Governance and the public sector 184542302X

Citation preview

|

_ Edited by : a

|| |

|

Ron Hodges - Series Editors

Kevin Keasey, Steve Thompson _ and Mike Wright Ta

i i i

ies

| _

_

|

Digitized by the Internet Archive in 2022 with funding from Kahle/Austin Foundation

tem

https://archive.org/details/governancepublicO000unse_r4p3

WA 1297418 8

ATION

ONE WEEK LOAN UNIVERSITY OF GLAMORGAN LEARNING

RESOURCES

CENTRE

Pontypridd, CF37 1DL Telephone: Pontypridd (01443) 482626 Books are to be returned on or before the last date below

17 OCT 2006

MB NAV FOF AQ jAN°

Governance and the Public Sector

Corporate Governance in the New Global Economy Series Editors:

Kevin Keasey Leeds Permanent Building Society Professor of Financial Services and Director of the International Institute of Banking and Financial Services, Leeds University Business School, UK Steve Thompson Professor of Strategic Management, Nottingham University Business School, UK Mike Wright Professor of Financial Studies and Director of the Centre for Management Buy-out Research, Nottingham University Business School, UK

1.

Governance and Auditing Peter Moizer

2.

Governance and Ownership Robert Watson

3.

The Life Cycle of Corporate Governance Igor Filatotchev and Mike Wright

4.

Governance, Directors and Boards Mahmoud Ezzamel

5.

Governance and Expropriation Larry H.P. Lang

6.

Governance: An International Perspective (Volumes I and II) Diane K. Denis and John J. McConnell

7.

Governance and the Public Sector

Ron Hodges Future titles will include:

Corporate Governance: Political and Legal Perspectives Mark J. Roe

Wherever possible, the articles in these volumes have been reproduced as originally published using facsimile reproduction, inclusive of footnotes and pagination to facilitate ease of reference. For a list of all Edward Elgar published titles visit our site on the World Wide Web at www.e-elgar.com oy

Governance and the Public Sector

Edited by

Ron Hodges Professor of Public Sector Accounting University of Sheffield, UK

CORPORATE GOVERNANCE

IN THE NEW GLOBAL ECONOMY

An Elgar Reference Collection Cheltenham, UK ¢ Northampton, MA, USA

© Ron Hodges 2005. For copyright of individual articles, please refer to the Acknowledgements.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior permission of the publisher.

Published by Edward Elgar Publishing Limited Glensanda House Montpellier Parade Cheltenham Glos GLS0 LUA UK

Edward Elgar Publishing, Inc. 136 West Street Suite 202 Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library 4¥

Or

oCGAaNn oe Aig

za 5°

' Ss.

a,

CA.&

aoe”

sal Resources entre

12974188

ISBN 1 84542 302 X Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall

Contents Acknowledgements Introduction Ron Hodges

PART I

PRINCIPLES AND PERSPECTIVES 3 R.A.W. Rhodes (1994), ‘The Hollowing Out of the State: The Changing Nature of the Public Service in Britain’, Political Quarterly, 65 (2), April-June, 138-51 i) Christopher Hood (1991), ‘A Public Management for All Seasons?’, Public Administration, 69 (1), Spring, 3-19 Ron Hodges, Mike Wright and Kevin Keasey (1996), ‘Corporate

1x

Xl

17

Governance in the Public Services: Concepts and Issues’, Public

Money and Management, 16 (2), April-June, 7-13

34

Adrian Leftwich (1993), ‘Governance, Democracy and

Development in the Third World’, Third World Quarterly, 14 (3),

September, 605-24

41

Jan Kooiman (1999), ‘Social-Political Governance’, Public

Management: An International Journal of Research and Theory, 1 (1), March, 67—92 (reset)

61

Chris Huxham (2000), “The Challenge of Collaborative

Governance’, Public Management: An International Journal of Research and Theory, 2 (3), September, 337-57

PART IT

84

GOVERNANCE AND PUBLIC SECTOR MANAGEMENT L James M. Ferris and Elizabeth A. Graddy (1998), ‘A Contractual Framework for New Public Management Theory’, /nternational Public Management Journal, 1 (2), 225—40 Laurence E. Lynn Jr. (1998), ‘A Critical Analysis of the New

107

Public Management’, /nternational Public Management Journal,

1 (1), 107-23 Martha S. Feldman and Anne M. Khademian (2001), ‘Principles for Public Management Practice: From Dichotomies to Interdependence’, Governance, 14 (3), July, 339-61 10.

140

Christopher Hood (1995), “The “New Public Management” in the

1980s: Variations on a Theme’, Accounting, Organizations and Society, 20 (2/3), February—April, 93-109 Walter J.M. Kickert (1997), ‘Public Governance in the Netherlands: An Alternative to Anglo-American “Managerialism’””’, Public Administration, 75 (4), Winter, 731-52

163

180

Governance and the Public Sector

vi

Christoffer Green-Pedersen (2002), “New Public Management Reforms of the Danish and Swedish Welfare States: The Role of Different Social Democratic Responses’, Governance, 15 (2), April, 271-94

PART III

202

GOVERNANCE, ACCOUNTABILITY, ACCOUNTING AND AUDIT iS: Lee Parker and Graeme Gould (1999), “Changing Public Sector Accountability: Critiquing New Directions’, Accounting Forum, 23 (2), June, 109-35

229

J.D. Stewart (1984), ‘The Role of Information in Public

Accountability’, in Anthony Hopwood and Cyril Tomkins (eds), Issues in Public Sector Accounting, Chapter 2, Oxford: Philip Allan, 13-34 Anthony Hopwood (1984), ‘Accounting and the Pursuit of Efficiency’, in Anthony Hopwood and Cyri] Tomkins (eds), /ssues in Public Sector Accounting, Chapter 9, Oxford: Philip Allan, 167-87

16.

256

Mahmoud Ezzamel and Hugh Willmott (1993), “Corporate

Governance and Financial Accountability: Recent Reforms in the UK Public Sector’, Accounting, Auditing and Accountability Journal, 6 (3), 109-32 Christopher Pollitt and Hilkka Summa (1997), “Reflexive

Watchdogs? How Supreme Audit Institutions Account for

18.

Themselves’, Public Administration, 75 (2), Summer, 313-36 Yves Gendron, David J. Cooper and Barbara Townley (2001), ‘In

the Name of Accountability: State Auditing, Independence and New Public Management’, Accounting, Auditing and Accountability Journal, 14 (3), 278-310

347

June Pallot (2003), ‘A Wider Accountability? The Audit Office

and New Zealand’s Bureaucratic Revolution’, Critical Perspectives on Accounting, 14 (1/2), 133-55

PART IV

GOVERNANCE IN NATIONAL AND INTERNATIONAL PERSPECTIVES 20. Joseph E. Stiglitz (2003), ‘Democratizing the International Monetary Fund and the World Bank: Governance and Accountability’, Governance, 16 (1), January, 111-39 2, Richard J. Stillman I (2003), “Twenty-first Century United States Governance: Statecraft as Reform Craft and the Peculiar Governing Paradox it Perpetuates’, Public Administration, 81 (1), March, 19-40 Dis Werner Jann (2003), ‘State, Administration and Governance in Germany: Competing Traditions and Dominant Narratives’, Public Administration, 81 (1), March, 95-118

405

434

Governance and the Public Sector

23.

Matthew Flinders (2002), ‘Governance in Whitehall’, Public

24.

Administration, 80 (1), Spring, 51-75 Geert R. Teisman and Erik-Hans Klijn (2002), ‘Partnership

25.

Arrangements: Governmental Rhetoric or Governance Scheme?’, Public Administration Review, 62 (2), March—April, 197-205 Meredith Edwards (2002), ‘Public Sector Governance — Future Issues for Australia’, Australian Journal of Public Administration, 61 (2), June, 51-61 Harald Fuhr (2001), “Constructive Pressures and Incentives to

Vil

480

505

514

Reform. Globalization and Its Impact on Public Sector Performance and Governance on Developing Countries’, Public

Management Review, 3 (3), September, 419-43

ois

BV)

Mark Beeson (2001), ‘Globalization, Governance, and the

Political-Economy of Public Policy Reform in East Asia’,

28.

Name Index

Governance, 14 (4), October, 481-502 Bidhya Bowornwathana (2000), ‘Governance Reform in Thailand: Questionable Assumptions, Uncertain Outcomes’, Governance, 13 (3), July, 393-408

550

572 589

ibe aeagitoer Soraioaety iV «

we ee ee a

ws

ee

ee

I

,

""

del

“i Atop yErre) wohaag) 11h) deal Kae”

Pet

a ee

liner

¥8

vate

it, =5 =

Oowere, a mane (Ser), Ve # Pie

Aoshi!

a

Se, COUN

SRSe

we

Acknowledgements The editor and publishers wish to thank the authors and the following publishers who have kindly given permission for the use of copyright material.

American Society for Public Administration for article: Geert R. Teisman and Erik-Hans Klijn (2002), ‘Partnership Arrangements: Governmental Rhetoric or Governance Scheme?’, Public Administration Review, 62 (2), March—April, 197-205.

Blackwell Publishing Ltd for articles: Christopher Hood (1991), ‘A Public Management for All Seasons?’, Public Administration, 69 (1), Spring, 3-19; R.A.W. Rhodes (1994), ‘The

Hollowing Out of the State: The Changing Nature of the Public Service in Britain’, Political Quarterly, 65 (2), April-June, 138-51; Ron Hodges, Mike Wright and Kevin Keasey (1996), ‘Corporate Governance in the Public Services: Concepts and Issues’, Public Money and Management, 16 (2), April-June, 7-13; Christopher Pollitt and Hilkka Summa (1997), ‘Reflexive Watchdogs? How Supreme Audit Institutions Account for Themselves’, Public Administration, 75 (2), Summer, 313-36; Walter J.M. Kickert (1997), ‘Public Governance in

the Netherlands: An Alternative to Anglo-American ““Managerialism’”’, Public Administration, 75 (4), Winter,

731-52;

Lee Parker and Graeme

Gould

(1999),

‘Changing

Public

Sector Accountability: Critiquing New Directions’, Accounting Forum, 23 (2), June, 10935; Bidhya Bowornwathana (2000), “Governance Reform in Thailand: Questionable Assumptions, Uncertain Outcomes’, Governance, 13 (3), July, 393-408; Martha S. Feldman

and Anne M. Khademian

(2001), ‘Principles for Public Management Practice: From Di-

chotomies to Interdependence’, Governance, 14 (3), July, 339-61; Mark Beeson (2001), ‘Globalization, Governance, and the Political-Economy of Public Policy Reform in East Asia’, Governance, 14 (4), October, 481-502; Matthew Flinders (2002), ‘Governance in Whitehall’, Public Administration, 80 (1), Spring, 51—75; Christoffer Green-Pedersen (2002),

‘New Public Management Reforms of the Danish and Swedish Welfare States: The Role of Different Social Democratic Responses’, Governance, 15 (2), April, 271-94; Meredith Edwards (2002), ‘Public Sector Governance — Future Issues for Australia’, Australian Jour-

nal of Public Administration, 61 (2), June, 51-61; Joseph E. Stiglitz (2003), ‘Democratizing the International Monetary Fund and the World Bank: Governance and Accountability’, Governance, 16 (1), January, 111-39; Richard J. Stillman II (2003), ‘Twenty-first Century United States Governance: Statecraft as Reform Craft and the Peculiar Governing Paradox it Perpetuates’,

Public Administration,

81 (1), March,

19-40; Werner Jann (2003),

‘State,

Administration and Governance in Germany: Competing Traditions and Dominant Narratives’, Public Administration, 81 (1), March, 95-118.

Elsevier for articles: Christopher Hood (1995), ‘The “New Public Management” in the 1980s: Variations on a Theme’, Accounting, Organizations and Society, 20 (2/3), February—

x

Governance and the Public Sector

April, 93-109; June Pallot (2003), ‘A Wider Accountability? The Audit Office and New Zealand’s Bureaucratic Revolution’, Critical Perspectives on Accounting, 14 (1/2), 133-55. Emerald Group Publishing Ltd for articles: Mahmoud Ezzamel and Hugh Willmott (1993), ‘Corporate Governance and Financia! Accountability: Recent Reforms in the UK Public Sector’, Accounting, Auditing and Accountability Journal, 6 (3), 109-32; Yves Gendron, David J. Cooper and Barbara Townley (2001), ‘In the Name of Accountability: State Auditing, Independence and New Public Management’, Accounting, Auditing and Accountability Journal, 14 (3), 278-310.

Information Age Publishing for articles: Laurence E. Lynn Jr. (1998), ‘A Critical Analysis of the New Public Management’, /nternational Public Management Journal, 1 (1), 107-23; James M. Ferris and Elizabeth A. Graddy (1998), ‘A Contractual Framework for New Public Management Theory’, /nternational Public Management Journal, 1 (2), 225-40. Pearson Education Ltd for excerpt: Anthony Hopwood (1984), ‘Accounting and the Pursuit of Efficiency’, in Anthony Hopwood and Cyril Tomkins (eds), /ssues in Public Sector Accounting, Chapter 9, 167-87. J.D. Stewart for his own excerpt: (1984), ‘The Role of Information in Public Accountability’, in Anthony Hopwood and Cyril Tomkins (eds), /ssues in Public Sector Accounting, Chapter 2, 13-34. Taylor and Francis Ltd (http://www.tandf.co.uk/journals) for articles: Adrian Leftwich (1993),

‘Governance, Democracy and Development in the Third World’, Third World Quarterly, 14 (3), September, 605—24; Jan Kooiman (1999), ‘Social-Political Governance’, Public Man-

agement: An International Journal of Research and Theory, 1 (1), March, 67-92; Chris Huxham (2000), “The Challenge of Collaborative Governance’, Public Management: An International Journal of Research and Theory, 2 (3), September, 337-57; Harald Fuhr (2001), “Constructive Pressures and Incentives to Reform. Globalization and Its Impact on

Public Sector Performance and Governance on Developing Countries’, Public Management Review, 3 (3), September, 419-43.

Every effort has been made to trace all the copyright holders but if any have been inadvertently overlooked the publishers will be pleased to make the necessary arrangement at the first opportunity. In addition the publishers wish to thank the Marshall Library of Economics, University of Cambridge, UK, and the Library of Indiana University at Bloomington, USA, for their assistance in obtaining these articles.

Introduction Ron Hodges

This edited volume brings together some important research papers on the principles and practice of the governance of the public sector. The sector plays a prominent role in establishing, maintaining and sometimes changing relationships between constituents within and outside its jurisdiction. Public sector expenditure accounts for a high proportion of GDP in many countries and we all have an interest in the maintenance of an effective public sector as citizens, as users of its services and, in some cases, as its employees. A definition of the scope of the public sector and its activities is problematic. The OECD defines the public sector broadly as the ‘Central government sector plus all public corporations, includ ing the central bank’ (www.oecd.org). The IMF definition suggests that ‘The principle of classification is that of government ownership and/or control rather than function’ (www.imf.org) and the phrase is often taken to include everything that is publicly owned and controlled, including government, non-department agencies and state-owned companies. In practice even ‘official’ definitions of government are open to different interpretations (for example see Heald (1995) in the context of the meaning of government expenditure). In the selection of papers for this volume I have taken the public sector to include all layers of general government (national, regional and local) and those enterprises that are likely to be financed significantly through some form of taxation or other government imposed charges. Privatized entities are excluded from this coverage, although they may operate within a highly regulated environment imposed by government. The selected papers focus on the public sector in various national and international settings, rather than on local government matters, in order to provide a broad coverage of issues for a wider audience. It is not usual to equate ‘governance’ with ‘government’; the latter typically signifies a collection of organizations run on hierarchical principles, funded through some form of taxation and whose authority is derived by the application of state-prescribed legislation. In contrast, although the meaning of governance is elusive and contested (Peters 1996) it appears to have a wider meaning, including the changing relationships between government and non-government organizations and the partnership or network collaborations between public, private and not-for-profit organizations. For example, Rhodes (1996) suggests that ‘governance’ refers to new processes and methods of governing and to changing conditions of the ordered rule. Governance studies recognize that there is a multitude of alternative structures for the delivery of public services. These range from the traditional hierarchical structures of state bureaucracy to forms of dispersed competition based upon market or quasi-market perspectives that involve splitting the purchasing or commissioning role from the direct provision of services. The literature on governance of the public services is eclectic, it extends across the boundaries of political science, public administration, law, economics, management and

Xil

Governance and the Public Sector

accounting. Any student of governance is faced with a daunting task of assimilating literature based on differing and competing theories, research methodologies and political standpoints. It is clear that one volume of selected readings, or even several, cannot hope to provide a comprehensive set of ideas and perspectives from such a wide and diverse literature capable of satisfying all readers all of the time. The selection in this volume includes papers from differing literatures rather than limiting the scope to a particular perspective, such as political science or my own field of accounting and finance. The principal benefit of this approach is that it has enabled a selection of papers on public sector governance without making, sometimes artificial, distinctions based upon a particular disciplinary classification. Governance in the public sector is quite different to the private sector perspective. The differences arise partly through the political objectives and processes that are an inherent part of public sector policy-making. They result also from the multi-dimensional nature of performance objectives and measurement in public services. There is no equivalent in the public sector of the ‘bottom line’ or shareholder-value metrics that dominate performance analysis in the private sector. These differences are reflected in the varying perspectives of the authors of the selected papers; for example some are explicitly supportive of the opening up to market forces of sectors that have traditionally been provided by organizations that are controlled by government and financed directly by taxation, while other writers are more critical of such reforms. The result is that you may find some of the papers in this volume make for uncomfortable reading; they will not all match your own political standpoints and you may not always agree with the methodologies, argumentative structure or conclusions of the papers. The selection includes papers that describe recent developments in public sector governance in different parts of the world. It is apparent that public sector reforms vary in both substance and detail despite having attached generic labels such as ‘governance’ or ‘new public management’. These papers provide evidence that, while the reform of governance and administration in the public sector appears to be a worldwide phenomenon, there is no single ‘off the shelf’ solution; successful reform is contingent upon political, social and cultural factors within national, regional and international settings. The rest of this essay gives an overview of each part of the volume and provides a short introduction to each of the selected articles.

Structure of the Volume and the Selected Papers The selected papers have been classified under four headings.

Part Part Part Part

I: Principles and Perspectives II: Governance and Public Sector Management III: Governance, Accountability, Accounting and Audit IV: Governance in National and International Perspectives

Part I reflects the broad scope of the meaning of governance within a public sector context to provide a range of perspectives into the literature. Part II relates governance to the world-

Governance and the Public Sector

Xlil

wide reforms in public sector management. Part III emphasizes the importance of financial management and accountability procedures in the reform of public sector governance in many countries. Part IV provides a selection of commentaries on the effect of governance reforms around the world. Part I: Principles and Perspectives

This first part of this volume provides an introduction to different concepts and perspectives of the meaning of governance in the public sector. Its objective is to enable an appreciation of some of the ways in which the term ‘governance’ is used in the research literature and how each may provide a different perspective on the changing public sector environment. Rhodes (1996) provides the following useful summary of six different meanings of governance:

e@ e

@

e

e

e

Governance as ‘the minimal state’, which implies the use of market mechanisms to decrease the activities and, by implication, the cost of government. Governance as ‘the new public management’ (NPM), which lays emphasis on professional management, explicit measures of performance and managing by results and the ideas of new institutional economics to introduce market-based incentives into public services in which steering policy decisions through governance and accountability mechanisms would supersede direct service delivery. Part II of this volume provides a flavour of the extensive and contested nature of NPM reforms. Governance as ‘corporate governance’, which refers to the systems by which organizations are directed and controlled and has been used to identify fundamental principles such as openness, integrity and accountability that should underlie the activities of public sector bodies. Governance as ‘good governance’, which marries NPM to the advocacy of liberal democracy by linking the opening up of public services to the need for a democratic mandate to give legitimacy and authority to the state. Governance as ‘a Socio-cybernetic system’, which sees policy outcomes as the result of complex social, political and administrative interactions rather than being determined by the actions of central government or another single, all-powerful institution. Governance as ‘self-organizing networks’, which reflects the development of networks of entities from the public, private and voluntary sectors that create interorganizational linkages to provide service delivery.

Governance as ‘the minimal state’ is represented by Rhodes’ own work in his 1994 paper ‘The Hollowing Out of the State’ (Chapter 1). The paper is located firmly within a UK context but its opening suggestion that ‘Administrative reform breeds more cynicism than efficiency and effectiveness’ may not be limited to these shores. Rhodes argues that the role of the nation state is being diminished through processes such as privatization, the loss of functions of national and local government to agencies and to the European Union, and by limiting the discretion of public servants through the application of NPM techniques. His pessimistic assessment is that this may lead to fragmentation of service delivery, the erosion of accountability and that a loss of central capability provides a potential for catastrophe. He makes an alternative case for the maintenance of a strong bureaucracy.

xiv

Governance and the Public Sector

Governance as the ‘New Public Management’ is introduced here through Hood’s (1991, Chapter 2) much-cited article which describes and analyses the doctrinal components of NPM through an identification of three families of core values that underlie public management. Sigma-type values emphasize economy and fitness for purpose; theta-type values relate to honesty and fairness; and lamda-type values relate to security and reliance. He suggests that NPM assumes a culture of public service honesty as given. The doctrinal components identified by Hood provide the student of public sector governance with a structure for testing the impact of NPM in different national and international settings. Governance reform in Western democracies has included various attempts to codify good practice in respect of issues of probity, openness and accountability. Such ‘corporate governance’ leads to a more restricted perspective than some of the other definitions, but provides a basis for codified application of governance procedures within public sector institutions. The paper by Hodges, Wright and Keasey (1996, Chapter 3) is drawn from a special issue of Public Money and Management. It compares various UK public sector codes of corporate governance to the private-sector based Cadbury Code. The influence of this codification process may be significant; for example the CIPFA framework (CIPFA 1995) has been used in drafting the equivalent international proposals (IFAC 2001) and similar principles underlie corporate governance proposals in other countries (for example, see Netherlands Ministry of Finance 2000). Governance as ‘good governance’ is represented here, in a critical form, by Leftwich (1993). He questions the orthodoxy that good governance is necessarily dependent upon a liberal-democratic model of society and forms a somewhat pessimistic assessment of the prospects for democratic survival in some parts of the world. He calls for a developmental state, rather than a democratic one, and describes his own conclusions as ‘unfashionable and

uncomfortable’. Kooiman (1999, Chapter 5) provides an overview and analysis of governance as ‘a sociocybernetic system’, examining the choice of theoretical approaches to identify six governing issues to pursue a path towards a theory of modern governance. This paper provides the broadest of perspectives of governance in this first part of the volume with its underlying themes that new modes of interaction between government and society are needed to address major societal issues and that ‘governing arrangements and mechanisms will differ for levels of society and will vary sector by sector’. The use of networks of organizations from the public, private or voluntary sectors working together to provide public services increases the importance of developing appropriate collaborative governance structures. Huxham (2000, Chapter 6) develops a conceptualization of factors inherent in collaborative governance and concludes that empathy, understanding, trust, dominance and thuggery are all factors that may be used within collaborative ventures. Part II: Governance and Public Sector Management

Part II of this volume provides a collection of readings around the theme of public sector management. A significant and worldwide theme of change in public sector management has been the application of market-based principles to public sector activities combined with an emphasis on separating service commissioning from delivery and the setting of targets linked to explicit management performance measures and payment by results. These fea~,

Governance and the Public Sector

xv

tures are often referred to as New Public Management (NPM) reforms although it should be recognized that NPM is itself a contested set of principles and practices. The first three papers, from US authors, provide contrasting expectations and analyses of NPM. Ferris and Graddy (1998, Chapter 7) evaluate the potential for institutional economics to improve public sector performance. They suggest that institutional economics can illuminate how public management can utilize private sector solutions, while providing some caveats to the application of NPM. A more critical perspective of the validity of transferring private sector techniques into the public sector is provided by Lynn (1998, Chapter 8) who questions the ability of NPM to reconcile tensions between legal and political traditions and the supposed universality of its managerial principles. One of the tensions inherent in NPM is between the quest for entrepreneurial and flexible public sector leadership and the desire for accountability structures to restrain or limit particular actions. Feldman and Khademian (2001, Chapter 9) analyse this dichotomy and use a number of illustrations drawn from US public management programmes to show that flexible action and accountability structures may be mutually constructive. The other three papers in this section illustrate that the implementation of NPM reforms in particular countries and their form of application is neither uniform nor easily explained. Hood (1995, Chapter 10) provides a macro-analysis of the causes and extent of implementation of NPM practices during the 1980s. There was considerable variation in the adoption of NPM between different OECD countries and the conventional explanations of the rise of NPM (in terms of being an Anglo-American phenomenon applied as a result of fiscal distress and poor economic performance) are difficult to sustain. Kickert (1997, Chapter 11) provides a critical review of ‘Anglo-American public managerialism’ and the contrasting perspective of ‘public governance’ in the Netherlands. Using illustrations from case studies of administrative reform from that country, he argues that the latter approach possesses theoretical and analytical cogency. The final paper in this section is more focused still: Green-Pedersen (2002, Chapter 12) provides an analysis of reforms in Denmark and Sweden and finds important differences in the extent of NPM implementation. He suggests that political struggles at the national level have been crucial to this process. His findings provide a warning lesson to those studying public sector governance reforms that apparent similarities between countries may break down when examined at a micro-level and that the study of NPM reforms should include some attention to national party politics. Part III: Governance, Accountability, Accounting and Audit

The third part of this volume considers themes of accountability, accounting and audit. Features of good governance and accountability are linked by the expectation that the legislature will be accountable to the society that it represents. Furthermore, changes in public sector accounting and audit arrangements are an important component of NPM, typically involving the transfer of private sector accounting practices into the public sector and an increased emphasis on value-for-money, or performance audit, in place of more traditional auditing practices. The first paper selected is a broad-ranging literature review of public sector accountability by Parker and Gould (1999, Chapter 13). The paper raises concerns of the extent to which accounting becomes a dominant feature of public sector reform and the authors question

xvi

Governance and the Public Sector

whether private sector accounting techniques are capable of providing appropriate information in a public sector context. The next two papers, Chapters 14 and 15, are drawn from Issues in Public Sector Accounting edited by Hopwood and Tomkins in 1984. Stewart (1984) considers the place of financial information within accountability structures arguing that there is a challenge to accountants (and other public sector managers) to meet the differing information requirements for performance, programme and policy accountability along a ‘ladder of public accountability’. Hopwood (1984) provides an insightful analysis of the limitations of accounting in the pursuit of efficiency suggesting that accounting may have a powerful influence in the public sector when technical expertise comes to dominate political debate. Ezzamel and Willmott (1993, Chapter 16) explore public sector corporate governance and financial accountability through a critique of institutional economics based upon the 1990 reforms of the UK National Health Service. Their paper provides a critical perspective on the identification of economic efficiency in public services and argues that institutional economics trivializes political and cultural discourses. Their discussion provides an interesting contrast to Ferris and Graddy (1998).

Studies of the role and authority of public sector auditing institutions are not heavily represented in the academic literature despite their important place in public sector governance and accountability. Three papers are presented here, from around the world, that reflect the challenges facing public sector audit institutions and their responses to public sector governance reforms. Pollitt and Summa (1997, Chapter 17) examine documents issued by Supreme Audit Institutions in Finland, Sweden, France, the UK, and the European Court of Auditors to assess whether they appear to have embraced or rejected NPM concepts. They find considerable variations in the approach to self-reporting by these institutions, which appear to be related to differing constitutional positions and administrative cultures. The paper by Gendron, Cooper and Townley (2001, Chapter 18) provides an analysis of the changing role of public sector auditing in Alberta, Canada. They illustrate how public sector reforms may increase the influence of state auditing institutions but cause auditors to become implicated in the promotion of NPM reforms to the detriment of their traditional independence from the executive. New Zealand has been at the forefront of public management reform in the last 15 years and it seemed appropriate to end this section with Pallot’s (2003, Chapter 19) study of the tensions that can develop between audit bodies, in this case the New Zealand Audit Office, and the executive branches of government, in this case principally the New Zealand Treasury. This tension is examined within a wider review of the shifting focus of New Zealand’s reforms from public administration to public managerialism to public governance. The paper reminds us that public sector reform is a continuing and non-linear process in which complex issues arise of defining accountability relationships within changing governance structures. Part

IV: Governance in National and International Perspectives

The final part of this collection provides a selection of papers examining public sector governance issues within various national and international contexts. The papers are intended to provide a series of contrasting studies over a cross-selection of jurisdictions. However, clearly some countries are covered more extensively in the literature than others

Governance and the Public Sector

XVil

and the desire to work within a single volume has naturally limited the number of papers that could be included. Some readers may have preferred a more focused coverage of a smaller selection of regions or countries. In my defence, the papers included here will provide references to many other publications. Furthermore, some academic journals have published special editions that provide excellent coverage of focused aspects of public sector governance such as “Traditions of Governance’ in Public Administration (2003), Vol. 81 No. | and ‘European Union Governance’ in Governance (2002), Vol. 15, No. 3.

This section commences with an assessment by Stiglitz (2003, Chapter 20) of the governance of the International Monetary Fund (IMF) and the World Bank. He provides a critical

review provide ters: he Five

of the reform process of the IMF, suggesting that it lacks transparency and fails to a forum for stakeholders, other than central bankers and government finance minismakes a set of recommendations for its reform. papers provide a selection of national perspectives from what may be termed the

“Western democracies’,

in this context meaning North America, Australasia and Western

Europe. Here, the continuity of democracy within a capitalist economy is taken as read; the fundamental concerns are with the scale and scope of government activity and of the linkages between the public, private and voluntary sectors. The first two papers are taken from the special issue of Public Administration, mentioned above, and provide historical

perspectives of the development of public governance and administration in the US and Germany. The paper by Stillman (2003, Chapter 21) considers what he describes as the paradox that the US governs as the last global superpower and yet Americans retain a fierce hostility to government. Jann (2003, Chapter 22) examines continuity and change of governance structures in Germany, suggesting that political competition has created a continuous demand for ‘better’ models to guide and develop public policy. Both papers illustrate the importance of the historical, political and cultural background within particular nation states to the interpretation of their governance structures. The next three papers examine the increasing challenges to governance theory and practice arising from the development of network and partnership arrangements for the provision of public services. Flinders (2002, Chapter 23) provides an extensive analysis of governance theory linked to the British Labour Government’s attempt to facilitate cross-departmental inter-organizational collaboration or what is known colloquially as ‘joined-up government’. Teisman and Klijn (2002, Chapter 24) provide an empirical analysis of the ambiguity of partnership governance based upon the expansion of Rotterdam harbour in the Netherlands. Edwards (2002, Chapter 25) reviews future issues of public sector governance in Australia, reflecting an expectation that a move towards collaborative networks of agencies will provide new demands and opportunities, not only to politicians and managers, but also to students of public sector governance. The last three papers examine the internationalization of governance mechanisms, effectively the exportation of neo-liberal concepts of governance from the Western democracies to other parts of the world. Fuhr (2001, Chapter 26) is supportive of this globalization

process, arguing that it creates constructive pressures that can be used positively by citizens and governments in the developing world as incentives to reform. Beeson’s (2001, Chapter 27) assessment of the reform of public policy in East Asia (Japan, China, South Korea, Taiwan and the ASEAN countries) provides an appropriate contrast. He is critical of the application of Western notions of ‘good governance’ to these countries, which may hide the

xvill

Governance and the Public Sector

domination of the reform agenda by powerful vested interests within each country and by international agencies outside of them. A specific illustration of the application of such reforms is provided by Bowornwathana (2000, Chapter 28), who reviews governance reform in Thailand. Issues that are discussed include the belief in ready-made reform packages, an emphasis on outputs, an over-emphasis on efficiency and the portrayal of public sector governance reform as a technical and managerial problem, rather than a political one.

Conclusions

The selected articles provide illustrations of the broad scope of research work being carried out under the umbrella heading of ‘Governance and the Public Sector’. The scope and direction of such work is influenced by the variety of meanings of governance, as discussed in the first part of this volume. At one end of the spectrum, public sector governance may be assessed from broad political and social perspectives such as those described in Kooiman (1999) and illustrated by many of the papers in Part IV. At the other end, a more restricted perspective of governance comes through a consideration of the impact of the more managerial and technical perspectives of new public management and corporate governance illustrated by the papers in the second and third parts of this volume. The scope of issues in the literature may, at times, seem daunting even to the most experienced researcher and lead most of us to become specialists in a few particular aspects of its study, while attempting to maintain some understanding of its broader developments. The broad scope of the literature on public sector governance exists as both a challenge and an opportunity to researchers. The eclectic nature of its research opportunities, together with the continuous public sector reform process throughout the world, makes this one of the most exciting fields of social science research. While there is much that we know, there is probably more that we do not. I trust that this collection of papers will provide a useful source to students who are new to research into public sector governance and become a well-used addition on the bookshelves of those who are already working in this field.

Additional References Chartered Institute of Public Finance and Accountancy (1995), Corporate Governance:

A Framework

for Public Service Bodies, London: CIPFA. Heald, D. (1995), ‘Steering Public Expenditure with Defective Maps’, Public Administration, Vol. 73, pp. 213-40. Hopwood,

A. and C. Tomkins

(1984),

/ssues in Public Sector Accounting,

Oxford:

Philip Allan

(2001), Governance

in the Public

Publishers Ltd. International Federation of Accountants Public Sector Committee

Sector: A Governing Body Perspective, New York: IFAC. Netherlands Ministry of Finance (2000), Government Governance. Corporate Governance public sector, why and how?, Den Haag: Ministerie van Financien. Peters, B.G. (1996), Governing: Four Emerging Models, University Press of Kansas. Rhodes, R.A.W. (1996), “The New Governance:

Vol. 44, pp. 652-667.

Governing without Government’,

in the

Political Studies,

Part I Principles and Perspectives

a

>

me

ve py Coane

2

=

-

a -

om re

4 5

@odids ©.

’

Rents We in

ns

7

ees

7

Ge

eee Tt

até4s (fame, 26 ee @

o (ERs ee

ee a

“) Gn Sapes

wat eo

a, tet

| cule

> ere Geag?. 3

Sib

eaet+

se

7438

008) & @>. Bnew? ee

fe)

[=P

“SG

—

By es CV Gomer

eae

=

ee,

See 6 a4

@w a

aes

argued that there was an urgent need to address the legislation surrounding the AuditorGeneral. Despite this plea, however, it took more than ten years for the Public

Governance and the Public Sector

136

J. Pallot

Audit Act to be passed, for reasons which will be outlined in this paper. Meanwhile, the Audit Office has completely restructured itself and its role has evolved in response to attacks on its position, the philosophies of successive AuditorsGeneral, and the radically altered public sector environment. The remainder of this paper considers the role played by the Audit Office before, during and after the revolutionary 1990-92 period during which the State Sector Act and Public Finance Act were implemented. Much of the material in this paper is based on interviews and reports, both published and unpublished. The paper is also, however, based on observations from my personal involvement in public sector reforms in New

Zealand?®.

Laying the Groundwork

Despite the appearance of revolution following the passage of the Public Finance Act 1989, the groundwork for reform of the central bureaucracy had begun to be laid some ten years earlier. In 1978, a landmark report on financial management in administrative government departments was issued by the Controller and Auditor-General. In this report, the Auditor-General, Fred Shailes, argued that, despite efforts since 1967 to introduce program budgeting, the continued use of cash accounting and the failure to develop meaningful performance measures had meant that managers continued to focus on budget and legal compliance rather than managing resources effectively and efficiently. Shailes advocated an accruals-based accounting system to ensure cost responsibility, encourage ongoing monitoring of assets and enable systematic costing and charging for services (Audit Office, 1978). In the wake of the Shailes report, New Zealand experimented with a variety of practices, (collectively referred to as “managerialism’ by observers of similar trends in Britain, Canada and Australia). Under slogans such as “Let the Managers Manage” and “Managing for Results”, private sector practices, such as corporate planning, increased budget flexibility, and new management information systems, together with progressive dismantling of Treasury regulations and ad hoc attempts at non-financial performance measurement, were tried with varying success (Pallot, 1991). “Value-tor-Money” audits were introduced by the Audit Office, influenced in

part by developments in Canada’. The Audit Office, concerned about the standard of reporting in local as well as central government, also played a key role in initiating the development of public sector accounting standards which would go beyond the minimum requirements prescribed by law. Along with a cadre of senior managers and finance officers concerned about the inadequacies of the traditional accounting systems in

government, the Audit Office was responsible for the establishment in 1982 of the Public Sector Study Group (PSSG) to investigate the accounting standards for the public sector. Following Office in the Shailes report, the PSSG quickly made than many of its overseas counterparts)* to accrual entities and the inclusion of non-financial performance

development of public sector the lead given by the Audit

a commitment (much earlier accounting for public sector measures in external reports.

383

Governance and the Public Sector

384

The Audit Office and New Zealand’s bureaucratic revolution

17

The PSSG was formalized as the Public Sector Accounting Committee (PSAC) in 1985 and continued to develop standards and guidelines until 1992 when it was disbanded in wake of the desire, on the part of the Institute of Chartered Accountants of New Zealand, to have one single set of accounting standards to apply across both public and private sectors. Throughout its life, the PSAC chaired by successive Deputy Auditors-General’.

was

In short, the Audit Office under Shailes played a significant role in the introduction of private sector accounting technologies as a means of improving management in the public sector'®. At the same time the Office sought improvements in external reporting and accountability. While advocating accrual accounting, however, the proposals facilitated by the Office very much envisaged a public sector distinctly different the private sector and even advocated some innovative reporting such as a Statement of Resources which included human resources and “community assets” (Pallot, 1990) reported in non-financial terms (and also financial terms where relevant). These various managerial and external reporting initiatives were largely incremental and did not threaten the fundamental structure or values of the public sector. This lack of disturbance to the foundations of the public sector was not to continue, however.

The Revolution Begins: State Owned Enterprises In 1984, a reforming Labour government was elected to office. It spent its first few years deregulating the private sector so as to improve the overall economic performance of the country. In 1986, it turned its attention to the public sector in the expectation that improving its performance would contribute to overall improvement of the economy. The State Owned Enterprises Act 1986 (SOE Act) marks the beginnings of the contemporary New Zealand model of public management, incorporating ideas from public choice and agency theory. Public enterprises were brought under this one common statute, as well as being companies under the Companies Act, unlike the previous situation where they had taken a number of organizational forms with no consistent framework. The framework developed for SOEs is significant because it is this model which was subsequently applied to the rest of the public sector including central government departments, non-commercial crown entities and even (although to a lesser degree)

local government!!. According to the SOE Act (section 14), the principal objective of each SOE is “to operate as a successful business”. The new model for state enterprises had several key components including a clear identification and separation of the roles of ministers and boards/managers and the reporting actual performance against prior specification of objectives (Statements of Corporate Intent). Furthermore, while the government's interest in state enterprises was primarily as an owner seeking the highest possible return on investment, it was also acknowledged that the government would frequently have a role as regulator, and could, in some circumstances, have a different interest as purchaser of non-commercial goods and services. If the government wished an SOE to undertake unprofitable activities for

Governance and the Public Sector 138

J. Pallot

social reasons, it was to make specific payments to the SOE for these so that they would assume the form of a commercial transaction. In debating the State-owned Enterprises Bill prior to enactment, there were strong objections to the requirement to have the Audit Office as auditor. It was felt that this statutory “monopoly” was out of place with the new philosophy of contestable markets. It was also argued that it would be more difficult to raise funds if the audit was not conducted by an internationally known accounting firm. As one of the major accounting firms said in its submission: With the need for state-owned enterprises to meet funding arrangements from borrowings, particulary offshore borrowings, lenders will require them to produce sophisticated

proposals, backed up by audited financial accounts. Lenders are familiar with the intemational reputation of large firms. Credibility of financial advisers and reliance placed on the work of these accounting firms are often critical to the success of a funding arrangement (Deloitte et a/., 1986, p. 11).

Public enterprises themselves also used possible problems in financing as an argument against auditing by the Audit Office: “Feedback we are getting from financial advisers both in New Zealand and internationally, is that DFC should have an internationally known auditor in order to provide comfort for international banks, Eurobond investors and New Zealand investors as to the strength of our financial position” (Development Finance Corporation, 1986, p. 9)!2.

Along with the other clauses in the Act which departed from normal commercial practice (such as more extensive reporting of objectives, the right of the Minister of Finance to declare a dividend, and the jurisdiction of the Ombudsman) the Act with respect to the Audit Office was passed substantially in its original form. However, these issues remained contentious in the SOEs’ relationships with the government and the public at large. Pallot (1998) suggests that the values and assumptions underpinning audit in government possibly sit uncomfortably with those of capital and, in particular, international capital. For example, the emphasis on democratic control over the use of funds in government could be at odds with the notion of capital mobility while parliamentary sovereignty could sit uncomfortably with the power of multinational corporations. If so, it is not surprising that multinational accounting firms were preferred or that the role of the Audit Office became a contentious issue in the corporatization and privatization program. The new SOE model, based on agency theory, placed ministers in the position of shareholders. This encouraged the reporting emphasis to come on executive or managerial accountability as opposed to public accountability to Parliament and the public at large. The fixation on the private sector model, and failure to appreciate the more complex accountabilities in the public sector was sharply illustrated in the Treasury’s 1987 discussion document Commercial Performance of State-owned Enterprises: Principles of Shareholder Monitoring. Having examined parent-company monitoring of subsidiaries in the private sector, the Treasury proposed vastly increased information flows from the SOEs to Ministers (a suggestion strongly opposed by SOE boards), but made no mention of accountability to Parliament. It was left to the Auditor General, Brian Tyler, to draw attention to the challenge to parliamentary authority posed by the new model:

385

Governance and the Public Sector

386

The Audit Office and New Zealand’s bureaucratic revolution

139

One of the features of a company ownership form is the transference of authority from Parliament to the Executive. Allowing the Executive to determine the resources to be entrusted to a State-owned Enterprise and the nature of the activities that will be undertaken with them, represents a very real reduction in the authority of Parliament. As Parliament's authority is eroded and its constitutional role diminished, so too is the effectiveness with which it can impose proper accountability. This will continue to occur until adequate mechanisms exist which allow Parliament to examine and challenge actions, both taken and proposed, of the Executive or the enterprises themselves _—_(Audit Office,

1988, p. 22).

The Auditor-General highlighted the importance of the Statement of Corporate Intent (SCI) as the basis of the accountability framework and noted that, in his view, the SCls presented in 1987 did not provide adequate information about the objectives, scope of activity, performance measures, or reporting obligations of

SOEs. Two years later, he again concluded that the SCls generally did not provide sufficient information to meet legislative requirements and that “the SOEs are consequently falling short in their obligations of accountability to Parliament and to the wider public” (Audit Office, 1990, p. 6). The SOEs argued that they were already putting considerable effort and expense into producing the normal commercial accounts and felt that this fully discharged their accountability obligations. Clearly, they already viewed themselves as private sector organizations. The entire concept of public accountability on non-market terms ran counter to the requirements of the liberal agenda whose reforms “could only be instituted by a strong state subject to minimal restraints” (Kelsey, 1993, p. 188). Criticisms made by the Auditor-General were met with criticisms of the Audit Office itself. A report commissioned from Strategos Consulting by the Finance and Expenditure Committee in 1988 reflected a number of views about the Audit Office that were prevalent at the time. The report even went as far as to suggest that “the ground [was] being laid for the removal of the Audit Office function” (Kirk, 1988, p. 1). As well as arguing that government corporations should be audited by private sector auditors, the report questioned whether the same office should

carry out beth audit and control functions and suggested that these functions be split or reallocated. It also thought that the Treasury and the Audit Department were duplicating the expenditure control function, that VFM audits were not an accounting

function and of doubtful value, that advice to Parliament should become contestable and that the relevance of state-sector-specific expertise had been diminished with the convergence of state and private sector management structures and objectives. The Strategos report, which had not undergone rigorous substantiation, and was described by the Auditor-General as “constitutionally illiterate”, contained numerous flaws. In particular, it failed to appreciate complex constitutional relationships in government or to distinguish between control on behalf of Parliament from control on the part of the government. It addressed neither the problems of auditor independence in the private sector, where there is strong competition for audit engagements and the client has the ability to dismiss the auditor if not satisfied, nor the effect of contestability on the independence of advice to Parliament. However, the report did reveal a need for the work of the Office to be more clearly understood and for the Audit Office to ensure it performed its functions efficiently and effectively and could demonstrate that it was doing so.

Governance and the Public Sector 140

387

J. Pallot

The Revolution in Central Government Departments

After the establishment of SOEs, attention turned to core central government departments. Two key pieces of mutually reinforcing legislation—the State Sector Act 1988 and the Public Finance Act 1989—formed the basis of the reforms in central government departments. The State Sector Act brought significant changes to the process of appointing departmental chief executives and ushered in a new era of devolved human resource management (Walsh, 1991). To strengthen the “rewards” and “sanctions” available to ministers, chief executives ceased to have permanent employment but were placed instead on renewable performance-based contracts of terms not exceeding five years. This principal-and-agent model required a Clearer definition of the notion of performance—one which would also mesh with the comprehensive overhaul of the financial management system being undertaken. Two sets of ideas underpinned the new system of performance measurement. The first set of ideas, influenced by agency and transaction cost theories, was the notion of contractual relationships between departments and the Government.

It was an

extension of the SOE model into the core public sector. Two types of contract, corresponding to two different relationships between the Government and the department, were envisaged. In the first type of contract, the Government was seen as a purchaser of outputs from departments or, alternatively, from organizations in the private sector. Accountability would be in terms of a purchase contract which would be as specific as possible about the nature and quantity of the output to be produced; the quality desired in the outputs; delivery time and place; and price. In the second type of contract, the Government was viewed as owner of its agencies. As owner, it would wish to ensure that it is getting the best possible return on the assets invested. The Government as owner was presumed to be interested in changes to the economic capital stock of the agency and the capacity of the agency to continue to provide services in the future. The second set of ideas was a distinction between inputs, outputs and outcomes. Inputs were defined as the resources (e.g., labour, materials, electricity) used in the production of outputs. The goods and services produced by departments were described as outputs. The notion of outputs encompassed a variety of types including policy advice, the administration of regulations, and the administration of transfer payments, as well as the provision of specific services such as education or prison management. The term “outcomes” was adopted for the impact on, or consequences for, the community of the activities of government (for example, a lowered incidence of disease, a lowered crime rate, an increase in economic welfare). On the basis of policy advice, ministers were expected to choose outputs which would help them achieve the desired outcomes. Treasury argued that it was not possible to hold chief executives accountable for outcomes, as they were affected by matters which were beyond their control, and that the performance measurement system should therefore be based on outputs. Based on these ideas, the Public Finance Act (PFA) redefined the appropriation process, shifting the emphasis from inputs to outputs, and established departmental and whole of government (“Crown”) reporting requirements (Pallot, 1991; McCulloch & Ball, 1992). Of major importance to the Audit Office was the fact that key

388

Governance and the Public Sector The Audit Office and New Zealand’s bureaucratic revolution

141

legislation, such as the PFA and the Local Government Amendment (No. 2) Act 1989, requires the performance of public sector entities to be reported not only in financial statements but also in non-financial terms in Statements of Service Performance (SSPs), all of which must be audited annually. The idea of auditing SSPs was not one proposed initially by the Audit Office. It appears to have originated, like the rest of the PFA, in the Treasury. However, once the requirement for auditing non-financial information was in the legislation, the Audit Office, as the primary advocates of legislative compliance, felt obliged to attempt the task. That the Treasury was keen to have performance measures audited can possibly be understood in terms of Power's observation that: The “hollowing out’ of the state by the NPM generates a demand for audit and other forms of evaluation and inspection to fill the hole. According to Rhodes (1994, 151), this is a deliberate erosion of central capability in favour of the long distant mechanics of auditing and accounting. Auditing has qualities of “portability and diffusion” and apparent “political neutrality” (Power, 1997, p. 44).

The Audit Office had an active involvement in the development and implementation of the PFA. In a small country such as New Zealand, where there is a limited pool of expertise, the Audit Office was best positioned in terms of knowledge and expertise to assist in a number of ways. First, it provided advisers to the Finance and Expenditure Committee of Parliament for its consideration of the Public Finance Bill in 1989, its inquiry into reporting by the Crown and its sub-entities, and its inquiry into the format of the Crown financial statements. Second, it developed guidelines for reporting non financial information. Since no other jurisdiction (with the possible exception of Western Australia) had experience in auditing non-financial information, the New Zealand Audit Office was forced to fill the gap and provide criteria for devising and auditing such information. The dimensions identified by the Audit Office for measuring the delivery of outputs (quantity, quality, timeliness, cost, and location) became widely accepted throughout the public sector. Third, it facilitated the production of the whole of government (“Crown”) financial statements (Pallot, 1994). This included commenting on the Crown accounting policies as they were developed and on the format of the Crown financial statements. The Audit Office also advised on the evidential standards to be met in some of the more technical valuation issues such as military assets, libraries, roads and archives. It can be argued that, in undertaking these activities, the Audit Office made performance “auditable” and served to constitute and legitimate “a realm of facts, to make a world of action visible and hence controllable in economics terms” (Power, 1997, p. 94). As this paper will show, however, the Audit Office was to go on to challenge aspects of the notions of performance it had itself been instrumental in establishing. The distinction drawn between outputs and outcomes which underpins much of the PFA, and the subsequent focus on outputs as the basis for accountability, was a crucial step in the development of the New Zealand model. Not only did it assist in the commodification of the public sector—glossing over the fact that many public sector agencies are engaged in procedural, craft or coping tasks rather than production ones (Wilson, 1989)—and make it more amenable to privatization, but it was instrumental in the displacement of public accountability by managerial accountability. The logic of the outputs/outcomes split is that outputs are a suitable

Governance and the Public Sector 142

J. Pallot

basis for “purchase agreements” between departments/agencies and ministers but that ministers are accountable to parliament and the public at large for outcomes (or, at very least, their choice of outputs to meet outcomes). Public accountability documents tabled in parliament might therefore logically be expected to be about outcomes, but a sleight of hand ensured that this was not the practice adopted. Instead of ministerial reports on outcomes, the documents tabled in parliament were the departmental Statements of Service Performance, based on outputs. That this was the appropriate mode of external reporting was reinforced by an accounting standard (Financial Reporting Standard 2, section C) published by the Institute of Chartered Accountants of New Zealand in 1991. This standard required reporting of outputs in measurable, largely quantitative, terms but did not require any reporting of outcomes; indeed, any suggestion that outcomes even be mentioned in the standard was fiercely resisted by Treasury representatives on the working party that developed the standard!*. Outputs-based information tends to be quantitative, detailed and boring to read, thereby attracting minimal parliamentary interest or attention. However, the boring, by being overlooked, can be used to deflect or avoid open controversy. The Auditor-General, in his submission on the Public Finance Bill, pointed out that no provision had been made in the Bill for reporting on outcomes. While acknowledging the point being made, the Finance and Expenditure Committee nonetheless “felt unable to consider amendments to the Bill in the area of Ministerial accountability” (Finance Expenditure Committe, 1989, p. 3). Undeterred, the Auditor-General, in public forums, continued to stress the need to ensure accountability: Currently, there are no explicit requirements for ministers to report their performance—and that of the government as a whole—against stated goals or outcomes. This is a significant omission from the current accountability arrangements ...If (ministers) think that such a requirement would be unfair is it because of, for whatever reason, the belief they would

be held to account for things which they cannot in fact control or influence? If so, | can understand their concern. The principle that should be adopted is that they be held to account only according to their extent of control or influence. (Tyler, 1989, pp. 147-8).

