Crisis management: aim high, act fast and keep the lights on

A few weeks ago, some of the participants at the new cabinet’s meeting must have been overtaken by a sense of déjà vu. It was a similarly urgent meeting in the weekend that the previous cabinet and ministry leadership gathered for in the middle of March and afterwards, a lockdown due to Covid-19 was announced in Lithuania, as well as measures for supporting businesses and citizens, Ramūnas Vilpišauskas writes.

That said, in spring, due to the prime minister and president’s disagreements, a minister of economics and innovation was not appointed and the ministry operated without a minister throughout the first wave. The new cabinet has taken to working on the crisis with a full team.

There are other differences between the first and second lockdown. During the first lockdown, there was a lingering sense of deep uncertainty. While in March, the official number of infections in Lithuania was relatively low, severe restrictions on economic activity and people’s movement were imposed in order to avoid the worst-case scenario in terms of public health. At the same time, a 5 billion euro economic stimulus package was announced. However, from the very first days of specific support measures being implemented, the process began stalling due to conditions placed before support recipients and insufficient capacities at administering institutions.

We now know much more about both pandemic management measures and about the experience of responding to it. We know that in spring, horizontal support measures worked better (firstly – tax obligation postponement), allowing businesses and employees to make use of them with minimal procedural requirements. Later on, support for micro-companies gained momentum, as did subsidies for downtime, grants to those taking care of children due to the epidemic related restrictions and other measures. More precise measures were proposed for the sectors facing the greatest restrictions.

That said, there were also some dubious initiatives – one-time grants to individual public groups, which did not directly experience the impact of lockdown, this being more akin to politicians demonstrating generosity at the expense of taxpayers, hoping for voters to feel thankful when the time comes to vote. Furthermore, the results of containing the first wave of pandemic appear to have led to excessive relaxation, which hampered preparations for the second wave, particularly contact tracing.

Now, the new government has the experience of spring. From the decisions announced in recent days regarding a planned extra billion euro to handle the crisis, facilitated conditions for businesses seeking to make use of subsidies and simplified administration, we can see that an effort has been made to learn from experience. Just like in spring, the effort is being made to act swiftly and manage people’s expectations, announcing planned support measures, which will be financed from funds borrowed by the state. This is exactly how, at the start of the pandemic, numerous European and US economists advised to react to it through economic support measures; it’s also emphasised in the wording of this piece. By the way, Lithuania has so far used up around 55% of the economic stimulus funds announced in spring.

This crisis is truly unlike the one in 2008-2009, which the A. Kubilius government had to handle. The opinion has emerged among economists and international organisations that it is now better to borrow as much as necessary to ensure that the crisis is contained and its impact on people’s health and the economy is minimised, rather than worrying about state debt levels. The Lithuanian government capacities for borrowing have also changed because now, Lithuania is borrowing at unprecedentedly affordable rates. Thus, we are in a crisis where “money is no object.”

The problem lies in the capacities of state institutions and the distrust that lingers between them and the Lithuanian citizens. Namely, these two reasons led to the slow and complicated use of business and private individuals’ support during the first wave. The resolution of these problems will be the greatest challenge the new government will face. One can only agree with Bank of Lithuania board chairman V. Vasiliauskas in that support should be more precise, directed to the most suffering companies. However, the use of more precise measures usually also requires better capabilities among administering institutions. These were also necessary this autumn, for the initially applied localised and differentiated restriction policy, which had to be abandoned due to the spread of infections.

Questions of motivation can be temporarily resolved by paying staff bonuses, but it appears that some institutions haven’t been able to do even that much. For example, it remains uncertain why under conditions when “money is no object”, it wasn’t ensured that the NVSC would receive the necessary resources for suitably preparing for epidemiological studies and contact tracking when the second wave struck.

Even more difficult will be launching structural reforms in state service, which would create conditions not only offering sufficient financial motivation for its employees but would also create a different work culture – a culture, which would allow taking the initiative and would tolerate mistakes borne out of experimentation. Crises are notable for how during them, you must seek non-standard solutions, act quickly, flexibly and be able to pick, for example, which measures used by other countries could be suitable in Lithuania and which might not prove suitable due to certain institutional or human behaviour conditions. More effective crisis management is possible in seeking new forms of cooperation between the public and private sector, bringing private companies and NGOs on board, allowing them to offer needed services and goods or offering them more effectively than state institutions could.

Based on conversations with those who participated in making crisis management decisions in spring, an ambiguous picture of leadership and initiative in managing a crisis emerges. On the one hand, many of the people making decisions did more than they were expected to based on their job descriptions and functions. On the other hand, among career civil servants, one could spot an unwillingness to take on responsibility and “sign under”, all borne out of a fear that it could later turn out that something wasn’t done as per regulation. Some in civil service still remember the inquiries related to the management of the 2008-2009 crisis and the investigations launched this year on the purchase of various medicines and medical equipment will not contribute to reinforcing initiative and leadership in civil service. Of course, this does not mean that we should tolerate abuses of office, disregard for the law or corruption. However, when adherence to instructions becomes the only value and no difference is seen between abuse of office and leadership, one should not expect much in terms of the state institutions’ capacity to manage the crisis or care for the welfare of the Lithuanian people in offering quality public sector services to companies and citizens.

The new cabinet has in its programme outlined numerous correct principles and aims related to higher quality and more effective civil service and entire public sector. The greatest challenge will be in implementing this in practice. A number of previous cabinets have aimed at beginning to suitably evaluate the impact of key decisions being made (by using cost and benefit analysis or other methods), but they never did manage to enable the impact evaluations performed since 2003, which quickly turned into an imitation of itself. The new government will also be unable to until each minister opts to not make key decisions if they are not based on a suitably performed impact evaluation. The lack of political demand for quality impact evaluations us no less of a problem than the lack of administrative capacity. Without establishing such “hygiene” in the cabinet’s work, it is hard to expect quality civil service work. And without high quality and effective operation on the part of the civil service, it is difficult to expect suitable decisions in reforming public service services and strengthening that which is called the welfare state.

The COVID-19 pandemic has significantly increased the role of the state in people’s lives, but whether in handling it, there will also be a respective increase in the state’s capacity to perform this role suitably is something that remains uncertain. What is clear though, is that for these matters, the cabinet and Seimas’ ruling coalition should dedicate their immediate focus, as soon as the “burning” crisis management questions are resolved. Private businesses have displayed through several crises now their ability to react flexibly and adapt to structural changes in the global economy. When the private sector is no longer bound by state-imposed restrictions, which are aimed at resolving the current crisis, we should allow competition to direct its efforts toward continuing to increase productivity and implementing innovations. Lithuanian state institutions should first take care of their own future DNA.