State capacity
The idea of state capacity – “the ability of governments to achieve their policy goals”– as Joe Walker puts it, is coming to the attention of policymakers, as they observe the consequences of policies that have deliberately enfeebled governments’ ability to deliver services and to shape the economy.
Although this renewed attention is a pushback against neoliberalism, those calling for strengthened state capacity do not place themselves on an ideological “left-right” spectrum. It’s not about the merits of governments’ goals. For example the Howard government enjoyed the benefits of strong state capacity, enabling his government to suppress wages. The Giilard government did not do so well because it was unable to embed a price on carbon.
Walker has made two contributions on state capacity – a literature review and a podcast conversation with policy experts. Both draw heavily on people with experience in the Commonwealth Treasury and senior ranks of the public service. They assess Australia as having a high level of state capacity – which some may find as surprising in view of some of the strong findings of Australian National Audit Office reports and commissions into Robodebt and aged care. It seems that Walker has found that while our governments have the capacity to serve the public purpose, they do not necessarily use that capacity wisely.
It should also be noted that many of the people involved in Walker’s contributions have worked in the Commonwealth Treasury, a body with competencies not always evident in other departments and agencies that have been weakened by politicization and from capture by interest groups.
Complementing Walker’s contributions is a post by Don Moynihan of the University of Michigan on the effect of politicization on state capacity.
One conclusion we can draw from all three contributions is that sacking 36 000 public servants would not serve the public purpose.
State capacity – a literature review
Together with Peter Bowers, formerly of Treasury, Joe Walker has posted a review of research around two questions. The first is an assessment of the strength of Australia’s state capacity, and the second is about the reason those studies find Australia has a high level of state capacity relative to its peers. “Australia has a talent for bureaucracy” to quote a rather old aphorism.
The review starts with a discussion of state power, distinguishing between “despotic power” – “actions the state can take without institutionalised negotiation with civil society” – and “infrastructural power” – “the capacity of the state to actually penetrate civil society, and to implement logistically political decisions throughout the realm.” They see the second as legitimate state capacity. It can be exerted through financial power, or through regulation, which is why a country with small government, like Australia, can have strong regulatory power.
Citing a study that assesses Australia’s state capacity against six indicators the review concludes that Australia has a very high level of state capacity – up there with the Nordic countries. As case studies Bowers and Walker note how the state shaped our pandemic experience, and how our governments have done well in a “human-centric digital transformation of the public sector”.
They find that while Australia has very low taxes compared with other “developed” countries, our public spending is well-targeted. We have an efficient public sector. (This should not be surprising, because there are diminishing returns in public sector activity.)
Australia’s success in achieving high state capacity is ascribed to the strength of our institutions, including our federal structure and a professional public service. They also remark on our culture of obedience to institutional authority (compliance with public health measures for example), a culture of relying on the state (to the dismay of libertarians), and a lack of “adversarial legalism”.
State capacity – a conversation
Three learned policy wonks talk about how governments get stuff done on Joe Walker’s podcast: A conversation on state capacity.
Walker’s guests are Richard Holden, of the University of New South Wales Business School, and Steven Hamilton, of George Washington University. And there is a cameo appearance by Peter Tulip of the Centre for Independent Studies.
The discussion commences with a reflection on the way we handled the pandemic – what allowed us to do some things very well (protecting lives), and why we did some things very badly (vaccinations). That part refers to Hamilton’s and Holden’s book Australia’s pandemic exceptionalism: how we crushed the curve but lost the race.
The discussion moves on to Commonwealth-state administrative issues, with some discussion about the trade-off between the benefits of state sovereignty and the administrative benefits of centralized control. Along the way they throw in a few of their own ideas for policy reform. All three are intimately familiar with the policy development process, and while on this podcast they refrain from partisan comment, they convey the impression that serious stuff like responding to a pandemic, or undertaking major policy reform, should be left to central agencies like Treasury, with the specialist agencies in subordinate roles.
(That aligns with the idea that while specialist agencies have a narrow view of the world, and are apt to be captured by interest groups, central agencies like Treasury, Finance and the Department of Prime Minister and Cabinet are more independent. That idea has some validity, and it aligns with public administration textbooks, but it ignores the possibility that these central agencies, even if they can keep unions and industry lobby groups at bay, can be captured by particular economic models.)
One of their insights is the observation that state capacity is not just about government’s responsiveness, flexibility and administrative efficiency. It also rests to a large extent on people’s compliance with directions for the public good, which depends, in turn, on people’s trust in government – trust in governments’ intentions, and trust in governments’ reliability.
Many of their comparisons are with the USA. That comparison puts Australia in a good light, as anyone who has ever dealt with America’s fragmented and indifferent bureaucracy knows. It’s as if, from Reagan through to Musk, Republicans have deliberately striven to sustain incompetence in government services, in order to promote their “small government” doctrine. The USA may be an outlier: it would be informative if a comparison could be made with Singapore or Denmark, for example.
State capacity – how it is eroded by politicization
Don Moynihan of the University of Michigan has a Substack contribution What research tells us about politicization and state capacity, which includes a link to his research published in the Journal of Policy Analysis and Management.
He lists seven ways in which politicization undermines the capacity of government agencies, eroding their human capital. For example employees with high levels of professional skills, and deep knowledge of the complexities of public administration, become replaced by politized zealots, who, in haste to implement their partisan agendas, overlook important constituencies and get mugged by the impact of unforeseen consequences. Experienced employees, their competencies no longer respected, leave, taking their accumulated learning with them.
Politicians may see politicization of the public service as an effective way to ensure that it is more responsive to the government’s priorities: in Australia there is a history, over 40 years, of governments intervening to replace ”frank and fearless” with “responsive” as the guiding principle for public servants. Moynihan reports that such politicization does not work out the way politicians intend, however. The agencies may become more responsive, but any such improvement is outweighed by their loss in administrative capacity. (He could have added even more weight to his research if he had looked at Australia’s Robodebt.)