Economics of Happiness – An Alternative to the Crisis?

First published Oct 6, 2010. Updated July 5, 2013

University of Leicester first ever World Map of Happiness

The US Declaration of Independence of 1776 states that “the pursuit of happiness” is an “inalienable right”. The economics of happiness aims to reconsider the traditional measurements of well-being, by identifying the variables influencing private well-being in order to implement public policies more susceptible to satisfy the aspirations of citizens. The macroeconomics of happiness reveals that from a certain level of attained degree of development, the possession of capital does not intrinsically entail happiness. Therefore, a reduction of marginal utility occurs. Similarly, the microeconomics of happiness reveals that social and environmental quality has an increasing impact on the durability of human satisfaction.

Public policies derived from the economics of happiness currently encourage the debate for a new remedy to the ongoing crisis, characterized by an economic crisis and a democratic deficit of representation. This new debate sustains the need for greater state intervention and for considering social problems as constitutive of the concern of the political sphere. The state must implement institutions and rules able to form a legal frame in which intense competition is less valued, because of its alienating and destructive long-term effects on the community’s organic character. Policies able to act in a transformative approach upon human nature are valued. For instance, policies instituting a progressive consumption tax or a progressive income tax, should allow individuals to pay less attention to the issue of capital accumulation. This would benefit both the state (higher fiscal income) and the individual (more cooperative and altruistic).

In conjunction with it, the economics of happiness provides an answer for the macroeconomic orientation states should take with regard to the unemployment/inflation issue. Empirical studies highlight that unemployment is worse than inflation for the degree of happiness. Employment provides essential intrinsic satisfaction. Because the current crisis is all-embracing an economic and democratic crisis, states should be aware of the importance of intrinsic satisfaction when implementing policies, provided by the realization of personal aims and perseverance (Spinozian conatus). States should increase the number of subsidized jobs and offer aid for structuring the unemployed free time.

In the end, the positive school of psychology put the accent on the importance of procedures and norms in the achievement of happiness. The utility of procedures appears as a key for the achievement of subjective well-being. It follows that the answer, for lightening the democratic deficit of representation, is the increase in the participation inside the political sphere. The increasing accountability and transparency of political institutions is therefore expected to revitalize citizenship, by empowering it. Hence, new public policies should implement a new agora for a vox populi, within which hierarchical relationships between semi-opaque state institutions and politically powerless citizens, dissolves into a comprehensive and participatory arena.

However, the implementation of this new type of policies does not consider the very nature of preferences, by not capturing the preference satisfaction in a given situation: there is no characteristic or appropriate purpose (i.e. contextualization). These policies pass over the fact the preferences are mostly adaptive, external and contingent, influenced by socialization. Owing that adaptation might be a form of resignation, if the current crisis persists – as it seems to occur – and reformative policies are not implemented, citizens might tend to have decreasing expectations and a less critical attitude towards the state. Hence, if policies derived from the economics of happiness were applied, they would provide citizens with only a minimum minimorum of happiness satisfaction. Another objection is that such public policies are unable to capture the variety of subjective preferences determining happiness. Without presenting a Huxleyan totalitarian risk, these public policies still do impose a universal regularity careless of particularities. These policies are by their very nature ethnocentric and impose some sort of paternalism. Indeed, as earlier mentioned preferences are adaptive, furthermore, in the case of the economics of happiness, preferences are no longer part of the private sphere. As politicians try to modify citizens’ preferences, they interfere in a more insidious manner with the traditional private sphere.

In conclusion, public policies derived from the economics of happiness – by being founded on realist grounds – provide elements of answer to the global crisis. However, in order to soften the effects of the crisis, such policies should have a more eudemonist dimension (1). They should focus more on the utility of the moment and not on the overall retrospective satisfaction.


(1) Eudemonism, theory that states the highest ethical goal is happiness and personal well-being

Related Posts:
· The Ideology of Economic Growth
· The myth of GDP – 1. GDP questioned
· The myth of GDP – 2. Measuring progress
· Economics in the nude


Negative externalities and taxes: a contribution to the debate on “junk food”

First published Aug 16, 2009. Updated June 13, 2013

>> Haga clic aquí para la versión en castellano

Alcohol and cigarette products are usually subject to high taxes. This occurs because the economic theory acknowledges that the price of these products does not reflect the true social cost of consumption.

Thus, a Pigovian tax [1] is applied to neutralize the externalities [2] caused by these products in both consumers and society.

Barcelona · Mercat de la Boqueria [Sant Josep]

Barcelona · Array of fruits and vegetables at La Boqueria Market

In this regard, developed countries have begun to consider the option of raising the tax burden of the food low in nutrients and high in saturated fats and carbohydrates, also called junk food as a way to lighten the deficit and in turn combat obesity [3]. If implemented successfully in the case of tobacco or alcohol, why do not tax the junk food and improve the way consumers make decisions about their diet?

In return, during the first half of 2009, interesting reports have been published focused on discussing the aspects of the issue. Thus, Engelhard, Garson and Dorn (July 2009) [4] put the junk food as a major cause of obesity, with direct consequences for the economy through a decline in productivity per worker and increased costs for medical care. United States estimates that medical costs of obesity are $ 700 higher than the costs of a thin person.

However, Yaniv, Tobol and Rosin [5] argue that the implementation of taxes on junk food has technical shortcomings. For example, there are too many possibilities of interpretation to decide what products should be considered within that tax. A hamburger has high levels of fat, protein and calories but these are also necessary for metabolism. In addition, unlike the case of cigarette or alcohol, consumption of junk food does not produce a direct negative externality on the welfare of someone other than the individual’s. Therefore, we must ponder the results of these surveys further to soon begin the implementation of tax measures that directly affect the purchasing decision of consumers.


[1] A Pigouvian tax is a duty charged on a market activity to correct the market outcome, if there are negative externalities associated with the market activity.
[2] In economics, an externality or spillover of an economic transaction is an impact on a party that is not directly involved in the transaction. In such a case, prices do not reflect the full costs or benefits in production or consumption of a product or service.  A negative externality occurs when an individual or firm making a decision does not have to pay the full cost of the decision. If a good has a negative externality, then the cost to society is greater than the cost consumer is paying for it. Since consumers make a decision based on where their marginal cost equals their marginal benefit, and since they don’t take into account the cost of the negative externality, negative externalities result in market inefficiencies unless proper action is taken.
[3] An individual is classified as obese based on his body mass index (BMI), which shows the relationship between weight and height as an indicator of body fat. An adult is classified as “overweight” if his BMI is between 25 and 25.9. If his BMI is greater than 30 he’s classified as obese.
[4] ENGELHARD, Carolin; GARSON Arthur; DORN Stan “Reducing obesity: Policy strategies from the tobacco wars”, Urban Institute. July 2009.
[5] YANIV, Gideon; ROSIN Odelia; TOBOL Yossef. “Junk-food, home cooking, physical activity and obesity: The effect of the fat tax and the thin subsidy”. Journal of Public Economics. June 2009.

The political economy of networks


Networked forms of the 1960s/70s were distinctive because essential to their origin, character and sustainability were values of solidarity, equality and democracy. Consciousness of these origins could help us now, when networked organizations are everywhere, to distinguish between the instrumental use of the concept of network in essentially undemocratic organizations (i.e. within states and corporations) and, on the other hand, as a way of connecting distributed activities based on shared values of social justice and democratically agreed norms.


The latter possibility is radically enhanced through the new information and communications technology in its non-proprietorial forms. The new possibilities of systems coordinating a multiplicity of autonomous organizations with shared values, through democratically agreed norms or protocol, can help upscale economic organizations based on non-capitalist – collaborative, P2P (peer to peer organizations such as The Pirate Bay) co-operative or other social and democratic – forms of ownership, production, distribution and finance.

What enables us to make this apparently surprising dive from the forms of organization shaped by the consciousness-raising groups of the women’s movement (or indeed other civil society initiatives of the same period, such as the factory shop stewards’ committees combining against multi-plant, multinational corporations and developing alternative plans for socially useful production is the importance they give to practical, experiential knowledge and the need to share and socialize it.

The political economy of knowledge

The reason why this is important for the development of a political economy beyond capitalism is that behind the imposed choice between capitalist market and the state is the polarization between scientific, social and economic knowledge on the one hand and practical knowledge on the other. While the former was regarded as the heart of economic planning and centralized through the state, defenders of the free market sustained the latter as being held individually by the entrepreneur, capable of coordination only through the arbitrary workings of the market, based on private ownership. The relevant step forward of the women’s and other movements of the 1960s/70s was to make the sharing and socializing of experiential knowledge – in combination with scientific forms – fundamental to their focused, but always experimental, organizations. And to do so through consciously coordinated (networked) and self-reflexive relations between autonomous (distributed) initiatives.

Translating this into economics in the age of information and communications technology – a project requiring much further work – points to the possibility of forms of co-ordination that can include and help to regulate a non-capitalist market. A regulated, socialized market, that is, in which the drive to accumulate and make money out of money is effectively inhibited. It also provides a base for democratizing and, where appropriate, decentralizing the state, within the context of democratically agreed social goals (such as concerning equality and ecology).

