Growth and Renewal in the United States: Retooling America's Economic Engine*

New research by the McKinsey Global Institute (MGI) examines the growth challenge facing the United States and explores how U.S. business and government can contribute to the economy's renewal by reinvigorating their drive toward higher productivity. As baby boomers retire and the female participation rate plateaus, the U.S. economy will receive significantly less lift from increases in the labor force and will have to rely increasingly on productivity gains to fuel growth. The report finds that the United States needs a 34% acceleration in productivity growth if it is to match the GDP growth rates of the past 20 years—and that this is possible. Three‐quarters of the necessary productivity growth acceleration can come from the efforts of private‐sector companies operating within the current regulatory and business environment. Even the best‐performing companies and sectors still have headroom to boost productivity by emulating the best practice of others and tapping into new innovations, and coming up with new innovations of their own. The remaining one‐quarter—and more—can come from government and business working together to address barriers that now limit growth. MGI lays out a seven‐point agenda for action to spur productivity.     

The Achievements and Future of Business Education

The dean of Columbia Business School is joined by the deans of Stanford, Harvard, and Wharton in discussing the challenges and opportunities facing today's graduate business schools. Most business schools aim to provide students with a certain body of knowledge—in disciplines such as marketing, finance, and accounting—as well as some general management and leadership training and skills. The biggest challenge to this model of business education is now coming from the high cost of the traditional two‐year MBA program and the threat of disruption by “online” alternatives. But the consensus of the four deans is that the combination of training and experience provided by today's top business schools will enable them to withstand the threat from online alternatives. And thus for the leaders of these top schools, one of the main challenges in designing and maintaining a successful business school program is to find the right mix of theory and practice, classroom and “experiential” learning. To the extent the schools succeed in achieving and maintaining this balance, they should continue to produce graduates who are sought by employers that include not only companies large and small, but non‐profits and, at some points in their careers, even the public sector. What's more, the deans all sense the growing demand for business to play a larger role in addressing social problems that have traditionally been seen as the responsibility of government and non‐profits. And one implication of this demand is that business schools, besides producing talent that finds its way to the public as well as private sectors, should prepare to play a greater role in the public debate over solutions to social challenges, such as protecting the environment while at the same time trying to stimulate enough economic growth to limit rising inequality.     

GOVERNMENT POLICY AND THE CHANGING MARKET IN RESIDENTIAL CARE FOR THE ELDERLY: A FINANCIAL ANALYSIS OF THE PRIVATE SECTOR

The market in residential care for the elderly is in a state of flux. Key factors are the increasing proportion of elderly (particularly the 85+ age group) and central governments new community care agenda. The mixed economy of public, private and voluntary residential provision will continue but community care policy changes will entail (a) the new role of case managers in the local authorities and (b) an anticipation that the private sector will play a more significant role than hitherto not only in meeting the demand for residential care but also in leading the way by diversifying into new types of care provision. These issues are addressed by (1) examining and commenting on government policy towards the care of the elderly and (2) examining, in detail, the profitability and financial viability of a random sample of private residential homes for the elderly. This financial analysis suggests that, at present, the ability of the private sector to innovate and expand into new forms of service provision is constrained by the number of homes which operate at the margins of viability. The implications of this are that (a) government policy may be founded on an optimistic view of the ability of private sector provision to respond as expected to the new community care agenda and (b) case managers in local authorities may have to exercise considerable financial expertise in identifying financial vulnerability, as well as social work skills, in the deployment of available funds for residential care for the elderly.     

