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Statecraft and Liberal Reform in Advanced Democracies

Statecraft and Liberal Reform in Advanced Democracies. Nils Karlson, Ratio Stockholm, Sweden www.ratio.se. The Puzzle …. Great need of liberalization and welfare-enhancing reform But how can reform be promoted? Is it possible to formulate a general theory of Modern Statecraft?.

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Statecraft and Liberal Reform in Advanced Democracies

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  1. Statecraft and Liberal Reformin Advanced Democracies Nils Karlson, Ratio Stockholm, Sweden www.ratio.se

  2. The Puzzle … • Great need of liberalization and welfare-enhancing reform • But how can reform be promoted? • Is it possible to formulate a general theory of Modern Statecraft?

  3. Statecraft • “The art of governing a country well” • Implementation of welfare-enhancing institutional change = reforms • Often equivalent to liberal statecraft, i.e., policies or political developments that increase liberty and make society more free

  4. Modern Statecraft

  5. Political Scientist and Economist Research focus on the interaction between politics, markets and civil society in advanced democracies and welfare states Working in the fields of political economy, institutional economics, political theory, public choice, and constitutional economics

  6. What I have done • Surveyed and synthesized the literature on institutional change • Formulated three reform strategies • Studied the reform processes of Sweden and Australia over the last 25-30 years

  7. Reform very difficult due to strong status-quo bias Special interests Cognitive biases Public opinion Liberal reforms especially difficult

  8. How did Australia and Sweden manage to liberalize ?

  9. Swedish reforms 1985-2010 1985 Deregulation of credit market 1989 Deregulation of foreign exchange market 1990 Start of deregulation of energy, postal, telephone, railway, airline markets 1991 Agricultural reform 1991 Tax reform, lowering marginal income and capital gains tax rates. 1991 Start of sales of state-owned companies 1992 School voucher system, floating exchange rate 1994 Choice in child care, elderly care, etc 1995 New budgetary process, required surplus over cycle 1995 Less generous social insurance and welfare systems 1995 EU membership 1997 Independent central bank and inflation targeting 1998 Pension reform, balanced 2000 Industrial relations reform 2004 Tax reform, inheritance and gift taxes abolished • -10 Wealth tax abolished, social insurance reforms, earned income tax credits introduced, tax deductions for household services etc.

  10. Australian Reforms 1983-2007 1983 Floating of the Australian dollar, abolishing of capital controls 1985 Deregulation financial markets 1985 Tax reform, lowing marginal taxes, abolishing double taxation 1988 Tariff reform starts 1990 Competition, micro-economic reforms, privatizations, deregulation 1990 Firm-level bargaining 1990 Pension reform 1992 Liberalized foreign bank entry, foreign investments eased1992 Pension reform, superannuation 1993 Industrial Relations Reform, enterprise bargaining 1996 Central bank independence and inflation targeting formalized 1996 Industrial relations reform, Workplace Relations Act 1996 Public sector reforms, competitive tendering, contracting out 1997 Welfare reform, work-for-the-dole scheme 1998 Privatization of employment service 1999 Tax reform, general sales tax 2002 Fiscal consolidation completed 2005-7 Industrial relations reform, WorkChoices

  11. Synthesis: The Reform Cycle

  12. Ideas are decisive Beliefs and values, worldviews Policy ideas (Hall 1989): • Instrument settings • Policy instruments • Overarching goals – most difficult

  13. But so are policy entrepreneurs…. • Articulate ideas, new facts, new perspectives, values, worldviews • Form ”advocacy policy coalitions” • Activate power resources and interests • Influence public opinion, decision makers, bureaucrats etc. • Use different reform strategies

  14. Three reform strategies

  15. Popperian strategies • Use scientific results, empirical research and experiments! • Rational argumentation and open public discussions. • Incremental, rather than large-scale institutional changes • Do not rely on firm beliefs about how the world works or on strong normative ideals

  16. Kuhnian strategies • Use windows of opportunities, focusing events, crises or critical junctures! • Focus on policy failures, really striking facts and figures, and examples • Narratives and rhetoric to frame and redefine discussions and agendas • Paradigmatic shifts are long-term projects – easier to change beliefs than values and preferences

  17. Machiavellian strategies • Obfuscate and lower the visibility through masking, indexing, delaying consequences etc! • Split the opposition and play off one group against another, compensate some and not others • Do not show your real intention, spread the blame for hardship on others • Beware that your competitors and partners use similar strategies

  18. Example 1: The Swedish tax reform 1991 • Very ambitious, lowering marginal income taxes and capital gains taxes, broadening the tax base • Implemented by the Social Democrats and Liberal Party • Almost everyone opposed the reform • Social Democrats made the Moderate Party the main adversary to win the LO • All reform strategies used, but Machiavellian dominated

  19. Example 2: The Alliance in Sweden 2006-2010 • Strategy of triangulation – embracing the welfare state, collective agreements, security on the job legislation etc. – used to gain power. The New Moderates • Deliberate framing: utanförskap (alienation), arbetslinjen (the job line) etc. • Broad reform agenda prepared, including earned income tax credits, tax deductions for household services, etc.

  20. Remaining puzzles • Why not welfare-decreasing institutional changes instead? • How was the collective-action problem involved in liberal reforms solved?

  21. Experiential learning important

  22. Polycentric experiential learning • Learning took place in the central zone of the country – top-down process • A large number of actors involved – not only central decision makers • A kind of polycentric governance • Required a critical mass of intrinsically motivated actors

  23. Modern Statecraft

  24. Modern statecraft • Requires both analytical and political skills, combines knowing what with knowing how • Takes place within the reform cycle, where Popperian, Kuhnian, and Machiavellian reform strategies are used • Requires a polycentric effort of experiential leaning, involving a large number of actors, with a critical mass being intrinsically motivated, in the central zone of a country

  25. Palgrave Macmillan (2018) Hardcover ISBN 978-3-319-64232-1 • Available as an ebook and hardcover • Free as an ebook at libraries that have SpingerLink • Printed low-price ebook, MyCopy if Springer Link https://www.palgrave.com/gb/book/9783319642321

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