In short, the Audit Office facilitated the introduction of the new regime in a number of ways. At the same time, however, it was one of the earliest voices questioning the narrowness of the focus on outputs-based performance measurement, despite the fact that outputs were more “auditable” and could more easily use existing expertise in financial statement auditing. Tyler also challenged the appropriateness of expenditure in the new-look, commercially oriented public sector and drew attention to a possible decline in public service ethics. On one memorable occasion he questioned the propriety of government expenditure on taxation advertisements. This prompted Peter Neilson, then Associate Minister of Finance, to say that he would sue the Auditor-General, a statement that was generally condemned in the media. Considerable public support was expressed for the role of the Audit Office in serving the interests of Parliament and the democratic process. In these circumstances, it was unfortunate to find the Chairman of the Finance and Expenditure Committee, Jim Sutton, attacking the response of the Audit Office to the Strategos report and making accusations of “headline hunting”. He went on to add:

389

390

Governance and the Public Sector The Audit Office and New Zealand’s bureaucratic revolution

143

The Audit Office responded . . with a campaign which employed a few tricks not unknown to politicians. A high profile media carnpaign was mounted to represent the call for contestability as an attack on the principle of independent audit itself. In my view it was no such thing, but the allegation has nevertheless been repeated in the Auditor-General’s latest report on the Public Accounts. The Audit Office seems to have adopted a policy of raising its own profile. Allegations of an explosion of fraud in the public sector have been loosely worded in a way which has predictably fostered the notion that the new look public sector with its profit motivated SOEs probably needs ever closer scrutiny from an ever strengthened Audit Office. Numerous editorials attest to the success of this presentation.

(Sutton, 1989, pp. 40, 41).

Such attacks from members of the Government, and select committee members who aspire to government office, highlighted the need to strengthen the ability of those who serve Parliament to make independent critical comments on the activities of the Government. By the time Tyler left office, however, that ability was at an all-time low. Kelsey (1993, chapters 10-13) depicts a public sector in which democracy was in “crisis”: parliamentary debates were recognized as impotent (although essential to /egitimate the exercise of executive power), the watchdogs were neutralized and the electoral system was in demise. In her words: Some offered simplistic remedies of procedural reform. Others proposed more radical schemes to depoliticise the executive. But neither would address the real cause for concern—the marginalisation of democratic accountability from the source, nature and operation of political economic power (Kelsey, 1993, p. 173).

At this point the privatization forces were arguably at their height. The next decade was to see a mounting reassertion of wider notions of public accountability in which the Audit Office was to play a key role.

The Audit Office Response

In December 1992, a new Auditor-General, Jeffrey Chapman, took up office. He immediately set about countering the attacks on the Office and its supposed “monopoly” by restructuring internally and changing the way audits were to

be carried out!*. Firstly, he significantly restructured the Office, separating

it

(administratively although not in a formal legal sense) into two units which mirrored the purchaser—provider and policy—operations splits by that time common the public sector. The new units were:

across

(a) The Office of the Auditor-General (OAG), responsible for standards setting and oversight of the provision of audit services and for parliamentary reporting, liaison and advice. The VFM audit group (tater renamed the Performance Audit Unit), although an operational function, was also included since its small size of approximately 15 staff did not warrant its standing alone. (b) Audit New Zealand, responsible for carrying out regular audits on a similar basis to private sector auditors. A “contract” was set up between the AuditorGeneral and Audit New Zealand for the provision of audit and related Operational services.

Governance and the Public Sector 144

J. Pallot

Secondly, Chapman introduced contestability as a means to demonstrate efficiency and VFM in the conduct of audits. The aims were, firstly, “to demonstrate efficiency and VFM in the conduct of audits” and, secondly, “to facilitate the exchange of knowledge which would occur as a result of drawing on a wider pool of auditors, and their associated knowledge and practices” (Audit Office, 1993a, p. 5). A portion (later considerably expanded) of the audit portfolio was now to be allocated to competent service providers, including both Audit New Zealand and

private sector audit firms, on the basis of competitive tender!>. On the surface, this reorganization gives the appearance of an Audit Office succumbing to the Treasury model. But it is also a classic strategy of a weaker side to save their own position by adopting that of their opposition in the hope of later neutralising it. Behind the scenes, Chapman set about strengthening the position of the Office and mounting a challenge to the Treasury-driven regime. Chapman saw new Audit Office legislation as an opportunity to reaffirm the role and mandate of the Office and ensure it would serve the needs of Parliament into the next century. The Governor-General!® had announced, in the Speech from the Throne at the opening of the new Parliament after the November 1993 general election, that a Bill for new Audit Office legislation would be introduced during the term of that Parliament. Also, the impending introduction of MMP (mixed member proportional representation and the probable end of single-party majority governments) was expected to result in significantly increased demands on the Audit Office for support for Parliament, thus adding to the need for review and clarification of the legislation. To initiate progress on new legislation, Chapman had the Office develop a discussion paper on the role and responsibilities of the AuditorGeneral (Audit Office, 1994a). A number of issues needed to be addressed in any new legislation. While little dissatisfaction had been expressed about the existing functions of the Audit Office, matters which Parliament expects it to examine (e.g., legislative compliance or

probity) were not expressly mentioned as functions in the 1977 legislation. The appointment of the auditor was contained in a variety of specific statutes (in some cases, such as universities, not specified at all) with the result that there was no consistent and coherent approach to audit arrangements. Statutory recognition as an Office of Parliament, rather than as a government department responsible to a minister, was needed to underpin independence from the Executive. From 1990 onwards the Audit Office had been treated de facto as an Office of Parliament, at least for funding purposes. However, this still had to be made law. Also, the existing legislation had the Auditor-General appointed by the Governor General on the recommendation of the Prime Minister, an arrangement which is at odds with the notion of independence from the Executive. The discussion paper on these matters and related issues was used as a basis for consultation with central government, local government, parliament, business and academia. Meanwhile Chapman set about examining some of the fundamental features of the public sector financial management reforms. While stopping short of giving a qualified opinion on the flagship of the accrual accounting regime—the Crown financial statements—he made it clear in a separate report to Parliament that there were theoretical problems and deficiencies in the accounting policies and

DiI

392

Governance and the Public Sector The Audit Office and New Zealand’s bureaucratic revolution

145

some of the information provided (Audit Office, 1993b). Chapman used the fifth anniversary of the passage of the PFA as a reason to investigate the financial management reforms in central government. While all those interviewed believed that the financial management reforms had improved the way central government operates, several areas of concern were identified and reported by the AuditorGeneral (Audit Office, 1994b). First, there was a widespread concern about the appropriateness of performance measures and, in particular, the link between outputs, outcomes and the new strategic result areas!’. Second, there was some dissatisfaction with incentives such as the capital charge regime. There was ongoing concern about the degree of sophistication and accuracy in the application of cost allocation!®. Finally, there were a number of concerns about the benefits and risks associated with large and increasing proportion of Parliament's appropriations going

to parties other than central government departments (for example Crown entities!? and private sector contractors or organizations). Of these issues, perhaps the one impacting most directly on the work of the Office itself was non-financial performance measurement. The rapid development of reporting on performance in the public sector, such as the requirement to publish statements of corporate intent, statements of service performance, and other nonfinancial information, had created an entirely new set of challenges for the scope of audits and their evidential requirements. Chapman set up an internal taskforce to examine the measurement and audit of non-financial performance. The major criticism of the performance measures that had developed in response to the reporting and audit requirements of the PFA and Loca/ Government Act was that reliability of measures had been emphasized at the possible expense of their usefulness. For example, auditors’ insistence on evidence had produced easily counted measures like “number of letters to the Minister”. There was a similar response in local government. As one local government manager commented in an

interview with the author:

.

| think perhaps the first objective was to get a clear [audit] opinion in terms of the non-

financiais. We started out using the residents’ survey as the basis for the non-financials— and we got ticked off about that: “these are the subjective assessments of a sample of residents, not the objective measures that we [the auditors] expect.”... So we then shifted the balance and put in a range of things like yes, we did do 65 reports this year and our target was 55. That meant more acceptance from the auditors but it kind of said “performance measurement is what can | easily count to put in the report to keep the auditor happy”.

Power (1997, p. 96) calls such audits, which concern themselves with auditable form rather than substance “rituals of verification”. He argues that, while such audits may produce some comfort, and hence organizational legitimacy, from time to time they are perceived to fail and new technical guidance is issued. In the New Zealand Audit Office case this took the form of guidance on forming judgments about the appropriateness of accountability information. Appropriateness was defined as that which was relevant, complete and understandable (Anderson, 1995) and further guidance on the meaning of these dimensions, and how the auditor should assess them, was developed. Once the notion of appropriateness had been clarified, the Audit Office worked with several departments and local authorities on a trial basis to see whether

Governance and the Public Sector

146

J. Pallot

discussions with management and examination of policy documents could lead to more appropriate measures. This process of questioning and discussion helped organizations to think more carefully about the purpose of their activities; for example, the Department of Conservation moved from the amount and frequency of dropping poison to kill opossums to thinking about the number of opossums killed. Further thought led to the number of opossums remaining and then to the extent of forest regeneration. In general, the search for more appropriate performance measures was found to lead to consideration of outcomes, not just outputs, and to the realization that measures over a longer term than one year are often necessary. This started to challenge the outputs-based accountability framework established by the Treasury. The Audit Office concern with outcomes (in contrast to the Treasury who were firmly wedded to outputs) stemmed from several sources. First, as noted above, the Office is concerned about information for Parliament. Detailed output specification may be important in purchase agreements between ministers and agencies but it amounts to information overload for parliamentarians who, in any event, are often concerned about outcomes. Second, unlike the Treasury, the Audit Office has responsibility in the local government sector. In this sector the output— outcomes/purchaser—owner model had been dismissed as “Wellington-speak’. Instead, the Society of Local Government Managers had set about developing their own approach to performance measurement, with encouragement from the Audit Office. These tended to be much more outcome and ‘onger-term oriented. In part this was because many local government services lent themselves more readily to outcome measurement (be it in terms of citizen satisfaction or in technical terms such as traffic flows). But it was also because local government has a more direct relationship with its public and is therefore less inclined to inwardlooking managerialist approaches. It was the different perspective provided by local government that the Audit Office was able to bring to the debate in central government.

Towards a Wider Accountability

Many of the Audit Office initiatives (especially new conceptual developments) lost their momentum in the wake of Chapman's shock resignation in October 1994. Over half the senior management team went to positions elsewhere and the new Auditor-General, drawn from the private sector, needed time to familiarize himself with the role. Given the public embarrassment of Chapman’s conviction on charges of fraud, the timing was not right for discussion of the role of the AuditorGeneral. Nonetheless, under the new Auditor-General, David Macdonald, the Office continued to issue reports on a wide range of subjects, to follow closely the new regime in local government and to be the key voice in drawing attention to the shortcomings of accountability arrangements for Crown entities (Audit Office, 1996, 1998). It continued to search for a widening of the managerialist model, this thinking culminating in its 1999 report titled The Accountability of Executive Government to Parliament.

593

394

Governance and the Public Sector The Audit Office and New Zealand’s bureaucratic revolution

147

The purpose of the 1999 report is, firstly, “to promote Parliament's awareness of issues relating to the way in which it scrutinises and controls the Executive and holds it to account” and, secondly, “to point to opportunities for.improvement and to stimulate debate about them” (Audit Office, 1999, p. 11). The report concludes that Parliament generally receives adequate financial information about what the Government is buying (outputs) and the financial performance of state agencies. However, it questions whether all transactions for the provision of non-departmental

ouput classes should be viewed as purchases’. It proposes an alternative to the financial management framework of the last decade with its private sector conceptions of “purchase” and “ownership”, suggesting instead that government expenditure be classified as current and capability expenditure. The Audit Office believes that this categorization has a number of advantages. First, it provides a comprehensive classification since all expenditure can be placed in one of these categories. Second, it might foster realistic judgments about the relationship between expenditure and outputs. For example, it would avoid false impressions of efficiency gains by concealing or absorbing costs in output prices or by consuming capital or otherwise depleting capability. Third, it avoids any implication that ownership interest can be fully reflected in balance sheet

assets. Much of the information needed about key dimensions of ownership is not simply information about expenditure. Accordingly, the Audit Office proposes wider information requirements with respect to ownership including: the fundamental reasons why the Crown should own a particular organization (as opposed to purchasing from, or regulating, an organization it does not own); the particular contribution that owning the organization is expected to make to the public good; the appropriateness of the organization's corporate form (e.g., department, company, statutory corporation); and the organization’s capability. Considerable attention is paid in The Accountability of Executive Government to Parliament to the notion of capability. Information on capability is considered to be important for accountability because it is difficult to establish accountability if it is unclear whether the organization had the resources to do the job required of it. Given that “it is fruitless to hold individual to account for events or outcomes over which they have little or no control”, the Audit Office argues that: .. .wWe believe the key consideration for accountability in relation to risk management is not that some unfortunate event has occurred. Rather, it is whether or not someone who had the capacity to mitigate that risk in a prudent and cost-beneficial way was negligent in not doing so (Audit Office, 1999, p. 93, emphasis added).

The Audit Office has given careful consideration to ways in which organizational capability might be comprehensively described, and how assurance about capability might be provided. It is currently undertaking work on how capability should be measured and reported. Although this work is not yet complete, the Audit Office believes that it is now possible to give Parliament some useful information on at least four dimensions of capability—balance sheet assets, human resources, outputs production methods, and information and control systems. As well as challenging the purchaser—owner catergorization, The Accountability of Executive Government to Parliament identifies a number of issues with respect to outputs and outcomes—the other leg of the performance measurement framework.

Governance and the Public Sector

148

J. Pallot

In the case of outputs, it is largely a matter of tidying up. The Audit Office notes that the contents of purchase agreements are not regulated by the PFA and can be changed at the discretion of the Minister. On the other hand, descriptions of outputs in the Estimates and departmental forecast reports (which are legally binding) are too vague, resulting in a reduction in Parliament's ability to exercise effective control over expenditure. The Audit Office proposes that outputs be specified in sufficient detail in the legally binding descriptions of appropriations for Parliament to have sufficient control. Descriptions in purchase agreements can be more specific, but they should be well-aligned with descriptions in the estimates and departmental forecast reports. The criticisms of reporting on outcomes are much more severe. The Audit

Office concludes (outcomes) of its does not say how no requirement to

that the Government's statements about the overall effects spending are generally high-level and vague, that the PFA outcomes are to be specified or measured, and that there is indicate their strategic priority. Linkages between outputs and

outcomes are generally not clearly explained, several outputs from several agencies may contribute to the same outcome, and any particular outputs may contribute to the same outcome. Other forms of expenditure (e.g., transfer payments), and other forms government involvement (e.g., regulation) may also contribute to outcomes. While successive governments have tried to address some of these difficulties through “strategic result areas” and “strategic priorities and overarching goals”, these ancillary statements were first developed as tools to be used within the Executive, are not regulated, and are generally not measurable. The Audit Office proposes a number of possible solutions, not least of which is a statutory requirement that outcomes actually be measured, and the impact of the outputs purchased by the Crown be evaluated. The Accountability of Executive Government to Parliament contains a section on impact evaluation (and its limitations) based on overseas experience. The Audit Office has since published a report titled /mpact Evaluation: Its Purpose and Use (Audit Office, 2000). The intention of the report is “to demonstrate the value of impact evaluation as a practical tool to enhance the quality of decision-making by the Government and Parliament’?! (Audit Office, 2000, p. 101). The Accountability of Executive Government to Parliament is the most direct challenge to the Treasury's financial management model to date. There are several reasons why the Audit Office is in a much stronger position to tackle Treasury’s thinking than it was a decade ago. First, there has been a decline in Treasury influence as the reforms lost their momentum (in particular, external pressures for privatization diminished once most major state sector commercial assets had been sold) and Treasury lost many of its key thinkers to private sector consultancies and elsewhere. Within the public service, the State Services Commission has reasserted its position as a control department and is now the main source of ideas about management within the public sector. Its disciplinary base is different from that of the Treasury (organization theory rather than economics) and tends to emphasize such factors as flexibility, strategic thinking, organizational learning and fuzzy boundaries

(see, for example, State Services Commission, 1997). Furthermore, there had been mounting public dissatisfaction with the economic direction New Zealand

395

396

Governance and the Public Sector The Audit Office and New Zealand’s bureaucratic revolution

149

had taken, and for which Treasury was viewed as responsible. This dissatisfaction resulted in the National government being re-elected in 1996 with a majority of only one seat, a subsequent coalition which struggled to retain power, and the election of a centre-left coalition in 1999 under the new MMP electoral system. By 1999 the Audit Office was also in a stronger position because new legislation, which would secure its mandate and establish it as an Office of Parliament, was by then clearly in sight. A potentially stronger Parliament under MMP”, a change of government, passage of years since the embarrassing Chapman resignation and diminished opposition had made the time ripe for introduction of a Public Audit Bill. The Public Audit Act (PAA) was passed on 6 April 2001 and came into effect on 1 July 2001. The PAA cements the position of the Auditor-General and enables him to carry out “performance audits” (efficiency and effectiveness/VFM audits) in all public sector entities other than the few remaining

SOEs.

All public sector entities are

brought under the Auditor-General’s mandate which is consistently applied across the sector. It enables a flexible approach to the organization of the Auditor-General’s business although it is intended that the current structure (OAG and Audit New Zealand) will continue in the forseeable future, as will the policy of encouraging contestability in the supply of auditing services. Most importantly, the PAA formally establishes the Auditor-General as an Officer of Parliament, thus securing financial and operating independence from the Executive, although there are new provisions to ensure the Auditor-General is responsive to the wishes of Parliament”>. Of wider significance is a global sea-change in thinking ahout the public sector, favouring democratization rather than privatization. After a decade of “reinventing government” (Osborne & Gaebler, 1993) the call now is increasingly one of “reinventing democracy” (Hirst & Khilnani, 1996). The focus of attention shifts from internal management to the wider political and social context within which government operates. As Kickert (1997, p. 742) points out: The internal changes in management and organization within ministerial) departments cannot be detached from the changes in external governance between government and societal sectors. The internal running of the “business” of public organizations cannot merely be approached from a business-like or “managerialist” perspective.

He argues (p. 732) that the idea of public management should be broadened into “public governance”: Public governance has a broader meaning than the usual restricted business-like, marketoriented interpretation of the concept of “management”. Public governance is also related to legality and legitimacy and more than strict business values. Government functions in a context of political democracy ... Public governance is complex activity involving the “steering” of complex networks in societal policy sectors.

Governance in networks poses some major challenges for traditional hierarchical models of accountability, a fact recognised by the Audit Office. The Accountability of Executive Government to Parliament points out that: [G]overnment organizations often establish both formal and informal working groups (‘virtual departments”) to deal with specific issues or to pursue collective objectives. It may be that “no one agency is primarily accountable and that no extemal reports acknowledge the existence of the objectives, the resources applied collectively to pursuing them or the group's performance in doing so. In summary, the structures of government

Governance and the Public Sector

150

J. Pallot organizations are becoming more diverse and complex. The information exchanges between these organizations and with their stakeholders are increasing in frequency, scope and complexity (Audit Office, 1999, p. 20)

In this context, Treasury’s argument that accountability should be based on outputs rather than outcomes because the latter are the product of many interdependent actors/factors is simply irrelevant; interdependence is an inescapable feature of modern government. Even in the case of outputs, there had been growing recognition in New Zealand that more than one agency might contribute to a single output (e.g., policy advice). Given that outcomes are a suitable focus for accountability if the concern is with governance, and not just intra-government management, what problems does this raise for auditing technology? Not surprisingly, the Office has concerns about measurement: An objection might be made that introducing a requirement for measurement is likely to cause attention to be devoted to issues that are readily measurable but less important. This objection has substance and must be confronted ... The approach must be to measure what needs to be measured. If that proves difficult, the response must be to address the difficulties rather than focus on things that are easier to measure. We concede that there will be real practical and technical problems in measuring outcomes and in understanding

causal relationships that affect them. However, we see little alternative to undertaking this work. If it is not done ... policy development and implementation will continue to be hamstrung by the absence of essential information (Audit Office, 1999, p. 53).

Accounting (and the auditing of it) should not be viewed as just a measurement discipline, however; accounting has frequently been described as a measurement and communication discipline. Throughout the Audit Office report there are references to an accountability dialogue between Parliament and the Executive, suggesting that the significance of measures is not so much in themselves but as a starting point for discussion and negotiation. This is consistent with a view that

“the role of government should not focus on planned steering and performing [in the traditional systems-theoretical cybernetic approach], but on mediating” (Kickert, 1997, p. 736). Calls to “reinvent democracy” should be heard by accounting academics and practitioners as they are a challenge to reinvent accounting and

auditing as well.

Summary and Conclusion

Whilst New Zealand’s dramatic public sector reforms have been widely documented, very little has been written about the influence of, or the impact on, the Audit Office in the process. This paper has attempted to address that deficit. In particular, it has argued that the experiences of the Audit Office, including its conflict with the Treasury, can be more fully understood in terms of tensions between a privatization agenda, on the one hand, and a democratization agenda, on the other. Privatization—be it recasting the public sector in corporate or commercial form or outright sale to private sector business interests—favours a minimization of public accountability. As Kelsey (1993) argues, such reforms require a strong state not subject to restraints of public accountability in non-market terms. Legislative auditors, however, have traditionally upheld notions of wider public or constitutional

IE

398

Governance and the Public Sector The Audit Office and New Zealand’s bureaucratic revolution

151

accountability and it is not surprising that, in seeking to defend these principles, the Audit Office came under considerable attack from those promoting sale of assets to the private sector. Sale of assets is but one, albeit highly visible, form of privatization. Within the core public sector, privatization also took the shape of NPM reforms which made governmental agencies appear more like the private sector and shielded their most important dimensions from public scrutiny. Departments were recast as commodity producers making their services more amenable to contracting out. Managerial accountability (in particular, for outputs) displaced, or attempted to disguise the lack of, public accountability for matters such as outcomes, social justice and the legitimacy of processes. To a significant degree the Audit Office facilitated New Zealand’s public sector reforms, especially in the development of performance reporting and whole-ofgovernment financial statements, and to this extent can be regarded as legitimating them. Power (1997, p. 49), writing in the UK context, asserts that the supreme audit body is associated with “political accountability to the electorate [being] more explicitly supplemented, if not displaced, by managerial conceptions of accountability’. However, this would be an incomplete, if not inaccurate, portrayal of the role of the Audit Office in New Zealand. Rather, as this paper has shown, the Audit Office has challenged many aspects of the new managerialism of the Treasury, such as the narrow on ministers and outputs, and consistently advocated a wider accountability to parliament and the public at large. By the mid 1990s the privatization forces began to retreat with most major state assets having been sold and the New Zealand public venting their dissatisfaction with the lack of consultation during the process of economic reform by altering their electoral system. With a new MMP parliament, a centre-left government and a weakened Treasury, other views—inherent in a mounting international concern for “reinventing democracy” and community or public “governance’— were better able to be expressed. Recent Audit Office publications, such as The Accountability of Executive Government to Parliament, represent a considerable shift in the way the New Zealand public sector views performance measurement and accountability. The new public audit legislation should help to secure an effective and independent Audit Office which continues to play its vital role in the process of public accountability. Just what “public accountability” entails in a world of fuzzy boundaries and complex networks, however, remains to be seen.

Notes 1. VFM auditing seems to be the aspect of public sector auditing most extensively covered in the accounting literature. For example, in addition to Jacobs (1998) see Glynn (1985), Guthrie and Parker (1999). Accordingly this paper will try not to repeat what has already been said on that topic. 2. The terms “privatization” and “democratization” are used in many different ways in the public policy and public management literature; hence, a particular definition is provided here. 3. Jacobs arid Barnett (2000, pp. 186-187) are somewhat skeptical of the notions of a policy elite (Goldfinch, 1998) or a policy conspiracy (Wallis, 1997) in New Zealand, considering that they require more real evidence. The comment made here about the Treasury and large firms is based on firsthand observation by the author.

Governance and the Public Sector J. Pallot

152

4. This particular version is taken from 1995 which is midway in the main period under discussion so as to be most representative. The underlying view, which is “an enduring fundamental” (Funnell, 2000) has not changed; nor has the wording has not altered much although more recent versions are more detailed and specific in their description of outcomes sought. 5. As it examines finance and expenditure issues across the board, this is the most influential of the select committees of parliament. It is responsible, inter alia, for parliamentary oversight of the Treasury. 6. This involvement has included: director of the financial management program for senior managers in government 1981-1988, director of a major State-owned enterprise (Telecom) from its days as part of the Post Office to its privatization, continuous involvement in either the accounting or auditing

standards setting boards and committees of the Institute of Chartered Accountants of New Zealand, and a two-year secondment as Assistant Auditor-General in 1993 and 1994. 7. Whilst there had been Audit Office studies throughout the 1970s, the “modern” era of VFM audits followed the Public Finance Act 1977, which gave the Auditor-General a mandate to audit efficiency and effectiveness. The Canadian influence was particularly strong in the early 1980s. 8. There are a number of reasons why accounting innovation in general has been rapid in New Zealand (see Pallot, 1996).

9. The Chair of the PSSG was David Hutton, Director in the Audit Office. The Chairs of the PSAC were firstly Jeffrey Chapman and then Wayne Cameron who were Deputy Auditor-General at the time. 10. Gendron ef a/. (2000, p. 4) argue that “it would be difficult for a state auditor who has strongly advocated and promoted NPM to objectively assess system that have been designed in accordance with her/his prior recommendations” (emphasis in original). While not denying this problem of independence (indeed when the New Zealand Audit Office produced guidelines for performance

measurement it was accused of being “both judge and jury”), hopefully this paper shows that Auditors-General in this country have not been afraid to distance themselves from their predecessors and that the Audit Office has on several occasions been prepared to critique systems which it had itself helped to make possible. 11. This is because of the stronger democratic impulse in local communities. As Horner (1989) notes, these reforms were in accordance with the same principles as had informed the reforms of central government: the quest for clear linear accountability, transparency in policy formulation, and greater operational efficiency. By the time the new legislation was passed, it was possible to detect “a shift in emphasis from efficiency/rationality toward some of the more traditional values ascribed to local government” (Horner, 1989, p. 6). 12. The DFC suffered a financial collapse a few years later. However, there is no evidence to suggest that this would have been avoided if they had an international accounting firm as auditor. They were certainly not the only public enterprise to argue this way (several who did not experience major financial problems argued likewise). However, DFC are cited because their views, unlike the others, were expressed in a written submission.

13. Author's personal experience in serving on the working party. 14. English and Guthrie (2000), describe a similar split in the state of Victoria, Australia and express concern that it had potential to “emasculate” the knowledge base of the OAG. One significant difference in the New Zealand case is that Audit New Zealand remained part of the Audit Office and under the control of the OAG; the separation was administrative, not legislative. The flexibility in administrative structure remains under the proposed new legislation in New Zealand. 15. By 1994, approximately one third of the total annual audit workload was being undertaken by audit service providers other than Audit New Zealand (Audit Office, 1994c, p. 26). By 1999, 81% of the audit portfolio (measured by audit hours) had been made contestable and this is currently being

16.

extended to 90%. New Zealand is a constitutional monarchy. The British monarch is also, separately, the sovereign of New Zealand. The Governor-General is her representative in New Zealand.

17. For a description and analysis of the Strategic Result Areas regime see Boston and Pallot (1997). 18. Miller (1996, p. 61) argues that “if accountants are to continue to play an ever-increasing role in managing the new public sector, it is important to identify the limits of their expertise . .. {I]f the public sector is to be transformed

in important part by the calculative technologies of accounting, then

any assessment of such a transformation should take note of the recent criticisms of management accounting information.” 19. Crown entities are the many (about 3000) and varied government-owned organizations which are not central government departments, local government or SOEs.

399

400

Governance and the Public Sector The Audit Office and New Zealand’s bureaucratic revolution

153

20. For example, a number of Crown entities are required by statute to undertake certain tasks and, in doing so, to act independently (e.g., the Police Complaints Authority, Privacy Commissioner). The sums appropriated are simply intended to fund those entities and it is quite wrong to categorize the economics relationship as that of purchaser and provider. 21. If, as Power (1997, p. 50) suggests, financial auditing and impact evaluation are fundamentally different evaluative logics (standing respectively in accountancy/business disciplines and social scientific inquiry), the renewed interest of the Audit Office in evaluation may result in some tensions. One possible scenario would be contractors (Audit New Zealand and private sector firms) applying common methodology to financial and non-financial information with the Institute of Chartered Accountants of New Zealand setting accounting and auditing standards that include non-financial

information. The OAG, with its more direct relationship with Parliament, might choose to build its expertise in commenting on impact evaluation. 22. |Ithas been suggested that it was public dissatisfaction with not being consulted over the reforms that led to pressures for a change to the electoral system (Nagel, 1993). 23. In particular, there is.a procedure whereby the Auditor-General’s draft annual plan (which includes the proposed work program for the year and the forecast financial statements required under section 34A of the Public Finance Act 1989) to be submitted to the Speaker and a committee of the House of Representatives at least 60 days before the beginning of each financial year. After considering any comments by the Speaker or Committee, the Auditor-General decides if and how the plan should be amended. However, the Auditor-General must indicate any changes to work priorities which have been requested by the Speaker of any parliamentary committee but which he has chosen not to include in the plan.

References

Anderson, B., “Establishing Appropriate Performance Measures”, Proceedings of the Public Sector Convention: Pursuing Further Innovation in Public Sector Management (Wellington: Institute of Chartered Accountants of New Zealand, 1995). Audit Office, Report of the Controller and Auditor-General on Financial Management in Administrative Government Departments, (Shailes Report) (Wellington: Government printer, 1978).

Audit Office, Report of the Controfler and Auditor-General; First Report for 1988 Covering—Companies, Corporations and Statutory Boards and Other Matters (Wellington: Audit Office, 1988). Audit Office, Report of the Controfler and Auditor-General on Statements of Corporate Intent (Wellington: Audit Office, 1990). Audit Office, Annua/ Report 1992-1993 (Wellington: Audit Office, 1993a). Audit Office, “Commentary on Crown Accounting Policies”, Report of the Controiler and Auditor General: Second Report for 1994 (Wellington: Audit Office, 1993b). Audit Office, The Role of the Auditor-General in New Zealand: A Discussion Paper (Wellington: Audit Office, 1994a). Audit Office, “Financial Management Reforms”, Report of the Controller and Auditor-General: Fourth Report for 1994 (Wellington: Audit Office, 1994b). Audit Office, “Management of Payments on Behalf of the Crown”, Report of the Controller and AuditorGeneral: Fifth Report for 1994 (Wellington: Audit Office, 1994c). Audit Office, Report of the Audit Office for the Year Ended 30 June 1995 (Wellington: Audit Office, 1995). Audit Office, Governance Issues in Crown Entities (Wellington: Audit Office, 1996). Audit Office, “Governance Issues in Crown Entities’, Report of the Controller & Auditor-General: Third Report for 1998 (Wellington: Audit Office, 1998). Audit Office, “The Accountability of Executive Government to Parliament’, Report of the Controller and

Auditor-General: Third Report for 1999 (Wellington: Audit Office, 1999). Audit Office, “Impact Evaluation—lts Purpose and Use’, /n First Report for 2000 of the Controller and Auditor-General Audit Office (Wellington: Audit Office, 2000). Ball, |., "Reinventing Government: Lessons from the New Zealand Treasury’, The Government Accountants Journal, Fall, pp. 19-28 1994. Boston, J. & Pallot, J., “Linking Collective Strategy with Departmental Performance: Developments in New Zealand”, Journal of Policy Analysis and Management, Vol. 16, No. 3, 1997, pp. 382-404.

Governance and the Public Sector 154

40]

J. Pallot

Boston, J., Martin, J., Pallot, J. & Walsh, P. (eds), Reshaping the State: New Zealand's Bureaucratic Revolution (Auckland: Oxford University Press, 1991). Boston, J., Martin, J., Pallot, J. & Walsh, P, Public Management:

The New Zealand Model (Auckland:

Oxford University Press, 1996). Deloitte, Haskins & Sells, Submission to the Government Administration Committee on the State-owned Enterprises Bill, unpublished. Development Finance Corporation, Submission

to the Government Administration

Committee on the

State-owned Enterprises Bill, unpublished. English, L. & Guthrie, J., Emasculating Should be in the Name of Competition Reform of State Audit in Victoria. Paper Presented at University of Alberta Conference on Government Accountability and the Role of the Auditor-General, Edmonton, Canada September 15, 16, 2000. Finance and Expenditure Committee “Report of the Finance and Expenditure Committee on the Public Finance Bill”. (Wellington: New Zealand House of Representatives, 1989). Funnell, W., “Enduring Fundamentals Constitutional Accountability and Auditors-General in the Reluctant State”. Paper presented at University of Alberta Conference on Government Accountability and the Role of the Auditor-General, Edmonton, Canada September 15, 16 2000. Gendron, Y., Cooper, D. & Townley, B., “In the Name of Accountability: State Auditing, Independence and New Public Management’. Paper presented at University of Alberta Conference on Government Accountability and the Role of the Auditor-General, Edmonton, Canada September 15, 16 2000. Glynn, J., “Value for Money Auditing—An International Review and Comparison”, Financial Accountability and Management, Vol. 1, No, 2, 1985, pp. 113-128. Goldfinch, S., “Remaking New Zealand's Economic Policy: Institutional Elites as Radical Innovators 1984-1993", Governance, Vol. 11, No. 2, 1998, pp. 177-202. Guthrie, J. & Parker, L., “A Quarter Century Performance Auditing in the Australian Federal Public Sector: A Malleable Masque”, Abacus, Vol. 35, No. 3, 1999, pp. 302-332. Hirst, P. & Khilnani, S. (eds), Reinventing Democracy (Oxford: Basil Blackwell, 1996). Hood, C., “De-Sir Humphreying the Westminster model of Bureaucracy: A New Style of Governance?” Governance, Vol. 3. 1990, pp. 205-214. Horner, T., “Local Government

Reform:

Links to Public Sector Reform”, Public Sector, Vol. 12, No. 3,

1989, pp. 2-10. Jacobs, K., “Value for Money Auditing in New Zealand: Competing for Control in the Public Sector’, British Accounting Review, Vol. 30, No. 3, 1988, pp. 343-360. Jacobs, K., “Value for Money Auditing in New Zealand: Competing for Control in the Public Sector”, British Accounting Review, Vol. 30, 1998, pp. 343-360. Jacobs, K. & Bamett, P, “Policy Transfer and Policy Learning: A Study of the 1991 New Zealand Health Services Reforms”, Governance, Vol. 13, No. 2, 2000, pp. 185—213. Kelsey, J., Rolling Back the State (Wellington: Bridget Williams Books, 1993). Kickert, W., “Public Governance in the Netherlands: An Alternative to Anglo-American “Managerialism””,

Public Administration, Vol. 75, No. 4, 1997, pp. 731-752. Kirk, A., Report of Strategos Consulting on the New Zealand Audit Office (Wellington: Strategos Consulting, 1988). McCulloch, B. & Ball, [., “Accounting in the Context of Financial Management Reform’, Finarcial Accountability and management, Vol. 8, No. 1, 1992, pp. 7-12. Miller, 2, “Ditemmas of Accountability: the Limits of Accounting”, in P. Hirst & S. Khilnani (eds), Reinventing Democracy (Oxford: Basil Blackwell, 1996). Nagel, J:, “What Political Scientists Can Learn from the 1993 Electoral Reform in New Zealand?” PS: Political Science and Politics, Vol. 27, 1993, pp. 525-529.

Osborne, B. & Gaebler, T., Reinventing Government (New York: Plume, 1993). Pallot, J., “The Nature of Public Assets”, Accounting Horizons, Vol. 4, No. 2, 1990, pp. 79-85.

Pallot, J., “Financial Management Reform”, in J. Boston, J. Martin, J. Pallot & P. Walsh (eds), Reshaping the State: New Zealand’s Bureaucratic Revolution (Auckland: Oxford University Press, 1991). Pallot, J., “The Development of Accrual-Based Accounts for the Government of New Zealand’, Advances

in International Accounting, Vol. 7, 1994, pp. 287-308. Pallot, J., “Innovations in National Accounting and Budgeting in New Zealand”, Research in Governmental and Nonprofit Accounting, Vol. 9, 1996, pp. 323-348. Pallot, J., “The Role of Accounting in Privatisation of State Trading Activities”, Advances in Public Interest Accounting, Vol. 7, 1998, pp. 161-191. Power, M., The Audit Society: Rituals of Verification (Oxford: Oxford University Press, 1997).

402

Governance and the Public Sector The Audit Office and New Zealand’s bureaucratic revolution

155

Rhodes, R., “The Hollowing out of the State; the Changing Nature of the Public Service in Britain”, The Political Quarterly, Vol. 65, No. 2, 1994, pp. 138-151. Scott, G., Bushnell, P & Sallee, N., “Reform of the Core Public Sector: New Zealand Experience’,

Governance, Vol. 3, 1990, pp. 138-167. State Services

Commission,

(Wellington: SSC, 1997).

:

Strategic Human

Resource

Capability

issues

in the Public

Service

Sutton, J., “Financial Management Reform and the Management of Public Resources”, Managing Resources in the New Public Sector: Papers from the 1989 Public Sector Convention (Wellington: New Zealand Society of Accountants, 1989).

Treasury, Government Management: Volume 1 (Wellington1: Government Printer, 1987). Treasury, Commercial Performance of State-Owned Enterprises: Principles for Shareholder Monitoring (Industries Branch, The Treasury, 1987). Tyler, B., “Accountability in the New Public Sector’, Managing Resources in the New Public Sector: Papers from the 1989 Public Sector Convention (Wellington: New Zealand Society of Accountants,

1989). Wallis, J., “Conspiracy and the Policy Process:

A Case Study of the New Zealand Experiment’, Journa/

of Public Policy, Vol. 17, No. 1, 1997, pp. 1-31.

Walsh, P,, “The State Sector Act 1988”, in J. Boston, J. Martin, J. Pallot & P Walsh (eds), Reshaping the State: New Zealand's Bureaucratic Revolution (Auckland: Oxford University Press, 1991).

Wilson, J. Q., Bureaucracy: What Government Agencies Do and Why they Do /t (New York: Basic Books, 1989).

Partially

Governance in National

and International Perspectives

[20] Democratizing the International Monetary Fund and the World Bank: Governance and Accountability JOSEPH E. STIGLITZ* Much has been said about the failing policies of the International Monetary Fund (IMF). In this essay, I attempt to explain why the IMF has pursued policies that in many cases not only failed to promote the stated objectives of enhancing growth and stability, but were probably counterproductive and even flew in the face of a considerable body of theoretical and empirical work that suggested these poilcies would be counterproductive. I argue that the root of the problem lies in the IMF’s system of governance. Thereafter, I discuss how the World Bank managed to reform its agenda in order to fulfill its goals of poverty reduction more successfully, and what lessons this reform holds for the IMF. I conclude by proposing needed reforms for the IMF that might mitigate some of the problems it has

encountered in the past.' Economists typically begin an analysis of the behavior of an organization or an individual by looking at the incentives they face—what is the nature and magnitude of their rewards and punishments, and who metes them out? Political discussions more commonly begin with a discussion of accountability. Before I discuss the specific problems of the IMF and the World Bank, it will be fruitful to first lay out what I mean by “accountability,” relate this notion to incentives, and identify the key problems in designing accountability systems for international financial organizations. ACCOUNTABILITY: A DEFINITION AND ILLUSTRATION

Accountability requires that: (1) people are given certain objectives; (2) there is a reliable way of assessing whether they have met those objectives; and (3) consequences exist for both the case in which they have done what they were supposed to do and the case in which they have not done so. Ina sense, the political notion of accountability corresponds closely to the economists’ concept of incentives. Several key problems face a multilateral organization, such as the World Bank or IME, in establishing a system of accountability. A first *Columbia University

Governance: An International Journal of Policy, Administration, and Institutions, Vol. 16, No. 1, January 2003 (pp. 111-139). © 2003 Blackwell Publishing, 350 Main St., Malden, MA 02148, USA, and 108 Cowley Road, Oxford, OX4 1JF, UK. ISSN 0952-1 895

406

Governance and the Public Sector 112

JOSEPH E. STIGLITZ

problem is created by the existence of a multiplicity of objectives. If organizations fail on one objective, they can always claim that they were trying to accomplish another objective. Whenever there is murkiness about an organization's real objectives, it will be difficult to assess whether the organization has been successful or not, and hence, it will be hard to

hold

the organization

accountable.

This

is particularly

problematic

in public institutions because, in fact, different participants in the politi-

cal process have different goals. As they represent the views of the members of society, public institutions almost inevitably involve a multiplicity of objectives. But that does not mean that in the design of public institutions, one cannot try to delineate specific objectives for particular organizations. Second, it is often quite difficult to ascertain the reasons why an organization may not have met its objectives. This may have occurred because an intervening event took place that the organization or person responsible could not do anything about. In that case, the failure could not, of course, be attributed to the organization or person involved.

Finally, it is often difficult in large organizations to design incentives that lead to individual accountability, even when organizational accountability exists. If widespread consultation and diffuse responsibility exist within an organization, then everyone is “to blame” when things go wrong. But if everyone is to blame, then no one is: one cannot punish all individuals in an organization. Much bureaucratic behavior is designed to assure that there exists collective responsibility for failures, eroding individual responsibility.

Let me illustrate the issues discussed so far with reference to the IMF. The organization was founded in the aftermath of the Great Depression and World War II. The Great Depression represented the most significant downturn in the global economy since the beginning of capitalism. The war expenditures brought the global economy out of the Great Depression. At the end of the war, a worry existed that the world would sink back into a slump. In particular, John Maynard Keynes was concerned that countries would reintroduce the kinds of policies that they had pursued at the beginning of the depression. In pursuing “beggarthy-neighbor” policies, countries had tried to protect their own aggregate demand by cutting back on imports, as a result of which their problems had spread to other countries. Keynes helped establish the IMF to address these concerns. He successfully argued that the cure for recessions was fiscal expansion. The IMF was to have two functions: (1) to provide money to countries in an economic downturn, so as to enable them to pursue more expansionary fiscal policies; and (2) to put pressure on countries to choose expansionary, rather than beggar-thy-neighbor, policies. He believed that an international organization was needed, because a global collective interest would be served by expansionary policies. Thus, the IMF seemed to have a clear set of objectives.

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

407 113

If we look at what happened in the financial crisis in East Asia, however, the IMF actually set forth conditions forcing countries to adopt more contractionary, rather than more expansionary, policies. To be sure, the countries did not engage in beggar-thy-neighbor policies. Rather, they followed what I call “beggar-thyself” policies that were even more detrimental. Both kinds of policies exacerbated the downward spiral within the region. But, unlike beggar-thy-neighbor policies, beggar-thyself policies did not even have the saving grace of benefiting the people of the country that engaged in them. These contractionary monetary and fiscal policies led countries to reduce their imports—other countries’ exports— Just as they would have been reduced by the imposition of tariffs and quotas (see Stiglitz 1997). The IMF was doing exactly the opposite of what Keynes had intended. Keynes must have been turning over in his grave

thinking about what he had done.’ The question is, why was the IMF advocating and imposing these beggar-thyself policies? Was it a mistake, or was the IMF pursuing other objectives? If it was pursuing other objectives, then perhaps the failure in stabilizing East Asia was not a failure in the eyes of the organization. And indeed, the IMF claimed that there were other objectives. One of the stated objectives was to preserve global stability—that is, to prevent contagion, even if doing so meant that the countries in East Asia might have to suffer more than they would have with less contractionary policies.’ Another was to make it more likely that creditors would be repaid. Senior IMF officials were very explicit in not wanting debtors to default on their loans. They viewed that as an abrogation of the sanctity of contracts.‘ Consider another example. In October 1997, just as the East Asia crisis

began, the IMF tried to change its charter in order to make capital market liberalization part of its mandate. Today, even the IMF recognizes that capital market liberalization presents considerable risks for many, if not most, developing countries, and it is now widely recognized that capital

market liberalization has contributed to global economic instability. It played a central role in the East Asia crisis, and it helps explain why crises have been more frequent and deeper over the past quarter-century. The pursuit of capital market liberalization thus seems inconsistent with the mandate given to the IMF at its creation: to enhance global economic stability. One way of coming to grips with the seeming anomaly is to look for another objective: facilitating the opening of capital markets may be in the interest of certain

financial

circles in the developed

countries,

because it enhances their business opportunities. The problems posed by the multiplicity of objectives are compounded by a tendency to confuse means and ends. Means that are supposed to be closely connected to well-accepted ends become goals in themselves, and little attention is paid to whether they do, in fact, advance the ultimate end. Privatization was supposed to contribute to economic growth; therefore, it was presumed that the countries in transition that privatized the

Governance and the Public Sector

408 114

JOSEPH E. STIGLITZ

fastest would grow the fastest. Accordingly, it was not surprising that the IMF put a host of privatization conditions on its loans to those countries and kept track of the number and value of state assets privatized. Those countries that privatized the fastest got the IMF's seal of approval, the teacher’s gold stars for good performance. Yet it is now apparent that speed of privatization mattered little: the countries that seemed to be privatizing slowly—Hungary, Poland, and Slovenia—are the countries that have had the most successful transitions. Statistical studies suggest that privatization without restructuring and corporate governance does not contribute to economic growth. But these results are perfectly consistent with what was known even at the beginning of the transition. How privatization is conducted (i.e., the institutional infrastructure and macroeconomic policy framework that accompanied it) is every bit as important as privatization itself. Similarly, inflation and exchange-rate stability are not ends in themselves, but means to ends. Yet the IMF has repeatedly treated these as if they were goals in themselves. While a general consensus exists that eliminating hyperinflation is necessary for economic growth, there is no consensus that reducing inflation increases economic growth. The transition countries with the best economic performance have not necessarily been those that have pushed inflation lowest. Excessively tight monetary policy is one of the factors generally blamed for the high level of barter in Russia (in recent years, 60% or more of all transactions have been barter). While inflation interferes with the ability of the price mechanism to work, barter may be even more harmful. The multiplicity of objectives—including the confusion of means with ends—thwarts the possibility of assessing success. Not long after the East Asian crisis began, the IMF claimed success for its interventions. To me, and to most of those in the affected countries, this seemed peculiar. Unem-

ployment rates had soared and were still three to five times higher than they had been before the crisis. Real wages were down, and incomes remained below 1997 levels. Gross domestic product (GDP) in countries like Indonesia was more than fifteen percent lower than it had been before the crisis, and the countries were still in recession. In what sense, there-

fore, could the IMF's policies be called a success? That depends crucially on the definition of the intended goals. The IMF said its interventions were successful, because exchange rates had stabilized. If that was the objective, then the IMF had indeed succeeded, as

exchange rates had stabilized. But if the IMF’s objectives had been the ones about which Keynes had talked—namely, stabilizing GDP and preventing workers from facing mass unemployment—then the programs had been outright failures. If the objective had been ensuring repayment of creditors, the picture was mixed: the IMF had succeeded in avoiding a unilateral declaration of suspension of payments, a debt moratorium or

standstill, and Korea had been able to negotiate a debt rollover, but the creditors were really given little choice—there was more to the form than the substance. In any case, whether there was a formal moratorium or not,

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

409 115

creditors were not being repaid. In Thailand, over fifty percent of the loans were in nonrepayment in 1997, and the picture did not improve much during the succeeding two years. The second problem in assessing the successes and failures of the IMF concerns the extent to which the organization was able to influence events. This is related to another question: what would have happened in the absence of the IMF action—what is the appropriate counterfactual? I have watched the IMF closely over the years, and there is a certain consistency in its responses. When things go well, the IMF claims the credit. When things go badly, it is because others did not do what the IMF told them to do in the manner that they were supposed to, they did not show adequate resolve, and, in any case, matters would have been

even worse but for the IMF’s intervention. Any seeming failure is not because of mistaken policies but arises from faulty implementation, governments not doing enough, and lack of commitment. At least in its public stance, the IMF seldom moves away from this position of organiZational infallibility. Indeed, it often seems to take the position as part of its credo: only if the markets believe that the IMF is infallible will it be able to affect market psychology and to restore confidence. Thus, the IMF has consistently discouraged public discussion of alternative strategies. For example, during and after the East Asia crisis, even after that situation had calmed down, the IMF refused to engage in processes of public evaluation. The IMF holds that transparency could undermine its effectiveness, a view it shares with the central bankers who play such a large role in its governance. With few exceptions, most of them are committed to the proposition that public discussions of monetary policy would not contribute to economic stability and believe that even public disclosure of the IMF’s deliberations would be counterproductive. Remarkably, there is little empirical evidence in support of these strongly held views. On the contrary, few untoward consequences have resulted from the Bank of England’s movement towards improved transparency and disclosure. In the few instances in which the IMF engaged in self-criticism, it appeared directed at limiting the scope of outside criticism as much as it was directed at understanding the sources of the failure. In the face of mounting criticisms of the failures in East Asia, the IMF finally admitted that it had imposed excessively contractionary fiscal policies, but it never addressed the appropriateness of its monetary policies.? More fundamentally, it never attempted to explain why it had pursued these excessively contractionary fiscal policies. Were its forecasting models at fault, or was the problem with its overall policy framework? And the IMF (and the U.S. Treasury) reacted vehemently (though secretly) to a more thorough World Bank review (1998b) that identified part of the problem as a failure to be attentive to the microeconomic structures of the affected countries. For instance, in Thailand, much of the foreign debt was asso-

ciated with the real-estate sector, which was already bankrupt. Contrary

410

Governance and the Public Sector 116

JOSEPH E. STIGLITZ

to what the IMF claimed, further devaluation would therefore not have had significant adverse effects. At the same time, the IMF preference for

raising interest rates to high levels predictably did have a significant adverse effect on every sector of the economy, in particular on small and

medium-sized businesses. This followed from the high level of domestic indebtedness. Thus, the IMF was not open to a true evaluation of its performance. The complexity of economic phenomena, however, made it easier for it to claim success for itself when the source of success lay elsewhere and to shift blame to others when their policies played at least a part in the failures. For example, the IMF has frequently claimed Mexico as a success. This country recovered, at least in the sense that the exchange rate stabilized after the intervention. The IMF claimed that the Mexican bail-out program was the reason for this. But if we look more carefully at what happened in Mexico, we find a simple explanation for why Mexico recovered. The exchange rate devalued, and the United States was going through an economic boom. The North American Free Trade Agreement,

which had lowered trade barriers with the United States, had recently been signed. In other words, Mexico enjoyed an export-led recovery that had little, if anything, to do with the IMF's bail-out packages (see Leder-

man, Menendez, Perry, and Stiglitz). The weaknesses of Mexico’s financial institutions also comprised an essential part of its problems. The IMF did not really address these shortcomings. Years after the crisis, the Mexican

banks

remained

in weak

condition.

