Essay: Economics and the Near-Death Experience of Democratic Governance. June Sekera. GDAE Working Paper No. 15-02, May 2015.

Excerpted from June Sekera:

“Non-market public production makes up a quarter to a half or more of all economic activity in advanced democratic nation-states. Yet here in the United States the public economy’s ability to
function productively on behalf of the citizenry is seriously imperiled.

In this paper I trace the connection between mainstream, market-centric economics and what James Galbraith has called “the collapse of the public governing capacity.” Marketization and its confederate, privatization, have led, sometimes intentionally, to the evisceration of governmental capacity, the downsizing of democracy and the dismantling of traditions of responsible public administration that are grounded in law and the Constitution.

Over the last decades, apostles of the market have intruded upon government a pseudo-market with outcomes ranging from the unfortunate to the disastrous. So-called “New Public Management” –“a child of neoclassical economics,” – has colonized and weakened every level of public administration.

Hollowed out through the cathartic of a “competition prescription,” the public sector time and again seems to fail us, so systems of performance measurement transplanted from profit-driven business models are being imposed across government, ostensibly to improve results and better supply what the populace wants and needs, but instead often leaving harm in their wake. We find our most basic public services and rights in jeopardy: from clean air and water to unencumbered judicial due process. While government “reinventors” boast about shrinking government, in reality a “submerged state” mushrooms through an explosion of private profitmaking contractors and behind the hidden hand of tax expenditures.

Yet, as I argue in this paper, there is no viable explanatory theory of the public non-market economy or of production within it, nor any consensus about how to measure public purpose or assess results in the public domain. Instead, a market-centric economics prevails in textbooks, university teaching and public policy, while private, market-mimicking motivations and values displace public purpose in measurement schemes.

We live in “a political economy that generates the conditions for its own failure.” Confined and constrained by the “doxic frame” of market superiority, “the state lacks basic conceptual tools to think differently.”

More than a century ago, the effective operation of the public economy was a significant, active concern of economics. But, with the rise of market-centrism and rational choice economics, government was devalued and allowed a role only in cases of “market failure.” The very idea of a valid, valuable public non-market almost disappeared from sight. So today we lack a coherent, comprehensive theory of the public economy.

We need to understand how public goods and services originate through collective choice and collective payment. We need to explain how the mechanisms of public production arise from and at the same time affirm the democratic process and constitutional governance. We need a theory of the public goods economy.

Toward that end, I outline the elements of a theory of the public non-market, and suggest a model to explain its forces, flows and dynamics. In the public non-market, it is not demand but identified societal need that is the driver, not exchange but “contingent flow” that is the overarching dynamic. Electorally-manifested collective choice is the generator of public goods and services, and collective payment is the financing source. With these inputs, democratically elected representatives legislate goods and services into being. Production takes place in a nonrival supply process wherein information sharing is the norm and invisibility a hallmark of effectiveness.

A cogent theory of the elements and dynamics of the public economy, and an acknowledgment of its complexity, can inform and improve public administration in theory and in practice and help rebuild the machinery of government. On the basis of such a theory we can also design appropriate instruments for measuring results and managing performance. As citizens of a democratic nation state we must recognize that public products originate with the polity, and that accountability is rather at the ballot box than the cash register.”

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