+

The Policy Context

+
Many of the analytical approaches (ideas) to
studying public policy (PP) encompass
Institutions and Actors that influence PP.

Analytical
Approaches
Institutions Actors
Positivist & Post-
positivist

Market
mechanism
Individuals
Public choice Neo-liberalism Politicians,
Bureaucracy, voters
Class analysis Capitalism Organized groups
Pluralism &
Corporatism
- Interest groups
Neo-
institutionalism
State and
Social
institutions
Individuals
Statism - State and society

+
Institutions
+
Institutions: Capitalism & Democracy

! These institutions constitute an important
part of institutional context within which PP
process unfolds in most modern societies.
! These institutions are influential among
policy-makers and greatly influence actors
in most policy-making processes
+
Institutions: Capitalism
! Refers to both market-oriented system of
production and exchange and to a society in which
control over the property required for production
(capital) is concentrated in the hands of a small
section of the populace, while most of the rest of
the population sells their labour-time in a system
of wages.
! Now almost all countries are capitalist, though
they vary in degree & approach
+
Capitalism Vs Socialism
Ref ers to both market-
o r i e n t e d s y s t e m o f
production and exchange
and to a society in which
c ont rol over proper t y
requi red f or product i on
(capital) is concentrated in
the hands of a small section
of populace, while most of the
rest of population sells their
labour-time in a system of
wages.

A state-oriented political
economy in which capital is
publicly owned and allocated
with expressed intention of
working towards establishment
of a communi s t pol i t i cal
economy, in which capital would
be communally owned and wage
labour abolished.

Capitalism Socialism
+
Major characteristics of Capitalism

1)Exchange of goods & services takes place thru.
markets.
2) Ownership of Inputs:
! Ownership of means of production (e.g. raw
materials & machinery) is largely in private
hands.
! This means private sector has exclusive right
(guaranteed by state with certain restrictions) to
decide on use of means of production
! That is they decide what to produce, in what
manner, and in what quantities.

+
Characteristics of Capitalism Contd.
! This power enjoyed by private sector establishes
capitalists as dominant social class since other
classes in society workers, peasants, small shop
owners and the like rely on capitalists for their
incomes and well-being.
! That is, to earn a livelihood (i.e. salaries and
wages) other classes must work for capitalists
(or sell their labour and skill).
+
Characteristics of Capitalism Contd.
3) Profit Motivation:
! Profit is to capitalism what motion is to bicycles:
capitalism, like bicycles, cant properly function by
standing still.
! Firms justify profits, in order for both them and economy
to survive.
! If adequate return on investment is not forthcoming,
capitalists will withhold their investment or invest it
somewhere else.
! The result can be a decline in economic activity in a
society and a general lowering of a society's living
standards.
! This imposes enormous pressure on govts. to ensure
hospitable conditions for businesses.
+
Characteristics of Capitalism Contd.
4) Influence over govt.:
! Businesses influence govts./public policy directly and
indirectly (i.e. thru trade bodies)
! This is made possible because govts. in capitalist
societies rely on businesses for their revenues and for
overall levels of social well-being.
! Due to forces of globalization, it is possible for
businesses to respond to an unwanted govt. action by
moving capital to another location thereby causing loss of
employment and revenues at home.
! This way, capitalists have the ability to punish the govt.
for any actions of which they disapprove.
! Hence, govt. must contend with such threats while making
decisions.
+
Characteristics of Capitalism Contd.
5) Capitalists & Democracy:
! In democratic states, financial contributions of
businesses to political parties, afford them control
over govt. policy.
! Modern elections can sometimes turn on relatively
short-term issues and personalities, which
necessitate large budgets for media advertising
campaigns to influence voters.
! Businesses can finance these budgets which makes
political parties vulnerable to accommodating
business interests.
+
Characteristics of Capitalism Contd.
6) Capitalists influence over policy agenda:
! Financial contributions businesses make to public
policy research institutions and individual
researchers cement their power.
! Organizations and individuals receiving funds tend
to be sympathetic towards business interests and
can provide business with intellectual wherewithal
often required to prevail in policy debates.
+
Ideology of Liberalism: The Backbone of
Capitalism
! Capitalism is a consequence of liberalism

