Governmental Financial Resilience

International Perspectives on How Local Governments Face Austerity

Ileana Steccolini, Martin David Singh Jones, Iris Saliterer

• Publisher: Emerald Publishing Limited
• Year: 2017
• ISBN:
  9781787149151
• Topic: Politik & Internationale Beziehungen
• Subtopic: Öffentlichsarbeit & Verwaltung

This volume provides a unique insight into the ways local governments have maintained financial resilience in the face of the significant challenges posed by the era of austerity. Taking an international perspective, it provides an enlightening and practical analysis of the different capacities and responses that local governments deploy to cope with financial shocks. Moving beyond traditional approaches dealing with financial stress, the financial resilience perspective reveals a wider range of organisational responses and enables consideration of the dynamic role played by internal and external contextual factors. The international case study approach allows for a comparative analysis of financial resilience in the context of different administrative and policy environments.By providing a unifying view of financial resilience, the importance of building resilience into organisational financial management is demonstrated, uncovering the relative effectiveness of different resilience building approaches. This edited volume is a valuable source for practitioners and academics, as well as students of public policy, public management and financial management.

CHAPTER 1

INTRODUCTION: GOVERNMENTS AND CRISES

Iris Saliterer, Martin Jones and Ileana Steccolini

ABSTRACT

Governments are no strangers to dealing with crises. On the contrary, a central role of any government is to absorb, navigate and mitigate them. However, crises themselves are unpredictable and represent a significant challenge to governments at both the national and local level. Despite such uncertainty, studying how governments in different countries respond to crises offers a great opportunity to learn from the past and to understand the nature of resilience in the face of significant shocks and disruption.

This book charts how local governments in 11 countries, covering Europe, the United States, South America and Australia, responded to the recent crises and austerity period by shedding new light on the role of contextual- and policy-related conditions as well as the internal capacities and conditions that may influence responses and, ultimately, performance.

This chapter sets the scene for the book, by highlighting the relevance of examining financial crises and austerity and the ways in which governments, and more specifically, local governments, are facing the related shocks. In doing so, it proposes a preliminary framework for exploring governmental financial resilience at the local level. In such a framework, financial resilience is seen as the dynamic combination of internal and external dimensions, including the external environment, financial shocks, vulnerability, anticipatory capacity and coping capacity.

Keywords: Local government; austerity; financial resilience

Governments are no strangers to dealing with crises. On the contrary, it could be said that one of central roles of any government is to absorb, navigate and mitigate them. However, crises are not straightforward to solve, as they do not respect timescales, are unexpected and disruptive and tend to be dynamic and chaotic in nature (Boin & ‘t Hart, 2003). Indeed, they are a challenge to governments, which may even make mistakes along the way in their attempts to deal with them (Peters, 2011).

While crises and shocks are often described as one-shot, unique events, it has been observed that they are increasingly becoming ‘routine’, requiring governments to be constantly ready to tackle with them, as they are left with the ultimate responsibility to manage and cope with them. As such, there have been increasing claims for studying how governments face crises so as to learn important lessons for the future (Boin & Lodge, 2016). There have also been calls to ensure that the wider complexities and nuances of responses to crises are explored, not only focusing on political and policy perspectives, but also allowing a greater understanding of institutional effects and organisational practices, together with how these are changed and implemented and the outcomes they deliver (Boin, ‘t Hart, & McConnell, 2009; Lodge & Hood, 2012; Peters, 2011). As such, a multidisciplinary approach may be required to give a fuller understanding of crisis responses within and across governments (Grossi & Cepiku, 2014).

The recent global financial crises, and the ensuing context of austerity, representing another important and contemporary crisis that governments have had to face, can provide an interesting opportunity for learning lessons of general relevance on how governments cope with difficulties and unexpected events. Whereas much of the preceding empirical literature on crisis responses has been focused on discrete events (such as natural disasters or terrorist attacks), and is therefore very localised and not necessarily generalisable, the global financial crisis and austerity period offer the opportunity to examine responses from a large population of essentially similar organisations from a wide range of countries, all facing a similar (though not identical) set of circumstances.

