Course Week 2d Study Notes The Basic Roles of Governments 2024-2025.pdf

The Lee Kong Chian School of Business Academic Year 2024-2025 Loo Khee Sheng The Basic Roles of the Government PART A: INTRODUCTION The government...

The Lee Kong Chian School of Business Academic Year 2024-2025 Loo Khee Sheng The Basic Roles of the Government PART A: INTRODUCTION The government performs important roles for the welfare of the people. What basic roles a government should play is the subject of this note. This note begins with a brief discussion of the basic reasons why governments are necessary before moving on to discuss the basic roles played by the government. This note concludes with a discussion of some of the main ways a government governs and the limitations faced by a government. PART B: WHY WE NEED A GOVERNMENT PART B1: Anarchism Do we really need a government? Some argue that a government is not necessary for society to function properly. Governments are seen as undesirable, unnecessary or harmful. To them self-help and voluntary institutions can play these governmental roles just as well, if not better. Take the instance of the police force. A community can provide its own police force voluntarily. The police force can comprise volunteers from the community or be paid by the community. This political philosophy is called anarchism and those who espouse it anarchists. Communists subscribe to a variant of anarchism. To them the ills of society are due to private property, which results in the exploitation of man. The owners of capital (such as money, assets and land) and the factors of production (such as tools, machineries and  The Roles of the Government (Academic Year 2024-2025) factories) exploit the workers who work for them by paying them poorly (creaming of the surplus value). These owners also exploit the users by charging them interests, fees and rents. If property is owned in common or communally (hence the term communists), exploitation will cease, resulting in a classless and just society. The government is necessary to convert private property to communal property so that society becomes classless and just. When the classless society is attained, the government withers away leaving behind the classless society free from exploitation. PART B2: Voluntary Institutions as Government Can voluntary institutions perform all the roles of the government? What are the roles that voluntary institutions cannot perform? A basic limitation of voluntary institutions, as the name suggests, is that they operate on a voluntary basis and not coercively. Voluntary performance may not be adequate when coercion is necessary. In the example of the community police force, some members of the community may not be willing to volunteer for the police force or fund it. Some members will choose to free ride on the contributions of the others. This free rider problem becomes greater when the community becomes larger. In these situations, voluntary institutions cannot function adequately to address the problem. Situations where coercion may be required include the following: co-ordination. Examples include a common currency, units of measurement, publicly established standards, road networks, train networks and public utility networks for the supply of water, electricity and gas and the discharge of sewerage. dealing with harm, dissenters, criminals and enemies. Examples include peace, security, defence, adjudication and enforcement of rights. tax and transfer. Forceful taxation for government spending for the poor or other causes. preventing or avoiding free riders. Examples include public goods such as the provision of defence. The government imposes taxes to pay for defence. forcefully acquire land and property for the public good. regulate and restrain rights to communal property. 2  The Roles of the Government (Academic Year 2024-2025) PART B3: Companies as Government Can corporations perform the roles of the government? There have been cases of companies governing their territories rather than governments. In this respect, the City of London Corporation (officially and legally the Mayor and Commonalty and Citizens of the City of London) offers an interesting example. The City of London Corporation is a company and functions as the governing body of the Square Mile of London (the heart of London’s financial district) and takes responsibility for supporting the financial services industry and representing its interests. Another example is the East India Company (which is a company) that effectively ruled in India from 1757 to 1858. Notwithstanding these examples, the roles of governing are normally performed by governments rather than businesses. PART B4: Failed States When a country does not have a properly functioning government, such as a failed state or a bad government, the living conditions are generally poor and basic. There is a lack of peace, security and amenities. PART C: THE ROLES OF THE GOVERNMENT It is, therefore, not surprising to see governments playing important roles in societies. These roles are varied and include: Maintaining a well-functioning state apparatus (e.g. executive, legislative, judicial and other state organs) to govern properly. Maintaining public order and safety (e.g. police services, fire-protection services, prisons), defence against external and internal threats (armed forces, internal security) and developing and maintaining foreign relations. Raising revenue (e.g. taxation, customs, loans). Providing an environment with good infrastructure for business, government and society to operate in (e.g. a currency, exchanges, market place). 