Why is it,” asked the Harvard professor of economics Alberto Alesina in a 2006 article, “some countries implement economic reforms quite sharply and quickly, whilst others dither and let significant costs build up?” Similarly, as Juan Francisco Jimeno pointed out in a more recent post with reference to Spain, certain structural reforms becoming increasingly necessary, now seem less politically feasible than ever.
Both comments take us from a scenario that explains the best group decisions for a given situation to one where the effectiveness of such decisions is what matters. In other words, from designing public policies to the “political economy,” i.e. the study of the factors and processes that enable implementation.
Major reforms are tightly interwoven with politics and the economy. In one well-known definition, Sarah Collinson refers to the political economy as “the interaction between politics and economic processes in a society,” a close-knit interdependence that cannot be sidelined by those seeking to change the status quo in any social landscape. In the words of the Chilean academic and former minister Alejandro Foxley, “Economists don’t only have to understand economic models – they must also understand politics, interests, conflicts, passions: the essence of life in society.”
Few people would deny that taxation, the management of public expenditure, employment, education and pensions are just some of the inadequate areas of public policy in Spain.
The Covid-19 fallout will make these untackled areas increasingly obvious and trigger a far-reaching recession, and yet the political system seems unable to metabolise and address these challenges by pressing ahead with reforms that equip us better to deal with the future.
Founded in 1958, ESADE ranks among the top ten business schools in Europe in the most important International MBA, Executive Education and university programme rankings. ESADE has agreements and works with over 100 universities and business schools worldwide. The school offers doctoral programmes in management studies and conducts cutting-edge research in the fields of Data Science & Market Decisions, Economics & Finance, Entrepreneurship, Globalisation & Geopolitics, Governance, Innovation & Operations, Strategy, Leadership & People Management and Social Innovation.