How to improve the Climate of Business in Algeria

This brief analysis is a synthesis of the Doing Business Report 2017 data compiled upto and as of June 1, 2016. The indicators are used within the context of Algeria to analyze economic outcomes of countries of the same calibre and identify the regulatory reforms of all legislation that are required so as the economies where they have been adopted and the reasons for which they have been implemented have born fruits. The question that such report brings to mind would therefore be about how to improve the Climate of Business in Algeria and how to go about it.  

In the meantime, the above mentioned report findings were that :

Starting a business
Algeria made starting a business easier by eliminating the minimum capital requirement for business incorporation.

Dealing with construction permits
Algeria made dealing with construction permits faster by reducing the time to obtain a construction permit.

Getting electricity
Algeria made getting electricity more transparent by publishing electricity tariffs on the websites of the utility and the energy regulator.

Paying taxes
Algeria made paying taxes less costly by decreasing the tax on professional activities rate. The introduction of advanced accounting systems also made paying taxes easier.

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This brief analysis is a synthesis of the Doing Business Report 2017 data compiled upto and as of June 1, 2016. The indicators are used within the context of Algeria to analyze economic outcomes of countries of the same calibre as first reviewed back in October 2016 and identify the regulatory reforms of all legislation that are required so as the economies where they have been adopted and the reasons for which they have been implemented have born fruits. The question that such report brings to mind would therefore be about how to improve the Climate of Business in Algeria and how to go about it.  
In the meantime, the above mentioned report findings are excerpted below:
  • Starting a business
Algeria made starting a business easier by eliminating the minimum capital requirement for business incorporation.
  • Dealing with construction permits
Algeria made dealing with construction permits faster by reducing the time to obtain a construction permit.
  • Getting electricity
Algeria made getting electricity more transparent by publishing electricity tariffs on the websites of the utility and the energy regulator.
  • Paying taxes
Algeria made paying taxes less costly by decreasing the tax on professional activities rate. The introduction of advanced accounting systems also made paying taxes easier.

 The authors state at the outset that there are some important areas not covered by the Doing Business report and that it does not evaluate all of the factors such as policies and institutions that affect the quality of the framework of the economic activity of an economy or its competitiveness. It does not for example,  consider the macroeconomic stability, the development of the financial system, the size of the market, the frequency of bribery and corruption, nor the quality of the workforce, deadlines and costs as related to the logistics of the import and export of goods, indicators on the cross-border trade, or the cost of international transport as well as the effect of roads, rail, ports and inadequate communication systems that can have on operating a business and their consequences in terms of competitiveness.

However, if this report does not evaluate and/or is not intended to assess the benefits of all social and economic programs funded by tax revenues, assessing the quality and efficiency of the business regulation is something to take into account in the debate on the burden on enterprises regulatory objectives, which may vary from one economy to another.

The score awarded to each country on entrepreneurship is based on the following criteria.

– Procedures, deadlines, costs and supply minimum capital required to create a limited liability company.

– Obtaining a building permit:-procedures, time and costs related to execution of all required formalities and controls of quality and security in the system of obtaining a building permit.

– Connection to electricity: procedures, time and costs of connection to the electric network, electricity supply reliability and transparency of prices.

– Transfer of property: procedures, delays and costs of ownership transfer, and quality of the land administration system.

– Getting credit: laws on the pledging of movable property and credit information system.

– Protection of minority investors: rights of minority shareholders in transactions between related parties and corporate governance.

– Taxes and payments: payments, delays and total pay for a business applying all tax legislation as well as procedures subsequent to its declaration.

– Cross-border trade: delays and costs associated with the export of a product with a comparative advantage.

– Performance of contracts: delays and costs of settlement of a trade dispute and quality of court proceedings.

– Insolvency regulation: delays, costs, results and recovery rates in insolvency cases and solidity of the legislation in this area.

– Regulation of the labour market: labour regulation flexibility and aspect of the quality of employment.

 

The three main conclusions of this report are:

  • Europe and Central Asia have improved significantly more commercial regulatory over time than any other region.
  • It is in the area of entrepreneurship that economies have improved their regulatory processes the most.
  • The economies in which it is easy to create a business tend to have lower levels of inequality in income on average.

 

Doing Business 2017 in its 14th Edition gives the following classification:

The first ten are :

1

2

3

4

5

6

7

8

9

10

New Zealand with a note of

Singapore

Denmark

Hong Kong

South Korea

Norway

UK

USA

Sweden

Mecedoine

87.01

85.05

84.07

84.21

84.07

8282

82.45

82.13

81.74

80.87

 

Classification of the major countries. 