3  The Roles of the Government (Academic Year 2024-2025) Providing goods and services for the people's welfare in education, housing, amenities, health care, social protection (eg. disability, old age, poor, family and children, unemployment), recreation, sports, culture and religion. PART D: THE EXTENT OF THE ROLES OF THE GOVERNMENT If governments are necessary and play important roles, where should the roles stop? Different governments have adopted different stands on this issue. In the religious sphere, some advocate the separation of state and religion while others the mixing of the two. In Europe religion was part and parcel of government in the past but the relationship has become more divorced now. Some countries still mix the two. In modern Iran religion is a part of government. In the family and social sphere, some advocate intervention in the personal affairs of families and communities while others the opposite. The Singapore government tried to limit the number of children in the past but presently promotes marriages and childbearing, such as through the Social Development Network (formerly the Social Development Unit). Singapore law requires children to maintain their parents. In China, the law encourages children to visit their parents. Singapore prohibited bar top dancing until 2003. In the individual sphere, some advocate that the government should prohibit certain private activities, while others champion more liberal policies. Until the 1970s Singapore discouraged long hair, certain types of clothing, certain types of music and "yellow culture". It is no different in the economic sphere. Some advocate more governmental intervention in the economy while others the opposite. The US government banned Bobby Fisher from playing in a chess match against Boris Spassky in Yugoslavia on the ground that he was getting involved in "business or commercial activities" with Yugoslavia. PART L: HOW TO GOVERN 4  The Roles of the Government (Academic Year 2024-2025) PART L1: Main Ways to Govern To play their roles properly, governments need to have adequate qualified personnel, know-how, money, resources, support, power and authority, etc. The following discusses, broadly, the main ways a government governs. Basically, the government governs by doing 2 things: By telling you what you should and should not do. By providing for you. PART L2: Telling you what you should do by persuasion The government governs by telling you what you should do and not do. The government tells you what you should and should not do using 2 basic methods: By persuading you. By forcing you. Information and Persuasion A government needs to inform, educate, advocate and persuade the public or target audience to think and behave in a certain way. To this end the Singapore government had engaged in various campaigns: "No Littering", "Speak Mandarin", "Stop at Two", "Go Green", "Recycle", etc. Persuasion and campaigns are important in matters involving more fundamental ideologies, such as morality, capitalism, liberalism, democracy and free trade. Examples of such fundamental ideologies include why capitalism is better than socialism, why foreign workers are good for Singapore, why the rich should be allowed to stay in football field-sized mansions while the poor squeeze into toilet-sized rooms, etc. Persuasion is important when the matter is difficult to regulate. The following are 2 examples: Suppose the government wants to ban the drinking of alcohol. America actually did it from 1920 to 1933, called the Prohibition era. During this period, the United 5  The Roles of the Government (Academic Year 2024-2025) States prohibited the production, importation, transportation and sale of alcoholic beverages. All sorts of problems arose and the US government had to lift the ban. Suppose the government wants every Chinese citizen to be literate in Mandarin and will punish any Chinese citizen who fails to be so. Such punishment will give rise to a lot of issues. The perceived “cure” may give rise to more problems than the perceived issue. Persuasion is also important for practical reasons. For example, when a new law is enacted, the government needs to publicise it so that the public becomes aware of it. The government also needs to educate and persuade the public to ensure compliance with the law. The government can undertake persuasion using public and private means of persuasion. For public persuasions the government can use both traditional means as well as more sophisticated ways. Traditional means include the print media, the radio, the television, speeches and social media. The more sophisticated means include using fashion blogger Nellie Lim to generate buzz for the opening of Downtown Line 2.1 In private persuasion the government seeks to persuade individuals or smaller groups more directly. Using private persuasion, a Minister can privately encourage the CEOs of banks to employ more locals. It will be easier if key people of influence agree with and support the government's programs. To this end governments support key people of influence in strategic positions to help support or carry out their objectives when required. The Singapore government can also control more entities and resources to do so. Hence, the Singapore government controls the NTUC and many GLCs and other entities to help it discharge its roles. When persuasion is seen in a negative light, it is sometimes referred to as propaganda, brain-washing, indoctrination, etc. PART L3: Telling you what you should do by regulation Regulation, Command and Control While persuasion and advocacy are important, they can be of limited effect. Some may just ignore it or may not be persuaded or agree with the idea. Thus, for certain matters, the government needs to put in place laws and regulations and enforce them accordingly. 1 Laura Philomin, "NTUC, govt agencies tap star power of social media influencers," Today, 6 March 2016. 