What do state institutions do for governance?

Having said that the state and its institutions are central elements for an understanding of governance, how do we conceptualize that process actually functioning? Given that we have defined governance as a process of steering the economy and society, and have identified four key elements involved in that steering, we can more readily identify the manner in which the formal (and informal) institutions of the state influence that steering process.

The most important thing about state institutions for the governance process is that they provide an agreed upon mechanism for establishing priorities, and for making choices among competing priorities. Social and political actors have any number of goals that they would like to see the society pursue, and to use the authority and financial resources of the state to make possible. However, given that resources are finite, there is a need to prioritize those goals. The political process, usually through a legislature of some sort, provides the means for making deci­sions that have the force of law. Whether by majority rule or other voting rules within these institutions provide a means of making the difficult choices required.

A second requirement for effective governance in the reconciliation of goals and programmes that, even with legislative choices, may be conflicting or at a minimum inconsistent. Governments adopt any number of laws and with the mobilization of different coalitions for different purposes with in governments there is no guarantee of consistency. Therefore, some means of co-ordination and clarification of the policies adopted by government will be required (see, for example, Scharpf 1996) for good governance. Although less formalized means have some potential (Bardach 1998), the general means of producing policy co-ordination is through institutions such as cabinets and central agencies.

A third component of governing is implementation, or the actual steering of economy and society. Implementation conventionally has been considered the province of the public bureaucracy, although increasingly it utilizes non-governmental actors and the instruments of ‘new governance’ (Salamon 2002), but even those instruments tend to function in the ‘shadow of hierarchy’ and to be backed by the possibility of using authority. Further, the macro-institutional structure of a country tends to have significant influence over implementation, given the importance of federalism, or other structures of sub-national government, for the implementation of programmes from the central government.

Finally, in order to be able to steer effectively one needs to understand the consequences of previous decisions, and hence feedback and accountability are important to governance. in any society the feedback element is crucial, to provide for on-going correction and change of policy, but for democratic governments the accountability element included in this stage is also important. The public bureaucracy, and its agents when programmes are not implemented directly by public employees, must be held to account for their actions so that citizens can have some assurance that their rights are being respected, and that public money is being used appropriately.

Having described the role of existing public sector institutions in the process of governance, it is important to understand the role of these institutions in other than those descriptive terms. The inherited, and persisting, institutional structures of states are crucial first for the legitimation of the policy choices made by government. In a more globalized and inter­dependent world national governments may have to respond to a number of external forces, but policy choices may still need to be legitimated through some rather conventional mechanisms. Likewise, in a world of governance in which networks of private sector actors are crucial to the formation and especially the implementation of public policy, the interactions of those social partners with government are important for the success of government, but cannot replace the legal mandates of states and governments. Thus, the actions of networks will in most circumstances be carried on within a context of state power, power that can be withdrawn if deemed necessary.

As well as conveying legitimacy, some of the institutions of the public sector are peculiarly well suited for performing certain governance activities. In particular, the institutions of the public sector have been designed to resolve conflicts, while neither markets nor networks are designed to do so. Markets tend to assume away conflicts, or assume that the most powerful economic actors will (and should) win. Networks are generally assumed to be co-operative and non-competitive, but if a network surrounding a policy area is inclusive and has within it a range of socio-economic interests it may well find collaborative solutions to problems impossible, having no ex ante method for legitimately deciding between winners and losers.

Further, although the critics of contemporary government would certainly not agree, conventional institutions of government do a reasonably good job of channelling the demands from the society into the processes of decision-making. Advocates of deliberative government (Dryzek 2003), communitarianism (Selznick 2002), referenda (but see Budge 1996) and networks argue that these conventional institutions privilege certain types of interests and exclude others. Although there is some logic to that position, there are several other points that should be made. First, the conventional political institutions establish ex ante rules for inclusion and have developed structures that channel and aggregate interests, so that the manner of inclu­sion is known in advance. Further, these structures are widely diverse and can provide a number of avenues for participation. For example, the public bureaucracy increasingly is a major, if not the major, locus of participation for social interests.

We should also point out that the proposed alternatives to the instruments of interest intermediation are perhaps no more inclusive than are the more conventional institutions. For example, although discursive democracy is meant to be inclusive, its reliance on advocacy and discourse advantages the more articulate, especially members of the middle class. Likewise, networks tend to involve the social actors that are immediately concerned with the policy area, but the broader society has little or no ability to exert any influ­ence, even if they may be affected by the policy choices, if for no other reason than they are taxpayers. Thus, the advocates of other forms of governance can point to significant problems in producing better outcomes through presumably more open and democratic means of public involvement.