17.

22.

25.

28.

29.

32.

34.

40.

42.

50.

Germany

Canada

Portugal

Netherlands

France

Spain

Japan

Russian Federation

Belgium

Italy

79.87

78.57

77.40

76.38

76.27

75.73

75.53

73.00

73.19

72.25

 

Ranking of middle  of the pack countries

63

66

68

69

74

77

78

83

94

102

116

120

122

123

130

Bahrain

Oman

Morocco

Turkey

South Africa

Tunisia

China

Qatar

Saudi Arabia

Kuwait

Argentina

Iran

Egypt

Brazil

India

68.44

67.73

67.50

67.19

65.50

64.89

64.28

63.66

61.11

59.55

57.45

57.45

56.64

56.53

55.27

Ranking of countries at lower grades than 50 requiring deep reforms

149

150

155

156

159

160

164

165

169

173

Bolivia

Niger

Bénin

Algéria

Ethiopia

Mauritania

Gabon

Iraq

Nigeria

Syria

49.85

49.57

48.52

47.76

47.25

47.26

45.88

45.61

44.63

41.43

 

Ranking of countries with less than 40 points

180

184

186

187

188

189

190

Tchad

Républic of Congo

South Sudan

Venezuela

Libya

Erythrea

Somalia (last)

39.07

39.28

33.48

33.37

33.19

28.05

20.29

 

In summary, the deplorable ranking at the 159th of Algeria that belies the euphoric statements of the former Minister of Industry having induced on the line the country’s authorities, and which I had been cautioning against on several occasions the Government, does not reflect the country’s significant potential.  There is no more a justifying speech that in anyway no-one believes in, therefore the only way is to go towards the necessary reforms to improve the business climate that primarily depend on Algerians themselves.

This ranking together for that matter many others would explain the collapse of the productive fabric and the importance of all hard currency services outflow and legal capital transfer that annually amounted between 2010 and 2016 to $14 / $15 billion to which the value of imports of goods need to be added for the calculation of currency.  These were $60 billion in 2013 and were brought back to $45 / $47 billion in 2016 and are currently extrapolated to be around $45 / $46 for 2017 giving approximately a total of $60 billion still less than what could paralyze the entire economic machine whose integration rate does not anyway exceed 15%.

Let us remember that the reserves of $114 billion as per the official data of both the IMF and the Bank of Algeria as at December 31, 2016. The Governor before the National Assembly on April 12, 2017 gave the amount of $109 billion as at end of March 2017 and as recorded by the official press agency APS.

With the deficit of the balance of payment as shown, during the first five months of 2017 customs statistics and those of the Office of National Statistics, reflecting an outflow of currency between April, May and June 25, 2017, the amount should be less than $109 billion on July 1, 2017.

According to this report, which gives a central place to the analysis of the informal sphere, an effective regulation would facilitate access of companies to the market, creation of jobs, productivity and the improvement of the levels of economic development in general; each new reform of the regulation is associated with a substantial increase in economic growth and thus improvement of the standard of life of the citizens. This report points out to what Haidar & Hoshi (2015) made 31 recommendations to achieve this goal for reform, classified into six different categories, depending on whether the reform is administrative or legal, and according to the level of potential resistance at the political level. 

By Dr Abdulrahmane Mebtoul, Mobile +213 0661552928- fax +213 041415837- +213 041446148

OPEC, Trump and Gulf Papers trends in May

It is under a title like this “How to get UAE residence visa for your parents in Dubai” in most of the GCC countries major papers that some sort of emigration appears to be underway or at least facilitated. After our daily review of the local press online; a clear OPEC, Trump and Gulf Papers trends in May was felt to be prevailing.

Trump’s Middle East visit could be decisive, says Justin Welby, Archbishop of Canterbury or head of the Church of England last week to The Guardian.

At a time where low oil prices are persistently down and investments generally stagnating, expatriates employment figures though demonstrably kept very carefully away from direct sight, these papers are keen to providing answers to frequently asked questions like this “Do you want your parents to live with you in Dubai?”  With answers such as “Here’s what you need to do.”

