How well are we governed?

Berlin, 22 February 2013 – Why is there such little progress regarding global questions like climate change, freedom of information, or monitoring of arms trade? Are we better prepared today for financial crises than we were five years ago? Where can we find innovative approaches to public services and to solve problems, and how can one measure governance progress? These questions stand in the foreground of “The Governance Report 2013”, which the Hertie School launched today with Jörg Asmussen, member of the executive board of the European Central Bank, as keynote speaker. 

The Report, which will be released annually by the Oxford University Press, focuses on  key issues of our governance systems and structures. At the same time, it particularly takes into account the interdependencies between states, as well as between nation, economy and civil society. With application-oriented analysis and concrete recommendations on policies, the research team involved aims to explicate and contribute to the solutions of current governance problems. 

Prof. Dr. Helmut K. Anheier, initiator and co-author of the Governance Reports and Dean of the Hertie School, explains: “At the moment we are experiencing a period of deep uncertainty. Established governance systems are under pressure. Innovation and change are required. In the Governance Report we set out to systematically search for approaches that will take us further.”

Overcoming the Sovereignty Paradox

Dr. Inge Kaul, former director at the UNDP and adjunct faculty member at the Hertie School, notes the central challenge as being deepening interdependencies between states that have up to now not been inadequately reacted to:  “The conventional perception of sovereignty and the maximizing of the national interest presumes independence. But, in policy fields marked by interdependence, such behaviour actually undermines rather than strengthens states´ policy-making capacity. Indeed, the paradox is that states, notably their governments, are losing policy-making sovereignty precisely because they hold on to conventional strategies of realising sovereignty, which make them shy away from international cooperation.”

Thus Kaul advocates a new multilateralism on the basis of “responsible sovereignty”: States exercise sovereignty with a broad respect of the sovereignty of other states. The realisation of such a strategy demands global fairness and an active search for positive balance outcomes. Because, notes Kaul, without new multilateral initiatives that really deserve this name, none of the global threats can effectively be confronted. As a concrete step, Kaul proposes, among others, the establishment of a high-ranking UN Commission to advance global consensus on how responsible sovereignty should be defined and in which problem areas it can be implemented.

Battling finance crises presents policies with conflicting goals

A stronger coordination that crosses borders is indispensable in order to efficiently fight financial and fiscal crises. Prof. Mark Hallerberg, PhD, Professor for Public Management and Political Economy at the Hertie School, and his co-authors in the Governance Report make it clear: Financial crises extend across borders faster and stronger than before, while at the same time decisions that national policy-makers take have stronger external effects than in the past. As a result, the existing institutional structure is overextended. Indeed, although this problem is recognized, crisis strategists regularly run into conflicting goals in the search for solutions:   

• Liquidity vs. moral hazard: In the particular case of crisis lending, a `bailout` directly benefits a country by providing it with the financing (liquidity) needed to service its debts, while at the same time creates moral hazard i.e. incentives for borrowers and lenders to assume additional risk in the expectation of future bailouts. 
• Accountability vs. effectiveness: While the creation of powerful new international organisations or the delegation of further authority to existing ones might strengthen the effectiveness of financial regulation and supervision, they would also present a direct challenge to national sovereignty (as conventionally understood) and democratic accountability. 
• Domestic politics vs. international commitments: The trade, monetary and financial policies maximising a government´s domestic political support are not necessarily those most conducive to international economic stability.  

In the Governance Report Hallerberg and his colleagues argue that in the light of these difficulties, the wrong decisions are often taken. Considering the significant inadequacies of international finance systems, the authors assess the European crisis management as being quite successful. However, the Eurozone is not adequately prepared for future crises.

Advancing Governance Innovations

A further focal point of the Governance Report is the systematic search for and analysis of innovations. Ten examples are presented as to how public problems can be dealt with more effectively than hitherto, and with better outcomes. Included is the German/Swiss ´debt brake`, as well as the so-called Social Impact Bonds for financing of social projects that are being tested in Germany, Great Britain and the USA. “The importance of innovation competence in economy and technology is undisputed. However, it is astounding how little attention is dedicated to innovation in the public sphere. With this and future outcomes, the Governance Report aims to draw more attention to the most effective solutions,” says Helmut Anheier.

New Indicators make progress measurable

With a new system of more practical and politically relevant Indicators, the authors, Prof. Mark Kayser, PhD, Professor of Applied Methods and Comparative Politics, and Dr. Piero Stanig, Research Fellow, want to make progress measurable – progress that goes beyond national interests and relates to the private sector and civil society on the same level as the public sector. The goal is to be able to better reconstruct developments that have been equally influenced by cross-sharing relationships on transnational, national and city levels as well as through nations, corporations and non-governmental organisations. In so doing, the Hertie School aims to deliver politically relevant and practical data for the implementation of ”Good Governance“ measures that will lead to the application of innovation and solutions of public problems. 

In this way, an analysis based on the new system documents the voting results in the UN General Assembly between 2005 and 2011, which frequently led to political stalemates: A deciding factor is the attitude of the member states to the Middle East conflict and to other conflicts that originate from the time of the Cold War. These factors also determine the outcome of many other questions. Furthermore, Kayser and Stanig compare countries according to the transparency of the public sectors and the strength of the civil society. The summarized result clearly establishes their claim: The more active civil society is, the more transparent the state and leadership will be.  

Also on the level of the big metropolises, the Indicator System makes it possible to view illuminating comparisons, for example regarding quality of the institutions, trust and corruption. 

The new Indicator System will be further developed and rounded off in the next few years within the framework of the Governance Reports. 

“The Governance Report 2013“, edited by the Hertie School with a fore-word by former federal president of Germany Prof. Dr. Horst Köhler, is available from the Oxford University Press as well as in book shops. The accompanying volume, “Governance Challenges and Innovations: Financial and Fiscal Governance” with extensive contributions on all themes of the Report will appear in August 2013.