Public Administration A perspective approach


Written by: Bernard Gbayee Goah

The first part of this paper centers on how the legislation and policy that regulated the financial and banking industry from the depression of the 1930s onward was severely weakened between 1970 and 2007 with dire results in 2008, as well as how these results illustrate the “George Washington Problem”. The second part of this paper explores how the communalist and individualist perspectives on public administration government in general shaped events from 1933 to 2008. The final part of this paper discusses the role the SEC played in these events.
Legislation and Policy
In order to understand how the legislation and policy that regulated the financial and banking industry from the depression of the 1930s onward was severely weakened between 1970 and 2007 with dire results in 2008, one must understand what caused the Great Depression in the first place. Some understanding of the depression will pave a ground work for better understanding of reasons that led to what we are in today.

Between 1930 and 2008 there was huge deregulation of the financial market. The market was left alone to regulate itself. The Great depression was the combination of the greatly unequal distribution of wealth throughout the 1920’s, and the extensive stock market speculation that took place during the latter part that same decade. The maldistribution of wealth in the 1920’s existed on many levels. Money was distributed disparately between the rich and the middle-class, between industry and agriculture within the United States, and between the U.S. and Europe. This imbalance of wealth created an unstable economy. The excessive speculation in the late 1920’s kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the maldistribution of wealth, caused the American economy to capsize.

However, the stock market crash of the 1929 was not a direct cause of the great Depression, but was the result of the fundamental weaknesses in the economy of the United States and other major nations of the world. Again as I have mentioned, the major causes of the Depression including over speculation in stocks, land, and other investments; too much credit supplied to consumers; farmers producing more but wages not keeping up with expenses; and increase in business inventory; curtailed production resulting in unemployment; wages were not keeping pace with the cost of living; the unequal distribution of wealth throughout the 1920s.

Many people thought the banks were going under, and took their money out of them, in large numbers. That causes the banking systems to collapse. In fact the speculation in the 1920’s caused many people to buy stocks with loaned money and they used these stocks as collateral for buying more stocks. Broker’s loans went from under $5 million in the 1929 to 850 million in September of 1929. The stock market boom was very unsteady, because it was based on borrowed money and false optimism. When investors lost confidence, the stock market collapsed, taking them along with it.

Short signed government economic policies might be a fractional part but not wholly the entire factors that led to the Great Depression. Politicians believed that business was the key business of America. Thus, the government took no action against unwise investing. Congress passed high tariffs that protected American industries but hurt farmers and international trade. It can be argued that the economy was not stable at all. National wealth was not spread evenly. Instead, most money was in the hands of a few families who save or invested rather than spent their money on American goods. Thus supply was greater than demand. Some people profited, but others did not. Prices went up and Americans could not afford anything. Farmers and workers did not profit. Unevenness of prosperity made recovery difficult.

By the 1929, the stock market had already crashed. Unlike this decade, the early 1930s were a period of generalized economic collapse. There was broad popular appetite for drastic remedies by the time Roosevelt took office in March 1933. Although all forms of household debt increased from 66 percent of house hold income in 1973 to about 140 percent today, the era of 1973 was less a general crisis and more a slow erosion of economic security for ordinary people, couple with escalating risks in liberated financial markets, and little political leadership offering a different path. Although the economy is not yet in the 1930s scale free fall cumulating previous financial risks from years past have turned into trillion dollars losses. All of these factors which resulted from the idea that that market could regulate itself lead to the great failure. Although the ideal of self-regulating financial market has been unmasked as a practical failure, the free-market melody lingers on (Kuttner, 2008).

The economic hazards of today are not only a problem for individuals and families; the market economy today faces more systemic risk than at any time since the Great Depression. The real economy of enterprises and workers is hostage to a casino of financial speculation.

The US trade policy has squandered American manufacturing, producing a permanent and structural imbalance in which more industries and jobs leaver our shores, forcing us to borrow what we no longer finance with exports. To finance its escalating trade deficit, the United States is ever more deeply in debt to foreign buyers of its bonds, notably Asian central banks. As a consequence of the trade imbalance and foreign debt, sooner or later the U.S. dollar will face a sharp decline in the value of what it can purchase. If that happens, it will lead to more economic damage. Even if the erosion is gradual and we get what is euphemistically termed a “soft landing,” It will still mean a further loss of living standards (Kuttner, 2008).

