The Governance Report 2018 (Published September 2018)
Faculty lead: Helmut K. Anheier
Publisher: Oxford University Press
Ten years after the onset of the global financial and economic crisis—the greatest economic stress test since the 1940s—the 2018 edition of the Governance Report examines developments in fiscal policy, administrative capacities, institutional trust, and global governance from before the crisis to current times. By teasing out their implications for governance today, the Report considers how such financial and other global crises of similar magnitude and complexity can be prevented or better managed in the future.
Contributors: Helmut K. Anheier, Luciana Cingolani, Mark Hallerberg, Sonja Kaufmann, Regina A. List, Jean Pisani-Ferry, Kai Wegrich, Sebastian Ziaja
Issues in focus
The fiscal effects of the GFC are most evident in advanced industrialised countries and the eurozone, where gross debt burdens have not returned to lower pre-crisis levels, and in many places, remain much higher. Public expenditures in relation to the economy’s size increased over the crisis period, but, despite austerity measures in many countries, have not snapped back to earlier levels. In fiscal policy terms, most OECD countries find themselves ten years after the GFC’s peak in more vulnerable positions because of higher debt burdens and higher social expenditures, leaving them little room for manoeuvre should another crisis arise.
A combination of governing capacities—delivery, regulatory, coordination, and analytical—is required to address complex policy issues and, in particular, crises. Since the onset of the GFC, these capacities developed differently in OECD and G20 countries. In some crisis groups, delivery capacity was not demonstrably affected, but in particular health and education spending as a share of total public expenditures declined on average in the countries that suffered protracted crisis. Trends in regulatory capacity are difficult to detect due to a dearth of valid indicators. Coordination capacity has improved in some countries, but it surprisingly declined in those countries that seem to have dealt well with the crisis. Analytical capacity improved in many countries, which may be a sign of learning and an attempt to generate resilience to future crises.
For more detail on administrative capacities, see The Governance Report 2014 and The Problem-solving Capacity of the Modern State: Governance Challenges and Administrative Capacities.
Crises can shake popular trust in key public institutions. In relation to the GFC, while this effect in terms of public institutions varied by country and especially individuals’ socioeconomic status, public opinion in OECD and EU countries clearly attributed blame for the crisis and its consequences on financial institutions. In some EU countries that had to resort to bailout packages and accompanying austerity, institutional trust was deeply affected. Nevertheless, recent electoral shifts towards far-right or ultra-nationalist options cannot be traced directly to the GFC. The good news: though good governance did not immunise countries against falling institutional trust in the GFC’s immediate wake, it made a difference in whether public institutions recovered this trust quickly.
The scale of the GFC was such that the 1990s’ globalisation process seemed in jeopardy. Though the G20 stepped up to deal with the GFC, the group is a significant departure from the standard model of international collective action, and many have doubted the sustainability of its success. More generally, global governance today is grappling with the tension between the need for global collective action and the increasing reluctance of sovereignty-conscious nations to participate effectively. The choices seem to be either trying to preserve the existing order to the extent possible or putting faith in a web of ad hoc arrangements. Before going down either of these paths, the trade-offs each involves must be better understood.
To find out more, order The Governance Report 2018 from Oxford University Press.