Saturday, April 09, 2016

The End of Nation States: Chapter 3. Public Sector Administration and Urbanisation

The End of Nation States: Chapter 4. Public Sector Administration and Urbanisation

- Public Sector Administration

In a traditional sense of modern economics, each nation is responsible for administrating its own public sectors operated in this nation. On the other hand, this form pattern started encountering a new problem in this globalised world with economic agents with a more active and wide life style and more affluent sets of choice than the Cold War period. This phenomenon encounters with the problem of claiming who is responsible to pay for what they have used. Majority of countries operated by modern macroeconomic concepts operate their fiscal policy based on a national level and two or various regional level in inside a nation. So, there has not yet solid transnational fiscal policy concept emerging yet.

There is also a remarkably significant macroeconomic problem related to this globalisation and the expanding individuals’ activities. Not only the fiscal responsibility issue but also controlling the entire macroeconomic climate such as boom and recession. Due to the globalised activity level of businesses and individual life style, the business cycles of nations are more and more harmonised ever than it used to be. Then, the macroeconomic intervention by the macroeconomic policy such as the monetary policy, the fiscal policy, the international trade policy, and various supply-side policies such as controlling and monitoring the labour and capital mobility is less efficient. This is because one nation’s macroeconomic climate is highly more influenced by the others so that it may rather require the macroeconomic intervention in a tremendously wide multi-national or even a world-wide level which simultaneously control over the entire targeted region of this world at once.

Both the first responsibility issue (microeconomics) and the economic climate issue (macroeconomics) are concerned. The administrators of these public sectors defining the cost coverage responsibility and the resource allocation are more centralised and become in charge of administrating a wider scale. This centralisation may be considered as the optimum only if individuals are happy with their high administrating cost.

The problems of the public sector administration issues cannot be simply ignored. Some economists claim that it should be possible to put the decentralised politics in this global economy without taking these previously mentioned issues into consideration. Their claim is that the responsibility is spontaneously determined by all free economic agents fairly by following the natural free market movement toward equilibrium. Nonetheless, this equilibrium is not always a good equilibrium as many other economists affirm that there are both good and bad equilibrium outcomes.

The Game theory wisely indicates the bad equilibrium condition called the Prisoners’ Dilemma. The good equilibrium condition is where all individual economic agents pay for what they have used and how capable to contribute to. The bad equilibrium condition is where many economic agents are not contributing by means of their ability and responsibility, and then the economic climate is always in turmoil due to their disturbed unstable business cycles.

The prisoners’ dilemma warns of the free riding which means that many take advantage of letting or even enforcing the others to cover for the service meanwhile they obtain the shared common benefit from this service. This Prisoners’ Dilemma takes place when nobody shares the same principle and objective to fulfil their mutual interests because of their ignorance about what is occurring in real and what they are supposed to do to overcome from their unwanted situation. Therefore, by perpetuating this situation, individuals tend to be diverted from the good equilibrium and then be converged at the bad equilibrium as long as the aimlessness and the ignorance prevail.

In the traditional sense, human individuals have kept their reliance on the collective rational authorities to direct their economic policies with their paternalistic wisdom. In the feudalism, the feudal lords and the divine authorities were their representative guardians in charge of this paternalism. In the modern world, nation states and their government are the paternalistic guardian institutes meritoriously selecting their representatives from their general public. This collective authoritarian method has been functional as long as these paternal guardians have their strong principle encouraged by their nobles’ oblige and the scale is optimum size.

As the economies of scale expands furthermore that a nation-state can be responsible for positively controlling, the transnational rational authorities are now required more than before. Even the economic performance of the least developed countries (LDCs) is becoming more correlated with the business cycle of their trading partners. As the industries are more specialised in the global level, the business cycle fluctuation of one LDC is no longer negligible because the performance of its specialised industry affects their trade partners this LDC exports to.

- Urbanisation and market potential

In terms of the new economic geography theory, followings are the key variables of economic development.

V1. Low inter-regional transportation costs of trades backed-up by little geological obstacles

V2. Highly developed logistic networks based on a developed infrastructure such as capability to prepare for a strong infrastructure for the logistics such as a dock capable of launching heavy containers and effective networks of paved roads and railways

V3 Having an accessible trade partners have a high productivity and a purchasing power: This effect is combined with low inter-regional transport costs and highly developed logistic networks because the efficient access magnifies this factor.

* There is an index called market potential index (MPI) which takes account of these three variables V1, V2, and V3 together.

V4. The growth in productive population growth relative to the unproductive population growth (reasonable birth control, affordability of general education and parental love for children, and adjusted population growth to economic growth and land-capability).

V5. The human capital development (E.g. Education, Individual Liberty and Right, and Rationality). This affects the speed of learning newly introduced technologies in the world, adapting them to produce and sell newly introduced goods and services created, and ability to invent an original new technology themselves by referring to existing technologies.

V6. The political and social stability in both the present and the future time period.

V7. Abundant natural resource reserves, which create a trade surplus. The impact of benefit from it is bigger in emerging economies and least developed economies than developed economies, but some developed economies are able to develop further more than the other developed economies due to the extra surplus by extracting natural resources.

In order to fulfil these factors except for the variable V7 (Abundant natural resource reserves), concentrating a big population into one economic and political hub is essential, and this gradual process of the concentration is called urbanisation.