This

did

not

hamper

Mexico’s recovery, as its export industries could tap into the American financial markets. The companies supplying products to American automobile companies could obtain money from these car manufacturers or their banks; indeed, many of them were American firms themselves. In

short, Mexico’s recovery had little to do with the IMF program. A second example is the stabilization of the exchange rate and economic turnaround in East Asia after the crisis. Every economic downturn comes to an end. The fact that this occurs does not mean that the policies were right. The issue that has to be addressed is whether the economic downturn was as short and as shallow as it could have been. Nowadays, most people agree that the excessively contractionary fiscal policies preferred by the IMF made the downturn in East Asia significantly deeper and longer-lived than it had to be. Even the IMF agrees that the way it went about restructuring the financial system in Indonesia contributed to a run on the banking system, further weakening that economy. The IMF also recognizes that Malaysia’s capital controls did not have the adverse effects that it had once predicted. It is less willing to admit that the controls in Malaysia resulted in a shorter recession and created less debt than would otherwise have been the case. Similarly, the IMF never mentions that Korea’s recovery was partly caused by the fact that it did not follow the IMF’s advice to get rid of its excess capacity in chip production. The recovery of the chip industry played a central role in the recovery of

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

41] 117

Korea’s economy. Nor does the IMF mention that Korea followed quite a different strategy in restructuring its banks than the one the IMF would have recommended—a far different strategy from that pursued in either Thailand or Indonesia, where recovery has yet to come, four years after

the crisis. One has to be careful in assessing the excuses for the failures. For instance, it is often argued that while the IMF's advice was good, implementation was bad. If only the country had done what it was told to do, recovery would have come sooner. Still, an increasing number of governments are governed by democracies, and democracies do not necessarily obey instantaneously the dictates of international organizations. Their decision-making processes often take time. In the United States, for example, we have been talking about problems in our Medicare system and our social security system for years. Nonetheless, much weaker and younger democracies are somehow expected to change basic institutions within their society—including their basic social safety nets—in a matter of weeks, rather than years or decades. This seems simply unreasonable to me. In any case, whether the IMF likes it or not, there will always be public discussions and criticisms of policies in democracies, especially of policies that are as problematic as the ones the IMF pushes. To argue that policies would have been successful if only they had not been undermined by public discussions is to claim that the policies would have been successful if only the countries involved had not been democratic. It is similarly indefensible to argue that policies would have worked if they had been implemented better. This argument is only plausible if a record exists of countries in similar situations that have been able to implement these policies successfully. Policies have to be designed so that they can be implemented by the kinds of institutions and individuals existing in the developing world. Otherwise, the IMF is simply saying that its policies might have worked in a world different than the one in which

we live. In fact, an awareness

of the implementation

problems

should be a central part of the program design. By the same token, it is beside the point to state that policies would have worked if not for political problems or social instability. The riots that occurred in Indonesia as a result of the policies imposed by the IMF were predictable, especially given the society’s ethnic fragmentation. The IMF might have preferred working in a different environment, but it had a responsibility to take the situation as it stood. Trying to balance Indonesia’s budget by cutting out food and fuel subsidies for the poor—at a time when the contractionary monetary and fiscal policies and the misguided financial market restructuring strategy were taking its toll on unemployment and real wages—most probably was the spark that set off the explosion. It will take years for the economic damage to be repaired. The IMF has to bear some responsibility for these events. Currently, the multiplicity of objectives, the difficulties of assessing the extent to which objectives have been met, and the problems of ascertain-

Governance and the Public Sector

412 118

JOSEPH E. STIGLITZ

ing who is responsible for a failure all contribute to a the word “accountability” is more a matter of rhetoric this need not be the case. Two of the reforms discussed of this article could improve the IMF’s accountability: its objectives, as well as creating a framework

situation in which than of reality. But in the final section clearly identifying

ex ante for assessing the

ex post performance of the IMF. GOVERNANCE: ACCOUNTABLE TO WHOM?

Before turning to the reform agenda, I want to argue that the IMF's basic problems derive from its governance structure. The IMF was established to pursue a far different set of objectives than the ones it subsequently pursued. This switch took place because the IMF was captured by financial interests, and the capture was the inevitable consequence of the IMF’s original governance structure. : Both the IMF and the World Bank deny that they are not accountable. In one sense, they are right. When the organizations were created, they were made accountable to an executive board, which maintains

closer

oversight than the board of directors of virtually any company. While boards of directors usually meet quarterly, the IMF and the World Bank are overseen by full-time boards. These boards, in turn, are accountable to governments.

Still, one has to recognize how frail these links are. The executive directors are accountable not so much to the governments themselves as to particular agencies within those governments. To be sure, these agencies are accountable to the government, and the government—at least in democracies—is accountable to the people. Yet, because of the length of the chain of accountability and the weaknesses in each link of that chain,

an attenuation of accountability occurs. From this perspective, the view that there is a lack of meaningful accountability has some validity. The IMF responds more to those to whom it is directly accountable than to whom it ultimately ought to be responsible. Its governors are finance ministers and central-bank governors, and they represent a particular segment of society. Their interests are very different from those of labor ministers. The whole culture of the IMF would be markedly different if it was accountable to different agencies within the government. Anybody who has worked, as I have, within a democratic government recognizes

the vast differences in the interests and cultures of the various government agencies. Even though the Department of State, the Treasury, the Council

of Economic

Advisers,

the Trade Representative,

and the

Department of Labor are all part of the U.S. government, they report to different constituencies and end up being accountable to those constituencies. In democratic societies, it is recognized that public decisions are affected by who has a seat at the table. That is why, when the U.S. government makes a decision about economic policy, it does not delegate

Governance and the Public Sector

413

GOVERNANCE AND ACCOUNTABILITY

that decision to the Treasury. Rather, the National

119

Economic

Council

brings together all the relevant parties. Of course, the Treasury takes the lead on issues on which it is supposed to have expertise. But it always remains only one voice, albeit a powerful one. In the case of the IME, however, the U.S. Treasury guards its powers jealously. It seeks to prevent others, including the president, from participating in the decisions, or at least to limit their role. On one occasion, President Clinton

expressed surprise at and apparent disapproval of an action undertaken by the IMF about which he had learned from the New York Times. He seemed unaware that the action was being taken at the behest of his Treasury. Perhaps the Treasury thought the matter of too little importance to “bother” him with it. More likely, they realized that if they had discussed the matter with the president, he might not have agreed on the course being followed, especially if others had been called in to express their views. In responding to the East Asian crisis, the State Department shared my views of the risks to Indonesia’s political and social stability of the policies being pursued, but the Treasury pushed ahead with its policies nonetheless. All of this might be of little importance if the IMF were merely entrusted with technical decisions, such as arrangements for interbank check clearing. But the IMF’s decisions have enormous effects on economies throughout the world. The IMF is not accountable to those who are significantly affected by its policies. The people in East Asia who were thrown out of jobs as a result of the excessively contractionary monetary and fiscal polices, or whose

firms were thrown into bankruptcy,

have no recourse. They have no way of expressing their dissatisfaction with the policies that were pursued other than to throw out of office the governments responsible for implementing them. But the IMF—the organization that puts the policies into place—and its officials, remain relatively immune

and, in that sense, unaccountable.

Only when

broader

global outrage occurs—or when the interests of those to whom the IMF and its officials are directly accountable are adversely affected—will there be consequences. The problem of accountability is even deeper than the above analysis suggests. I mentioned earlier that the IMF is overseen by finance ministers and central-bank governors. One of the IMF’s missions in recent years has been to make central banks more independent—that is, to make them less directly accountable to democratic processes. Whether this is required for ensuring good economic performance is an issue that need not detain us here.° The point is that as a result of these efforts, the IMF is becoming more accountable to people who are increasingly less accountable themselves. Moreover,

macroissues

are far from

merely technical

matters;

they

involve trade-offs requiring political judgments. Even if there are arguments for depoliticalization, this does not mean that decision-making should be unrepresentative. Yet, in most countries, financial interests have

414

Governance and the Public Sector 120

JOSEPH E. STIGLITZ

a much larger say than do other stakeholders. Indeed, in many countries, key stakeholders have no say at all. Thus, the board of the IMF not only lacks an adequate degree of direct political accountability, but also fails the test of representativeness. Not all affected parties have a seat at the table. The IMF board lacks representativeness in another manner as well. Voting shares in the IMF are in proportion to an outdated and imperfectly measured economic weight of a country. For more than a century, in other democratic processes, wealth has not been a qualification for voting. Richer individuals do not have more votes, even when it comes to issues

of economic import. The justification for a system of “one-dollar-onevote,” rather than “one-man-one-vote,” is that the IMF is ostensibly a commercial enterprise with shareholders. Larger shareholders (i.e., the

richer countries) have more votes, just as they would in a private corporation. This analogy is far from persuasive. In the case of a private firm, a shareholder displeased with the actions of the company can sell his shares. Those who approve of the company’s actions may thus wind up holding a larger share. In the case of the IMF, voting shares were determined half a century ago. Since then, economic weights have changed dramatically, but the adjustment of voting rights to reflect these changes has been far from adequate. The IMF is an international public organization, but the lack of legitimacy in its allocation of voting rights undermines its political validity. That leads me to the view that one has to change the governing structure of the international financial organizations in order to close the gap between rhetoric and reality in democratic accountability of these bodies. One has to make them accountable to more than the financial markets

and their representatives. In this respect, I think that the World Bank is substantially better off than the IME. Its executive directors belong to aid agencies as well as finance ministries. The political perspectives of aid agencies tend to focus more on issues of social justice and equity than do those of finance ministries. Regardless of the political color of the government,

aid agencies

tend

to be more

liberal, counterbalancing

the

usually more conservative finance ministries. As a result, the spectrum of perspectives represented in the World Bank is broader than that in the IME. Also, in its day-to-day operations, the World Bank has to deal with environmental ministers, education ministers, and health ministers. Therefore, it has to confront a much broader swath of society than does the IMF, and it has thus become more sensitive to the broader spectrum

of society. However, in negotiations of policies that have an enormous effect on workers or small businesses, the IMF still does not deal with

labor ministries or unions. The IMF's evolution, and its failures, especially in terms of its original objectives, are best understood when looking at its system of account-

ability. The financial markets are more interested in ensuring that they get repaid than in ensuring that there be full employment in Thailand or Indonesia. A debt moratorium is anathema to them. Building up reserves

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

415 121

to facilitate the repayment of foreign debts makes sense, even if it requires a major recession in the country. Capital market liberalization opens up new markets for the financial industry, even if it contributes to global economic instability. There is a confluence here of interests and ideology, with both serving to override economic analysis. Those I talked to in the IMF genuinely believed that capital market liberalization was good for the countries involved. Many even genuinely believed that they were doing countries a favor by pushing for capital market liberalization, that they were helping to overcome the special interests that were resisting liberalization within developing countries. They held these beliefs so strongly that they simply shunted aside contradictory evidence and theory. Their discussions with those in financial markets, whose interests might be well served by capital market liberalization, reinforced these beliefs.

The shift in the IMF's objectives to which I referred earlier is not the only reason for its failure to pursue its original objective. The IMF's inability to openly discuss the changes in its objectives—it could not say, for instance, that one of its objectives was ensuring that lenders got repaid— caused it to deal with a disparity between what it said it was doing and what it was actually trying to do. This led to a kind of cognitive dissonance and intellectual incoherency. For instance, the IMF argued for the virtues of free markets and against government intervention, but in fact its main activity was intervening in exchange-rate markets. In addition, the IMF appeared highly concerned about the government's limitations, yet refused to discuss its own limitations and incentives (for a fuller discussion of this point, see Stiglitz 1998a). The IMF borrowed the culture of secrecy from the financial market as well. As it dealt with some of the most difficult problems, for which there was no obvious

solution, it tried to pretend that there existed a single

solution that was best for all groups within society. Economic advisers are supposed

to analyze trade-offs—that is, the risks associated with alter-

native policies for different groups, and to leave the ultimate choice to the political process. The IMF pretended that there was a single, Paretodominant policy and tried to foist that policy on developing countries. There probably was not a single policy that served the interests of the financial market as a whole, although there may have been a single policy that best served the interests of foreign lenders. Both a culture of secrecy and vested interests served to successfully keep discussions of alternatives and trade-offs out of the public domain. The irony is that the IMF’s culture of secrecy, its lack of in-depth interaction with countries, and the dissonance between its “new” objectives and the objectives for which it was founded all contributed to its failure to achieve its new goals. Thus, it even failed to serve the interests of those to whom it was accountable. REFORMING THE WORLD BANK

During the 1980s, the World Bank and the IMF advocated similar policies, and there were many similarities in the ways in which they inter-

Governance and the Public Sector

416 122

JOSEPH E. STIGLITZ

acted with the developing countries. The organizations worked closely together in the structural adjustment programs, they were both committed to the principles of the Washington consensus, each believed that conditionality was an effective way for improving economic performance, and neither monitored closely the impacts of the programs on poverty or the environment. Still, there were important differences, especially in organizational design and behavior. The Bank has always been less hierarchical than the IMF and more accepting of alternative views, even when certain orthodoxies dominated policy. By the time I arrived in 1997, the new president of the Bank, James Wolfensohn,

was well on his way to

changing its course. Though the new direction was not always clear, the intellectual foundations not always firm, and support within the Bank far from universal, the Bank had begun to seriously address the fundamental criticisms levied at it. Reforms involved changes in philosophy in three areas: development, aid in general and the Bank’s aid in particular, and relationships between the Bank and developing countries.

New Thinking about Development In reassessing its course, the Bank examined how successful development had occurred.’ Most examples of successful development—for example, China and Botswana—were countries without IMF programs. The lessons that emerged from this reassessment included ones that the World Bank had long recognized: the importance of living within one’s budget constraints; the importance of education (including education of females);

and macroeconomic stability. However, some new themes emerged: Success comes not only from promoting primary education, but also from establishing a strong technological basis that includes support for advanced training. It is possible to promote equality and rapid growth at the same time. In fact, more egalitarian policies seem to help growth. Support for trade and openness is important,’ but it is most effective when it encourages exports rather than merely reduces trade barriers on imports. Government plays a pivotal role in successful development by encouraging particular sectors and helping create institutions that promote savings and efficient investment allocation. Successful countries also emphasize competition and the creation of enterprise over privatization and the restructuring of existing enterprises. Other factors were also studied. While no economy can succeed under hyperinflation, there is no evidence that pushing inflation to ever lower levels yields gains commensurate with the costs.’ Privatization without the necessary institutional infrastructure in transition countries led to asset-stripping rather than wealth creation. In other countries, privatized firms showed themselves more capable of exploiting consumers than did state monopolies. By contrast, privatization accompanied by regulation and corporate restructuring leads to higher growth. Social capital and cohesion are important to maintain output, spur growth, and ensure that

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

417 123

reforms can withstand the vicissitudes of the political process. Predation from the Mafia turns out to be even worse than predation from government bureaucrats. Government makes a difference. Good public institutions—from an independent, qualified judiciary to effective regulation of monopolies and the financial sector—are required. As many countries suffer from too weak a government as from a too-intrusive one. The Asian financial crisis had been brought on by a lack of adequate regulation of the financial sector. Mafia capitalism in Russia was caused by a failure to enforce the basics of law and order. Overall, successful countries pursued

a comprehensive development approach that went well beyond technical

issues. Thirty years ago, economists of the left and right agreed that the improvement in the efficiency of resource allocation and the increase in the supply of capital were at the heart of development. They differed only as to whether those changes should be realized through government-led planning or through unfettered markets. In the end neither worked. Today, we recognize that what separates developed countries from less developed ones not only concerns the amount of capital, but also involves knowledge and organization. This includes knowledge of how to produce more efficiently and how to live healthier lives. It also involves the organizational capacity to use the limited resources in the most efficient way possible. Gaps in knowledge and organization, both between more and less developed countries and within developed countries, account for much of the differences in incomes. Closing those gaps has thus become one of the main foci of development strategies. More broadly, development today is considered a transformation of society, which requires more than a solution to technical problems. Projects—such as dams, new schools, or health clinics—alone cannot make a dent in pervasive poverty. Only broad-based policies and institutions can wage a serious war on poverty, the kind of war that might lift up the lives of billions of individuals.

Thinking about Aid and the Role of the World Bank This reassessment of development put the World Bank in a difficult position. Although it is a development organization, it is organized as a bank, has many bank attributes—even to the extent of referring to the countries that provide funds as “shareholders,” and to those who borrow funds as “clients.” Some argue, on the basis of the reassessment, that the Bank should do less, others that it should do more, and most that it should do

something different. The Bank was originally founded to facilitate the flow of capital from more developed countries to the less developed, on the premise that capital markets work far from perfectly and that there is a role for government to address this market failure. But the 1980s and 1990s saw a flood of private capital to developing countries. As a result, many ask

4/18

Governance and the Public Sector 124

JOSEPH E. STIGLITZ

whether the Bank is still needed. Some of these critics divide the world into two groups, middle-income

countries and lower-income

countries,

and argue that middle-income countries do not need the Bank. In this view, all Bank services—both lending and non-lending—should be provided privately, and low-income countries need grants, not loans.'’ Lending them money for schools and health clinics—activities that do not generate direct returns—is what has gotten low-income countries into their present predicament, in which many face overbearing debt burdens. Though there is a grain of truth in these criticisms, they go too far. Private capital markets do not work perfectly. Some would say that they do not work well, even for middle-income emerging markets. This means

that there is a role for a “credit cooperative” that allows them better access to international capital markets at more favorable terms." Although it makes sense to provide more funds to low-income countries in the form of grants rather than loans, a need for loans (for infrastructure projects, for instance) remains.'’* Furthermore, the financial markets are fairweather friends, lending when the countries are doing well and less

needy of funds, but nowhere to be seen when the going gets rough. The World Bank is needed for countercyclical lending, even for middleincome countries. Finally, capital has gone to relatively few countries, and then only to sectors within these countries—such as infrastructure—that can generate returns. The Bank is still needed to fund other important sectors, such as health and education. Reflecting these new insights, Bank lending has shifted enormously towards health and education.” Interactions between the World Bank and Developing Countries At the same time, the World Bank asked an even more potentially dis-

turbing question: did its aid make any difference at all? The answer was only partially reassuring. Aid could lead to higher growth only if the country receiving aid had put into place “sound” policies and institutions (such as stable macroeconomic policies and governments with limited corruption) (see, e.g., World Bank 1998a). This finding led to greater selectivity in the direction of Bank aid flows, directing more to countries that had good policies and institutions. For countries without these qualities, the Bank placed an increasing focus on creating such policies and institutions and finding alternative venues, such as nongovernmental organizations, through which aid funds could be channeled in the interim. Research also convincingly demonstrated that countries did not move to better policies if promised increased aid. When policies were imposed, the governments worked hard to get around them, and opposition parties quickly dismantled such policies when they came into office. This conclusion questioned the efficacy of the policy of aid-conditionality used by the IMF and the World Bank, which was intended to bring about better policies.

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

419 125

The Bank has moved away from the failed policy of loan- and projectconditionality and towards letting each individual country take responsibility for its own development program. Since Bank research has shown that more active participation in a development program by the borrowing country improves its effectiveness, the Bank set out to change the fundamental relationship between itself and the recipient countries. It has stated that it wants to put the country in the driver’s seat, though many in developing countries question whether this will in fact occur. Does the Bank have in mind a “dual control” car or a car in which the true driver is the instructor, with the pupil’s steering wheel, brakes, and accelerator for little more than show? The real test will come when the country proposes doing something different from what the Bank wants. How much leeway will the Bank provide? Will it be able to distinguish between cases where its fiduciary responsibilities—its responsibility to those that provide the funds to make sure that they are reasonably well spent—are at issue and those where reasonable people might well differ about the desirability of alternative policies? Redefining the Mandate The World Bank’s honest reassessment of development has put it into a difficult position. The Bank recognizes the central importance of matters that are not within its core competence. It emphasizes the importance of “governance”—the rules by which public and private institutions are governed—yet it has on its staff few people that know much about the subject beyond the ability to recite the latest mantra. It could help build good water projects, but could it really help build a good judicial system? And was this what the Bank was supposed to do? If the core mission of the Bank is not lending money, then its own governance structure makes little sense. Why should finance ministers, who know little about poverty,

play such a pivotal role? Why should developing countries not be in the driver’s seat on the board of the Bank, or at least have a far larger vote there? The Bank has made enormous strides in its reform. Its rhetoric has changed enormously. It now voices the need to go beyond projects— beyond even policies—to change institutions. It talks not just about limiting the role of the state, but about creating a more effective state. It discusses the impact of corruption on development, when only a few years ago this would have been viewed as crossing the dividing line between economics and politics. It articulates the need to take a comprehensive approach to development that sees development as a transformation of society (see, e.g., Stiglitz 1998b; Wolfsensohn). And it talks about putting the country in the driver’s seat, about participation and ownership, and about the salience of poverty. This change in rhetoric has had an impact on thinking about development both in developing countries and inside the Bank itself.

420

Governance and the Public Sector

126

JOSEPH E. STIGLITZ

If the Bank has not fully changed, then no one should be surprised. It is not easy for those who entered the Bank in the days when the Washington consensus reigned supreme to buy into the new Bank. They see all the new rhetoric as soft fluff, distracting the Bank from its core mission

involving tough and often painful decisions. Many in the finance ministries in the more developed countries, and some in academia, say amen

to these concerns (see, e.g., Bhagwati; Srinivasan). The risk that soft talk could replace hard analysis certainly exists. However, the Bank is far from that place today. It has changed, both in what it does and how it does it.

Earlier I described the changes in the Bank’s loan portfolio. Safeguards have been put into place to make it less likely that there will be large adverse effects on the environment, or on minorities within countries. The dialogue between the Bank and governments is now on a far more equal footing—there is less of the colonial overtone left. The Bank is a far more open and transparent organization than it was a decade ago. But the reforms are fragile and could be reversed easily. Evidence of their precariousness abounds. The Bank refuses to openly discuss economic policies when those policies conflict with the views of its “sister” organization, the IMF. As a result, it is rightly seen as a “partner in crime” in the often-misguided structural adjustment policies—such as those in East Asia and the economies in transition—in which the IMF sets the overall framework. As a result, its reputation in much of the developing world does not stand much higher than that of the IMF. The Bank’s reputation gets tarnished when policies of financial-market liberalization lead to soaring interest rates, as they did in Kenya, regardless of whether the Bank or the IMF was responsible. In recent controversies, as we have seen, the Bank’s management and beard have equivocated on a commit-

ment to openness and transparency. This backfired in the case of a recent report over the Bank’s handling of a resettlement project in Western China. In the report, an independent assessment concluded that the Bank had failed to follow its own procedures. The Bank voted not to release the report, but the report was

leaked

to the press

nonetheless

and

thus

became fully available." Changing a large organization entails redefining both its mission and culture and is not easy to achieve. From this perspective, the World Bank reforms, as incomplete as they may be, are impressive. The contrast between the limited successes of the Bank and the broader failures of the IMF may be instructive.

AN AGENDA FOR REFORM OF THE IMF

The IMF has failed to accomplish the goals set out for it at its creation. In response, five non-mutually-exclusive reform strategies have received extensive attention. Some conclude that the IMF failures are so endemic and the hostility toward it so strong that the IMF should simply be dis-

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

42] 127

mantled. Others blame the IMF’s failures on its politicization and conclude that a more independent IMF is the solution. A third group believes that the severity of the global problems outpaced the IMF’s resources and argues that the IMF’s mandate should be extended and its resource base increased. A fourth group argues that the IMF’s problems arose because it lost its clear sense of mission. In this case, the solution is a refocusing of attention on crisis resolution. Finally, there are those who suggest that none of these solutions are enough. They conclude that the IMF will need improved governance, even if its mission is greatly restricted. | would argue strongly in favor of the fourth and fifth strategies. Abolishing the IMF At one level, the first position has much merit. With a flexible exchangerate system, what purposes do the bail-outs serve? They have enabled countries to maintain their exchange rates at artificially high levels for a bit longer than would otherwise have been the case (as in Brazil and Russia). The gains from this are not obvious. Typically, only the readjustment of the exchange rate has allowed growth in these countries to resume. Prolonging the overvalued exchange rate simply gave wealthy individuals time to get their money out of the country at the more favorable terms. The IMF has actually argued that the intervention is necessary because of the tendency of markets to “overshoot.” But there is little evidence that IMF bureaucrats (or the government officials in the countries requesting assistance) do a better job than the markets in assessing the equilibrium exchange rates. The IMF’s recent track record certainly does not lend much credibility to the view that they can do so.’ IMF funds often serve a second purpose: they facilitate the repayment of foreign banks’ loans by giving countries the wherewithal to do so in a process that frequently entails the nationalization of private liabilities. In effect, the taxpayers in debtor countries are made to repay foreign banks’ loans that were often made to private parties. Furthermore, the mere existence of the IMF as a provider of funds contributes to the problems that it is supposed to address: (1) it helps feed speculative sharks; (2) it undermines lenders’ incentives to engage in sound lending (this is the oftendiscussed moral-hazard problem); and (3) it undermines borrowers’ incentives to obtain cover for their foreign-exchange risk (this is, in fact, a moral-hazard problem of equal or greater severity than the lender moral-hazard problem that has been the subject of so much discussion). Yet, having watched the political dynamics behind the Mexican bailout from the vantage point of the White House, I do not think that this first position is politically tenable. If there was no IMF, someone would reinvent it, though perhaps in a more humane form. In times of crisis, people and their political leaders want to feel that someone is in charge and that action is being taken. Saying that market forces will eventually take care of the problem provides too little comfort. Effective or not, action

Governance and the Public Sector

422 128

JOSEPH E. STIGLITZ

is required. Perhaps because it is so hard to tell whether any particular action is wrong, politicians would rather be blamed for taking the wrong action than for taking no action. In such circumstances, the IMF is ideal. For example, the U.S. administration can claim that action is being taken

and claim credit if things go well. If things go poorly, the U.S. government can shift blame either to the IMF or to the crisis country. The IMF has the further virtue of costing the U.S. taxpayer almost nothing. Once created, such an organization will take action even when the more appropriate action is to do nothing. There will be a bureaucratic imperative for it to expand its mandate. The goal of reform is to minimize the mischief—the damage, especially to the poor—that such an organization can do and to maximize the chances that it actually contributes to achieving its mandate. That is the objective of the reform agenda set forth below: narrow its scope, limit its range of action, and enhance the safe-

guards. Before turning to those reforms, I want to dispense with a reform that would go in the exact opposite direction and that some within the IMF are pushing. The attention that this proposal has received is symptomatic of the lack of understanding of the problems of global financial markets today. Lender of Last Resort

The IMF's deputy managing director, Stan Fischer, has argued for changing the IMF into a lender of last resort (see, e.g., Fischer), a central bank

for central banks, performing a function analogous to that performed by the Federal Reserve Bank (Fed) for banks within the United States. The reasoning is simple—indeed, simplistic. In this view, runs on banks are

caused by a lack of confidence that the banks have sufficient resources to meet their obligations. The knowledge that the central bank will provide a source of funds gives depositors the confidence required to keep funds in the banking system. With this confidence in place, the funds would not

actually have to be drawn upon. There are at least two problems with this reasoning. First, the existence of America’s lender of last resort, the Fed, did not avert the financial crisis of the Great Depression. Since then, America has averted major bank runs,

but not just because of the existence of a lender of last resort. Two other factors—deposit insurance and adequate government regulation—have been crucial. Deposit insurance guarantees an individual investor’s bank account up to a given limit. Because depositors know that they are insured, they do not have to rush to take their money out of a bank when the economy is doing poorly. Deposit insurance creates its own problems, as evidenced by the S&L debacle. Depositors have much less incentive to examine the soundness of the institution in which they deposit their money, and they concentrate instead on the interest paid. Banks that engage in high return but risky lending can offer depositors higher interest rates and attract funds away from more prudent banks. The simple

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

423 129

solution to the problem is to remove deposit insurance and return to a pre-Depression world of bank runs and financial collapses. However, ordinary depositors are simply not in a position to inspect a bank’s books and ascertain its financial position. Given the huge changes that can occur overnight

in a bank’s

financial

position with

derivatives,

individuals

would have to constantly monitor the bank into which they had put their funds. In this case, the more likely scenario is that investors would simply pull their money out of the banks and put it into safe mutual funds that invested in Treasury bills, thereby weakening, if not destroying, the banking system. The correct solution to the problem of deposit insurance is government regulation, imperfect as it may be. Such oversight is a classic example of a public good, since all depositors benefit by knowing that the bank is sound. This recitation of the role of the central bank (lender of last resort) in ensuring domestic financial stability should make obvious the problems at the international level. Surely no one is proposing to accompany it with some form of insurance? What would such insurance even mean? Would it include insurance against default or exchange-rate fluctuations, against private or public default? Would sovereign governments be willing to cede authority to the [MF—or any other international body—for regulation?'© And what would such regulation embrace—presumably the banking system, but what else? What would be the standards? And who has the competence? Certainly not the IMF! The second criticism of the analogy between the IMF and the Fed as the lender of last resort goes deeper. Domestic banks need a lender of last resort because they promise to pay out a fixed amount of the deposit plus interest. Mutual funds do not require a lender of last resort because they agree to pay their shareholders whatever the value of their shares is. (In this case, the government still has the role of preventing fraud by levying criminal penalties on managers of funds that engage in fraudulent practices.) In the international arena, a lender of last resort would be required

if a government guaranteed a particular exchange rate. In the case of a country with a fixed exchange rate, if enough individuals and corporations pull their funds out of the country, there would be no reserves left

to buy back funds for those who wait. This worry would induce a panic, and this is why a lender of last resort might be useful under the fixedexchange-rate system. However, the world abandoned the fixed-exchange-rate system almost thirty years ago. With a flexible exchange-rate system, a country makes no guarantee about the exchange rate. Establishing a lender of last resort is tantamount to providing a guarantee. The IMF might argue that as a lender of last resort, it would not seek to defend any arbitrarily chosen exchange rate, but rather would ensure that exchange rates did not become extremely over- or undervalued. However, no organization has yet determined a price more accurately than the market, and there is no reason to believe that the IMF will be the first. It was a clever gambit on

424

Governance and the Public Sector 130

JOSEPH E. STIGLITZ

the part of those who had failed to address the problems of the global financial crisis to suggest that their powers had been too limited and that the organization needed to be enhanced by making it a lender of last resort. But enhancing the powers of the organization would be a move in exactly the wrong direction. Increasing the IMF's Political Independence and Expanding Its Resource Basis Two other proposed reforms would, I think, also be a move in the wrong

direction. First, giving the IMF more resources without undertaking the broader reforms described below would lead it to intervene more aggressively, and to create bigger blunders with more adverse consequences. The bail-out packages have not worked, and there is no reason to believe that the reason for the failures was lack of resources. Second, while I have argued that many of the IMF’s problems are caused by a lack of accountability, some see too much political interference as the main cause. They wish to make the IMF more independent. There is some merit in their argument. Some of the worst lending programs—those to Russia, for instance—were politically motivated. Many of the staff at the

IMF (and most at the World Bank) did not think that the 1998 loan to Russia made any sense. At most it would stave off a devaluation by a few months, at great cost. At worst, it would allow the oligarchs to put more

of their money into foreign bank accounts. In the end, the latter turned out to be the case. Yet the IMF is a hierarchical organization, and the people at

the top actually believed that the program would work. More importantly, organization has broadly supported the market fundamentalist / Washington consensus policies that have been at the root of many of the failures. In short, I believe that the IMF’s core problems would be exacer-

bated by reforms that gave it more independence. It would worsen all the problems of accountability discussed above.

MY PROPOSED REFORMS

Three basic sets of IMF reforms are required: (1) returning to its original mandate—that is, focusing on crises; (2) changing its mode of operations; and (3) most importantly, changing its governance. Focus on Crisis

On the first item of reform, almost universal agreement exists. The IMF should return to its original mandate and focus its attention on the prevention and resolution of crises. It should discontinue its program of assistance to the post-Soviet and extremely poor countries that face chronic development problems.'” These problems are more appropriately the province of the World Bank. Three independent reviews of the IMF

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

425 131

have agreed with this proposition: those of the Council for Foreign Relations, the Overseas Development Council, and the bipartisan Congressional Commission chaired by Alan Meltzer. Their reasons go beyond just the IMF’s demonstrated failures in these areas. Just as firms do better when they focus, hopefully the IMF’s performance will also improve if it focuses on its central mission. Most importantly, from the perspective of this article, a clearer focus would allow a clearer system of accountability.'* It should be emphasized that focusing on crises does not mean ignoring poverty. There are different ways of responding to crises, with different effects on poverty, and some of the reforms are intended to

enhance the attention that the IMF pays to its impact on poverty.

Changing Modes of Operation A focus on crisis prevention and resolution, however, will hardly resolve

the IMF’s problems. Few would claim that the reason the IMF failed in addressing the East Asian crisis was that its top management was too busy dealing with the problems of Africa! One would like to be able to wave a magic wand over the IMF to ensure that it uses “better” or “more up-to-date” economics. One will have to be content with more modest interventions that circumscribe how it operates. The size of bail-out packages, the circumstances in which those packages can be provided, and the kinds of policies that can and should be imposed as part of those packages should be restricted.'’ If the IMF cannot bail out creditors, and if it allows exchange rates to be determined by market forces, then there is little need for large bail-out packages. Instead, there will be a greater emphasis on using standstills and enhanced bankruptcy procedures, especially when (as was the case in East Asia) private-sector indebtedness is involved. Conditionality has, by and large, been ineffective, and the

IMF seems to find it difficult to restrict itself to conditionality that is directly related to the crisis. Certainly the conditionalities it has imposed have not been related to enhancing the likelihood of repayment. That should be the only form of conditionality allowed. Other procedural reforms would help reduce the adverse effects of IMF programs on the poor and enhance democratic processes. Today, before the IMF adopts a program, it attempts to make a macroeconomic forecast of the program’s impact on variables such as growth and inflation. It should also provide a forecast of the program’s impact on poverty, unemployment, and wages. Such impact analyses serve two functions. First, by focusing attention, they affect choices. If the projected poverty impacts are large, then there will be a demand

for alternative policies. Second,

they provide a basis of accountability. If the IMF consistently underestimates its impacts on poverty, then it should be asked why. Is something wrong with its models? Is it trying to hide the adverse effects of it programs? A final procedural reform would require that the IMF present governments with alternative courses of action (with estimates of the con-

426

Governance and the Public Sector 132

JOSEPH E. STIGLITZ

sequences of each strategy on various groups). There is almost never a single program that is best for all groups. Presenting alternatives will help delineate the economic and political roles. The economic advisor should set forth the analysis of alternatives, while the choices should be made within the political process. Reformed Governance Structure

In the end, the IMF's bright bureaucrats will find a way of getting around whatever restrictions are imposed. True, permanent reform of the organization requires reforming its governance structure. Ultimately, the behavior of an organization is affected by the interests of those to whom the organization is accountable. In the case of the IME, its direct accountability to central banks and finance ministries can explain much of its poor behavior. Today, the majority of IMF votes are in the hands of the G7, a small minority of the world’s population. This must change. In the United Nations

(UN),

five

countries

have

veto

power;

this

is viewed

as

inequitable, a historical accident of the power of five states at the end of World War II, a time at which India and most Third World countries were

but colonies. In the IMF, only one country—the United States—has effective veto. It is hard to think of any set of principles that could undergird the current distribution of voting powers. Undoubtedly, alternative voting schemes have their own problems. The one-country-one-vote system used in the UN General Assembly is hardly persuasive when countries differ so markedly in population. A system of one-man-one-vote would give enormous power to a two-country coalition of China and India. A more complicated voting system is clearly required. If the rights of minorities are to be protected, this voting system will require broad consensus for collective action. This will encourage the broader and more open discussions so lacking in the past. Governance reform, however, must go beyond the issue of voting. Governments are represented at the IMF by finance ministers and central bankers, who tend to be directly accountable to only certain groups within a country. They are chosen because they are presumed to be the most knowledgeable

in their

countries

about

financial

markets,

the

core

responsibility of the IMF. All democracies must struggle with the issue of how best to combine expertise and political accountability. In the IMF’s case, finance ministers and central bankers may have a degree of expertise, but they do not adequately represent the broad array of interests affected by IMF policies. The issue of representativeness is important, as we have seen, because different policies impose different risks on different groups. For instance, some may entail a greater risk of recession, others of a greater risk of inflation, and still others a greater risk that cred-

itors may not be repaid. We have traced many of the IMF’s failings back to the fact that the organization sees the world through the lens of the financial community, putting its interests and ideology above those of others.

Governance and the Public Sector

427

GOVERNANCE AND ACCOUNTABILITY

133

At this point, Iam often asked for concrete suggestions on how I would change the governance structure. I should be frank: there is no easy solution. Given that so much of the IMF's activity now deals with the developing world, expertise on that part of the world should be drawn upon. Developed countries should be represented by people drawn from both their finance ministry and their aid agencies. Developing countries should send representatives of the agency responsible for the overall functioning of the economy, whenever such agencies exist. Either alternatively or in addition, representatives from labor ministries and commerce or indus-

try ministries should also sit in on the board. Finally, to ensure that broader national interests are taken into account, direct representation from the prime ministers’ or presidents’ offices should be sought as well. Democratizing the IMF not only entails changing who is at the table, but also involves enhancing oversight of the IMF. That requires setting up an outside agency or agencies to assess the performance of the IME, evaluate the accuracy of the assessments of the impacts of its programs, and help explain the failures. Surely, an organization that has made such a point of surveillance should allow surveillance of itself. One of the main functions of the IMF is to give countries advice. The notion of a monopoly of advice in macroeconomic policy, or in preventing or responding to crises, should be no more acceptable than that of a monopoly in any other part of the economy. Opening up the market for advice—allowing and even encouraging the IMF, the World Bank, and the other multilateral financial organizations to provide alternative views—would not only strengthen and help democratize the organizations themselves, but also promote democratic processes within the countries. Increased Openness I am not sanguine, however, about the likelihood of governance reform,

particularly the deeper reforms of voting and representation. Those who control the organization are not likely to surrender control easily. It is unlikely that the United States will give up its effective veto. When direct democratic

accountability

is lacking,

alternative

control

mechanisms

must be sought. Of these, openness and transparency are the most important. It is not just that they are fundamental to democratic processes. Public scrutiny will put a check on the most abusive practices. It can increase the likelihood that the policies that are in the general interest— not just in the special interests of, say, the financial community—are pursued. To me, this is the key practical reform. The IMF, no less than democratic governments, should be subjected to Freedom of Information acts. Just as there are safeguards within such acts for certain types of exceptions, so, too, will it be necessary to carve out some exceptions. But

they should be narrowly circumscribed. For instance, one does not want public disclosure of information that a bank has a high likelihood of insolvency,

lest there be a run

on the bank.

Today, the IMF

often states

that it is willing to be more open, but that the member governments

Governance and the Public Sector

428 134

JOSEPH E. STIGLITZ

do not want to disclose information. The IMF never seemed hesitant before in imposing conditionality. In the East Asian crisis, it imposed a host of conditions that went well beyond those enhancing the likelihood of repayment or the speed of recovery. It went into long-term structural matters and even into political issues (see, for example, Feldstein 1998).

It seems peculiar that the IMF is unwilling to impose conditions that ensure more democratic accountability—that is, until one understands the underlying governance structure, which not only is based on a culture of lack of transparency but almost requires secrecy for it to continue in the way that it has in the past. CONCLUSION So far, the debate about the reform of the international economic archi-

tecture in the aftermath of the global financial crisis has gone nowhere, other than a growing consensus that reforms need to be made and that at the center of those reforms must be changes in the IMF. But there has been something peculiar about those discussions. I have argued that the underlying problem lies in the IMF’s governance structure, which gives finance ministers and central bankers all the seats at the table, and which

allows for much of their business to be conducted in a nontransparent way. How strange, then, is the manner in which the reform discussion has

been conducted: behind closed doors and at tables at which all of the seats have been taken by finance ministers and central bankers. Behind those closed doors, the same U.S. government officials who condemned the lack of transparency in East Asia oppose more transparency for American hedge funds. To me, the first reform should be reform of the reform debate

itself. Discussions about the global economic architecture must embrace all affected parties. It is unacceptable that only central-bank governors and finance ministers have seats at the table when the decisions that they make have such vital effects on others. Is it any wonder that those who were, in some sense, ultimately responsible for the failed policies, and for an international regime which concentrates power in their hands, are less than enthusiastic about major reforms that would bring other voices to the table? This may be the most profound lesson to emerge from the global financial crisis: we cannot entrust reform of the global financial architecture to those who created it in the first place. Reforms must be based on more democratic principles. The voices of all those affected must be heard and must be heard clearly. This is the challenge to us and to our political leaders. ACKNOWLEDGMENTS

This is a revised version of a paper presented at a workshop on Deliberately Democratizing Multilateral Organizations organized by Stanford University’s European Forum on 29 September 2000. Financial support

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

429 135

from the Ford and Rockefeller Foundations is gratefully acknowledged. I am indebted to Marco Sorge and Nadia Roumani for assistance and valuable comments. NOTES Li:

In this essay, I do not lay out the indictment against the IMF: its failure to manage the East Asia crisis (see, e.g., Furman and Stiglitz), to manage the transition from communism to the market economy (Stiglitz 1999, 2000), and to promote development (see the IMF’s review of its ESAF facility). Actually, Keynes himself expressed misgivings and worries not long after it was established about the organization he had helped to create. My purpose here is not to assess the reasonableness of this objective (i.e., whether contagion was a real threat) or the consistency of the objective with the theories of well-functioning markets that seem to be at the center of much of the IMF’s economic models, or to evaluate whether it succeeded

in that objective (crises spread from country to country, arguably partly because of the policies that they pursued.) Rather, I simply wish to illustrate the difficulties of designing systems of accountability. This example illustrates the difficulty of ascertaining what it was that the organization was supposed to do. To be sure, they argued that the abrogation of contracts would be bad for the economies involved. But there is little reason to believe that it would be worse than contractionary monetary and fiscal policies. Indeed, the standard argument they put forward was that if the countries defaulted, then they would not be able to get capital. Yet the facts, especially in East Asia, suggested that this was hardly a cogent argument: (1) the countries were unlikely to get additional funds in any case until their economies recovered, whether they defaulted or not; (2) given the high savings rate, the countries hardly needed an influx of foreign capital; (3) capital markets are forward looking—once the debt overhang was reduced by restructuring through bankruptcy and once the economy was growing again, capital would flow in (while capital markets might like to punish those who behave badly, there are large numbers of participants in the market, and even if those who have been hurt refuse to lend, new suppliers of capital will enter if they see a profitable opportunity); and (4) history suggests that capital flows do return rather quickly once the economic circumstances warrant it. Thus, it never responded to the kinds of issues raised in Furman and Stiglitz. The IMF believes that having macroeconomic policy determined by independent central banks is somehow better. While there is some evidence that an independent central bank with an exclusive focus on inflation does lead to lower inflation, little evidence

exists that it leads to higher economic

growth or even greater stability in terms of unemployment and real variables. Interestingly, though one of the arguments for an independent central bank is to bring in expertise, the boards of many, if not most, central banks are not dominated by those who have the greatest expertise in macroeconomics. The reassessment actually began earlier, under pressure from the Japanese, and was reflected in the Bank’s publication in 1993 of the landmark study The East Asian Miracle. The changes in thinking were reflected in the annual reports on development, called the World Development Report. For instance, the 1997 report re-examined the role of the state, the 1998 report focused on knowledge (including the importance of technology) and infor-

430

Governance and the Public Sector

JOSEPH E. STIGLITZ

136

mation (including the imperfections of markets associated with imperfect information), the 1999 and 2001 reports emphasized the role of organizations (not just policies), and the 2000 report took a much broader perspective on poverty (World Bank 1998c, 1999¢, 2000, 2001).

Not surprisingly, the Bank has still not taken seriously the theoretical and empirical critiques of trade liberalization, such as those provided by Rodrik

solo and Rodriguez and Rodrik together. Whatever the intellectual merits of that view, it runs counter to the “official” position of the United States

and other G7 governments that trade is good. Given the emphasis on trade expansion in both the Clinton and Bush administrations, the Bank’s official position is no surprise. World Bank studies, including those coauthored by my predecessor as Chief Economist

10.

at the World

Bank, Michael

Bruno

(formerly head of Israel’s

central bank), helped provide the empirical validation of this perspective. See Bruno and Easterly. The Meltzer Commission has argued that the World Bank should get out of the business of lending to middle-income countries. (This body was an eleven-person International Financial Institutions “Advisory Commission created by the U.S. Congress that submitted its final report to the Congress and the Treasury Department on 8 March 2000, evaluating the past, present, and future of the IMF and the World Bank.) Ironically, many middle-income countries contend that the World Bank should get out of the business of providing funds to low-income countries. They see the World Bank as a credit cooperative for middle-income countries, not as an aid agency, and believe that many of the problems of the World Bank can be traced to the confusion over these two roles. Moreover, they believe that the World Bank has been used by the more developed countries to force the middle-income countries to subsidize low-income countries. They argue that the margins that they have to pay on their loans include a substantial subsidy for lowincome countries. The issue is complicated by a nontransparent accounting system that does not allow a clear tracing of the implicit subsidies arising from return on the Bank’s “endowment.” One more critique of the views of the Meltzer Commission should be mentioned: net, middle-income

ithe

coun-

tries are not borrowing—new loans just provide the funds to repay old loans as they come due. Contrary to the popular impression, the World Bank receives no significant subsidy from the United States or other developed-country taxpayers. The Bank borrows money on international capital markets and lends it to middle-income countries at a slight mark-up. While the World Bank does borrow at more favorable terms than do developed countries, little evidence

12.

exists that the advantageous interest rates that it can then pass on to developing countries result from the effective guarantees from the U.S. and other developed-country governments. There is even some question about how advantageous these interest rates really are for developing countries (though there is less doubt that the Bank gives them access to funds when they are credit-rationed, particularly in crises such as the global financial crisis of 1998). Interest rates are low because the loans have “preferred creditor status”—that is, the Bank gets repaid even if others do not. Extending more preferred-creditor-status loans typically results in other loans paying higher interest rates—implying that the total savings in interest payments may be less than meets the eye. The Meltzer Commission would have us believe that capital markets function so well that there is no need for such lending. If the infrastructure project yields sufficient returns to repay the loan, it should be undertaken by the private sector. However, the commission underestimates the role of

Governance and the Public Sector GOVERNANCE AND ACCOUNTABILITY

43] 137

government in financial markets in more advanced industrialized countries. It was a government-sponsored agency, Fannie Mae, that effectively created the national mortgage market in the United States. And in recent years, as much as a quarter of all lending in industrial countries has been through government-sponsored enterprises or with government guarantees.

133

Since its first education loan in 1963—to Tunisia, for vocational training— the World Bank has been expanding its financing of education projects for decades. The proportion of new education commitments in the total Bank new commitments (annual average) has increased from 2.9% between 1963 and 1969 to 8.2% between 1990 and 1998, a 1.8-billion-dollar (constant 1996)

14. BS:

increase in terms of annual average (see World Bank 1999a). The Bank’s expenditure on health-related projects has also increased significantly. For example, spending on fighting communicable diseases (AIDS and tuberculosis) has averaged $270 million annually in recent years, while for fiscal year 2001, the Bank spent $1.3 billion (World Bank Annual Report 2001). See also the discussion in the Financial Times of the handling of the U.S. Treasury Secretary’s highly unusual intervention in the World Bank’s 2000 World Development Report on Poverty. There is a curious intellectual incoherence in the IMF's position on this issue, because it constitutes an exception to its usual faith in market eco-

16.

17.

nomics. Evidently exchange-rate markets do not function well, and government intervention is desirable. Yet the IMF has never articulated well why these markets are more subject to market failures than any others, why government intervention in these markets is mcre warranted than in any others, or why government intervention should take the form that it does, rather than, for instance, impeding the short-term capital flows which are a major factor in any overshooting. Indeed, regulation itself requires delicate balancing: good regulation needs to be politically sensitive. Too little forbearance in a recession can exacerbate the downturn; too much can lead to weak banks and a crisis down the line. Focusing on crises does not only entail cutting the IMF’s programs for developing and transition economies. The IMF has also been entrusted with statistical-data collection and surveillance of economic performance. Neither of these should be its responsibility. Statistical-data collection is a critical task, and there is growing recognition throughout the world that sta-

tistical agencies should be separated from operating agencies. Having the two combined offers some savings, as the operating agency may be better informed about what data is needed and better able to collect it. But the dangers outweigh these slight advantages. Inevitably, the data collected is tainted by operating imperatives and institutional interests. For example, the IMF regularly distorts some of its published statistics, simply because its published growth forecasts must conform to those it uses in its programs, and those numbers do not represent the economists’ best estimates, but rather numbers that will make the program “add up’—that is, produce a budget deficit that is “acceptable” to the IMF. Remarkably, many people who use IMF projections do not realize that in many cases, the numbers are simply “negotiated” as part of the IMF program. They are not the result of a sophisticated—or even an unsophisticated—statistical analysis. In contrast, an independent statistical agency has as its sole interest obtaining the most accurate statistics possible in the timeliest way possible. The IMF's second additional task is reviewing each country’s economic performance. This surveillance has several functions: (1) social pressure to ensure that countries do not “export” their recessions; (2) provision of infor-

mation to private and public actors operating in the country; and (3) offer-

432

Governance and the Public Sector 138

JOSEPH E. STIGLITZ

ing advice to the country about what it might do to improve economic performance. In many cases, private parties already perform many, if not most, of these functions far better than the IMF does. To be sure, there is some

value in surveillance in those economies in which no private gathering of information and assessing of performance exists. But assessing economic performance entails looking at more than just macroeconomic statistics, which are the province of the IMF. And peer reviews—such as those by similar or neighboring countries—are likely to have more credibility than reviews by international bureaucrats based in Washington, DC, wedded to

18.

19.

a particular ideology that is increasingly being discredited and with limited knowledge of the particular characteristics of the country under review. It should be clear that I am not criticizing the IMF on the grounds that its activities in this area duplicate those of the Bank. I believe that there is a role for competition in the public arena, just as there is in the private realm. If meaningful competition were possible—in providing alternative macroeconomic advice, for example—then one might be able to make an argument for having more than one organization engaged in these activities. But the IMF's position that all the international organizations should speak with “one voice” is an attempt to suppress all competition in the arena of ideas. In its patronizing way, it claims that poor developed countries will be unable to sort out the different views, and only the international experts can be entrusted with that task! This is one of the Meltzer Commission’s main recommendations, though I

would differ from the commission in the particular restrictions that it recommends. The commission seems to believe that certain preconditions (relating mainly to the banking sector) exist that can easily be ascertained and that will reduce the likelihood of a crisis. Iam less sanguine. Even countries with well-regulated banks have had crises.

REFERENCES Beattie, Alan. 2000. “Strains” in Bank’s Inclusive Model. Financial Times 16 June.

Bhagwati, Jagdish. 2000. Letter: Growth Is Not a Passive “Trickle-Down” Strategy. Financial Times 27 September. Bruno, Michael, and William Easterly. 1998. Inflation Crises and Long-Run Growth. Journal of Monetary Economics 41:3-26. Feldstein, Martin. 1998. Refocusing the IMF. Foreign Affairs 77:20-33. Fischer, Stanley. 1999. On the Need for an International Lender of Last Resort. Journal of Economic Perspectives 13:85-104. Furman, Jason, and Joseph E. Stiglitz. 1998. Economic Crises: Evidence and Insights from East Asia. Brookings Papers on Economic Activity 2:1-114. International Monetary Fund. 1997. The ESAF at 10 Years: Economic Adjustment and Reform in Low-Income Countries. Occasional paper 156. Washington, DC: International Monetary Fund. Lederman,

Daniel, Ana M. Menendez,

Guillermo

Perry, and Joseph E. Stiglitz.

