New governance theory and its impact on international trade

New Governance

Application to International Trade

Evaluation of New Governance

Application of New Governance to International Trade for Free Market

In today's robust world, scholars as well as the think tanks and tools of democracy and beaurcracy have been using a term "governance" or good governance rather frequently. Where governance in needed in every aspect of corporate management and public administration, it is important to understand how the very concept of governance has evolved over time. Old theory of governance has been replaced by its contemporary version which can be seen as a pre-requisite for the free trade regime especially for exporters. Where the new governance theory has a considerable impact on international trade; its effectiveness in public and private sector cannot be ignored.

Evaluation of New Governance

Over time, the distinctions between the term government and governance have become rather clear over time. Where the term government deals with exercising controls over processes, governance entails the various ways which is used by entities to manage their common affairs. These entities can be individuals or organizations of public and private nature. Where government promotes strict control which would lead to no conflicts or may suppress conflicts, the new concept of governance accommodates the diversified interest through cooperative action. Where the term 'government' is strictly related to organizations with concrete hierarchy, governance deals with formal organizations which have a sole objective of ensuring compliance, and also individuals who do the same yet in informal manner.

Where the concept of governance possesses an extensive history, major research has taken place in the last two decades in this regard. In order to evaluate the current model and its productivity, John Williamson performed a study which entailed observing the radical reforms in the developed as well as in underdeveloped countries. As per his stud, majority of the countries who have gone through successful reforms had a democratic structure. Similarly, a study conducted by Surjit Bhalla 90 countries of the world in econometric frame of reference; the outcome of this study strengthens the concept that it is freedom of civil and political rights which causes economic growth. It is said that proprietary rights are the pre-requisite for economic growth and they tend to be more secure in democratic environment rather than autocratic one. Similar studies have been conducted Nauro Campos, Monojit Chatterji and Brian Hilmore have also performed studies leading to the similar conclusion. These studies helped in establishing the hypothesis that new governance is more effective than old concept of government, therefore it is necessary to understand what the basic characteristics of governance itself are.

As far as the term, 'governance' is concerned; there can be a unanimous consensus on the basic definition of government and governance. Where the government provides the structure of an organization having an objective, governance provides the guidelines regarding how it should be done. As per Peter and Pierre (2000), both governance and government have governing nature however their methods are rather unique to each other. Where government is a name of direct intervention, governance is management at distance. They further state that steering the situation while maintaining the distance is a politically correct approach in today's era where Public is aware of the details of matters in hand and has a resisting power. Furthermore, governance has more intrusive nature as compared to government which makes is more adaptable and productive.

Furthermore, traditional public administration provides rigid boundaries for organizations to operate and has rather fixed mode of public administration. Traditional public administration possesses a defined and definite hierarchy and is preoccupied with a stable structure with defined internal regulations. However, this model because of its fixed nature only gave rise to disappointment from poor government performance and continuous deficits in various fields. At this point the need for a rather flexible public administration model arises.

Studies have proved that there are four approaches via which public administration can be performed by using the current concept of governance. Governance transformation that has taken place in Great Britain, New Zealand, Australia and United States, has taken place following four models of governance: deregulation, flexible government, participative government and market government.

These four models of governance have distinct features which help in develop clear concepts of each. In market government, internal factors of the market are major policy makers who design the market incentives. In such market, the general customer is interested in the low cost of goods and services. Market government emphasizes on paying for the efforts or performance whereas in private sector, perks and benefits are also included in reward other than monetary benefits. Such mode of government has a decentralized structure and scattered nodes of power. Market government is principally diagnosed to have monopoly.

Participative government involves input given by various factors of the market. It has a hierarchical structure with organizations trying to achieve total quality management and working on the model defined by it. Here, policy is product of consultation and negotiation that takes place in between team members. Similarly, public's interest is also considered at the time of negotiations and representatives from public are allowed to participate.

