EFFICIENT STATE
7.1 Public regulation and bureaucracy 7.1.1 RELATIONSHIP BETWEEN BUREAUCRACY AND GROWTH
level (Lovett, 2011). The quality of bureaucracy reflects higher variance among the lesser developed countries than in those with advanced economies, and thus a stronger growth effect can be identified in the first group. In addition to the public administration headcount, as a quantitative factor, it is of key importance that the government should also satisfy the requirements of public administration based on the qualitative criteria. A public administration of adequate size alone is not a sufficient condition; it must have a highly qualified team of specialists, able to efficiently manage the tasks they are commissioned with.
The quality of public administration, via its effects controlling and influencing the economy, is a fundamental competitiveness factor. In order to ensure the efficient functioning of a country's society and economy and satisfy their needs, it is essential to maintain a proper public administration and bureaucracy. This is partially due to this fact that in the welfare economies the state is the largest employer. After World War The improvement of efficiency is complicated by the fact II, in the developed countries the number of public that value added cannot be measured in public administration employees dynamically rose; for example, in administration in the same way as in the case of businesses. France the ratio of bureaucracy within the total number of Statistics measure the public administration's value added people in employment doubled in the period 1955-1990. The primarily from the input side, due to the fact that output rising trend broke in the mid-1980s in Europe. Despite the cannot be measured and it also has no market price. However, consolidation thereafter, the state continues to be one of the measurement of the state's efficiency has already commenced in certain countries and there are still plenty of key employers in the economy (Rothenbacher, 1997). opportunities in store. In this area, the United Kingdom has Essentially, three criteria can be examined to assess the the greatest experience; the Office for National Statistics impact exerted by public administration on the economy. (ONS, 2018) gives an account of the public sector's efficiency Firstly, the public administration headcount, which absorbs annually in its report. The limitations of measuring efficiency labour force in the economy and thus also affects private at an aggregated level increase the role of individual and sector employment. Secondly, the cost of maintaining the management responsibility. public administration, which is obviously covered by the tax burdens imposed on the private sector. Thirdly, the quality of High-quality public administration is conditional upon a public administration, the efficiency and growth-friendly wage level comparable with the private sector, which is nature of regulation, which are much more difficult to quantify hindered both by the fiscal barrier and the possibility of than the first two criteria. The efficiency of public measuring performance. The condition of wage increases administration can be enhanced by rationalising the activities, could be productivity similar to that in the private sector, eliminating redundancies and strengthening digitalisation. which, however, cannot be measured due to the aforementThis releases resources for the private sector and may also ioned limitations. Staff management is an approach frequincrease the budget's room for manoeuvre. The government ently applied in bureaucracy, which yields no efficient result. may spend the fiscal saving thus realised on: 1) tax cuts; 2) The managers are interested in raising the headcount financing productive public sector spending; 3) wage increase reporting to them and efficiency considerations are of secondary importance. A more modern and expedient within the sector; and 4) reducing the deficit and debt. approach is wage bill management: if fewer but more highly The correlation between efficient public administration and skilled officials are able to carry out the tasks, the saving economic growth is also supported by empirical analyses. realised on the headcount may be used for wage increases. Evans and Rauch (1999) identified an explicit positive corre- This may help reward high performance and stimulates the lation between public administration and economic growth, staff to achieve it. naming the Four Asian Tigers as one of the most important examples. The successful economic policy reforms in these Competitiveness rankings reflect bureaucracy indirectly, Asian countries were built on centralisation; planning and occasionally with contradicting conclusions, due to the coordination was performed by councils and committees, challenges inherent in the possibility of performance vested with even stronger competences than the ministries. measurement. The institutions that compiled the key Later analyses identified impacts varying by development competitiveness surveys (World Bank, World Economic GROWTH REPORT • 2018
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