2000. Mexico: Five Years after the Crisis. In Boris Plezkovic and Nickolas Stern, eds., Annual World Bank Conference on Development Economics 2000. Washington, DC: World Bank. Meltzer Commission (International Financial Institution Advisory Commission). 2000. International Financial Institutions Reform. Washington, DC: United States Congress. Rodriguez, Francisco, and Dani Rodrik. 2001. Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence. In B. Bernanke and K.

Governance and the Public Sector

433

GOVERNANCE AND ACCOUNTABILITY

139

Rogoff, eds., NBER Macroeonomics Annual 2000. Cambridge, MA: MIT Press,

2000, forthcoming. Rodrik, Dani. 1997. Has Globalization Gone Too Far? Washington, DC: Institute for

International Economics. Srinivasan, T. N. 2000. Letter: Variety of Routes to Development Already Known. Financial Times 28 September. Stiglitz, Joseph E. 1997. Dumping on Free Trade: The U.S. Import Trade Laws. Southern Economic Journal 64:402-424. .1998a. Knowledge for Development, Economic Science, Economic Policy,

and Economic Advice. In Proceedings of the Annual World Bank Conference on Development Economics 1998. Washington, DC: World Bank. .1998b. “Towards a New Paradigm for Development: Strategies, Policies and Processes.” 9° Raul Prebisch Lecture delivered at the Palais des Nations, Geneva, 19 October 1998, United Nations Conference on Trade and Development. Reprinted 2001 as chapter 2 in Ha-Joon Chang, ed., The Rebel Within.

London: Wimbledon Publishing Company. .1999. Quis Custodiet Ipsos Custodes? [Who is to Guard the Guards Themselves?] Corporate Governance Failures in the Transition. Challenge 42:26-67. .2000. Whither Reform? Ten Years of the Transition. In Boris Pleskovic and Joseph E. Stiglitz, eds., Annual World Bank Conference on Development Economics 1999. Washington, DC: World Bank. Wolfensohn, James D. 1998. The Other Crisis. Address to the Board of Governors. Washington, DC: World Bank.

World Bank. 1993. The East Asian Miracle: Economic Growth and Public Policy. New York: Oxford University Press. .1997. World Development Report 1997: The State in a Changing World. New York: Oxford University Press. .1998a.

Assessing

Aid:

What

Works,

What

Doesn't, and

Why. New

York:

Oxford University Press. .1998b. Global Economic Prospects and the Developing Countries 1998/99: Beyond Financial Crisis. Washington, DC: World Bank. .1998c. World Development Report: Knowledge for Development. New York: Oxford University Press. .1999a. Education Sector Strategy. Washington, DC: World Bank. .1999b. World Development Report 1998/99: Knowledge for Development. New York: Oxford University Press. .1999c. World Development Report: Entering the 21" Century. New York: Oxford University Press. ——.2000. World Development Report: Attacking Poverty. New York: Oxford University Press. .2001. World Development Report: Building Institutions for Markets. New York: Oxford University Press.

[21] TWENTY-FIRST CENTURY UNITED STATES GOVERNANCE: STATECRAFT AS REFORM CRAFT AND THE PECULIAR GOVERNING PARADOX IT PERPETUATES RICHARD J. STILLMAN

II

Nothing is more striking to a European Traveler in the United States than the absence of what we term the government, or the Administration. Alexis de Tocqueville, Democracy in America

The United States is commonly referred to as the last global superpower, exercising unrivalled political, economic, military and social influence. Yet, paradoxically, unlike any other nation, Americans were — and remain — radically antistatist. Until roughly the twentieth century the United States did not want, need, nor create a

powerful administrative state to govern itself, let alone others abroad. This essay explores that peculiar paradox, namely how Americans govern as the last global superpower today, yet retain an inherently fierce hostility to government. The thesis that is developed argues that it is a deep-rooted reformist faith which ultimately shapes US statecraft as a unique style of reformcraft, with both benign and not-sobenign consequences.

This essay is premised upon an old-fashioned, storybook version of American History, namely that the United States was founded by men and women who escaped the Old World’s oppression in order to find liberty in the New World. That belief, often single-mindedly and dogmatically expressed, to exercise their version of personal freedom from state authority in their special way was — and remains — the central theme of the American Experience. Or, in other words, at the heart of the American Political Tradition, antistatism endures

as the core belief that is evidenced

over and

over again during the past four centuries of American Life. So while everywhere else in the West, indeed throughout most of the world, some conception of state frames the fundamental way government works; in the USA, the reverse is the case, that is, radical antistatism is the rock-ribbed faith that unites the American People.

Take for example the words of John Winthrop explaining why the Pilgrims landed on Plymouth Rock in the bleak November of 1620 (Boorstin 1958):

Richard J. Stillman II is Professor of Public Administration at the Graduate School of Public Affairs, University of Colorado, Public Administration Vol. 81 No. 1, 2003 (19-40)

© Blackwell Publishing Ltd. 2003, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

435

Governance and the Public Sector

20

RICHARD. J. STILLMAN II

Wee shall be as a Citty upon a Hill, the eies of all people are upon us; soe that if wee shall deale falsely with our God in his workee we have undertaken and soe cause him to withdrawe his present help from us, wee shall be made a story and a by-word throughout the world.

The Pilgrims, the first of millions of migrants to the American shores, sought to flee a morally corrupt, oppressive Europe in order to be ‘as a Citty upon a Hill’ so as to set a virtuous example for the rest of the world. They were the most radical of the radical sects of the Reformation, who called themselves ‘separatists’ or Protestants who sought to separate themselves from the established ecclesiastical hierarchy, ‘protesting’ against church officialdom, or clerical dogma that smacked of wicked, state-spon-

sored religion to worship their God their way. Such extreme antistatism was reinforced by waves of later immigrants such as the Quakers who like the Puritans came to Pennsylvania in the seventeenth century to find religious freedom. Or, for a very different rea-

son, English debtors colonized

Georgia

in the nineteenth

century, or

impoverished Germans, Irish, Scandinavians and Italians, in the nineteenth century, sought cheap land to homestead; Jews fled Nazism; Hungarian

Freedom Fighters, Cubans and Vietnamese Boat-People escaped Communism in the twentieth century. There were no stout advocates of Machiavelli’s ‘Prince’, Bodin’s ‘Divine Right of Kings’, Hobbes’s ‘Leviathan’ or Lenin’s ‘Dictatorship of the Proletariat’ among these motley myriads of migrants. If there were any British Tories, the Revolution sent them packing back to England or off to Canada for good in 1776 when the British evacuated Boston. The first century of ‘the first new nation’ further buttressed this fundamental belief that the state was not only evil but unnecessary, and hence no one ever calls the USA ‘the first new state’. Americans’ well-being could be sustained if only people would be left alone to fend for themselves and work things out privately without a state ‘mucking up their lives and livelihoods’. Geographic isolation, a predominantly self-supporting agrarian economy, the absence of significant external threats, a frontier mentality, the lack of an industrial revolution — without a concomitant need for a sizable civil service or professional military nursed the notion (some would say ‘illusion’) that escaping statehood was not merely sensible but The American Way. As Theda Skocpol so aptly put it, just as Prussia in the eighteenth century was less a state with an army than an army with a state, the early United States was ‘not so much a country with a post office, as a post office that gave popular reality to a fledgling nation’ (Skocpol 1996). By the mid-nineteenth century, three-quarters of all federal employees were postal workers and until the Civil War in 1860, 85 per cent of the growth

in the federal government was in that one department. Indeed, to this day politicians routinely rail against government in order to get elected — as if they themselves were not part of government. Ronald Reagan, one of the most popular presidents in recent decades, tapped into

© Blackwell Publishing Ltd. 2003

436

Governance and the Public Sector

TWENTY-FIRST

CENTURY

UNITED STATES GOVERNANCE

21

this rock-hard antistatism in his first inaugural address when he told the nation in January 1981, ‘Government is the problem’, implying that Americans would be better off if they got rid of ‘such stuff’. Reagan, by the way, was re-elected in 1984 in a landslide and if not term-limited, might well

have remained president as long as he wished. Waco, Ruby Ridge, the Oklahoma Federal Building Bombing as well as the 2000 Presidential Election of George W. Bush, are only more recent and more extreme reminders that antistatism is alive and well in mainstreet America. Paradoxically — and this is the central paradox of twenty-first century American Governance — a massive, powerful, American State exists and in

fact governs not only the USA, but the rest of the world as the last global superpower. Thus, the obvious question: how does America govern itself and operate so successfully at home and abroad (at least in the eyes of many of its citizens, if not foreigners who flee to its shores)? What narratives (or

ways of thinking about and practicing self-government) evolved to create its current governmental system in the overheated cauldron of fierce antistatism? In brief, how is America ruled, given its ingrained hatred of rulers

of all stripes? In essence, two governing narratives evolved over the first century and a half of American History that serve to establish a unique framework for twenty-first century American governance: the first, the Grand Old Narrative or the story of America’s Written Constitution of 1787, and the second,

the Hidden Unwritten Narrative or the story of how America’s administrative state grew up, quietly and largely unchronicled, between roughly 1883— 1940. These twin narratives complemented

one another, at least to some

extent. The US Constitution created ‘the first new nation’ and the incremental, evolutionary development of the administrative state, beginning approximately a century later, adapted the nation to the new socio-politicaleconomic realities of the modern world. Public administration thinking evolved organically along with the rise of the administrative state in order to understand it and run it, but now, just after the dawn of the twenty-first

century, the reverse seems to be happening, namely, administrative thought in the guise of public service reform ideas are being used to adapt the modern American State to the new socio-political-economic realities for the new millennium (see table 1, below). It is the peculiar twist of fate that the ideas growing out of state development should be used to govern it and also give full voice to US ingrained antistatist sentiment now. But here we are getting ahead of our story (or stories), so let’s first turn to the Grand Narrative of 1787. THE GRAND NARRATIVE OF 1787: THE STORY OF CREATING THE WRITTEN CONSTITUTION

Almost every American High School student learns the story of how the US Constitution was written in basic civics class which briefly runs something like this:

© Blackwell Publishing Ltd. 2003

437

Governance and the Public Sector

22

RICHARD. J. STILLMAN II

The U.S. Constitution serves today as the fundamental law of the land and therefore is America’s most important public document. It was a product of serious deliberations by the Founding Fathers in Philadelphia during the summer of 1787.

After the Revolution (1776-83), the Articles of Confederation (actually America’s First Constitution) granted independence to each state to conduct its own affairs, namely, ‘Each state retains its sovereignty, freedom, inde-

pendence and every power....’ Yet, as the 1780’s progressed, it became increasingly difficult to get the 13 states to work together under the Articles to resolve their common problems to regulating trade, conducting foreign relations, defending against Indian attacks, and the like. So George Washington, James Madison and 53 other leaders representing the 13 states convened the Philadelphia Convention, on May 25, 1787, to find a more work-

able plan of government. At first they considered amending the Articles but soon settled on the idea of writing a new Constitution that would strengthen national authority yet protect state and individual rights. After intense debates and numerous, delicate compromises between large states such as Virginia and small states such as Connecticut, all carried out in secret sessions over three months, a

new Constitution was drafted. It had a preamble, specifying its purposes, seven articles that framed the document according to principles of federalism, separation of powers, with clearly enumerated national authority, yet

careful protection for state and individual rights based upon republican ideas, plus well-described ratification and amendment procedures.

The new Constitution was signed by 39 Framers on 25 September but next faced the difficult ratification process in which nine of 13 state legislatures had to approve it. In several key states the vote was close with fierce debates between Federalists (its supporters) and Anti-Federalists (its opponents). Thanks to the Federalist Papers, written originally as newspaper articles by James Madison, Alexander Hamilton and John Jay, explaining and arguing for the US Constitution in major swing states, ratification occurred on 21 June 1788, when New Hampshire’s legislature approved it. TABLE

1

Evolution of American Governance

One governing belief

Two governing narratives

Anti-statism —

US Written Constitution

1620 onwards —

USA as last superpower

—_

1787 —

T 1780's governing dilemmas

© Blackwell Publishing Ltd. 2003

Administrative state state-making

Four varieties of public service reform traditions

1883-1940 —

21st century

T late 19th century governing dilemmas

T 21st century governing dilemmas

438

Governance and the Public Sector

TWENTY-FIRST CENTURY

UNITED STATES GOVERNANCE

23

The ‘real’ grand narrative: Locke’s politics, Calvin’s religion, the enlightenment’s idealism The story behind the story of the Great Charter of 1787 is obviously complex and deserves many volumes (and certainly many are available), but for our purposes here of explaining twenty-first century American governance, the Fundamental Law of the Land framed ‘the first new nation’ with-

out a state, or at least a state in the European sense of state. To paraphrase Louis Hartz, Americans were ‘locked into John Locke’ whose political treatises stressed personal liberty, that is, ‘life, liberty, and property’ (with the

word ‘property’ neatly changed by Jefferson to ‘the pursuit of happiness’ in the Declaration of Independence), not glorifying the state as the ends of good government (Hartz 1955). The accent was on the individual, not the collective whole. The only government tolerated by Locke was ‘a night watchman variety’ for regulating trade, promoting the common defence, coining money and little else. The Founders of 1787 wrote Lockeanism into the US Constitution with a vengeance, ‘in order to form a more perfect union...’, they drafted the new Law of the Land as a tangled bundle of procedures in order to constrain public power, not enhance it, via checks and balances, federalism, enumerated powers, periodic elections, and so on — all to protect a wide

variety of freedom from real and possible state encroachment into religion, speech, the right to keep and bear arms, etc. Recall: there was no mention in the US Constitution of ‘civil service’, ‘budgets’, ‘regulation’, ‘the executive

branch’ or ‘public administration’. Why? These were the hallmarks of European-positive states that the Framers sought to avoid at all costs. Practically, of course, the Constitution never would have been ratified if it had

smelled the slightest whiff of statism, for the Anti-Federalists were even more rabid on that subject (and théy nearly won). Indeed, much of the debate between the Federalists vs the Anti-Federalists argued over who was more true to Lockean antistatist ideals, and the authors of the Federalist Papers worked very shrewdly to stress that precise point in key contested states. To set American antistatism even more firmly in bedrock, Lockean Poli-

tics were erected upon a tough-minded Calvinism. Man’s nature was believed sinful due to Adam’s Fall, thus no one could be trusted with public power for very long. In the words of James Madison in Federalist Paper No. 51, ‘Ambition must be made to counteract ambition’ (Hamilton, Madison

and Jay 1961). As Gary Wills recently wrote, the Protestant Faith was almost unanimously accepted as a given by the American Founding Fathers who were convinced ‘that a better world than any that had every been known could be built where authority was distrusted and held in constant scrutiny’ (Wills 1999). Yet, the US Constitutionalism was salted with just enough New Testament Faith in Man’s possibility for redemption coupled with the Enlightenment’s Idealism in the virtues of progress through rationality. Humans

© Blackwell Publishing Ltd. 2003

439

Governance and the Public Sector

24

RICHARD. J. STILLMAN II

could advance through the application of scientific knowledge within the political realm meant constructing a Newtonian-like constitutional mechanism to achieve the promised land here on earth, rather than the hereafter:

‘A machine that would go of itself’, in the phrase of James Russell Lowell

(Lowell 1888). The Great Seal that adorns every US Dollar reflects this enlightenment optimism. At the centre is a pyramid, the US Constitution, erected on the foundations of MDCCLXXVI (1776). The American Revolution would be man’s hope for bringing about ‘Novus Ordo Seculorum’, literally ‘a new turning of the ages’ or ‘a new order of the ages’. Above this edifice, built of 13 tightly united layers, is the all-seeing eye of God, ‘Annuit Coeptis’, that reads, ‘He smiles on our undertaking’. Yet, if one looks closely at the foreground, there appears a prosperous landscape whereas the background

portrays a desert, symbolizing the promising New vs the decaying Old World Order. Governance by night watchmen: from gentry-men to common-men, 1789-1882 Despite American inborn hostility towards government, the USA, like all

nations, requires a government to provide the basic core functions. As luck would have it, George Washington was inaugurated the first President and unlike any other, could start a new administration from scratch, so to speak,

because the Articles of Confederation possessed little, if any, permanent civil service. Precedent thus offered no guidance for how to begin. Washington was selected President undoubtedly by his fellow countrymen because they trusted his moral judgement in these matters and Washington himself was highly conscious of the model he would set for future Presidents. Generally, historians characterize Washington’s criteria for personnel appointments

as ‘the fitness of character

doctrine’

that meant

men

(and

they were all men) would be selected for government positions based upon family background, usually landed gentry, who were educated, loyal and to some degree represented a balance of regional and state interests (Mosher 1982). Here in the best sense, a governing class of ‘enlightened gentry-men’ was selected by merit, but it only came to fruition by the peculiar circumstances of: (1) the force of Washington’s prestige; (2) the lack of a

competitive party system; (3) a fairly small, homogeneous English-speaking community run by a tiny educated elite; (4) a predominantly rural, selfsupporting population that made relatively few demands upon government; and (5) as a result, the necessity for only a small public service that meant early Presidents could personally know most of their appointees and the quality of their work. In 1800, for example, there were only approximately 3000 civil servants, with a mere 150 located in the new Capital of Washington, DC. That fortuitous beginning which connected public appointments with a

© Blackwell Publishing Ltd. 2003

440

Governance and the Public Sector

TWENTY-FIRST CENTURY

UNITED STATES GOVERNANCE

25

Protestant sense of merit and morality would remain to this day as an important ideal for public service reformers, yet the rise of male suffrage, coupled with the growth of a two-party system after 1800, increasingly challenged the narrow rule by an elite gentry. The 1829 election of Andrew Jackson in particular brought about a radical shift in appointee criteria, one best characterized by Senator William L. Marcy, ‘to the victor belongs the spoils’ (White 1954). Or, as President Jackson said in his first inaugural address, ‘The duties of all public offices are ... so plain and simple that men of intelligence may readily qualify themselves for their performance ...” (Richardson,

1903). If Washington’s

tenure connected

merit and mor-

ality with public office, Jackson’s cemented the polar opposite view that anyone can and should be able to serve in a democratic government. Thus to this day equality of opportunity remains alongside merit as a deeply held norm for public service appointment. By the mid-nineteenth century, selection to office based on equity and party loyalty (again meaning, ‘white males only’) was well-established. The ‘spoils system’, as it became known, operated with relative success largely due to the — once again — special circumstances of the times: (1) the federal government remained small, employing only 49000 people in 1860; (2) much of the work, as Leonard White noted, was ‘repetitive, fixed and gen-

erally routine operations’ (White 1954) since three-quarters of the federal workforce were postal employees; (3) the bulk of Americans still were rural and self-supporting, placing few demands on government for services — between 1789 and 1889 only one new Federal Department was created, the Interior Department, to house bits and pieces of other agencies such as Indian Affairs and Military Pensions; and (4) the excesses of the spoils system were tempered by the recognition that a few key, skilled personnel in each agency could be retained for the sake of continuity and expertise as administrations came and went. THE HIDDEN UNWRITTEN NARRATIVE: THE CREATION AMERICA’S ADMINISTRATIVE STATE, 1883-1940

OF

If American kids know the story of the Great Charter of 1787, none are taught how the US Administrative State was created; indeed, that it even

exists. A quick glance at advanced college political science texts shows no mention of this significant historical development, perhaps a development as significant as the Great Charter itself, maybe more so. Indeed, while books on American Politics appear at an astonishing rate, there is no account of the entire process of American State formation. To be sure, there

are bits and pieces of this history, such as Leonard White’s impressive fourvolume study of administration, but that ends at 1900 when the US administrative state just started to develop (White 1948, 1951, 1954 and 1958).

Why is this important narrative missing? Possibly the American antistatist political tradition prefers not to know about it? Or, rather, think it

is worth knowing about and then teach to others? Perhaps this narrative

© Blackwell Publishing Ltd. 2003

44]

Governance and the Public Sector

26

RICHARD. J. STILLMAN II

is simply less exciting, for there are no great Founding Fathers meeting in secret sessions for three months to draft the one grand document and then engage in a colourful fight for its ratification? Where is the drama and excitement of administrative state-making, at least in the USA? Or, maybe,

the very word ‘state’ means nothing of the sort thing to Americans that the word ‘state’ implies for Europeans, as the ‘whole ball of wax of government’, not merely to designate a subunit of national government, such as

the State of Colorado? For whatever reasons, American State-Making remains largely an unknown and possibly an unwanted narrative, yet significant,

if not

vital, for understanding

American

Governance

and

its

dilemmas today. As Dwight Waldo noted, ’...public administration exists massively, centrally, and often decisively for our individual and collective lives’ (Waldo 1985).

New dilemmas creating a new governing narrative Just as the Articles of Confederation was replaced by the 1787 Grand Narrative of the US Constitution due to the dilemmas of the necessity to strengthen American Governance, ‘to provide for the common defense’ and so on, so too the late nineteenth century witnessed new dilemmas for US

Governance. While its sources are complex, lengthy, and still unexplored in many respects, put simply, the formation of America’s State came slowly, imperceptivity, in bits and pieces as specific empirical responses to multiple crises profoundly transforming the United States in the late nineteenth and

early twentieth century that included: e the North’s victory in the Civil War which created a stronger Federal Union and largely ended ‘states rights’ radicalism; e the closing of the frontier; ¢ rapid urbanization at the fastest rates in US history;

* fast-paced technological innovation, also at the highest rates in US history;

¢ a

massive

industrial

revolution

that

shifted

Americans

from

the

country-side on farms to cities working in factories; e international competition for overseas markets starting with the Spanish American War in 1898; and e new concentrations of wealth and power in the private sector with industrial monopolies called ‘trusts’ and countervailing growth of strong labour unions.

Administrative state-building came incrementally as a direct result of profound socio-economic-political upheavals that historian Robert Weibe labelled as forming ‘a distended

society’, one without

a purposeful centre,

focus of authority or core government (Wiebe 1967). By the 1880s, questions about how to put things back together became acute. Heated political debates occurred between the major parties as well as numerous third par-

© Blackwell Publishing Ltd. 2003

442

Governance and the Public Sector

TWENTY-FIRST CENTURY

UNITED STATES GOVERNANCE

27

ties such as the Grangers, Populists, and Southern Alliance, Goldbugs, Silverbugs, and other ‘crazy-bugs’, seeking ‘answers’ with ‘solutions’ implied by their party names. Just as frontier log cabins were ‘chinked in’ with mud and straw between

the logs to keep the homes warm in the winter and cool in summer, in reality so too Americans ‘chinked in’ administrative machinery between the cracks that were appearing to shore up their constitutional order between 1883-1940 (Stillman 1991). Or, in Woodrow Wilson’s words, ‘to run a Con-

stitution’ (Wilson 1887). Again, the US Constitution says nothing about planning, budgets, regulation and so forth, but these essential administrat-

ive devices were added piecemeal around the dawn of the twentieth century (Skowronek 1982; Skocpol 1992; Stillman 1998), without much fanfare via adding the following: e a civil service system (the Pendleton Act of 1883) which grew slowly in scope and coverage of federal personnel brought permanent expertise throughout American Government; e

a regulatory system that started with the Interstate Commerce Commission in 1887 to regulate railroads, but by 1940 other commissions

had been established to regulate major private-sector markets; monetary controls were set up in 1913 with the creation of Federal Reserve Bank System, a federal income tax was authorized in 1913 with the ratification of the 16th Amendment, and fiscal controls for the President were first created with the Budget and Accounting Act of 1921;

planning and management systems began to appear at the federal level in 1902 when the US Army established its General Staff and at the local level in 1909 with the first council-manager plan city in Staunton, Virginia; ‘ ¢ position classification, efficiency ratings, time-motion studies, job analysis, executive budgets first were introduced at the local level thanks to ‘inventions’ by the New York Bureau of Municipal Research (founded in 1906) and spread throughout the United States via the ‘bureau movement’ in the 1910s and 1920s and upward to the Federal Government by the Taft Commission,

1911-12;

positive ‘public law’ or administrative law (as opposed to common law and constitutional law that governed America in its first century) was first recognized by Professor Frank Goodnow’s ground-breaking studies but not formalized institutionally at the federal level until 1936 with

the publication of the Federal Register (Goodnow 1893); masters-level graduate training for public administration within universities began in 1924 at the Maxwell School, Syracuse University, and the first textbook

in the field appeared in 1926, Leonard

White, An

Introduction to the Study of Public Administration (1926), but separate entry levels for college graduates in the federal personnel system were not formalized until the mid-1930s.

© Blackwell Publishing Ltd. 2003

Governance and the Public Sector

28

RICHARD. J. STILLMAN

II

In many respects, the 1937 Brownlow Committee Report, officially titled

the Report of the President's Committee on Administrative Management, synthesized these various administrative elements. They first had been ‘tested’ at the local level over the past 50 years but slowly ‘bubbled up’ to the federallevel and finally to the pinnacle of US Government with the formation of the Executive Office of the President (EoP). The Brownlow Report, known for its chairman, Louis Brownlow, fundamentally reconceptualized the Presidency for the first time since the office was established under George Washington in 1789 by envisioning its work as administrative management of the executive branch (heretofore Presidents were seen mainly as party leaders, chief diplomats, etc.). Brownlow accordingly argued that the office should be empowered,

staffed, organized and equipped to manage effec-

tively the federal executive branch using the tools of budgeting, personnel, coordination and so forth (at the time the Presidency had only a few staff assistants ‘on loan’ from other departments).

When Brownlow’s proposals were sent to Congress, his report was tagged as ‘the Dictator Bill’ and defeated (another sure sign of visceral American antistatism even when enduring its worst economic crisis in history). Yet, pieces of Brownlow became institutionalized either through statutes or executive orders, such as Executive Order No. 8245 (1939) and the Hatch Acts of 1939 and 1940 (Brownlow 1937). By good fortune, at the start of World War II, an administrative state had become an established reality, or at least its framework, that would turn out to be essential to

successfully fighting World War II and later vital to American free world leadership during the Cold War with the Soviet Union (for a contrast with European state-building, see Poggi 1979). If the Great Seal epitomizes the US Constitution, possibly a scene from

the classic children’s story, The Wizard of Oz by Frank Baum, best depicts America’s administrative state. Recall the delightful account where Dorothy and her friends first glimpse Oz, the Great and Powerful Wizard, behind the curtain. He had been busy running the gears, wheels, wires and machinery that created the amazing steam clouds and awesome illusions of his magical kingdom. To their astonishment, Oz was neither great nor terrible but just a little, bald old man. ‘You are a very bad man!’ Dorothy exclaims. Oz replies ‘Oh, no, my dear, I’m really a very good man; but I’m a very bad Wizard!’ (Baum 1899). Dorothy, like most Americans, may damn the administrative state that runs their kingdom, or its illusions of a kingdom, but when the veil is lifted,

it is run by someone neither great nor terrible, but simply operated by an average Joe Citizen who is for the most part ‘a good man’. However, given his limited resources, he often is cursed by the public as ‘a very bad man’ and as ‘a very bad Wizard’. Frequently through no fault of his own, he must take responsibility for his own failure at wizardry — while insisting on his own essential goodness!

© Blackwell Publishing Ltd. 2003

443

444

Governance and the Public Sector

TWENTY-FIRST CENTURY

UNITED STATES GOVERNANCE

29

FOUR VARIETIES OF TWENTY-FIRST CENTURY PUBLIC SERVICE REFORM TRADITIONS AS IMPLICIT COMPETING ADMINISTRATIVE STATE MODELS If the absence of state during America’s first century left night watchmen

in charge of governance, the rise of an administrative state in the nation’s second century created the necessary institutions for governance. This administrative framework has been serviceable and versatile enough to be reshaped unobtrusively as America’s constitutional democracy shifted from dealing with the Great Depression in the 1930s, to World War II in the early 1940s, to the Cold War in the later 1940s until the Fall of the Soviet Union

in 1989. As the twenty-first century proceeds, the United States confronts numerous new challenges; these include:

¢ new responsibilities as the last global superpower; e rapid shifts in demographics within the United States with major increases in percentages of ‘seniors’ and ‘minorities’; ¢ significant population movement to the suburbs and to the western as well as southern regions; e Americans new interdependence

on the borderless, global economy,

increasingly focused upon trade with the Pacific Rim; ¢ swift, innovative changes due to information and computer technologies; e sudden growth of size and wealth of ‘knowledge workers’ and decline of farming, old smokestack industries, middle management white collar jobs; increases in single-parent households and concerns about the future of the American family;

a widening generational gap between the affluent elderly and less-well off youth, especially minority youth; a inassive rise of well-financed PACs, and issue networks, that decid-

edly influence the outcomes of political campaigns and government policy-making; complex, life-threatening global environmental challenges; new threats from biological-nuclear-technological terrorism worldwide. The list of dilemmas facing modern US Government could go on, and on, but what is important is that within the current debate over public service reform is contained implicit competing models for refashioning the administrative state to cope with the immense, complex challenges for US Government as the new millennium unfolds. In essence, Americans are engaged in a great state debate today, though few realize it since the argu-

ment is couched in ideas and ideals of public service reform. Surely such ideas define, or rather redefine, the basic administrative state, its function,

purposes and processes for the future in profound ways. In other words, differing concepts of public service reform traditions in our own century,

© Blackwell Publishing Ltd. 2003

Governance and the Public Sector

30

RICHARD. J. STILLMAN II

rather than night watchmen during the nineteenth century, guide the future of American Governance. However, these public service reform ideas are not taken out of thin air but are very much fragmentary products of past administrative thought. The rise of an administrative state gave rise to a peculiar home-grown administrative science or public administration thought during the twentieth century. The organic development of administrative thinking in the United States is well-known, so need not be elaborated upon here. What is critical is that out of these past administrative theories, largely though not entirely, today’s administrative reform traditions evolved and gelled to address seminal problems; for example, the meaning of the good life. What is the role of government in society? What is the place of the individual in civic life? Should administration be centralized or decentralized? Should government's powers be separated or combined? What are the criteria for administrative action? In short, the classic questions of political thought from Plato onwards for designing the vision of a ‘good’ state. Right now four major reform traditions that define the good state are implicit in the current administrative reform arguments: (1) public service reform by ‘meritocrats’ focused upon promoting organizational effectiveness of public institutions for ‘the general public good’; (2) public service reform by ‘the efficient’ aimed at producing the most returns for the least costs, much

like businesses;

(3) public service reform by ‘entrepreneurs’

with a goal of freeing up public managers from red tape to compete much like managers in open market economies; and (4) public service reform by ‘equalizers’ who advance notions of citizen participation as the best means to achieve democratic governance and the good society. Reform by meritocrats From the Pendleton Act (1883) to the Brownlow Report Volcker Commission (1989), the mindset of meritocratic

(1937) to the public sector reform has been to put ‘the best and the brightest’ in charge to achieve

‘good government’. In essence, good government is equated with classic bureaucratic design where organizations are well-ordered, neutral, with clear lines of responsibility running from top to bottom. At its core is a professional civil service, selected and promoted on a base of merit criteria

and equipped with the necessary tools to manage, plan, organize, and so on, free (or as free as is conceivable within a constitutional democracy) of political influence. Accountability, therefore, is best achieved externally through the ballot box as well as oversight by elected officials combined

with the internal controls of professional ethics and standards imposed by public servants on themselves. The knowledge and sense of responsibility

of public managers rate high among meritocrats for insuring that the public interest is protected and promoted. Their ‘products’ cannot be measured in mere dollars and cents. Rather, attaining the broad national, societal well-

being through organizational effectiveness, is deemed without question to

© Blackwell Publishing Ltd. 2003

445

446

Governance and the Public Sector

TWENTY-FIRST CENTURY

UNITED STATES GOVERNANCE

31

be ‘the only bottom-line’. Thus, wide-discretion for their exercise of professional judgement for ‘the good of the whole’ is advocated. In many aspects, this meritocratic reform view is backward-looking to the nostalgic era of the Founding Fathers and George Washington’s Administration that connected governance as ‘the highest calling’ with a protestant sense of merit and morality. Later came the Progressive Era, with Woodrow Wilson’s early advocacy that ‘clean’ administration was necessary in order ‘to run a constitution’. Or, as Wilson said elsewhere

in his famous

1887

Centennial Essay, ’...the civil servant should not serve his superior alone but the community’ (Wilson 1887). In cooperation with elected officials, the

enlightened generalist public servant (and the accent is often on ‘servant’ as if for ‘the Lord Public’ in lieu of Christ) would administer (literally, ‘to minister’) for the community and national interest (as opposed to petty, narrow special interests). While a mere ‘servant’, public officials within this

reform tradition ironically equate themselves more often than not as equal in status and worth to the elected official. POSDCORB, an acronym coined by Luther Gulick, means plan, organize, staff, direct, coordinate,

report and

budget

(Gulick

and

Urwick

1937).

POSDCORB describes the chief functions of any executive’s job and remains its most succinct statement of how meritocrats ought to manage effectively,

presumably in the proper sequence of steps. Gulick also saw coordination and specialization as critical: coordination ensures oversight, narrows

the

span of control, offers adequate staff support. Specialization on the other hand fosters expertise-and essential knowledge through division of labour,

as well as establishes the appropriate rules and functional processes vital to carry out the complex tasks of government. POSDCORB especially makes certain, in almost military-like precision, that the ‘man-on-top’ comes first and that command

is unified under one boss. [n other words, to quote the

opening lines of the Brownlow Report, ‘The President needs help’ (not the people on the line or the customers of government services) (Brownlow 1937). Although the last two or three decades have seen little popularity for reform by meritocrats, professional bodies such as the National Academy of Public Administration and the American Society for Public Administration sustain this reform tradition. Today, the city/county manager who plans at the local level, or the US Senior Executive Service set up after the enactment of the 1978 Civil Service Reform Act, or the 1994 Social Security Inde-

pendence and Improvement Act which formed an independent Social Security Administration with cabinet status under a single administrator as well as the creation of the Department of Homeland Security in 2002, continue this Brownlow reform tradition by meritocrats. Reform by the efficient A second significant tradition of public service reform evident today is ‘reform by the efficient’ or ‘for efficiency’. Here, the aim is to make govern-

© Blackwell Publishing Ltd. 2003

Governance and the Public Sector

32

RICHARD.

J. STILLMAN II

ment operate like a business firm, securing the most benefits for the least

costs. Ideally, ‘outputs’ like ‘inputs’ are measured in dollars and cents and managers manage as technocrats, specializing in applied efficiency techniques that can be used interchangeably in either the public or private sectors (and with, in the US, preference given to private business). The efficiency movement came into US Government at the start of the twentieth century thanks to the ideas of Frederick W. Taylor and his scientific management disciples. Other bodies, especially the work of the littleknown New York Bureau of Municipal Research (founded in 1906), the Taft

Commission Report (1911-12) and the bureau movement during the 1910s and 1920s, as was previously mentioned, spread efficiency techniques throughout all levels of the US government. Scientific Management silently and profoundly transformed American Governance through the introduction of efficiency ratings, job analysis, executive budgets and the like. It was considered also the ‘holy gospel’ for teaching and practicing ‘good’ public administration in the United States during roughly the first half of the twentieth century. In the words of Frederick W. Taylor, its main idea

was ‘Maximum output in place of restricted output. The development of each man

to his greatest efficiency and prosperity’. In short, a utopian

scheme to transform America, or again in Taylor’s words, ‘A complete mental revolution’ (Taylor 1911). Unlike POSDCORB, in which generalist, top-down managerial principles define ‘best managerial practices’, scientific management — like its successor today, operations research — embodies a bottom-up, inductive methodology. Gather enough empirical data, perform the proper analysis, correlate the information based on ‘the facts’, and arrive at ‘objective truths’. From this neutral evidence ‘an action agenda’ and ‘basic principles’ are derived which are beyond debate to guide government, again ideally spelled out

in dollars and cents or where the ‘most bang for the least buck’ can be delivered. Politics is not just viewed as outside — that is, values determined

by the ballot box as in the case of meritocrats — but fundamentally antagonistic to the goal of efficiency. So, in the extreme statements by ‘the efficient’ proponents, politics best be eliminated entirely from decisions, or as much

as is humanly feasible. Implicit in the efficient model of reform is therefore a Comtean conception of the state framed as: (1) above or outside politics; (2) rooted in the

shape of a corporate firm with a cost/benefit ‘bottom line’ measures; (3) based on objective ‘hard scientific’ positivism as a criteria for promoting efficiency; and (4) managers who manage as technocrats (as opposed to managerial generalists) via a bundle of efficiency techniques. Variations of this theoretical model have appeared in the writings of Herbert Simon, Operations Research

Studies by the Rand

Corporation, The Urban Insti-

tute’s ‘Tools Approach’ and on the popular level advocated by third party candidates such as Ross Perot or numerous business consultants. In practice, key federal legislation enacted this public reform model into law,

© Blackwell Publishing Ltd. 2003

447

448

Governance and the Public Sector

TWENTY-FIRST CENTURY

UNITED STATES GOVERNANCE

33

examples being the Budget and Accounting Act of 1921, the Inspector General Act of 1978, or the Financial Officers Act of 1990. Large portions of US government indeed conform closely to the pattern of private business through single-function government corporations largely independent agencies outside the federal executive branch or at the local level, Special District Governments (which today make up 31131 or the current 86 743 units of US government). Reform by entrepreneurs The market model applied to public sector reform has found wide-spread appeal and support across America during the last two decades or so, especially thanks to the work of Public Choice Economists such as James

Buchanan and Gordon Tullock of the Virginia School or Indiana Political Scientists such as Vincent and Elinor Ostrom. For public choice enthusiasts, government is conceived of like any organization which produces goods and services for ‘customers’ in society. The challenge, therefore, is, as Vincent Ostrom argued: ‘When the central problem in public administration is viewed as the provision of public goods and services, alternative forms of organization may be available for the performance of those functions, apart from an extension and perfection of bureaucratic structures’ (Ostrom 1974). Contrary to meritocrats who view government and bureaucrats as ‘good’, or the efficient who seek to ‘neutralize’ bureaucracy and bureaucrats, this third cluster of public service reformers assume the opposite, namely that bureaucrats are selfish profit-maximizers. Without profit/loss statements and market discipline, as in business firms, government managers essentially turn in to ‘budget-power maximizers’ interested only in acquiring more personnel lines, bigger public budget shares and organizational size. The world inside government, according to this reform tradition, is there-

fore populated by individual egoists, merely out for their own gain, not the collective good nor societal welfare. It is a Darwinian world of survival of the fittest entrepreneurs with the appetites of voracious predators who not only eat each other but gobble up the public (you and I) as well through imposing higher and higher taxes. That in turn shrinks the private sector where ‘real’ productivity and community wealth are generated. Public choice theorists thus largely focus upon ways to economize, limit, reduce, even eliminate government agencies through imposing a variety of market incentives to induce internal or external competition such as privatization, load-shedding, vouchers, downsizing, franchising and outsourcing devices.

Alternatively, they advocate creating administrative units within government that conform as closely as possible to private, competitive business firms. Government in their eyes is thus ‘the enemy’ so they wage constant, bloody warfare — them versus us; ‘bad guys of government’ versus ‘the rest of us in white hats’ — at least at the most extreme. This reform tradition premised upon an implicit Adam Smithian conception of state assumes: (1) no one or few are in charge at the top but rather

© Blackwell Publishing Ltd. 2003

Governance and the Public Sector

34

RICHARD. J. STILLMAN II

it is constructed from the bottom-up in the marketplace where everyone votes their preferences for goods and services; (2) market competition is key to determining what goods and services should or can be provided through public as well as private agencies; (3) Adam Smith’s ‘invisible hand’ best sorts out winners and losers for the general well-being of society,

not some unelected meritocrats or efficiency experts; (4) rules of competition and voting must be constructed clearly and fairly to insure open competition and free access to information; (5) and if citizens are seen as ‘customers’, bureaucrats are viewed here as self-serving ‘entrepreneurs’ whose incentive systems should be geared as closely as possible to market incentives via either external or internal devices in order to hold them accountable. During the 1990s the reinventing movement spawned by David Osborne and Ted Gaebler’s best-seller with that title (1992) and the Gore Report, Creating a Government That Works Better and Costs Less (1993), popularized reform by entrepreneurs. Throughout all levels of US government, ‘reinventors’ pushed for cutting and trimming government and ‘freeing up managers from red tape’ to deliver ‘goods and services’ to ‘customers’ with incentives of ‘the marketplace’ built-in to promote more entrepreneurial behaviour within the public sector. Perhaps the highpoint of the reinvention movement (or low-point, depending on your point of view) came when Vice President Al Gore was lectured by the CEO of Harley Davidson on how to run government just like a motorcycle manufacturer. Reform by equalizers ‘Equalizers’, much like the efficient and entrepreneurs, share an intense dislike for the stereotypical bureaucrat and big bureaucracy. To equalizers, they are self-serving, power-hungry, manipulative, amoral, out to subvert

the public good, even oppress it. It must also be quickly added that equalizers part company with the efficient and the entrepreneurs by their clear dislike of efficiency techniques, ‘hard quantitative measures’ or marketdriven incentives applied to manage government. For them, such devices are ‘the work of the devils in the establishment’, seemingly neutral techniques used by the ‘powerful’ to ‘get their share’ of the public wealth, while

the rest of us suffer. In many ways, equalizers draw from one of the oldest public service reform traditions in America. They can trace their heritage back to the Jacksonian Rule by common-men, but the 1960s and 1970s observed a reemergence of this ideal in forceful and important ways for public service reform. As Samuel P. Huntington pointed out, this era saw the reassertion of democratic idealism in all phases of American Life by ’... a general challenge to the existing system of authority, public and private. In one form or another, this challenge manifested

itself in the family, the university,

business, public and private associations, politics, the government bureauc-

racy and the military service. People no longer felt the same compulsion

© Blackwell Publishing Ltd. 2003

449

450

Governance and the Public Sector

TWENTY-FIRST CENTURY

UNITED STATES GOVERNANCE

35

to obey those whom they had previously considered superior to themselves in age, rank, status, expertise, character or talents’ (Huntington 1975). In essence, an equalizer’s ideal state is no state at all, and an equalizer’s approach to management is, as Shan Martin’s book title indicated, ‘manag-

ing without managers’ (Martin 1983). Thus in many respects their public service reform ideas are the most complicated of all, for they know what they dislike, bureaucracy, as well as the processes or techniques they prefer, in order to get ‘to the promised land’, that is, decentralization, citizen par-

ticipation, community problem solving certain what the ‘promised land’ looks when we arrive. So, what do they like? Their ideal England Town Meeting where citizens

and so on. But we are never quite like, nor how we can recognize it

government is possibly the New (and the accent here is upon ‘cit-

izenship’, as opposed to ‘customers’ or ‘clients’), without bureaucrats, col-

lectively meet face-to-face at the local level to solve community problems for themselves. They formulate the solutions by themselves and then carry out the required tasks to implement them. In short, their end goal is more

process than substance, pure American nineteenth century democracy that Alexis de Tocqueville witnessed and praised in his Democracy in America. Of course, how to transplant that idyllic ‘small town’ Jacksonian Democracy into the twenty-first century amidst a complex urban society remains the equalizer’s chief conundrum. Happily, the excesses of 1980s’ individualism brought an effective intellectual response in the guise of communitarianism. One of its major spokespersons was Amitai Etzioni, whose book, The Spirit of Community, argued: ‘Individual rights are to be matched with social responsibilities. If people want to be tried before juries of their peers, they must be willing to serve on them ...’ (Etzioni 1993). Communitarians thus place the primary importance upon collective social responsibility of citizens and the moral values of citizenship which translate into specific policy proposals such as national public service programmes, crime control through ‘neighborhood watch’, job retraining and child care run through volunteers or non-profit associations. Implicit within their thinking, like other public service reformers, equaliz-

ers, do in fact have a vision for the twenty-first century state emphasizing democratic

processes

over

substance

where:

(1)

self-management,

as

opposed to professional managers, govern; (2) ‘subsidiarity’ or the lowest level grass-roots associations deliver services by deciding what should be done, how to do it, then doing it, and thereby eliminating any split between ‘politics’ and ‘administration’; (3) accountability and legitimacy are achieved through ‘empowerment’ and ‘participation’ by volunteers or citizens directly affected by public actions; and (4) balancing ‘rights’ and ‘responsibilities’ is the key to good citizenship and ultimately to achieving a just, ‘good society’. Tables 2 and 3 attempt to summarize what has been said so far. Over the past three decades bits and pieces of the equalizer’s reform

© Blackwell Publishing Ltd. 2003

45]

Governance and the Public Sector

36

RICHARD. J. STILLMAN I

TABLE

2

Four varieties of public service reform as implicit state models Meritocrats

The Efficient

Entrepreneurs

Equalizers

Implicit state model

Bureaucracy’s classic form

Business-Firm organization

Free market economy

Participatory democracy

Values stressed

Top-down organizational effectiveness

Organized business efficiency

Bottom-up competition

Flatorganizations, inclusive, diverse and open

Key actor

Civil servant professional

Efficiency experts

Public-sector entrepreneurs

Citizens of every kind

End goals

Broad public

Most returns for

Results for

Justice, good,

promoted

interest

least cost

consumers

equity

Preferred

Management

Efficiency

Public choice/

Democratic

methods to manage

principles like POSDCORB

techniques like Taylorism

microeconomics _ ideals

Major reports(s)

Brownlow

Taft (1911-12)

Gore Report

Kerner (1968)

in support

Hoover (1949) Volcker (1989) Hart/Rudman (2001)

Grace (1983)

(1993) Thompson Report (1993)

Watergate Report (1974) Pentagon Papers (1974)

(1937)

Important

1939

Budget &

Government

FOI (1967)

statutes and executive

Reorganization Act

Accounting Act (1921)

Performance & Results Act

Whistleblower Protection Act

orders

DoD Created

Classification Act

(1993)

(1947) Hatch Acts (1939-40) Ex Order 8248 (1939) Homeland Security (2002)

(1923) IG Act (1978)

Ideal public organization

US Marines City Manager Plans

GAO Inspector

‘Lakewood Plan’ (a city run by

General

contracting-out)

Chief

Brownlow

Taylor

Public Choice

Jefferson/Jackson

theorist(s)

Gulick

Simon

Reinventing Government

Presidencies

Today’s main

Brooking

Operations

AEI; Heritage

Common Cause;

advocates

Institution;

researchers;

Foundation;

Public Citizen;

National Academy of PA

consultants

PAT-NET

Key politics-

Is the citizen or

administration dilemma

meritocrat in charge?

Is anyone in charge of the

Alliance for Results in Government How can

© Blackwell Publishing Ltd. 2003

expert?

(1989)

Ethics in Government (1989)

markets be held accountable to ‘the public’?

NE Townships; Neighborhood |Watch

Who is the boss?

452

Governance and the Public Sector

TWENTY-FIRST CENTURY

TABLE

3

UNITED STATES GOVERNANCE = 37

The evolution of US governance US Constitution

of

Administrative State-

21st Century Public

1787

Making 1883-1940

Types of rule

Federal republic

Administrative state

Implicit competing state models in reform

Created by

Secret convention

Incremental, hidden ‘chinking-in’ process

Concept-driven from administrative theory

Basis of legitimacy

Fundamental law/common law

Administrative rulemaking procedures

Political elections

Control of human nature by

‘Checks and balances’

Structured institutions

Reform of Institutions

Role of

Limited/decentralized

Broad/centralized

Varies by reform idea

Separation of powers

Yes

No

Mixed

Citizen participation

Indirect /inputoriented

Direct/client-oriented

All depends on the reform idea

Service Reform Ideas

government in society

Key actors

Night watchmen

Meritocrats

Theorists/politicians

Public expenditures

Only for core functions of

Broad societal welfare functions

All depends who is elected

Key authority

Lack of administrative

issue

state

government

Democratic oversight of administration

Instability due to frequent electoral change

agenda have been written into law, as, for example, during the 1960s with

‘maximum feasible participation’ clauses in The War on Poverty Programs, the 1967 Freedom of Information Act, or during the 1970s and 1980s with term-limits and tax limitation amendments to state constitutions and local

government charters. Throughout the 1990s various Bush and Clinton administrative initiatives sought to stimulate local voluntary efforts — both religious and nonprofit — to deal with crime, health care and child care issues.

CONCLUSION: FUTURE AMERICAN SITUATIONAL REFORM-CRAFT?

STATECRAFT

AS

At the outset of this article, the question was posed: how is America ruled, given its ingrained hatred of rulers of all stripes? The US Constitution, its first governing narrative, framed the Fundamental Law of the Land without a European-style state. This was dictated by practical necessity: at the time Americans neither needed a state, nor would

they have adopted their Constitution if they had smelled the slightest whiff of statism. The nation’s first century of governance was thus left in the hands of night watchmen who neither threatened nor were seen as a threat

© Blackwell Publishing Ltd, 2003

Governance and the Public Sector

38

RICHARD. J. STILLMAN

II

to constitutional democracy. Rather they quietly and progressively served to legitimize it as well as resolve the dilemmas of governance through increasing popular participation within government, from gentry men to common men. The second century of national life witnessed the rise of a second, silent governing narrative: the ‘chinking-in’ of an administrative state. Here too new dilemmas forced the slow emergence of new governing narrative. The open, democratic framework of the US Constitution, especially its federal structure, permitted this ‘chinking process’ quietly and effectively to happen in a situation unlike anywhere else in the modern world. By 1940 just enough of a rudimentary state framework was in place to serve well the needs of increasing US global leadership during World War II and the Cold War. However, when the administrative state sneaks in via the backdoor,

so to speak, its legitimacy is always open to question. Public debates still erupt today over whether or not this or that administrative activity is ‘constitutional’. Of course it is, if you accept an administrative state as a fact of modern life; of course it is not, if you believe America is only governed

by the US Constitution. US legitimacy essentially rests upon which narrative you believe. Nevertheless, we can find some pluses from this ‘chinked-in’ state. When a democratic constitution precedes state-building (unlike the reverse in Europe), the resulting administrative state becomes less rigid and more

adaptive to democratic needs. It in essence becomes a willing handmaiden of society, a highly innovative, open system that can easily change to accommodate new circumstances as they arise. And even that may be some-

what of a modest assessment of its achievements: it successfully fought two world wars and numerous minor conflicts, helped to cure the Great Depression, secured prosperity for millions, nurtured abundant technological and material progress, and now governs as the last global superpower. Indeed, civilized life within America’s constitutional democracy would be hard to comprehend without the immense service performed by an administrative state in some highly novel and complicated ways — from NASA's space exploration to hometown public library video rental services. Therefore, in this the twenty-first century — or third century of America’s national life — paradoxically its governance now depends on how constitutional democracy interrelates with its ‘chinked in’ administrative state. Largely out of fragments from past administrative thought current reform concepts have evolved and gelled to guide its future. Thus, as tables 2 and 3, above, sum up, American statecraft today turns on four dominant, com-

peting public service reform traditions: reform by meritocrats? The efficient? Entrepreneurs? Equalizers? Each one, as Figure 1 suggests, may well be rooted in the deeper, ongoing past Protestant reform religion — but drawing from very different elements of the reform faith. To be sure, each

vision carries with it pluses and minuses, advantages and dilemmas. What the future outcome of this ‘great state debate’ will be is hard to predict,

© Blackwell Publishing Ltd. 2003

453

454

Governance and the Public Sector

TWENTY-FIRST CENTURY

UNITED STATES GOVERNANCE = 39

Four public sector twenty - first century reformers Meritocrats

Protestant

Church goverance

by ‘ The Elect’

Reform Protestantism

Community as a \ Distrust of authority} City Upon a Hill’

Aj) Believers’

Equalizers

(i.e. antistatism)

Protestant’s zeal

‘ To Be Known by Thy Works’

Entrepreneurs

FIGURE 1 Do the four varieties of public sector reform ultimately stem from the 16th century Protestant religious tradition of distrust of authority?

possibly foolish to even try. However, it is safe to assume that, barring collapse of the present global state System, at least as we know it now, American statecraft will remain intimately connected with reform craft, or rather, as in the past, the United States continues to craft, re-craft or chink-

in specific administrative reforms incrementally in order to ‘solve’ each unique, challenging situation the nation confronts.

