L4. The Economic Governance 2024 PDF

Global economy mechanisms – Lecture 3 Economic governance in the context of a globalized world – from a global to a regional perspective  Structure of the lecture The concept of governance/economic governance Economic governance as a stimulating factor for the economic growth Instruments t...

Global economy mechanisms – Lecture 3 Economic governance in the context of a globalized world – from a global to a regional perspective  Structure of the lecture The concept of governance/economic governance Economic governance as a stimulating factor for the economic growth Instruments to measure governance across EU ❖ World Bank governance indicators ❖ The Competitiveness Index ❖ The Transparency Index For the future... Activity 1: What is governance? – Join by web: – 1. Go to www.menti.com 2. Enter the code 1909 0120 3. Respond to activity  What governance is? 1 2 World Bank: ”Governance consists of the traditions and Oxford English Dictionary: a) the action or manner of institutions by which authority in a country is exercised. This governing, controlling; b) the function of governing; the includes the process by which governments are selected, permission or authority to govern; c) the manner in monitored and replaced; the capacity of the government to which is governed; a regulatory system, a discipline; d) effectively formulate and implement sound policies; and the the method of developing a business or a lifestyle respect of citizens and the state for the institutions that govern economic and social interactions among them” (Documentation | Worldwide Governance Indicators (govindicators.org) 3 Dixit, A (2009: 5): Economic governance ”the functioning and organization of the social and legal institutions that support the economic activity and transactions by protecting the property rights, implementing arrangements and the collective work with the purpose of developing a physical and organizational infrastructure that would allow the interconnection between economic actors, individuals and companies ”.  Governance and Government “in a free society governed by the rights and responsibilities of its citizens, the vast majority of transactions … presuppose trust in the word of … strangers. … Reputation and the trust it fosters [are] the core attributes of market capitalism.” Alan Greenspan (2007, 256) Law without order: https://www.youtube.com/watch?v=5WU8hilbN9Y Good governance  Corruption Inefficient Social policies exclusion Weak governance Governance indicators – The World Bank is the global institution that was constantly preoccupied in developing indicators that provide accurate information on what a sustainable governance means. In its opinion, ‘governance consists of the traditions and institutions by which authority in a country is exercised’ (The World Bank, 2016). – Kaufmann, D. et all identified in 2010 a set of indicators that allow the analysis of the governance process between countries. – These indicators include: a. Voice and accountability - freedom of expression, freedom of media, freedom of the citizens to elect their government b. Political stability and the absence of Violence/Terrorism - military risk, terrorism, political attacks c. Government effectiveness - quality of public and civil services, government capacity in formulating and implementing certain categories of policies d. Regulatory quality - capacity of the legal authorities in developing regulations that stimulate the development of the private sector e. Rule of law - the enforceability of contract, property rights, the quality of judicial system f. Control of corruption - effects and costs of corruption, the degree of confidence of the individuals in the public institutions, the effects of the instability of the political system; Governance indicators No. Indicator 1. Institutions ❑ The World Economic Forum publishes 2. Innovations starting 2005 an annual report regarding the competitiveness level of more than 3. The business environment complexity 141 worldwide economies. 4. The market share ❑ The category corresponding to 5. The level of absorption of the technologies evaluating the economic governance is 6. Infrastructure the one referring to institutions. The 7. The development of the financial markets institution category holds a share of 25 % from the total of 12 indicators used to 8. The macroeconomic framework measure competitiveness. 9. Health and primary education 10. Higher education and specialization 11. The efficiency of the goods market 12. Labor market efficiency  Governance indicators The structure of the institution pillar grom the Competitiveness Index publiseh by World Economic Forum Institutions Pillar (25%) Public Institutions (75%) Private institutions (25%) - Property rights (20%) Ethical corporative (50%) a. Property rights a. Ethical behavior of the companies b. Intellectual property rights - Excessive influence (20%) Audit (50%) a. Judicial independence a. Standards reports b. Decisions taken by national b. Efficiency of the management boards governments c. Protection of minority shareholders' interests d. Investors protection - Governmental effectiveness (20%) a. Governmental spending b. Governmental protection c. Efficiency of the legal framework d. Governmental policies transparency - Security (20%) a. Costs of terrorism/violence on business; Organized crime; Confidence in the police service Source: http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf Governance indicators Transparency International is an organisation developed in 1993 whose primary objective is to Corruption reduce the level of corruption in Perception Index world economies. The main categories of