Another subject that is keenly pursued by all newspapers editors is about items of news such as this particular one that is about Oman deciding lately to allow property purchase by non-nationals residents.  GCC and foreigners rights to own real estate in the GCC member countries have always been very heavily constrained and / or restricted to certain areas of well-defined urban territories, whereas these seem to be looked at little more liberally these days for the benefit of the expatriate workers.  Could such facilitation be allowed for any specific reason or is it just an operation for fishing wide and large for some kind of PR campaign.

Apart from wondering on the nature of the newspapers response to obviously a well felt demand for such as it were family reunion or gathering, it must be said that all this is happening whilst the rest of the Middle East is going through its most poignant phase in its millennia history.  Ironically it is at this conjecture that taxation will be introduced shortly starting in a few months making expats wonder whether they will be going to have to start paying taxes in the countries where we work.  Their immediate reaction is as for everywhere : does taxation mean representation.  These know that after all they have no political clout, no representation in municipal, regional, let alone national councils.

We have fished a typical rendering of this on-going thread of business as usual in Gulf News of May 16, 2017  citing their Source as being The official portal of Dubai Government .

 

 

Ernst & Young on Fraud and Corruption in 2017

Fraud and Corruption in the MENA . . .

In a report of Ernst & Young on fraud and corruption in 2017 it is said in its Executive summary that “Today’s businesses are operating in an uncertain economic environment. Popular discontent with globalization, political instability and slower growth in emerging markets is placing pressure on companies as they seek alternative ways to meet ambitious revenue targets.”

It is also advocating that “Restoring confidence through enforcement as “Bribery and corruption remains a challenge and business conduct is under greater scrutiny from both regulators and the public than ever before. The majority of our respondents support the strong stance taken by regulators, particularly respondents in emerging markets.”

The report, titled ‘Human instinct or machine logic – which do you trust most in the fight against fraud and corruption?’ is the synthesis of a survey of 4,100 employees of large businesses in 41 countries across EMEIA.

It was already highlighted back in 2015 in similar report of EY that generally “The cost of unethical behaviour has never been higher” than that of that year.

Although sporadic progress were acknowledged to have taken place in the struggle against bribery and corruption in most countries of Europe, the Middle East, India and Africa (EMEIA), almost half of the surveyed by EY of the MENA region reported their concern and still feeling that it is a rampant problem in their own country. In other words good morality is definitely not there in business.

Whistle-blowing when things get eventually out of hand might be a way out but how to do would be crutial as to how.  Hotlines are now considered an important part of a company’s compliance program in the MENA and only few respondents were aware of such a channel in their company, whilst half would not allow themselves as if to salvage their career first and foremost.

In our view and in so far as the North African half of the MENA region is concerned, we would like to think that it is widely acknowledged that the domestic business informal sphere of these countries’ account for no less than 50% of their respective economies.  Can we therefore assume that a sizable portion of that informal sphere being carried out outside any radar coverage is of doubtful nature, meaning possibly tainted with burrs for most close to the ground and lots of well-known politico-economic blunders for the different leaderships.  These were found at 57% of MENA’s respondents not believing that business management do not emphasize enough high ethcal standards.

Where is the Market’s Invisible Hand gone?

An article in French by Ramdane Mohand Achour and published on March 25th, 2017 by LibreAlgerie is proposed. It is about Algeria in the course of the persistently decline of its hydrocarbon exports related revenues is currently undergoing soul searching questioning of what is best for making its economy work. Many are wondering where is the market’s invisible hand gone? Like many countries, Algeria that is struggling with falling revenue from lower oil prices is presently looking for ways to upgrade its energy systems to fully support current and future requirements of its economic growth.

Where is the Market’s Invisible Hand gone?

Proponents of liberalism argue that the market naturally produced a self-regulating mechanism that corrects imbalances born out of the multitude of society shaping special interests. This mechanism, called “the invisible hand of the market”, would satisfy the public interest. The law of supply and demand would naturally harmonize economic situation marked by the selfish will of each individual. In this scheme, the State doesn’t have to intervene if it is to guarantee the exercise of free and undistorted competition intended to benefit at all.

The current state of the oil international market turns wrong this angelic vision of a self-regulated inclusive market. Left to itself, the market has experienced a bullish cycle during ten years (1999 – 2008). The price of the barrel thus reached 140 dollars in June 2008 before tumbling within the 2008 crisis, but he soon to rise in 2009 again to be slightly above 120 dollars in April 2011. In 2014, it exceeded even the 110 dollars.

