Fundamentals Unpacked: the role of the state

The debate on the ideal role of the state has always shaped political science, and still frames many contemporary political disputes.

Even with public discourse increasingly dominated by Brexit, the dispute underlies today's political arena in the UK, dividing the Labour and the Conservative parties. While the former believes that the state represents the best available instrument for delivering large-scale positive outcomes for its citizens, the latter has argued for a reduction of the size of the government, being suspicious of the potential consequences deriving from its powers.

Opposing arguments

Perhaps not every politician, however, is aware of the origins of the debate. On one side, the German philosopher Max Weber laid the ground for the defence of the modern state. Weber saw it as the core of all political activity and, at its best, as an instrument of legitimate domination, based on the rule of law and a strong, efficient, hierarchical bureaucracy.

The Public Impact Fundamentals agree with Weber on the capacity of the state to deliver positive impact. While this does not mean that all policy initiatives should necessarily arise from the state (or that the state does not make mistakes), we believe that it is particularly well placed to drive successful change.

Not all policy thinkers and practitioners, however, share our (and Weber's) confidence in the potential of governments to achieve positive change. Thinking of prominent state-sceptics, the Nobel Prize-winning economist Friedrich von Hayek comes to mind.

Far from remaining confined to academia, Hayek's theories have significantly influenced national governments, shaping British and American policies in the 1980s as Thatcherism and Reaganism. In his 1944 book, The Road to Serfdom, he famously warned against the “tyranny that inevitably results from government control… through central planning”. Hayek thought it was difficult for the state to design and implement truly effective policy on a large scale, because the government does not possess all the necessary information to take truly informed decisions.

If the state is doomed to fail, then who should be in charge of such large-scale decisions?

According to Hayek, the market represents the best mechanism for delivering effective change, since, as a group, market actors have greater access to information and thus are better able to take decisions. From this perspective, the role of the state should be limited to ensuring the conditions for the market to function properly.

Should policymakers incorporate Hayek's wariness of the state in their (and our) quest for impact? Not necessarily. Indeed, Hayek's concerns may have been partly justified by the era from which they derived. Significantly, The Road to Serfdom was written during the Second World War, at a time when a state's capability seemed to lead inevitably to the oppression of its citizens. It is also true that, in some instances, market-based solutions can produce better results than governmental measures - but we do not believe this has to be the case.

Overtaken by the digital revolution

In fact, the key assumption at the core of Hayek's argument - that states neither can nor do possess enough information to take truly effective decisions - is becoming more and more debatable by the day. With the rise of big data analytics, governments have access to improved, specific, constant flows of information at both a macro and micro level, as well as novel techniques for data processing. Beyond this general trend, states are uniquely positioned to exploit these new analytics, as governments are the only entities to have full access to the entirety of these emerging data flows.

This new data-rich reality also has implications for the internal organisation of governments. Recent decades saw a decentralisation trend in government decisions and actions - influenced by the new public management (NPM) belief that local agencies take more efficient decisions because they are better positioned to acquire information. However, the shift of information management towards centralised big data is making this approach to decision-making increasingly suspect. Recent academic theories have gone so far as to argue that central-based “digital-era governance” represents a better means of delivering the promises of NPM: principally, increased effectiveness and efficiency in the public sector, and targeted and personalised services for citizens.

The emergence of new technologies and increased data availability presents a unique chance for governments to achieve positive impact. They can design more informed policies, make policy design more targeted to the issue, and enhance its implementation capabilities, among other opportunities.

Nevertheless, it is crucial for governments to fully realise the possibilities offered by the recent innovations in digital analytics, and take the necessary steps to exploit them across different policy areas. There are already some successful examples of governments using new technologies in big data, but they are still too limited to shift the “state versus market” debate significantly.

Let's see whether this will change over the next few years.

FURTHER READING

• Helping governments bridge the gap between intentions and performance. The ideal of good government is one shared by billions of people around the world but more needs to be done for it to become a reality, says Adrian Brown
• Focusing on the Fundamentals. The RSA's Matthew Taylor tells Adrian Brown about how the Public Impact Fundamentals has influenced his thinking and approach to a high-profile government review on modern employment.
• Recognising and renewing governments' legitimacy. Preserving their legitimacy in such a fast- changing world should be a priority for governments the world over, says Maryantonett Flumian
• Action stations: advancing to impact. Beth Blauer explains why management, measurement and alignment are critical to the successful transition of a policy into real-world effect
• Picking the policy that will have the greatest impact. Overcoming the barriers to policy implementation involves not only the setting of priorities and ambition but also defining what outcome is actually intended, says Sir Michael Barber