We Are All Actors. Being a Citizen is Not Living in a Society. It is changing it. (Augusto Boal)
What kind of country do you live in? Are you living in a developing economy, or in a welfare state? Or, in a transitory state? Or, in a failed state? If in a failed state, you are most probably not even capable of reading this post, since a failed state is a) either in some sort of crisis (e.g. war) or b) not allowing its citizens to surf the Internet, or even participate in social networking, and social networking/professional business sites, such as LinkedIn.
Market fundamentalism is out, as is belief in comprehensive state interventionism. (Gylfason & al. Nordics in Global Crisis. Vulnerability and resilience. 2010. 20.)
Whichever kind of state you are living in, it is worthwhile noticing that your state, including its governance and legal aspects, have a major influence upon the economic development, and possibilities, for the country’s citizens. Many citizens in countries, feeling unempowered, believe they have no influence upon their surroundings. This, however non-empowering it may sound, is a false belief. Every citizen has a voice, and the possibility of influencing the economic, and thus societal, developments in their country.
In Welfare States, including Finland (situated in Northern Europe) the outbreak of the financial crisis in 2008, often compared to the Great Slump of 1930 ́s (or even worse), and the economic events of the past years, together with the current economic situation both on micro and macro levels, intertwined with estimates and forecasts for the future have certainly given many, not only economists, but in general citizens of the world food for thought.
Milton Friedman about Welfare State Dynamics
Many countries have been hit hard by the crisis, and have not yet recovered – including several small, open economies, vulnerable to, and severely affected by, global developments. However, some of the shocks were internally created, leaving some of the responsibility of “cleaning up the mess” to domestic institutions, and policies. (Gylfason & al. Nordics in Global Crisis. Vulnerability and resilience. 2010. 21).
Coe, N., Kelly, P., and Yeung H.W.C. Economic Geography: A Contemporary Introduction. 2007, have discussed the role of different kinds of states and firms in the economy, with a purpose to pinpoint how these, together with supra-national institutions, shape economic processes. The discussion about the changing role of the state in an era of globalization, together with the demonstration of why geographical scales matter when re-configuring a state, is also out of most relevance.
A state has several functions:
– A state is the guarantor and institution of economic activities dealing with financial crisis, guaranteeing national economic instruments, securing international economic treaties, property rights and the rule of the law.
– A state is the regulator of economic activities such as market regulation, and the regulation of economic flows.
– A state is the architect of the national economy, including trade policies, strategic industrial policies, attractor of FDI (foreign direct investment), and regional development policies.
– A state is an owner of public enterprises.
– A state is the provider of public goods and services, such as infrastructure, healthcare, transport, and education.
– A state has also political-economic influence upon mergers and acquisitions, through regulatory control.
– On a geographical scale, a state plays a role in international, macro-regional, intra-national, and local levels.
The vast amount of different types of states existing today is divided into:
– Neoliberal states (North America, Western Europe, and Australasia).
– Developmental states (Asia and South America).
– Transitional states (Eastern Europe, Russia, China, Southeast Asia).
– Welfare states (Nordic countries and some European countries).
– Weak and Dependent states and
– Failed states
In a reconfiguration of the state, following can be taken into consideration:
– A State is a dynamic set of institutions.
– The nation-state is a dynamic entity capable of self-transformation
– Rise of corporate power and global finance
– A nation-state is powerless in controlling inward and outward investments, or is it?
– The political-economic geographies, together with the mutually dependent relationship between state/firm
– The different power-relationships between states within the global economy
– The interaction between states/firms/markets.
– Nation-states shape profoundly the economic activity within and across their borders.
– The state itself is always implicated or involved in directing processes through conscious decisions.
– Nation-states remain critical institutions through which international, regional, and local economic issues are evaluated and acted upon.
– Economic governance on international and sub-national scales, upscaling: international organizations such as UN, IMF, World Bank, and WTO, together with macro-regional groupings such as the EU, APEC, NAFTA, ASEAN, NEPAD, SAARC, CARICOM, and MERCOSUR.
– Hollowing out the state = state functions taken over by public-private partnerships and private forms of regulation QUANGO = Quasi-Autonomous Non-Governmental Organizations
– Leading business media Beyond the State?
– State control is uneven in its operation and effectiveness
Traditional welfare states, such as Finland and Sweden, have not avoided the global crisis, the reasons for which include the level of openness, and the dependence on exports of investment goods. Both Finland and Sweden experienced an equally severe slump in the early 1990 ́s with the difference that it was at large homemade. Lessons learned from the 1990 ́s crisis include that early signs of financial fragility need to be taken seriously, and policy planning needs to base upon worst-case scenarios. The current crisis, still ongoing, includes problematic consequences: public finances have deteriorated, unemployment is high, and significant structural changes in the economy are taking place. (Gylfason & al. 2010. 21; 118).
Restoring public finances can be taken care of in many ways, as suggested by Gylfason & al. (2010. 28):
– Public consumption and transfer payments can be cut
– Composition of expenditure directed in a growth-friendly way
– Smooth flow and functioning of infrastructures, including communication
– Well-functioning education system and funding of research
– Broadening the tax base by raising the employment rate
– Changing the structure of taxation in a way that encourages economic growth, i.e. reduction of taxes on productive economic activity, corporate and labor taxes, and an increase in taxes on consumption, natural resources and real estate.
Due to globalization, the mutual interdependence between countries is stronger than ever, suggesting that there is a need for stronger international, and global, cooperation in areas including trade policy, financial regulation and supervision, macroeconomic policy and actions to prevent climate change. (Gylfason & al. 2010. 31).
However complex policies are, the maintenance of a welfare state, and economics, includes the following:
– A democratic system with equal rights and possibilities for all citizens
– A solid infrastructure in terms of access to services such as education, and healthcare
– A balanced economy, with little deficits
– A lucrative, innovative environment attracting FDI and sustainable economic growth
– A taxation policy attracting firms, which in turn create jobs and employ citizens
– A taxation policy that is attractive for all kinds of firms, including small enterprises
These are measures that, in a welfare economy, are expected to be taken care of by the state, and therefore, through public policies. Firms, on the other hand, choose to operate and invest in markets capable of offering them attractive conditions, and an optimization of factors included in a PESTLE analysis.
However important the role of the state, or a nation, a state is always being constructed by its citizens. Citizens who have the possibility of influencing their direct and indirect surroundings, including their personal lives, their neighborhoods, the politics of their country and so forth. In fact, every single action, and every single effort made by an individual in a country, has direct and indirect impacts upon the developments in the nation in question.
Thus, your personal efforts, however small they may seem, always do have an impact upon the society you are living in. Never underestimate your capability of influencing, changing, and developing society and people around you, because often, small actions and improvements lead to giant leaps and changes in (economic) development.
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I am an international business management professional with an MBA from Haaga-Helia UAS, Finland, communicating fluently in several languages. I am also a certified investment adviser/specialist (Aalto University/Federation of Finnish Financial Services) with years of experience from investments and business advisory services through education and professional activities.
Currently I study adult pedagogy at Tampere University of Applied Sciences. My vast international experiences and passion for humanity and ethical leadership make me a Global Citizen. I believe that advanced communication, empowerment, continuous learning and development lead to sustainable economic development and a sustainable future for individuals, organizations and nations across our Globe.
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Anne-Maria Yritys 