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Showing posts from May, 2014

Mexico's Bond Market

Mexico's New Regulatory Envorinment
Beginning in 1997, the Mexican Ministry of finance (SHCP) created reforms to open its access to buy and sell government securities. These reforms included the improving of regulatory bodies within finical systems through the creation of the National Banking and Securities commission (CNBV ), the National Financial Services (CNSF) and the National Savings System for Retirement (Consar), through the umbrella agency, the Federal regulatory Improvement Commission (Cofemer).   These regulatory bodies helped to create a solid foundation for Mexico’s internal municipal bond market, which became operational in 2001.  
These structural considerations encouraged the use of credit ratings and structured finance in order to leverage retirement accounts (AFORES) to be used as guarantees for financing infrastructure within states and municipalities. The traditional method for issuing government debt was only operational through the auctions that big investors, …

What are some examples of Government Faliure?

The following provides a justification for either government intervention on market failures or the antithesis, suggesting a need for less government intervention due to government failure.
a. Interstate Highway Grants are federal grants for states to maintain and construct the interstate highway system. First, we must analyze whether road construction could be provided by a purely-private market. Roads could and are made in the open market; they are both excludible and rivalries. In order to make them non-rivalry, toll roads are built. But if the ideal is to ensure that the highway connects every state in the union, this makes inter-state highways a non-excludible and non-rivalries type of market. Therefore, if you believe that it is important to unify the country through the inter-state highway system, this is a perfect example of how government can intervene into the market place to provide a public good. That is not to say, many people object to the formula devised by Congress wh…

How to Run a Constitution....

In the book, To Run a Constitution, John Rohr advises us that the word “administration” is not mentioned once in the constitutions. Yet today, when we think of the American government we think of the bureaucracy that manages and implements (and sometimes establishes) many of the policies that run our country. Therefore when Richard Neustadt argued that the notion of the “separation of powers” is miss leading was because in the US we have separate administrative institutions sharing these powers. That is again to say, that today’s bureaucracy not only sets policy, it manages and implements it too.
We learn from Rohr, the notion of the “separation of powers” originates from the Federalist vs. Anti-federalist arguing over power, and finally suggesting that not one authority within the federal government should be omnipotent. Rather there should be a balance between the executive, judiciary and the legislative bodies. America’s Founding Fathers created the laws of checks and balances tha…

What is the relationship between capitalism and democracy?

Lindblom’s Politics and Markets highlights the relationship between capitalism and democracy. Writing in 1977, he makes a comparative analysis of the American system of government with other world political and economic systems. Particularly he is concerned with the privileged position of business in a democracy, its efforts towards growth and the indoctrination of Americans to incorporate a pro-business bias.
Lindblom divides the political economy into a government/people and business/market dichotomy. Suggesting that it is the will of the citizen voters who are both consumers of goods and policy. They make up the collective decision making in a polyarchy. Lindblom argues that decisions are more complex than rational choice economics suggest, particularly in the political realm. Therefore, politicians use persuasion to sway voters to believe in what would be good for them. This persuasion is often tainted due to the types of controls they might have, such as wealth, organization and…

Inter-governmental Relations in the US

The Price of Federalism according toPaul Peterson (1996) is the cost of doing business for a government when various levels (national, state and local) are segmented the bureaucracy. For him, modern federalism in the US has evolved far away from what the forefather’s originally envisioned. Today each level of government has its own independently elected political leaders and its own separate taxing and spending capacity. Functional theory argues that the appropriate level of government should be used to provide the public services to the people. By and large, it argues that economic development policy should be managed at the state and local governmental levels, while the national government should be in charge of redistributing wealth. This is a more normative view of how government “should” operate. On the other hand, Legislative theory says that modern federal system is shaped by political needs and legislatures are responsible for its design. Politicians strive to distribute benef…

What is liberation management?

Whereas Kettl (2005) has argued that the attempts at governmental reform has been prompted by efforts at efficiency and cost reduction, Light (1997) suggests that too many reforms have come and gone and have not made any major impasses. Regardless of which you believe is more relevant, one could argue that the national bureaucracies have had to changed their behaviors to meet the various rigor required by these reforms. In the Tides of Reform, Light agues that there has been too much management reform in government. He groups them into four major categories: scientific management, war on waste, watchful eye and liberation management. He contends that political leaders want to make their mark on the administration and promote reforms to manage mounting bureaucracies. (Although it is well known that every forty years, the US has seen major progressive-style increases in budget. For instance the creation of the 1880s progressives, the 1930s New Deal, the 70s style Great Society, etc.)R…

What is liberalism and how do we study it?

In the End of Liberalism, Lowi (1979) makes a sweeping argument that in the 20st century the United States political system has been “captured” by interest group politics and has ended traditional liberalism—defined as the opposition to fight against capitalist economic domination. He argues that this new political culture to fight for “left leaning” or “conservative leaning” favors has drawn an end to socialism/Marxism. Instead the US draws on partisan politics of democrats and republicans appease public interest groups for political favors. He argues that neither left nor right leaning groups have the complete interest of the public. Rather the sense of commons is lost within the American political system. Furthermore, Lowi argues that the “automatic economy” of the post industrial revolution has also converted into the “automatic society.” He stresses that the capitalist ideology has transformed a sense of pluralism. People are more passive and are “content” with more consumerism. …

The study of the bureaucracy

The study of the bureaucracy is at the heart of public administration, given that it is the organism that executes the policies created by politicians. Since the Pendleton Service Act of 1883, there has been a distinctive political/administration dichotomy or the separation of power between political leaders and the merit-based appointment of professional permanent civil servants. Elected officials are chosen by ‘the people’ they represent and their actions are held “in check” by periodic elections, which is not the case for bureaucracies. The theory of representational bureaucracy argues that policy implementers should also represent the public and can do so by having an equal proportion working within the various agencies. Furthermore the theory of political control of the bureaucracy comes from principle-agent theory. It is associated with matters of compliance or responsiveness of elected officials’ wishes. Politicians will attempt to control the activities of bureaucrats by influ…