So paradoxically,

and

perhaps this is the ultimate paradox, a people so fiercely antistatist should forge an awesomely powerful super-state, the most massive in world history, one whose

future is intricately linked to an administrative

reform

theory that Americans are neither taught to understand nor probably care to know about. REFERENCES Baum, L. 1899. The Wizard of Oz. Indianapolis, IL: The Bobbs-Merrill Co., p. 146. Boorstin, D, 1958. The Americans: the colonial experiences. New

York: Alfred A. Knopf. p. 3.

Brownlow Report. 1937. ‘The President’s Committee on Administrative Management’. Washington, DC: Government Printing Office. Cigler, B. and L. Neisvendr. 1991. ‘Bureaucracy in the introductory American government textbook’, Public Administration Review, 51, No. 5, Sept/Oct, p. 44.

© Blackwell Publishing Ltd. 2003

455

Governance and the Public Sector

40

RICHARD. J. STILLMAN II

de Tocqueville, Alexis. [1805-1859] 1990. Democracy in America. London and Chicago: Encyclopaedia Britannica. Etzioni, A. 1993. The spirit of community. New York: Crown Publishers, p. 249. Goodnow, F. 1893. Comparative administrative law. New York: Macmillan. Gulick, L. and L. Uriwck (eds). 1937. Paper on the science of administration. Washington, DC: US Government Printing Office. Hamilton, A., J. Madison and J. Jay. 1961. The federalist papers. New York: New American Library edition, p. 322. Hartz, L. 1955. The liberal tradition in America. New York: Harcourt Brace. Huntington, S. 1975. ‘The United States’, in M. Crozier (ed). The crisis of democracy. New York: New York University Press, pp. 74-5. Lowell, J. 1888. ‘The place of the independent in politics’, Political Essays. Boston, MA: Houghton Mifflin,

p. 312. Martin, S. 1983. Managing without managers. Beverly Hills, CA: Sage. Mosher, C. 1982. Democracy and the public service. New York: Oxford University Press, Chapter 3. Ostrom, V. 1974. The intellectual crisis in American public administration. Tuscaloosa, AL: University of Alabama Press. Poggi, G. 1979. The development of the modern state. Stanford, CA: Stanford University Press. Richardson, J. (ed.). 1903. Messages and papers of the presidents. Vol. Il. Washington, DC: Bureau of National Literature and Art, p. 438. Skocpol, T. 1992. Protecting soldiers and mothers. Cambridge, MA: Harvard University Press.

Skocpol, T. 1996. ‘Presidential Address’ for the Annual Meeting of the Social Science History Association, New Orleans, LA., October 12, unpublished, p. 10.

Skowronek, S. 1982. Building a new American state. Cambridge: Cambridge University Press. Stillman, R. 1991. Preface to public administration. New York: St. Martin’s Press, Chapter 3.

Stillman, R. 1998. Creating the American state. Tuscaloosa, AL: University of Alabama Press. Taylor, F. 1911. The principles of scientific management. New York: Harper and Brothers, p. 128. Waldo,

D.

1985.

‘A conversation

with

Dwight

Waldo’,

Public

Administration

Review,

Vol. 35, No.

4,

July/August, p. 465. White, D. 1951. The Jeffersonians. New York: Macmillan. White, D. 1954. The Jacksonians. New

York: Macmillan, p. 46.

White, D. 1958. The Federalist. New York: Macmillan. White, D. 1958. The Republican Era. New

York: Macmillan.

Weibe, R. 1967. The search for order, 1877-1920. New York: Hill and Wand, pp. xili-xiv.

Wills, G. 1999. A necessary evil: a history of American distrust of government. New York: Simon & Schuster, p- 237. Wilson, W. 1887. ‘The study of administration’, Political Science Quarterly, June 1887, 197-222.

[22] STATE, ADMINISTRATION AND GOVERNANCE IN GERMANY: COMPETING TRADITIONS AND DOMINANT NARRATIVES WERNER JANN The article explores the evolution of competing views on state, administration and governance in Germany from an historical perspective, with an emphasis on the last five decades. To understand the governance discourse in Germany one has to start from different notions of the state. The first part therefore offers a brief, somewhat polemic, overview about different state traditions in Germany in the twentieth

and twenty-first centuries. The second part looks at how discourses about the proper role, the appropriate structures and processes of the public sector and its interactions with its environment have changed during the history of the Federal Republic. The analytic focus is on the different narratives about administrative policies, understood as the various scenarios, assumptions and arguments on which competing policy-suggestions for the public sector have been based. The article argues that it is not sufficient to interpret the ups and downs of different discourses and Leitbilder as more or less erratic, post-modern fashions and fads. Instead, the line up of the central catch-phrases, from democratic via active and lean to the activating state, reflect learning processes, driven above all by the political competition creating a continuous demand for ‘better’, more appropriate narratives to guide and explain current policies.

INTRODUCTION

When talking about governance in Germany — about recent changes in the form and function of public administration and the ‘state’ — one will hear two competing stories. One will stress the extraordinary continuity and stability, the other will stress the unbelievable and profound changes. One story is about an ultra-stable system where government and administration are still — as they were 50 or even 100 years ago — dominated by the typical characteristics of a Weberian bureaucracy; that is, hierarchical subordination, clear competencies,

rule-bound and legally-organized procedures.

The dominant functions and structural features in the sphere of personnel (Berufsbeamtentum, fixed classes of civil servants), macro- and microorganization (three-tier systems, line organization), procedures (legality, judicial control) and finances (cameral, line item budgeting) have not really

changed, in spite of continuous reform commissions and fashions. The other story claims just the opposite: the public sector in 2000 has little in common with its predecessor in 1950, not to mention in the old Werner Jann holds the chair of Political Science, Administration and Organization in the Faculty for Economics and Social Sciences, University of Potsdam, Germany.

Public Administration Vol. 81 No. 1, 2003 (95-118)

© Blackwell Publishing Ltd. 2003, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

Governance and the Public Sector

96

457

WERNER JANN

Reich. The modern German state differs substantially from its forerunners, both concerning tasks and responsibilities, size, differentiation and professionalisation, because of the values and qualifications of its staff, its techniques, communications and procedures, and, most significantly, because of its manifold interactions and networks with its political, social and econ-

omic environment. The classical autonomous, hierarchical state no longer exists.

Both propositions do not necessarily contradict each other, and one can find each in a critical and a reassuring version. There are some narratives telling how necessary changes have been absorbed in a highly adaptive and evolutionary system, such that incremental adjustments will take care of most problems

(Derlien

1996; Seibel 2001; Kénig 2001), or, on the other

hand, how the growing antagonism between traditional forms and changing contents leads to functional alterations without structural adaptations and in the end to a highly inefficient, uncontrollable and angst-ridden public sector (Wagener 1979; Ellwein 1994; Reichard 1997).

This article considers how the public discourse about the German public sector and its reform has changed during the last fifty or so years. It explores the assumptions and beliefs that often are embedded

in, and at

the very least used to justify, political action and administrative reform. The article also covers the debate (much of it written) in which people, that is, the administrative and political elite and their academic companions,

discuss what is right or wrong about state and administration in Germany, and what should be done about it. To understand the governance discourse in Germany, about the changing boundaries between the public and the private sectors, between governments, markets, civil society and individual citizens, one has to start from

different notions of the state. Germany is to a large extent still a heavily state-based society, and the dispute about the proper role and understanding of the state lies at the heart of much of the current debate. Quite a few

languages use the family as an analogy to their community and refer to the head of state as Landesvater (or sometimes

Landesmutter), but only in

Germany is this metaphor even today quite easily transferred to the abstract state — Vater Staat still looms large (Reinhard 2000, p. 460). The first part of this article will therefore give a brief overview of the different state traditions in Germany in the twentieth and this century. The second part looks at how the discourses about the proper role, the appropriate structures and processes of the public sector and its interactions with its environment have changed during the history of the Federal Republic. The analytic focus of this part are the different narratives about administrative policies, understood as the various scenarios and arguments on which competing policy-suggestions for the public sector have been based. In this manner, the paper is not about ‘real’ changes, different ‘trajectories’ of public sector reform and their outcomes (Pollitt and Bouckaert

© Blackwell Publishing Ltd. 2003

458

Governance and the Public Sector

STATE, ADMINISTRATION

AND GOVERNANCE

IN GERMANY

2000), but about the beliefs, problem definitions and recommended

97

sol-

utions that inspire the ‘real’ changes or ‘trajectories’ of public sector reform. In Germany, the term Leitbild (or guiding model) has been suggested for these types of shared factual, theoretical (that is, causal), and normative narratives about the fundamental problems, objectives, solutions and actors

of administrative policies. As cognitive reference points they restrict the scope of possible alternative actions, function as filters to reduce complexity and allow actors a normative foundation for their interests. They may contain both stories describing why things are as they are and arguments (with premises and conclusions), but also scenarios and rhetorical metaphors and devices to defend or to prevent change. There are obvious links to related concepts of ‘culture’ in organizational development, which operate with ‘vision, mission

and

action’

to influence

organizational

behaviour.

But

while in this kind of managerial-organizational change Leitbilder are intentionally designed to influence behaviour in and of organizations, our concept is broader and is concerned about the reconstruction of more or less implicitly shared understandings legitimizing policies and social practices (on the related notion of culture, see Jacquin et al. 1993, p. 376; and Wildav-

sky 1987). There are, obviously, at any one time several competing narratives about

administrative policies. There are dominant ones which are held by the elite majority, and minority narratives telling ‘another story altogether’. In this paper we are mainly concerned with how dominant narratives or Leitbilder (the terms are used as synonyms) change, how different state traditions fit into these changes, and how these traditions also gradually change.

The analysis relies heavily on textbooks and programmatic statements (journal

articles,

commission

reports)

about

administrative

policies.

In

Germany the division between academia and practitioners in this area is rather blurred. There is probably no other policy field that has seen such a constant

flow of advisory commissions,

reports and reform initiatives;

thus, the policy networks are closely knit. Academics and practitioners are members

of the same

commissions

and associations, write and read the

same journals and reports, and have, at least in the past, enjoyed a rather homogeneous socialization through a highly dogmatic legal education. STATE TRADITIONS

IN GERMANY

The classical tradition: the autonomous and authoritarian state To understand any discourse about state and governance in Germany one has to start from the ‘classical’ German Staatswissenschaft or Staatslehre, which dominated German thinking at least until WWII (on the several traditions see Bohret et al. 1988; and Benz 2001). At the core of the classical

tradition is the either state or nothing mixing this conceptual

separation of state and society. In this tradition there is society, but nothing above, overlapping or integrating, the two spheres and nothing besides (Grimm 1996). Since separation was interpreted as a real, universal and timeless

© Blackwell Publishing Ltd. 2003

459

Governance and the Public Sector

98

WERNER JANN

phenomenon, it created rather substantial and tangible understandings. Institutions and even persons thus had to belong to either sphere, either representing the state, for example as a civil servant or a soldier, or being a (mere) civilian. Both spheres are still today separated by different legal systems. There is public and private law, each with its own sources, law courts, controls, dogmatic foundations and rules. Furthermore, the state has

a legal personality of its own; everything done in its name is a legal act. The legal programming helps to neutralize the fact that in reality it is not the state, but individuals who act in its name. Through this fiction the con-

cept of legitimacy is easily reduced to formal legality. If it is legal, it must be legitimate — the typical explanation of German administrative elites for their criminal actions in support of the Nazi — or recently communist dictatorships. This understanding of the state has many sources (Grimm 1996; Dyson 1980), but its main foundations stems from German idealistic philosophy, first of all Hegel. For Hegel and his followers (Schmitt 1931; Forsthoff 1933,

1971) modern society is ruled by individualistic and particularistic interests, unable to create unity and to guarantee the common good. For this we need the state, which is the Verkérperung der sittlichen Idee, the substantiation and

personification of moral and ethical ideas and values. Thus the state is not only separated from society, ruled by its own law and being a legal personality of its own, but furthermore stands above society. It is the only place where unity, the common good and moral values can be realized and enforced. Only the state knows what is in the public interest (a priori Gemeinwohl), and only the state can — and has to enforce — this common good. The individual is its subject (Untertan), its highest duty being to obey the state. Foremost, in this idealistic concept the state is an idea, but this idea can be — and has to be — understood and enforced. This is, of course, the duty of Staats(rechts)lehre, which educates the state elite. Traditionally it was the

monarch and his loyal allies, the civil service, whose highest duty is to guarantee

the public

good,

not

least against

politicians

and/or

society

based representatives of private interests. With the monarch out of the picture, only the civil service as a class of its own — responsible for the public good — remains. Pluralism, interest groups, parties and even parliaments are dangerous, because they undermine state unity and autonomy. Only

the state, represented by its loyal servants, is above parties, interest groups and private interests. The great achievement of this tradition is the construction of the state as a purely legal entity, the victory of administrative law over policy and politics. Whatever the state does (starting in the nineteenth century) was looked upon as the implementation of laws. Thus there was no room for politics and policy, German does not even have a word for policy (Heidenheimer 1986). Areas such as social policy, building policy or railroad policy (Sozialpolitik, Baupolitik, Eisenbahnpolitik) are solely interpreted as specific

© Blackwell Publishing Ltd. 2003

460

Governance and the Public Sector

STATE, ADMINISTRATION

legal

fields

(Sozialrecht,

Baurecht,

AND GOVERNANCE

Eisenbahnrecht),

IN GERMANY

probably

one

99

of the

reasons for the extreme fragmentation and specialization of German law and administration. State and civil service are exclusively about the interpretation of laws, unless there is the Ernstfall (also called Notstand), under which the state has to get rid of the mantle of the Rechtsstaat and fight. a hee can be no doubt that this tradition was dominant in Germany at least until WWII and still influences German thinking today. Its dominance has much to do with the supremacy of the legal profession in the public service. Since the state is a legal personality, all actions are legal acts, and

civil servants therefore require legal training. At the same time legal teaching was and is dominated by the concept of ‘ruling doctrine’ (herrschende Lehre, hL), thus a large part of the administrative elite was brought up within a narrow, unified, cohesive and often doctrinaire concept of the state. Traditional etatist, anti-democratic and anti-liberal Staatsrechtslehre sup-

ported and legitimized the Nazi dictatorship. Its proponents fought and discredited competing ‘Jewish-liberal’ traditions, forcing their supporters out of office and quite often out of the country to save their lives, thereby offering quick career-possibilities for lawyers and civil servants with the right persuasion. But the tradition did not disappear with the Nazi regime. From the elite of Staatsrechtslehrer, the law professors teaching the ruling doctrine, only one particular crucial ideologue of the total state had to leave university in 1945 (Carl Schmitt), the others stayed on after the war and

continued their careers. The tradition was nurtured in large parts of the legal profession, professors and practitioners defining themselves as ‘pupils’ of Schmitt, dedicating several Festschriften to him, educating the civil service elite, and publishing in established legal publications, the conservative press and finally in a specialised academic journal, program-

matically named Der Staat. Schmitt remained the most widely quoted legal author in post-war Germany (see Voigt and Luthardt 1986). Forsthoff, his

most prominent pupil, became the author of the most prestigious textbook of administrative law in the Federal Republic. Outside academia this tradition was symbolized by civil servants such as Hans Globcke, the highly efficient chief of the chancellor’s office under Adenauer and previously a well-known commentator of the Nuremberg race laws from 1938, the legal foundation of the elimination of Jews and other so-called Untermenschen,

or Hans Filbinger, the prime-minister of Baden-Wiirttemberg, who when confronted with the fact that he had sentenced soldiers to death even after the formal end of the war in 1945, argued that ‘what was legal then, cannot

be illegal now’. So when the avowed Nazis disappeared in 1945, the tradition was carried on. For example in a new Staatslehre published in 1964, a highly esteemed law professor argued that while the individual is protected against the state by the constitution, the problem of the modern, democratic state is that it has no protection against individual interests and society. Democratic

© Blackwell Publishing Ltd. 2003

461

Governance and the Public Sector

100

WERNER JANN

institutions should therefore function as filters, protecting the state against the evils of society (Kriiger 1964). Since democracy is inherently unreliable in this respect, the state had to rely on the civil servants, who should act as ‘partisans behind enemy lines’, protecting state interests. Enemy lines, of course, being politicians and interest groups undermining state autonomy and authority. (This view was put forward in the keynote address at the annual convention of the civil service union and was mellowed somewhat in the published version.) In this tradition, the modern state is in a sorry state: it is characterized by not being a real state any longer. It is lacking sovereignty, it does not guarantee the common good, and is no longer above society and interests. Instead it is captured by interest groups and politicians. The modern welfare state is like a castrated

tomcat, it is getting fatter and fatter, but it

lacks potency.

The democratic tradition: the pluralistic and co-operative state There were also, of course, different traditions during the Weimar republic,

criticizing the concept of the apolitical state ‘above’ parties, politics and society as the Lebensltige des Obrigkeitsstaates, the life-lie of the authoritarian state (Gustav Radbruch), and brandishing the ‘ruling doctrine’ as the doctrine of the rulers. A prominent example was Herrmann Heller, who tried to establish a modern, democratic state theory. But democratic academics and practitioners weré in a minority and lost — with rather serious consequences. Most of them had to emigrate, quite a few did not survive the

expression of their deviant views. For example, Heller emigrated in 1933 and died in 1934 in The Netherlands. His magnum opus Staatslehre, was published in exile. Yet after the collapse and disappearance of the Nazi dictatorship (and nearly all avowed Nazis), the time for a more democratic, anti-state tradition had come, also in Germany.

liberal,

It was above all reintroduced by the old democratic elite of the WeimarRepublic, often emigrants and legal scholars who had spent the Nazi period in Britain or the US where they had made a living in journalism or political science. When this elite came back, and quite a few did soon after the war, they were determined that the classical German, Hegelian perception of the

state should be eliminated once and for all. In their view it was responsible for most of the German and European catastrophes in the twentieth century. For example, by 1937, 86 per cent of Prussian civil servants were members of the Nazi party (Reinhard 2000, p. 472). Therefore the fight against the classical tradition was not only highly political, but, quite understandably, emotional. The democrats did not engage in a theoretical, aca-

demic debate about different state concepts, but in a battle about the future of democracy and liberal, ‘western’ values in Germany. They were therefore highly allergic to terms like Staatsrdéson, Notstand, Obrigkeit, to any idealistic interpretation of the state, and towards the old elite still ruling the legal

© Blackwell Publishing Ltd. 2003

462

Governance and the Public Sector

STATE, ADMINISTRATION

AND GOVERNANCE

IN GERMANY

101

profession. For example, Fritz Morstein-Marx refused to join the prestigious association of Staatsrechtslehrer because he would not sit next to old Nazis. When the emigrants returned they wanted to establish a new state tradition along the lines of —- mostly —- Anglo-Saxon political science. The state should be stripped from all its metaphysical connotations, it should be reduced to ‘government’. Quite a few translated their American textbooks

into German, deliberately avoiding the term state and using ‘government’ (Regierungslehre) or even ‘constitution’ (Verfassungslehre) instead. Examples include ‘Political Power and the Governmental Process’ by Karl Loewenstein and ‘The Representative Republic’ by Ferdinand A. Hermens (German title for both Verfassungslehre) and ‘Constitutional Government and Democracy’ by Carl Joachim Friedrich (Verfassungsstaat der Neuzett). Ernst Fraenkel’s Deutschland und die westlichen Demokratien was also highly influential, as well as Fritz Morstein-Marx and many others, who belonged to this tradition. : Put simply, the democratic tradition argued in many ways just the opposite of the classical etatist tradition: e the state is not separated and does not stand above society, but is part of it;

e pluralism is a necessary prerequisite of the state; no one has the right to define the public good, certainly not civil servants, it is the result of the democratic process (a posteriori Gemeinwohl); government is akout interests and politics, not about truth or the correct legal interpretation of the common good; e only democracy can guarantee the public good — the more democracy, the better the state. The most important characteristic ofthe modern state is democratic control and accountability. It is not separated from society, civil servants are not isolated from and above politics. This, of course, does not interfere with a

traditional hierarchical and legalistic view of the state. Hierarchy is, in this tradition, a necessary pre-requisite of the modern, democratic state, as symbolized in the concept of ministerial responsibility. A whole generation of German political scientists was thus brought up in a new tradition, making them suspicious about the term ‘state’ and keenly aware of its political dimension. In the political science tradition,

‘state’ had markedly negative connotations, leading to a preference for concepts such as political or politico-administrative system (PAS). The new tradition was supported by a new liberal democratic legal doctrine, mostly developed within the German constitutional court. It was embodied by politicians like Adenauer, with his very un-Prussian, catholic background,

or Helmut Schmidt who described himself as leitender Angestellter der Bundesrepublik Deutschland (leading employee of the Federal Republic). Thomas Mann’s sneer at General Dr. von Staat as the typical embodiment of German authoritarian thinking became quite well known. His brother’s Heinrich

© Blackwell Publishing Ltd. 2003

Governance and the Public Sector

102

WERNER JANN

Mann’s novel Der Untertan (translated as Man of Straw), which was written

before WWI and filmed in the 1950s (in the GDR), is perhaps the best example of this highly critical view of the traditional German state and society. The liberal tradition: the over-burdened and over-extended state The third tradition is even more concerned with an overly strong and assertive state, with its threats to civil liberties and its limited abilities and potentials for social problem-solving. In its extreme form this tradition sees the state as the problem, not the solution to most of our collective dilemmas.

Also this tradition does have a long history in Germany going back to a continuous laissez-faire ideology from the old Kaiserreich through the Weimar

republic. It is liberal in the continental

sense of the term, stressing

limited state intervention in the private sector. In the Federal Republic this tradition gained early prominence through the concept of Soziale Marktwirtschaft in the economic sphere. But it is also important as a concept protecting citizens and society against excessive state activism, strengthening expertise and professionalism against egalitarianism and democratization, and finally, in its most elaborated and speculative form, claiming that mod-

ern societies are made up of ‘auto-poetic systems’, rendering any attempt at goal-directed state intervention futile from the start. The concept of Soziale Marktwirtschaft was the term used by Ludwig Erhard, the first Minister of the Economy

to introduce and implement a

free market economy in Germany, starting even before the foundation of the Federal Republic with the introduction of D-Mark in the western occupied zones in 1947. Its basic concepts were traditional liberal economics: private property instead of a large state sector, decentralized allocation through market competition instead of state planning, but cushioned and complemented by state intervention when outcomes are unacceptable and when the market allocation fails; that is, by stringent social and competition policies. These concepts may seem rather trivial today, but they were highly controversial in Germany after WWII. Even the conservative Christian Democrats favoured in their first programme (Ahlener Programm) a large state sector and significant nationalization of industry, and if social democrats had won the first election in 1949, they would certainly have pursued a programme of much stronger state intervention and central planning (Adenauer became chancellor by a majority of one in the first Bundestag). The liberal programme of restricted state intervention is equally influential outside the economical sphere. Its proponents (prominent authors like

Hennis, Schelsky and Dahrendorf, who had been a well-known liberal poli-

tician in the 1960s and 1970s) argue that state and society are not separated, as the classical tradition claims. They are rather differentiated, and it is

important to accept this differentiation in a free and efficient society. The private sphere should be protected from the public sphere and should be allowed to develop with as little state intervention as possible. The distinction, it is claimed, goes back to the classical Aristotelian difference between

© Blackwell Publishing Ltd. 2003

463

464

Governance and the Public Sector

STATE, ADMINISTRATION

AND GOVERNANCE

IN GERMANY _ 103

oikos (the private household) and polis (the public sphere). Blurring this distinction would eventually lead to the downfall of the occidental, western tradition. Accordingly claims for democratisation

of societal spheres, like

working places, universities, Kindergartens, neighbourhoods or even families should be strongly resisted. In the end, they would lead — again towards Gleichschaltung and an authoritarian, total state. The stronger the state and the more politicized decision-making, the less we can rely on neutral expertise to solve complex problems. In modern civilizations classical power relationships have been superseded by Sachzwange and Sachgesetzlichkeiten (impartiality and objectivity). The development of modern socio-technology should thus lead to less political decision-making and state intervention, not more.

In its most radical form this tradition can be found in modern systems theory as proposed by Luhmann and his disciples (Luhmann 1995). This position is highly elaborated, but at its core it argues that the debate about the modern state is merely a big misunderstanding. Modern societies are characterized by differentiation and auto-poetic systems, each functioning after its own, special code. They cannot communicate, much less ‘steer’ each other in a systematic way. Thus ‘state’ is only the way the political system reflects itself, but it is not able to intervene systematically into other societal systems, be they economic, cultural, ecological or scientific. This view in its

speculative tradition is highly attractive to German intellectuals, at least judging from the Feuilleton of the quality press, so Luhmann is a household name, although one can doubt how deep the understanding of ‘auto-poetic systems’ runs in the daily intellectual debate of the ‘chattering classes’. Through all differences, the common denomination of these liberal traditions is a healthy suspicion against the state’s abilities and capacities to solve societal problems and to intervene into non-public spheres. All positions are concerned about the limits of state-controlled problem solving and warn against the failures of over-extended and over-burdened states. They differ in how radical they perceive these limits and where they draw the lines between the public and private spheres, but in the end they trust society and its different sectors and systems to solve their own problems, rather than leaving them to state activism. The Marxist and Socialist tradition: the strong and necessary state Finally, more or less Marxist theories of the state have a long tradition — not only in East Germany, the former GDR, but also quite elaborated amongst intellectuals in the 1970s in the West. Both originate from the Marxist founding of the social-democratic party in the old. Kaiserreich. Put very briefly, in this tradition the bourgeois state is the instrument of the ruling classes, its main function is to guarantee the working of the capitalist system. Democracy, parliamentarism, pluralism, and the growing machinery of government are merely elements and instruments to prolong and to hide the class character of the state.

© Blackwell Publishing Ltd. 2003

465

Governance and the Public Sector

104

WERNER JANN

These theories of various sophistication cannot be examined here. Nevertheless, they have influenced German thinking about governance, especially in the Social-Democratic and Green Parties, and, obviously, in the old GDR. In the more complex and intellectual version, the class character of the state

is constituted via its dominating structural arrangements, ‘behind the back of the actors’, without them being aware or being able to do something about it (Offe 1984). Here state activism is Sozialstaatsillusion, the welfare state merely a dangerous illusion. The practical implications of this kind of reasoning are a deep-seated distance between intellectuals and the state. The state is, by predetermined structural arrangements, a capitalist, unman-

ageable undemocratic entity, so why bother reforming it? Democratic, but also effective and efficient governance is impossible. So any political strategy should be focused outside the state and the established political system. In another, simpler version, the state acts quite literally in the interest of the capitalist system. The identity between monopoly capital and state is quite real, organized through a coherent power elite, elaborate lobbying, corporatist arrangements, and direct pressure. Without continuous and sys-

tematic state intervention the capitalist system could not survive. Here practical implications are much more direct: because the state is important and powerful, to achieve socialist goals and eventually to abolish the capitalistic system, it is basically only necessary to gain control of the state. If the state is ruled by the right majorities and elites, it will be possible to formulate socialist policies and, because resistance can be overcome,

implemented.

The strategy is therefore to capture the state machinery (in the Leninist version)

or to create

democratic

sion — the different implications

majorities

(in the social-democratic

ver-

of both strategies are, of course, quite

severe). But still, in this socialist thinking, the state is the most important instrument to fulfil the intentions of the working classes. At the core of this tradition is once more a hierarchical chain of command. The state is in principle able to control and steer society, and it is also in control of its apparatus.

There will be resistance, but it can be overcome

through an

efficient and effective bureaucracy and hierarchy. This reasoning, albeit having been drastically simplified, is still relevant, because citizens of the old GDR as well as West-German intellectuals were brought up in this tradition. Social-democratic policies, the famous student

revolution of 1968 — and especially the Green Party — cannot be understood without this highly intellectual, speculative and in the end often terribly dogmatic debate. DILEMMAS

AND SOLUTIONS

Changing narratives of state and administration All four state traditions influence the discourses and narratives about government, public administration and governance in Germany since WWIL, reacting quite differently to contingent problems and dilemmas. There are various ways of telling how diverse traditions define, interpret

© Blackwell Publishing Ltd. 2003

466

Governance and the Public Sector

STATE, ADMINISTRATION

AND GOVERNANCE

IN GERMANY

105

and answer the same challenges. One could read the German experiences and discussions as an eternal ‘struggle’ between contradictory world views, where one position may reign for a certain period of time, but where history in the end is cyclical. The same assumptions and solutions are presented again and again. Parallels to cultural theory are obvious (Hood 1998). ‘Nothing new under the sun’ is the daily version of these kinds of narratives. But there are other ways of interpreting the German experiences. The development of administrative policies can also be viewed as a cumulative learning process, or more critically, as a succession of competing fashions and fads. In this part, the story of German administrative policies since WWII will be explained, looking for the underlying Leitbilder and narratives which describe and rationalize different strategies and assumptions. What kind of problems, objectives, theories and solutions were perceived and utilized by people indebted to different traditions sq as to justify or criticize administrative policies? The hypothesis is that beyond all conflicting traditions and world

views, one can identify ‘dominant’

narratives.

Not in

the sense that policies and discourses are consensual and coherent, but by directing and defining policy debates for a certain period of time. The democratic state: rule of law and democracy The conventional narrative about German public administration after WWII sees public administration as basically a continuation of the administrative systems of the Weimar Republic and the Third Reich (Jann 1999). The allied

occupying forces removed the most incriminated Nazi-elites and developed a comprehensive system of ‘de-nazification’ for all administrative personnel. Yet in reality the old organizational, personal, judicial and procedural structures did not change, at least‘in the western zones. The reasons for this have been often told. For both allied occupants and Germans rebuilding public infrastructures was of central concern, and for this a smoothly functioning public sector was indispensable. The allied military governments tried to abolish certain elements, most prominently the traditional civil service system, which they (and their emigrant advisors) thought to a large extent responsible for the overwhelming support of the Nazi dictatorship by administrative elites and personnel. They failed however. Even an allied military law, passed just shortly before the foundation of the Federal Republic in 1949, which abolished the traditional civil service system, was ignored by the German administrative system and was eventually withdrawn. This fundamental continuity of the old administrative system defined the central problems and dilemmas of administrative policies at the beginning of the Federal Republic. The old Nazi-elites and ideologies had been thoroughly discredited, so the new elites (of course, in many respects still the

old ones), regardless from which tradition, were preoccupied with one problem: how did the Nazi catastrophe happen, and how can any recur-

© Blackwell Publishing Ltd. 2003

Governance and the Public Sector

106

467

WERNER JANN

rence be prevented? Since many of the old elites stayed on, especially in the legal and administrative professions, there were bitter and prolonged conflicts. In the end, however, the consensus about what ought to be done was quite substantial. The arising democratic tradition saw the Nazi-period resulting from ‘democratic failure’ of the Weimar Republic. The first German democracy, so the conventional wisdom argued, collapsed due to the old anti-liberal elites and their pre-democratic and authoritarian state tradition, converging in the disastrous and criminal theories of the ‘total state’ by Carl Schmitt,

Forsthoff and others. The predominant objectives of administrative policies were therefore obvious: democracy and the rule of law. The new administrative system should be akin to Western democracy, and this meant a civil service adjusted to parliamentarism and pluralism. All this, according to this narrative, was quite comparable to the traditional structures of a hierarchical, rule-bound and legally-controlled Weberian bureaucracy. This again was easily comparable with the old Staats-tradition. Here the Nazi-period was interpreted as a historic accident, whereby the state had

been taken over by criminals with a highly popular ideology (so Forsthoff’s popular explanation of the Nazi-period). The traditional ‘good’ state was not to blame, but merely ‘bad’ politics. The solution was to strengthen the state against society, by reinforcing its legal basis and autonomy. So the first dominant narrative was essentially a broad, if somewhat uneasy, coalition between democrats, stressing pluralism, parliamen-

tarianism, democratic accountability and control of the public sector with liberal

and

socialist

traditions,

which

wanted

to pursue

either

Soziale

Marktwirtschaft or Sozialstaat (the German version of the welfare state) through democratic means, and traditional lawyers and Staatsrechtslehrer, who tried to preserve the autonomous, legally defined state through the establishment of an ever more elaborate system of judicial control and legalistic reasoning. Hierarchy controlled by a sophisticated system of legal rules and regulation was the preferred solution, both for internal relationships within the public sector, and for the steering mechanisms of the state towards society and economy. So, in the end, the first dominant narrative

was again characterized by the predominance of public law. The new administrative system was supposed to be just like the old one, only democratically

legitimized

and

controlled,

with

legality

being

much

more

important than efficiency. Adenauer and the broad Christian Democratic Union,

embracing

both

liberal

economic

policies

and

labour

unions,

Christian anti-Nazis and old elites, were the perfect symbol for this period.

The active state: planning and reforms It took some time before a new discourse about administrative policies and practices gained prominence in the mid-1960s. This new narrative was about the active state or, as it was called quite programmatically, about

aktive Politik. The democratic tradition with its ingrown suspicions towards

© Blackwell Publishing Ltd. 2003

468

Governance and the Public Sector

STATE, ADMINISTRATION

AND GOVERNANCE

IN GERMANY

107

the old German concept of ‘state’ had gained so much ground that, at least in the social sciences, the term with its authoritarian connotations was avo-

ided. In the 1960s, the old elites started to retire and at the same time public

employment grew, leading to quite comprehensive changes, which can be seen, for example, in the transformation from traditional to more political bureaucratic attitudes (Aberbach, Putnam and Rockman 1981). The talk was now about the political-administrative system (PAS), about Regierung und Verwaltung (RV), more and more about policies, and less about law. The second dominant narrative grew out of the dilemmas confronting the

modern welfare state. Also in Germany the state had assumed far greater responsibilities both in the economic and social spheres, and faced growing problems of co-ordination and control. The state was increasingly responsible for the welfare of its citizens, for the overall performance of the economic and social systems. Yet according to the emerging new consensus, it was insufficiently prepared and equipped to fulfil these tasks.

The new narrative emerged first from the conservative and technocratic tradition. Using the legal concept of Daseinsvorsorge, denoting the states responsibility to provide adequate services for its citizens as a prerequisite for social and economic development (again developed by their chief ideologue Forsthoff),

a widely noted debate about the necessity for staatliche

Planung, for both long term and comprehensive state planning began (see the Planung series, starting with Kaiser 1965). When

economic

the first rather soft

recession hit Germany shortly thereafter, the discussion was

reinforced by Keynesian economists and traditional socialists, both urging a more co-ordinated and coherent economic policy. Planning became the overriding catch-phrase, again symbolizing a coalition between different traditions. Assumptions of market failure and

the insufficient steering and planning capacities of the state were the common underlying dilemmas, better information and problem solving capacities of the state being the new and overriding objectives of administrative

policies.

Traditional,

incremental

problem

solving

was

termed

‘reactive’; instead ‘active’ policy making was to be achieved. Even though this discourse had been started by traditional supporters of the strong state, the theoretical foundations came no longer predominantly from law and political science, but increasingly from macro-economic theory and American Policy Science, with their strong rationalistic underpinnings. Solutions were seen in Keynesian macro-economic interventions, in a reform of financial planning, and in a radical overhaul of the machinery of government, ultimately in the introduction of comprehensive planning systems like PPBS, both at local and central levels (B6hret 1970). The social-democratic tradition argued about the elements of ‘political planning’ (see for example Scharpf 1973). The more socialist variant argued about ‘economic planning’, how government control of public and private investment should be

organized and even what the responsible public authority should look like (hence the German

© Blackwell Publishing Ltd. 2003

trade union congress, DGB

1977).

469

Governance and the Public Sector

108

WERNER JANN

The overall agenda of the active state was heavily supported by highlevel government commissions, organizing and structuring the public debate. After new territorial structures at the local level and financial reform

at the federal level, the most important being the Projektgruppe Regierungsund Verwaltungsreform (Project Group for Governmental and Administrative Reform),

which

from

1967 became

the nucleus

of modern

German

administrative science and theory (see for example Mayntz and Scharpf 1975). However, establishing a public discourse about an issue, does not mean that reforms really take place. The dominance of a narrative for a certain time in the public discourse should not be confused with real changes in administrative structures and procedures. The commission for

the reform of the civil service (Dienstrechtsreformkommission since 1970) sat for five years, produced twelve highly acclaimed volumes of evidence and

findings, and in the end changed nothing. The etatist tradition no longer dominated the public discourse, but it was nevertheless able to prevent any changes to its core structural base, the traditional civil service system.

However, when the practical problems of comprehensive planning and the implementation of high-flying public policies became evident, the social science discourse did change. From more or less prescriptive theories of planning, the attention turned to empirical studies of policy formation and

finally implementation. The basic paradigm shifted from hierarchical top-down assumption of policy development by government and implementation

by administrative

agencies,

towards

a bottom-up

perspective,

emphasizing characteristics of target sectors and groups and their reactions,

and finally including the complex processes of policy-development and implementation in public-private networks, the co-operative state, and selfregulating societal systems (see Mayntz 1998 for the most comprehensive overview). But this new narrative did not reach the practical world of public

administration for some years.

The lean state: privatization, de-bureaucratization and management

The end of the 1970s marked the rise of a third dominant narrative about

administrative policies, with a new and clearly discernible agenda. Problems and dilemmas of overload and state failure came to the fore in public discussion (Hennis et al. 1977, 1979). The new debate centred on issues of

bureaucratization

(Btirokratisierung);

(Verrechtlichung); on the unrestrained

tures; on impersonal

and

on

excessive

growth

rules and

regulations

of state tasks and expendi-

in the end inhuman

bureaucratic

procedures,

which lead to the creation of dependent and eventually deprived citizens and clients; on state bureaucracy running out of control; and so on. Similar

to other Western nations neo-liberal academic theories gained importance, but

even

more

influential

were

popular

books,

which

depicted

state

bureaucracy as something from a horror movie (die lautlose Krake, the soundless monster) or somewhat akin to prostitution (das hoheitliche

© Blackwell Publishing Ltd. 2003

470

Governance and the Public Sector

STATE, ADMINISTRATION

Gewerbe),

written

by

a

social

AND GOVERNANCE

democratic

member

IN GERMANY _ 109

of

the

Bundestag

(Lohmar 1978). Both the Christian Democrats, who were re-inventing themselves as a more liberal party under their secretary-general Heiner Geissler, and the Social Democrats took up the challenge early on in widely-quoted conferences (1978 and 1979). Already from their headings one can sense the different traditions, hinting at their preferred solution: the former called their meeting ‘Administrated Citizens — Society in Chains’, the latter ‘Citizens and Administration’. The

classical

state

tradition

saw

these

new,

or

at least

enhanced,

dilemmas as another chance to strengthen the state by reducing it to its important and authentic tasks. A rehabilitated discussion about the ‘strong state’ commenced, proving itself, for example, through the self-assured use

of symbols and rituals. At a conference in Speyer in 1976 the introduction of new official titles and honours was discussed and, amongst other matters, the desirability of the Bundeswehr using tanks at military parades (see Quaritsch 1977). The state should concentrate on its essential tasks, first of

all law and order, and get rid of the socialist welfare state. Conservative politicians proposed the re-introduction of certain ‘aristocratic elements’ (Albrecht 1976, p. 258), traditional Staatsrechtslehrer contemplated the creation of a new elite-corps, which should be co-opted entirely undemo-

cratically and ‘nurse real state mystery’. One even wondered whether a state which had abolished public executions could be called a real state (Leisner 1979). These examples can be seen as somewhat eccentric, but they show that the old state tradition even in its more extreme fashion was still alive (see Béhret et al. 1988, p. 327 ff). At the same time the democratic state tradition started a prolonged dis-

cussion of the pros and cons of Verrechtlichung (Voigt 1980). It reacted by creating de-bureaucratization commissions in every state (Land) of the Federal Republic. At the federal level there were, at least for the time being, no new commissions. The ministry of the interior held, however, a large

and illustrious hearing about the ‘Causes of a bureaucratization of public administration and about selected activities to improve the relationship between citizens and administration’, assembling most of the administrat-

ive science elite of Germany (documented by Mayntz 1980). De-regulation and de-bureaucratization commissions at the federal level were finally created when the conservative Kohl government took over in 1982 (see Jann and Wever 1998 for a detailed account). The rising criticism of state overload, bureaucratization and fiscal irresponsibility saw the social-democratic tradition on the defensive. The typical reaction was a renewed discourse on citizen participation in state activities (started by the social-democratic congress in 1979). The state should be strengthened by involving citizens in its activities, but certainly not by reducing or handing over some of its tasks. Another strategy was to deny

© Blackwell Publishing Ltd. 2003

Governance and the Public Sector

110

471

WERNER JANN

the reality of government overload and any fiscal crises in principal (Lafontaine 1990). The liberal tradition finally used the debate surrounding the new dilemmas to promote privatisation, which immediately triggered severe resistance from the trade unions. For example, the public sector union OTV instituted in 1975 a series of publications arguing against privatization. At the more traditional level the Kommunale Gemeinschaftsstelle fiir Verwaltungsvereinfachung (KGSt), an important agency advising local governments on matters of administrative reform, had already in 1976 started deliber-

ations about the critique (and ultimately reduction) of state tasks (Aufgabenkritik). It took quite a while — until the beginning of the 1990s — before the objectives of simplification, de-bureaucratization and state reduction were backed and strengthened by a new agenda of managerialism, contractualizing, outsourcing and marketizing, following the international agenda of NPM. The debate was set off at the local level by a famous, somewhat polemic article by a well-known practitioner and head of the KGSt, Gerhard Banner, who described the traditional, honoured principles of the German

legalistic-bureaucratic administration as ‘organized irresponsibility’ (Banner 1991). The story of the ‘bushfire-like’ spread of the German version of NPM,

the Neues

Steuerungsmodell, has often been told (Reichard

1997).

Again the close links between practitioners and academics are evident, because the KGSt used mixed teams from both sides to develop its German version of NPM (including Reichard). And again the new narrative was espoused by a broad coalition drawing on diverse traditions: NPM-like reforms where proposed and taken up not only by ardent liberal politicians and academics (Mitschke 1990), but soon by conservative academics (Hill

1993), social democrats (for example the government of Schleswig-Holstein 1993; Banner being a social democrat himself) and even green politicians and academics (Clasen et al. 1995). A government that ‘works better and costs less’ offered something for every tradition. From the outset this new, now heavily managerial discourse was backed by private consultants and by foundations, most prominently by the wealthy and active Bertelsmann Foundation. Like its predecessors, this narrative was not confined to one level of Ger-

man federalism, nor to one party-political dimension. Management and analogies with the private sector became the supreme catch-phrases of the 1990s. Working its way up through the German system, dominating first local government and later the modernization discourses at the different Lander, this discourse was also eventually backed by a blue-ribbon federal commission, the Sachverstindigenrat Schlanker Staat (Expert Commission Lean State) from ommendations,

1995 to 1997, which produced a large volume of recbasically every NPM-related suggestion ever

containing

made. For a time, the managerial narrative became so prominent, that only a few deviating positions could be heard. Klaus Kénig (1996) argued, from

© Blackwell Publishing Ltd. 2003

472

Governance and the Public Sector

STATE, ADMINISTRATION

AND GOVERNANCE

IN GERMANY

111

a modern etatist tradition, that market principles should and could not be transferred to the public sector, while Hans-Ulrich Derlien (1996) pol-

emicized against the loss of democratic control in public management. The activating state Finally, towards the end of the 1990s new problems and dilemmas were defined and discovered, and a new Leitbild appeared on the public agenda, the ‘activating state’. Mostly politicians and intellectuals close to the Social Democrats and obviously inspired by the ‘third way’ and ‘New Labour’ debates were responsible for this new agenda. However, the implications and applications seem to be of wider applicability. The underlying reasons for this new narrative are quite obvious. On the one hand, the concept offers an alternative to the conservative and neo-liberal ‘lean state’ agenda. On the other hand, it allows reformers to keep the state as an important and vital actor for the development of public welfare, while at the same

time reacting towards its diminished role in problem solving and offering a new definition of its future functions. At the core of this new agenda are again new assumptions and explanations about the reasons for governmental failures and their underlying problems. So the difficulties of steering the modern state are not simply caused by state and bureaucracy failure, even though internal structures and processes are inadequate and have to be modernized. Rather it is caused primarily by the inherent complexity and interdependencies of modern societies. Individualization, exclusion and fragmentation are first

of all results of the accelerating modernization and differentiation of the modern world. To cope with the ensuing dilemmas not only the state needs to change, but new forms of interactions between state and society have to be invented, enabling new modes of societal self-regulation. It is no longer just ‘state failure’ which lies at the heart of the dilemmas of modern governance, but rather ‘community failure’. In order to cope with these problems, we need more advanced patterns of negotiated public-private coordination. Solutions lie, first of all, in creating and strengthening autonomous, self-

regulated networks which generate ‘public value’ without the state. Thus, the ‘third sector’ between state and market, comprised by associations, nonprofit agencies and clubs, which in Germany traditionally have played an important role in social policy, is rediscovered, as is civil society (Biirgergesellschaft). The traditional division of labour between state and society has to be ‘re-invented’,

and there is a new

concept

of state, the

Gewahrleistungsstaat (guaranteeing state). It has to guarantee the extent and the quality of public services but, at the same time, create and encourage alternatives ways of financing and delivering these services, using the whole spectrum between state, third sector, civil society and market. For

this we need coherence and ‘joined-up’ government, e-government being one of the instruments to achieve this. The overall gist of this new agenda is captured nicely in the programme

© Blackwell Publishing Ltd. 2003

Governance and the Public Sector

112

473

WERNER JANN

‘Modern

State — Modern

Administration’

1999) by the Social-Democratic

(Bundesministerium

and Green government

des Innern

from December

1999. There follows the official translation, where the term ‘enabling state’ is used for the German aktivierender Staat:

The state and the administrative system must redefine their tasks and competencies taking into account the changed conditions within society. The enabling state will promote the devolution of responsibility where it is feasible. This means that there will be a new distribution and grading of responsibilities between

the state and society: (...) A reform of the

state and its administrative system which is based on such a model must create a new balance between state duties, individual initiative and social

commitment. This will shift the focus in such a way that the state becomes less of a decision taker and producer and more of a mediator and catalyst of social developments which it cannot and must not control on its own. The enabling state means strengthening society’s potential for self-regulation and guaranteeing the necessary freedom of action. Above all, this requires the concerted action of public, semi-public and

private players to achieve common goals. (Bundesministerium des Innern 1999) The new agenda is backed and popularized by programmatic articles in academic and ‘high-brow’ journals and books, in particular by Chancellor Gerhard Schréder (and his ghost-writers), who already coined the concept ‘activating state’ when still an ambitious prime minister of Niedersachsen (Schréder 1995) and managed to start a quite lively debate about the virtues and pitfalls of ‘civil society’ (Schréder 2000). Even though the concept did not become part of ordinary political debate, the significance of the new discourse is still apparent. For example, Bundestag established an advisory Enquete-Kommision about ‘Civil Engagement’; and the federal government opened a new internet-portal ‘www.wegweiser-buergergesellschaft.de’. In addition, internationally, the government tried to push the agenda by taking an active part in the ‘progressive governance’ network of ‘third way’ government leaders, arranging one of its high-level conferences in Berlin.

Not only central government is pursuing the new agenda. At the local level one of the gurus of the Neues Steuerungsmodell annoyed his devoted followers by declaring that the managerial service-orientation was only a first step and certainly not enough. What was needed was a citizen-orientation in the new Biirgerkommune (Banner 1920). The KGSt also joined the new bandwagon (KGSt 1999), and even the hallmark of the management crusade, the Bertelsmann-Stiftung, created a new central theme — ‘CIVITAS —

Network of citizen-oriented local communities in Germany’. Evidently, the new agenda is inspired by current trends of the social sciences. Network theory, the co-operative state and other concepts, claim-

ing the demise of the hierarchical state, which have dominated public policy research in Germany since the beginning of the 1980s, have finally trickled

© Blackwell Publishing Ltd. 2003

474

Governance and the Public Sector

STATE, ADMINISTRATION

AND GOVERNANCE

IN GERMANY

113

down to practical politics, as have fashionable concepts such as social capital and communitarianism, whose proponents are quoted widely in the relevant literature (see, for example, the journal Gewerkschaftliche Monatshefte No. 6 1999). Interestingly, he term ‘governance’ is increasingly introduced

as an all-purpose political concept, denoting this new form of decentralized, self-organized steering. But the new agenda is not only attractive as an alternative to former socialist ideas of the hierarchical state. Because it stresses the importance of social, political and administrative cohesion, participation and civil engagement, it also appeals to the democratic tradition. Government and

governance are again about proper institutional arrangements, values and appropriate behaviour, about suitable relations between society and state, and not only about incentives and markets. The activating state narrative fits these beliefs, because it stresses the co-ordination of all kinds of actors, whether public, private or ‘third sector’, and because.it stresses the combi-

nation of different modes of steering, especially the importance of networks and ‘trust’. But also the old anti-etatist, left-wing-green tradition fits nicely, since problem-solving without and outside the state is stressed; networks

as an alternative to state-centralized social policies having been a prominent green catch-phrase since the 1980s. System theory uses the same approach to theorize about context-steering, once more disenchanting the state (Willke 1997). The liberal tradition has, of course, its problems with any concept using the state as ‘activating’ anything, be it the market or civil society. But also

here the discussion of a self-organized ‘welfare society’ as an alternative to the welfare state has been put forward (see Dettling 1995). The etatist tradition is, as always, concerned about the proper boundaries between state and society. But also this traditon has changed. The more modern section of the public law profession accepts the new agenda and discusses how the legal definition of the Gewdahrleistungsstaat should look like and how a special, new form of public law, regulating the different steps in the states responsibilities for public service provisions could be established (Schuppert 1999).

