You are here

Op-Ed Global Development

The state’s new balancing act

Cambridge, United Kingdom

Today, new digital technologies and organizational structures can enable the state to balance policy effectiveness with citizens’ freedom. But achieving this will require governments to be responsive, inclusive, willing to experiment, and entrepreneurial.

By Jaideep Prabhu

CAMBRIDGE – For over a century, the size and role of the state has been a hotly debated issue, and is so once again in the wake of COVID-19. Should governments involve themselves in ever more areas of social and commercial life, or does more government necessarily mean less freedom and more waste?

On one side are libertarians, who regard governments as at best incompetent and inefficient, and at worst a threat to individual liberty. This is the intellectual tradition of Friedrich A. Hayek and Milton Friedman, and of political leaders like Ronald Reagan and Margaret Thatcher.

Ranged against them are statists, who think government is inherently benevolent and seek to expand its powers to influence society and the economy. This is the view of Fabian socialists and central planners, contemporary politicians such as US Senators Bernie Sanders and Elizabeth Warren, and European political parties like Greece’s Syriza, Italy’s Five Star Movement, and Spain’s Podemos.

New digital technologies

But today, new digital technologies and organizational structures can enable states to balance policy effectiveness with citizens’ freedom. Governments can be both big and small, generous and frugal, and deeply involved in people’s lives while stopping short of meddlesome intrusion. This is particularly important during crises such as the current COVID-19 pandemic, when the state must play a crucial role.

In the past two decades, the internet, social media, smartphones, and cheap computers and software have enabled private-sector firms to do more with less, thereby upending entire sectors from media and music to retail and travel. That revolution is now coming to the state. Governments around the world increasingly have access to technologies – as well as to accompanying organizational models such as delivery skunkworks, policy labs, and behavioral-insights units – that profoundly alter the potential scale and scope of what they can achieve. For good or ill, policymakers can now build a vast state apparatus quickly and at low cost.

These developments have three major implications for how the state functions. For starters, governments can potentially deliver services better, faster, and at lower cost. If Amazon, Google, and Facebook can harness big data to provide a huge number of customers with a seamless and efficient experience, while relentlessly seeking to improve it, surely governments can do the same for their citizens. In India, for example, the federal government gave over one billion citizens a unique digital identity in just over five years at a cost of less than $1 per person.

More worryingly, governments can also use digital tools to gain greater control over their citizens, monitor them more closely, and accrue more power. If Big Tech has been able to gain so much influence over people’s lives, then these same technologies could be much more dangerous in the hands of governments.

For example, the Chinese government’s Social Credit System uses digital technologies to track citizens’ and businesses’ interactions and transactions, and assigns them a rating that combines Western-style credit scores with more expansive and intrusive reputational scores based on their public and private behavior. These ratings have real consequences for people’s access to employment, finance, and social services, as well as their freedom to travel.

Then there is the question of how governments should view and manage the private sector’s use of such tools and technologies. Policymakers must decide how to regulate immensely powerful digital platforms, and how to engage with large and small firms to stimulate innovation and drive inclusive growth.
vAlthough digital technologies are recent inventions, the question of how to balance government effectiveness and individual liberty is far older. In 1936, John Maynard Keynes noted that, “The authoritarian state systems of today seem to solve the problem of unemployment at the expense of efficiency and of freedom.” But, he added, “it may be possible by a right analysis of the problem, to cure the disease whilst preserving efficiency and freedom.”

Four key principles

Meeting this challenge will require governments to adhere to four key principles. First, states must be responsive to citizens’ needs. In designing and delivering public services, they need to work outside-in, from the perspective of the people who use them, rather than inside-out, from public officials’ viewpoint. Countries like the Netherlands are doing this in areas such as social care.

Second, the state must be inclusive, and balance the interests and needs of different groups of citizens. In designing social-security and employment laws, for example, governments must weigh the needs of employers against those of job seekers. This is the goal of Denmark’s “flexicurity” system, and of experiments with universal basic income schemes around the world.

Third, states need to experiment. They should constantly test new initiatives in pilot programs to reduce the risk of failure, evaluate them, and then scale up the ones that work. The United Kingdom has done this in education and criminal justice through the Behavioural Insights Team and the What Works foundations.

Fourth, states must be entrepreneurial. That means proactively engaging with new technologies and firms, regulating them in innovative ways, and cultivating them so that they flourish. Examples include the UK’s regulatory sandbox approach to fostering the fintech and autonomous-vehicle sectors.

With the world reeling from the pandemic and struggling to address complex systemic issues such as climate change, it is vital that we return to the fundamental question of politics: how a government should be. If we don’t ask it – and ask it often – we risk ending up with a government we would never choose.

Jaideep Prabhu, Professor of Indian Business and Enterprise and Director of the Centre for India & Global Business at Cambridge Judge Business School, is the author, most recently, of How Should a Government Be? The New Levers of State Power (Profile Books, 2021).

Copyright: Project Syndicate, 2021.