6  The Roles of the Government (Academic Year 2024-2025) Regulation has been increasing in several areas. Social and workers regulation aims to address the social problems in society. There have been calls for more regulation of the internet. Environmentalism has also been gaining ground as a justification for regulating business. For example, many European cities are creating environments openly hostile to cars, leading to adverse effects on car manufacturers and related businesses: “Cities including Vienna to Munich and Copenhagen have closed vast swaths of streets to car traffic. Barcelona and Paris have had car lanes eroded by popular bike-sharing programs. Drivers in London and Stockholm pay hefty congestion charges just for entering the heart of the city. And over the past two years, dozens of German cities have joined a national network of “environmental zones” where only cars with low carbon dioxide emissions may enter. Likeminded cities welcome new shopping malls and apartment buildings but severely restrict the allowable number of parking spaces. On-street parking is vanishing. In recent years, even former car capitals like Munich have evolved into “walkers’ paradises,” …. To that end, the municipal Traffic Planning Department here in Zurich has been working overtime in recent years to torment drivers. Closely spaced red lights have been added on roads into town, causing delays and angst for commuters. Pedestrian underpasses that once allowed traffic to flow freely across major intersections have been removed. Operators in the city’s ever expanding tram system can turn traffic lights in their favor as they approach, forcing cars to halt. Around Löwenplatz, one of Zurich’s busiest squares, cars are now banned on many blocks. Where permitted, their speed is limited to a snail’s pace so that crosswalks and crossing signs can be removed entirely, giving people on foot the right to cross anywhere they like at any time. As he stood watching a few cars inch through a mass of bicycles and pedestrians, the city’s chief traffic planner, Andy Fellmann, smiled. “Driving is a stop-and-go experience,” he said. “That’s what we like! Our goal is to reconquer public space for pedestrians, not to make it easy for drivers.””2 Another area where regulation has been called for is the area of inequality. The capitalistic system favours those with capital and relevant skills. With capital and skills they can accumulate more capital and skills. Those who are not so gifted, such as the 2 “Across Europe, Irking Drivers Is Urban Policy,” The New York Times, Elisabeth Rosenthal, 26 June 2011. 7  The Roles of the Government (Academic Year 2024-2025) poor, sick, incapable or disadvantaged, can lose out in the system. As a result, the rich become richer and the poor poorer. While incentive is necessary to reward hard work, the disadvantaged cannot be too harshly punished for their mistakes or failures. Poverty can lead to crime and an unsafe society. The key is to provide the poor with means to survive in difficult times without jeopardising the incentive to work and be responsible. Effect of Regulation Regulations affect the relationship among businesses and between business and other parties. Many areas of substantive law, such as contract law, tort law, restitution law and company law, prescribe rules governing the relationship between business and other parties. Through regulations the government acts as a referee between the various parties. Sometimes regulation and policies can be beneficial to a lot of people but be detrimental to a few. In this respect, the government should look not only at the effect of the regulation and policies on the country as a whole but on certain individuals as well. A policy that is good for most of the people may not be good overall if it affects adversely a smaller group of people which can in turn affect the whole adversely. How the tension between the individual and society is resolved is a necessary exercise of government. The irony of market regulation is that prices of important goods and services are never truly freely determined by the market. The government will seek to intervene when food staples and other important goods and services become too expensive for the public. Only goods and services that are not essential such as the services of sports stars and luxury goods can truly be determined by the market. The irony is that truly important goods and services can be cheaper than discretionary goods and services. PART L4: By providing for you By providing for you Above, we have discussed how government governs by telling you what you should or should not do. The second way the government governs is by providing for you. The government can provide for you in 2 basic ways: By giving you money. By providing goods and services to or for you. 8  The Roles of the Government (Academic Year 2024-2025) Money A government can govern by the expenditure of money. It can be in the form of outright payments of welfare to the poor or subsidies to those who need them or the purchase of goods and services that the country needs. Provision of Goods and Services A government can govern by providing you with goods and services you need or want. The provision of goods and services by governments is related to the expenditure of money discussed above. The difference is a matter of degree. The provision of money can be an outright giving or spending of cash. The provision of goods and services, on the other hand, is provision in kind, such as HDB flats, public parks and infrastructures. Through spending and purchases governments acquire required goods and services, such as defence and infrastructure, and establish programs for the benefit of the people. The provision of the goods and services can be free to the user (in the sense that the user does not need to directly pay for it) or at a fee. An example of a free provision of goods and services is the free parks and gardens that a person can enjoy. An example of a provision of goods and services at a fee is the enclosed areas in parks that you have to pay to go in. Basic ways to govern By telling you should By providing for you do and not do By persuasion By law By providing you By providing you with money with goods and services PART M: LIMITATIONS OF GOVERNMENTS 9  The Roles of the Government (Academic Year 2024-2025) Above, we have seen how government governs. However, all governments are inherently limited in resources, personnel, expertise, power, territorial reach, public support, control, etc. Governments that fare well have more resources and make better use of them. Governments that fare poorly lack them or fail to make good use of them. Government limitations, unfortunately, can lead to government failure. ΩΩΩ Loo Khee Sheng [email protected] Feedback is welcome. 10