AnAssessmentofPublicPolicyResponsetotheGlobalFinancialCrisis.docx

AnAssessmentofPublicPolicyResponsetotheGlobalFinancialCrisis.docx

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AnAssessmentofPublicPolicyResponsetotheGlobalFinancialCrisis

AnAssessmentofPublicPolicyResponsetotheGlobalFinancialCrisis

By

UkertorGabrielMoti（Ph.D）

（SeniorLecturer）

DepartmentofPublicAdministration,

UniversityofAbuja.

ABSTRACT

MostprevailingdiscussionsontheGlobalFinancialCrisis（GFC）focusontherolesandimpactoftheglobalcrisisontheprivatesectorandhowithasbeenabletosurvivetheturbulenceorhowitistryingtomanagethecrisisandwhethercorporationsandbusinessescouldcomeoutofitorbecomesubmergedintoliquidationsortakeovers.Itisimportanttorealizethattheissuesaboutthefinancialdownturnrelatetoregulatoryissuesandthusultimatelyhaveanenormousbearingongovernance,governmentinstitutionsorpublicadministrationingeneral.Whicheverwaythecrisisislookedat,governmentsorpublicadministrationsarenotinnocentinthematter.Theissuecanbeexaminedinrelationtopublicadministrationwithaviewtodeterminetowhatextent,policiesorlackofpolicies,actionorinaction,decisionsorindecisionsofgovernmentscontributedtotheemergenceofthecrisis.Itisequallynecessarytodiagnosticallyanalysetheextenttowhichthesituationhasimpactedpublicadministration.Moreover,andprobablymoreimportantly,itisnecessarytoexaminewhatcouldbedonebypublicadministrationtoavert,minimizeormitigatetheimpactofthefinancialcrisis.Thereareincreasinglypersistentquestionsabouttheroleofandtheeffectivenessofgovernmentinterventions.Therealsoappearstobeconfusionanddisagreementaboutwhatgovernmentorpublicadministrationshouldandcandotoamelioratethesituation.Thepaperarguesthatpublicadministrationhasaroleinfinancialcrisisintermsofcauses,impactandremedies.Theon-goingfinancialcrisishascreatedaglobalproblematicsituationthatrequiresimmediatemitigation.Theargumentfurtheristhatpublicadministrationthroughtheknowledge,skills,competence,professionalism,commitment,strategicforesightandtheactionofitshumanresourceshasacriticalroleinfindingandimplementingthemitigatingremediestothecrisis.Thepaperconcludesthatpublicadministrationneedstoreassessandreaffirmitselfasaguarantorofthepublicinterestandprotectorofthecitizenfromanythreatfinancialandotherwise.InweakAfricancountries,thisroleismorecritical.Whatisrequirednowistotakeadvantageofthecrisistore-asserttheroleofpublicadministrationasaninstrumentthroughwhichthestatesatisfiesandprotectsthepublicinterestagainstdangersofmarketfailures,privategreedandimportedcrisissuchasthecurrentone.

KeyWords:

FinancialCrisis,PublicAdministration,Mitigating,Government,Remedies.

1.Introduction

Theglobalfinancialcrisissincethelate2007hashadasignificantnegativeimpactontheincome,wealthandlivingconditionsinbothdevelopedanddevelopingcountries.Thecrisishasalsohadanimpactonpublicadministration,especiallyontheimplementationofsocialandeconomicpoliciesanditseconomicfunctionsmoregenerally.Publicadministrationisinneedofreform,transformationandtheadoptionofmeasuresthatwillnotcontributetoarecoveryfromthecrisisintheshortormediumterms,butalso,helpachievebettersustainable,inclusiveandequitabledevelopment.Thecrisishasthusresurrectedadebateabouttheeconomicroleofpublicadministration.Sincethelate1970s,thedebatehasbeenstronglytiltedtowardstheprivatesectorandmarket-drivenmanagementapproaches.Thecalltoreducestateinterventionsineconomicmatterswasfollowedinmanycountries,privilegingtheprivatesectorastheengineofeconomicgrowth.

2.StatementoftheProblemandObjectives

Thequestionsthenarise:

howhasthecrisisaffectedPublicAdministrationandhowarePublicPoliciesrespondingtothecrisis?

WhataretheopportunitiesforPublicPolicyinthewakeofthecrisis?

TheobjectiveofthepaperistoexaminetheimpactofthecrisisonPublicAdministration,theresponseofPublicPolicytothecrisisandthechallengesandopportunitiesthecrisishasforPublicAdministration.

3.Methodology

Thestudyisareviewandreliesondocumentaryevidencewhichprovideddatafromofficialrecords,reportsofinternationalconferences/workshopsaswellasliteraturereflectinginformedopinionsofacademicsandpractitioners.

4.LiteratureReviewandTheoreticalPerspectives

Thecurrentglobalfinancialcrisisisperhapsanissuethathasattractedtheloudestbrainstorminginrecenttimes.Scholarshaveattemptedtounderstandthecause,impactandofcourse,solutionstothecrisis.FromtheKeynesianbackground,afewscholarshavearguedthatthecrisisisaresultofgovernment’sfailureinregulatingtheeconomy.Theyexplainthatthestatehadbecomeratherlooseintheapplicationofproperandeffectiveregulatorymeasuresrequiredtomanagetheperiodicinstabilitiesintheeconomicsystem（Moyo,2009）.