Horrible political policy and the failure of the political systems also played a major role in how severely the banking systems were weakened. As national challenge demanding attention, the issue of foreign debt is mostly beyond political discourse. Both parties, most of Wall Street, and even the Federal Reserve are whistling past the graveyard where as the danger is just nearby. This is huge failure of politics (Kuttner, 2008).

Between 1989 and 2006, credit card debt grew from $211 billing to $876 billion. College debt has gone from practically nothing a generation ago to an average of $20,000 per graduating student. The ratio of mortgage debt to the value of an average home has gone from under 20 percent in the 60s to 50 percent today. During the stock market bubble of the 1990s, inflated stock price made people feel temporarily richer. Federal Reserve economists have calculated that for every additional dollar of paper financial wealth, people increased their spending by three to five cents. This means that the temporary stock market bubble added between $200 and @400 billion of purchasing power per year in the late 1990s. But the stock market collapsed, so did this source of consumer spending.

The evisceration of controls on financial speculation not only contributes to a widening to economic inequality, it increases the risk of an economic crash. The stock market collapsed in 200-2001 and remarkably few lessons were learned. No sooner was a very modest form enacted than banks and corporations found new subterfuges to disguise illicit financial maneuvers. Politic failure to seriously engage national problems goes hand in hand with the disrepair of democracy itself.

For the first time in more than a century the national government in the Bush era has spent more effort on suppressing voting that on expending it. This resulted into the huge decline in political participation by citizens. This also left most citizens with the belief that one or both of the last two presidential elections were stolen. When politics does deliver the goods the citizens expect, citizens give up on politic or they see politics as a realm mainly for cultural warfare, for battle over patriotism, or as something for other people. The very citizens must expose to the most severe economic stress have been exposed to the most severe economic politics at the most accelerating rate. People have been disconnected from their politics, in turn, leaves democracy far less energized. Consequently, when an autocratic administration ignores rights and laws, invents extra constitutional doctrines such as presidential “signing statements,” uses a state of permanent warfare to undermine free debate, or colludes in the suppression of the fundamental rights to vote and to have every vote counted, there is far too little popular outcry (Kuttner, 2008).

Unlike the conception of a missed economy as a public policy model which was once an animating source of popular politics during the boom decades after World War II, and that which mainly delivered broadly shared prosperity, as well as greater security for both the system and individuals, the prevailing myths of today which is a bit contrary to the prevailing myths of the past, there is nothing about the structure of the new economy to prevent us from reclaiming an economy of broader prosperity and security. What needed to be done the most is to reclaim our politic first.

Many Americans see the period of 1973 as economically trying times with stagnating real incomes and increased personal financial risks. But they have been terrific times for the top 10 percent, even better for the top 1 percent and best of all for the superrich.

There have been some brief general boom times, as in the late 1990s, but the period as a whole has brought nothing like the economic gains of the previous quarter century to the common American (Kuttner, 2008).

There were multiple defaults of democratic politics but mostly bad economic policy resulted into lot more economic defaults which was substantially bipartisan. For example, Democrats although fought skirmishes around issues such a s budget balance and tax cutting as we see as well today, too many of them have joined the business class in dismantling a regulated form of capitalism that once produced broader prosperity as well as greater security both for individuals and for the system. Both Democrats and Republicans depend on large donors for the preponderance of their financial support and election campaigns grow more expensive every year.

Between 200 and 2005, people turned to their one remaining asset-the equity in their homes. Bankers and brokers encourage consumers to believe that housing prices would keep rising faster than the growth rate of the real economy. They made it even easier for people to borrow. About 5 percent of consumer spending every year was the result of home equity withdrawals. This was another classic asset bubble. It could not continue, because at some point some buyers have to pay the seller’s price. If family purchasing power is falling then housing prices eventually have to fall as well.

The U.S. economy failed to modernize its manufacturing industry and to insist on fair play from other trading nations led to another debt crisis. Instead of exporting products, America exported jobs. Instead of using export earnings to pay for imports, America allowed nations like china to accumulate huge trade surpluses and then borrowed the money back to finance imports.

America as a whole when deeper into debt –over a trillion dollars to China alone! In the mist of all of this, creditor nations are diversifying their financial holdings into other currencies and buying up American companies and America real estate rather than American Treasury bonds. The financial economy became addicted to ever more exotic products with names like collateralized debt obligations and credit default swaps. Like the financial instruments of the 1929, financial instruments between 200 and 2005 were opaque and interested in crisis but they had one thing in common which is a very high ration of debt to real assets (Kuttner, 2008).

In 2007 to 2008, the Federal Reserve has attempted to cure the crisis with cheap money and selective bailouts, but this strategy has its limits. A cheap dollar only fuels inflation and drives foreign creditors to seek the safety of other currencies. Bailouts reward bad behavior and invite the next round of speculation. It is nether neither prudent nor practical for government to guarantee the entire financial economy against losses. The alternative is better regulation. Since market fundamentalism has proven over and over to be a complete failure and that market does regulate itself, I hope this time better regulation would be the answer to our financial crisis (Kuttner, 2008).

Communalist and Individualist Perspectives
Citizens must be aware of all potential possibilities that are available for them to improve themselves in order to become fully competent, energetic, and to become good and dependable governors for public service. Otherwise the United States is most likely to go through the same problems it has been going through since the 1920s up now. For if public servants that are concerned with financial forecasting are not equipped enough with the knowledge to predate the future of the financial systems, over speculation in stocks, land, and other investments would resurface and thus creating the same situation of today or even worse. Government become powerless when there are only few competent and energetic public servants while the majority of public servants remain incompetent.

The threat of too little power in government, making weak and feckless, as illustrated under the articles of confederation is what Morgan and his colleagues call the “George Washington Problem”. The correctives of the George Washington Problem prescribe competent, unified, energetic governance; effective career professionals; efficient customer service; contracting out; and systematic planning. 
Morgan and his colleagues mentioned that the inability of General Washington to acquire the necessary troops, arms, and supplies during the Revolutionary war demonstrated the need for unity of command operation within a stable and more robust system of funding. I was nearly impossible to conduct coordinated and sustained military campaigns under the authority of the Articles of Confederation, which gave the responsibility to a committee. Severe war losses and economic depredations taught painful lessons about the need for unity of command, coordinated planning, functional specialization, adequate powers to implement legislative will, and the ability to respond quickly to emergencies (Kuttner, 2008).

Good governance comes with proper regulation as well. If fund are not regulated, and there is no control, then there is lot of room for fast loose activities. So again, the incapacity of government institutions and agents to act energetically and competently breeds more and more of the “George Washington Problem” (Kuttner, 2008). From President Obama speech of February 24 2009, he stated that the necessity of all Americans students completing college education. He said only 50 % of students in the United States complete college while the balance 50% do not complete college thus leaving a vacuum of positions in public service that could be later filled with people who do not have the require competence to work in public service.

The American republic has evolved into a regime dominated by large, complex organizations. In public life, these organizations are integrated into a pluralist array of agencies, nonprofit organizations, public corporations, special districts, networks and intergovernmental policy subsystems. Conducting public discourse and responsibly achieving public purposes in this environment requires astute skill in bureaucratic politic, which poses its own distinct ethical challenges. Public servants are obligated to support the integrity of policy formulation and implementation processes. These obligations entail the need to overcome a variety of organization pathologies and perverse dynamic (Morgan, 2008).

Bureaucracy works but only if we are reminded that the heart of the matter in these financial catastrophes in the United States of America requires the rich political tradition and sets of administrative practices that treats bureaucracy with a large framework of our systems of constitutional governance. In so doing, a concern for citizenship, checks and balances, separation of powers, federalism, public spiritedness, reputation, honor, virtuous leadership, the interdependence of social and political institutions, and the corrosive consequences of excessive individualism are properly observed.
I will argue that while it is truth that the US system of constitutional governance is to protect individual liberty, most endanger this liberty, firstly, the abuse of power by officialdom, and the citizenry at large in the second instance. There is also danger in crafting policies that inadequately take into account the need for, and the impact on, social institutions and the character of the citizenry. The restoration of the constitutive role of government, particularly at the administrative level, without undermining the primacy of the legislative function is the actual sticky issue. Government must regain citizens’ confidence and trust in order to get the brightest minds of the United States in public service.

Both the communalist and individualist perspective on public administration and government help shape events from 1933 to 2008 in many ways. Firstly, the United States political and economic systems share a common root in classical liberalism, which asserts that authority rests first with individuals. Governmental power is derived as a grant of authority from those who want their rights protected through a social contract. Similarly, in market economy, the idealized actor is the individual who exercises autonomous choice in pursuit of his or her material self-interest. It is through the aggregation of individual preferences and actions that political society and its economy are formed. This presents a rather stark view of society as a mere collection of autonomous strangers interacting only as they motivated to advance their mutual interests. Such a view minimizes the role of community and government, and therefore also of public leadership.

Furthermore, people are much more complicated than this stark, individualistic image depicts. While Americans express strong individualistic preferences, they also express a desire to live in communities with a real sense of identity and commitment to a larger common good. For example when asked where they would like to live, most choose vibrant communities that work- where schools function, where potholes are filled, where the perception of a high quality of life exists, where public services are effective and efficient, where people are known and respected and where the public, private, and nonprofit institutions join in fashioning community identity and spirit.

The successful management of this tension between libertarian individualism and our more communitarian aspirations constitutes a key standard against which public service leadership is measured, and it is not an easy standard to meet. This is how in general citizens behaviors are reflected within the United States Political and economic systems until recently few individuals decided to take a the trend of only narrow self interest instead of self interest rightly understood. This can be illustrated by the statement made by Allen Green Span on the current financial problem in the United States of America. According to Allen Green Span, he did not think anyone would act in their self own interest.

Although Mr. Green Span did not specify whether he was referring to narrow self interest or self interest rightly understood. If Allen Green Span intended to say self interest rightly understood, he might not have mentioned it publically since self interest rightly understood takes into account the welfare of others on the premise that if the majority does well then in the long run individuals will also do well. (Kass,2009)

Whatever the case was, it is implied that Mr. Green Span meant some key people at Wall Street and in other higher places in government acted in their own narrow self interest not taking into consideration the welfare of others at all. This has been dominantly the case with the US financial systems at least since 1933 up to now. Hopes are high up for the coming years under the Obama administration that we will all rethink our actions in order to help redeem the economy of the United States. (Morgan, 2008).

The Role of the SEC
The staff at SEC played a constitutive role by carrying out the policy as told by congress. If the “George Washington Problem” as have already been mentioned in this paper was corrected in the Case of SEC, we would not be in this problem today. The SEC fell in the hands of people who did not believe in regulation (Kass, 2008).

However, research conducted just two days ago, The SEC has worked and is working tremendously in adopting the regulatory concept of an agency chartered to protect investor; maintain fair, orderly, and efficient market; and facilitate capital formation.

An important reason the SEC has been able to accomplish so much now is the expertise gained in each of its complementary roles. The agency’s work to protect investors through the enforcement program has been greatly benefited by the expertise of SEC staffs that are specialized in the regulatory program, including its commitment to ensuring full disclosure of public company information in the capital markets, has been informed by the experience of the enforcement and examinations staffs. SEC’s ability to oversee accounting and auditing standard setting has likewise been aided by its concurrent responsibilities in each of these areas. Regulation, as well as the approach the government takes to the enforcement of law and regulation is a top propriety at SEC. All of these steps of Regulation, specification, and competent staff initiatives at SEC are getting to improve currently.

The current market crisis began with the deterioration of mortgage origination standards. It could have been contained to banking and real estate if the US market was not so interconnected. (Morgan,2008). But in today’s market these problems quickly spread throughout the capital market through securitization. And while the securitization process served at first to disperse risk, it did not eliminate it – and ultimately, the growing size of the risk combined with its dispersion created a need for greater transparence for financial institutions of all kinds. This is but one way ion with the seamlessness which characterizes today’s market has confronted SEC regulatory system. One example where the regulatory system has responded well is in the area of disclosure. The need for greater transparence to rebuild confidence in the financial system however extends beyond the public reporting that is bedrock of the US capital markets (Cox, 2008).

While this paper discusses Kuttner reviews how the legislation and policy that regulated the financial and banking from the depression and how it was severely weakened over the time, it also attempts to illustrated what Morgan and his colleagues call the ‘George Washington Problem and how such problem can be corrected. This paper also attempts throw some light on how the communalist and individualist perspectives on public administration and government in general help shape events from 1933 up to 2008. There are many reasons why the US financials system has reached present level contra positively, and such reasons are too numerous to be mentioned in a paper of only ten pages.References 
Kass, Henry D. (2009). The Individualist Perspective. Oregon: Blackboard.

Kass, Henry D. (2009). The Communal Perspective. Oregon: Blackboard.
Kuttner, Robert (2008). The Squandering of the America. New York; Vintage Books.
Morgan, Douglas F., Richard, Shinn, Craig W., & Robinson, Ken S. (2008).
Foundations of Public Service. New York; M.E. Sharpe.
Cox, Christoper (2008). Reform of the Financial Regulatory System. U.S. Securities and Exchange Commission

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