CONCLUSION

Table 1 presents a simplified summary of the narratives presented in this article. The idea is to underscore

the main

argument,

that we

can

dis-

tinguish different dominating Leitbilder of public sector reform in the history of the Federal Republic, that these narratives are more than just fads but represent certain learning experiences of different traditions, and that they become dominant because they offer acceptable answers to perceived dilemmas confronting different traditions. At the same time, these traditions change. Each has its ‘museum-wardens’, who are engaged in a permanent retreat, defending the autonomous or the classical welfare state,

trying to resist any kind of revision. But others adjust their traditions to

© Blackwell Publishing Ltd. 2003

Governance and the Public Sector

114

475

WERNER JANN

TABLE

1

Dominant narratives and their underlying traditions The democratic

The active state

The lean state

(beginning of 1950s)

(middle of 1960s)

(end of 1970s)

Authoritarian tradition Nazi governance ‘Democracy failure’

Interventionist state Incrementalism ‘Market failure’

state

Dilemmas

Catch phrase

Etatist answer

= Demokratie

Rule of law Rechtsstaat

The activating state

Government overload — Unregierbarkeit ‘State failure’

(middle of 1990s) Fragmentation Exclusion ‘Community failure’

Planung Aktive Politik

EntBurokratisierung Management

Zivilgesellschaft Governance

Daseinsvorsorge Technocratic

Strong state Privatization

Gewihrleistungsstaat

planning

Guaranteeing state regulation

Democratic answer

Pluralism Parliamentary government

Active policy making Policy science Political planning

Debureaucratization Task reduction Simplification

Institutional arrangements Trust in civil society

Liberal answer

Soziale Marktwirtschaft

Less state intervention

Privatization Marketization Contracting

Public-private partnerships Managerial third sector

Welfare society Socialist answer

Sozialstaat Welfare state

Keynesianism Citizen Investitionslenkung participation Economic Professionalism planning

Enabling state Regulation

Preferred solution

The democratically controlled hierarchical state Law Hierarchy

The active state Governmental reforms PPBS information

Less state New Public Management Competition Incentives

Autonomous, self-regulated networks Different steering modes Trust in civil society

Main commissions

Parlamentarischer Rat 1949

Territorial Reform 1965ff Projektgruppe Regierungs- und Verwaltungsreform

Entbtirokratisierungs- Buirgerschaftliches kommissionen Engagement 1998 1978ff

1968 Dienstrechtsreform 1970

© Blackwell Publishing Ltd. 2003

Schlanker Staat

1995

476

Governance and the Public Sector

STATE, ADMINISTRATION

AND GOVERNANCE

IN GERMANY

115

new dilemmas and narratives, trying, for example, to define the legal boundaries of the activating state or the institutional arrangements that guarantee coherence and joined-up governance. The wider argument is, that administrative policies can be understood and should be analysed just like any other policy field, or at least using the same concepts, and that narrative policy analysis, stressing the importance of ideas and normative concepts in policy formation and implementation, should play an important part in our understanding of administrative reform. Leitbilder and narratives of administrative policies include historical, generic and causal stories about how administrations are, and how they ought to be, but first of all they are concerned about the implicit relationships between bureaucracy and politics, state and civil society. So

they are grounded in and have to be understood in the context of political theory. This tends to be forgotten in much of the rn debate about public management and reform. This article could not cover all relevant aspects of the evolving governance agenda in Germany. For one, the international aspects of the various

stages of debate are under-played, they become more important as time passes, and both the managerial and the governance narratives are obviously not specifically German debates. Also the relationship between discourse and practice is more complex than could be discussed in this paper. Narratives change because of practical experiences, they are not just Sprachspiele. One important change is of course totally missing from this story — German unification in 1990. This is no accident: unification did not alter administrative policies and narratives. Citizens and elites in East Germany were brought up in the Marxist tradition, but they just joined Western political debates, as they joined everything else. Unification may have to some

extent hampered the managerial narrative, because it was a heavily stateled process, and because the traditional West-German bureaucratic system was transferred to the east. But the reform narratives followed soon after,

and in the end it did not stop the bandwagon. As this article argues, it is not sufficient to interpret the ups and downs of different discourses and Leitbilder as more or less erratic, postmodern fashions and fads. Instead, the line up of the central catch phrases from

democratic via active and lean to the activating state reflect learning processes. It is also not a cyclical process, where each tradition has its time and

place, competing in an eternal life cycle. Traditions, at least in Germany, are quite stable, but they adjust to different themes and dilemmas, and they do change. These learning curves are supported by academic discourses, not least through

the clarification

of concepts.

However,

academic

dis-

courses follow actual changes and do not fabricate them. It is above all the political competition creating a continuous demand for ‘better’, more appropriate Leitbilder to guide and explain current policies. The phases of public sector narratives match rather nicely the political phases in

© Blackwell Publishing Ltd. 2003

477

Governance and the Public Sector

116

WERNER JANN

Germany — but interestingly narratives change first, new party-political coalitions usually following a few years later. Different Leitbilder, like the now

fashionable governance narrative, can

be interpreted as a welcome device to sell neo-liberal policies of the minimalist state to reluctant social-democrats and traditional etatist civil servants. And of course it is used in this way. But it also reflects criticism and experiences of its predecessors. By stressing the institutional foundations of the public sector, different modes of steering and co-ordination, norms,

rules, appropriate behaviour and trust, it draws on older traditions and tries to correct certain apparent mistakes of its immediate forerunners, the managerial and interventionist narratives. Ultimately it becomes obvious, that this is not the end of (administrative) history. It will be exhilarating to see when administrative science picks up the scent of the next great narrative of administrative reform. REFERENCES Aberbach, J.D., R-D. Putnam and B.A. Rockman. 1981. Bureaucrats and politicians in western democracies. Cambridge, MA: Harvard University Press. Albrecht, E. 1976. Der Staat — Idee und Wirklichkeit. Stuttgart: Seewald. Banner, G. 1991. ‘Von der Behérde zum Dienstleistungsunternehmen’, Verwaltung, Organisation, Personal, 1,

6-11. Banner, G. 1998. ‘Von der Ordnungskommune zur Dienstleistungs- und Birgerkommune’, Der Biirger im Staat, 4, 179-86. Benz, A. and K.H. Klaus. 1996. A new German public sector? Aldershot: Dartmouth. Benz, A. 2001. Der moderne Staat. Munich and Vienna: Oldenbourg.

Bohret, C. 1970. Entscheidungshilfen fiir die Regierung. Opladen: Westdeutscher Verlag. Bohret, C., W. Jann and E. Kronenwett. 1988. Innenpolitik und politische Theorie. Opladen: Westdeutscher Ver-

lag. Bundesministerium des Innern. 1999. Modern State - Modern Administration. The Programme of the German Government. Berlin (www.staat-modern.de) Clasen,

R., E. Schréter,

H. Wiesenthal

and

H. Wollmann.

1995.

Effizienz und

Verantwortlichkeit.

Refor-

mempfehlungen fiir eine effiziente, aufgabengerechte und biirgerkontrollierte Verwaltung. Gutachten im Auftrag der Bundestagsfraktion Btindnis 90/Die Griinen, Berlin. Derlien, H.-U. 1996. ‘Germany: The intelligence of bureaucracy in a decentralized polity’, in J.O. Olsen and G.B. Peters (eds), Lessons from experience. Oslo: Scandinavian University Press. Dettling, W. 1995. Politik und Lebenswelt. Vom Wohlfahrtsstaat zur Wohlfahrtsgesellschaft. Gutersloh: Bertelsmann Stiftung DGB-Bundesvorstand (eds). 1977. Gewerkschaft und Mitbestimmung, Dusseldorf. Dyson, K. 1980. The state tradition in Western Europe. A study of an idea and institution. Oxford: Robertson. Ellwein, T. 1994. Das Dilemma der Verwaltung: Verwaltungsstruktur und Verwaltungsreformen in Deutschland. Mannheim: BI Taschenbuchverlag. Forsthoff, E. 1933. Der totale Staat. Hamburg:

Hanseatische Verlagsanstalt.

Forsthoff, E. 1971. Der Staat der Industriegesellschaft. Munich: Beck. Grimm, D. 1996. ‘The modern state — continental traditions’ in F.X. Kaufmann, V. Ostrom and G. Majone (eds), Guidance, control, and evaluation in the public sector. Berlin and New York: de Gruyter.

Heidenheimer, A.J. 1986. ‘Politics, policy and policey as concepts in English and continental languages’,

Review of Politics, 48, 3-30. Hennis, W., P.G. Kielmannsegg and U. Matz (eds). 1977, 1979. Regierbarkeit. Studien zu ihrer Problematisierung

Vols 1 and 2. Stuttgart: Klett-Cotta.

© Blackwell Publishing Ltd. 2003

4785

Governance and the Public Sector

STATE, ADMINISTRATION

AND GOVERNANCE

Hill, H. and H. Klages (eds). 1993. Qualitéts- und erfolgsorientiertes Duncker & Humblot. Hood, C, 1998. The art of the state. Oxford: Clarendon Press. Jann, W. and G. Wewer.

IN GERMANY

117

Verwaltungsmanagement.

Berlin:

1998. ‘Helmut Kohl und der “schlanke Staat”’ in G. Wewer (ed.), Bilanz der Ara

Kohl: Christlich-liberale Politik in Deutschland 1982-1998. Opladen: Leske and Budrich. Jann, W. and G. Wewer. 1999. ‘Zur Entwicklung der 6ffentlichen Verwaltung’ in T. Ellwein and E. Holtmann (eds), 50 Jahre Bundesrepublik Deutschland ~ Rahmenbedingungen — Entwicklungen — Perspektiven. Opladen: Westdeutscher Verlag. Jann W. and G. Wewer. 2002. ‘Der Wandel verwaltungspolitischer Leitbilder’ in Konig, Klaus (eds), Deutsche Verwaltung an der Wende zum 21. Jahrhundert, Baden-Baden:

Nomos. forthcoming

Jacquin, D., A. Oros and M. Verwij. 1993. ‘Culture in international relations. An introduction to the special issue’, Millenium, 22, 3, 375-77. Johnson, N. 1978. ‘Law as the articulation of the state in Western Germany: A German

tradition seen from

a British perspective’, West European Politics, 1, 177-92. Kaiser, J.H. (eds). 1965 ff. Planung — Bande 1-6. Baden-Baden:

Nomos.

KGSt (eds). 1999. Biirgerengagement. KGSt-Bericht, 6, 99. Konig, K. 1996. ‘Unternehmerisches oder exekutives Management — die Perspektive der klassischen 6ffentli-

chen Verwaltung’, Verwaltungsarchiv, 87, 19-37. Kénig, K. 2001. ‘Public administration in the unified Germany’, in K. Kénig or H. Siedentopf (eds), Public administration in Germany. Baden-Baden: Nomos. Kruger, H. 1964. Allgemeine Staatslehre. Stuttgart: Kohlhammer. Lafontaine, O. 1990. Deutsche Wahrheiten. Hamburg: Hoffmann

& Campe.

Leisner, W. 1979. Demokratie. Selbstzerstorung einer Staatsform? Berlin: Duncker

& Humblot

Lohmar, U. 1978. Staatsbiirokratie: Das hoheitliche Gewerbe. Munich: Goldmann. Luhmann, N. 1995. Social Systems. Stanford, CT: Stanford University Press.

Mayntz, R. 1998. New challenges to governance theory. European University Institute, Jean Monnet Chair Paper RSC No. 98/50 Mayntz, R. and F.W. Scharpf. 1975. Policy-making in the German federal bureaucracy. Amsterdam: Elsevier. Mitschke, J. 1990. Wirtschaftliches Staatsmanagement. Baden-Baden: Nomos. Muramatsu, M. and F. Naschold. 1996. State and administration in Japan and Germany. Berlin and New York:

de Gruyter. Offe, C. (edited by John Keane). 1984. Contradictions of the welfare state. Cambridge, MA: MIT Press.

Pollit, C. and G. Bouckaert. 2000. Public management reform: a comparative analysis. Oxford: Oxford University Press. Quaritsch, H. (eds). 1977. Selbstdarstellung des Staates. Berlin: Duncker & Humblot. Reichard, C. 1997. ‘Neues Steuerungsmodell: local reform in Germany’, in W.J.M. Kickert (ed.), Public man-

agement and administrative reform in Western Europe. Cheltenham: Edward Elgar. Reinhard, W. 2000. Geschichte der Staatsgewalt. Munich: Beck. Scharpf, F.W. 1973. Planung als politischer ProzeB. Frankfurt: Suhrkamp.

Schmitt, C. 1931. Der Hiiter der Verfassung. Tiibingen: Mohr. Schréder, G.. 1995. ‘Der aktivierende Staat aus der Sicht der Politik’, in F. Behrens

(eds), Den Staat neu

denken. Berlin: Sigma. Schréder, G. 2000. ‘Die zivile Biirgergesellschaft’, Neue Gesellschaft, 4, 200-7. Schuppert, G.F. (ed.). 1999. Jenseits von Privatisierung und ‘schlankem Staat’: Verantwortungsteilung als Schliisselbegriff eines sich verdindernden Verhiltnisses von offentlichem und privatem Sektor. Baden-Baden: Nomos. Seibel, W. 2001. ‘Administrative reforms’ in K. Kénig and H. Siedentopf (eds), Public administration in Germany. Baden-Baden: Nomos. Voigt, R. (ed.). 1980. Verrechtlichung: Analysen zu Funktion und Wirkung von Parlamentarisierung, Biirokratisierung und Justitzialisierung sozialer, politischer und okonomischer Prozesse. Konigstein (Ts.): Athenaum. Voigt, R. and W. Luthard. 1986. ‘Von Dissidenten und Klassikern. Zitationsanalyse der Verdffentlichungen der Vereinigung der Deutschen Staatsrechtslehrer’, in E.V. Heyen (ed.), Historische Soziologie der Rechtswissenschaft. Frankfurt am Main: Klostermann. Wagener, F., 1979. ‘Der Offentliche Dienst im Staat der Gegenwart’,

Veréffentlichungen der Vereinigung der

deutschen Staatsrechtlehrer. 37, Berlin and New York: de Gruyter, pp. 215-66.

© Blackwell Publishing Ltd. 2003

Governance and the Public Sector

118

WERNER JANN

Wildavsky, A. 1987. ‘Choosing preferences by constructing institutions’, American Political Science Review, 81, 3-22. Willke, H. 1997. Supervision des Staates. Frankfurt: Suhrkamp.

Wollmann, H. 2000. ‘Local Government Modernization in Germany: Between Incrementalism and Reform waves’, Public Adminstration, 78, 4, 915-36. Wollmann, H. and E. Schréter. 2000. Comparing public sector reform in Britain and Germany: key traditions and trends of modernisation. Aldershot: Ashgate.

479

[23] GOVERNANCE MATTHEW

IN WHITEHALL

FLINDERS

Governance theory raises conceptual and theoretical questions about the coordination of complex social systems and the evolving role of the state within that process. A central aspect of the governance debate focuses on the ability of national governments to address salient social issues. This article examines the British Labour governments’ attempts to facilitate cross-departmental inter-organizational collaboration within Whitehall in an attempt to develop innovative responses to seemingly intractable social problems. The government's desire and strategy to increase its capacity to orchestrate ‘joined-up’ government can be interpreted as both an acceptance and a response to the challenges of modern governance. The article locates the structural, procedural and cultural responses to this challenge within the theoretical and analytical framework of governance theory. It concludes by suggesting that meaningful change in the way public policy is designed and implemented may well demand a more deep seated reappraisal of the structure of Whitehall and the dominant values of the British political elite than is currently anticipated.

Governance theory reconceptualizes traditional approaches of examining the state (Rhodes 1997). It highlights weaknesses in adopting the ‘Westminster model’ as the organizing perspective around which contemporary research is conducted, instead favouring the ‘differentiated polity’. Governance theory therefore stresses the empirical manifestations of state adaptation to its external environment in the early twenty-first century (Pierre 2000). More broadly, governance theory also raises conceptual and theoretical questions about the co-ordination of complex social systems and the evolving role of the state within that process. Governance therefore refers to the challenge of steering and co-ordinating a complex range of organizations via a control system constructed upon a multiplicity of linkages (Bovens 1998; Kickert et al. 1997). A central aspect of the governance

debate focuses on the ability of national governments to address salient social issues. This article examines the British Labour governments’ attempts to facilitate cross-departmental inter-organizational collaboration within Whitehall in an attempt to develop innovative responses to seemingly intractable social problems. The government's desire and strategy to increase its capacity to orchestrate joined-up government (JUG) can be interpreted as both an acceptance and a response to the challenges of modern governance. However, the literature on governance is eclectic. Matthew Flinders is a Lecturer in Government in the Department of Politics at the University of Sheffield. Public Administration Vol. 80 No. 1, 2002 (51-75) © Blackwell

Publishers

Malden, MA 02148, USA.

Ltd. 2002, 108 Cowley

Road, Oxford

OX4

1JF, UK

and 350 Main

Street,

48]

Governance and the Public Sector

52

MATTHEW

FLINDERS

The first section of this article reviews a number of dominant perspectives and approaches to governance. A definition of governance theory is proposed which isolates four key themes or variables as central aspects of the wider literature and which can be usefully applied as an organizing perspective for empirical research on state adaptation. The article then proceeds to: explore the problem of departmentalism; outline earlier attempts within Whitehall to address this issue; and, set out the plans of the present Labour government. The final section considers the government's response juxtaposed with a discussion of the four variables (control, co-ordination,

accountability and power) highlighted as forming the foundation of governance theory. The article concludes by suggesting that the current plans may be insufficiently radical and that they risk producing a range of unintended consequences. GOVERNANCE

THEORY

When Sidney Low wrote The Governance of England in 1904, his use of the term ‘governance’ was the result of careful selection. Indeed he stressed that ‘the governance of a people is concerned with much besides politics’ (p. xxxvi). His central thesis questioned the degree to which the political and institutional machinery of the time could cope with the emerging social and constitutional challenges. He concluded: ‘The stability of our institutions may be exposed to tests more searching than they have recently had to encounter’. Almost a century later ‘governance’ has emerged as a grand narrative to encapsulate the increasingly complex relationship between

state and

society. However,

governance

is a contested

concept.

Pierre and Peters (2000, p.7) note: ‘The concept of Governance is notoriously slippery. It is frequently used among both social scientists and practitioners without a definition which all agree on’. Therefore to make reference to ‘governance theory’ risks suggesting a false coherency. Governance theory can be said to be in an embryonic phase of development. Its utility derives from the questions it posits about the interaction and linkages between the state, the market and civil society. Moreover, it questions the epistemological and ontological foundations on which traditional research has been conducted. For Pierre and Peters (2000, p. 7), governance

theory therefore refers to future refinement through to design and advocate a the fact that the uses and Kooiman

a ‘proto-theory’ — a preliminary theory awaiting theoretical and empirical research. Any attempt coherent ‘governance theory’ is complicated by definitions of governance are multifarious (see

1999; Pierre 2000; Pierre and Peters 2000). Governance

is not a

synonym for government. It accepts that the relationship between state and society and particularly the successful implementation of public policy is increasingly dependent upon a much wider array of public, private and voluntary organizations than would traditionally be included within the ‘governmental’ framework. It is, however, possible to extract three primary distinctions or

© Blackwell Publishers Ltd. 2002

482

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

53

approaches from the jungle of governance literature. The first distinguishes between governance as structure and governance as process, Governance as structure emphasizes the historical dominance of hierarchies, markets and networks as the main state forms mediating state-society relations. There is no perfect state form. Nevertheless the perceived failure and inadequacies of hierarchies and markets coupled with the bureaucratic fragmentation occasioned by the marketization and agencification of New Public Management (NPM) has focused attention on governance as the management of complex networks (Kickert et al. 1997). Governance as process emphasizes that governance is about more than institutional design. It considers the interactions both between institutions and between the public and institutions. Governance as process is therefore dynamic and concentrates on issues such as control and accountability. A second distinction underlines both the horizontal (across governance networks) and vertical (between different governance levels) dimensions to governing modern states. Horizontal governance is predominantly interested with the level of the nation state. While this frequently involves coordinating actors at the sub-regional level, it is essentially concerned with the policy process within states. Attempts to foster greater crossdepartmental co-operation within Whitehall would therefore fall within the remit of horizontal governance. Vertical governance emphasizes the increasing inter-dependence between different governmental levels (Hooghe 1996; Kohler-Koch and Eisling 1999). This broader approach to governance also includes an appreciation of the increasingly intertwined global economy and the development of a transnational civil society (Rosenau

1995; Strange 1996; Weiss

1998). In reality, the management

of

complex networks often involves the governance of both vertical and horizontal structures. Hence governance,

in most policy fields, can be seen as

a complex matrix involving overlapping and interdependent organizational relationships. However, matrix management is difficult. To some extent British government has always involved matrix management. But a range of factors, not least the transfer of policy competencies away from central government

and

increased

institutional

fragmentation

within

the state,

have exacerbated traditional tensions. The demarcation between horizontal and vertical governance provides a neat illustration of possibly the most significant distinction to be found within the wider literature: state-centric versus society-centric approaches (Marks et al., 1996). While accepting that theories of governance challenge traditional understandings of state power and capacity, the state-centric approach asserts that the nation state remains the key political actor in society and the predominant expression of collective interests (Pierre and Peters 2000, p. 25). The state-centric approach does not accept that the nation state is losing power or being ‘hollowed out’ but that the role of the nation state and its levers of control are evolving in light of changing domestic and international circumstances (Evans 1997). Much of the literature

© Blackwell Publishers Ltd. 2002

483

Governance and the Public Sector

54

MATTHEW

FLINDERS

on national level horizontal governance adopts an implicit if not explicit state-centric approach. Conversely, much of the literature on vertical multilevel governance approaches the challenges of governance from the opposite perspective via a society-centric approach. As Gamble (2000, p. 291) notes, ‘It starts with the global economy and trans-national civil society and understands the policy process in the UK as part of the system of trans-national governance’. The society-centric approach therefore posits more fundamental questions about the power, capacity and future of national governments. Central to this approach is the movement of policy competencies upward to supranational bodies, outward to quasiautonomous organizations and downward to regional governmental levels. Society-centric approaches culminate in an exposition of the tensions between an increasingly interconnected global political-economy and the fragmented structure of political authority within states. The result, at its most extreme, is a ‘centreless society’ in which the nation state is influenced

by global trends but has little capacity to steer the ship of state (Luhmann 1982). Governance therefore has a dual meaning which explains the variety of approaches to the terms and the confusion regarding the precise scope of the word. ‘On the one hand it refers to the empirical manifestations of state adaptation to its external environment. On the other hand, governance also denotes a conceptual or theoretical representation of co-ordination of social systems and the role of the state in that process (Pierre 2000, p. 3).’ The former is a state-centric approach, the latter emphasizes a societycentric approach. Despite the ubiquitous employment of ‘governance’ within and beyond political science, much of the confusion surrounding the term stems from the failure, on the part of both academics and practitioners, to isolate and

justify the approach or perspective used. Given this fact is it possible to talk of governance as a ‘theory’? Governance seen from a general academic perspective is in something of a mess but is it possible to pull together the disparate literature to advance a coherent definition and some central tenets that could form the basis of a coherent research design facilitating transferability within and between approach and disciplines? The elucidation of a consistent ‘theory’ would provide a valuable grounding or partial organizing perspective on which to base empirical and comparative research — to substantiate and deepen the ‘proto-theory’ outlined by Pierre and Peters (2000). Drawing on the above distinctions and paraphrasing the work of Pierre (2000, p. 3) governance theory can be defined as: the study of the structural manifestation of state adaptation to its external social, political and economic environment with particular reference to the evolving processes and mechanisms

of control,

co-ordination,

accountability

and the location

of

power within complex networks. The remainder of this article seeks to apply this definition of governance theory to an empirical piece of research examining the current attempts within Whitehall to foster a greater degree

© Blackwell Publishers Ltd. 2002

484

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

55

of interorganizational co-operation. The British government's attempts to cultivate JUG can be directly applied to the conceptual and analytical literature on governance. More generally, there is a recognized need within the wider literature to embellish the theoretical literature on governance with empirical research. Case study and comparative analysis will allow analysts to more completely comprehend the response and capacity of nation states to govern in a more globalized and networked environment. It may also highlight the development of new instruments, tools of governance or policy styles with the capacity for transferability or, conversely, demonstrate and explain policy failure. The work of the Cabinet Office is a direct reflection of how the British core executive has interpreted and responded to the challenges of governance. The word governance is deeply embedded in the Labour government's rhetoric and yet there is little appreciation by academics of what practitioners understand by the term or the approach they adopt in designing responses to its challenges. By analysing their response it is possible to locate and interpret it in terms of the various approaches outlined above. It may also be possible to draw on the wider literature to draw out issues and factors which may have been overlooked while also suggesting unintended consequences that may arise from the government's plans. It is clear that at the heart of the government's modernization agenda lies the acceptance of the need to modify both institutional and cultural aspects of the current governing arrangements in order to increase the centre’s governing capacity. Governance demands that flexibility and institutional learning be an ongoing process. There is evidence to suggest that the centre’s capacity for such learning and adaptation is increasing to the point where the ‘hollowing out’ thesis is the subject of fresh challenge (Holliday 2000). But what happens if the ‘filling in’ of the ‘hollowing out’ fails? More precisely, if JUG fails, as similar Whitehall initiatives have done

in the past, what would that indicate for the capacity of the British state to cope with the challenges of governance? If networks as a state form fail, like hierarchies and markets

previously, what kind of state form would

develop? Would it be a new form of communitarian governance based on the devolution of state power to the locality? All these questions are premised on the possible failure of the Labour government's attempts to reassert its central steering capacity and yet failure is not guaranteed — despite the complexity of the problem. THE PROBLEM

Since the mid-nineteenth century, government functions have largely been established within departments of state headed by a minister accountable to parliament (Willson 1955; Schaffer 1957). Throughout the last century, the basic structure of central government remained remarkably stable. Many departments can trace their origins back directly to the Northcote—Trevelyan reforms of the 1860s (6, P, 1997 pp. 17-18). The Haldane Report confirmed the departmental structure as the basic build-

© Blackwell Publishers Ltd. 2002

Governance and the Public Sector

56

MATTHEW

FLINDERS

ing block of the central state (Cmd. 9230, 1918). The bureaucratic configuration of Whitehall manages most areas of public policy in vertical structures — hence the terminology of cages, chimneys and silos. These

vertical structures are arguably effective at delivering discrete policies and providing clear lines of management and accountability. However, the system is administratively, constitutionally and culturally illequipped to deal with society’s ‘wicked’ issues — persistent and intractable, mainly social, problems which reach across departmental boundaries (Stewart 1997). Within Whitehall, the focus of ministers and

officials is concerned with departmental objectives. Complex issues which do not fit neatly within a departmental portfolio, or span the interests of several departments, tend to be neglected. The structural prob-

lems are reinforced by the allocation of budgets on a departmental basis which does little to encourage cross-departmental working. Too often departments have launched their own initiatives which have not been co-ordinated with other departments. Front-line staff have therefore had to contend with a complex range of policies and confused policy messages. This problem was exacerbated by the lack of any central steering mechanism, particularly the cabinet committee system, to reconcile conflicting departmental objectives while at the same time being proactive in encouraging cross-cutting policy formation. Often there are practical problems which make effective cross-departmental working difficult. For example, ‘joined-up’ government can involve substantial costs to one department while the benefits accrue to another (Lovell and Hand 1999). This discourages a collective approach. Legal factors can also inhibit cross-departmental working. For example, joint working arrangements between the Department of Social Security and the Inland Revenue are complicated due to the latter’s tight legal framework. A major impediment to cross-departmental working across Whitehall since the mid1980s has been incompatible IT and computer systems (Cabinet Office 1999d, para. 9.4). However, probably the most significant challenge to cross-departmental working involves the personal and political incentives that ministers and their officials have in putting strategic ambitions above departmental aims. Ministers like to make an impact in their department and gain recognition for high-profile initiatives rather than less visible but significant contributions to cross-cutting objectives (Kaufman 1980). The loyalty of officials to their minister and department is culturally entrenched. This creates a massive cultural barrier to JUG. At present there is little incentive for officials, in financial terms or in terms of enhanced career opportunities, to concentrate on cross-departmental issues. Moreover, although cross departmental working is clearly complex, the departmental structure has inhibited the civil service — as individuals and as an organization — from developing the necessary skills and capacity (Bovens 1998). Although the orthodox model of the central department remains, its

© Blackwell Publishers Ltd. 2002

485

456

Governance and the Public Sector

GOVERNANCE

actual form was radically revised throughout the son 1995; Foster and Plowden 1996). The Next rapid creation of executive agencies, supposedly relationship with their parent department. More

IN WHITEHALL = 57

1980s (Campbell and WilSteps reforms led to the enjoying an arm’s-length broadly, NPM’s emphasis

on decommodification, marketization and incentivization has increased the

organizational complexity and institutional hybridity within the state. Thus it underlines the outdated nature of the ‘Westminster model’ and the utility of the ‘differentiated polity’ as a more realistic analytical framework for the study of the central state (Rhodes 1997). The dominant paradigm of NPM has been subjected to extensive criticism (Hood 1991). Within the differentiated polity the design and implementation of public policy is frustrated by complexity, increased bureaucratic linkages and the decline of central steering mechanisms. As the Head of the Civil Service, Sir Richard Wilson, noted:

I would not claim that the manner in which we implemented all these reforms over the years was a model to emulate. There was not enough overall vision or strategic planning. Too often it was uncoordinated, with

different parts of the centre of government launching similar initiatives simultaneously or at a pace which long-suffering managers in departments found difficult to handle. (1999, p. 5)

The fundamental point is that the reform of government has left the core executive

less, rather than more, able to address critical issues of social concern (Richards 1996; Peters 1996). And yet it would be wrong to suggest that the issues under discussion are new.

A BRIEF HISTORY OF JOINED-UP GOVERNMENT Under every government since the turn of the century ministers have called for more cross-departmental working and have announced plans to realize that ambition (Chester and Willson 1957, Chapter IX ‘The central co-ordination of government 1914-1956’; Hennessy 1989). In the early 1950s, the Conservative Prime Minister, Winston Churchill, introduced the concept of ministerial ‘overlords’ (see Morrison 1954, pp. 28-

57). These formed a layer of ‘co-ordinating’ ministers between the Prime Minister and departmental ministers, recreating a version of the 19401945 War Cabinet (Hennessy 1998). The creation of ministerial overlords floundered on their lack of a powerful department of state, their blurring of the lines of individual ministerial responsibility and, critically, the antagonism between ‘overlords’ and departmental ministers (see Macmillan 1969, p. 485).

During the 1960s, a number of authoritative reports and books lamented the capacity of the British civil service in the sphere of policy making

(Plowden

1961; Sampson

1962; The

Fabian

Society 1964). The

1961 Plowden Report, The control of public expenditure, led to the estab-

© Blackwell Publishers Ltd. 2002

487

Governance and the Public Sector

58

MATTHEW

FLINDERS

lishment of annual government expenditure reviews co-ordinated by the Public Expenditure Survey Committee (PESC). PESC was intended to improve strategic policy making by replacing the annual spending cycle with a medium-term planning strategy in which departments had more flexibility (Pliatzky 1982). A major aim of PESC was to plan public expenditure between departments on the assumption that collegiate decision making by ministers ‘would lead to a willingness to forswear departmental loyalties and take a broader view’ (Heald 1983, p. 187). In 1966, the Fulton Committee was established to examine the structure

and management of the civil service. Although the Fulton Report failed to address the issue of policy making directly, the late 1960s did see a flurry of departmental mergers and amalgamations. For example, in 1966, the Colonial and Foreign Offices were merged and in 1968 the Department of Health and Social Security was created. However, interdepartmental tensions were never fully resolved and were probably most visible between the newly created Department of Economic Affairs and the Treasury. In 1970, the Heath Government published The reorganisation of central government (Cmd. 4506, 1970). The aim was to reduce the number of departments through amalgamations to produce a smaller Cabinet with a broader strategic overview of the government's objectives. The White Paper therefore sought to tackle the problem of ‘departmentalism’ directly. It was responsible for the creation of ‘super departments’. These included the Department of the Environment and the Department of Trade & Industry. The year 1970 also saw the implementation of Programme analysis and review (PAR). PAR was a department-based system of reviewing the efficiency and co-ordination of public policy. As Gray and Jenkins (1985, p. 108) note: Prior to PAR, programmes were rarely assessed together or in terms of their influence on each other. Thus a department's policy impact on other departments, as well as the whole gamut of interdepartmental initiative and the latters consequences were often analysed superficially if at all. The success of PAR, like PESC, was limited. Departmental rivalries ensured

ministers defended their department’s budgets and departments viewed PAR reviews as a threat. PAR failed in the final analysis because it threatened the policy territory of Whitehall departments (Greenwood and Wilson 1984, p.57). PAR

was

abolished

in 1979 and superseded

by the Rayner

Scrutiny Programme. A central mechanism for facilitating strategic cross-departmental working under Heath was the Central Policy Review Staff (CPRS). The CPRS provided a bulwark against departmental briefs and a central co-ordinating mechanism for government policy. As Heath notes, ‘I regard the CPRS as one of the best innovations of my years at No. 10... it helped maintain

© Blackwell Publishers Ltd. 2002

488

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

59

the cohesion of the government’ (1998, p. 316). The CPRS produced issuebased studies which transcended departmental boundaries. In 1975, the CPRS published its Joint approach to social policies Report (JASP). This highlighted the need for greater interdepartmental co-ordination in formulating and administering policies (Plowden et al., 1988). As Greenwood and Wilson note, “The CPRS’s freedom from day to day pressures and vested departmental interests enabled it to engage in more wide-ranging analysis than might otherwise have been possible’ (1984, p. 62; see also Hennessy, Morrison and Townsend

1985). JASP failed and petered out towards the

end of the Callaghan government — ‘it was ambitious, schematic and com-

pletely unsuccessful’ (Blackstone and Plowden 1988, p. 102). The main reasons for failure included ministerial reluctance to pursue long-term aims, the cultural and organizational differences between departments, a lack of incentives for cross-departmental working and the sheer complexity of the exercise (Plowden 2000). In addition to the formal structural mechanisms of cross-departmental working, a great deal of co-ordination has operated through informal channels and mechanisms. This has traditionally rested upon the public service ethos, a common grading system and a similar social background amongst the senior echelons of the civil service. As Heclo and Wildavsky (1981, p. 80) state,

‘...co-operation

is facilitated

by the

fact that, despite

traditional

allegiances, all officials are part of a greater civil service society’. However, it might be argued that an unintended consequence of NPM has been the lessening of informal contact. Concerns regarding the public service ethos, the increased flexibility in terms of pay and grading and the introduction of quasi-market situations have petete prioritized organizational targets above broader objectives. It is clear that since 1945 a range of initiatives to foster cross-departmental working have been established (see Kavanagh and Richards 2001). All of them contain similar aspects and seek to address well-known problems. Departments have been amalgamated and functions transferred. Interdepartmental working parties have proliferated. Cabinet sub-committees and special inter-ministerial working parties have been created to co-ordinate policy across departments. The Cabinet Office has grown while its capacity to nurture ‘joined-up’ working has theoretically been enhanced by the creation of a range of specialist issue-orientated units (for example, the Social Exclusion Unit; Women’s Unit; Rough Sleepers’ Unit; Anti-Drugs CoOrdinator). Taylor (2000) suggests that the creation of these units represents a ‘filling in’ — a direct response to the perceived ‘hollowing out’ of the centre’s strategic co-ordination capacity. The Office of the Prime Minister has been expanded in order to increase the central capacity for steering departments and dealing with interdepartmental conflict (Smith 1999). In a manner reminiscent of the 1950s, the Cabinet Office has enjoyed the company of a range of ministers who have been charged with taking forward strategic cross-departmental aims — without I think any particularly note-

© Blackwell Publishers Ltd. 2002

Governance and the Public Sector

60

MATTHEW

FLINDERS

worthy success. I have in mind the tenures of Roger Freeman, David Clark, Peter Mandelson and Jack Cunningham. Every reform of the civil service has stressed the need to increase secondment both within and outside the civil service in order to encourage cross-departmental planning. The aim of this brief historical account is to underline the fact that the challenges which are being addressed under the current government’s modernization agenda are by no means new. On the contrary, ‘modernizing government’ revolves around finding answers to well-established problems. In 1998, this

task was assigned by the prime minister to the newly created Performance and Innovation Unit (PIU). THE PERFORMANCE

AND

INNOVATION

UNIT

The creation of the Performance and Innovation Unit was announced by the prime minister on 28 July 1998 as part of the changes following Sir Richard Wilson’s review of the effectiveness of the centre of government (Hansard HC Debs. 28/7/98 col.133). The PIU in many ways reincarnates the CPRS, as recommended

by Peter Hennessy et al. (1997, p. 32).

It aims to improve the capacity of government to address strategic, cross-cutting issues and promote innovation in the development of policy and in the delivery of the government's objectives. The creation of the PIU, alongside the new cross-cutting units within the Cabinet Office,

demonstrates that the British political elite is aware of its loss of capacity and is attempting to counter the hollowing out thesis and address the chailenges of modern governance. The Cabinet Office is essentially attempting to learn how to steer networks with the PIU being charged with designing new tools of governance and the various units orchestrating the multiplicity of actors in their particular policy area. Like the CPRS,

it is based

in the Cabinet

Office and reports directly

to the prime minister and is officially a resource for the whole government. The work of the PIU is based around specific long-term projects that cut across institutional boundaries and are carried out by teams assembled from both within and outside government. As one of its first tasks the PIU was charged with examining how current accountability arrangements and incentive systems can be reformed to facilitate joinedup policy-making and delivery. Its recommendations (Wiring it up) were published in January 2000 (Cabinet Office 2000a; see also Cabinet Office 2000b). Wiring it up highlights a number of reasons why JUG is difficult for Whitehall. The main factors are: that policy makers take too narrow a view of the issues that concern them; weak or perverse incentives exist

for cross-cutting working; the civil service lacks the skills and capacity to work across departmental boundaries; and, the centre has largely failed to promote the benefits of effective cross-cutting working. The report emphasizes that a cross-cutting approach will not be appropriate in all circumstances (Box 1).

© Blackwell Publishers Ltd. 2002

489

490

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

61

BOX 1. A typology of the circumstances in which a cross-cutting approach between departments and agencies might be needed (Cabinet Office 2000a,

p. 15) e Strategic policy outcomes requiring a top-down approach led by the centre in order to deal effectively with trade-offs and/or issues affecting several departments;

Optimizing the benefits of policy outcomes across a range of departments and agencies; Achieving the best trade-off between conflicting policy outcomes; Improving the delivery of complementary outputs and services; and,

Improving the implementation of shared tasks and processes to deliver common or different outcomes.

There is, of course, a spectrum of possible cross-cutting strategies which range, at one extreme, from the merger of organizations to the simple creation of shared working procedures and information distribution at the other (Box 2).

BOX 2. The range of different forms of cross-cutting interventions and joint working (Cabinet Office, 2000a, p. 16)

e e e e

Organizational change; ‘ Merged structures and budgets; joint teams (virtual and real); Shared budgets;

e Joint customer interface arrangements; Joint management arrangements; Shared objectives and performance indicators;

Consultation to enhance synergies and manage trade-offs; Sharing information to increase mutual awareness.

It is clear from Box 2 that there are a number of strategies which are conceptually and practically indistinct while also being by no means new. It is also apparent that restructuring organizations has a cost (see Table 1). Cross-cutting approaches are not a panacea for the problems of modern governance. Indeed, the PIU adopts a comparative perspective in order to draw on overseas experience and best practice. Comparative analysis highlights three critical factors. First, although

© Blackwell Publishers Ltd. 2002

49]

Governance and the Public Sector

62

MATTHEW FLINDERS

TABLE

1

2000a, p. 17)

The potential benefits and costs of cross-cutting interventions (Cabinet Office

Benefits

Costs

Helping to convey ‘big picture’ strategic

Less clear lines of accountability for policy and service delivery;

issues (e.g. social exclusion) which are not

captured by departmental objectives; Helping to realize synergies and maximize the effectiveness of policy and/or service delivery;

Greater difficulty in measuring effectiveness and impact, because of the need to develop and maintain more sophisticated performance measurement systems;

Exploiting economies of scale (e.g. sharing of IT facilities, data and information,

Direct and opportunity costs of management and staff time spent

property, etc);

establishing and sustaining cross-cutting working arrangements;

Bringing together organizations or key staff whose co-operation could prove beneficial in other areas — for example, joint working by the police and housing providers on anti-drugs measures;

Organization and transitional costs of introducing cross-cutting approaches and structures.

Improving customer/client focus and thus the quality and user-friendliness of services; Providing a framework for resolving potential conflicts and making trade-offs;

Improving service delivery for particular

groups.

governments

may

set overarching

objectives and budgets which

cross

departmental boundaries, if they fail to alter the main levers of behaviour —

budgetary and accountability systems, relations with parliament and so on — cross-cutting objectives will remain notional. This indicates that joinedup policy making is a far more complex reform agenda than is readily appreciated. It cannot be contained purely within Whitehall but necessitates a complete reappraisal of the Whitehall-Westminster model, in addition to relationships within the core executive. Secondly, cross-cutting objectives need champions at ministerial and permanent secretary level if they are to have a substantial and lasting impact on behaviour. Finally, cross-cutting objectives and targets are also best kept to a minimum. The maintenance of the majority of governmental activity within departments keeps crossdepartmentalism at a realistic level, reduces complexity and allows enthusiasm and commitment to be focused, reduces the potential for crossdepartmental conflict and increases the centre’s capacity for control and co-ordination. The PIU report concludes that six inter-related reforms are necessary if the government's ambitions in the sphere of policy making are to be realized (Cabinet Office 2000a, p. 27). These are:

© Blackwell Publishers Ltd. 2002

492

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

63

stronger leadership from ministers and senior civil servants to create a culture which values cross-cutting policies and services, with systems of rewards and recognition that reinforce desired outcomes; improving policy formulation and implementation to take better account of cross-cutting problems and issues, by giving more emphasis to the interests and views of those outside central government who use and deliver services;

equipping civil servants with the skills and capacity needed to address cross-cutting problems and issues; using budgets flexibly to promote cross-cutting working, including using more cross-cutting budgets and pooling of resources; using audit and external scrutiny to reinforce cross-cutting working and encourage sensible risk-taking; and e using the centre (No. 10, the Cabinet Office and the Treasury) to lead the drive to more effective cross-cutting approaches wherever they are needed. The centre has a critical role to play in creating a strategic framework in which cross-cutting working can thrive, supporting departments and promoting cross-cutting action while intervening directly only as a last resort. ASSESSING

THE QUIET REVOLUTION

In a speech at City University in London in May 1999 Sir Richard Wilson stated that the civil service was engaged in a quiet revolution (1999, p. 18). At the heart of that revolution was the need to change the culture of Whitehall while increasing the core executive’s capacity for complex interorganizational policy making. Governance theory provides a foundation on which this agenda can be placed. Moreover, it identifies important weaknesses in the Westminster model and highlights key problems facing the architects of the modernization agenda. Governance theory is particularly relevant as it emphasizes the inherent tension involved in the government's attempts to restructure and transform the state, in light of internal and external pressures, while maintaining and/or operating through a ‘governmental’ framework — for example, introducing agencification and marketization into the civil service within a credible framework of ministerial responsibility to Parliament. This section seeks to examine the JUG agenda through four inter-linked issues outlined above as being central to governance theory — control, co-ordination, accountability and power.

Control and co-ordination Taking control and co-ordination together, it is evident that the co-ordination of a wide variety of organizations and actors is a complex task. The centre is attempting to strengthen its levers of control while working through an increased number of bureaucratic linkages and across a fragmented structure. In this context, Downs’ (1967) laws of bureaucracy (imperfect control, lessening control, diminishing control and counter

© Blackwell Publishers Ltd. 2002

Governance and the Public Sector

64

MATTHEW

FLINDERS

control) are pertinent. This issue can be demonstrated from a number of perspectives. From a cultural/organizational perspective it is clear that within Whitehall power resides in departments of state: What is often underestimated is the extent to which departments have characteristics and, indeed, characters. Departments are to a very great

extent coloured in their attitudes by the last major reform that they undertook (Williams, S, 1980, p. 92). Peter Mandelson’s belief that a ‘super minister’ without portfolio based in the Cabinet Office could tackle ‘wicked’ issues such as housing or drug abuse foundered because ministers acquire power from the size, status and functions of their department (Mandelson and Liddle, 1996, p. 245). And

yet departments of state are by no means neutral responsive bureaucratic organizations. The PIU is correct to emphasize the significance of the traditional Whitehall culture. Although a contested concept, the Whitehall culture shapes the actions and attitudes of officials. Beneath the general Whitehall culture distinct departmental cultures exist which combine grounded philosophical beliefs with established policy framworks and are heavily influenced by organizational structures. Smith, Marsh and Richards note ‘Essentially, department cultures are structured patterns that provide the framework within which officials and ministers act’ (2001). In light of this, any attempts to alter the culture of officials, and the incentive structures which are designed to achieve this,

must accommodate or at least take into account these distinct departmental cultures. Governance revolves around the manipulation of incentives for the participants of complex networks with the centre working via negotiation and compromise rather than hierarchy and law. And yet the historical institutionalist approach views governing as path-dependent and influenced by embedded precepts (Thelen et al. 1992). Policies that have worked in the past, according to this approach, have more chance of working in the present. Historical institutionalism therefore emphasizes inertia in the policy process and highlights factors that contemporary reforms to produce JUG will have to overcome. Moreover, the strength and impact of cultural

issues within the civil service has not received the analysis it deserves; but given the civil service’s resistance to change in the past, manifested in the partial failure of previous reform programmes, it is possible that the PIU has underestimated the complexity and challenges of occasioning meaningful cultural change within Whitehall. Clearly, the culture of the civil service is constructed around the political

configuration of the Whitehall-Westminster model. Civil servants have no legal personality and are responsible only to their minister. This is enshrined in constitutional convention and its enduring influence is displayed in the government's continuing refusal to abolish the limitations imposed on agency chief executives who appear before select committees. The system was designed to and continues to serve ministers. Officials

© Blackwell Publishers Ltd. 2002

493

494

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

65

attend inter-departmental policy meetings in order to protect their ‘turf’ and inform their minister of any potentially damaging consequences for their department of another’s proposed action. As Donoughue (1987, p. 16 quoted in Taylor 2000, p. 49) remarked, ‘The conduct of British government involves a process of continual inter-departmental debate which frequently turns into intense and protracted trench warfare’. The interests of the department and minister have been equated with maximizing budgets, functions and personnel. Officials therefore view the thought of voluntarily ceding these factors in the name of cross-departmentalism as anathema. When Richard Crossman, newly appointed as Minister of Housing and Local Government in 1964, surrendered responsibility for physical planning to another department, he was immediately assailed by his Permanent Secretary, Evelyn Sharpe, on the grounds that he had significantly weakened the capacity and standing of the department (Kavanagh and Richards 2001, p. 1). The interaction between culture, politics and policy action can often be negative as officials believe they, and not ministers, ‘know best’. For example, research within the Department of Social Security (DSS) indicates that significant tension existed between senior officials and the Secretary of State for Social Security between 1997 and 1998 (Harriet Harman) due to her willingness to reallocate functions and personnel to other departments if she thought that it would deliver improved policy outcomes (for example, the Working Family Tax Credit and Contributions Agency). The notion that departmental ministers can also assume responsibility for strategic cross-departmental issues is not based on encouraging recent precedents. For example, in addition to being Secretary of State for Social Security, Harriet Harman was Minister for Women. Drawing on empirical research within the DSS, it is suggested that combining these roles was extremely problematic. In particular, senior officials, mostly male, failed to take on issues assigned to them by Ms Harman in her capacity as Minister for Women with anything like the vigour demanded. Senior officials appear not only to have failed to understand the link between the social security system and women’s issues but, more importantly, did not really think that women’s issues were something that the Secretary of State for Social Security should be involved in. A senior official in the DSS stated: ’...it was perceived by the department, I think, as an unwarranted burden on a minister who was already too busy (1998)’. It has been suggested that this view was prevalent and frequently resulted in direct disregard for ministerial instructions. For example, it took several months and many instructions before the department created a dedicated Women’s Unit. This lack of bureaucratic support led Harriet Harman to devote an increasing proportion of her time to women’s

issues which, in turn, increased tensions

within the DSS. (The Women’s Unit was immediately transferred to the Cabinet Office on Harriet Harman’s departure from the government.) Cultural challenges are exacerbated by the political dimension of Whitehall reform. It is not clear how the PIU’s recommendations will solve

© Blackwell Publishers Ltd. 2002

495

Governance and the Public Sector

66

MATTHEW

FLINDERS

‘departmentalitis’ — the tendency for ministers to become obsessed with their own department's objectives (see Ponting 1986, p. 102). Ministers’ ambition means they are unlikely to pursue interests which do not deliver benefits to them directly. On occasion, ministers may actively seek to thwart cross-departmental policies in order to damage a cabinet rival and/or enhance their own position. More broadly, the political system itself is a disincentive to cross-departmental working. Ministers often want to see measures that produce results in the short rather than medium or long term because of the pressures of the electoral cycle (Cabinet Office 1999d,

para. 4.2). Within the electoral cycle, cross-departmental working is complicated by reshuffles and resignations. It might therefore be argued that meaningful progress in the sphere of ‘joined-up’ policy making will depend on specific historical and political junctures — ‘windows of opportunity’ (Richards and Smith 1997). The election of the Labour government in 1997 may be interpreted as such a ‘window’. A new Cabinet was made up of individuals who had worked together for many years in shadow teams, had held several shadow portfolios yet few of whom had held ministerial office previously and were bolstered by a large and loyal parliamentary party. A senior DSS official (1998) noted: It was very true when ministers came in and it was positive that they had been working very closely with each other in opposition and were disciplined on coming into power and when initially they were either asked to write or received letters to and from other ministers which said ‘Get your tanks off my lawn. This issue does not concern your objectives!’ they were genuinely and rather encouragingly pained as they thought they were still all colleagues. The argument is that the window of opportunity will close as Cabinet rivalries intensify, departments convince their ministers of the importance of ‘departmental’ objectives and the heavy workload of ministerial office reduces the amount of informal contact between ministers. The crucial question is therefore what happens when the ‘window of opportunity’ closes and ministerial support for JUG wanes? The PIU report would advocate the role of the centre in refereeing interdepartmental conflicts and maintaining a focus on cross-cutting goals. Successful governance is dependent on effective conflict management. However, the pro-active role of the centre may frustrate expected levels of departmental autonomy, much to the annoyance of ministers (while also heightening concern about a ‘control freak’ tendency at the centre). Research conducted within Whitehall in 1998 and 1999 suggests that departments continue

to resent central interference.

between the small issue-orientated units and No. 10 and a number of departments ence within Whitehall is resented because pensate for the failure of departments to

© Blackwell Publishers Ltd. 2002

Moreover,

the relationship

based within the Cabinet Office appears problematic. Their presthey have been created to comtackle these issues. Many senior

496

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

67

officials within departments perceive these units as lacking the necessary specialist knowledge, particularly in the area of implementation, to design realistic policies. A senior official in the Home

Office (1999) stated, ‘The

general view towards the small central units is that they are ephemeral and should not be taken too seriously’. And yet it is clear from the wider literature that network management is fated if key actors are not committed. The creation of new issue-based cross-departmental units to provide horizontal linkages between vertical bureaucratic structures also raises questions of administrative complexity and unintended consequences (see Rhodes 2000a, 2000c). The current reforms are not substituting old structures with new but, on the contrary, are imposing new layers and mechanisms upon the existing framework. It is therefore possible to identify the evolution of a complex matrix within central government. A programme of reform intended to increase efficiency and effectiveness may therefore deliver the unintended consequences of increased costs, more bureaucracy,

reduced flexibility and pluralistic stagnation. For example, the role of the Treasury is clearly changing (Lipsey 2000). And yet there is no mention in the PIU’s recommendations of how differences of opinion between the Treasury and No. 10 would be resolved and, at present, the precise role of, and relationship between

No. 10, the various

parts of the Cabinet Office

and the Treasury, is unclear. Consequently, it is unclear how ‘the centre’ will communicate coherently with departments to underpin the JUG programme — an issue that the Centre for Policy and Management Studies is currently examining. Accountability Governance theory reconsiders traditional approaches to the issue of democratic accountability. The surfeit of literature that laments the democratic deficit provides evidence of how changes in British government have become increasingly difficult to reconcile with traditional processes of accountability (Barberis 1998). At the central level, ministerial responsibility to Parliament was never designed to cope with multi-organizational, fragmented policy systems (Rhodes 1997, pp. 21-2). However, initiatives to foster cross-departmental working are likely to eviscerate ministerial responsibility by increasing institutional hybridity within the central state and blurring departmental boundaries. For example, in July 2000, Home Office Minister Paul Boateng was appointed as the Minister for Young People. He reported to a new Cabinet Committee on Children and Young People’s Services and was supported by a new Young People’s Unit. However, the Young People’s Unit was based not in the Home Office but in the Department for Education and Employment. The 2000 Comprehensive Spending Review made it clear that the Home Office minister was responsible for the day-to-day running of the new Unit. In this respect, a central insight of governance theory is that traditional notions and forms of accountability need to adapt in the light of the evolving state form.