It is over these issues concerning the sharing of knowledge and information and the implications for the relationship between autonomy and social co-ordination that the ideas coming from the Occupy movement can creatively converge with those of earlier movements. It is interesting in this context to read the economics working group of Occupy London describing in the Financial Times how Frederick von Hayek, the Austrian economist and theorist of free-market capitalism, with his ideas on the significance of distributed knowledge, is the talk of Occupy London. No doubt this was partly a rhetorical device for the FT audience. But the challenge of answering Hayek and his justification of the free market on the basis of a theory of distributed practical and/or experiential knowledge does provide a useful way of clarifying for ourselves the importance of the networked social justice initiatives of today and the anti-authoritarian social movements of the past for an alternative political economy. (
There is a point at which Hayek’s critique of the ‘all knowing state’ at first glance converges with the critique of the social democratic state made by the libertarian-social movement left in the 1960s/70s. Both challenge the notion of scientific knowledge as the only basis for economic organization and both emphasize the importance of practical and experiential knowledge and its ‘distributed’ character. But when it comes to understanding the nature of this practical knowledge and hence its relation to forms of economic organization, these perspectives diverge radically.

Whereas Hayek theorizes this practical knowledge as inherently individual and hence points to the arbitrary, unplanned and unplannable workings of the market and the price mechanism, the radicals of the 1960s/70s took, as we have just explained, a very different view. For them, the sharing of knowledge embedded in experience and collaboration to create a common understanding and self-consciousness of their subordination and of how to resist, was fundamental to the process of becoming a movement. In contrast to the individualism of Hayek, their ways of organizing assumed that practical knowledge could be socialized and shared. This led to ways of organizing that emphasized communication and shared values as a basis for co-ordination and a common direction. It provided the basis for purposeful and therefore more or less plannable action – action that was always experimental, never all-knowing; the product of distributed intelligence that could be consciously shared.

At the risk of being somewhat schematic, it could be argued that the movements of the 1960s/70s applied these ideas especially to develop an unfinished vision of democratizing the state. This took place both through attempts to create democratic, participatory ways of administering public institutions (universities and schools, for example) and through the development of non-state sources of democratic power (women’s centers, police monitoring projects and so on). It involved working ‘with/in and against’ the state, such as in the early 1980s when Madrid was handled by Enrique Tierno Galvan and the Greater London Council was led by Ken Livingstone.

Today’s movements are effectively focusing their energies especially on challenging the oligarchic market, and the injustice of corporate, financial power. Here the development of networked forms are increasingly linked to distributed economic initiatives – co-ops, credit unions, open software networks, collaborative cultural projects and so on. In this way, today’s movements are beginning to develop in practice a vision of socializing production and finance and creating an alternative kind of market, complementary to the earlier unfinished vision of democratic public power.

What they have in common, more in practice than in theory, is an assertion of organized democratic civil society as an economic actor, both in the provision of public goods and in the sphere of market exchange.

From social rebellion to transformation


As we become increasingly dominated by the pursuit of economic growth, what campaigners can learn us from #occupy as well as previous radical movements in our attempt to forge a new kind of political economy based on a framework of equality, mutuality and respect for nature.

occupy-everything2The philosophy and experience of radical movements in the 1960s and 70s are complementary to the ideas of the direct action movements today. It is here to examine the possibility of forging a new kind of political economy by assimilating the best of both of them.

The Occupy movement’s ability to create platforms out of our closed political system to force open a debate on inequality, the taboo at the core of the financial crisis, is impressive. It is a new source of political creativity from which we all have much to learn.

One cannot fail to be impressed by the similarities between the late 1960s and 1970s and the current movement. There are both within the same strong feeling of power “from below” that comes from the dependence of the powerful on those they dominate or exploit. There’s the creative combination of personal and collective change, and proper rapport between resistance and experiments in creating alternatives here and now. There’s the repulse of hierarchies and the creation of organizations that are today described as ‘horizontal’ or ‘networked’ – and that now with the new technology tools for networking (Twitter, Facebook …) have both more potential –but it should also lend to greater distortion…

Here come back the same old problems: informal and unaccountable leaderships, tensions between inclusion and effectiveness. The Tyranny of Structurelessness, a strong assay of American feminist Jo Freeman inspired by her experiences in the 1970s in favor of the liberation of women and addressing, in particular, those unforeseen difficulties from the perspective of the movement women’s liberation, may be well read.

But that was 40 years ago – even before the widespread use of faxes, not to mention personal computers and mobile phones. Reflecting on these marginalized earlier movements possibly take forward the debates opened by Occupy and the Indignados.

From social rebellion to capitalist transformation

The fate of the energies and aspirations of that rebellious decade is a long and complex cluster of stories. Considering their relevance today, I want only to point to a historical process that was not generally anticipated at the time and still is not fully understood today. This was the ability of capitalism, which sought a way out of its stagnation and crisis, to feed opportunistically on the chaotic creativity and experimental culture-restless of the movements of the 1960s and 1970s.

For example, in the 80s while attacking unions, corporate management was also dismantling the military-style hierarchies characteristic of many leading companies and decentralizing the production process. A new generation of managers, especially in the innovative industries, assumed that more tacit knowledge by workers would infer a valuable source of increased productivity and higher profits – as long as workers have little or no power on their real redistribution.

Another prime example is how, in the endless pursuit of new markets, marketing experts were able to identify and anticipate business opportunities in the broad perspective and wants of a growing number of women with own income.

The key underlying feature of these and similar trends is that much of the innovative nature of capitalism’s renewal in the 1980s and 1990s – strengthened by the credit expansion– came from external sources to both the society and the state. In fact, frequently its origins lay in the resistance and the search for alternatives to both.

In other words, capital proved very much more agile in responding and appropriating the new energies and aspirations stimulated by the critical movements of the 1960s and 1970s than did the parties of the left – for which these movements could have been a force for democratic renewal.


Now, with the credit that supported the social turmoil of this particular period of capitalism having become toxic, the search for alternatives is back again. Even the Financial Times, much to our astonishment, insisted in a series of articles on the crisis of capitalism to conclude that “at the heart of the problem is widening inequality”.

Are we witnessing in the combination – not necessarily convergence – of unease within at least the cultural elites, the growth of sustained popular resistance and public unhappiness, the emergence of what Karl Polanyi called a ‘counter-movement’ to the socially destructive consequences of rampant capitalism? And to what extent might the ideas of the movements of the 1960s and 1970s influence the character of that counter-movement?

A fundamental break

To answer this we need briefly to remind ourselves of the essential nature of the original social critique driven up by the 1960s/70s movements and in particular the nature of its potential break with the institutions of the post-war order: their paternalism, their exclusions, their narrow definition of democracy and the assumption that production and technology were neutral values.

Essential to the character of this assessment was its aspiration, more in practice than in theory, to overcome the deleterious dichotomies of the Cold War between the individual and the collective/social; freedom and solidarity/equality; ‘free’ market versus ‘command’ state – dichotomies that were refrozen through neoliberalism and the conditions in which the Berlin Wall fell.

The ideas and practices of the feminist’s movement are particularly explanatory. This movement arose partly from the gender-blind inconsistencies and from unfulfilled promises of radical movements of the time. It deepened and extended their transformation, adding ideas emerging from women’s specific experiences of breaking out of their subordination.

Especially important here was an emphasis on the individual as social and the collective as based on relationship between individuals: a social individualism and a relational view of society and social change. After all, the momentum of the women’s liberation movement was encouraged both by women’s desire to develop as individuals and their determination to end the social relationships that blocked these possibilities of progress. This required social solidarity: an organized movement.

The nature of its organization was shaped by a constant attempt to create organizational forms that combined freedom and autonomy – what every man struggles for– with solidarity, mutuality and values of equality. The result – cutting a complex and tense story short – was ways of relating that allowed autonomy, coordination and mutual support, without having to go through a single center. It’s what might be called an early solution, pre-ICT (*), a form of network organization.

Multinational Corporations (& 2)

II. How does multinational conduct affect the human backdrop

Once considered dangerous and untrustworthy by governments, corporate enterprises are now the key players in the globalized economy, exerting substantial influence over governments and international organizations the world over. Their financial success seems endless; despite a widespread economic downturn in recent years, corporate profits are at an all-time high, with the largest banks, oil, pharmaceutical and retail companies regularly reporting record turnovers. A significant proportion of these profits are reinvested not only in influencing politics and economics, but ensuring that people continue to consume their products.

Economic and Political Influence

Despite employing less than one percent of the global work force, 200 of the largest multinational corporations (MNCs) have sales equivalent to almost 30% of the world’s GDP. Given their sheer economic might it is unsurprising that, in a period where economic growth is considered a panacea for development success, governments increasingly adopt pro-market policies and facilitate commercial activity. The result is a firmly established mutual-interdependence between corporations and governments, a phenomenon which is most evident in the United States which increasingly undermines a truly democratic representation of public interest.

While corporate-friendly policies of privatization, government downsizing and market liberalization continue to be propagated, large swathes of the public in both the North and South are suffering.  As a result, there is now a significant worldwide backlash against many of the principles and effects of economic globalization. Transnational corporations, in their relentless drive to maximize profits and bolster share prices, have been re-locating their production facilities to developing countries where tax, labor and environmental restrictions are negligible – creating large-scale unemployment in the industrialized countries.

Many argue that this is a necessary sacrifice in order to secure economic growth and opportunity in the developing world, but in many cases the result is merely a glut of labor force working in inhumane factory conditions for comparatively miniscule pay. These workers often give up their families and rural life to migrate en masse to overcrowded cities, inadvertently buying into an economic state of play which promotes unsustainable over-consumption in already wealthy countries.