Such a situation was undoubtedly beneficial to the producing countries and companies in the sector as well as those rich countries whose States taxed petroleum products so as to keep their economy afloat. It was not the same for the non-producers, and all poor and middle-income countries who were struggling to feed themselves because of their limited financial resources. The market did not benefit to all, far from it.

The second disadvantage of this situation of relatively expensive oil lay in the fact that it boosted search for more hydrocarbon and production and allowed shale oils to make a big splash, in a full sense of the word, on the world market. With a production of 11 million barrels a day, the United States will see their rate of dependence on foreign oil drop to 30% in 2016 down from 60 percent in 2005.

Such a dynamic did fail to cause a state of overproduction; the purpose of the market is not, contrary to the image that its promoters sell us, to satisfy human needs, but rather to garner, first and above all for not only, profits, but for maximum profits.

Proponents of the “the invisible hand of the market” were right about one thing: in an economy obedient to the laws of the market, the engine of the “economic agents” is selfishness, the individual profit, at the expense of the lives of the producers (workers), consumer and research of nature which we see what mess it is today.

Overproduction intervening in a situation of de facto global stagnation, in the first place, the downturn in the economy of emerging countries (China, Brazil…) dropped slowly but inexorably the price of the barrel. Out of $110, it fell to $35 in February 2016. Decided to reduce the share of the North American Shale oil producers, Saudi Arabia will trigger a price war which played a vital role in this descent into hell.

If the drop in prices could theoretically help poor and middle-income countries producers, it on the other hand hit with full force the producing countries, primarily those of OPEC. For the first time in its history, the rich Saudi Arabia could no more balance its budget and had to resort to austerity. Its involvement in Yemen who turned into a quagmire for Riyadh, financial support of ‘takfirist’ groups in Syria and Iraq and a fierce will to challenge Iran contributed to accentuate its financial crisis. In this sequence of fall in the price of oil, as in the previous bullish sequence, no sign of self-regulation by the market. The invisible hand had other things to look after.

Last November and to everybody’s surprise, the 14 member countries of OPEC, under the impetus of Algeria but due to the will of Saudi Arabia, decided to reduce their production to the tune of 1.2 million barrels a day. Eleven countries non-members of the cartel, including Russia, committed as well to reduce their 560000 barrels per day. In the month of December, stocks of the OECD countries dropped to 1.2 MBD.

 

Number of non-conventional oil producers will be forced to close their wells that became no more profitable below a price floor of around $50 a barrel. The agreement of the producing countries, OPEC and non-OPEC, which was not an action of “the invisible hand of the market”, but of the conscious and active action of 25 States, will result in stopping the fall in prices on the world market and could even allow the beginnings of a rebound in prices which will pass from between 45-50 dollars to 50-55 dollars.

Number of non-conventional oil producers will be forced to close their wells that were most profitable below a price floor of turning around 50 dollars per barrel. The agreement of the producing countries, OPEC and non-OPEC, which was not the action of “the invisible hand of the market”, but the conscious and active in 25 States, will result will stop the fall in prices on the world market and will allow even the beginnings of a rebound in prices which will pass a fork understood between 45-50 dollars to 50-55 dollars.

There is however, that this new ‘virtuous cycle’ for producing countries is not shared by the importing poor and middle-income countries. It also translates into a revival of the production of Shales. In the United States, the number of wells increased each week. Mid-March 2017, it stood at 617 and the U.S. production has reached the historical peak of 9.1 MBD that recalls the production rate of the 1970s. Stocks of oil and oil products are at the highest historical level at 2 billion barrels. The commercial reserves of the country reached 528,4 million barrels with an increase of 8.2 million barrels, the largest weekly increase since 19821.

This new overproduction mechanically caused a new fall in the price of oil, which threatens the stability of many countries. We think first of countries such as the Venezuela struck by an economic and social crisis. But it does not spare the rich monarchies of the Gulf as well. Thus, below a certain price, producers of Shale disappear from the market while exporters suffer a severe income crisis whereas if prices were back on the rise, Shale producers will return to the market. But in the absence of a significant global economic recovery, they contribute quickly to only flooding the market.

The bullish and bearish cycles seem to alternate way more and faster, impeding the process of renewal of the facilities and the discovery of new deposits that require significant investment that the big oil companies do not realize by altruism, but through their search for profits.

One could therefore ascertain that the market does not regulate anything and that without the intervention of the State that plays a major role but not always effective, the market being not self-regulated, would verge onto anarchy causing economic, social, and humanitarian crises as the deterioration of the environment.

The reality of the international oil market confirms that the role of “the invisible hand of the market” is just a myth. The Liberals, who are constantly putting their realism and their pragmatism forward but who do not have enough teeth against their opponents, in ideology, swim themselves in full ideology. Behind a friendly speech sold according to the lastest in marketing theories, formidable doctrinaires could be hiding.

Source : Libre-Algérie

 

Thousands Marching for Native Nations

The Native Nations Rise march was the culmination of a week of workshops, actions, and prayers to battle for native rights in the face of the right-wing Trump administration and the ongoing fight. [ . . . ]

This most beautiful article produced and published on Friday, March 10, 2017 by Common Dreams and written by Nika Knight, staff writer about Thousands Marching for Native Nations, a movement of populations reacting to the newly elected president of the United States standing for the Big Oils forcing their way with a pipe-line through indigenous lands in the Dakota plains.

We would take this opportunity to remind that the right of marginalised indigenous individuals as well as communities are almost unknown or unheard of in the MENA region populations. The very best example that could laid out for illustration would be the Kuwaiti Bidoons that are by the way found in pockets in almost all countries of the Gulf, Palestine and North Africa.

We recommend reading the article in its original setting for a better appreciation of the embedded message of justice, and eventually provision of some equity as it were in our consumption of the environment.

 

‘We Exist, We Resist, We Rise’: Thousands March for Native Nations

 

‘Standing Rock was just the beginning’

 

The Native Nations Rise march was the culmination of a week of workshops, actions, and prayers to battle for native rights in the face of the right-wing Trump administration and the ongoing #NoDAPL fight.

The march began at the U.S. Army Corps of Engineers headquarters and ended at Lafayette Square, in front of the White House. En route, demonstrators erected a tipi at the Trump Hotel to “reclaim stolen land”:

Afterward, the rights and land defenders marched on to the White House:

The march culminated in a rally at Lafayette Square. Indigenous people and protesters spoke, prayed, played music, and repeated calls for environmental justice, sovereignty, and a meeting between President Donald Trump and leaders of tribal nations.

“Standing Rock was just the beginning, “said a journalist with Indigenous Rising Media, speaking to a plaintiff in one of the multiple lawsuits against the U.S. government for permitting the Dakota Access Pipeline’s construction.

A live broadcast of the march and rally can be found here. Throughout the day, participants and journalists are also posting photos and videos of the action under the hashtag #NativeNationsRise:

 

Qatar enjoys ‘lowest political risk’ in MENA

Doha News’ Victoria Scott citing BMI Research came up with this comforting piece of writing as per BIM R’s analysis and findings in a background of increasingly alarming news of upheaval reaching into the Gulf countries generally. Qatar enjoys ‘lowest political risk’ in MENA and anything contrary to that would pass perhaps unnoticed were it not for the forthcoming World Cup Football games of 2022. Seriously, the peninsula of Qatar [ . . . ]

Doha News‘ Victoria Scott citing BMI Research  came up with this comforting piece of writing as per BIM R’s analysis and findings in a background of increasingly alarming news of upheaval reaching into the Gulf countries generally. Qatar enjoys ‘lowest political risk’ in MENA and anything contrary to that would pass perhaps unnoticed were it not for the forthcoming World Cup Football games of 2022. Seriously, the peninsula of Qatar with a population of no more than 350,000 nationals and almost 1,000,000 expatriate workers might seem to be a peace heaven to the naked eye, but it is not that different from the surrounding neighbouring countries of the GCC.  The latest United Nations estimates its total to 2,321,525 as of February 24, 2017 with the median age of 30.8 years. The evocation of this piece of statistics alone would no doubt allude to all those issues that have yet to come into the open.

Qatar enjoys ‘lowest political risk’ in MENA, despite austerity measures

Qatar is likely to remain one of region’s most stable economies in the coming years due to its strong economy, top-heavy governance and politically inactive population, a new report has found.

According to BMI Research, the government’s ability “to provide its citizens with generous subsidies and economic opportunities” is a main reason for the stability.

However, Qatar has implemented some austerity measures in recent years due to lower oil prices and budget deficits.

 

Photo for illustrative purposes only Reem Saad / Doha News

But when asked about actions such as rising utility and gas prices, BMI told Doha News that these were “unlikely” to have a negative effect on stability.

