A transformative strategy for the state

Marcio Pochmann

The global crisis has exposed the false promise of neoliberalism. The countries which advanced most rapidly down the path of marketisation and state deregulation are now amongst the most vulnerable in a world undergoing rapid change. It is therefore not surprising that today, in our efforts to respond to the global crisis, we are witnessing a “return” of the state, even if the latter, in its current configuration, still lacks the transformative strategy needed to address the challenges of the 21st century. Yet, a new overarching development model is within reach and the new state will be a crucial part of it. The rise of this new development model is now possible due to new post-industrial trends: life-long education, admission to the labour market after the age of 25, and work that is associated less with survival and more with social improvement and creativity. Three overarching “axes” must serve as the basis for this process of restructuring:

Forging a new relationship between state and market
The market, overvalued by the neoliberal consensus, ended up weakening rather than enabling economic competition. The latter was increasingly suppressed by the growing power and activities of large transnational corporations which effectively monopolised the markets. If we are to recover from the current crisis and advance towards a dynamic economy based on innovation, we will need to address this process of weakening competition as a matter of priority. One key step should be the creation of trail-blazing institutions, strong enough to break established monopolies thereby establishing the conditions needed for healthy competition and cooperation between enterprises. This will need to be accompanied by greater regulation of large private firms.

Establish a new social contract
The indiscriminate process of privatisation which we have seen in recent decades has resulted in a rapid deterioration in social relations. A new development path is needed which strengthens public ownership over key collective goods, thereby triggering the emergence of a more transparent, democratic and just relationship between state and society. However, to create and sustain this 21st century development model, it will be necessary to expand public finances. It should be possible to collect this additional revenue by reforming our tax collection systems so that they are able to capture new, more intangible sources of wealth.

Introduce a new model of public administration
How best to organise systems of administration to make them responsive to people’s needs has always presented a difficult dilemma. In the past, the state was fully in charge of this through bureaucratic systems. These systems followed an organisational model based around sectoral divisions and proved to be increasingly inefficient. With increasing market liberalisation, this model changed to allow room for private actors in delivering public goods. This led to the recruitment of external workers and outsourcing of government functions to private companies. It also presented unprecedented opportunities for lobbying by private groups. This resulted in increased corruption and an environment in which short-term goals outweighed long-term commitments. The current economic crisis reflects the corrosion of the state. It is now evident that neither the privatisation of public administration nor excessive reliance on rigid bureaucracies works. Now is the time to introduce a new model of public administration, which enables holistic and integrated public policies that respond to the needs of the people.

Only such a sweeping reform of the state will succeed in creating the necessary post-crisis conditions to uphold the new model of environmental, economic and social development.

Marcio Pochmann is the president of the Instituto de Pesquisa Econômica Aplicada (IPEA)