Most Americans tend to believe that they’ve lived under the same form of government, more or less, since the country was founded in late 1700s. They’re mistaken.
It’s true that there have been important continuities. The American conception of what government should and should not do is deeply rooted in clear thinking at the start of the republic; the country has long preferred limited government and effective constraints on capricious executive action. But this persistence of core ideas (and the consistent use of the same buildings in Washington, D.C.) obscures the dramatic changes that have taken place within the governing institutions themselves.
In fact, formidable challenges at the end of the 19th century were met by fashioning a transformation so thorough it could effectively be deemed a “Second Republic.” This new republic came with significantly different economic and political rules — and, as a result, enabled the American system to survive and even thrive for another century. Today, faced with serious economic and political dysfunction, we are in need of another round of deep institutional renewal: a Third Republic.
The conditions that brought about the first transformation of American society are strikingly similar to those we see today. At the root of the problems confronting the United States by 1900 was a wave of innovation that sped up growth. The direct benefits of these new technologies accrued to a few, while many others became more uncertain about their economic future.
Doug Criscitello, Executive Director of MIT’s Center for Finance and Policy
From MIT Golub Center for Finance and Policy
As the keynote speaker at a recent conference of the International Consortium on Government Financial Management held in Washington DC, I had the opportunity to discuss with representatives from over 40 countries one of the primary challenges facing governments around the world – citizen engagement.
My remarks emphasized that recent populist movements should be a wake up call to everyone involved in government – including those in the budgeting and finance communities – on the need to turn citizen cynicism into engagement and buy-in.
The growing availability of technology and data should be enabling a highly informed citizenry (i.e., voters) armed with actionable information. Moving beyond tired factory-like mindsets where government financial staff spend their days grinding out reports, preparing audit remediation plans and manually executing budgets, a modern approach enables technology to drive iterative, customer-focused engagement and creates and marshals electronic resources.
Ask most finance experts about the “world’s largest financial institutions,” and you’ll hear names like Citigroup, ICBC (China’s largest bank) and HSBC. However, governments top the list of large financial institutions, with investment and insurance operations that dwarf those of any private enterprise. For instance, last year the U.S. federal government made almost all student loans and backed over 97% of newly originated mortgages. Add to that Uncle Sam’s lending activities for agriculture, small business, energy and trade, plus its provision of insurance for private pensions and deposits, and you’ll discover it’s an $18-trillion financial institution. By comparison, JP Morgan Chase, the largest U.S. bank, had assets totaling about $2.4 trillion.
While government practices differ across countries, the basic story is much the same everywhere. As the world’s largest and most interconnected financial institutions — and through their activities as rule-makers and regulators — governments have an enormous influence on the allocation of capital and risk in society. And as financial actors they are confronted with the same critical issues as their private-sector peers: How should a government assess its cost of capital? How should its financial activities be accounted for? What are the systemic and macroeconomic effects? Are the institutions well-managed? Are its financial products well-designed?
Richard Locke faults a production system geared to speed at all costs
Two decades after Nike faced heat for poor working conditions in its suppliers’ overseas factories, Apple has been responding to a series of scandals – health and safety problems, worker suicides and riots by workers employed at Foxconn, one of its lead suppliers in China. And, once again, consumer activists and others are calling for better standards, more workplace inspections and other steps to prevent such abuse. Read More »
I am just back from an exciting weeklong trip to China to meet applicants for a new program MIT Sloan is helping develop at Yunnan University for women entrepreneurs. The program is part of Goldman Sachs’s 10,000 Women Initiative. Goldman’s initiative is a $100 million campaign designed to provide business and management education to promising female entrepreneurs in developing countries.
I met 15 candidates and found them each to be impressive – educated, articulate, and brimming with ideas. They have already experienced some success: some of them had at least 1 million yuan in revenue, which is about $150,000. Read More »