This book shows how local governments in 11 countries responded to the recent crises and austerity by shedding new light on the role of contextual and policy-related conditions as well as the internal capacities and conditions that may influence such responses and, ultimately, performance. In spite of national governments having attracted most scholarly attention (Kickert, 2012; Lodge & Hood, 2012; Peters, 2011; Peters, Pierre, & Randma-Liiv, 2011; and Raudla, Savi, & Randma-Liiv, 2013), local governments are often the residual bearer of the impacts of crises and shocks, and have been significantly affected by recent crises and austerity (Barbera, Guarini, & Steccolini, 2016; Steccolini, Barbera, & Jones, 2015). Moreover, while traditional literature on crises, austerity, fiscal stress, cutback management and financial difficulties has focused on the contextual conditions and the organisational actions and reactions to difficulties, this book considers the role of internal preexisting conditions and organisational capacities in affecting such responses. In doing so, it adopts the conceptual perspective of financial resilience. The concept of resilience, which can be defined more generally as the ability to ‘learn how to do better through adversity’ (Wildavsky, 1988, p. 2), can contribute to the adoption of a long-term and lifelong perspective on organisational ability to cope with difficult times. Moreover, a resilience perspective can help overcome the traditional focus of management approaches to efficiency, stability and control (Leach, 2008; Shaw, 2012) and point to the likely importance of flexibility and adaptation, or the enduring capacity to absorb shocks (Dalziell & McManus, 2004; Hood, 1991; Martin-Breen & Anderies, 2011; Pain & Levine, 2012; Scotti-Petrillo & Prosperi, 2011).

This chapter sets the scene for the book and in so doing it introduces and explores a number of issues relevant to understanding the following chapters. The remainder of this chapter considers the need to examine the financial crises and austerity period and introduces the concept of financial resilience. It proposes a first framework, where financial resilience is viewed as a dynamic combination of interrelated dimensions which are seen as being at the same time the antecedents and the results of their interactions with the external context and shocks. The possible dimensions of resilience from the literature (in terms of robustness, recovery ability, awareness and flexibility) are identified and translated into a first conceptualization of financial resilience. This seeks to show how local authorities’ capacity to anticipate, absorb and react to shocks, which affect their finances over time, can be considered to be a dynamic combination of interrelated dimensions, namely financial shocks, vulnerability, anticipatory capacity and coping capacity. Finally, we discuss the importance of the global financial crisis and associated austerity to the study of resilience before focusing on the impact that each has had on local government.

STUDYING CRISES AND AUSTERITY IN THE PUBLIC SECTOR

Crises have been the subject of enduring interest in public administration and public policy research. While a variety of approaches and standpoints have been adopted in the study of governmental responses to crises, at least three different streams of research can be identified from the literature that are considered below.

The first stream has developed at the intersection of public management and organisation theory (e.g. Andrews, Boyne, & Walker 2012; Boyne & Meier, 2009; Meier & O’ Toole, 2009; Meier, O’Toole, & Hicklin, 2010; O’ Toole & Meier, 2010), and focuses on organisational reactions to shocks, threats, uncertainties and turbulences. This predominantly quantitative research stream highlights the role of the overall management capacity in coping with shocks, and has pointed to the need to further explore such capacity and its dynamic properties over time (Boyne & Meier, 2009).

The second stream of literature has developed at the intersection of public policy and organisational studies and has been more traditionally focused on understanding how policy makers respond to major crises (such as natural and man-made disasters and terrorist acts) and the effectiveness with which they link to the administrative processes that underpin crisis management and disaster recovery systems (Boin & ‘t Hart, 2010). More recently, this literature has focused on changing societal conditions that give crises transboundary characteristics, allowing them, as with the financial crisis, to wickedly cut across geographic boundaries and policy sectors (Boin & Lodge, 2016).

