Changing 'political economies of scale' and public sector adjustment: insights from fiscal federalism

Publisher Website
Google Scholar
Abstract
Numerous studies have recently emerged on the impact of economic globalization for the nation-state. Philip G. Cerny to date is one of the few scholars to generate hypotheses about the state's future role in providing various public goods. He principally asserts that globalization forces state governments to continually adjust their political institutions to this process. In his terminology, the optimal 'political economies of scale' are changing, leading to a shift from the welfare state to the 'competition state'. While he depicts this development as practically inevitable, the theoretical foundation for this claim remains unclear; consequently, the hypotheses based on it are largely left ambiguous. I propose that the analytical scope of Cerny's model can be extended by employing insights from the economic subdiscipline of fiscal federalism, which is concerned about the assignment of public sector functions among different levels of government. The article develops three hypotheses on this basis, which are tested in a probability probe by examining the rationale underlying the development of European integration from the inception of the Single European Market (SEM) to the Maastricht Treaty. The argumentation suggests that the supranationalization of monetary policy as well as the subsequent budgetary increase in EU structural funds have been logical results of the preceding deregulation, associated with the SEM.

This publication has 11 references indexed in Scilit: