Applied Economics: Public Financial Management and Development

60 countries and 50 years of experience

John Short

• Verlag: Austin Macauley Publishers
• Jahr: 2022
• ISBN:
  9781398444706
• Thema: Commerce
• Thema: Gouvernement et monde des affaires

Applied Economics: Public Financial Management and Development is focused on economics applied to public financial management and development. It charts over 50 years of the author's practical experience of economics and public policy in 60 countries on five continents, from Afghanistan to Zimbabwe.
The book's main focal point is on central and local government budgeting, tracing the progress of revenue aspects and expenditure allocation over time from inputs alone to matching these inputs to achieving and measuring service delivery in programmes. It also presents the assessment instruments that measure public financial management strength and weakness, with real-life illustrations of their application.
All of these instruments use examples from the countries that the author has worked in, demonstrating the conditions faced – mostly stable economic environments, but at times during periods of conflict and insecurity, as well as neighbouring geopolitical tension.These experiences have been gained from the author's resident assignments and short-term visits (mainly multiple over many years) as a consultant for the IMF, World Bank, and bilateral development programmes as well as academic research.

1 Introduction

The initial aim of this document was straightforward – to put down in paper or at least in electronic format some semblance of what I have been doing over the past 50 years or so for my offspring and theirs. However, the more I put the proverbial pen to paper to achieve this initial aim, the more I also realised that there was material relating to the application of economics which may be of interest to those with a curiosity in public policy and how it is formulated and applied. It may even be attractive to those that are studying economics and want to pursue a career in the field as well as a tool to assist in learning. It might even encourage those studying economics to pursue a career as an economist rather than become an accountant! Indeed, it might stimulate my grandchildren to follow in their grandfather’s footsteps.

Public policy is often decried and those who work in it are dismissed as “experts” which has taken on a derisory connotation in the political times of today, particularly since 2015. The scope and content of this manuscript are centred on Public Financial Management (PFM). PFM refers to the set of laws, rules, systems and processes used by sovereign nations (Central Governments (CG) and sub-national (SN) governments), to mobilise revenue, allocate public funds, undertake public spending, account for funds and audit results. What I hope to achieve is to present a picture of the reality of applying public financial management using warts-and-all examples from across the world from my own experiences – and, with a bit of luck, a smidgen of humour to lighten the load! After all, everything has to be evidenced-based and theory is dismissed without the verification of application. The book may be useful for those working in the public policy environment in central and local government who are focusing on the interaction of the planning and executing of budgets, and their financial control and audit, from both the revenue and expenditure perspectives. Hopefully, it demonstrates that they are not alone and the overall environment that they may be experiencing is not unique. The developments in public financial management that have taken place in the recent and not so recent past are presented with country examples taken from my own experiences.

The document can be divided into three interrelated parts. These parts are theme based and not in chronological order. Chapter 2 presents my apprenticeship years learning to and applying research in economics and public finance and some later intermittent follow up research. The second part from Chapters 3 to 8 covers budgeting and public financial management from both the expenditure and revenue perspectives as well as the assessment tools that have been developed to measure performance. I have sneaked private sector development in alongside taxation, both its policy and administration, in Chapter 7 as after all if taxes are at 100% there will be no private sector! Chapter 8 examines tax expenditures which is the revenue forgone or cost from giving tax breaks to achieve policy objectives. Capacity building experiences in these areas are presented in Chapter 9. The final part is Chapter 10 which attempts to draw some commonality from the previous chapters and assess what progress I have seen in the areas that I have worked in as an economist.

There are many colleagues that I have been fortunate to have worked with throughout my career. Their experiences are, in some cases, shared with me but they have many of their own. I have tried as far as possible to include our common experiences in the appropriate places to acknowledge their inputs to what I have been involved in. Some are frequent flyers. Where their experiences are wider I have referenced them wherever possible. I offer my sincere and grateful thanks to all of them and to the many others that I may have missed, who have contributed to this Short journey of an itinerant economist.

In the beginning

My journey as a practising economist started in my undergraduate years and could have easily been finished as soon as after I graduated. I applied to Stirling University early in 1967 for the academic year starting in September of that year. My memory is that I applied to Edinburgh and Stirling only as a late applicant and Stirling accepted me before Edinburgh so I chose Stirling which was a new university and was accepting its first students. Perhaps I was the only Irish citizen applying and the university wanted to broaden its cultural mix! There were only 164 undergraduates and some postgraduates in the very first year.