At the same time, food security has sharply declined in many developing countries as large-scale agribusinesses out-compete local farmers, exporting cash crops and not growing food for those who need it locally. Consequently, communities are no longer able to grow the food they need to eat, must import food instead, and are therefore at the mercy of increasingly volatile international markets – a factor at the heart of the current food price crisis.

Influencing the public

Far from supplying public demand, corporations actively dictate cultural habits and create demand by influencing the public through a sophisticated and well-funded combination of research, marketing, advertising and media manipulation. The result is the subtle, but quite apparent, alignment of public and corporate interest. This cultural homogenization of society both nationally and globally is fertile ground for maximizing profit. Whilst levels of unnecessary and unsustainable consumption increase globally, corporate longevity is secured.

The sophistication and effectiveness of advertising and marketing methods is well understood. The ubiquity of the television and the increasing number of hours it is watched, especially by children, is particularly disturbing. In the US, watching TV is the third most time-consuming pastime after sleeping and working.

As domestic markets become saturated, or public opinion turns against a particular product, corporations – using the same aggressive marketing tactics – shift their attention to developing countries with devastating effect. Nestle is notorious for its aggressive marketing of infant milk formula in poor countries in the 1980s. Because of this practice, Nestle is still one of the most boycotted corporations in the world, and its infant formula remains controversial. In recent years, as public awareness of dire health consequences of smoking tobacco have come to light in industrialized nations, tobacco giants have also had to shift their focus to increasing demand in developing countries. The WHO has reported that 84% of an estimated 1.3 billion smokers live in developing and transitional economy countries. A 1994 WHO report estimated that the use of tobacco resulted in an annual global net loss of US $200 billion, a third of this loss being in developing countries which consequently hampers development efforts.

Corporate Greed or Public Good?

The battle for control of the democratic process is clearly being won by those with the greatest financial and economic leverage, and the phenomenon of market forces is becoming more entrenched in every aspect of public life. As many industrialized nations call for democracy to be spread abroad, the economic ideologies they have vested our future in are cancerous to these same democratic principles. True democracy can only be established if the global public is empowered to make decisions that favor cooperation and economic efficiency over competition and self-interest.

After 30 years of economic globalization and the decadent rise of multinational corporations, almost half the world is still denied even the most basic of goods and services such as clean water, basic food, energy and medicine. Whilst small to medium-scale business is crucial in a thriving and interdependent society, the commercialization of all resources and their distribution through a tiny number of oligarchic corporations will never supply the most essential resources to those who need them most. Small-scale, localized industry combined with international economic sharing is likely to play a significant role in creating a sustainable future.  This will only be possible, however, when corporate rights are scaled down to a level where corporations act in a limited and regulated capacity to serve the public’s economic needs.

Multinational Corporations (1)

Multinational Corporations are the main actors driving economic globalization which thrives when market forces are de-regulated, allowing essential goods and services to be allocated by commercial activity, not human need. The result is a world economy that favors affluent countries and their corporate interests whilst neglecting those living in extreme poverty who the market fails to reach.

I. Key Facts

Size and Income

Many corporations have a greater turnover than the GDP of most countries. Of the 100 largest economies in the world, 52 are corporations and 48 are countries, and these corporations have sales figures between $51 billion and $247 billion.

Seventy percent of world trade is controlled by just 500 of the largest industrial corporations, and in 2002, the top 200 had combined sales equivalent to 28% of world GDP. However, these 200 corporations only employed 0.82% of the global work force.

In the US, ninety-eight percent of all companies account for only 25 percent of business activity; the remaining two percent account for nearly 75 percent of the remaining activity. The top 500 industrial corporations, which represent only one-tenth of one percent of all US companies, control over two-thirds of the business resources in the US and collect over 70 percent of all US profits.

According to the International Finance Corporation (IFC), inflows of foreign direct investment to the emerging markets have grown by an average of 23 percent per year between 1990 and 2000. The combined value of stock markets in emerging economies is set to exceed $5 trillion in 2006, and has more than doubled in the past decade.

Chevron’s CEO received $37 million in total compensation in 2005, whilst Exxon’s CEO received a $400 million pay and retirement package. In the meanwhile the minimum wage in America (£5.15 per hour) is at a 50 year low.

Corporate growth is around four times as high as global economic growth.

In 2005 the number of millionaires globally swelled to 8.7 million, 5.7 million of whom are based in North America and Europe. Forbes reported a 15% rise in the number of billionaires since 2005, who now have a combined worth of $2.6 trillion.

Job Losses

Between 1980 and 1993, over four million jobs were shed by the largest 500 industrial corporations in the US. Since President Bush took office, two million have lost their jobs and in 2004 nearly one in ten could not find a full time job.

The International Labor Organization (ILO) calculates that global unemployment rates are at an all-time high. Of the 2.8 billion workers in the world in 2005, nearly 1.4 billion still did not earn enough to lift themselves and their families above the two dollars a day poverty line – the same proportion as ten years ago.


Nestlé’s fierce marketing of powdered milk in the 80’s caused the deaths of an estimated 1.5 million children through the contaminated water used to make the infant formula.

Nestle is still one of the most boycotted corporations in the world, and its infant formula is still controversial. In Italy in 2005, police seized more than two million liters of Nestle infant formula that was contaminated with the chemical isopropylthioxanthone (ITX).

In recent years tobacco giants have had to shift their focus to increasing demand in developing countries. The WHO has reported that 84% of the estimated 1.3 billion smokers live in developing and transitional economy countries. A 1994 WHO report estimated that the use of tobacco resulted in an annual global net loss of US$ 200 billion, a third of this loss being in developing countries, stumping development efforts.

Human Rights

Chevron and Coca Cola have been indirectly involved in the violent killings of workers and union officials in developing countries in attempts to suppress workers’ rights. Instances of kidnappings, torture, discrimination, health violations, fuelling conflicts, privatizing and contaminating local water sources, using child labor and even sex trafficking have all been documented as occurring under the responsibility of the largest corporations.

Sweatshops are often used in developing countries by the apparel industry which usually pay negligible wages to under age workers who often work long hours in terrible conditions.

Corporate Welfare

Government support to farmers in OECD countries came to $283 billion in 2005, representing 29% of total farm income. The majority of farmers who own small to medium sized farms do not benefit from these subsidies. 30% of farmers in the US do not receive any of the $26 billion of US subsidies, and over 85% go to only 20% of the largest farms, a pattern repeated in the EU.

The number of small farms in the US has decreased from 6.8 million in 1935 to 1.5 million in 1998. In global commodity markets these subsidies mean that producers in developing countries, many of whom produce their goods with more efficiency and less cost than the US and EU, cannot compete with agri-business suppliers.

The US Government Accountability Office (GAO) reports that 95 percent of corporations paid less than 5 percent of their income in taxes, and 6 in 10 paid nothing at all in federal taxes from 1996 through to 2000. The corporate share of taxes paid fell from 33 percent in the 1940’s to 15 percent in the 1990’s. The individual’s share of taxes has risen from 44 to 73 percent.


Every year corporations are fined hundreds of millions of dollars as their externalities create serious environmental catastrophes, neglect employee rights and even cause deaths. Examples include Chevron, guilty of some of the worst environmental and human rights abuses in the world such as the dumping of 18 billion gallons of toxic waste into rivers used for bathing water in the Amazon, devastating the health of the local community.

Taking the cost of these externalities into account, Ralph Estes estimated that the public cost of private corporations was over $3 trillion in 1995. His externalities included “workplace injuries, pollution, employment discrimination, consumer rip-offs, corporate white collar crime, tax abatements and all the other instances of corporate welfare, government contracting fraud and creative accounting”

The World Bank

Foreign direct investment now exceeds $1 trillion per year for World Bank projects such as privatization of public utilities and creating banking systems. 1% of all multinationals own 50% of the total stock of all foreign direct investment.


When these corporations made bad loans to developing countries, the IMF provided multi-billion dollar bailouts. For example, it bailed out foreign investors in Russia with an $11 billion package and orchestrated a massive bailout of the big banks that made bad loans to Asian countries. In 1995, the IMF gave almost $18 billion to Wall Street investors who stood to lose billions with the peso devaluation.


WTO rulings have often resulted in national governments being sued by corporations simply for placing national interests above corporate profit. The overall effect is the harmonizing of international regulations and standards to their lowest denominator.

The success of corporate influence on the global economy is measurable, as 70% of global trade is now controlled by just 500 corporations

The developing world, where 75% of people’s livelihoods depend upon agriculture, is the source of 90 per cent of all biological resources. Yet transnational companies based in developed counties hold 97 percent of global patents. Since 1985 there have been 10,778 patents on plants registered in the US. Overall, patent applications at the World Intellectual Property Organization have soared from 3,000 in 1979 to 67,000 in 1997.

Influencing Governments

Eighty percent of all corporations reside in the US and EU. Over 30,000 corporate lobbyists are based in Washington and Brussels, vastly outnumbering the US Congress and European Commission staff that they lobby.

The vast majority of lobby groups represent business interests who spend billions of dollars annually advocating their main cause, which is currently market access in emerging economies. In the US, corporations and their agencies spent $9.7 billion lobbying Congress between 1997 and 2000, about $4.5 million per year per member of Congress.

In his book Captive State (2000), George Monbiot lists 43 individuals who, since the 1997 elections in the UK, have been appointed as ministers, heads, chairmen, and advisors to as many government departments and independent committees. In each case their previous corporate positions (mostly as directors, chairmen or chief executives) and existing links to industry present a direct conflict of interest with their governmental roles.