Governance and Climate Change: A Success Story in Mobilizing Investor Support for Corporate Responses to Climate Change

Until fairly recently, the main approach to getting business to respond to climate change has been top‐down efforts to regulate emissions and enact various forms of “carbon pricing.” The aim of such efforts has been to make businesses “internalize” the costs associated with greenhouse gas (GHG) emissions. Governments are expected to set the environmental protection rules for companies in their respective countries, and markets are expected to adjust to the new regulations and carbon prices. But this classical approach to economic policy does not work when applied to a global “public goods” challenge like trying to limit the extent and effects of climate change. Instead of a top‐down approach, in which economic actors are forced to respond to regulations imposed on them, the Paris climate agreement of 2015 was reached using a bottom‐up approach centered on the concept of Intended Nationally Determined Contributions (INDCs)—along with a process that ended up encouraging the participation of all economic actors, not just governments. The authors provide an account of how the Paris agreement was reached, and why the “Portfolio Decarbonization Coalition” under the auspices of the United Nations is the most important of several private‐sector initiatives that are changing the way corporations operate. Thanks in large part to the PDC, investors can now undertake meaningful corporate governance action on climate change. With GHG emissions from a particular companies’ operations now much easier to measure, objective performance metrics on GHG emissions can now be set by boards and verified by shareholders. And current decarbonized indexes can be used as performance benchmarks for asset managers’ compensation, which can be tied to return outperformance relative to a “decarbonized” index.     

A contingency theory perspective on the risk management control system within Birmingham City Council

In recent years the topic of risk management has moved up the agenda of both government and industry, and private sector initiatives to improve risk and internal control systems have been mirrored by similar promptings for change in the public sector. Both regulators and practitioners now view risk management as an integral part of the process of corporate governance, and an aid to the achievement of strategic objectives.The paper uses case study material on the risk management control system at Birmingham City Council to extend existing theory by developing a contingency theory for the public sector. The case demonstrates that whilst the structure of the control system fits a generic model, the operational details indicate that controls are contingent upon three core variables—central government policies, information and communication technology and organisational size. All three contingent variables are suitable for testing the theory across the broader public sector arena.     

A Private-Sector Perspective

The Public-Private Partnership model is best placed as a means for delivering public infrastructure for government. However, the private sector needs to consider some issues if it is to encourage governments to use this model effectively. Specifically, for the public-private partnership model to be sustained and accepted by governments, the private sector needs to explain its benefits in a way that wins the trust of the community.     

发挥保险行业价值积极承担社会责任服务经济社会建设

近年来保险业积极承担社会责任取得良好成效,成为国家灾害救助体系和社会管理机制的重要组成部分,成为社会保障体系的重要组成部分,成为金融资源配置与稳定机制的重要组成部分,成为国家宏观调控机制的重要组成部分,成为国家创新机制的重要组成部分,成为国家对外经济金融合作对话机制的重要组成部分.在国家加快转变发展方式,政府创新社会管...     

Investors as Stewards of the Commons?

The author makes the case that business generally, not just government, should assume responsibility for social and environmental problems. The Sustainable Development Goals (SDGs) formally recognize the role of the private sector in addressing some of the world's most pressing environmental and social challenges. What started as a corporate social responsibility movement now a focuses on integrating positive social impact into the core mission of the organization. Encouragingly, studies document that improving firm performance on business‐relevant ESG issues has a positive association with future financial performance. Investors can enable better societal outcomes by exercising ‘voice’ and voting rights in corporate governance. He acknowledges that competitive businesses face a “commons” or “free‐rider” problem where a defector avoids the full cost of his actions. Overcoming this problem requires legally sanctioned collaboration between business enterprises and large institutional shareholders, particularly pension funds. He also acknowledges that the corporate level free‐rider problem has a counterpart that at the investor level. Investor engagement with companies involves resources, money and time. It is no simple matter to justify increased costs in the context of asset managers that compete on the basis of low management fees, such as index funds. Collaboration between companies can mitigate some of these free riding problems. Large institutional investors with long time horizons and significant common ownership across different companies may have the best opportunities for collaboration. But, smaller activist funds and retail investors also have an important role in pushing large institutional investors to engage. While it is unlikely that investors will be able to solve all of the pressing societal problems, progress can be made.     

The industrialization of space: Prospects and barriers

In the USA, and also in some Western European countries, there is noticeable business and government confidence in a larger, more productive role for private invetment in space applications. The industrialization of space is now a serious possibility. This paper examines the role of private interests in this field, explores how government can stimulate or assist private space ventures particularly through removing barriers to investment and offering incentives, and discussess the pros and cons of possible policy initiatives.     