indicators used by Global Corruption the Transparency Barometer Index are: – The corruption perception index was first established in 1995 and constitutes one of the most important instruments used by the Bribe Payers Index transparency index in modelling the data concerning this aspect. – This index is calculated for 180 world economies (according to Data available at: the most recent report published by the organisation) and https://www.transparency.org/en/cpi/202 concerns the manner of which corruption is perceived by officials 2 or politicians. The value of this indicator ranges between 0 (the highest perceived value of corruption) and 100 (the lowest perceived value of corruption). What is governance for sustainable development – Do we know how to get, or support, good governance? – What are the difficulties and the potential unintended consequences?  Dimensions of effective sustainability governance Dimensions of effective sustainability governance Reflexivity and Democratic Participation Policy coherence adaptation institutions  1. Participation - The capability of economic and non- economic interest groups to propose and assess Dimensions of relevant policy measures and their implementation. effective 2. Policy coherence - The extent to which the institutional structure fosters coherent and sustainability coordinated policy-making and implementation. 3. Reflexivity & adaptation - The degree of reflexivity governance and adaptation of institutional arrangements including self-monitoring, capacity for reform, the influence of strategic planning units and regulatory impact assessments. 4. Democratic institutions - The quality of democratic institutions including electoral process, media freedom and access to information, civil rights and political liberties as well as rule of law.  Governance in practice –Effective, responsive and accountable state institutions ❑ State capacity, or the ability of states to form and implement policy across the Corruption Government Political effectiveness whole of their territory, is an essential stability Rule of law prerequisite for sustainable human (-) (+) development. Economic ❑ Many studies have demonstrated the growth importance of state capacity. For example, there is a causal link between the quality of public administration and economic growth. Source: UN (2014), ” Governance for Sustainable Development”, available at: Discussion Paper - Governance for Sustainable Development | United Nations Development Programme (undp.org)  Activity 2 How can we ensure that development is done as effectively and inclusively as possible? Openness and transparency???  Openness and transparency – public access to information ✓ Openness and transparency are essential to achieve sustainable development. There is evidence that informed citizens and the private sector are better able to engage in developing policy; they are better collaborators and partners with government on service delivery, and also better able to hold governments to account, leading to improved development outcomes. ✓ Transparency in government behaviour sends strong signals to citizens Governance and investors, and evidence shows that the more information a government releases, the greater the investment and subsequent affect on in practice growth. ✓ There is also evidence that transparency in budget, expenditure and procurement processes lead to increases in service delivery. ✓ Transparency also has an intrinsic value (endorsed in various international conventions), namely, that citizens have a right to know how revenue and resources are being used in their name. ✓ In the recent Global Opening Government Survey published by World Bank, over 61% of citizens surveyed reported that they wanted their governments to be more open. Source: UN (2014), ” Governance for Sustainable Development”, available at: Discussion Paper - Governance for Sustainable Development | United Nations Development Programme (undp.org)  Governance in practice Addressing corruption and curbing illicit financial flows ❑ There is a wealth of evidence that corruption is a major hindrance to sustainable development, with a disproportionate impact on the poor and marginaized populations. ❑ Corruption is bad for health and education outcomes, equity, rule of law, and foreign investment. ❑ It is also an international problem: USD$1 trillion of illicit flows are estimated to leave annually from the developing world; USD$11.5 trillion of assets are considered to be owned by individuals in off-shore banks, resulting in an estimated annual loss of USD$250 billion in tax revenue. ❑ Conversely, there is evidence that anti-corruption and wider transparency and accountability policies are associated with improved development outcomes such as education, health and water. ❑ Transparency International, for example, finds that good performance on anti-corruption initiatives and the rule of law is linked with higher youth literacy rates and lower maternal mortality rates. Source: UN (2014), ” Governance for Sustainable Development”, available at: Discussion Paper - Governance for Sustainable Development | United Nations Development Programme (undp.org)  Economic Resilience and good governance? Resilience to economic shocks is strengthened through five key features: 1. A strong, innovative and diverse business base 2. A skilled workforce with strong levels of participation 3. Characteristics of the place itself 4. The strength of the community and sense of pulling together 5. Good governance Source: Five features for resilient economies | Guiding local and regional economic resilience (cardiff.ac.uk)  Questions? Opinions / Suggestions? Thank you, see you next session...