The President, Vice-President, Commerce Secretary and National Security Adviser all have strong ties to the oil industry. The Bush family had strong ties to Enron-which was President G. W. Bush’s largest corporate source of funding.

Vice-President Dick Cheney amassed some £50m-$60m while he was chief executive of Halliburton Oil Company. Condoleezza Rice was a director of Chevron. Secretary of Commerce Donald Evans held stock valued between $5m and $25m in Tom Brown Inc, the oil and gas exploration company he headed.

Influencing Society

In the US, watching TV is the 3rd most time consuming pastime, after sleeping and working. In the US, 75% of commercial television time and 50% of public television time is paid for by the 100 largest corporations. Projected global advertising expenditure for corporations in 2006 is over $427 billion dollars.

Public Relations

All major corporations, particularly those which have the greatest negative impact upon the environment, have repackaged themselves recently as having ‘green’ credentials to great effect. The oil giant BP’s new green, flower-like logo and recent PR campaign is an excellent example. As a result, BP has successfully managed to shift public focus away from the fact that is one of the world’s foremost polluters of the environment and considered by many as one of the top 10 corporate lawbreakers.

The Need for Radical Change


Proposed solutions to the financial crisis tend to involve more regulation and the break up or separation of banking activities, but these merely scratch the surface. The financial sector is not only too big; it embodies massive contradictions. In particular, the social role of finance makes it impossible for monetary authorities to let the system fail. This creates moral hazard on an epic scale, ‘Wall Street socialism’ with massive benefits for the financial elite and costs and liability for the many.

Given that the public nature of money makes the financial system a public liability, there is no case for its private ownership and control. As bank credit issue is the main engine of money creation in modern societies, how that money is issued and circulated is a crucial question. The allocation of that credit determines economic priorities.

Under free enterprise system the only priority is private profit. On this basis global speculative ventures are supported while local, particularly social, businesses are marginalised.

The allocation of credit is only part of the problem, however. The main question must be why the private banking system should have control of the monetary system at all. Historically this was developed through the link between trading money, promissory notes and bills of exchange, which were exchanged for bank credit notes designated in the national currency (legal tender). More recently the system has shifted to ‘sight accounts’, money records rather than cash in hand. The question that needs to be asked is: why is the private issue of notes and coin (counterfeiting) punished by law while the private creation of sight accounts is seen as a natural function of banking?

Capitalistic control of the financial system has played a major trick on the public. Given that bank credit is created out of fresh air, like fresh air it should be a public resource, not a private horn of plenty. Decisions about the allocation of that credit should be made democratically. Private profit should not be the only criterion for money issue.

Nor should all money be issued as debt with the interest charged accruing to the issuing financial institution. Debt-based money builds in a growth dynamic that prevents the emergence of a more socially and ecologically sustainable economic system. Instead money could be issued without debt as grants or interest-free loans. The only reason this is not done is that capitalism has ideologically captured economic reasoning. The right of banks to issue money for profit is not challenged.

If people demand to issue money themselves or demand that social and ecological priorities come first they will be told that ‘this cannot be afforded’. The trick is that the market puts some kind of brake on money creation and allocates it most efficiently. The recent crisis shows that neither of these claims is true. Any money creation by the public is decried as inflationary, while massive inflation of the capitalist financial system was given the euphemism ‘capital growth’. The public were to be grateful for the few portions of taxes that were reluctantly extracted from the financial sector.

In fact, there is no reason why money should be issued through the private banking system. It may be that with money under democratic control the public would vote to give financial resources back to the private sector, but it is more likely that social expenditure would be prioritized. The private sector would then have to re-orient its activities to serving public needs. This could form the basis of an economy in which growth would occur in response to social need, rather than the demand for ever expanding profits. Money circulation would return to the production of goods and services and not the never never land of perpetual financial growth. The idea that the whole of society could secure itself on constantly inflating financial assets is a total illusion.

The financial crisis has revealed the financial system’s enormous power and lack of democratic control. Money and finance, nationally and internationally, must be socially and politically re-embedded to enable socially just and ecologically sustainable economies to emerge. Rather than asking ‘can the financial crisis be the basis of radical change?’ the crisis must be the basis of radical change if we are not to continue on the capitalist financial merry-go-round until we all fall off.

The Contradictions of Privatised Finance


Financialized capitalism rests on its capacity to create credit to lend to itself to inflate its speculative profits and financial assets. But financial asset inflation is always a pyramid scheme, whose value will collapse as soon as there are no new investors.

Traditionally states had a concentration of financial power through their ability to issue money as currency and tax it back. Capitalism has similar power through its control of financial resources. It creates money and calls it back with interest. This puts a growth dynamic into the economy. More money must come back than has been issued; this in turn demands that more money be created.

The neoliberal rationale for private control of money issue is that the market is more ‘efficient’. This is despite the endemic tendency to crisis in financialized capitalism. People have been encouraged to trust their future security in terms of pensions and savings to the financial markets, which in itself creates the conditions for a boom.

While hedge speculators can make money on rising or falling assets, for most people money can only be made on inflating financial assets such as housing or equities. This requires constant creation of credit to fuel the new buyers, a phenomenon that was clearly seen in the mortgage market. When the market has peaked and no one is willing to take on more credit, or the borrowers can no longer pay, the value of the financial assets must fall. Even in the case of hedge speculators, winners will be balanced by losers.

Why were the banks so desperate to lend money recklessly to home buyers and to develop such complex financial packages? The answer lies in the demand for increased profits to raise dividends and share prices. The bonus strategy of payment in shares also drove this. In such a situation banks engaged in the most profitable aspect of banking, which was also the most risky. It is not without irony that financialized capitalism fell because of its exploitation of the very poor. As capitalism runs out of a market for its goods, services or investments, all that is left is the poor. In the case of financialized capital this was the subprime householder. However, the subprime borrowers did not cause financialized capitalism to fail; the cause was its own contradictions.

Profit-driven banks must always be tempted towards speculation, no matter how many firewalls are put up between deposits and investments. For this reason the calls for narrow banking or smaller banks will not work. As long as the companies running the banks are driven by capitalist values they must be driven by the drive for profit, and therefore risk. This would not be so important if the activities of the privatized banking sector were not a liability on the public. But the financial system is interconnected and the only way to save some parts is to save the whole. The speculative sector can only be separated if the deposit-based sector is not part of the capitalist system and if its credit creation capacity is brought under democratic control.

The private control of banking and finance is fundamentally flawed in that its neoliberal claim to financial freedom is in contradiction to the social foundation of money systems. The crisis has also undermined the claim that through global financialization a substantial portion of national populations can sustain their economic future through appreciating financial assets. Far from ‘rolling back’ the state, the implosion of deregulated finance has directly contradicted the neoliberal case that the market and its money system is a self-regulating process that would be distorted by state intervention.

Under the illusion that money was a neutral representation of the wealth of the market, financial institutions operated far and wide. Financial traders speculated on currencies and borrowed from low-interest countries to invest in higher-interest ones. Claiming that their industry was global they played off countries against each other, demanding favorable tax status or lodging themselves in tax havens. In doing so they undermined the conditions of their own existence, the public authority of money.

A major problem for countries such as Greece or Argentina is that they have considerable problems in raising tax with substantial informal economies and high levels of tax avoidance. Finance may have escaped regulation but it has also separated itself from the legitimization of money through public authority. This led the sector to expand to such an extent that the amounts of money at risk threatened the solvency of countries that had residual responsibility for their activities.

Public Foundations of the Financial System


The financial system is concerned with the issue and circulation of money. Within capitalism the purpose is to direct money to the most profitable use.

Money is a peculiar phenomenon, real and not real so far. In essence it is a promise. Holding money is a claim on any resources, goods or services that are categorized in money terms. However, for these claims to be realized, the sellers of resources, goods or services must trust in the persistent value of that money.

Historically, money has been made of a commodity that can itself be resold, such as gold, but today it mostly consists of base metal, paper, or merely electronic records. People trust it because convention and experience tells them it will be honored. It is also backed by a public monetary authority as legal tender that has a stated value.

This is critical to public responsibility for money. For example, all monetary activities designated in pounds are collectable from the British banking system (or its international agents). Underlying the whole banking system is the Bank of England. Despite it having been made independent in policy terms, the Bank’s authority rests on the financial viability of the nation in terms of its productivity (GDP) and its ability to collectively assemble money through taxes.

As has been shown in Iceland, the people, through the state, are forced to take on financial liabilities created by the private sector. If a company produces a car that ceases to function, the owner does not go to the state asking for a new one. With money, however, this is exactly what the holder of that money will do. People invested in Icesave, the Icelandic online bank, because it offered higher interest. Despite the fact that the bank was linked to a small country of only 300,000 people, investors did not see it as a risky investment.

When the parent bank failed, depositors turned all together to the British government and demanded payment in full. In order to secure the safety of its own banks, the UK lent Iceland the money to repay deposits – a huge debt on the Icelandic people against which they are now protesting.

How could Iceland’s banks have financial commitments several times larger than its economy? Partly this was because the banks took in deposits from around the world, but mainly it was because banks can themselves create money. They do this by issuing bank credit – loans.

Free market has been built on bank credit. Traders and companies have borrowed bank money to set up their businesses. Recently most credit issue has been related to consumption or financial investments such as housing. The illusion is that banks act as intermediaries between savers and borrowers, but that is not so. Banks take in deposits, some paying interest. They also issue loans and charge interest. There is no direct relationship between savers and borrowers.

All deposits are returnable, regardless of what loans are still outstanding. Banks can also lend much more than they have in deposits, traditionally up to ten times more and even more in recent years. This is how financial sectors can explode in total value, eclipsing the productive economy and inflating financial assets.

Recently bank lending has contributed to the vast use of ‘leverage’ to enable the investments of the rich to go even further. Hedge funds, private equity investments and the investment arms of banks use borrowed money to inflate their speculative gambles. Some of these may even be gambles against the banks themselves or the national currency. As more money is issued it floods into the financial system and becomes part of the waves of money looking for a profitable home. As it is impossible to separate the interests of bank depositors or pension holders from financial speculators, in a crisis the whole system must be secured.

In such a crisis, the public groundwork of the money and banking system becomes clear. As all bank-created credit is designated in the national currency, this becomes a liability on the state. The logic would be that such a public liability should also be seen as a public resource. If the people are to be made ultimately responsible for whatever money is issued in their name, should they not have a say about how this money is used?

Far from having democratically controlled access to the process of credit issue, the public, as represented by the state, has itself to borrow from the capitalist owners and controllers of the nation’s money supply or tax money for public expenditure as it circulates. Today more than 95 per cent of money issue is through bank credit. Historically states controlled much higher levels of money issue as coinage. As expenditure on social or public needs are seen as secondary to privatized economic forces, the private sector determines how much public expenditure can, or cannot, be ‘afforded’.

Privatized control of money issue creates the impression that it is the private market that is creating wealth. Certainly it is making money, quite literally, largely through issuing it to itself as leverage to swell speculative trading. Private ownership and control of money issue has created huge differences of wealth. The mass of the people can only hope for a trickle down of economic activity through the consumption of the champagne-swigging traders and increasing numbers of billionaires. On the illusion that the manipulators of money have actually generated the wealth they gamble with, those playing the money markets demand a huge percentage of the product. The levels of pay and bonuses have become so obscenely puffed that they have become an economic ‘gated community’ set apart from ordinary mortals by their wealth. In fact they have stolen what should be a public resource and harnessed it for private benefit.

Finance Is Not Private


The global economic crisis in progress has naked the contradictions of privatised finance. If taxpayers have to bolster the system when it fails, why should they not also have control over the supply and allocation of money in the first place?

The UN’s Economic and Social Commission for Asia and the Pacific (UNESCAP) painted a grim picture for the region overall in the wake of the global financial crisis

At the height of the financial crisis, the total public financial exposure in rescuing the world’s financial systems was around $15 trillion – a quarter of world GDP. Most of this was not operated, but the existence of public aid prevented a worldwide collapse of financial institutions. This vital role of the public sector has in practice been ignored, as the surviving banks return to the bonus culture, benefiting from reduced competition and additional state support through, for example, quantitative easing/ facilitation (increased money supply).

Not all states could support their bloated financial sectors. Iceland collapsed with financial commitments up to ten times its GDP. Britain, with a financial sector worth around five times GDP, could have faced similar problems. Globally the financial sector eclipses world GDP by at least ten times.

Why do governments feel compelled to spend uncountable billions rescuing the banks and financial sector when other businesses are often left to fail? The answer is that the financial sector is not a private sector at all. It embraces a public function, the issue and circulation of money – something that has been appropriated by private capital.

The contemporary banking and financial system has appropriated this public doings for its own benefit. However, when the financial system goes into crisis, the need to retain this public function means that it becomes a liability on the public, as represented by the state or equivalent monetary authority. As John McFall, chair of the UK Treasury select committee, wrote (Guardian, 9 January 2009):

 ‘After the extraordinary self-induced implosion of the financial system, the future of the market system now rests in the hands of governments. The politicians are the only show in town.’

The financial crisis and the public response have revealed both the instability of the global financial system and the importance of a public monetary authority of last resort.

The latter half of the 20th century saw a rapid growth in the financial sector as people became entangled in debts (particularly consumer debts and mortgages), as collective and public financial security was abandoned in favour of personal investments (particularly pensions), and because there was benefit to be had from inflated financial assets (particularly housing). Even institutional investors were tempted by the promise of higher profits in the most speculative areas, such as hedge funds.

With such a large proportion of the population entangled in the financial system, a demand for public rescue became more likely. A collapse in the financial system is much more threatening to social order than failures in the productive sector. If one factory fails it does not automatically close the rest (they may even benefit from less competition). But if a bank fails the panic threatens to become systemic as people lose confidence in the banking system. This alone was a major reason why states had to get involved.

The need for state intervention has exposed the contradictions of financialized capitalism and its reliance on ‘Wall Street socialism’. A pivotal point was the rescue of the US investment bank Bear Stearns. The US monetary authorities were not only bailing out the retail banks, but finance capital as well. When the US Treasury later tried to isolate the investment sector by letting Lehman’s fail, there were nearly fatal consequences for the banking sector. The financial sector was so interconnected that a crisis of default in the US subprime sector could bring down a relatively small bank in the UK, France or Spain via the functioning of the global money market and the drying up of credit.

Rehabilitating the African Civil Service


The customary  problems  of  public  sector  ineffectiveness  due  to  erroneous  reform movements – leading to a reduction instead of a reinforcement of the system – and the ongoing  danger  of  corrupt  public  officials,  give  reason  to  speculate  about  more successful policies for the reinvention of the African public administration. In order to do so, public service ministers came together in Stellenbosch, South Africa in 2003 to respond to “unfolding challenges” in African public administration (1).

In accordance with some reform approaches of the late 1990ies, the aim of new reforms is to switch to home-grown and demand driven methods directed at specific problems and challenges instead of the donor-pressured goals of broad downsizing and cost- cutting (1). While the UN observes that contemporary reform methods do still aim to improve business and customer satisfaction techniques –“a  carry-over from the early days  of  New  Public  Management”  (1),  intangible  reform  topics   such   as  the implementation of norms and values as well as public service ethics and accountability play a vital role.

Since African countries like Ghana do not possess the financial assets necessary for a much needed rise of public servant salaries, it seems crucial to at least stabilize the employees feeling of normative obligations. Despite negative experiences citizens have encountered with corrupt public officials so far, the latter must still be expected to have a  special  awareness  for  accountability  since  they  belong  to  the  directly  elected government of the country (2). Von Maravic argues that ethics in public management influence the quality of decisions made in public administration as well as the trust the citizen has in the system. (3). Hence, if one could ensure the ethical comportment of public officials, African (and more precisely Ghanaian public administration) could highly improve.

However, at this point another problem must be faced: the lack of resources. In this way, the UN states:

“In many countries, public administration remains weak largely owing to a shortage of human resources and to deficiencies in staff training and motivation.“ (4).

When speaking about the amelioration of African public services, one must be cautious not to attempt to apply the same public sector reform logic to all African countries. The differentiation of Adamolekun provides a possible classification of African states that has been mentioned before when referring to Ghana as a reform-committed country.

The above  table  or  a  similar  one  could  be  used  in  order  to  ensure  a  sustainable improvement  of  African  public  administration  systems.  In regard to this, the UN highlights the necessity of information sharing among reforming African states (4). Implementing the homegrown, but still NPM influenced methods of public sector reform in combination with the support of ethical and accountable changes in countries of the “virtuous circle” could be a first step (5). While the public service ministers all attempt to work on similar criteria they must accept countries like Botswana, Namibia or South Africa as a ‘primus inter pares’and a focal point of orientation. Moreover, it is obvious that foreign investments are still necessary; however one must not repeat the mistakes of the 1980ies and let donor schedules pressure the implementation of reforms.

Related posts:
· The African Governance Crisis (1/4) · A sift inventory of Africa’s development problems
· The African Governance Crisis (2/4) · The Consequences of Reforms on the African Civil Service
· Millennium Development Goals: Fragile states claim summit outcome off-target


(1) African Press Organization. (2008). 6th Conference of African Ministers of Public Service Opening Remarks.
(2) Solinski, H.M. (1993). Ethic-conscious outlook behavior in public administration in Switzerland. Considerations and suggestions for the introduction of an ethics understanding based on the American experience. Reports and contributions of the Institute for Business Ethics at the University of St. Gallen.
(3) Von Maravic, P. (2009). Ethical challenges in administrative action. 5/4/2009.
(4) United Nations. (2005). Public Administration and Development – Report of the Secretary General.
(5) Adamolekun, L. (2005). Re-Orienting Public Management in Africa: Selected Issues and Some Country Experiences. In: African Development Bank – Economic Research Paper Series No. 81.

The Consequences of Reforms on the African Civil Service


 “Since the late 1980s, many African countries have been reforming their civil services (…) Unfortunately, these reforms have not been very successful because of faulty diagnosis and prognosis. They have failed to tackle the major problems confronting African civil services.” (1)

Before the analysis of African public administration reforms can be undertaken, one must remember that the landscape of Africa’s civil service was not build from scratch. With its independence from British colonial rule, countries like Ghana inherited a system of public management that fulfilled tasks of “assuring the continuity of the state and maintaining law and order” (2). However, the civil service was doomed to re-orientate after independence in order to follow national interests instead of the ones of former colonial rulers. The African Development Bank thus asserts  that  an  enormous  expansion  of  the  civil  service took  place  until  the  grave economic decline at the  end of the 1970ies leading to a full-scale development crisis (2). This is when reforms of the civil services this paper aims to concentrate on were launched. Ghana shall be utilized as a hands-on example in this work, because it may be identified as a reform-committed country (2) that demonstrates strong efforts to rehabilitate its public service despite tremendous economic shortfalls. Therefore, a lack of commitment can be dismissed as a possible inhibiting factor to a successful development of Ghanaian public administration.