Andrine Skjelland, MENA Country Risk Analyst at BMI, said:

“The scope of fiscal consolidation remains limited, and the overall impact on Qatari citizens’ living standards will be minimal.

In any case, we believe the government would be quick to scale back measures at first signs of significant popular discontent, preventing unrest from spreading.”

However, BMI’s report noted that political involvement from Qatari citizens is expected to remain “minimal.” Additionally, it forecast that foreign workers will continue to be subject to “heavy restrictions.”

It added that national policies will continue to be shaped by “a small group of elite decision makers” who face few constraints, “in turn ensuring broad policy continuity.”

Trump effect

BMI was also optimistic in terms of the big picture. For example, it asserted that Qatar’s diplomatic ties with the US will remain strong.

This is despite Donald Trump’s presidency and his views on radical Islam and the Muslim Brotherhood.

The report concluded that the continued US military presence at the Al Udeid air base and deep economic ties between the two countries will outweigh other US foreign policy concerns.

BMI’s experts added that a softer focus on human rights by the US would likely work in Qatar’s favor.

“Compared with the previous administration, we expect the US government under Trump to focus less on human rights issues and the spread of democracy in its foreign policy – a trend that will likely be welcomed in Doha, as it limits the potential for external pressure on it to implement political and social reforms.”

Muslim Brotherhood links

Trump’s team is also currently debating whether to designate the Muslim Brotherhood as a terrorist organization.

This move could strain diplomatic relations between the US and Qatar, whose support of the group in Egypt has caused past conflict with its neighbors.

 

European External Action Service

However, BMI asserted that Qatar’s ability to act as a peace-broker in the region, coupled with financial and military concerns, guarantee that the two countries won’t fall out over the issue.

“Doha’s ties to a broad range of state and non-state actors mean it is still considered a facilitator of MENA negotiations in Washington,” the report stated.

“The two countries also have deep trade links, particularly in the energy sector, and Doha has announced plans to invest $45bn in the US over the next five years.”

BMI added that Qatar would likely yield to US pressure over its Muslim Brotherhood ties if required to do so.

This is because relations with the US and other GCC countries are becoming increasingly important amid regional instability, according to the report’s authors.

Thoughts?

 

The 3 core Responsibilities of every Government of any Nation

The best way to go about discussing the topic covered by the proposed article written by Anne-Marie Slaughter, President and Chief Executive Officer, New America and published on Monday 13 February 2017 by the WEF is to recall the failure and eventual collapse [ . . . ]

The best way to go about discussing the topic covered by the proposed article written by Anne-Marie Slaughter, President and Chief Executive Officer, New America and published on Monday 13 February 2017 by the WEF is to recall the failure and eventual collapse of the former Soviet Union and what caused its abrupt end not so far ago. Is it lack of these 3 core responsibilities of every government of any nation discussed here, from the agenda of the successive governments?

Or was it as many see it, like in those MENA’s region so-called republics due to that sprinkle of socialistic orientations in their political strategy of the 60s and 70s ? Any thoughts ?

Or is the whole thing a soft reminder directed towards the new tenant of the White House of his basic duties?

3 responsibilities every government has towards its citizens

The oldest and simplest justification for government is as protector: protecting citizens from violence.

Thomas Hobbes’ Leviathan describes a world of unrelenting insecurity without a government to provide the safety of law and order, protecting citizens from each other and from foreign foes. The horrors of little or no government to provide that function are on global display in the world’s many fragile states and essentially ungoverned regions. And indeed, when the chaos of war and disorder mounts too high, citizens will choose even despotic and fanatic governments, such as the Taliban and ISIS, over the depredations of warring bands.

The idea of government as protector requires taxes to fund, train and equip an army and a police force; to build courts and jails; and to elect or appoint the officials to pass and implement the laws citizens must not break. Regarding foreign threats, government as protector requires the ability to meet and treat with other governments as well as to fight them. This minimalist view of government is clearly on display in the early days of the American Republic, comprised of the President, Congress, Supreme Court and departments of Treasury, War, State and Justice.

Protect and provide

The concept of government as provider comes next: government as provider of goods and services that individuals cannot provide individually for themselves. Government in this conception is the solution to collective action problems, the medium through which citizens create public goods that benefit everyone, but that are also subject to free-rider problems without some collective compulsion.