© Blackwell Publishers Ltd. 2002

497

Governance and the Public Sector

68

MATTHEW

FLINDERS

Extant mechanisms of accountability, however, largely structured around

individual departments, reinforce departmentalism (Flinders 2000a). As the Wiring it up report makes clear, cross-cutting policy demands new forms of accountability and scrutiny which do not inhibit inter-organizational working, reinforce boundaries or prevent sensible risk-taking (see Cm 4310, 1999, para.11). As Sir Richard Wilson commented, ‘We want to look at our

concepts of accountability and make sure they do not reward too highly the “safe” way of doing things’ (1999, p. 18). It is clear that traditional frameworks of accountability are evolving (Flinders 2001). Select committees have launched joint inquiries to examine cross-departmental polices (see HC 225, Session 1999-2000) but this has proved problematic (see HC 300, Session 1999-2000, paras. 64-7) and, overall, accountability mech-

anisms focus on departmental targets. As a consequence, departments face a powerful incentive to concentrate on ‘their’ policies and have little incentive to work with other departments or organizations. Some of the mechanisms of parliamentary accountability are inevitably tied into party political point scoring and the ‘theatre’ of the UK House of Commons which obviously discourages ministers and officials from launching innovative and complex policies. If cross-departmental working is taken to its logical conclusion the departmentally related select committee structure would have to be reformed to reflect cross-cutting policies. In effect the House of Commons needs to create its own matrix structure with departmentally related committees scrutinizing the vertical structure of government while also increasing the number of thematic committees to oversee the horizontal structure of crossdepartmental policies (Brazier 2000). JUG replaces individual ministerial responsibility with collegiate responsibility among any number of ministers. The fear would be that, without parliamentary reform, responsibility would become opaque as ministers attempted to shift responsibility to other ministerial stakeholders. The constitutional position of the civil service may also demand formal revision. Officials may increasingly be subject to conflicting and overlapping loyalties (Langford 1984). So the creation of a matrix structure in which the vertical structure of departments are co-ordinated by centrally based horizontal units may provide a flexible dimension to traditional government structures (Hogwood and Gunn 1984, p. 210). But at the same

time, without

concomitant

reforms

elsewhere

in the consti-

tutional infrastructure, the clarity of the relationship between officials and ministers and ministers and parliament risks becoming increasingly uncertain. Power The Westminster model posits some crucial, if implicit, assumptions about

the position and nature of power in central government. However, governance theory seeks to offer more complex theoretical and analytical representations of the state and the position of power within it. The governance

© Blackwell Publishers Ltd. 2002

498

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

69

perspective questions traditional understandings of what constitutes state power. ‘Rather than relying on their legal and constitutional capabilities, states in a governance perspective derive their strength more from coordinating public and private resources, broadly defined. Traditional legal “powers over” are replaced by contextual “powers to”’ (Pierre and Peters 2000, p.9). As Smith

(1998)

illustrates,

the Westminster

model

involves

crude assumptions about the nature of power: its tendency to see power in false dualities; its view of the executive as having a monopoly of power;

and, power being essentially a zero-sum game. Governance theory reconceptualizes power in central government. It suggests that simple notions of power that are hierarchical and zero-sum are inadequate, largely because traditional structures have given way to complex networks in which power is a fluid positive-sum concept and a resource held by all actors. This perspective would seem to reflect the challenges of JUG more realistically than traditional approaches. JUG, like governance, revolves not around command and formal hierarchy but rather around negotiation and management within complex networks.

Consequently,

the modernization

agenda

is constructed on the premise that the rhetoric of JUG will only become reality if all the actors in the networks

(ministers, civil servants,

public/

private/voluntary bodies, interest groups) employ their resources [power] in order to realize these ambitions. This power dependency acceptance seems paradoxical in the light of the undoubtedly centralizing thrust of the reforms. As Rhodes and Bevir (1999, p. 231) stress, they aim to co-ordinate

the departmental cages, a centralizing measure, and to impose a new style of management on other agencies, a central command operating code. However,

networks

are often constructed

on more

flexible and devolved

models. This presents an obvious tension which has not yet been addressed. The Cabinet Office has not yet clarified how the centre is to relate to local authorities, regional bodies and quasi-autonomous bodies for purposes of implementation and control. In addition, the current proposals fail to mention the existence of statutes

that ascribe functions to designated departments, thereby frustrating central intervention. Nor do they appreciate that any attempt to influence departmental policy by the centre is likely to be challenged by members of the established policy network through judicial review (Flinders 2000b). The power of the centre to intervene and co-ordinate is therefore subject to a number of formal and informal limitations. Such an appreciation would appear to sit more comfortably within the ‘differentiated polity’ perspective of the state that governance theory supports rather than the traditional Westminster model. CONCLUSION

Governance theory provides a suitable conceptual and theoretical framework for analysing the attempts to increase inter-organizational policy making within Whitehall, not least due to the fact that it focuses attention on

© Blackwell Publishers Ltd. 2002

Governance and the Public Sector

70

MATTHEW

FLINDERS

issues of control, co-ordination, accountability and power. This article has

only been able to offer a preliminary analysis of what is a far-reaching reform agenda. Despite this it is possible to locate and interpret the response of the Labour government within the range of perspectives and approaches to be found within the wider literature. Not surprisingly, JUG can be interpreted as a state-centric response to the challenges of governance. It defines the nation state as the locus of legitimate and considerable power even if the mechanisms through which that power is exercised demand refinement. The Cabinet Office’s reforms would also fit into the Rhodes (2000b, pp. 72-4) ‘instrumentalist approach’ to central network management. Essentially, it is a top-down model of network steering, recognizing the dominance of central government departments while accepting the constraints imposed by networks. The instrumentalist approach believes in the centre’s capacity to devise new tools of governance to ensure cooperation between network members and to deliver governmental objectives. Rhodes interprets the government's zeal for JUG as epitomizing the long-standing Fabian tradition in the Labour Party which remains faithful to the potential of administrative engineering. However, as identified above, a central problem with this approach is the centralizing thrust which may produce conflict with network members who crave greater flexibility and freedom. At the same time, pursuing social goals through governance structures must provide the capacity for governments to translate public preferences into public and political action (see Pierre and Peters 2000, pp- 193-209). Governance as an approach to governing therefore contains mutually contradictory elements. Centrifugal pressures emphasize a consensual and pluralist policy style while centripetal considerations require a degree of centralism and dominance by the centre (see Gamble 2000). It would appear that the view of the Labour government and many civil servants is that holding back the pressures of governance is not an option (Pierre and Stoker 2000, p. 45). Indeed, many of the government's consti-

tutional reforms (devolution and incorporation of the European Convention of Human Rights, for example) are likely to exacerbate the challenges of governance (Flinders 2000b). The response of the British political elite is instead to concentrate on managing governance through the management of complex networks directed by a central core. From this it is possible to highlight a number of interlinked issues. First, governance theory explains the increasing contrariety between constitutional theory and practice. The tension arises from attempts to construct a governance system of public policy based upon steering complex networks within a credible ‘governmental’ framework. In reality, such a strategy is doomed. The malleability of the British constitution has arguably been exhausted and the fault lines that have always existed are increasingly and crudely visible. Consequently, and secondly, the modernizing government agenda cannot be contained within Whitehall. It challenges many of the basic foundations of the Whitehall—Westminster model. Finally, joining-up government is an

© Blackwell Publishers Ltd. 2002

499

500

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

71

ambitious commitment. It rests upon controlling complexity. The insights of governance theory are therefore crucial to this project as they offer a more reflective and realistic representation of the processes of governing within and beyond the central state. Possibly the most fundamental debate in the governance literature revolves around whether the power of the nation-state has been eviscerated. Or, alternatively, whether states continue to enjoy their traditional powers but must exercise them through re-engineered governing processes. The Labour government's reforms in the sphere of JUG may be construed as an attempt to alter governing processes in order to reassert the power of the central actors. The question then arises of what happens if JUG fails? Moreover, what might the failure of JUG indicate for the capacity of the nation-state to respond to the challenges of governance? The literature on this point is somewhat pessimistic. Rhodes reminds us that to some degree all governing structures fail (Rhodes 2000b, p. 161). Pierre and Stoker (2000, p. 43) note: ‘The idea of governance failure should not surprise us since both the “state” and the “market” are known to fail to some degree’. Jessop (1999) suggests that the existence of diametrically opposed interests within networks may make failure inevitable - whatever governance structure is employed. And yet the pressures of governance on the state derive not least from the fact that the public expects the state to deliver more at a time when the state’s capacity to deliver is arguably diminishing. Moreover, the failure of JUG might be seen as symptomatic by the public of the state’s

inability to address key issues of social concern. Public faith in the institutions of representative government — what Evans (1997) has termed ‘stateness’ — could be further eroded. Further, the failure of JUG may emphasize society-centric over state-centric governance perspectives while also reopening considerations upon the limits of admistration (Hood 1976). However, it is too early to predict the trajectory of the Labour modernization agenda and it is unfair to be overly pessimistic. There are elements of the Labour government's attempt to address cross-cutting issues which do differ from past initiatives. Previous attempts to nurture JUG tended to focus on institutional or procedural devices whereas the current plans emphasize meaningful cultural change (Wilson 2000). It is also important not to underestimate the dynamics of the current government, in particular the Blair/Brown axis, and the potential this provides to mitigate the obvious strength of departmentalism. Moreover, the JUG project takes place at a time when there is an increasing awareness both within and beyond the United Kingdom of the need for cross-cutting policies and objectives (Hayward and Wright 2000). The PIU’s report represents an attempt to increase the centre’s capacity for steering, co-ordination and control in an increasingly fragmented state. However, as a blueprint for reform, it is historically blinkered. It fails to account for the failure of similar initiatives in the past. Paradoxically, it is

the existence of relatively stable functionally distinct departments of state

© Blackwell Publishers Ltd. 2002

Governance and the Public Sector

72

MATTHEW

501

FLINDERS

with culturally entrenched preferences for policy and action which represent the greatest obstacle to JUG. The long-term solution may therefore be more radical than the PIU suggests. A more radical but progressive reform strategy might involve the gradual brigading of ministerial portfolios around cross-cutting objectives — in a manner similar to that of the Scottish executive. Parliamentary committees could evolve to mirror ministerial posts rather than strict departmental lines. A committed Prime Minister and Cabinet could launch a programme by which departmental structures were amalgamated and reformed around objectives rather than functions -— however, this may simply present a mirror-image of traditional and current difficulties. The modernizing government agenda proposes a new and more creative approach to policy making. Although selective, the use of comparative research is refreshing and yet the PIU’s proposals are typically British — stressing the familiar themes of continuity and change (see Flinders 2000c). The work of the PIU continues to seek to identify and respond to the challenges of modern governance for British central government. Its Strategic Challenges Project (Cabinet Office 2000c) declared: ‘that government's effectiveness in coping with future challenges will be determined by its structural agility, the robustness and flexibility of its institutions and its openness to new ideas. One of the biggest challenges for the future therefore is how to get governance systems right’ (emphasis in the original). However, it is clear that a radical change in the way public policy is designed and implemented in the United Kingdom may well demand a more deepseated reappraisal of the structure of Whitehall and the dominant values of the British political elite. ACKNOWLEDGEMENT The author would

like to thank Dave Richards, Martin Smith, Sir Peter

Kemp, Ian Bache, Anthony Barker, William Plowden and two anonymous referees for their comments and suggestions. This article stems from research conducted under the ESRC-funded ‘New Labour and the Reform of Whitehall:

Transition, Accommodation

and Inheritance’

project (Grant

Ref. No. 000222657).

REFERENCES 6, Perri. 1997. Holistic government. London: Demos. Barberis, P. 1996. ‘Whitehall since the Fulton Report’, in P. Barberis (ed.), The Whitehall reader. Buckingham:

Open University Press. ——.

1998. The new public management and new accountability’, Public Administration, 76, 451-70.

Blackstone, T. and W. Plowden. 1988. Inside the Think Tank: advising the Cabinet 1971-1983. London: Manda-

rin.

Bevir, M. and R.A.W. Rhodes. 1999. ‘Studying British government: reconstructing the research agenda’, British Journal of Politics and International Relations, 1, 2, 215-39.

Brazier, A. 2000. Systematic scrutiny: reforming the Select Committees. London: Hansard Society. Bovens, M. 1998. ‘The social steering of complex organisations’, British Journal of Political Science, 20, 91-117.

© Blackwell Publishers Ltd. 2002

502

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

73

Cmd 9230. 1918. Report of the Ministry of Government Committee of the Ministry of Reconstruction. London [The Haldane Report]: HMSO. Cmd 4506. 1970. The Reorganisation of Central Government. London: HMSO. Cabinet Office. 1999a. Modernising government CM 4310. London: HMSO. ——. 1999b. Modernising government: action plan. London: Cabinet Office. ——. 1999c. Civil service reform: report to the prime minister from Sir Richard Wilson, Head of the Home Civil Service. London: Cabinet Office. ——. 1999d. Professional policy making for the twenty first century: report by the strategic policy making team.

London: Cabinet Office. ——. 2000a. Wiring it up: Whitehall’s management of cross-cutting policies and services. London: Performance and Innovation Unit. —. 2000b. Reaching out: the role of central government at regional and local level. London: Performance and Innovation Unit. ——. 2000c. Strategic challenges project: the future and how to think about it. London: Performance and Innovation Unit. Campbell, C. and G. Wilson. 1995. The end of Whitehall. Oxford: Blackwell.

Chester, D. and F. Willson. 1957. The organization of British central government 1914-1956. London: Allen & Unwin. : Downs, A. 1967. Inside bureaucracy. Boston: Little Brown & Co. Evans, P. 1997. ‘The eclipse of the state: reflections on stateness in an era of globalization’, World Politics,

50, 62-87. Flinders, M. 2000a. ‘The enduring centrality of individual ministerial responsibility within the British Constitution’, Journal of Legislative Studies, 6, 73-91. ——. 2000b. ‘Mechanisms of judicial accountability in British central government’, Parliamentary Affairs, 54, 54-71. ——. 2000c. ‘The politics of accountability: a case study of freedom of information legislation in the United Kingdom’, Political Quarterly, 71, 422-36.

——. 2001. The politics of accountability in the modern state. Aldershot: Ashgate. Flynn, N. 1999. ‘Modernising British government’, Parliamentary Affairs, 52, 4, 382-97. Foster, C. and F. Plowden. 1996. The state under stress. Buckingham: Open University Press. Gamble, A. 2000. ‘Policy agendas in a multi-level polity’, in A. Gamble et al. (eds). Developments in British politics 6. London: Macmillan. Gray, A. and W. Jenkins. 1985. Administrative politics in British government. Brighton: Harvester Press. HC 300. Shifting the balance: select committees and the executive. First Report of the Liaison Committee, Session 1999-2000. London: HMSO, Hayward, J. and V. Wright. 2000. ‘Governing from the centre: policy co-ordination in six European core

executives’, in R. A. W. Rhodes (ed). Transforming British government: Vol. 2. changing roles and relationships. London: Macmillan. Heald, D. 1983. Public expenditure. Oxford: Martin Robertson. Heath, E. 1998. The time of my life. London: Hodder & Stoughton. Heclo, H. and A. Wildavsky. 1981. The private government of public money. London: Macmillan. Hennessy, P., S. Morrison and R. Townsend. 1985. Routine punctuated by orgies: the central policy review staff 1970-1983. Glasgow Strathclyde Paper on Government and Policy No. 31. Glasgow: University of Strathclyde. Hennessy, P. 1989. Whitehall. London: Secker & Warburg.

—.

1998. ‘Lords of all they surveyed? Churchill's ministerial ‘overlords’ 1951-1953’, Parliamentary Affairs,

51, 1 62-70. Hennessy, P., R. Hughes and J. Seaton. 1997. Ready, steady, go! Labour and Whitehall. London: Fabian Society.

Hogg, S. and K. Jenkins. 1999. ‘Effective government and effective accountability’, Political Quarterly, 70, 2, 139-45. Hogwood, B. and L. Gunn. 1984. Policy analysis for the real world. Oxford: Oxford University Press. Hood, C. 1976. The limits of administration. London: Wiley. ——. 1991. ‘A public management for all seasons?’, Public Administration, 69, 2, 3-19. Holliday, I. 2000. ‘Is the British state hollowing out?’, Political Quarterly, 71, 2, 167-77.

© Blackwell Publishers Ltd. 2002

.

Governance and the Public Sector

74

MATTHEW

FLINDERS

Hooghe, L. 1996. Cohesion policy and European integration: building multi-level governance. Oxford: Oxford University Press. Jessop, R. 1999. ‘Governance failure’, in G. Stoker (ed.). The new politics of British local governance. London: Maemillan. Kaufman, G. 1980. How to be a minister. London: Faber & Faber. Kavanagh, G. and D. Richards. 2001. ‘Departmentalism and joined-up government: back to the future?’,

Parliamentary Affairs, 64, 1, 1-18. Kickert, W., E. Klijn and J. Koppenjan. 1977. Managing complex networks. London: Sage. Kohler-Koch, B. and R. Eisling. 1999. The transformation of governance in the European Union. London: Routledge. Kooiman, J. 1999. ‘Social-political governance: overview, reflections and design’, Public Management, 1, 1, 67-92. Langford, J. 1984. ‘Responsibility in the senior public service: marching to several drummers’, Canadian Public Administration, 27, 4, 513-21. Lipsey, D. 2000. The secret Treasury. London: Viking. Lovell, A. and L. Hand. 1999. Expanding the notion of organisational performance measurement to support joined up government’, Public Policy & Administration, 14, 2, 17-29.

Low, S. 1904. The governance of England. London: Fisher Unwin. Luhmann, N. 1986. The autopoiesis of social systems’, in F. Geyer and J. van der Zouwen (eds), Sociocybernetic Paradoxes. London: Sage. Macmillan, H. 1969. Tides of fortune 1945-1955. London: Macmillan. Mandelson, P. and R. Liddle. 1996. The Blair revolution: can New Labour deliver? London: Faber & Faber. Marks, G., L. Hooghe and K. Blank. 1996. ‘European integration since the 1980s: state-centric versus multilevel governance’, Journal of Common Market Studies, 34, 341-78.

Morrison, H. 1954. Government and Parliament. Oxford: Oxford University Press. National Audit Office. 1999. Modernising government: the NAO response. London: NAO. Peters, B. 1996. The future of governing: four emerging models. Lawrence: University of Kansas Press. Pierre, J. 2000. Debating governance: authority, steering and democracy. Oxford: Oxford University Press. Pierre, J. and G. Peters. 2000. Governance, politics and the state. London: Macmillan. Pierre, J. and G. Stoker. 2000. ‘Towards multi-level governance’, in A. Gamble et al. (eds), Developments in

British Politics 6. London: Macmillan. Pliatzky, L. 1982. Getting and spending: public expenditure, employment and inflation. Oxford: Blackwell. Plowden, W. 2000. Joined-up government meets JASP: co-ordination in government. Report of a seminar held at the Nuffield Trust,

9 March, 2000.

Plowden, W. et al. 1988. Joint approaches to social problems. Cambridge: Cambridge University Press. Ponting, C. 1986. Whitehall: tragedy and farce. London: Hamish Hamilton. Public Audit Forum. 1999. Implications for audit of the modernising government agenda. London: Public Audit Forum. Rhodes, R.A.W. 1997. Understanding governance: policy networks, governance and accountability. Buckingham: Open University Press. —. 2000a. ‘New Labour’s civil service: summing-up joining-up’, Political Quarterly, 71, 2, 151-67. ——. 2000b. ‘Governance and public administration’, in J. Pierre (ed.), Debating governance: authority, steering and democracy. Oxford: Oxford University Press. —. 2000c. ‘The governance narrative: key findings and lessons from the ESRC’s Whitehall programme’, Public Administration, 78, 2, 345-65.

Richards, D. and M. Smith. 1997. ‘How departments change: windows of opportunity and critical junctures in three departments’, Public Policy & Administration, 12, 62-79. Richards, S. 1997. ‘New Labour — new civil service’, Political Quarterly, 67, 4, 311-20.

Rosenau, J. 1995. ‘Governance in the twenty-first century’, Global Governance, 1, 13-43. Schaffer, B. 1957. ‘The idea of the ministerial department: Bentham, Mill and Bagehot'’, The Australian Journal of Politics and History, 3, 1, 60-78. Smith, M. 1999. The core executive in Britain. Basingstoke: Macmillan.

Smith, M., D. Marsh and D. Richards. 2001. The changing role of central government departments. Basingstoke: Macmillan.

© Blackwell Publishers Ltd. 2002

503

504

Governance and the Public Sector

GOVERNANCE

IN WHITEHALL

75

Stewart, J. 1997. Handling the wicked issues: a challenge for government. Birmingham: INLOGOV. Strange, S. 1996. The retreat of the state: the diffusion of power in the world economy. Cambridge: Cambridge University Press. ‘ Taylor, A. 2000. ‘Hollowing out or filling in? Taskforces and the management

of cross-cutting issues in

British government’, British Journal of Politics and International Relations, 2, 1, 46-71.

Thelen, K., F. Longsterth and S. Steinmo. 1992. Structuring politics: historical institutionalism in comparative analysis. Cambridge: Cambridge University Press. Weiss, L. 1998. The myth of the powerless state: governing the economy in a global era. Cambridge: Polity Press. Williams, S. 1980. ‘The decision makers’, in Policy and Practice. London: RIPA.

Willson, F. 1955. ‘Ministries and boards: some aspects of administrative development since 1832’, Public Administration, 33, 43-58.

Wilson, R ‘The civil service in the new millennium’, speech given at City University, London, 5/5/99. Wilson, R. The role of the public servant in a time of change’, speech to the Chartered Institute of Public Finance and Accountancy, London, 14/6/00.

[24] Geert R. Teisman

Erik-Hans Klijn Erasmus University Rotterdam, Netherlands

Partnership Arrangements - Governmental Rhetoric or Governance Scheme? it has become popular to advocate partnership arrangements. Such partnerships may be seen as new forms of governance, which fit in with the imminent network society. However, the idea of

partnership is often introduced without much reflection on the need to reorganize policy-making processes and fo adjust existing institutional structures In this contribution, we discuss the ambiguity of partnerships. An empirical basis is provided by means of an analysis of the policy making on the expansion of the Rotterdam harbor. This case indicates that although new governance schemes are being proposed and explored, they still have to comply with the existing procedures in which they are imbedded. Governments especially are not prepared to adjust to governance arrangements. Policy making continues to be based on selfreferential organizational decisions, rather than on joint interorganizational policy making. This raises questions about the added value of intended cooperative governance processes.

Looking for New Forms of Interorganizational Governance The involvement of all kinds of organizations in joint decision making has received a great deal of attention lately. This search for cooperation can be seen in all domains of societal decision making: between government organizations, between government and citizens, and, more recently, also between government organizations and private-sector organizations. Intergovernmental interaction has been the subject of a number of studies on planning and decision

making (Mayntz and Scharpf 1973; Rhodes 1996). While interactive decision making was also one of the main topics of the 1990s (Daemen and Schaap 2000). Public—private partnerships are gaining support as new forms of governance (Osborne 2000).

This call for governance, cooperation, and partnerships, however, does not directly lead to major shifts in day-today decision making. Partnership projects are not easy to realize. Verbally, much has been made of the potential benefits of cooperation. The term “partnership” has clearly penetrated the language games played by politicians and

governors. For instance, the Labour prime minister of Great Britain, Tony Blair, and his Cabinet have frequently referred to “partnerships” when implementing their policies.

The partnership concept stands for the New Labour, which works with society rather than directing it from above. Partnership gives the government a new legitimacy: the efficiency of the private sector and the involvement of civil society (for partnerships, New Labour, and contradictions, see Falconer and McLaughlin 2000). However, looking more concretely at everyday reality, we find there seems to be a scarcity of projects set up jointly by public and private actors. For instance, the well-known Public Finance Initiative in the United Kingdom, set up by Geert R. Teisman is a prciesser of public administration at Erasmus Univer-

sity Rotterdam. He holds degrees in transport and sociology. His PhD thesis concerned the phenomena of complex decision making, especially in the field of urban i ese and transport. Recent research focuses on intergovernmental relations, public-private partnership, and interactive decision making. These themes are studied from the perspective of process analysis and process management. Email: feisman @fsw.eur.nl. Erik-Hans Klijn is an associate professor of public administration at the Erasmus University Rotterdam. He achieved a degree in public administra-

tion. His PhD concerned the influence of network rules on restructuring postwar housing areas. His recent research focuses on complex decision making and institutionalization processes in networks, public-private partnerships, and institutional design. He has published in Administration and Society (1996, 2001), Public Administration (1995, 2000), and Public Manage-

ment Review (2000, 2002). Email: klijn @fsw.eur.nl.

Partnership Arrangements: Governmental Rhetoric or Governance Scheme?

197

506

Governance and the Public Sector

public actors, is a contracting-out scheme rather than a partnership (for the distinction between contracting-out and partnerships, see Klijn and Teisman 2000). In the Netherlands, we see only a few cases where we can really speak

of a public—private partnership. And even in several of the so-called Partnerships Key Projects that have been adopted by the Partnerships Center of the Ministry of Finance, one may question the level of partnership. While there is an intensified interaction between public and private partners, there is little joint decision making and continuity in cooperation. In fact, the use of the term “partnership” does not immediately imply a change from unilateral to joint decision making, as opposed to experiences in the private sector, where many joint ventures and strategic alliances have actually been established (Faulkner 1995; Bottcher 1995)

In this article, we explore the factors that account for the gap between dream and reality with regard to partnership as a governance scheme. Our insights and conclusions are based on an analysis of a prominent case in the Netherlands: the planning and decision making of Mainport Rotterdam, one of the leading harbors in the world. Due to the globalization of the production chains of many firms, the amount of goods transports worldwide is growing. In 1995, Mainport Rotterdam handled some five million containers; in 2020, this will be at least

10 million and possibly more than 15 million. This raises the question of how to deal with this growth. In terms of economy, many stakeholders are in favor of growth and, therefore, advocate reserving additional space reservations for new industrial areas. This, however, implies the realization of a new polder in the river delta and partly in

the North Sea. This solution has been questioned, not just by various environmental groups, but also by public au-

thorities responsible for spatial planning. Even some of the economy-oriented actors are not in favor of expanding the port, questioning the added value of the traditional transport sector. All the critics advocate shifting from a “mainport” to a so-called “brainport.” Before discussing this case (section 3) and the lessons we can-learn from it (section 4) in more detail, we will

first address the reasons for the rise in pleas for partnerships. Partnerships in general and public—private partnerships in particular can be seen as new governance schemes, which aim to manage the increased interdependencies between all kinds of societal actors. The partnership concept may be linked to the trend toward network forms of governance, in which public actors take their interdependencies with other actors into account and try to solve governance problems through cooperation rather than through central steering and control (Susskind and Cruikshank 1987; Sinnig 1995; McCarthy 1998). 198

Public Administration Review * March/April 2002, Vol. 62, No. 2

The Need for Governance Schemes Despite the problems they entail, public—private partnerships are pointed out as worthwhile schemes over and over again. Partnerships are seen as the best way, in the end, to govern the complex relations and interactions in a modern network society. As an argument in favor of public—private partnerships it is said that the intertwining of the public and private sectors calls for new forms of governance (Castells 1996). We will elaborate on this argument.

Beyond Markets and Hierarchies: A Theory of Cooperation We assume that the classic separation between market and hierarchy or between public and private sector is disappearing. The validity of this assumption can be illustrated in many ways. The first one that springs to mind is the fact that public and private actors are becoming increasingly dependent on each other. This has been shown in recent theoretical and empirical work on governance and also by the discussion on the public-private distinction (Marsh

and Rhodes

1992;

Kickert,

Klijn, and

Koppenjan 1997). But one can also observe that the organizational mechanisms that are traditionally labeled as part of either the public or the private sector (and are often at the same time labeled as hierarchy and market) are changing. Competition has become part of government regimes, and cooperation and coordination have become a part of network management in the private sector (Bottcher 1995). Firms are oper-

ating within “industrial networks,” where they depend on a range of other firms for the manufacturing and sale of their products. Within these networks, firms seem to rely on forms of relational contracting rather than on simple market transactions, or on hierarchically internalizing activities as survival strategies. There is a growing body of literature that tries to account for these developing relations between firms and addresses the question of how these industrial networks function and what advantages they have to offer (Miles and Snow 1986; Hakansson and Johansson 1993; Lundvall 1993;

Alter and Hage 1993). It is stated that interorganizational chains and networks are a reaction to the rising expectations and demands of clients (Martin 1994; Ohmae 1994).

In fact, governments are faced with the same developments in society. They are also becoming more and more dependent on private and semiprivate actors for implementing their policies. In this respect, we may say that governmental organizations and actors are functioning in similar networks (see the large body of literature on this topic: Hanf and Scharpf 1978; Rhodes 1988; Marsh and Rhodes 1992; Kickert, Klijn, and Koppenjan 1997; Teisman 2001). This makes the implementation of policies and projects a complex issue, requiring cooperation with various actors.

Governance and the Public Sector The Governance Debate as a Twofold

Question:

507

2. The knowledge and resources necessary for achieving the desired outcome are distributed among different ac-

Why Needed and Why Not

Established There is, however, a major difference between the public and the private sector. The public sector is based, to a far greater extent, on hierarchical demand mechanisms that are controlled by the top administrators and politicians. They can define demands of society on an aggregated level without the need to trace this demand back to individual demands. It may be argued that many of the hierarchical mechanisms in the public sector do not fit in well with situations in which the government has to achieve its goals. Implementation problems are legendary (see the classic Pressman and Wildavsky 1984). At the same time, however, the government is unwilling to abandon its formal superior position, mainly because hierarchy is the only representative democracy model we are familiar with that has shown its quality. And due to a lack of alternatives, governments and politicians tend to adhere to the formal procedures based on principles of hierarchy. Within this hierarchy, it is the politicians who impose the demands, not society. This diagnosis brings us to a twofold question: The first refers to the need of new theories and practices in terms of governance arrangements, and the second refers to the need for theories about the inability to establish new governance arrangements. By dealing with these two questions at the same time, we are able to better understand the splits that many governments find themselves in.

» If markets increasingly resemble networks, and if governmental agencies have also become increasingly de-

pendent on aetwork cooperation for their own efficiency and effectiveness in meeting societal demands, what does this imply for governance schemes in terms of partnership relations? What could these new schemes look like? + If, however, governments continue to stick to their traditional procedures based on hierarchy and the primacy of politics as the best representative arrangement we have in Western society, what then are the chances of success for partnership schemes? Can we think of effective combinations of partnership and hierarchy? To deal with these two questions, we will start our argumentation and exploration with statements that have been made recently about network society and network management (Castells 1996; Kickert, Klijn, and Koppenjan 1997; Teisman 2001). We postulate three features that should be incorporated into theorizing about the implementation of new governance schemes: 1. The achievement of the goals of each individual actor requires activities by the other actors; mutual adjustment is an important prerequisite.

tors. The importance of resources is not a given, but

depends on the value attributed by others (Scharpf 1978, 1997). Moral support, for instance, seems to have become an important resource in decision making. The scattered control of various resources creates a “world in which nobody is in charge” (Bryson and Crosby 1992, VI). 3. Complexity is a result of the interaction and negotiation processes between different actors, whose resources are indispensable for a joint undertaking. All these actors bring their own perceptions and strategies (Lissack and Gunz 1999; Teisman 2000; Klijn, Koppenjan, and Termeer 1995).

A crucial question now is how organizations in general and governments in particular will cope with these developments. We assume the perceptions and interpretations of these developments are the main factors that predict government’s reactions. It may, for instance, be assumed that if complexity (several actors involved, a variety of resources that should be combined, and a variety of perceptions and solutions) is seen as a threat by governmental organizations and politicians, proposed partnership arrangements are likely to be quickly transformed into traditional contracting-out schemes. In contracting-out schemes, the government can go on using its existing, well-established procedures of internal decision making. The interaction with the private sector can be defined in terms of a principal—agent relation. The government decides what it wants and the private sector decides what it can deliver and at what price. The insights resulting from our search into the way governments deal with the partnership phenomenon can be summarized as follows: + The establishment of network society and, more specifically, the rising expectations on the part of citizens challenge the existing processes of decision making, both in terms of participation and quality of the outcome (Castells 1996; Teisman 2001).

* In response to the rising expectations, the private sector has become more consumer oriented and, as a result, numerous interorganizational production chains, alliances, and partnerships have been established (Hoogervorst, 1998). * Due to the different way that demands are defined in the public sector, governments have only recently begun to talk about and carry out experiments with cooperation and partnership. + These same governments, however, still seem to be dedicated to their own procedures, rules, and principle of control; for this reason, they try to fit partnerships into the mold of traditional policy-making procedures.

Partnership Arrangements: Governmental Rhetoric or Governance Scheme?

199

508

Governance and the Public Sector

[ Scheme 1 Depiction of Societal Development to Account for the Increased Call for Partnerships and Alternative Responses to the New Situation Growing demands with HIncreased interdepenrespect to the output of dency; a need to decision making combine resources

Rising societal wqpectiians

Creation of

cooperative

jovernance enangeren and i

Is anes acce

an

Lneres§ complex!

ll

nacahed as

desirable and

development

interdependency will

manageable?

of networks

Increased

and the

be dealt with by way of traditional P

lures:

ration

of tasks, rebui ding

borderlines and contracting-out

If governments do not appreciate the complexity that partnerships entail, in the end they will probably opt for traditional contracting-out schemes, despite all the rhetoric about partnerships and third ways (Giddens 1998). These steps of reasoning can fit into a scheme that depicts the societal development that the private and public sectors are facing and the two different responses that can be foreseen, based on the perception governments have of the phenomena of complexity. In the next section, we will present empirical material to elaborate on the question of the choice governments make with respect to complexity and governance arrangements such as partnerships. The case affirms statements often made that processes are becoming more complex due to societal demands. These demands are no longer represented by a single governmental organization. A whole ecology of governmental organizations, as well as economic, social, and environmental groups, are seen as im-

portant as representatives (though not elected in the traditional sense) of societal needs and ambitions. The participation of all these organizations complicates policymaking processes. The case also indicates that public authorities have recognized the phenomenon of rising demand. They also rec-

ognize the need for support from others, which, in turn, will create new and complex arrangements and processes. Therefore, the first part of our train of thought, illustrated in scheme 1, seems to be valid. The key question is to what extent governments are ready and able to deal with this complexity. The case clearly indicates that the demands imposed upon governments by society call for partnerships to be established. The case also indicates that existing governmental procedures and positions still force all three iden-

200

Public Administration Review * March/April 2002, Vol. 62, No. 2

tified types of partnership arrangements (intergovernmental, citizen participation, and public—private partnership) back into traditional arrangements such as division of tasks, hearings, and contracting out.

Complex Policy Making with Regard to the Mainport Rotterdam The Rotterdam Harbor developed rapidly after the Second World War. In the period of reconstruction, from 1945 until the early 1980s, the development of the harbor was not under discussion. It was seen as a keystone of economic development. The policy-making process was not complicated by all kinds of opposition, and therefore rela-

tively simple. The alderman of the Council of Rotterdam and the Rotterdam Harbor Authority, a department of local government, took the main decisions. The National Department of Transport was responsible for the infrastructure and was the sponsor of substantive investments in the harbor. The first sea polder, the so-called Maasvlakte I for industrial activities, was realized under this regime. The Harbor Authority defined the need for new industrial areas and national government paid for it. Its interesting to see that the investment was based on the assumption that the Maasvlakte I would be needed for new chemical industry (blast furnace). When the polder was ready for use, however, this need did not exist any-

more. This mismatch, however, did not lead to any governmental crisis. And after a few years, fortunately, a new activity appeared on the scene: container shipping. The container trans-shipment activities were located on the Maasvlakte. In our case study, we present a reconstruction of the decision-making processes in the last decades. We distin‘guish three rounds of decision making (for the method of decision-making rounds, see Teisman 2000). The first round of decision making, labeled Space and Environment (ROM), started in the 1980s. The ROM arrangement can

be seen as one of the first efforts to organize interaction between several public authorities that were responsible for a specific territory. In this case, the area was the Rijnmond region, which covers Rotterdam and 22 other public and private organizations. In 1993, these 23 organizations signed the ROM-Rijnmond Covenant. They agreed to set up some 50 projects in order to realize a twofold objective. It was their aim to stimulate economic growth within this region and improve the living conditions of its inhabitants. The Maasvlakte II project, possibly needed if an ongoing economic expansion created a shortage of industrial areas, was also covered by the ROM covenant. In several ways, this project, proposed by the Harbor Authority, was a copy of the Maasvlakte I, not only technically, but also in terms of governance.

509

Governance and the Public Sector

Three Generations of Governance Arrangement

ning of the Ministry of Housing, Spatial Planning and

in Policy Making

Environmental

To work out the details of this plan, a project organization was set up in 1994. In December 1995, this organization, whose main actors were the Rotterdam Municipal Port Authority and members of the State Water Board, concluded that the harbor would be faced with a considerable lack of space fer new economic activities in the near future. The construction of a new polder in the sea

Policy (December

1988). Due to all

kinds of implementation problems in both spatial planning and environmental policy, a search was begun for new and more effective schemes (Tatenhove 1993, 137). Keywords of the ROM approach—Ruimtelijke Ordening en Milieu (Spatial Planning and Environmental Policy)—were regional orientation, integration, co-

operation, and feasibility (Tatenhove 1993, 145). In the

(Maasvlakte II, covering some 2,000 hectares) would be

Netherlands, 11 ROM regions were selected (Ministerie

needed. The organization advised defining the project as

van VROM

one of major national importance in view of its significant

schemes was the integrated area approach, which had two main characteristics:

consequences in the field of economics, spatial planning, and the environment. Thus, the administrative council for the Rijnmond area concluded in December 1995 that a discussion would have to take place at the national level about the problem of space in the Rotterdam port area. The Cabinet took up this proposal in the context of its views on handling large-scale projects, which also led to widening the scope of the project. From a project intended to expand the Rotterdam port area, it became a project intended to explore the possibilities of expansion and the way these would correspond to other objectives and uses of space. In other words, a decision was made to widen the scope of the project, both in terms of the number of actors involved and the number of issues covered by the project. This round of decision making became known as VERM— VErkenning Ruimtebehoefte Mainport (exploring spatial needs mainport). A lot of new actors were involved in this process, especially citizens and local and regional groups. The results of this round were handed over to the government in the summer of 1997. Several months later, the national government decided to start a third round of decision making, the so-called PMR (Project Mainport Rotterdam). This round can be characterized in different

ways, but the main theme we will deal with here is the attempt made during this round to combine public decision making with private development.

1990, 14). One of the appealing new

¢ Integration of content: an explicit effort to integrate spatial and environmental policies. These two policy fields had quite different characteristics. Several of the instruments of environmental policy, however, were counterproductive in terms of spatial planning. ¢ Administrative integration: an explicit effort to set up some form of collaborative decision making between the different layers of government. The ROM scheme can be seen as one of the first efforts in spatial planning to set up a dedicated scheme for decision making on an ad hoc basis. To kick off the ROM project, an administrative agreement was drawn up between all the authorities (and other parties) involved in decision

making in this specific area, in which the various partners set out their goals and main principles. In the next two years, a joint plan of action was developed (ROM project Rijnmond 1993), followed by a final covenant (December

1993). Two ministers, one deputy

minister, the province, 15 mayors, and three regional economic agencies signed this covenant. After this, the implementation of this joint undertaking was begun. The covenant mentioned the realization of Maasvlakte II as one of its projects, and a project organization responsible for its implementation was set up. In 1995, this organization pre-

The integrated, area-oriented policy was a new concept formulated in the Fourth Report on Spatial Plan-

sented a report on Maasvlakte II. In 1996, the Cabinet decided to start a separate decision-making process on Mainport Rotterdam. In 1997, ROM-Rijnmond was evaluated, and a new covenant was signed. It is interesting to see that from that point onward, the term “project” was replaced by the term “program.” It had become clear to the people in

Scheme 2 Policy-Making Rounds on the Development of

charge that ROM was not aproject, and, for

Round I: A Public Partnership Approach: Combining Physical Planning, Environmental Policy, and Economic Development

Mainport Rotterdam = 3 Pr Public partnership Three rounds approach (ROM) Period

1990-95

Characteristics of the Joint decision making governance scheme _ between public authorities

on ee ic—priv ‘opular participation _partnershi asset 9(VERM) approach (PMR) 1998-2001 1996-97

this reason, it could not be managed as such (ROM-Rijnmond, Drawing Up the Balance— De Balans opgemaakt, November 1997). The new covenant mentions the PMR as its first and most important project under the head-

Interaction between —_Interaction between | ing “Space for the Mainport.” governments, citizens governments and and societal groups _ private organizations

Partnership Arrangements: Governmental Rhetoric or Governance Scheme?

201

c 510

Governance and the Public Sector

Round II: Toward a Widening of Scope: The Interactive Approach of Policy Making The Cabinet’s decision in April 1996 started the so-called VERM round. This round of decision making was based on the proposal made by the Scientific Council for Goyernment Policy (Wetenschappelijke Raad voor het Regeringsbeleid), formulated in its report “Decisions on

« Increasing port activities by expanding the port area: Such expansion plans existed in several regions. Maasvlakte II could be designed in a number of different ways. A small polder could be constructed to handle growth in the container sector. A larger polder could also

Large-Scale Projects.” The VERM round ran from April 1996 until the summer of 1997. It became one of the first major infrastructure projects that was explicitly described as a type of decision making that would be handled interactively. The twofold objective stated in the ROMRijnmond Covenant was adopted. VERM’s purpose was to offer a solution to the possible lack of space in the Rotterdam port area and to improve living conditions within the surrounding environment. Thus, economic ambitions would have to be combined with environmental goals. To organize this open planning process, a new project group was once again set up, in which officials from four ministries took part (Traffic and Waterways, Economic Af-

be constructed to cope with the lack of space in all sectors. The general opinion in the workshops was that the polder area should be kept as small as possible. There was also a preference for northward expansion, which would cause fewer harms to the natural environment than expansion southward. The option of expanding into the sea was not studied further. After the results of VERM were handed over to the national government, the further preparation of the Cabinet decision took place along the usual official channels. During this preparation, the findings of the VERM project group were used only sporadically. The decision of the Cabinet in 1997 was more in line with existing opinions at the beginning of the interactive process than with the contents of the VERM debates. Several characteristics of the

fairs, Agriculture, Nature Control and Fisheries and Hous-

process contributed to this result:

ing, Spatial Planning and Environmental Policy). In the pe-

¢ In contrast to the ROM round, no explicit attempts were made to incorporate the interactive process into the policy-making procedures of the national government. ¢ The activities of supporters of the Maasvlakte II solution were neither stopped nor incorporated into the VERM process. « Government had no experience with the new scheme proposed by the Scientific Council for Government Policy and had not developed a clear concept of the implications of interactive decision making for existing procedures.

riod from May 1996 to mid-1997, an interactive process was

initiated, in which the usefulness of and need for expansion of the Rotterdam port area and possible alternatives were discussed with many of the parties involved. During brainstorming sessions with experts on content and process development, sounding-board groups, and workshops, many actors were consulted, and the nature of the spatial problem and its possible solutions, also outside the Rotterdam area,

were discussed (Klijn and Koppenjan 2000). The report drawn up by the project group, on the basis of this interactive decision making, was published in mid-

1997. The findings of the project group were that lack of space could be seen in three sectors in particular: containers, chemistry, and distribution. However, these data became available only at a late stage of the process, so it did not play a dominant role in the workshops, where discussions were held with several of those involved. Basically,

there were three alternatives: ° The zero option: No expansion, because the economic advantage had not been convincingly proved. Economic development would have to focus on other (more environmentally friendly) sectors.

¢ Expansion by increasing port activities within the existing area: New functions would have to be incorporated into the existing space by means of restructuring. In addition, space would have to be made available in other areas. This would make it possible to handle container transport in Vlissingen/Terneuzen. Several regions indicated they would have space to cope with the growth of chemistry.

202 Public Administration Review * March/April 2002, Vol. 62, No. 2

Round II: In Search of Private Financing ‘and Involvement

On June 14, 1997, the Dutch Cabinet decided to initiate a new round of decision making. This decision was called a project decision, in compliance with the Scientific Council for Government Policy’s proposals. It was the official conclusion of the VERM round, even though the Cabinet did not decide to what extent a new polder would be necessary. The third round was heavily embedded in the existing national procedures of decision making in the field of spatial planning and environmental policy: the spatial core decision procedure (PKB) combined with an envi-

ronmental impact study. For this reason, the Cabinet used the term PKB+. In this round, the ambition to combine economic development with upgrading spatial and environmental qualities was consolidated (twofold goal).

At the same time, however, the Cabinet was urged by Parliament to pay specific attention to the possibilities of public-private collaboration (motion proposed by the

el

Governance and the Public Sector Labour Party in Parliament). In practice, however, the public authorities, more specifically the new project organiza-

tion on Mainport Rotterdam, took the initiative: PMR. This project group consisted of representatives from the four ministries, together with the Rotterdam Regional Authority, the municipality of Rotterdam, the province of South-

Holland, and the Ministry of Finance. The last-named actor entered the Mainport arena because it was the initiator

of the Knowledge Center on Public Private Partnership. Ten other municipalities involved in ROM, however, did not participate in this scheme (see Mainport Development Rotterdam Starting Memorandum—Strartnotitie Mainportontwikkeling Rotterdam 1997). A private-involvement study project was set up in October 1998, in which a consortium of several public and private parties explored the possibility of private involvement in realizing parts of the Mainport Rotterdam project. An interim report indicated that it was important to involve private parties at an early stage (On Board Together— Samen aan Boord 1999). Three schemes were explored: * Traditional contracting out: The national government and other governments are involved in joint decision making and specify the output they need, the optimal scope of the project, and the kind of cooperation they wish to establish with private parties. Following this, a contracting-out scheme may be set up. * The combination model: Governments and private parties are involved in decision making at an early stage, but still develop separate ways for public and private decision making. * The partnering model: Governments and private parties

nomic and social merits. In the end, however, the government did not set up any of these more innovative models, but opted for the traditional approach instead. There were several reasons for this course of action. First of all, the municipality of Rotterdam, which owned the Harbor Authority and thus was accustomed to exploiting and controlling developments in the harbor to an important extent, did not want to lose control of the financial revenues it received from the harbor. Furthermore, the state committee responsible for the PKB+ procedure was not in favor of the early participation of private parties. Using formal arguments from public law, it chose to stick to traditional procedures. This made any form of partnership extremely difficult. Third, the environmental movement feared that environmental objectives would be neglected in the case of a partnership scheme. Solutions for the intensified use of industrial areas in the port (in terms of underground oil storage, more stacking of containers, etc.) were likely to be rejected by private parties. Thus, the environmental movement advocated a more active position on the part of public actors that would place more pressure on private actors to improve living conditions in the surrounding environment.

Lessons Drawn From Three Generations of Schemes in Search for Partnership When analyzing the decision-making process regarding Mainport Rotterdam so far, we may draw some interesting conclusions on governance and partnership: ¢ Increased complexity of policy making is unmistakable reality. Due to the emancipation of local and regional governments, citizens, and all kinds of private partners, the number of parties involved in decision making has clearly increased. ¢ This complexity is not just due to the fact that many actors are involved. It also has to do with the development of different perceptions on the problem and preferable solutions and strategies. National government has tried to solve the question of the need and necessity of Mainport development and a new polder by way of the VERM debate. It is still, however, faced with the

set up a joint platform in which all parties participate on a risk-bearing basis. Together, they specify the projects needed for further development of Mainport Rotterdam, and together they will be responsible for contracting out parts of the plan. All three models have been elaborated in the PMR process (scheme 3). The PMR management gave preference to the combination model. They began a kind of exploratory round, in which private parties could submit proposals for projects that would be judged by their eco-

Scheme 3. Three Forms of Private Involvement in Spatial-Development Projects Variable

Contracting out

Role government

Governments specify what is needed

Combination model Global definition of governmental aims

Parimering model A joint public-private platform

Process characteristics

Tendering procedure leading to contracting out

Early tendering procedure choosing the best private proposal even though a

Joint principal position in relation to parties who tender for parts of the projects

Private production of specified project

available Private proposal in interaction with

Role private actor

specifies the projects needed

definitive aslic decision making is not

public Action

decision making

Finished job handed over to

Project realization by private

government

companies

Joint development by private and public organizations Joint schemes for production and exploitation

Partnership Arrangements: Governmental Rhetoric or Governance Scheme?

203

SW

Governance and the Public Sector

ongoing debate about the advantages of the development of the Mainport, the transition froin Mainport to brainport, and so on. Moreover, the government itself is unable to take a clear position in this debate. Our conclusion is that the Mainport Rotterdam case clearly shows that the number of requirements for development is constantly growing. It is for this reason that we have formulated the twofold goal given above; moreover, the specification of what should be done is undergoing constant change. « These constant alterations in the inputs and desired outputs of processes, in positive terms, one could say an ongoing learning process, make it difficult to implement a traditional contracting-out scheme (Klijn and Teisman 2000). From this it might be concluded that partnerships are indeed called for. At the same time, however, we may observe that governments are strongly dedicated to their own procedures such as PKB+. In practice, this is likely to lead to situations in which governments refrain from partnerships, because sooner or later these schemes will challenge the formal procedures (based on the centrality of government rather than on joint undertakings). ¢ Despite all the rhetoric and debate about governance and partnership, the policy making of the Mainport Rotterdam is still rather traditional. Some forms of public cooperation do exist, but they are not yet very powerful. There has been some popular participation, but these activities were too loosely coupled to existing— and still rather dominant—political decision making. And although public-private partnership schemes have been investigated more intensively, in the end they were not implemented.

Conclusion: Contradictions and Possibilities There have been repeated calls for a shift from a government to a governance approach in general, and partnerships in particular. There are impressive arguments for this shift. Governance could be the public answer to the rise of network society. At the same time, however, practice shows us that existing governmental organizations are not yet

capable of developing such partnership schemes in practice. Governance strategies, such as public-private partnerships, call for an exchange of information between actors and a willingness to look for solutions on a mutual basis. Government does not act this way: It recognizes the need for cooperation, but it does not take the consequences. It is for this reason that ideas for public—private partnership are, in practice, transformed into contracting-out schemes. This last type of arrangement meets the need for clear goals defined by government and politicians, clear product specifications, and clear rules for tendering. 204

Public Administration Review * March/April 2002, Vol. 62, No. 2

The decision-making process of Mainport Rotterdam indicates how difficult it is to establish a partnership, in spite of all the sincere efforts made by public and private officials. Public actors want to retain their primacy within the process. As long as this is the case, private partners will not bring in their knowledge and their efforts. This is a serious obstacle to achieving synergy and finding new solutions. It certainly cannot be precluded that the problems with the Maasvlakte I (no users and an extensive use)

will by copied again.

