Reforms in the Public Sector
(Week 1)
Introduction
Eduard Bakoš
bakos@econ.muni.cz

Course outline
Interactive syllabi
https://is.muni.cz/auth/el/1456/jaro2017/BPV_TRPS/index.qwarp
The materials will be continuously updated! -  Follow regularly!

Evaluation
CONDITIONS
FINAL MARKS (APPROXIMATELY)
•lecture activity evaluation (see Notebooks) - up to 20 points every lecture
•seminar work (paper) - up to 20 points (max. 10 points for the presentation and max. 10 points for
the content)
•final test (17. 5. 2017) - up to 40 points
•final essay (17. 5. 2017) - up to 20 points
A more than 61 points
B 56 - 60 points
C 51 - 55 points
D 46 - 50 points
E 40 - 45 points
F less than 40 points

Czech Republic - Historic overview
•1918: Czechoslovakia is established with diverse conditions among its regions
(Slovakia being the less-developed part with predominantly agrarian population, low urbanization,
education and literacy)
•1948 – 1989: The rule of communists
•1989: Velvet Revolution
•1993: The break-up of Czechoslovakia
•1999: Joining NATO
•2004: Joining the European Union
•

Following the defeat of the Austro-Hungarian Empire in the First World War, the Czechs and Slovaks
declared independence in 1918 and Czechoslovakia was established as a sovereign country. During the
1920s and 1930s, Czechoslovakia ranked among the ten most developed countries in the world.
The two parts of the newly established state differed in a number of aspects, including the degree
of industrialization, urbanization, education and literacy (Slovakia being the less-developed part)
and religiosity (Slovakia being the more conservative and religious part). Within pre-war and
post-war Czechoslovakia the two parts converged in many aspects, whether as a consequence of
deliberate policies or as a by-product of mingling populations and coexistence under one roof.
Carpathian Ruthenia was the eastern-most part of Czechoslovakia that ceased to be part of
Czechoslovakia as a consequence of World War II.
After the Velvet Revolution deep economic, social and political reforms were implemented, leading
to democratization and economic liberalization in Czechoslovakia. On January 1, 1993, the Velvet
Divorce resulted in two successor states of Czechoslovakia – the Czech Republic and Slovakia.

Reforms in the Public Sector
•Public Administration Reform
•Public Finance Reform

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References (European Union)
•Maastricht Treaty
•- SGP - Stability and Growth Pact  (Resolution) including corrective rules and amendment
•Lisbon Treaty
•Pix Pack, Two Pack
•Treaty on Stability, Coordination and Governance (Fiscal Compact)
•SGP Review
•etc.

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References (European Union)
•Country Specific Recommendations
•Commission Recommendation
•Council Recommendation
•Country Report (each year)
•National Reform Programme
•Convergence Programme (countries without euro)
•Stability Programme (countries with euro)

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References (international)
•Recommendations and Reports of international organizations
•International Monetary Fund (IMF)
•Fiscal Issues at the IMF
•Worldbank
•The Organisation for Economic Co-operation and Development (OECD)
•North Atlantic Treaty Organization (NATO) – specially for defence
•etc. (G8, G20, WTO, UN, ….)
•

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General Reasons for Reforms
vdemographic changes (population structure)
vincreasing budget amounts
vpermanent imbalance (    public deficit and debt)
vValue for money approach
(economy, efficiency, effectiveness and equity)
vpublic control of public finance
vchanges in the management of public sector (e-governance, quality management system etc.)
vglobal economic crisis
v
v
•

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Specific Reasons
v economic crisis in 70s (recession) – oil crisis
v post-communist transformation (25 years)
vmembership in European Union (adaptation of EU rules – standards, law etc. )
vinternational migration
veconomic development of each specific country (Greece, Spain, Germany, Great Britain etc.)
•

Factors that influence reforms
•Internal (specific conditions in the country – e.g. economic performance, culture, tradition,
public policy and politics etc.) – the country can change •External (general conditions -
geographical location, international relations etc.) – the country can hardly change
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A comprehensive approach to reform (1)
•policy reform in some sectors – health care, pension system, budgeting – what, why and how – try
to think about goals, reasons and ways
•technological aspects in some sectors – development of IT technologies, budgeting system, software
etc.
•institutional – formal and informal relations in some area including formal organizations
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A comprehensive approach to reform (2)
•government reform
•tax reform
•reform of the social system (including pensions and social benefits)
•reform of the health care
•
•reform of budgetary policy
•
•
•
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Theory
•Capitalism x Socialism
•
•Many different theories:
•classical economics (liberal)
•Keynesian economics
•Marxian school of economics
•Austrian school
•…..
•
•What is the role of the state?
•What is the role of the individual?
•
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Reality - praxis
•no one view
•many ways
•economic policy (e.g. fiscal and monetary)
•methods (e.g. cost-benefit analysis, cost-effectiveness etc.) •financial instruments (public
budget, regional and local budgets, subsidies, expenditure, tax)
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Many examples in the world
•Recommendations of IMF and World Bank
•Recommendations of EU
•
•Specific examples of past reforms in selected countries like New Zealand, Chile, Japan
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Public Finance Reform – country example of Czech Republic
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Public Finance Reform – area example - Pension Reform
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