Stirling’s 2 semesters in an academic year system1 helped me in settling down to economics as a subject rejecting along the way both history, which I nominally applied to study, and sociology. The lack of initial rigidity in having to specialise early was invaluable to me. The second great challenge that the university afforded was the formation of its institutions: in my case this was in the sporting sphere and I got myself tied into sports administration. I became the first Sports Union President (handing over to Vice President Jim Wylie at the end of my third year) and Chair of the Gannochy Sports Facility management committee (which I am sure would not have been chaired by an undergraduate in other places) as the Gannochy was a staff and student facility. There was no distinction between the species at that time in Stirling. As President I established the Sports Union and chaired the committee of all the sports clubs, represented them in dealings with the Students Union and the University Administration and attended meetings of the all the Scottish University Sports Unions and the British Universities Sports Association. A budgeting system had to be developed – agreeing with the Students Union on a budget, where a fixed percentage2 (40% if I remember correctly) of the total Student Union Budget was negotiated and then distributed to member sports clubs based on need and availability.

So when I departed Stirling with a 2.2 majoring in economics, I also had gained valuable (and time consuming – was there a correlation?) experience in administration and budgets from scratch which has served me well since. Of those who continued into our fourth year3 in economics I was the only one of the five to opt for the Money and Public Finance option with the rest doing Managerial Economics. Imagine one to one with Prof Andrew Bain and Prof Chuck Brown – nowhere to hide and looking back, daunting. Sometimes postgraduates were thrown in to help me out. Indeed I am grateful to one of the five, Neil Kay4 for comments on my initial draft suggesting I separate out the non economic and economic components so that there would be two detached documents and adding in a lessons and observations final chapter.

I realised that I needed to improve on my class of degree if I wanted to work as an economist. I was fortunate to be accepted at Lancaster to do an MA. There is no doubt that the Stirling connection of Dr Ahmed El Mokadem who was now lecturing at Lancaster and had been a post doctoral research fellow at Stirling helped in getting me accepted. I had attended his seminars at Stirling.

Consultancy by its very nature is all about people – people you work with and the people you work for. I have been very fortunate to work with some great human beings right from the start. At Stirling lecturers Mark Brownrigg, Mike Greig, Les Simpson, and David Simpson and at Lancaster Jim Taylor and Ahmed El Mokadem guided me in the right direction. At the University of Aberdeen, David Greenwood, at the Northern Region Strategy Team Nick Segal and at the University of Durham Dick Morley continued to develop me.

Connections and luck were also important in my journey. After finishing in Indonesia (more of which later) in December 1985 I started out on my own with, it must be said, some trepidation. Having worked with Ray Goodman in Nigeria in 1984, I got a communication from him (phone call or letter? but certainly not an email as the internet was not as we know it now and email did not exist) saying he was leading a mission for the World Bank on behalf of the Dutch Government and would I be available to join him? At that time all such missions ended up back at Washington DC and I left with my next assignment as well as making more connections. Also by that time, Tom Allen and Charles Draper from the Australian company I had worked with in The Philippines and Indonesia had joined the Bank and became part of the West Africa team. Having already worked in the region previously, I joined missions to Nigeria and Ghana. One of the missions was to Sierra Leone and my working relationship and friendship with Pirouz Hamidian-Rad (whom I had met on mission to Ghana) started which end up in Afghanistan via Papua New Guinea and on to Albania where he carried out a review of the Structure of the Ministry of Finance in the context of the Medium Term Budget Programme (MTPB).

Without these colleagues and experiences I suspect my career as an applied economist would have indeed be short-lived. There may be some lessons for an aspiring economist to draw from.

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1 Which was different from the other universities’ 3 terms in a year system.

2 This was unique among the Scottish Universities and the envy of the other sports unions.

3 University Undergraduate Degrees in Scotland are over 4 years and secondary education was one year shorter relative to, say, England.

4 Neil is now Emeritus Professor in the Economics Department, University of Strathclyde, Scotland and has a stellar academic career: http://www.brocher.com/Academic/Academic.htm. Neil Walden also one of the five provided constructive comments. Neil became a specialist in marketing, tourism management and environmental studies and taught at the University of Strathclyde and Manchester Polytechnic as well as Jordanhill College. Mick Connarty, who took a sabbatical to be President of the Student Association in our final year, has also provided valuable comments. After graduation, Mick became leader of Stirling Council and was an MP from 1992 to 2015. https://en.wikipedia.org/wiki/Michael_Connarty

2 The Research Years

I was incredibly fortunate in my foray into the research arena in the field of economics. I was studying for a Masters Degree in Economics at the University of Lancaster. Jim Taylor was a senior lecturer in the department and one of my lecturers on the regional economics module. He was carrying out research for his book Unemployment and Wage Inflation with special reference to Britain and the USA which was published by Longman in 1974. He invited me to work with him for my dissertation project which in the end turned out to be titled “An analysis of Earning Changes in the United Kingdom, 1960-71: expectations, Union Influence and Excess Labour Demand. A Fourteen Industry Study”. Jim kindly used the results in Chapter 6 of his book and referenced it.

Looking back at the book and dissertation manuscript almost 50 years on, I am grateful that econometrics was one of the modules in the degree cour...