The goal of the following chapter is thus to properly understand why policies from the 1980ies aiming at the economic stabilization and development of African states such as Ghana have shown little success (1). One of these policies is the liberalization African markets (3). Taking this as the initial point of  this  work’s  analysis,  one  is  more  likely  to  comprehend  the  nature  of  reforms launched  during  the  1980ies.  The question whether the latter actually inhibited or actually reversed Ghanaian administrative, hence ultimately economic progress shall now be at focus.

NPM-Waves in Africa

Influenced by donor countries providing the necessary financial support for reforms (4), the ideal of New Public Management began gaining ground as a leitmotif for reforms in Ghana and other SSA countries. In general one can follow Bamidele Olowu in asserting that “African civil services [were] originally modeled on their metropolitan precursors.” (1). Although New  Public Management does not  translate  into  the  same  dogmatically  closed  catalogue  of  instruments  in  every country, in this work NPM shall be understood as a business interpretation of administrative action, hence a trend toward micro economic behavior in public management.

According to Peter Evans, this phase of reforms in developing countries may be seen as market-centered (5). After decades of viewing the state as the ultimate instrument of development, reforms in the 1980ies were initiated under the sentiment of negative experiences with the central government, hence a thrive for a reduction of the state.

As mentioned before, Ghana like many other African countries experienced a great expansion of the civil service sector after the 1960ies (1). After the global oil crisis, African economic decline and the ideal of a business-oriented reform wave  of  the  public  administration,   this   growth  of  the  state  was  to  be  ended (2). Donor countries provided African states with the necessary financial aid for the cutback of civil services (4). To make this more accessible, one must look at some exact data, in this case from Ghana.

The shrinking of the Ghanaian public administration was tackled through a myriad of reforms steps. The most important ones for the analysis in this paper are as follows. A grand movement of organizational restructuring led to a reorganization of government ministries eliminating four agencies during the reform efforts. Hence, seemingly unnecessary agencies were cut.  Another method, which was very well received by donor countries, was Ghanaian retrenchment. The core goal of this policy may be seen in the cutback of unneeded civil servants in order to shrink the countries’ public administration system. Therefore, Ghana reduced its civil servants from 131 089 in 1990 to 80 000 in 1995 (1).

Despite the reduction of civil servants, the payment of the latter was to be increased. Therefore Ghana foresaw decompressing wages and providing higher salaries for public managers. While information on the actual increase varies depending on the source, it is safe to say that actual salaries in Ghana did not rise significantly. Although still higher than for many African countries, the increase during the reforms in Ghana was modest (2).

These three aspects of Ghanaian public sector reform are sufficient for the following line of argumentation. However it shall be noted that Ghana was also at the forefront in regard to privatization and decentralization of public services (1). Due to its British past and organizational influence, reforms like the latter were faster implemented than in other African countries (1).

Evaluation of the NPM Reforms in Africa

The crucial part now lies in the evaluation of the New Public Management reforms and their effect on policy-making capabilities of the African civil service.

As mentioned above, the size of the Ghanaian public administration was decreased in regard to the number of agencies as well as the number of employees. Donor countries favored this approach due to  the conviction that a smaller public sector would work more  efficiently  as  for  instance  experienced  in  the  UK  (3). Moreover, the state’s involvement was seen as one of the core problems in developing countries after the 1970ies (5), thus the idea of a roll back of the state was widely popular (6).

However, the African civil service was never abnormally big in comparison to other regions (1).

      Figure 1: Government Employment as a Percentage of Population (various recent years)

Source: Olowu, 1999, p. 9.

As visible in the above chart, the central as well as the local government in sub-Saharan Africa is much smaller than the OECD average. While the observation that there was an enormous growth of the latter may very well be correct, this must be viewed as a post- colonial necessity. It seems rather logical that a growing economy must increase its public administration capacities. In regard to the number of public employees, the UN states that the African public administration “is significantly understaffed in professional and managerial areas, and perhaps overstaffed in semi-skilled and unskilled areas.” (4).

Therefore, one must conclude that a reduction of Ghana’s civil service at all levels was contra-intuitive and defeating the purpose of a more effective public administration.

The retrenchment in the civil service in general has proven to be more costly than expected in the beginning. More precisely, the research on the proper identification of cost saving possibilities mostly exceeded the actual ex-post cost saving (1).

Ghana is once again a perfect example for this miscalculation as the country actually encountered cumulative losses as a result from downsizing in the 1980ies. Although  Ghana  has  been  classified  as  a  committed  reformer,  the  former  head  of Ghanaian civil service, Robert Dodoo asserted his dissatisfaction in regard to the reform movement. According to him, the reason for the lack of improvement of the country’s development lay in the “donor time-tables, agendas and conditionalities” (7). While external support was necessary and vital for an improvement of the African  civil  service  the  provision  of  money  came  with  unreasonably  short-term expectancies.  It  does  not  seem  surprising  that  a country in  danger  of  loosing  all monetary  support  decides  to   hustle  through  a  reform  and  risk  less  successful implementation instead of the loss of crucial financial aid.

There are two core weaknesses to be identified after this ex-post evaluation of the first part of African civil service reforms: (1) the way reform was embarked upon, along with (2) the goal of the reform.

The first point has been made quite clear with the previous statements of Robert Dodoo. The pressure for success coming from donor countries was in no way beneficial for the improvement of the Ghanaian civil service. As one of many, Ghana had agreed to reduce the cost of the public sector and implement questionable structural adjustment programs: “This was an explicit condition for financial support from the International Monetary Fund and the World Bank.” (2). Although the size of the civil service was reduced, the results in cost saving were modest.

But why reduce the African public administration at all? As demonstrated with the graph, the African civil service was in no way bigger than ones from many other states. While it was indeed expanding after the colonial rulers granted independence, this was a vital step toward a functioning economy and a sustainable development of countries like Ghana. State and market building are mutually dependent; hence a strong state in combination with a functioning market could be seen as the more adequate policy for Africa at this delicate time (3).

The World Bank itself states that

‘An effective  state  is  vital  for the  provision  of the  goods and  services  – and  the  rules  and institutions – that allow markets to flourish and people to lead healthier, happier lives. Without sustainable development, both economic and social is impossible.’ (8)

The problem  of  the  1980ies  believe  that  effectiveness  would  be  achieved  through downsizing is  made clear in the above. However, it now becomes tangible that the effects of the 1980ies reforms may very well have resulted in lacking capabilities to implement crucial policies for the countries’ development, i.e. the liberalization of markets. If there are too few agencies and employees to oversee the realization of liberalization, this process is doomed to fail.

The third reform step that shall be evaluated here is the alteration of salaries in the civil service. While there was indeed some increase in the salaries of civil servants in Ghana, they are still stunningly low (1).  When being confronted with unattractive   employment   opportunities, the reaction of workers is universally comparable. High-qualified human capital either leaves the country in order to find better-paid jobs or the employee opens him – or herself to corruption. A report by the IMF shows a strong correlation between wages in public administration relative to wages in manufacturing: “It is estimated that government wages needed to be 2×8 (…) times higher to make corruption negligible.” (The Economist 1997, Reasons to be venal).

Corruption is another major weakness of African public administration and must be seen as another NPM-influenced repercussion (1). Peter Evans asserts in this regard that methods of personalism and plundering at the top levels of African civil service destroy all possibilities of rule-governed behavior in the lower levels of public administration (5). More precisely, in order to make a living less qualified officials go along the example set at the top.

Another fatal repercussion of corruption for these countries is not only the waste of financial  resources,  but  also  the  cancelation  of  international  aid  programs  as  a punishment (5). Weak public administration with corrupt officials therefore results in a vicious circle for the whole country.

After evaluating the three vital reforms in Ghana, the downsizing of the public sector as well as an insufficient rise of civil servant salaries, in the following, this paper aims at observing some of the latest reform movements. By doing so, the goal is to make a recommendation as to where the development of the Ghanaian and African civil service should be headed in order to guarantee more capable ways of implementing policies for an improvement of the countries’ development.

Related posts:
· The African Governance Crisis (1/4) · A sift inventory of Africa’s development problems
· The African Governance Crisis (3/4) · Rehabilitating the African Civil Service
· Millennium Development Goals: Fragile states claim summit outcome off-target


(1) Olowu, B. (1999). Redesigning African Civil Service Reforms. In: The Journal of Modern African Studies 37, 1 (1999). Cambridge University Press.
(2) Adamolekun, L. (2005). Re-Orienting Public Management in Africa: Selected Issues and Some Country Experiences. In: African Development Bank – Economic Research Paper Series No. 81.
(3) Chaudhry, K. A. (1993). Myths of the Market and the Common History of Late Developers.
(4) United Nations. (2005). Public Administration and Development – Report of the
Secretary General, Sixtieth Session.
(5) Evans, P. (1995). The State as Problem and Solution: Predation, Embedded Autonomy, and Structural Change. In: Politics and Society.
(6) Goldsmith, M. J. & Page, E. C. (1998). Farewell to the British State? In: Public Sector Reform by Jan-Erik Lane. London: SAGE Publications.
(7) Dodoo, R. (1996). The Core Elements of Civil Service Reforms. In: African Journal of Public Administration and Management
(8) World Bank. (1997). World Development Report. New York: Oxford University Press

A sift inventory of Africa’s development problems


Index of African Governance Human Development

Index of African Governance Human Development © European Statistical Laboratory

The underdevelopment of developing countries and the attempted overcome of the latter are at heart of international debates ever since development politics began gaining ground in world politics in the 1960ies. Today, African states receive special attention in regard to possibilities of an amelioration of their economic status quo.