The third stream of literature is more focused on financial management and accounting. There is a long-standing academic interest in financial crises and fiscal stress in public sector financial management literature (Behn, 1980; Greenwood, 1981; Hood & Wright, 1981; Levine & Posner, 1981; Levine, 1978, 1979; Schick, 1980). Building on this literature, studies of how governments tackled the fiscal crisis and austerity worldwide have been developed (Baker, 2011; Cepiku & Bonomi Savignon, 2012; Dougherty & Klase, 2009; Klase, 2011; Raudla et al., 2013; Sacco, Stalebrink, & Posner, 2011; Scorsone & Plerhoples, 2010; West & Condrey, 2011), providing detailed accounts and classifications of reactions to the crisis and austerity, therefore ensuring an accumulation of contextual and descriptive knowledge on response strategies. Less attention appears to have been devoted to austerity and crises in the accounting literature, with a few notable exceptions (see Bracci, Humphrey, Moll, & Steccolini, 2015; Hodges & Lapsley, 2016).

These streams of research offer a mix of empirical and theory building approaches and while each stream is valuable in its own right, they do not on their own capture the dynamic and interrelated nature of crises responses, and tend to underplay the complex and interrelated nature of capacities that underpin strategic responses, something which a resilience view can help in understanding.

AN ALTERNATIVE CONCEPTUAL LENS: RESILIENCE

Since its origins in the field of physics and ecology (see Davoudi & Porter, 2012), the concept of resilience has been adopted and extended to other disciplines, including public policy, urban planning and disaster and crisis management (Boin & Van Eeten, 2013; Comfort, 2002; Pain & Levine, 2012; Reid & Botterill, 2013; Vale & Campanella, 2005; Wildavsky, 1988; Wukich, 2013). In the next sections, we advance the case for conceptualising financial resilience.

Organisational Resilience: Definitions and Dimensions

The concept of resilience refers to both organisational capacity to recover from crises and reduce risks (Boin & Van Eeten, 2013; Holling, 1973; Pickett, Cadenasso, & Grove, 2004; Shaw, 2012; Sutcliffe & Vogus, 2003; Vickers & Kouzmin, 2001; Wukich, 2013) as well as the ability to ‘keep operating even in adverse “worst case” conditions and to adapt rapidly in a crisis’ (Hood, 1991, 14). The former view focuses on recovery and bouncing back to equilibrium (Altintas & Royer, 2009; Boin & McConnell, 2007; Coutu, 2002; Davoudi, 2012). In this perception of resilience, organisations build slack that cushions and absorbs shocks (Huy & Mintzberg, 2003; Meyer, 1982), presumably with the aim to resist and survive. The latter, i.e., the evolutionary approach to resilience (Davoudi, 2012; Hamel & Välikangas, 2003; Pike, Dawley, & Tomaney, 2010), draws more on anticipatory responses (Martin & Sunley, 2006). This view interprets resilience as a continually changing process and goal, and as a case of becoming rather than being, interpreting it as part of a path-dependent trajectory. In this view, organisations become resilient not despite of distress or decline, but in anticipa...

Table of contents

• Cover
• Title Page
• Chapter 1 Introduction: Governments and Crises
• Chapter 2 Austria – Building Capacities versus Resting on Laurels
• Chapter 3 A Tale of Two Jurisdictions: A Focus on the Effect of Regulatory Constraints on Municipal Resilience in Australia
• Chapter 4 Financial Resilience in Brazilian Municipalities
• Chapter 5 English Resilience in the Face of Austerity
• Chapter 6 Resilience Patterns of French Municipalities: A Case Study
• Chapter 7 A Cushioned Impact of the Financial Crisis – Local Government Financial Resilience in Germany
• Chapter 8 Financial Resilience of Greek Local Governments
• Chapter 9 Patterns of Financial Resilience in Italian Municipalities
• Chapter 10 Financial Resilience: How Dutch Cities Have Buffered and Adapted to the Financial Crisis
• Chapter 11 Financial resilience: the Swedish case
• Chapter 12 Financial Resilience at the Root of the Crisis – Michigan, U.S.
• Chapter 13 Conclusion
• Index