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Managing in the public sector for investment and growth

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Managing in the public sector for investment and growth

Author: Martner Fanta, Ricardo Physical Description: páginas. 19-34 Date: August 2001 ECLAC symbol: LC/G.2135-P


This article will focus on the central role played by imperfect or incomplete markets in the spread and perpetuation of recessionary situations. It is a known fact that demand volatility perpetuates such situations, and this can only be mitigated by sustainable economic stimulus policies. Macrofiscal rules, which are important for enhancing the tarnished credibility of State action, need to combine two basic principles: responsibility and stability. This means preserving regulation mechanisms so that excessive macroeconomic fluctuations can be stabilized. The best thing the authorities can do is to use flexible intervention policies to prevent such fluctuations. The new paradigm of public management by results thus entails setting clear fiscal rules with medium-term targets and short-term stabilization capabilities, but it must also involve allocating a larger and larger proportion of public expenditure on a multi-year basis. In seeking to combine stable economic growth with proper implementation of the plans and programmes voted for by citizens, public management faces three essential challenges: adhering to a macrofiscal rule over the cycle, identifying structural deficits as they arise, and correcting the traditional bias against investment. This article will look at some recent efforts to deal explicitly with these serious obstacles by applying legal provisions designed to cope with the uncertainties that surround both the cyclical behaviour of the economy and calculations of its long-term growth potential.