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The ‘shrinking state’

The state’s role is dwindling in areas ranging from social programmes to regulatory structures, but a lack of uniform data makes it difficult to understand the impact on different national regions, says a new journal article co-authored by Michael Kitson of Cambridge Judge Business School.

The shrinking state

The effects of the “shrinking state” are visible in areas ranging from underfunded social programmes to weakened regulatory structures, but a lack of systematic quality data makes it difficult to understand how this affects social programmes in different national regions, says a new journal article co-authored by Michael Kitson, University Senior Lecturer in International Macroeconomics at Cambridge Judge Business School.

The article, published in the Cambridge Journal of Regions, Economy and Society, provides an overview of many research studies that look at the overall weakening of the state as an institution in local and regional affairs.

“The ‘shrinking state’ both produces and is a product of a restructured social contract between government and citizens and the private sector that has transformed regions and localities,” the article argues. These changes are seen in withdrawal of services and staff as part of austerity programmes, the selling of assets or outsourcing of services, and a reduction in workforce protections.

However, it is often easier to compare welfare states’ policies and spending across different countries than between cities or regions within an individual nation. The cause of this ranges from simple bureaucratic differences in local data collection to “potentially deliberate efforts to obscure hardship and inequality generated by retrenchment and austerity.”

The article – “The shrinking state? Understanding the assault on the public sector” – is co-authored by Professor Linda Lobao of the School of Environment and Natural Resources at Ohio State University, Dr Mia Gray of the Department of Geography at the University of Cambridge, Professor Kevin Cox of the Department of Geography at Ohio State University, and Michael Kitson of Cambridge Judge Business School.

Michael Kitson

Michael Kitson discusses some of the article’s findings:

The lack of uniform data within individual countries makes it difficult to trace the political foundations of state retreat. A study in the US found that in contrast to assumptions about broad-based spending cuts, most reductions were to cash-assistance welfare while other programmes stayed the same or even expanded. A study in the UK found that across-the-board cuts disproportionately affected areas that are economically disadvantaged.

In looking at state decline, it’s a potentially misleading shortcut to look only at public sector spending. There could be increased public spending but this rise often does not keep up with growing risks nor help poorer populations. As nations develop economically, the real costs of providing many public services may increase. And spending figures alone does not reflect the pressures placed on teachers, nurses and other public sector workers to do more as their numbers – but not the public’s needs – decline. So it is important to also look at other qualitative factors: how the state’s role has shifted, what constituencies are being served, and how the private sector’s role in governmental affairs has evolved.

“Globalisation” has become a vehicle for states to avoid blame for workers’ weakened protection and stagnant living standards. In fact, the role of the state and how capitalism functions has long varied between various countries and regions – be it in Europe, the US and Japan – and the power of labour movements have also been very different in various parts of the world. But the article points out that it is now often accepted discourse to make the sweeping generalisation that declining wages or other trends affecting workers reflect globalisation and international competition.

As the public sector outsources many functions due to austerity, the restructured public sector also loses crucial capacity to oversee private sector providers. The Audit Commission to monitor value for money in public contracting in England and Wales was closed in 2015, and the private sector regime that replaced it has a narrower audit scope. We have seen several recent big scandals in the UK relating to outsourced services – and although the British Government has recently announced that there will no new private finance initiatives, it is likely that outsourcing will remain a ubiquitous part of public provision in Britain for a very long time.