Efficiency, not size

Lluís Saurí's picture
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The case for Europe to enhance its competitiveness in the global economy has been made recurrently over the last years. The Lisbon strategy formulated a decade ago included a number of measures that should have transformed the European Union into the ‘most competitive and dynamic knowledge-based economy in the world’ by 2010. Little doubt, our efforts fell short.

The goal was most likely over-ambitious and political commitment turned out to be largely unsatisfactory. But the recipe was nonetheless fairly inspired and governments should not cast it away. It rightly highlighted the importance of an efficient public sector to build a competitive economy. Businesses expect public authorities to ensure a level playing field where economic activity can develop. They must be able to offer simple and clever regulations, and must be ready to act as partners for private businesses.

In that respect, the Lisbon strategy and the so-called Better Regulation initiative have had some merit. New tools have been incorporated into policy-making processes, notably the systematic assessment of the social and economic impacts that new regulations are likely to have. Regulations are increasingly the result of a structured process including the production of evidence and extensive consultation with stakeholders. These efforts are raising the overall quality of public intervention by incorporating all available expertise.

The European Commission and the UK have led this effort so far, but to some degree all European countries have been working to improve the efficiency of their public sectors. Catalonia is no exception and has recently published its guidelines for administrative simplification, which is part of the effort to make public regulations a spur rather than a burden for private initiative.

The economic challenges we face should lead us to renew the commitment to reform our public sector. Current financial distress imposes austerity measures in the short run, but austerity will do little to improve our competitiveness. In a longer perspective, reforming the public sector cannot merely mean reducing its size, but increasing its efficiency. Downsizing could even prove counterproductive if it were to jeopardise the necessary role the public sector plays in our economy. Efficiency may call for some form of rationalisation, including a more flexible management of human resources. The emphasis however must be on how decisions are taken and public services are provided. 

Public expenditure as a share of the gross domestic product in Spain has grown during the recession, but it is still moderate compared to most Western European countries. The number of public officials per inhabitant in Catalonia is one of the lowest amongst Spanish autonomies. There are reasons to reform our public sector, but its size is not one of them. We should rather focus on following our Northern neighbours by accompanying any austerity measures with stronger efforts to develop evidence-based, transparent policymaking.

 

Lluís Saurí

Consultant economist at Charles River Associates and researcher at the European University Institute

 

The views expressed herein do not purport to reflect or represent the views of Charles River Associates, the European University Institute or any of the organisations with which the author is affiliated.

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