Core problems  of  these  so-called  Least  Developed  Countries  (LDCs)  are  a  highly restricted  access  to  basic  human  needs  such  as  food,  water,  energy  resources  or medicine.  Moreover “social services and infrastructure have largely collapsed  owing  to  a  lack  of  resources  for  their  upkeep.”  (1). Although the Millennium Development Goal aiming at a worldwide reduction of extreme poverty by 50% is expected to be reached until 2015, this data must be considered with caution in regard to Africa. While countries such as India or China, who are also targeted by the UN agenda  do  indeed  face  an  incredible  improvement  of  public  wealth,  sub-Saharan countries are at risk of being left behind permanently. More precisely, the UN today expects goals such as the reduction of extreme poverty to be reached in Africa no sooner than in 150 years (1).  This vicious circle of underdevelopment is well highlighted in the Human Development Index. From the 1980ies until the end of the millennium 13 of 22 countries that suffered large setbacks were African (1). Among a great number of possible explanations for this economic disaster, one of the most plausible ones is the conviction that “governance and public administration  weaknesses,  [and]  the  failure  to  reflect  poverty  concerns  in  budget allocations…” (1) generate economic gaps. This analysis thus aims to demonstrate that so far weak governance institutions are one of the main causes for the above-depicted underdevelopment of some African countries.

But how exactly does the public administration system of sub-Saharan LDCs affect their (economic) development?

Many theories regarding the economic improvement of these poorest countries have been launched and abolished. Sub-Saharan Africa (SSA) has been at the receiving end of a myriad of developmental experiments ranging from modernization concepts to self-help and good governance approaches. The core train of thought driving these, mostly Western models of development, has been the ideal of market liberalization (2) as  a  motor  for development.  But  what  is  often  forgotten  when  dealing  with  the  approach  of  free markets is the vitality of  strong governance institutions. Kiren Chaudhry and Peter Evans acknowledge that market building and state building must go hand in hand (2)(3). More precisely, they hereby avert from the idea of a simple roll back of the state of New Public Management (NPM) reforms launched during the 1980ies (4).  The UN General Assembly corroborates: “With challenges of poverty and growing inequality (…) organized and constitutional Government becomes the only guarantee of personal and collective security.”  (1).

Although development aid or development strategies in general may have fallen into some disgrace during the last decades due to little trickle down effect and images of corrupt African leaders wasting  Western money for their personal pleasure,  increased  financial  aid  might  be a sine qua non at this crucial time of development of African governance institutions. A lack of financial resources leads to dramatic human capital flight in the African public administration (1). Further, NPM-like cuts in administrative resources in order to minimize the size of African public management could have led to a setback and to less development in the target countries.

The reforms of the civil sector in Africa so far have been mainly concerned with technicalities, such as the reduction of the size and the cost of the public sector (5).

However, this approach fails – as I shall argue later in more detail – to comprehend the crucial task of building lasting human and institutional aptitudes.

This contribution therefore aims to concentrate on the civil service sector of underdeveloped sub-Saharan countries. Questions such as: ‘What kind of reforms were implemented?’ must be answered before diving into the complex task of evaluating the latter and discussing a different approach to possible improvement in the civil service, hence in the countries’ development. Thus, in a first step, this paper will focus on some major reforms in reform-committed African countries such as Ghana and underline the weakness of the attempts to change the system of public management (6).

A second step will then be dedicated to suggestions of a new direction for the handling of the African public administration.

In a last step, this paper then aims to draw a conclusion and answer the initial question whether public sector reforms in Africa so far actually inhibit or support development.

Related posts:
· The African Governance Crisis (2/4) · The Consequences of Reforms on the African Civil Service
· The African Governance Crisis (3/4) · Rehabilitating the African Civil Service
· Millennium Development Goals: Fragile states claim summit outcome off-target


(1) United Nations. (2005). Public Administration and Development – Report of the Secretary General. Sixtieth Session.
(2) Chaudhry, K. A. (1993). Myths of the Market and the Common History of Late Developers.
(3) Evans, P. (1995). The State as Problem and Solution: Predation, Embedded Autonomy, and Structural Change. In: Politics and Society.
(4) Goldsmith, M. J. & Page, E. C. (1998). Farewell to the British State? In: Public Sector Reform by Jan-Erik Lane. London: SAGE Publications.
(5) Olowu, B. (1999). Redesigning African Civil Service Reforms. In: The Journal of Modern African Studies 37, 1 (1999). Cambridge University Press.
(6) Adamolekun, L. (2005). Re-Orienting Public Management in Africa: Selected Issues and Some Country Experiences. In: African Development Bank – Economic Research Paper Series No. 81.

Dreadful post coitum in the backstage of power (2)

Dominique Strauss-Kahn VS. Nafissatou Diallo: A case of Comparative Law


A brilliant career, stunning accusation · © CNN

Reality is a hard nut to crack.
Dominique Strauss-Kahn is a major figure who has friends who may be sincere in their affection, no matter how often crossbred with ulterior political motives. Whenever a person is accused of something incredibly serious, his relatives have the natural reflex to refuse to believe that it is just possible.

The first instinct is to protect, to rush to help, sometimes awkwardly, like that wife who thought helping her husband accused of robbery and who found nothing better to say at the bar of the criminal court: « Murderer maybe, but a thief, surely not! »

Clumsy reactions, not to say completely ill-advised have been held. Most of those who did so have retracted or expressed their regrets by realizing the nonsense of their arguments.

It is not herein about demonstrating the guilt or innocence of the IMF’s managing director. No more than trying to prove a hypothetical plot, in one way or another, but to describe and explain the criminal proceedings which he is subject to understand what is happening and what will happen. Note that I do not pretend to be a lawyer practicing in New York and I beg more eminent experts than me to forgive my probable errors and approximations, and I will correct the post if required.

The U.S. procedure, a much more balanced system than the French feedback might suggest.
Let us briefly recall the facts: DSK is charged of having appeared suddenly naked, facing a maid who had entered the room thinking it was cleared out, to put it back in order. After closing and locking the door, DSK would have intended to force her for oral sex, he would have tried to take off her clothes in order to go further, but she managed to escape. The police arrived, reportedly found that he had left the scene, forgetting one of his (seven) mobile phones, and tracked him down in the list of passengers on an Air France flight to Paris.

He was arrested onboard by the Port Authority of New York and New Jersey – the local Border Police – and delivered to the NYPD, the Special Victims Unit to be precise.

In the United States like in England, police have broad powers of inquiry and initiative in investigations. Unlike France, where the prosecutor leads the investigation and gives instructions to the police – which are in fact orders –, the district attorney discovers the records when the police bring them together with the suspect. For some serious cases, police officers may have an advisory role, stating the evidence that the DA needs to go further on prosecution. Both authorities are more separated in the U.S. than in France.

The arrest may take place without an arrest warrant in two cases: the crime takes place in the presence of the police officer or if the officer has sufficient evidence to arrest the person (sufficient grounds). In general, a home arrest requires a judge to issue an arrest warrant.

The first stage is booking and it is held at the police station. Fingerprinting, photo identification, judicial collect of criminal record (in New York it is called NYSID report or rap sheet. The person under suspicion may be questioned but he has the right to remain silent (which will never be retained for the prosecution against him unlike in French law). He may be assisted by a lawyer who has the right to intervene during interrogations (the Paris prosecutor shivers in terror at this perspective). The police officer in charge of the case (usually the first on scene) prepares a report – the criminal complaint— which is the basis for prosecution.

Less serious facts give rise quickly to release from custody with straight summons by the judge (Desk Appearance Ticket, DAT). Here we are facing a felony – on top of the scale of gravity, not DAT, but submission to a judge. This arrest should be as brief as possible. The law provides for a period of 48 hours in case of arrest a weekend away, but this rule does not apply in NYC, where hearings are held 365 days a year (from 9:00 a.m. to 1:00 a.m.). In this matter, DSK agreed that such hearing which could take place on Sunday – as New York city’s justice doesn’t sleep’— might be postponed to allow achieving DNA testing.

Once the booking is completed, the suspect is escorted to the Court Building, the competent court (here, in the case of felonies, the New York City Criminal Court, but only for the preliminary phase). It was there that DSK was featured on May 16: his memorable walking out under the flashes, that most French journalists published by asking if they could do it, and his transfer from police station to Criminal Court.

There, the police officer handling the case – and/or the complainant – is received by a substitute (Deputy District Attorney, DDA) who decides whether to prosecute or not. The DDA does NOT speak to the suspect, since in the United States, they have realized quite a long time ago that he is the opposing party (in France, there is hope it finally occurs all along the XXII century). If DDA considers the record substantial, he should formalize a ‘written complaint’, i.e. the official complaint of public prosecution.

The suspect is then brought before a judge for a hearing called the arraignment. The judge notifies the suspect of charges against him (a copy is delivered to him), of his right to counsel (he must be assisted, if necessary by a court-appointed lawyer at the arraignment), he is entitled to a preliminary hearing (in the case of a felony as it happens to DSK). He will not be asked at this stage whether he pleads guilty or not guilty, only in cases of misdemeanors and minor offenses, the equivalent in France of ‘délit’ and ‘contravention’ (but the suspect is entitled to give it up and, if need be, to plead guilty before the Criminal Court, this option is already ruled out by DSK’s lawyers).