Keynesinhis“Generaltheory”hadadvocatedamodifiedcapitalismwhichshouldensurethefullemploymentofallresourcesbutwouldrequireanextensionoftheagendaofthestate.Roper（1987）quotesKeynestosaythegovernmentneededtoactasaprimebulwarkofthesystemthroughitsorchestratingofthemacroeconomybymeansofnotonlyfiscalandmonetarypolicybutalsodirectpublicinvestmentexpenditurewhenrequiredinordertomaintainaggregatedemandatthelevel.

ItseemsthattheargumentofKeyneshasbecomeoneofthegroundsuponwhichscholarsexplainedthatstate’spolicymachinerieslefttheirroleoforchestratingthemacroeconomybymeansoffiscalandmonetaryregulation.

Thus,scholarsexplainingthecauseoftheglobaleconomicdepressionfromthestandpointoftheKeynesian‘Generaltheory’arguethatitistheinabilityofStateswherecapitalismisallowedtothrivetodetectandcounteractpossibledistortionsofthemarketthroughnecessaryinterventionsthathasledtotheproblem.

Conversely,criticsofthisviewtracetheproblemtothe“fanancialization”oftheglobalsystem.Amin（2009）explainedtheterm“fanancialization”oftheglobalsystemtomeanthecurrentcapitalsystemthatisvastlydominatedbyahandfulofOligopoliesthatcontrolthebasicdecisionmakinginoftheworldeconomy.Itisasysteminwhichthemainsourceofeconomicdecisionhasbeentransferredfromthecreationofsurplusvalueinproductiontowardstheredistributionofprofitsbetweentheoligopoliesforwhichreasonthesystemrequirestheexpansionoffinancialinvestment.Inthatrespect,asaddedbyMoyo（2009）,themajormarket,theonewhichdominatesallothermarkets,ispreciselythemonetaryandfinancialmarket.Accordingtoher,thisscenarioisfundamentallyflawedbecauseithascreatedasituationinwhichspeculativecapitalintheformoffinancialtransactionfaroutstripsrealproductionintermsofgrossdomesticproduct（GDP）,asystemthatcannotbesustained.

5.FactorsResponsiblefortheCrisis

TheoriginsoftherecessioncanbetracedbacktomajorproblemsinthefinancialsectorintheUnitedStatesofAmerica.Alargequantityofbankassetsconsistingofmortgageloanswereconvertedbyfinancialintermediariesintoavarietyofinnovativesecondarysecurities,whichinturnweresoldinthefinancialmarket,attractinglargeamountsofsavingsfrominvestorsaroundtheworld.Sincetheexchangeofassetsprovedveryprofitable,thephenomenoncontinuedandgrewconsiderably,creatingafinancialbubble.

Motivatedbyhighprofitsinthosesecondaryfinancialoperations,financialintermediariesofvarioustypes,inparticularlargebanks,pushedthesupplyofloansforhousinguntilinterestrateswereverylow—evenlowerthantheloanratesofferedtohigh-qualitydebtors（i.e.,primerates）,althoughloanswerebeinggrantedtocreditorswithhigher-riskqualifications.Riskanalysiswaswidespread,butattentionwasconcentratedmostlyonthesecondaryinstruments’risksandmuchlessontherisksoftheunderlyinghouseloans.Thus,buyersofsecondarysecuritieswerenotfullyawareofthetotalrisksasthesefinancialinstrumentsbecameincreasinglycomplex,andneitherprivateratingcompaniesnorpublicauthoritiesprovidedsufficientinformationforthemarketparticipants.Itwaslaterrecognizedthatofficialregulatorshadnotactedpromptlyatthetimethefinancialbubblewasgrowing,assumingthatthefinancialintermediariesthemselveswouldhaveactedoutofself-interesttoadoptmeasurestopreventacrisis.Atthesametime,itbecameclearthattheratingagencieshadaconflictofinterest,astheyhadaclose,ongoingworkingrelationshipwiththelargestmortgage-backedsecurityandcollateralizeddebtobligationsissuers.Thecurrentcrisisisthustheresultofregulatoryfailure.

Thecollapseofaleadingfinancehouse,LehmanBrothers,hadasystem-widedominoeffect,leadingtoaseriesofdefaultsonmortgageloans.Asaresult,anumberofbigbanksbegantogointoseverebalance-sheetdisequilibrium,resultinginbankruptcyornear-bankruptcy,notonlyintheUnitedStatesbutalsoinothercountrieswherebanksacquiredthecomplexUnitedStatesfinancialassets.Itwasonlythenthatgovernmentdecidedtointervene;contributingwithpublicfundstostrengthenthecapitalofmajortroubledbankstoavoidfurtherrepercussionssuchasmightresultfromgeneralizedbankrunsorafinancialcrash.

Asnon-institutionalfinancialinvestorsbecameawareofthelossesincurredintermsofwealth,theyhadtorapidlyincreaseprecautionarysavingstodealwiththeimpactofthefinancialcrisis.Thismeantthattheyhadtocutexpenditureongoodsandservices.Thedeclineinn