The basic economic infrastructure of human connectivity falls into this category: the means of physical travel, such as roads, bridges and ports of all kinds, and increasingly the means of virtual travel, such as broadband. All of this infrastructure can be, and typically initially is, provided by private entrepreneurs who see an opportunity to build a road, say, and charge users a toll, but the capital necessary is so great and the public benefit so obvious that ultimately the government takes over.

A more expansive concept of government as provider is the social welfare state: government can cushion the inability of citizens to provide for themselves, particularly in the vulnerable conditions of youth, old age, sickness, disability and unemployment due to economic forces beyond their control. As the welfare state has evolved, its critics have come to see it more as a protector from the harsh results of capitalism, or perhaps as a means of protecting the wealthy from the political rage of the dispossessed. At its best, however, it is providing an infrastructure of care to enable citizens to flourish socially and economically in the same way that an infrastructure of competition does. It provides a social security that enables citizens to create their own economic security.

The future of government builds on these foundations of protecting and providing. Government will continue to protect citizens from violence and from the worst vicissitudes of life. Government will continue to provide public goods, at a level necessary to ensure a globally competitive economy and a well-functioning society. But wherever possible, government should invest in citizen capabilities to enable them to provide for themselves in rapidly and continually changing circumstances.

Not surprisingly, this vision of government as investor comes from a deeply entrepreneurial culture. Technology reporter Gregory Ferenstein has polled leading Silicon Valley entrepreneurs and concluded that they “want the government to be an investor in citizens, rather than as a protector from capitalism. They want the government to heavily fund education, encourage more active citizenship, pursue binding international trade alliances and open borders to all immigrants.” In the words of Alphabet Chairman Eric Schmidt: “The combination of innovation, empowerment and creativity will be our solution.”

This celebration of human capacity is a welcome antidote to widespread pessimism about the capacity of government to meet current national and global economic, security, demographic and environmental challenges. Put into practice, however, government as investor will mean more than simply funding schools and opening borders. If government is to assume that in the main citizens can solve themselves more efficiently and effectively than government can provide for them, it will have to invest not only in the cultivation of citizen capabilities, but also in the provision of the resources and infrastructure to allow citizens to succeed at scale.

Invest in talent

The most important priority of government as investor is indeed education, but education cradle-to-grave. The first five years are particularly essential, as the brain development in those years determines how well children will be able to learn and process what they learn for the rest of their lives. The government will thus have to invest in an entire infrastructure of child development from pregnancy through the beginning of formal schooling, including child nutrition and health, parenting classes, home visits and developmentally appropriate early education programmes. The teenage years are another period of brain development where special programmes, coaching and family support are likely to be needed. Investment in education will fall on barren ground if brains are not capable of receiving and absorbing it. Moreover, meaningful opportunities for continuing education must be available to citizens over the course of their lives, as jobs change rapidly and the acquisition of knowledge accelerates.

Even well-educated citizens, however, cannot live up to their full potential as creative thinkers and makers unless they have resources to work with. Futurists and business consultants John Hagel III, John Seeley Brown and Lang Davison argue in The Power of Pull that successful enterprises no longer design a product according to abstract specifications and push it out to customers, but rather provide a platform where individuals can find what they need and connect to whom they need to be successful. If government really wishes to invest in citizen talent, it will have to provide the same kind of “product” – platforms where citizens can shop intelligently and efficiently for everything from health insurance to educational opportunities to business licenses and potential business partners. Those platforms cannot simply be massive data dumps; they must be curated, designed and continually updated for a successful customer/citizens experience.

Finally, government as investor will have to find a way to be anti-scale. The normal venture capitalist approach to investment is to expect nine ventures to fail and one to take off and scale up. For government, however, more small initiatives that engage more citizens productively and happily are better than a few large ones. Multiple family restaurants in multiple towns are better than a few large national chains. Woven all together, citizen-enterprise in every conceivable area can create a web of national economic enterprise and at least a good part of a social safety net. But government is likely to have to do the weaving.

A government that believes in the talent and potential of its citizens and devote a large portion of its tax revenues to investing in its citizens to help them reach that potential is an attractive vision. It avoids the slowness and bureaucracy of direct government provision of services, although efficient government units can certainly compete. It recognizes that citizens are quicker and more creative at responding to change and coming up with new solutions.

But government investment will have to recognize and address the changing needs of citizens over their entire lifetimes, provide platforms to help them get the resources and make the connections they need, and see a whole set of public goods created by the sum of their deliberately many parts.

Further reading recommended by the WEF.