Flexible government is another name of experimentation. This form of government works on testing model where various practices are tested and one which tends to be successful in achieving the target is considered to be viable one. Public interest is rules by low cost factor as most of the processes are taking place in the form of trial. Flexible government comprises of virtual organizations with temporary workforce and is coordinated by the team leaders in a virtual manner. The main objective of this form of governance is to obtain permanence.

As far as deregulated government is concerned, the control of such government is at minimum level. It provides greater managerial control to other stakeholders and allowed market forces to operate freely. Public tends to get interest in unique and creative services providing optimum productivity and satisfaction. Also, it doesn't have any defined structure. The deregulated government has a policy structure which is designed by entrepreneurial forces of the market who also try to control internal regulations as well (Peter, 2001).

Governance is a rather broad term which is used in various contexts. Due to its multi-purpose nature, it has varying uses as well. Governance can be used as minimal state. In this context, it defines public intrusion which focuses on establishment of market aimed at delivering public services. Another use of it is corporate control or corporate governance which will not control the enterprise but oversee it. Governance also provides mechanism of new public management: managerialism (introduction of managerial practices specific to private sector in public sector) and the institutional economics (introduction of reward structure). Fourth use of governance is good governance which entails using political power to control national matters (Plumptre & Graham, 1999). Other uses are socio-cybernetic systems and governance as self-organizing networks (Rhodes, 1996).

Application of New Governance to International Trade for Free Market

After discussing the various uses of governance, it is important to understand how this concept can be levied in today's world where free trade is the main force driving the economies of many countries. Where governance allows the entities to perform with independence and often provides them with supervision and guidance, the organizations and entrepreneurs become capable of operating on their own. Since such freedom makes these entities take independent decisions, therefore the responsibility for such decisions is also borne by them. Such combination of freedom with responsibility allows the organizations to provide products and services of optimum efficiency and effectiveness.

Free trade has been greatly affected by this new concept of governance. In the previous era, governments played vital role in the decision of business especially exporters who have more access to global markets. This introduction of governance allows the business to make independent entrepreneurial decisions and provides necessary supervision only. This theme lead to the establishment of effective global bodies such as NAFTA, WTO etc. which have been assigned with the task of global trade management. The independence provided by this new mode of control over organizations allows the businesses to have more access to the factors of production and also helps them in reaching an extensive target segment (Brown & Stern, 2011).

Where free trade has benefited by new governance, another important use of governance is using governance as self-organized network. This concept ensures the transfer of power from the local government to an independent network formed by amalgamating public and private organizations. In this complex set, representatives from concerned segments of society such as corporate, NGO, private and public sector etc. work collaterally to achieve maximum efficiency and effectiveness. Here, various segments of public and private sects are involved and represent the concern of their respective segment in decision making and policy making. Interorganizational linkages are a defining characteristic of service delivery and I use the term network to describe the several interdependent actors involved in delivering services. These networks allow the forces of society to exchange resource and the end-product would benefit everyone.

These functions and uses of governance leads to a final term called Good governance. As per the definition provided by World Bank, " Good governance is an efficient public service, an independent judicial system and legal framework to enforce contracts; the accountable administration of public funds; an independent public auditor, responsible to a representative legislature; respect for the law and human rights at all levels of government; a pluralistic institutional structure, and a free press." The definition explains that public and private operate in a transparent manner and legislation and media are allowed to follow their own discretion in an unbiased manner. Following the governance model would allow the economies of the countries to operate independently with extended trade horizon and necessary supervision by private sector and the networking between public and private sectors would allow them have access to each other's potential resources and use them in a symbiotic manner.

Conclusion

Governance is a new concept which has replaced the classic model of government. Governance provides independence to the public as well as private entities and helps them exploit their potential to the fullest by allowing expanding their operations and goals. It further ensures that the practices adopted by these segments are provided with necessary guidance and public and private institutions are allowed to follow their own regime. It further stresses that a model of free trade should be adopted where businesses are allowed to expand their operations and provide services with maximum efficiency. Similarly, it allows public and private institutions to have symbiosis which would allow them to help each other out. Comparison of concepts of government and governance provides a logical conclusion that for free trade, governance is more viable than government as it allows independence and maximum access to the required resources.