! It refers to a set of beliefs & practices that
serve to maintain and promote capitalism.
+
Key teachings of Liberalism
! Individuals are prime players in society.
! They have indisputable economic rights (to own
property, to sell the same etc.)
! These rights have to be protected from intrusion by
social organizations such as state and trade unions.
! A good society is one that guarantees individuals
freedom to selfishly pursue their rights/interests,
realize their potential and accumulate wealth, all
thru. mkt. mechanism.
+
Key teachings of Liberalism Contd.
! This freedom should be restricted only when one
person's freedom erodes that of another, say thru.
theft/violence
! Role of state/govt. is to perform functions that
wouldnt otherwise be performed.
! Role of state can take 2 forms: Supplementary &
Corrective
! Supplementary role: Provision of public goods
! Corrective role: Correcting the market failure.
+
Institutions: Democracy
! Democracy is a contentious concept. One survey in late
1980s found 311 definitions of 'democracy'
! Example 1:
Democracy is a plan of political organization, a political
decision-making system, which involves structuring the
mechanisms of day-to-day control of state through
representative institutions staffed through periodic
elections.
! Example 2:
Democracy is a representative govt. elected by an
electorate consisting of entire adult population, whose
votes carry equal weight, and who are allowed to vote for
any opinion without intimidation by state apparatus'
+
Characteristics of Democracy
! Democracy confers entitlements on citizens to
choose, thru elections, who they want to have
represent them in govt.
! Representatives are held directly/indirectly
accountable to citizens
! Those who dont own means of production (say
weaker sections of society) can exercise their
numerical superiority to vote in govt. that
addresses adverse effects of capitalism.
! Example: Influenced by democratic politics in most
count r i es govt . has i nt roduced i ncome
redistribution measures defying capitalist tenet
that market alone can determine this.
+
Relationship between capitalism/liberalism and
democracy
! They are fundamentally contradictory because
capitalism is about individual rights while
democracy is about collective rights.
! Thus, democracy poses fundamental threat to
liberal order because it gives majority the capacity
to erode individual (capitalists) rights.
! In other words, opportunities for political control
that democracy offers to economically weak groups
sit uneasily with basic tenets of capitalism.
! Democracy is often needed to diffuse tensions
generated by capitalism so as to avoid revolution
and rebellions.
+
What determines govts. capacity to implement policies
independently and effectively in a liberal capitalist
democracy?
(a) Organisation of the state:
! State needs to be well organised and supported by
prominent social actors.
! When state is weak, policy effectiveness is lowest
! Fragmentation within and among prominent social
groups undermines states policy capacity by
(i) Limiting its ability to mobilize social actors towards
resolution of societal problems.
(ii) Limiting its capacity to implement policies effectively.

+
Determinants of Govt. Capacity Contd.
(b) Strong partnership between state & society:
! If both state & society maintain close partnership,
then policy making and implementation would be
effective.
! Such an institutional arrangement is called
embedded autonomy.
+
Determinants of Govt. Capacity Contd.
(c) Political system:
! Most significant aspects of political system affecting PP is
whether it is Federal or unitary.
Characteristics of Unitary
system
Characteristics of Federal
system
National govt. retains all
decision making powers.

Its role is legally
unchallenged.
Existence of at least two autonomous
levels or orders of govt. within a
country.
It can choose to delegate
decision making powers to
lower levels of govt. or
dictate to them
Two levels of govt. enjoy more or less
complete discretion in matters under
their jurisdiction and guaranteed by
constitution.

This is distinct from unitary system
where lower level govts. owe their
existence to national govt. rather than
to constitution
Examples: Britain, France,
Japan, and Thailand
Examples: Australia, India,
Brazil, Nigeria, and the
United States

+
Determinants of Govt. Capacity Political System Contd.
! Under federalism govts. find it difficult to develop fast,
consistent and coherent policies because:
(a) National policies in most areas require
intergovernmental agreement, which involves complex,
extensive, and time-consuming negotiations among govts.
that dont always succeed.
! Examples: Delay in introducing GST in India; Difficulty in
preventing hoarding to fight against rising food prices
(b) Different govts. may make contradictory decisions
that may weaken or nullify effects of a policy.
! Examples: Stand of Indian states on allowing FDI in retail
sector.
+
Determinants of Govt. Capacity Contd.
( d) Rel at i onshi p bet ween execut i ve and
legislature:
! In parliamentary systems (e.g. India, UK), executive
is chosen by legislature from among its members
and remains in office only as long as it enjoys
majority support from legislators.
! In presidential systems (e.g. USA), executive is
separate from legislature and is usually elected
directly by voters, and need not enjoy majority
support in legislature.
! It is argued that policy process is easier under
parliamentary system compared to presidential
system. How?
!"#$%&#'(%)* ,-$(#. !)"*%).#'()"- ,-$(#.
ulvlslon of powers promoLes dlfflculLles for
pollcy-makers.

lndlvldual members and commlLLees of
leglslaLure play acLlve role ln deslgnlng pollcles,
lncludlng Lhose proposed by presldenL.

Pere local and parLlsan concerns ofLen
moLlvaLe leglslaLors

1o ensure ma[orlLy supporL for pollcy measures
requlrlng leglslaLlve approval, presldenL have Lo
bargaln wlLh members of leglslaLure

ln dolng so, he/she may offer admlnlsLraLlve &
budgeLary concesslons ln reLurn for supporL.

Consequences of Lhls power separaLlon &
bargalnlng are: (a) mulLlple polnLs of confllcL
wlLh execuLlve, (b) greaLer chances for lnLeresL
group & voLer Lo lnfluence pollcy process, (c)
dlluLed or even confllcLlng pollcles
LxecuLlve can more ofLen Lhan noL Lake leglslaLlve
supporL for lLs measures for granLed.

1hls ls due Lo sLrlcL parLy dlsclpllne enforced on
lndlvldual members of Lhe parllamenL.


1here may be some bargalnlng over pollcy wlLhln a
parLy group. 8uL Lhere ls llLLle chance of changlng a
blll once lL has been lnLroduced ln arllamenL.

1he only Llme when Lhls may noL be Lhe case ls when
governlng parLy does noL have an ouLrlghL ma[orlLy ln
leglslaLure and governs ln coallLlon wlLh oLher parLles.

1hus, ln general, Lhls sysLem enables govL. Lo Lake
declslve acLlon lf lL so chooses


+
Determinants of Govt. Capacity Contd.
(e) Nature of interest groups:
! If society is characterized by umbrella groups
consisting of variety of similar interests then
policy making and implementation would be
effective.
! On the other hand, in the presence of narrow
interest groups policy making would be difficult as
groups pressure the state to serve their members
interests only.