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2011-10571 IR-356

Political Economic Geography

Policy Effectiveness, Economic Constraints, Political Institutions and Credibility This chapter discusses how institutions and economic constraints affect policy effectiveness through the concept of credibility. Credibility, according to Glazer and Rothenberg (2001) is an act of persuading economic actors (i.e. firms) that government will follow through or pursue actions (i.e. policies) promised on the long run. So any instability that may disrupt continual implementation may delay investments necessary for policies to be effective. First is on political institutions, the government, whether divided or unified: which provides more credibility? Divided government is characterized by having the different branches of government (esp. executive and legislative) be controlled by opposing political parties while unified government is simply having a single party dominance in all branches. Divided government is universally perceived as bad/problematic since opposing parties normally attempts to block each others policy proposal which delays adoption of effective policies (Glazer and Rothenberg 2001). Unlike in unified government, according McKay (in Glazer and Rothenberg, 2001:120), there is a coherent and cohesive policy making because there is the vital institutional connective tissue provided by common party control. But on another view, policies adopted under a divided government are more effective as they have more credibility since these policies demonstrates broader political consensus between contending parties. The policy will therefore be pursued for the long run even if the administration changes therefore there is more credibility. Divided government is applicable only under a presidential system, either way, under parliamentary system, as with a unified government, exhibits more policy instability since change in leadership also means change in policy thus disrupting continual implementation. The next issue is whether policy control should generally be local or national. Under the national level, is similar to the issue discussed above. But under the local level, local leaders

may better establish credibility and induce behavior that makes policy effective. Local leaders, wanting to make policies effective will encourage economic actors to invest on what is necessary for the policy to succeed. By having interests at stake, investors will then invest to make the policy survive. However, mobile firms may be able to bypass regulations by trying to transfer to places with weaker regulation therefore losing the investments necessary for the policy to become effective. Interstate competition for these investors may therefore force states to formulate weaker policies so there is a need for a centralized regulation to temper this effect. Therefore, national and local governments must work together in making policies more effective as there are inevitable flaws which weaken the credibility of policies. Last is about how terms of office and political reforms affect credibility. The point of the authors is that the more instability on the makers of policies will also make policies more unstable. Incoming political leaders may probably choose to discontinue an incumbents policy for publicity and if there is only one term for each leader, it may make things worse. On political reform, sunset laws for example, seek to review the continuation of state agencies have made policy implementation unstable since there are possibilities of discontinuation of policies when certain agencies are dropped. But sunset laws also provide information of which agencies, thus policies that would continue on the long run-credibility. Therefore political reforms according to Glazer and Rothenberg (2001) bring about increase in credibility but could undermine credibility of others. To conclude, credibility as affected by changes in rules and institutions also affects policy effectiveness as economic actors (economic constraints) considers policy credibility before making investments that are vital in making policies effective. Reference: Glazer, A. and Rothenberg, L. (2001) Why government succeeds and why it fails. Cambridge: Harvard University Press, pp. 118-138.