The judge may decide to immediately stop the proceedings if he believes that the offense is not clearly established (case dismissed, French’s ‘affaire classée’)). With regard to alleged felonies against DSK, the indictment is incumbent on the Grand Jury.

The judge will then decide what happens to DSK until the Grand Jury decides. He can be released on his promise of appear spontaneously (Released on his Own Recognizance, ROR), released on bail or exceptionally remanded –i.e. arrested up to 120 hours until the Grand Jury has ruled or a Preliminary Hearing is held if the suspect, who is now the defendant, asks for it; but the prosecution does not bet on it usually).

The essential difference between Preliminary Hearing and Grand Jury is that the former is public and is held in the presence of the defendant while the Grand Jury meets closed-doors in the presence of the sole District Attorney and witnesses brought to testify.

The Grand Jury is composed of 23 people (a quorum of 16 people is required for it to decide). It outlines the evidences gathered and deliberates and it either votes a true bill – 12 jurors at least consider that there is prima facie, and then the case goes to trial (indictment) – or a no bill – i.e. no trial, then the case is dismissed.

In case of indictment by the Grand Jury, a new arraignment hearing is held before the Superior Court competent to try crimes (felonies), here the New York Supreme Court. Thus began the preparatory stage: the parties may negotiate a plea bargaining, ie, a guilty plea, where they have 45 days to submit petitions (motions) to be settled before the trial, eg to exclude illegally obtained evidence, or direct certain actions. Once these motions considered, a trial date is set. The trial shall be public, and judged by a jury who votes only over the conviction. The penalty, under the sole judge’s domain, is ruled at a subsequent hearing.

Finally there are 3 qualifications retained at this point: criminal sexual act, attempted rape, unlawful imprisonment. The penalty system is somewhat complex. Crimes are divided into categories AI, A-II. B. C, D and E. DSK appears to fall into the category B, so a maximum of 25 years imprisonment and a minimum of 1 to 8 years (Criminal Code of New York State. art. 70).

Dreadful post coitum in the backstage of power (1)

Dominique Strauss-Kahn vs. Nafissatou Diallo: A case of Comparative Law

On the eve of the hearing to be held June 6, throughout Dominique Strauss-Kahn will have to plead guilty or not guilty on the seven charges against him, it seems appropriate to analyze the situation – and report progress – from the perspective of comparative law. To be precise, if DSK pleads guilty, there will be no trial but a conviction to several years in prison, whose number will be negotiated with the judge. If he pleads not guilty – as his lawyers have suggested – a trial will take place.


DSK was the favorite candidate for the French presidential elections of 2012

Falling of an idol. After two breathless weeks of one of the most spectacular cases in French politics, with hearings filmed, suspense, shocking images, conspiracy theories – will this century experience a significant event without its conspiracy theory? – and of course sex – which means outselling–, the excitement will drop, so to speak, and a media relief will be imposed from necessity.

But the jurist loves nothing more than the calm and serenity, which are propitious to reflection.

In hindsight, 15 days later, it is clear that the omnipresence of this case in the timeliness will inevitably recess. « At last! » some masochists might say – the same ones who are sick of this case but who still read this article.

Dominique Strauss-Kahn has been released (but is very closely supervised) and I am delighted, beyond any consideration, of his eventual guilt. Everyone expects to be released until their trial, as detention must be truly exceptional. This is not the case in France. This principle is best applied in the U.S. than in France, especially in criminal cases. Not to mention that before 2000 in the French criminal procedure, before a criminal court, the accused was free until he would necessarily become a prisoner on the eve of the hearing.

The conditions under which this freedom has been granted (a deposit of one million dollars, in addition to a 5 million warranty executed if Dominique Strauss-Kahn does not attend the hearing; prohibition from leaving NYC where he ought to live in a CCTV apartment, an armed guard at the door entrance, waged by the accused himself; a permanent electronic tracer anklet… anything at his expense) have prompted comments on Justice of richest (the accused had to raise $ 6 million and spend about $ 200,000 a month to ensure his own 24-hour monitoring). One thing must be understood.

Though a person who’s well off can probably – and in the U.S. probably more than anywhere else among the democratic countries with an independent judiciary – easily put the necessary resources to ensure his defense and will necessarily be much better defended than a person that may not do so, at this point it was not the New York justice who imposed stringent conditions for releasing DSK. It was the DSK defense who proposed what is called a lease package made of reinforced concrete: the defense came with such a turnkey probation, saying « That’s what we propose.» Basically, the judge just alleged: «Okay, I’m fine with this. » Defense brought out the (very) heavy artillery, for it knew that the prosecutor’s office (District Attorney, DA) would do everything possible to keep this very big fish in the fishpond of Rikers Island. Being elected, the NY prosecutor (in contrast to French judges who are appointed by the President of the Republic on proposal of the Minister of Justice, and the opinion of the Supreme Council of Magistracy; if someone could point it out to some know-it-all, thank you) has everything to gain by showing that he’s severe with the powerful, especially if this powerful is an alien. The prosecutor’s office has pushed to the limits the Polanski precedent: the flight risk (under French law, one talks about « lack of guarantees of representation »), stressing that the accused was arrested on an airplane when he was getting ready to leave the territory. The defense did expect this and anticipated correctly: it showed the ticket purchased before the facts occurred and came up with a proposal that no judge would probably have dared to require since it is costly and burdensome. Add to this the argument that the IMF Managing Director may be considered an honorable man, and the decision has been taken away…

Now begins a period that in French law would be called « pretrial » –understand « making the case ready for trial. » Indeed, U.S. law in general and New York in particular ignores the criminal enquiry conducted by a judge, specific to the Anglo-American inquisitorial system. It is an accusatory system, where the Judge is at a retreat – on a temporary basis – and acts as arbitrator.

A clarification: the Anglo-American accusatory system has never meant that it was on the accused to prove his innocence. It does not preclude the innocentation scheme, but the inquisitorial system, where Justice leads the investigation and keeps the bulk of the initiatives. The systems are not incompatible: in France, civil proceedings are accusatory, while criminal procedure is inquisitorial, with accusatory parties (such as the procedure before the trial chamber). Both parties – and I mean both parties because under U.S. law the complainant is not a party to criminal proceedings – will present their motions to the judge who will decide essentially on the admissibility of an evidence a party wants to produce and which the other does not want to hear about (Let’s say if a DNA test charges the defendant but the chain of custody was broken, meaning that at some point the integrity of the sample was not preserved with certainty -if  the sample has been forgotten in the police officer car at night, so as that could allow its contamination or its replacement- the Judge will exclude this evidence and the prosecution may not fall back on it). They have 45 days to do so. The hearings will be held in the Office of the Judge without publicity so the jury is not aware of these elements. If the DA had fled the information that a DNA test was rejected the defense may request a mistrial, (which is) to consider that the right of the defendant to a fair trial was irreparably damaged and that case should be permanently dismissed. And for those wondering, if it was the defense that was the source of the leak this would allow the DA to make a point of mentioning before the jury. Proceedings are not messy…

To sum up,at the end of the day,  until the trial begins the case will be prepared secretly, without further hearing or videoed suspense. So goodbye, hilarious scenes of special correspondents from the courthouse live from New York, less well informed about what is happening than journalists in Paris who have access to Twitter. I will miss it.

I have heard the optimistic statements of a DSK’s lawyer, Mr. Benjamin Brafman. I must confess my astonishment. Such statements, even cautious are not common in general and it is a first for this lawyer who has now a lot to loose in the event of a guilty plea or of a conviction. I can only speculate that he has a wild card up the sleeve to be so affirmative.

This leads me naturally to the presumption of innocence. In short, it is primarily a rule of evidence (it is up the prosecution to prove the guilt) to which French law added a protection matter of reputation: it is forbidden to make a person being subject of an investigation or prosecution as guilty until he has not been finally convicted. It is not easy (enough), even a lawyer like President Sarkozy cracks up regularly.

Respect for the presumption of innocence is then both a fundamental principle of trial, a pillar of the rule of law – listed by the Declaration of the Rights of Man and of the Citizen, Article 9, since this assumption was far from obvious in 1789 – and a rule limiting freedom of expression.

So to avoid torturing Language, let us clarify concepts so far. Talking about Dominique Strauss-Kahn as a suspect or indicted or accused is entirely correct. Legally speaking, the most accurate perception at this stage is ‘defendant’ since the indictment has been delivered by the Grand Jury. To designate him as « rapist » would undermine the presumption of innocence. But designate him as « alleged rapist » is cumbersome, inelegant and imprecise – as the implicit concept, probably inspired by presumption of innocence, has a sense of « Who is supposed by hypothesis or conjecture. » The opposite of what we mean actually. An alleged rapist is not a presumed innocent.

Where the auditor risks headache is when the victim becomes in turn alleged. Lord! If the rapist is presumed innocent, the victim is an alleged liar? No, of course not, she’s just downgraded to alleged victim category. This makes a lot of suspects, presumed and alleged, isn’t that so?

The French word for « alleged victim » (‘victime présumée’) is « complaining » (‘plaignant’). The concept of « victim » which etymologically refers to the religious as it refers to what is offered in sacrifice to the gods (‘victima’ in Latin) is legally adequate once the crime is established or after conviction. In short, the term victim is inconsistent with presumption of innocence.

This leads me to my second assessment (next week), namely, the French perception of the U.S. procedure –which often forgets the U.S. context and aims to exonerate the alleged abuse of power while forgetting the alleged victim.