In order to increase the MPI representing the variable V1, V2, and V3, economic agents had better establish an economic hub gathering human and material resources together in one designated compact area. They can efficiently reach their needing/wanting resources when they are allocated closely to each other in this urbanised area. International trade hubs such as ports and traffic-junctions should be located in inside or near this urbanised area to ship in and out these traded goods and traveling individuals together in an efficient pace. The variable V4 (The growth in productive population growth) and the variable V5 (The human capital development) are more efficient when individuals live together closely in order to exchange their information and their resources to exchange. When these materials and individuals are scattered around, the transportation connecting individuals and the international trading hubs becomes very inefficient.

The challenge is the potential conflict among various unique individuals living together closely. In order to concentrate people together into one area, the political stability and the community harmonisation are highly required. In particular, in these Southern economies, the conflict between different identities tends to be an obstacle of their urbanisation process. Therefore, the variable A6 (The political and social stability) is a key element to achieve their urbanisation.

Nowadays, thanks to the globalisation encouraged by the rapid information technological growth, people in emerging and least developed economies have become able to copy the newly introduced knowledge and technologies, and use them to produce better goods and services. But, in order to grow their economy by this process, they need to fulfil these three following conditions:

- They need to improve and develop their education system to become able to copy the newly introduced technologies.
- They need a huge population in either their homeland or neighbourhood countries, or both, to sell these goods and services faster to grow their business.
- In order to accomplish these two objectives, the political and social stability is significantly required.

All in all, these nations require an urbanisation of their economy, which means increasing population density, which enables people to exchange information and physical resources each other fast. The urbanisation requires a huge population already existing. Therefore, an already highly populated nations tend to have an advantage.

Furthermore, the urbanisation lowers the cost of developing human capital because the speed of exchanging knowledge and technology becomes faster as the place become urbanised. The cost of developing human capital used to be a big obstacle for least developing nations when there was a huge barrier of exchaning the information. Both The end of the Cold War and the rapid information technological growth since then brought a globally free exchange of information flow. In addition, the knowledge and the wisdom gained from this flexible information flow have enabled people there to become harmonised with themselves. This aspect of the globalisation has made the harmonisation and the urbanisation tremendously easier than the past.

- The transition of Public Sector Administration and Urbanisation under the Globalisation

Judging from these two big aspects, public sector administration and urbanisation, human individual residents will be more concentrated into a limited number of urban cities to live due to the convenience for them to access to their economic needs and wants. At the same time, the population of many provinces of many countries will keep decreasing, and their industries will be more specialised in the primary industries sorely depending upon the variable V7 Abundant natural resource reserves which is irrelevant to the urbanisation.

The combined phenomenon of growth of the limited number of urban cities and decline of many provinces will reduce the cost of the public sector which is responsible for sustaining the infrastructure for both transportation and utilities in these areas. The cost of maintaining the transportation of the remote provincial areas and the infrastructure of utilities is significantly higher than the tax revenue gained from the local residents. Therefore, the government subsidies provided by the huge distribution scheme by the nation state regime have sustained these provinces.

The declining financially costly provinces and more efficient allocation of resources into an urban area seem to imply the reduction of the government subsidies required for aiding provinces. As the population of the provinces decreases, their power for bargaining to obtain the government subsidies will be weakened. Then, individuals living in an urban area are more keen to maintaining their convenient life style and easier access to the foreign countries with more variety of goods and services to trade. So, these urban individuals will have less sympathy to those claiming for the subsidies for these provinces, and even may insist on reducing their tax spent for these subsidies.

The significance of the public sector management based on the loyalty to nation-state will decline as both the economic globalisation and the urbanisation are growing further, and they seem to be an inevitable phenomena. The globally influential economic agents will also keep lobbying for encouraging these phenomena in order to take an advantage of the efficient resource allocations and distributions in this system. As these globally influential economic agents contribute to the taxation for the public services, they eventually have a strong voice in the political lobbying so that this also create the political movement.

The government of each nation state will function as the subsidiary of the globally influential institutes and individuals. These remarkable globally influential ones are big global corporations and the influential global investors because these globally influential ones are those who contribute to the taxation at most. For the time being, most of the globally influential economic agents are the wealthy minority elites. But, there can be a possibility that there will be a strong active union of majority, who are actively moving across the national borders, sticking together such as a strong trade union of young labourers moving across various jobs in different countries, in the future. The key point is that almost all major economic activities are now world-wide so that the responsibility which a nation state government can cover will be diminished furthermore.

The well-being of these countries is now under the influence of the globally influential economic agents. These countries' national interest is overwhelmed by the global interest of these globally influential economic agents. The lobbying of the global economic agents based on their global interest will become stronger than the counterpart based on the national interest. Therefore, the reason d'etre of a national government declines.

This political transition also implies the end of majority of the modern political philosophies. They include some rebellious ideologies such as Marxism which aspires to destroy the status quo but wishes to replace the current nation state with another nation state. Even these political ideologies which put a strong emphasis on radical scepticism about nation state such as libertarianism are also in danger of extinction. The former example is just an attempt to hijack the nation state governemnt so that it cannot exist without an existence of a nation-state. The latter example is merely an attempt to decrease and minimise the power of the nation state, and its structural concept is still built upon the traditional nation-state function. All in all, this gradually induces the end of political ideological battles represented by the party politics. The near future politics will be more technocratic motivated by the economically pragmatic principle.

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