Delivering Public Services Under the New Public Management: The Case of Public Housing

One of the biggest changes in public sector housing practice in recent years has been the introduction of New Public Management techniques. Housing associations, promoted by successive governments to supplement local authority provision of social housing, have readily taken on the new management agendas of performance indicators and business disciplines in service delivery. The author identifies a conflict between the social purposes of public funding for housing and the business practices of housing associations. The limited accountability of housing associations allows for practices that lead to social exclusion. For local authorities, a parallel conflict arises because of government emphasis on 'what works' in public housing management, rather than on 'what matters'.     

New Public Management: The Cruellest Invention of the Human Spirit?1

This article examines one of the most significant phenomena of the late twentieth and early twenty‐first centuries—the emergence of New Public Management (NPM). NPM has been widely adopted, internationally. However, its adoption is based on governments having faith in its deployment to transform their public sectors using private sector performance criteria. In this article, the case is advanced that the widespread use of NPM is often a cruel disappointment for governments. This is demonstrated by focusing on four key elements of NPM, as practised in the early twenty‐first century—the role of management consultants, the development of e‐government, the emergence of the ‘audit society’ and the increasing importance of risk management.     

NOT REPORTING A PROFIT: CONSTRUCTING A NON‐PROFIT ORGANISATION

Public sector reformers advocate contracting‐out as a means of improving cost‐effectiveness. In the health sector, market‐based contracts with for‐profit organisations can reduce equity of access and divert public funds to private gain. Such issues have prompted policy makers to seek alternative contracting strategies. This paper examines a primary health care policy whereby government contracts with private non‐profit organisations to increase efficiency and meet World Health Organisation ideals. The study found that the policy's implementation has not achieved these aims when for‐profit providers masquerade as non‐profit organisations. The implication is that governments may find it more effective to manage for structural diversity than mandate homogenisation.     

CARE Conference Hong Kong Polytechnic University,June 9, 2014: Equity Financing for Early‐Stage Companies in China

Many of the smaller private‐sector Chinese companies in their entrepreneurial growth stage are now being funded by Chinese venture capital (VC) and private equity (PE) firms. In contrast to western VC markets, where institutional investors such as pension funds and endowments have been the main providers of capital, in China most capital for domestic funds has come from private business owners and high net worth individuals. As relatively new players in the market who are less accustomed to entrusting their capital to fund managers for a lengthy period of time, Chinese VCs and their investors have shown a shorter investment horizon and demanded a faster return of capital and profits. In an attempt to explain this behavior, Paul Gompers and Josh Lerner of Harvard Business School have offered a “grandstanding hypothesis” that focuses on the incentives of younger, less established VCs to push their portfolio companies out into the IPO market as early as they can—and thus possibly prematurely—to establish a track record and facilitate future fundraising. This explanation is supported by the under‐performance of Chinese VC‐backed IPOs that has been documented by the author's recent research. Although they continue to offer significant opportunities for global investors, China's VC and PE markets still face many challenges. The supervisory system and legal environment need further improvement, and Chinese funds need to find a way to attract more institutional investors—a goal that can and likely will be promoted through government inducements.     

Sustainable technologies and the innovation–regulation paradox

This article examines the paradox between innovation and regulation and its implication for the adoption of sustainable technologies in the domestic sector of the construction industry. The case of UK is examined, where progress towards the inclusion of social and environmental considerations has been slow. Recent change in attitude in the private sector, combined with government initiatives, has prompted a more sustainable agenda in construction. With significant reductions in greenhouse gas emissions required to meet climate change targets, the case for a particular energy-saving technology—natural thermal insulation materials for cavity wall insulation—suitable for widespread use in residential buildings, is assessed. In addition to the inherent conservatism in the construction industry, additional barriers inhibiting the uptake of new sustainable thermal insulation technologies include capital costs, the failure of the market to account for social and environmental costs and savings and their perceived cost-effectiveness and performance over a 50-year lifetime. Policy implications are drawn from the analysis.     

