.

The ‘Community method’ can then be maintained for market integration policy. Attempts of irrational return of powers to states incapable to exercise them individually can be resisted better if democratic governance is improved. But this method should be more clearly limited to market integration in agriculture, industry and services. The acquis of the Internal Market and the EMU must be preserved. For all shared or own competences and for non-market policies, a fundamentally innovative governance system should be elaborated in order to give the EU an additional well organised system of decision making through effective inter-governmental collaboration, inspired by the existing but unloved Open Method of Coordination (OMC).

An innovated and better structured OMC should be more democratic by leaving policy choices at national level and restricting the EU role to framework legislation. National governments should remain responsible for specific policy solutions, but they should do so by focussing on jointly defined problems and objectives, and they should consider their own policy choices within the framework definition of these common European objectives. Governments should present their plans for achieving common goals and expose their performance to benchmarking and peer review, but coordination and cooperation should be voluntary and without formal sanctions. National governments should remain responsible for specific policy solutions, but they should do so by focussing on jointly defined problems and policy objectives, and they should consider their own policy choices within the framework definition of common European concerns and objectives. The qualified majority system should be used in the OMC as in the Community Method. European and national parliaments should have complementary roles. The use (and abuse) of the implied powers theory by the EU should be controlled through a joint committee of the national constitutional courts.

In general, all EU policy and regulation innovation needs to be less path dependent and more inventive in order to capture the new complex economic, scientific and technological realities and to be effective for competitiveness and sustainability and to be more democratically responsive by being more flexible and varied in achieving common goals. Real and upfront consultation processes about problem definition, before proposal elaboration will facilitate alignment of views and interests and more creative solution finding.

These ideas are intended to open a discussion which avoids the trap of more centralising powers at supra-national level, and reduced democracy, or the reverse problem of less common governance efficacy. The next few years should be used by seeking a new trans-European consensus, bottom-up and without pre-conceived framework of thinking. The only real challenge today is to improve Europe’s common governance capabilities and to maintain its liberal and social democratic credentials when all around them seem to ditch these.

22.1.2018

Andrew Kakabadse, Klaus Gretschmann, Stefan Schepers