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Government Leader home > news stories
12/14/05
COMMENTARY | Governments must act now to protect the future
By Todd S. Ramsey
Special to Government Leader
Across the globe, nations lie in the path of the perfect economic storm. Whether they are in Europe, the Middle East or Asia, dozens of formerly prosperous countries now face the same, potentially crippling, issues.
Yet by taking a few straightforward steps, governments can help assure prosperity for the next generation and beyond.
The issues? First, for the most part, budgets across the world remain flat. While some countries might have some modest growth potential, nowhere is any great economic boom predicted.
Second, the demand for increased spending is spiraling out of control, driven primarily by pensions and increasing health-care costs. In the developed world, falling birthrates, coupled with aging populations, are rapidly shrinking the workforce. As the ratio of retirees to working citizens increases, governments will be harder-pressed to support their retirees. According to the European Policy Center, the cost of caring for retirees in member states will grow 3 percent to 7 percent per year in the coming decades, while gross domestic product growth in these states has averaged 2 percent annually.
And third, national competitiveness—the idea that one or two nations will prevail by virtue of legacy or sheer hard work—is falling by the wayside. With international competition for jobs, capital, services and goods, governments are less able to act independently or monopolistically within their borders. They’re obliged to take steps—often expensive ones—to increase or to just maintain their economic attractiveness. Today individuals, not nations, drive the economy.
So against this dim backdrop, how can the wave be avoided? The answer lies in innovation: Nations need to rethink and re-create they way the operate. And government must be the catalyst that makes innovation happen. Here’s how:
Launch innovation strategies to encourage growth
To create the economic growth required to support aging populations, governments must help nurture innovation. One way is to revise intellectual property protection: if too stringent, it can retard innovation across nations.
Additionally, governments must provide basic economic and social “enablers,” such as flexible labor policies, extensive transportation systems, plentiful and thus affordable energy, and capacious information and telecommunications networks.
Furthermore, governments must innovate in their own operations, perhaps partnering with the private sector to do so. In many countries, government spending as a percentage of GDP is so large— 35 percent in the U.S., and 61 percent in Sweden, for instance—that pervasive economic challenges cannot hope to be met without making the public sector more efficient.
Finally, in this area governments must make necessary “innovation investment” to assure prosperity. This means investing in research, which will spark business growth and create jobs, and moving away from additional regulation on goods and services. Innovation investment mandates that governments combat the “bad” within their midst—fighting agency fraud and abuse, as well as terrorists and others with destructive intentions.
Accelerate short-term actions to achieve fiscal balance
“Quick hit” actions cut costs and require little or no legislative action. They show a commitment to reform and provide the breathing space to enact more substantial change.
One action is to streamline and integrate processes, and to share services where possible, across government. For instance, one consolidated finance or human resources department could serve all agencies. For example, through consolidation the British government plans to increase efficiency 2.5 percent per year for every department. The U.S. Homeland Security Department was also a consolidation of multiple agencies in an effort to improve security.
Adopt an outcome-based approach to steer transformation
Focusisng on outcomes is vital to long-term, substantial governmental change. Traditionally, governments tackle symptoms individually and measure their progress the same way.
An outcome-based approach begins with defining, prioritizing and selecting what constituents want. Then the strengths (and weaknesses) of current processes in meeting those needs are evaluated. Next, the outcomes of competing strategies are examined. And finally, stakeholders—citizens, businesses, community influencers—are engaged to evaluate the results.
Here are examples of the differing approaches and how government can help:
- Increasing the number of businesses. In lieu of trying to start more businesses, concentrate on reducing the startup failure rate by defining an outcome linked to raising the survival rate. This might take a consortium of banks, tax agencies, local governments and experienced entrepreneurs.
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- Providing social benefits accurately and efficiently. Rather than distributing benefits program by program, governments would assess the aggregate needs of entire households, customizing programs and services for them.
This tripartite approach—fixing first what can be easily fixed, to prepare the way for wider, deeper change—is the best way to fight the risk to our prosperity. Governments worldwide must use their resources to develop a workforce driven by knowledge, agile enough to seize opportunities wherever they arise.
The cost of inaction is beyond the pale.
Todd S. Ramsey is general manager of IBM’s Global Government Industry.
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