Major Issues Associated With the Reporting of Government Net Worth

Modern governments are increasingly making legislative commitments to adopt responsible fiscal policies and, as part of those commitments, undertaking to maintain their net worth and to report against that undertaking. With recent developments in public-sector accounting, reporting of government net worth and change of net worth has become possible. This paper examines some major issues relating to the reporting of government net worth. As attempts to provide for the measurement of assets and liabilities (the components of net worth) on a current value basis have met significant opposition in the private sector, some implications for the public sector are considered.     

Public education spending in a globalized world:

This paper studies the effect of globalization on public expenditures allocated to different stages of education. First, we derive theoretically that globalization’s influence on education expenditures depends on the type of government. For benevolent governments, the model suggests that expenditures for higher education will increase and expenditures for basic education will decline with deepening economic integration. For Leviathan governments, on the other hand, the effects of globalization on public education spending cannot be unambiguously predicted. In the second part of the paper, we empirically analyze globalization’s influence on primary, secondary, and tertiary education expenditures with panel data covering 104 countries over the 1992–2006 period. The results indicate that globalization has led in both industrialized and developing countries to more spending for secondary and tertiary and to less spending for primary education.     

The impact of contract characteristics on the performance of public–private partnerships (PPPs)

Four significant features of public–private partnership (PPP) contracts are analysed to understand their impact on performance. These are whether the contract allows sanctions to be imposed; its complexity; its flexibility; and whether renegotiation is possible. The effects of these characteristics were investigated by surveying participants in all of the PPP projects in The Netherlands. The only feature considered to have any significant impact on perceived performance was the possibility of imposing sanctions. The authors’ findings cast doubt on earlier research into managing PPP performance and suggest that researchers, governments and the private sector need to look beyond contract terms to properly understand and manage PPP performance.     

Political competitiveness and the private–public structure of public expenditure: a model and empirics for the Indian States

Studies of government size usually try to identify the factors that explain what parts of economic activity are brought within the public sector and what parts are left strictly in private hands. Modern governments are now so large that the question of what determines the private/public composition, or privateness, of public expenditure is of comparable importance for understanding the role of government in society. In this paper, we use a model of the composition of public budgets to uncover the importance of electoral competitiveness and other factors in the evolution of the privateness of public expenditure across the Indian states. These states vary widely in their socioeconomic characteristics while sharing a common political heritage based on parliamentary government. New measures of public expenditure on private targetable goods and of electoral competitiveness at the Indian state level accompany the paper along with a primer on Indian public finance accounting practices in an Online Appendix. The empirical analysis shows that the degree of privateness in India’s more developed states falls substantially with greater political competition and with rising incomes, while in the less developed states it responds more weakly to these key factors and in some cases even inversely.

     

房价调控、地方政府债务与宏观经济波动

在地方政府债务高企的背景下,房价调控能否使资本流向非房地产部门？房价调控如果触发地方政府债务违约,宏观政策应如何应对？本文基于中国宏观经济的特征事实,引入地方政府的土地财政行为,将房价变动与地方政府的偿债能力联系起来。研究表明,由于地方政府依赖土地出让和土地抵押贷款筹集收入,房价管控导致的地价下降会带来地方政府收入的下降,直接影响地方政府的偿债能力。如果地方政府债务不出现违约,那么房价管控带来的地价下降会降低地方政府从金融部门获得的抵押融资额,使非基建部门的融资成本下降,非基建部门投资和产出上升。而如果调控房价带来的地价下降导致地方政府出现债务违约,金融部门资产受损,使金融中介减少贷款和提高贷款成本,带来整个社会的信贷紧缩,经济中各个部门的产出大幅下降。进一步的政策分析表明,有必要在避免地方政府债务违约的同时,使用财政资金补充银行资本金等多种方式稳定金融中介的资产负债表,从而将房价调控对经济的负面影响程度降到最低。