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Political Economy and Public Policy

Explore the intricate relationship between democracy, bureaucracy, and political economy, examining issues such as corruption, income inequality, and economic development strategies. Delve into the complexities of policymaking in liberal democracies and the role of the state in economic performance. Analyze various economic systems like laissez-faire capitalism, socialism, and market socialism, and their impact on macroeconomics. Understand the functioning of bureaucracies, the Weberian model, and the challenges of the politicization of bureaucratic institutions. Investigate income inequality trends, human development, and strategies for economic development, questioning the government's role in the economy and tackling inequality through subsidies, taxation, and land reforms.

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Political Economy and Public Policy

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  1. Political Economy and Public Policy

  2. Macroeconomics • Bureaucracy • Public Policy

  3. Politics and Markets • Role of the state in liberal democracies: to induce economic performance • Pluralist Approach • Class Approach

  4. Needs of the state

  5. Economic Systems • Laissez-faire capitalism • Socialism • Market socialism • Soziale Marktwirtschaft • State-led capitalism • Mixed economy

  6. Macroeconomics • Scarcity • Exchange • Money

  7. Schools of Macroeconomics • Mercantilist (nationalist) • Classical (liberal) • Keynesianism • Monetarism • Supply-side

  8. Resources Called into Government Service

  9. Fiscal Policy • What • Who • How: The Multiplier

  10. Monetary Policy • Who • What • How: Money Supply

  11. Central Bank Independence

  12. Bureaucracy A bureaucracy is the name given to a large organization that is structured hierarchically to carry out specific functions. Generally, most bureaucracies are characterized by an organization chart. The units of the organization are divided according to the specialization and expertise of the employees.

  13. Names for Exec. Bureaucracies • Whitehall (UK) • Quai d’Orsay (France) • Wilhemstraße (Germany) • Sublime Porte (Turkey)

  14. Choosing the Civil Service • Birth (“who you are”) • Political allies (“who you know”) • Competitive exams (“what you know”) • Generalist vs. Specialist

  15. Corruption

  16. Corruption likely when • Adverse government structures • Information deficits • Opportunities and incentives • Social conditions • Deficits of law • Imperfect electoral processes

  17. Corruption: Good and Bad • Least corrupt: Australia*, Austria*, Denmark*, Finland*, Iceland*, New Zealand*, Norway*, Singapore*, Sweden*, and Switzerland* • Most corrupt: Angola, Bangladesh*, Chad, Côte d'Ivoire, Equatorial Guinea*, Haiti*, Myanmar, Nigeria*, and Turkmenistan • * = Democracies

  18. Types of Corruption • Cronyism • Bribery • Nepotism • Rent-seeking • Influence peddling • Kleptocracy

  19. Kleptocracy • “Rule by thieves” • The ten most self-enriching leaders of recent times: 1. former Indonesian President Suharto ($15 billion – $35 billion) 2. former Philippine President Ferdinand Marcos ($5 billion – $10 billion) 3. former Zairian President Mobutu Sese Seko ($5 billion) 4. former Nigerian President Sani Abacha ($2 billion – $5 billion) 5. former Yugoslav President Slobodan Milošević ($1 billion) 6. former Haitian President Jean-Claude Duvalier ($300 million – $800 million) 7. former Peruvian President Alberto Fujimori ($600 million) 8. former Ukrainian Prime Minister Pavlo Lazarenko ($114 million – $200 million) 9. former Nicaraguan President Arnoldo Alemán ($100 million) 10. former Philippine President Joseph Estrada ($78 million – $80 million)

  20. Five Function of Bureaucrats • Implement the law • Provide expertise • Provide research and information to the executive officials • Provide research and information to legislatures • Quasi-judicial powers and responsibilities

  21. Weberian Model of Bureaucracy Bureaucracies as rational, hierarchical organizations in which power flows from the top downward • Decisions are based on logical reasoning and data analysis. • Division of labor • Chain of command • Formal rules • Apolitical (neutral decision making) • Advancement based upon merit • Bureaucrats are salaried by superior institutions

  22. Democracy and Bureaucracy

  23. Issues in Politicization of the Bureaucracy

  24. Policymaking • Some issues: • Management of the economy • Health care • Old age pensions • Inflation • Unemployment • Distribution issues • Crime • Globalization • Human rights • Migration

  25. Human Development Index

  26. Development Strategies • Import-Substitution Industrialization • Export-Oriented Industrialization

  27. Should government stay out of the economy? • Yes: markets choose better than states • No: the East Asian miracle • Positive aspects • Illiberal aspects

  28. Income Inequality

  29. Income Inequality (Over Time)

  30. Income Inequality – Selected States

  31. Dealing with inequality • Subsidies • Transfer payments • Progressive taxation • Land reform • Whom to aid: cities vs. country-side

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