Governance Local Government and Civil Society u INTERNATIONAL

Governance, Local Government and Civil Society u INTERNATIONAL DONORS u IMPACT ON CIVIL SOCIETY u PRIVATIZATION AND CONTRACTING OUT

Local Government and Civil Society: THE PROBLEM u Models of Social Services Systems: u The Context of Privatization and Contracting

Overview: Concepts- New Public Management Principles u A. Re-inventing Government u B. Subsidiarity u C. Privatization u D. Contracting Out u E. Social Services

Privatization and Contracting Out A Survey of the Literature

Privatization- The Private Provision of Services: u u u Use of conventional Markets: no public sector involvement (Purely private) Contracts with public agencies Monopoly Franchises Management Contracts Vouchers Consumer Cooperatives

Service Delivery Systems and Categories of Service Delivery Issue- Size: Hard services or soft Capital or recurrent costs

Types of Services Macro- Physical Services- Highways, Sewerage Main Lines, Electricity [Deconcentrated or Privatized] n Micro- Physical Services- [Devolved, or Delegated ] n Social Services-Health, Education or Community Development (such as Social Funds) [Delegated or Contracted] n Investment or Production [Privatized] n

Dismantling the State: Madsen Pirie u The arguments in favor of “Dismantling” the State n u Problem areas of public sector performance n u Production, Labor, Consumer, Administrative The Deficiencies of Public Sector Reform n u Ideological or rational Efficiency, waste and budget control Evaluation of Techniques of Privatization

Privatization as the key to Better Government: E. S. Savas Arguments for Privatization: n Ideological w size of government n Pragmatic w normative, too big n Commercial w generate private sector development n Populist w empowerment, choice, and community based activities

Private Provision: Defined 1. Use of conventional Markets 2. Contracts with public agencies 3. Monopoly Franchises 4. Management Contracts 5. Vouchers 6. Consumer Cooperatives

Privatization as the key to Better Government: E. S. Savas u Keynesian vs. Neo-Orthodoxy u Arguments about exclusion

Privatization u Privatization A Process: The process of divesting direct civil service responsibility for the provision of public services or the collection of revenues u Ideal: Key to the provision of efficient and effective goods and services (Savas) u

Privatization u a. The Need for Exclusion u b. User Fees not taxes: the principle of tolls u c. Need to exclude Collective, and some would argue, common pool goods from privatization u d. Worthy goods (health, education, etc. ) are not collective goods

Privatization as the key to Better Government: E. S. Savas u Services Government—Taxes n Government—Fees, or tolls n Government Vending n Contracting n Intergovernmental or interdepartmental agreements n Franchises and Monopolies n Subsidies n u Assessment of the Privatization

Private Provision—Contracting: Gabriel Roth u Private Sector n u Contracting vs. Grants n u u u Sub-contracting and sub-grants: Blurring the lines Making the Choice Contracting and Non-profits n u Indigenous vs. Foreign (or Pariah) Issues of privilege Debate about transaction costs Cost recovery vs. subsidies

Reasons for Privatization u u u u a. High Production costs b. Low levels of efficiency c. Featherbedded labor costs d. Pork Barrel Capital Allocations e. Low level consumer input f. Poor Maintenance and loss of service g. Inability of political leaders to impose cost control h. Free Riders

Ways and Means of Privatization u u u u a. Liquidation- Close down (Load Shedding) b. Divestiture- Sell off in whole or in part government shares c. Public-Private partnerships d. Commercialization- autonomy and user fees e. Public Sector Reform- Cutback- the infamous 19% first cut f. Transfer to a public service organization or union g. Contracting Out

Criticism of Privatization a. Private sector and NGOs are not necessarily more effective and efficient than government agencies (Paul Nelson) b. Loss of Coverage for social services (Rule of Structural Adjustment) c. Can replicate private sector within government (Core of Reinventing Government argument-Osborne and Gabler)

Reinventing Government: David Osborne and Ted Gaebler 1. Steering Rather Than Rowing- Weberian Bureauracy: Bankrupt? 2. Customer Driven Government 3. Competition within Government and between units and Entrepreneurial Government 4. Earning as well as spending--charging fees and selling goods and services 5. Key is decentralization not privatization 6. Third sector vs. Private sector Use of Non-governmental organizations rather than Privatization

Reinventing Government: David Osborne and Ted Gaebler u Community Based Government n u Subsidiarity People as citizens or consumers Is there a difference? n TQM—add on to consumers n u Government agencies compete with themselves

Reinventing Government: David Osborne and Ted Gaebler u Mission vs. Rules based government: n u u NASA and the Moon—Output based government Incremental vs. Zero Based (or targeted) budgets Decentralization n The Circle Rounds

Corruption Privatization enhances corruption. Enhanced by cultural differences (Gifts vs. Kickbacks; corruption as lobbying the Executive- Robert Klitgaard)

Corruption—the Real Problem? Robert Klitgaard u u Corruption as functional and cultural Causes of corruption n u Poverty vs. ethnicity The Ethical Issues in a society of poverty n Obligation to family vs. obligation to society w The starving children problem u Are there benefits from corruption? n Getting things done means paying for it

Corruption—the Real Problem? Robert Klitgaard u “Rent Seeking” n u Charges higher than market price Corruption n Too much government or too much privatization

Corruption—the Real Problem? Robert Klitgaard u Corruption: Graft n Bribery n Nepotism n Kickbacks n Insider bidding (wired) n u Can and should corruption be controlled?

Literature u u u REFERENCES Robert Klitgaard, Controlling Corruption (Berkeley: University of California Press, 1988). David Osborne and Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector (New York: Plume Books, 1992).

Literature u u u Madsen Pirie, Dismantling the State: Theory and Practice of Privatization (Dallas, TX: National Center for Policy Analysis, 1986). Gabriel Roth, The Private Provision of Public Services in Developing Countries (Washington, D. C. : World Bank and Oxford University Press, 1987). E. S. Savas, Privatization: The Key to Better Government (Chatham, NJ: Chatham House, 1987).