Future Possibilities In order to realize the full potential of governance arrangements and public-private partnership, a long road is still ahead. We are dedicated to our traditional representative democracy, and therefore on our guard with respect to more complex governance arrangements. We cherish the different roles of public and private sector, and therefore create clear borders. The exploration of how to create new governance arrangements, more mature forms of popular participation, and effective public—private partnerships has only just begun. In order to understand the abilities of and problems with governance arrangements, scholars in public administration first should shift from a focus on governmental organizations and the internal procedures to a focus on the interorganizational processes that shape a growing amount of public policy. The importance of process analyses has already been recognized in business administration (Hammer and Champy 1994; Short and Venkatraman 1992; Riggins and Mukhopadhayay 1994). It seems necessary to us that public administration also embraces interorganizational process as an important object for theorizing. From these new theories on governance, we can deal with the interesting dilemma of achieving new types of partnership in order to improve the quality of policy output and being accountable at the same time. In the meantime, governments should ask themselves whether it would be fruitful to become more dedicated to interorganizational processes and less to their own internal procedures.

Governance and the Public Sector

2S

i

Re RE

RS Ee a ae lr le References

Alter, Christine, and Jeremy Hage. 1993. Organizations Working Together. Newbury Park, CA: Sage Publications. Bottcher, Roeland. 1995. Global Network Management, Context— Deciston-Making—Co-Ordination. Wiesbaden: Gabler. Bryson, John M., and Barbara C. Crosby. 1992. Leadership for the Common Good; Tackling Public Problems in a Shared-Power World. San Francisco, CA: Jossey-Bass. Castells, Manuel. 1996. The Rise of the Network Society: Economy, Society and Culture. Cambridge: Blackwell Publishers. Daemen, Harry, and Linze Schaap, eds. 2000. Citizen and City: Developments in Fifteen Local Democracies in Europe. Delft: Eburon. Falconer, Peter K., and Kathleen McLaughlin. 2000. Public-Private Partnerships and the “New Labour’: Government in Britain. In Public-Private Partnerships: Theory and Practice in International Perspective, edited by Stephen P. Osborne, 120-33. London: Routledge Faulkner, David. 1995. /nternational Strategic Alliances. London:

McGraw-Hill. Giddens, Anthony. 1998. The Third Way. Cambridge: Polity Press. Graeber, Gernot, ed. 1993. The Embedded Firm; Understanding Net-

he}

a

eS

Mayntz, Renate, and Fritz W. Scharpf. 1973. Planungsorganisation: die Diskussion um die Reform von Regierung und Verwaltung des Bundes (Planning organization: A debate on the reform of government and administration of Germany). Miinchen: Piper. McCarthy, John. 1998. Consensus-Building in Urban Regeneration: Recent Practice in Scotland. Paper presented at XII AESOP Conference, Aveiro, Portugal.

Miles, Raymond E., and Charles C. Snow. 1986. Organization: New Concepts for New Forms. California Management Review 28(3). Ministerie van VROM. 1990. Actieplan gebiedsgericht milieubeleid (Action plan area oriented environmental policy). Den Haag: Sdu. Ohmae, Kenichi. 1994. The Borderless World. London: HarperCollins Publishers. Osborne, Stephen P., ed. 2000. Public-Private Partnerships; Theory and Practice in International Perspective. London: Routledge. Pressman, Jeffrey L., and Aaron Wildavsky. 1984. Implementation. Berkeley, CA: University of California Press. Rhodes, Rod A.W. 1988. Beyond Westminster and Whitehall; The Subsectoral Governments of Britain. London: Unwin Hymann. . 1996. The New Governance: Governing without Government. Political Studies 44(4): 652-67.

works: Actors, Resources and Processes in Interfirm Cooperation. London: Routledge. Hakansson, Hakan, and Jan Johansson .1993. The Network as a

Governance Structure; Interfirm Cooperation beyond Markets and Hierarchies. In The Embedded Firm; Understanding Networks: Actors, Resources and Processes in Interfirm Cooperation, edited by Gemot Graeber, 35-51. London: Routledge. Hammer, Michael, and James Champy. 1994. Reengineering the Cooperation: A Manifesto for Business Revolution. New York: Harper Business. Hanf, Kenneth, and Fritz W. Scharpf, eds. 1978. /nterorganizational

Policy Making; Limits to Coordination and Central Control. London: Sage Publications. Hoogervorst, Johannes A.P. 1998. Quality and Customer Oriented Behavior: Towards a Coherent Approach for Improvement. Delft:

Riggins, Frederick J., and Tridas Mukhopadhyay. 1994, Interdependent Benefits from Inter-Organizational Systems: Opportunities for Business Partner Reengineering. Journal of Management Information Systems \1(2): 37-57. ROM project Rijnmond. 1993. Plan van Aanpak; Beleidsdocument (Implementation plan). Den Haag: Sdu. Scharpf, Fritz W. 1978. Interorganizational Policy Studies: Issues,

Concepts and Perspectives. In [nterorganizational Policy Making; Limits to Coordination and Central Control, edited by Kenneth Hanf and Fritz W. Scharpf, 345-70. London: Sage Publications. . 1997. Games Real Actors Play; Actor-Centered Institutionalism in Policy Research. Boulder, CO: Westview Press. Short, James E., and N. Venkatraman. 1992. Beyond Business Pro-

cess Redesign: Redefining Baxter’s Business Network. Sloan Management Review 34(1): 7-21. Sinnig, Herman 1995, Verfahrensinnovationen kooperativer Stadtund Regionalentwicklung (Innovations in cooperative procedures for urban and regional development). Raumforschung und Raumordnung 3: 169-76.

Eburon. Kickert, Walter J.M., Erik-Hans Klijn, and Joop F.M. Koppenjan, eds. 1997. Managing Complex Networks; Strategies for the Public Sector. London: Sage Publications.

Klijn, Erik-Hans, and Geert R. Teisman. 2000. Governing PublicPrivate Partnerships: Analysing and Managing the Processes and

Susskind, Lawrence, and Jeffrey Cruikshank. 1987. Consensual Ap-

Institutional Characteristics of Public-Private Partnerships. In

proaches to Resolving Public Disputes. New York: Basic Books.

Public-Private Partnerships; Theory and Practice In International Perspective, edited by Stephen P. Osborne, 184-201. London: Routledge. Klijn, Erik-Hans, Joop F.M. Koppenjan, and Katrien J.A.M. Termeer. 1995. Managing Networks in the Public Sector. Public Administration 73(3): 437-54. Lissack, Michael, and Hugh P. Gunz, eds. 1999. Managing Complexity in Organizations: A View in Many Directions. Westport, CT: Quorum Books. Lundvall, Bengt Ake. 1993. Explaining Interfirm Cooperation; Limits of the Transaction-Cost Approach. In The Embedded Firm; Understanding Networks: Actors, Resources and Processes in Interfirm Cooperation, edited by Gernot Graeber, 52-64. London: Routledge.

Tatenhove, Jan Van. 1993. Milieubeleid onder Dak (Environmental

Marsh, David, and Rod A.W. Rhodes, eds. 1992. Policy Networks

in British Governments, Oxford: Clarendon Press. Martin, David M. 1994. Delaying with Demanding Customers; How

policy accommodated). Wageningen: Agricultural University. Teisman, Geert R. 1997. Sturen via creatieve concurrentie (Gover-

nance by creative competition). Nijmegen: Katholieke Universiteit. . 2000. Models for Research into Decision-Making Processes: On Phases, Streams and Decision-Making Rounds. Public Administration 78(4): 937-56. . 2001. Ruimte mobiliseren voor codpetitief besturen, over

management in netwerksamenlevingen (Creating abilities for cooperative governance processes). Inaugural speech, Erasmus University, Rotterdam. Teisman, Geert R., and Erik-Hans Klijn. 2000. Public-Private Part-

nerships in the European Union: Officially Suspect, Embraced in Daily Practice. In Public-Private Partnerships; Theory and Practice in International Perspective, edited by Stephen P. Osborne, 165-86. London: Routledge.

to Turn Complaints into Opportunities. London: Pitrnan Publishing.

Partnership Arrangements: Governmental Rhetoric or Governance Scheme?

205

[25] Symposium — GOVERNANCE AND PusLic SECTOR MANAGEMENT

Public Sector Governance — Future Issues for Australia* Meredith Edwards Deputy Vice-Chancellor University of Canberra Governments in many countries today find themselves in unchartered waters as they attempt to redefine their role, including how they relate to the business and community sectors and to citizens more broadly. There is currently a serious questioning of what are the appropriate structures, institutions, processes and organisational relationships required in an environment placing much more emphasis on collaboration with partners within the public sector and also outside it. Globalisation and the increased importance placed on competition, increased use and variety of information technologies and changes in values and political beliefs have contributed to this new environment (for example, see Davis and Keating 2000; Edwards 2001). Alongside this, and particularly noticeable in Australia, is a public sector facing uncertainties as it attempts to adopt private sector governance practices in the belief that this will lead to greater efficiency in achieving outcomes.

This article deals with the main governance challenges facing the public sector over the next decade with a focus on the Australian public sector at the Commonwealth level. The challenges raised, however, are known also to

be of concern tu many Australian states as well as overseas governments. Challenges identified here have arisen out of discussions with the network of Australian researchers and practitioners who are members of the National Institute for Governance based at the University of Canberra. Through the network — as well as through a series of Canberra-based public and closed forums and conferences, and through research and consultancies — key governance issues and research priorities for the future have emerged and are reported on below. The article has a bias in its discussion toward those issues somewhat neglected in current Australian literature or practice. Hence, for example, little is said about service delivery issues which have been dealt with at length in the literature, especially in an outsourcing environment; but issues more relating to internal governance arrangements and issues dealing with non-government players in the policy process have been relatively neglected and therefore are given more attention.

The article is organised around two of the main themes which have been the focus of the institute’s work on the public sector: corporate and participatory governance. As will become evident, there is some overlap between these two aspects of governance with the common theme being the importance of building up strong organisational relationships if good governance is to occur. The next section provides relevant definitions; the third section deals with governance issues essentially internal to the public sector; and the final section raises issues more directly involving stakeholders and citizens themselves.

Corporate and Participatory Governance: Concepts Governance is one of those words that is currently in fashion and hence its meaning is in danger of not being well understood unless further defined. In fact it is an old word (Shake-

speare used it) and its meaning has evolved over time from: ‘a method of management’ in the 17th century (Osborne 1999:38) to encompassing roles and responsibilities of private boards of directors to now, put simply, dealing with all.

Australian Joumal of Public Administration + 61(2):51-61, June 2002 © National Council of the Institute of Public Administration, Australia 2002. Published by Blackwell Publishing Limited

Governance and the Public Sector

32

Edwards

forms of organisational relationships (Edwards

2000:5). Governance is best understood in terms of the key elements that are commonly seen to describe what is ‘good governance’ to assist performance: accountability, transparency, participation, relationship management and,

depending on the context, efficiency and/or equity. Until recently, the concept of ‘corporate governance’ was used to refer to the more technical issues of how organisations set up and managed their governing boards and related committees. Now, as a result of closer public scrutiny of the private sector, corporate governance is usually extended to encompass the ways in which organisations deal with shareholder and stakeholder interests in the decision-making process. Partly as a consequence, corporate governance is sometimes defined in terms of structures and processes, sometimes

SHS)

in terms of direction and control,

sometimes in terms of its substantive elements, and usually in terms of relationships (see Horrigan 2001a:7). As a result of an increased global focus on the importance of good governance for corporate results, several bodies have come up with a set of principles of good governance, a set which seem to be evolving over time. One such set has been produced by the OECD (1999),

tions for the future of relationships of government, business, the community sectors with each other and their roles and responsibilities, and also for related accountability issues.

Corporate Governance within the Public Sector Over the last decade in Australia there has been a strong push by the Commonwealth government to adopt private sector processes and structures within its agencies and to use the phrase ‘corporate governance’ to describe some of these practices. A common assumption is that the corporate form of governance can be readily adapted to improve on government policy and implementation activities. There are undoubted elements of commonality between the public and private sectors. Both sectors seek means to enhance performance and both currently give much attention to the roles and responsibilities of their boards and CEOs. The adoption of corporate practices by the public sector also holds potential for inclusion of a broader range of stakeholders in the process of policy advice (discussed in the next section).

Most Commonwealth agencies operate under either the Commonwealth Financial Management and Accountability [FMA] Act

Closer to home, the Australian National Audit

1997 or the Commonwealth and Companies

Office (ANAO)

has produced better practice

[CAC] Act 1997. Those Acts provide the major

guides which Commonwealth agencies are encouraged to use as benchmarks for good practice (ANAO 1997, 1999) ‘Participatory governance’ is a less familiar term and is about collaborative relationships; specifically about the role of non-government players, beyond delivering services to a role in the policy development process. It requires structures and arrangements which support effective relationships across public, private and community sectors as they collaborate in decision-making processes towards agreed

statutory accountability and governance framework for Commonwealth bodies. The areas of commonality in public and private sector practices are encouraged by these two pieces of legislation. The FMA Act, for example, provides a scheme of accountability for Commonwealth government agencies, with Part 7 specifically requiring chief executives to use Commonwealth resources (money and property) ‘efficiently, effectively and ethically’ (as also stated in the Corporations Law affecting companies). However, not sufficiently reflected in the legislation are the key differences between

objectives

(Edwards 2000).

It is my contention that governments cannot remain as firmly in control of the policy decision-making process as they have in the past and at the same time continue to move toward a more facilitative or enabling role. The mood is clearly toward non-government players wanting a greater direct involvement in public policy-making. This raises important implica© National Council of the Institute of Public Administration, Australia 2002

the public and private sector environments;

hence the legislation can create real tension between public and individual responsibilities. Chief executives confront a situation under the FMA Act where a ministerial direction is considered to be potentially inconsistent with their primary obligation under the Act to manage the agency’s affairs and Commonwealth

516

Governance and the Public Sector

Public Sector Governance — Future Issues for Australia

resources in the most efficient, effective and ethical way (see Horrigan 2001a and Nicoll 2000). Similar tensions arise for Commonwealth agencies that come under the CAC Act. CAC Act provisions take into account the ‘public interest’ obligations which directors and officers might have under the Act. However, unlike corporate governance legislation in some states (for example, NSW and Queensland), the duties of

directors ‘are not expressly modified to account for ministerial directions, community service obligations and other public accountability mechanisms’

(Horrigan 2001b:1). In addition

the wholesale application of private corporate law raises issues around the meaning of corporate concepts such as ‘shareholder’, ‘ownership’ and ‘control’ in the public sector. For example, ‘does share ownership in this context impose some greater onus upon governments to preserve the asset values of corporations in which it holds shares? Does a concept such as the national or public interest best describe the government’s role as shareholder? The government’s role as shareholder in this respect seems quite different from its role of monitoring corporate management performance’ (Nicoll 2000). New considerations arise here which could represent the beginnings of an altogether new form of corporate governance. Obviously clarification is required. There are many other questions that arise in attempting to apply the Corporations Law to Commonwealth authorities and companies; for example, to what extent and in what form should the business judgment rule in Corporation Law be.applicable to the directors of CAC bodies (Horrigan 2001a)? Nicoll makes the following observations in this context:

In the private sector, the concept of business judgment recognises that shareholders are providers of risk capital, but in a public sector context, it seems inappropriate to consider the Commonwealth to be a provider of risk capital, or even to think of the Commonwealth’s responsibilities in such terms ... Under the CAC Acct, the duties of directors or officers of CAC bodies include obligations such as keeping the Minister informed of significant events and the implementation of government policy. These are very new additions to the concept of business judgment (Nicoll 2000). ©National Council of the Institute of Public Administration, Australia 2002

53

In the private sector there is considerable discussion around, if not concrete action on, the achievement of the ‘triple bottom line’ (TBL) in the attempt by some organisations to be seen

as good corporate citizens. To some extent CAC bodies do this insofar as they meet ‘community service obligations’ (CSOs) although TBL thinking and practice engages wider interests than CSOs. But how far should we expect the public sector to embrace broader TBL objectives? Our Auditor-General sees our public sector agencies as well placed to take on a TBL reporting approach given the focus on outcomes as a main measure of performance, but he admits that our public sector has a long way to go compared with other countries (Barrett 2000:16). Horrigan, in discussing TBL implications for the public sector, observes: If directors and officers of corporatised entities have an obligation to act in the best interests of the corporation and that includes the interests of its shareholders as a major element, how is that obligation framed when the shareholders are shareholding ministers who represent broader public interests, and how might that framing of corporate best interests influence broader notions of what it means to act in the best interests of a corporation and its shareholders? (Horrigan 2001a:43). ‘This area is ripe for conceptual and case study research. Ultimately the private sector corporate board does not have roles and responsibilities akin to the achievement of government policy and the protection of the public interest: it is the democratic processes of parliament that underpin the public sector concepts of ownership and public interest. But there is still an unanswered issue around the extent to which it is appropriate to have differences between public and private governance practices. Corporate governance is in a state of transition whether it be in reference to the public or private sectors. There is a need in this transition to clarify language and to develop a conceptual framework for corporations in an environment which is demanding more accountability, transparency, ethical behaviour, a TBL as well as increased participation of stake-holders. An important part of this conceptualisa-tion which has been brought to the attention of the institute in many of its forums, is how both govern_~

Governance and the Public Sector

Dil,

54

Edwards

mentand business deal with longer-term issues in an environment that emphasises the short term, especially in infrastructure decisions, whether that be the life of a chief executive ora minister. The UK government is going to considerable effort to address this challenge with a special project within its prime minister’s office to get consensus on the key challenges government will need to face over the next 10— 15 years (UK Cabinet Office 1999:4. 1ff). Forums of the institute have identified several corporate governance issues applicable to the public sector that need to be resolved, including: * the hybrid nature of CAC bodies and their regulations under public and private law; * the legal structure of the corporation on the one hand and the responsibility of its officers if the corporation is expected to meet broader government objectives on the other; ¢ the structure of boards, for example how appointments are made and what processes exist to ensure independence;

* *

*

how to assess the performance of boards; the reconciliation of the legal responsibilities of directors under Corporations Law and of directions under the CAC Act; the capability of corporate constitutional structures to absorb public/private stakeholders; and

*

reconciling

obligations of company directors under corporate law with requirements for ministerial responsibility as well as parliamentary and public accountability. There is a dearth of documented case studies on good corporate governance practices, especially how they could work in the public sector. These are needed to progress to a longer-term program of monitoring performance leading to improved standards. Performance and Connections The Australian Auditor-General has observed that Commonwealth government agencies have now put in place many of the elements of good corporate governance (as defined in the ANAO better practice guides (1997, 1999) but have not integrated these well to ensure effective performance. The Auditor-General has noted: However, too often these elements are not

linked or interrelated in such a way that people in the organisation can understand © National Council ofthe Institute of Public Administration, Australia 2002

both their overall purpose and the various ways the various elements need to be coordinated in order to achieve better performance ... Therefore the real challenge is not simply to define the elements of sound corporate governance but to ensure that all the elements of good corporate governance are effectively integrated into a coherent corporate approach by individual organisations and are well understood and applied throughout those organisations. If implemented appropriately, such an approach should provide the integrated strategic management framework necessary to achieve the output and outcome performance required to fulfil organisational goals and objectives (Barrett 2000:13).

More recently a forum of secretaries and agency heads, the Management Advisory Committee (MAC),

has promoted

better performance

management in the Australia Public Service with a similar theme of integrating people, planning and performance with organisational objectives

(2001). A major future challenge is to build and mutually reinforce connections across the different elements in a corporate governance framework. To ensure this happens, some future actions government agencies could take to ensure good practice include: * bringing greater alignment between specified government outcomes (or at least objectives), agency strategic planning and divisional business planning; * — ensuring that each member of the executive team identifies with and takes responsibility for particular corporate outcomes; * — tying departmental outcomes to individual performance agreements, or, as the MAC report, suggests ‘that there is a clear “line of sight” for staff between their responsibilities and the objectives of the organisation ...’ (ibid:10);

*

‘engaging and winning the support and competence of staff through transparency, fairness, simplicity, progressive implementation, CEO and management commitment, reducing the gap between rhetoric and reality and by addressing poor performance’ (ibid:10);

*

achieving a balance in decision-making between tangible economic considerations and intangible, non-economic

considera-

Governance and the Public Sector

Public Sector Governance — Future Issues for Australia

tions, whether in ‘value for money’ public tender assessments or even ‘balanced scorecard’ assessments. It will be most useful for Commonwealth agencies to study the recently released MAC report referred to above which contains many suggestions for good practice as part of a performance management framework. People and Communications

While most public sector agencies comprehensively specify their strategic vision, values, goals and plans for the organisation as a whole, this framework does not necessarily align with what actually happens within divisions or their equivalent within the organisation. Too often executive decisions, such as on governance matters, fail to be known, or at least understood,

55

least through the large senior executive of that organisation. Every six weeks around 80 senior executives meet not only to share information but also to have meaningful dialogue often to decide on current issues. This has been a practice for four years now and deserves evaluation (Vardon

1998). However, how far down the

message gets in the organisation would need to be assessed alongside other means by which communication takes place (for example, direct emails between the chief executive and staff),

and what works for Centrelink is not necessarily going to work for other agencies. Some of the practices which appear to enhance organisational communication in the public sector include: systematically appraising the amount of information going out to staff in emails and memos with the aim of being as selective as possible; aligning priority agency goals with individual performance agreements; use of knowledge networks around areas of common interest (including by information and communication technology); and regularly monitoring and evaluating the effectiveness of communication methods, including surveys of staff which ask for suggestions for improvement.

further down in the organisation, impeding their effective implementation. One of the hardest management tasks for a chief executive of any organisation, therefore, is to communicate desired outcomes to lower levels of management to the point where each employee can identify with and contribute to those outcomes in terms of their daily work. There is a vast literature on organisational communication in relation to leadership. At its Knowledge Creation and Management basic level the literature distinguishes between A rapidly emerging area of challenge for all information or ‘getting out the message’ on the organisations is how to engage effectively in eone hand, and quality communication in terms » governance and take control of the knowledge of effective interaction on the other. In the past, explosion. Information and knowledge are the management could more easily than today get essence of innovative management and, if away with the one-way process of disseminating harnessed well, can give organisations a cominformation down the line. Flatter structures in petitive edge. organisations, increasing demands on the time What is ‘knowledge management’? Knowof-employees and greater reliance on internal ledge management is a new concept recently organisational networks (including the web) added to managerial and governance literature make two-way dialogue essential for the and it is not easy to understand its dimensions. effective performance of organisations. The OECD suggests that it could be viewed as: Problems of organisational communication . a process for optimising the effective seem to take up so much of management’s time. application of intellectual capital to achieve No one prescription can be offered since the organisational objectives’. A useful definition issues to be communicated as well as the is provided by Stephens: “‘Knowledge managepersonalities involved mean that how the ment” is getting the right knowledge to the message is communicated will be quite specific right people at the right time to serve the right in each case. How the words are used, the tone objectives’ (Stephens 2000:4). It is, most conveyed in a message and its timing can all importantly, not only about gaining but also affect the desired result. So too does the willingsharing knowledge. Effective management of ness to listen. Communication is a ‘personal knowledge is most dependent on people — what art’ (Fitz-enz 2001:54). is in their heads and what they do with The ‘Guiding Coalition’ used by Centrelink information, although the term has confusingly is an interesting example of communication at come to be associated with information and © National Council of the Institute of Public Administration, Australia 2002

-.

Governance and the Public Sector

56 communication technology (ICT) because ICT

is now such a relatively important source of information. One ICT example here will suffice (although others could be given (see, for example, Snellen and Van den Donk 2001)). In the UK recently, a knowledge pool was set up around the controversial issue of foot and mouth disease. An Internet site was created by the relevant department for access by other departments benefiting from sharing policy briefing as well as background material, required for ministerial decision. This was in contrast to previous practices when knowledge of this kind was held close and seen to give a power advantage. Officers involved who may initially have been resistant learnt through the exercise that a little effort in sharing information through their knowledge pool led to significant longer-term benefits (UK Cabinet Office discussion). This point is relevant to facilitating integrated government (discussed below). Of course, issues

of privacy, confidentiality and legal liability (for example, economic loss arising from negligent government information) can also arise here, as part of the ‘conformance’ dimension of governance. That is why an integrated approach to governance is necessary. The UK Cabinet Office, through its Centre for Management Studies (CMPS) and the Office

of e-Envoy are promoting the concept of a ‘knowledge pool’ as a practical way of harnessing information from many sources and disseminating it to those who need it. Trials will be required as to what will work for which agency in what circumstance. Obviously people in the ‘community of interest’ are a basic ingredient to ensure a knowledge pool works; they are as important as are the processes used to create and share knowledge and the knowledge base itself (see also Bellamy 2001). Government agencies in Australia and overseas are moving toward creating positions of knowledge managers (or equivalent). In the UK they tend to be at the executive level and in Canada at the Deputy Secretary level (Borins 2001:8 and Haque 2001:6). A network of such officers can be most beneficial for effective knowledge management and its coordination across agencies. Overseas evidence would suggest that knowledge management should not be seen as the province of either IT or HR areas but instead be integrated into decision-making © National Council of the Institute of Public Administration, Australia 2002

9 Edwards

processes; after all, knowledge creation, management and dissemination are inseparable

from other aspects of management. If knowledge management is not to be just another technique but part of a strategy to aid management achieve its objectives, then there 2 a need for (adapted from OECD 2001:18):

strong commitment and oversight from the *

executive level; a knowledge management strategy defining who is to use what knowledge in the interests of the organisation as well as the

needs of the knowledge worker; a focus of implementation on improving human capital and adapting organisational infrastructure; and ° regular assessments of the implementation of the knowledge management strategy. While several Australian agencies at the Commonwealth level have made considerable advances in coming to grips with managing relevant knowledge including appointing knowledge managers (or equivalent), fewer have knowledge strategies at this point in time *

(see Stephens 2000). Even fewer can be found

to place knowledge management within the context of achieving objectives (ibid.). ‘Integrated Government’

The move by governments toward ‘enabling’ rather than ‘doing’ or ‘steering’ rather than ‘rowing’ has had an apparent unintended consequence of a disconnection both between policy and delivery and across policy units. Arguably, one of the greatest future challenges for public sectors around the globe is to do better at breaking down departmental ‘silos’. The task is described differently in different countries: in the UK it is ‘joined up government’; in Canada and New Zealand it is ‘horizontal management’; and emerging in Australia is ‘integrated or collaborative government’. Regardless of the term, reference is being made to how government agencies can collaborate more effectively around issues that cross a number of portfolios. Not discussed here but also of relevance is how that same collaboration can occur with other levels of government (which raises a host of ‘national governance’ issues), if not globally. Both vertical federal/ state/local and horizontal (for example, department to department) integration are necessary, as well as transnational and global integration. Countries differ in their progress here and

520

Governance and the Public Sector

Public Sector Governance — Future Issues for Australia there are overseas experiences from which Australia can learn. The UK (especially through

its Cabinet Office) has an agenda that looks impressive, if overly ambitious, and in the UK

a7

ment of Prime Minister and Cabinet — the only department that is set up to get a ‘whole-ofgovernment’ perspective (see, State Services Commission 1999 and UK Cabinet Office 1999).

(as in other countries such as Canada and New

Zealand) there does appear to be at least a recognition that a problem exists with an agency silo mentality. But it is easier said than done to rectify that position, even with strong central agency leadership. Into the future, the setting up of knowledge networks on crosscutting policy and research issues could be an increasingly common way of breaking down the silo mentality. More integrated government could be encouraged by the setting up of networks around common policy or research or other interests. Related, greater collaboration across govern-

ment agencies can occur by taking advantage of ICT technology, for example forming knowledge pools as mentioned above. Strong

ministerial leadership would seem essential. Another way in which better practice can be encouraged within and across organisations is through peer review. This was a suggestion made in the UK Modernising Government White Paper (cm 4310) and taken up subsequently by the UK Cabinet Office. Departments are now committed to carry out independent reviews of their business planning through peer groups or with outside organisations (UK CMPS

2000).

Peer review uses people who have hands-on experience Of a particular area to act as ‘friendly critics’ to another organisation or a part of the same organisation facing similar issues. There are many types ranging from the most informal to the most structured. There is a need to consider moving away from agencies delineated by designated functions, (for example, education, health) toward groupings of agencies focused more on crosscutting issues (for example, based on client groups or geographic areas). This new approach could be seen to focus more on ‘policy domains’ (see Algen 2001:8). There is a tension between the vertical processes of government represented in function-based departments and government’s horizontal problems. That tension is growing (Kettl 2000:12). Although this will be a possibly contentious suggestion, it would seem appropriate to have integrated government initiatives facilitated and monitored by the Commonwealth Depart© National Council of the Institute of Public Administration, Australia 2002

Participatory Governance Over the past few years, an increasing number of countries have begun developing new forms of policy advice and citizen participation, or are currently about to engage in such experiments. While there does not seem to exist any universal pattern to the forms that have emerged in these respects, it appears that the basic drive behind these changes is to make policy advice and public policy more directly accessible and responsive to citizens’ preferences and also to provide policy makers with a wider variety of ideas, perspectives and suggestions than traditional policy advice can offer (Pierre 1998:137). Over the last decade in particular, governments in most countries have given considerable attention to whether or not to use nongovernment agencies in service delivery; and where that occurs, the focus has tended to be on the desired outcomes in a purchaser—provider framework. There has been much less attention given to the relationships formed between the government and non-government players in this context and their expectations of each other. In particular, a largely unexplored question is on what issues should non-government players — Organisations as well as the public more generally — be brought into the policy development process, and at what stage or stages in that process. And a related set of questions arise in the context of assessing who is responsible for what, or the appropriate accountability regime if non-government agencies are brought into the decision-making process. Institute forums have revealed considerable lack of understanding of each sector, and hence trust, of what each can do to assist the other. Non-Government Players and the Policy Process

With government withdrawing to a ‘steering’ rather than a ‘rowing’ role, and non-government organisations delivering services previously -_

Governance and the Public Sector

58 delivered by government, government, as the main player in the policy-making process, is unlikely to have sufficient knowledge of a problem at hand to identify and negotiate effective solutions, without relying more on the knowledge and experience of non-government players and hence bringing them more into the policy-making process (Wolfish and Smith 2000). An underlying assumption of this paper, therefore, is that governments today cannot remain as firmly in control of policy processes as in the past and, at the same time, take a more ‘enabling’ role, if they are to learn from agencies delivering services as well as agencies in touch with consumers of services. Over the last five years in Australia there has been more involvement of external players, including citizens, in the policy process: the Howard government’s Task Force on Youth Homelessness, the McClure Report on Welfare Reform — both headed by respected representatives from religious organisations — and the Ralph Review of Business Taxation headed by a prominent business person are three cases in point. In addition parliamentary committees play a potentially important role in bringing together internal and external viewpoints. However, so far the process of external involvement of players in policy processes has been somewhat selective and ad hoc and has tended to exclude peak organisations that would claim to represent consumers. In addition, through Community—Business Partnerships, the Howard government has attempted to get closer to communities. Although early days, there remains considerable uncertainty outside of government about what it is that government expects to occur as a result of such an initiative. There does not appear to be an agenda for more systematic inclusion of non-government players in the policy process across a range of portfolios, as is occurring in some of the states (such as

Queensland, for example) or in other countries (for example, the process toward an Accord in Canada or the establishment of a Compact with the voluntary sector in the UK). One of the greatest challenges facing governments today is how to engage citizens in the decision-making process in ways that suit both citizen and government (Bishop and Davis 2001). The use of ICT offers possibilities but overseas evidence shows mixed success. For example, the UK ‘People’s Panels’ was recently © National Council ofthe Institute of Public Administration, Australia 2002

521 Edwards

given a negative appraisal by the House of Commons Public Administration Committee. Elsewhere, to date, the use of ICT, especially the Internet, has not been as effective as expected to enhance people’s access to policymakers (Norris 2001, in Haque 2001:16).

With a future encompassing a broader sharing of decision-making power between government and non-government players, there will be fundamental questions to address about appropriate governmental structures and processes needed to gain most effectively from partnership arrangements with non-government players. More participatory or inclusive processes of governing are called for if governments are to have enhanced capacity to cope with the blurring of boundaries across the sectors and to facilitate good policy-making. In particular, in circumstances where there is much conflict on an issue and/or many organised stakeholders, and also in circumstances where there may be many alternative solutions and/or high uncertainty on outcomes, a participatory framework for policy development would seem essential for policy progress (see also Walters et al. 2000:354).

There is much that can be learnt from overseas experience where the acknowledgement of sharing of policy-making power by governments has gone further than at the Commonwealth level in Australia. In the UK at present, for example, several agencies are recruiting people from outside of government to assist on specific projects (for example, currently around half of the recruits into the Performance and Innovation Unit in the Cabinet Office in the UK).

Accountability and Ministerial Responsibility Issues

Important accountability issues arise the more non-government players are involved in the policy development process. Accountability in the public sector seeks to ensure that public sector agencies and their staff are responsible

for the collective and individual actions and the decisions leading up to them (Barrett 2000:7). This is in line with Westminster con-

cepts of ministerial responsibility to parliament. But what does this mean when accountability for decision-making is shared with nongovernment players? Can the principles of

522

Governance and the Public Sector

Public Sector Governance — Future Issues for Australia

individual and collective ministerial responsibility and accountability to the taxpayer through parliament hold when the boundaries between the sectors are more blurred? Can there be multiple accountabilities and how far can ambiguities in partnership arrangements be tolerated (Dobell and Bernier 1997:258)? How

far can the nature of accountability arrangements change as a result of a convergence between public and private sectors (Barrett 2000:62)? These issues have been explored by many Auditors-General apart from our own. The Canadian Auditor General, for example has explored in some detail implications in the context of ministerial responsibility (AuditorGeneral, Canada 1999). He, like our AuditorGeneral (Barrett 2000:15), emphasises the

59

a greater complexity of their jobs with the trend toward increased contestability in policy advice including from non-government organisations (NGOs). In addition, the formation of task forces

and other mechanisms including non-government players means that their pre-eminent position in providing advice to ministers is challenged. Indeed a public servant can sign off on a report as a compromise document with non-government players and then take quite a different line in subsequent and more internal briefing processes. New or additional skills are being required of public servants. Some of the skills required in order to be ‘partnership ready’ include: negotiation, presentation, participation, diplomacy, communication and managing complex relationships, conflict resolution, understanding the broader context and managing

importance of clarity and clear understanding of the roles and responsibilities of relevant risks (UK Cabinet Office 1999:11.12). These participants. The Canadian Auditor-General skills will also be required of public service suggests that the minister is accountable to partners and there would be much to gain from parliament for the involvement of a federal joint training across the sectors. department or agency in a collaborative arrangeToday government agencies are expected ment but partners are accountable for the to communicate more with the public than preachievement of results. But he also suggests that viously, with ICT adding to that pressure. An the government should begin a process of additional pressure placed on public servants consulting parliament and the public on how and identified through a 2001 National Institute to reconcile new governance arrangements with for Governance Forum is the role of public accountability to parliament and how to servants vis-a-vis ministers when it comes to ‘formalise the participation and accountability - communicating with the public. When is it the of independent parties involved in the role of public servants and when the role of the achievement of federal objectives’ (1999:21). politician and why? In practice the boundary is That sounds like good advice for Australia as blurred (http://governance. canberra.edu.au). well and has been echoed by our Auditor-General recently (Barrett 2001:6). There needs to be Next Steps processes such as this suggestion to minimise Overseas experience, academic writings and our the inevitable tension between representative Own institute forums would suggest several and direct or participatory democracy. important elements in a good participatory governance framework which could assist in Changing Role of Public Servants advancing accountability as well as transWhat does all of this mean for the role of public parency in processes if endorsed by all players servants? (Edwards 2001): * acommon language and set of principles The accountability tensions that the citizen to guide how the relationship is to work; voice reforms have introduced into the * mutual understanding and recognition of equation (are the voices of the elected the value frameworks of each sector; officials or those of citizens higher on the ° clarity of goals and expectations of each chain?) have not been directly addressed, sector; but now constitute a very important part of * aclear statement of respective roles and the brokering activity that members of the responsibilities through the policy senior service manage (Ingraham 1998:178processes; 79). * agreement on what outcomes are to be Policy advisers within government have noticed evaluated; and ©National Council of the Institute of Public Administration, Australia 2002

Governance and the Public Sector

60 *

early agreement on dispute-resolution processes. Even with appropriate skills and an operational participatory framework such as that above, partnering experiences always emphasise the importance of giving the process time, with its concomitant costs, for trust to develop before benefits can be realised. Governments with an eye on the next election often force the pace and can prevent this essential partnering agreement from being realised. Commitment of government leaders would seem to be an essential precondition for effective participatory governance as well as transparency in the way government operates and a sharing of its information base, wherever possible. One UK minister observed recently in a seminar run by the Centre for Management and Policy Studies: ‘For consultation to be real, we have to disempower ourselves’ (http://www.cmps.gov. uk:5). In turn, non-government players more involved in policy processes will need to assure government that, although representing certain sections of society, they have the capacity to be responsive to consumer needs and to determine broader citizen perspectives; that they do not operate only as narrow sectional interests but can represent societal interests more broadly. It is worth noting here that with closer collaboration across sectors will follow different structural arrangements; partnerships cannot be expected to work if they are dealt with within existing bureaucratic processes. In other words, structures must inevitably follow after establishing a process for engagement and after outcomes have been agreed. That will not necessarily be easy for the public sector. Many issues arise around greater involvement of non-government players in assisting government with policy development processes rather than just in delivery of services. There is a need to develop and monitor models of how to involve citizens as well as stakeholders in a more participatory, more networked and less hierarchical framework of decision-making, using case studies to define best practice. Overseas experiences are worth watching in terms of the changing relationship between citizens and the state and how government can re-engage citizens. Particularly this is the case for how ICT is used to engage citizens more directly in democratic processes, including how ICT itself can be used to support those processes. © National Council of the Institute of Public Administration, Australia 2002

SA3} Edwards

Conclusion Over the next decade we can expect that the Commonwealth public sector will move from a set of what are effectively mini-enterprises to a more collaborative network of agencies in the way in which they deal with each other and with their clients and customers. The public sector will need a different set of structures, principles and values to support collaborative arrangements, both within government and also with external partners and citizens. It will need to be more focused on problems cutting across departmental functional lines and in this process trust will become more valued as a basis for operating. The public sector will go beyond clients and customers and structure itself so it is both more citizen-centred and also more networked (including through ICT). Agencies will become organisations of more learning and will have staff who learn in forums alongside staff from the private and community sectors; the public sector could profitably bring such people to work within it more than has been the case in the past. More shared accountabilities with non-government players will occur but necessarily there will be a streamlining in clarity around roles and responsibilities, not just for board members but throughout public organisations. All this, hopefully, will occur without losing emphasis on a performance culture. The above will be critically dependent on strong leadership from government with a clearly articulated belief about the importance of new governance arrangements within agencies and across the sectors in the interests of a more participatory society. Note *

This paper has benefited from comments made by Bryan Horrigan and Russell Ayres. It extends on a paper entitled ‘Participatory Government’ presented at a Minter Ellison Canberra Seminar,

June 2001.

References Algen, J-M 2001 ‘A Second Wave of Public Sector Reforms in the Flanders: An Outlook on a Transparent Organisational Model for the Flemish Administration’, 25the International Congress of Administrative Sciences, July, Greece.

524

Governance and the Public Sector

61

Public Sector Governance — Future Issues for Australia ANAO 1997 Better Practice Guide: Applying Principles and Practice of Corporate Governance in Budget Funded Agencies, July, Canberra. ANAO 1999 Corporate Governance in Commonwealth Authorities and Companies — Principles and Better Practice, May, Canberra. Auditor-General, Canada 1999 Report of the AuditorGeneral, Chapters 5 and 23, November (http:// www.oag-bvg.gc.ca). Barrett P 2000 ‘What’s New in Corporate

Governance’, address to CPA Australia Annual Congress, November. Barrett, P 2001 ‘Some

Current

Issues

in

Accountability’, SES Breakfast Seminar, July. Bellamy, C 2001 ‘From Automation to Knowledge Management: Modernising British Government with ICTS’, 25th International Congress of Administrative Sciences, July, Greece. Bishop, P & G Davis 2001 ‘Mapping Public Participation in Policy Choices’, APSA Conference, September, Brisbane. Borins, S 2001 ‘Electronic Governance:

‘Panel on

International Review of Administrative Sciences’, 25th International Congress of Administrative Sciences, July, Greece. Davis,

G & M Keating eds 2000

The Future of

Governance, Allen & Unwin, Sydney. Dobell, R & L Bernier 1997 ‘Citizen Centred Governance: Implications for Inter-Governmental Canada’ in R Ford & D Zussman, Alternative Service Delivery: Sharing Governance in Canada, IPAC/KPMG. Edwards, M 2000 ‘Governance: Meaning and Issues’, Public and Private Sector Governance: Exploring the Boundaries Conference, April, Canberra Bulletin of Pubic Administration, June.

Edwards, M 2061 ‘Participatory Governance into the Future: Roles of the Government and Community Sectors’, AJPA 60(3):78-88.

Fitz-enz, J 2001 The E-aligned Enterprise: How to Map and Measure Your Companies Course in the New Economy, American Management Association, New York. Haque, MS 2001 ‘E-Governance in India: Its Impact on Relations Among Citizens, Politicians and Public Servants’, 25th International Congress of Administrative Sciences, July, Greece. Horrigan, B 2001a ‘Integrating Corporate Governance, Governmental Liability, Directors’ Duties, and the Public Interest for Government Business Enterprises’, paper presented at the Governance and Justice Conference, July, Griffith University. Horrigan, B 2001b ‘Workshop Notes on the CAC Act, the FMA Act and Executive Boards for Agencies’, paper presented at the PSMPC Workshop on Governance, November. Ingraham 1998 ‘Taking Stock: Assessing Public Sector Reforms’in GB Peters & DJ Savoie eds Taking Stock: Assessing Public Sector Reforms, Canadian © National Council of the Institute of Public Administration, Australia 2002

Centre for Management Development, McGillQueen’s University Press, Montreal. Kettl, DF 2000 ‘The Transformation of Governance:

Globalisation, Devolution and the Role of Government’, discussion paper, National Academy of Public Administration, June, Albuquerque. Management Advisory Committee (MAC) 2001 ‘Performance Management in the Australian Public Service, A Strategic Framework’, PSMPC, September. Nicoll G 2000 Roles and Responsibilities in the Public and Private Sectors: Some Identifiable Trends, Analogies and Comparisons, Background Paper

for Defence Roundtable, National Institute for Governance. Norris, P 2001 Digital Divide? Civil Engagement, Information Poverty and the Internet in Democratic Societies, Cambridge University Press, Cambridge. OECD 1999 OECD Principles of Corporate Governance, Ad Hoc Task Force on Corporate Governance, April, SG/CG (99) 5. OECD 2001 ‘E-Government for Democracy and Development’, Focus, Public Management Newsletter, March, No. 19. Osborne D 1999 ‘Governance, Partnership and Development’ in Governance: Concepts and Applications, I1AS, Brussels. Pierre J 1998 ‘Public Consultation and Citizen Participation: Dilemmas of Policy Advice’ in GB Peters & DJ Savoie eds Taking Stock: Assessing Public Sector Reforms, Canadian Centre for Management Development, McGill-Queen’s University Press, Montreal ‘Snellen

I & W Van den Donk

2001

‘Electronic

Govemance: Implications for Citizens, Politicians and Public Servants’ ,25th International Congress of Administrative Sciences, July, Greece. State Services Commission 1999 ‘Essential Ingredients: Improving the Quality of Policy Advice’, Occasional Paper, June No. 9. Stephens, D 2000 ‘Knowledge Management in the APS: A Stocktake and a Prospectus’, paper presented at the IPAA Conference, ‘Five Years of Reform’, Canberra, November. United Kingdom Cabinet Office, CMPS 2000 Peer Review: A Guide to Peer Review, September. United Kingdom, Cabinet Office Strategic Policy Making Team 1999 Professional Policy Making Jor the Twenty-first Century, September. Vardon, S 1998 ‘Leadership and the Executive Team’, Speech to ACT Public Sector Quality Network, October. Walters LC, J Aydelotte & J Miller 2000 “Putting More Public in Policy Analysis’ , Public Administration Review, July-August 60(4). Wolfish,

D & G Smith 2000 Governance and Policy

in a Multicentric World, Canadian Public Policy Special Supplement on the Trend Project, August. aoa

[26] Abstract Contrary to widespread pessimism regarding the effects of globalization on nation states and the quality of governance in developing

countries, this con-

tribution stresses that several of its features can be made instrumental, and be beneficial, in terms of public policy making and state capability.

Four ‘constructive pressures’ stemming from globalization could be seized constructively by citizens and governments in the developing world: First, better informed and better connected citizens, and an emerging global civil society, demand improvements in service delivery, transparency, and participation. Second, subnational governments, often backed by local NGOs and businesses, and keen to attract foreign investment, increasingly exert pressure vis-a-vis central

yovernments.

Third,

CONSTRUCTIVE PRESSURES AND [INCENTIVES 10 REFORM Globalization and its impact on public sector performance and governance in developing countries Harald Fuhr

global

investment strategies by private businesses increase the demand for appropriate institutional arrangements within developing countries as well as credible government policies. Although with mixed results, forth, International Organizations, in particular IFls, have been addressing public sector modernization indeveloping countries, alsosponsoring global public policy networks in critical areas. Moreover, policycoordinationand cooperation among states increases Significantly, constraining arbitrary action by governments. Globalization, thus, advances the discussion about, and the demand for, new institutional arrangements, clearly with new opportunities for improvements in state capability and governance.

Harald Fabs

wea!

Faculty of Economics and

Social Science

University of Potsdam PO Box 900327 D-14439

Potsdam

5 mee

Germany

Tel: +49 (331) 977-3417 Fax: +49 (331) 977-3429 E-mail: [email protected]

sTLE,

fe)

, Ns

7)

6)

Key words Globalization,

public

administration,

governance, developing

countries, incentives

sector,

public Vol. 3 Issue 3 2001 419-443 Public Management Review ISSN 1471-9037 print/ISSN 1471-9045 online © 2001 Taylor & Francis Ltd http://www.tandf.co.uk/journals DOI. 10.1080/14616670110050011

Governance and the Public Sector

526 420

Public Management Review (Previously ‘Public Management’)

In both developed and developing countries there is an ongging debate on the decreasing importance of the nation state, particularly on its role of exercising power and pursuing and implementing policy decisions.' Some authors even portray ‘globalization’ — particularly those aspects driven by private corporations and supported by international organizations such as the WTO, the World Bank and the International Monetary Fund — as a set of harsh tools eroding sovereign governments’

capacity, power and authority (e.g. Strange 1996: 4, ch. 1). Moreover, it is argued that globalization would lead to cultural imperialism (Barber 1995: Part 1), with the likelihood of cultural clashes or even armed conflict (Huntington 1993). Such scenarios would be particularly harmful for the poorest countries of the developing world where organized opposition to globalization, as for example articulated by labour unions and civic movements, is considered weak (O’Donnell 1996: 27). Joining the global economy, indeed, carries risks. For example, it can make countries more vulnerable to external price shocks or to large, destabilizing shifts in capital inflows (e.g. World Bank 1997b; Gilpin 2000: ch. 5). There could be tensions between trade and domestic social arrangements and policies (Rodrik 1997: 67, 77).

And, in the absence of a proper institutional framework for private sector development, there is ample evidence of damaging economic, financial and social effects

through hurried liberalization and shock therapy (North 2000). But as many authors argue, such difficulties should not be exaggerated, particularly when laid against the risks of being left out of the globalization process altogether. As the history of international economic integration indicates (e.g. Garrett 1998: 796, 822; Wolf 2001),

the cost of not opening up can be a widening gap in living standards between those countries that have integrated and those that remain outside. While the purpose of this article is not to ponder such pros and cons of internationalization and globalization in its many variations, it intends to stress that, in any case, the challenges of globalization makes the state’s role all the more critical, both in handling such risks and shocks and in helping people and firms grasp the opportunities of the global market-place. For countries lagging behind, the route to higher incomes will lie in pursuing sound domestic policies and enhancing state capability. In this sense, globalization begins at home. Yet, as this contribution will stress, at the same time, integration can provide powerful support to such policies and increase the benefits from them. More importantly, governments in the developing world may also benefit in terms of public policy making and state capability. Contrary to widespread pessimism, smart integration may thus open — rather than foreclose — options for ‘good government’. In the following sections we will discuss such positive scenarios, pointing to the new opportunities that could be seized constructively by citizens and governments in the developing

world. Before getting into substance, in Section 1, we need to briefly explain a model for improving state capability within national boundaries. Based on two major schools of thought — new political economy and new _ institutional economics

—

it stresses

the

importance

of appropriate

incentives

for public

sector

527

Governance and the Public Sector

Fuhr: Constructive pressures and incentives to reform

421

reform and change in developing countries. We will briefly discuss this model, and then turn to some key messages that apply for more internationalized and globalized environments in Section 2. We will argue that certain features of internationalization and globalization may actually serve as ‘constructive pressures’ and incentives to enhance state capability” and improvements in overall governance — here more narrowly defined as the quality of government management.’ Section 3 will summarize the most important arguments put forward so far.

HOW CAN STATE CAPABILITY BE IMPROVED?4 A more capable state can be a more effective not the same thing. Capability, as applied to goods at lowest cost to society; it can be means and resources enabling ‘the permanent

state, but effectiveness and capability are states, is the ability to provide collective understood as having the organizational administrative machinery of government

to implement policies, deliver services and provide policy advice to decision makers’

(Polidano 2000: 805). An effective state would be one that uses this very ability to meet a society's demand for those goods. A state may be capable but not very effective

if its capability is not used in society’s interest (World Bank 1997a: Box 1). The path to a more effective state is likely to be a two-stage process. First the state must focus what capability it has on those tasks that it can and should undertake, and as it does this, it can then move on to build additional capability. As Figure 1 illustrates, countries in Zone I pursue a broad range of activities in an unfocused manner despite little state capability, and their efforts prove ineffective. But countries cannot move to Zone III overnight — building capability takes time. The pathway to greater effectiveness leads, first, to focusing on fundamental tasks and leveraging the state’s limited capability through partnerships with the business community and civil

society (Zone II). Countries then can move gradually to Zone III by strengthening their capability over time. State capability refers to the ability of the state to undertake collective actions at least cost to society. It encompasses the administrative or technical capacity of state officials but is much broader than that. It also includes the deeper, institutional mechanisms which give actors within the public sector the flexibility, rules and incentives enabling them to act in a given societal interest. Three interrelated sets of institutional mechanisms can provide an incentive environment to enhance state capability. These aim to: ® e 6

enforce rules and restraints in a given society as well as within the state; facilitate voice and partnerships from outside and within the state; and promote competitive pressures from outside and within the state.

Historically, sustainable state institutions in the developed countries have been built upon formal checks and balances, which in turn reflected power-sharing as well as

Governance and the Public Sector

528

422

Public Management Review (Previously ‘Public Management’)

More capable

Less capable

Figure 1: The pathway to a more effective state Source: World Bank (1997a).

participatory arrangements among key societal actors.’ Most were anchored around core state institutions such as an independent judiciary and the separation of powers. These are essential for ensuring that neither state officials nor the rest of society is above the law. But rule-based government is only one important feature. State capability will also be improved by institutional arrangements that foster partnerships with, and provide competitive pressures from, actors outside and within the state. Partnerships with and participation in state activities by external stakeholders — businesses and civil society — can build credibility and consensus and supplement low state capability. Partnerships within the state build commitment and loyalty, and reduce the costs of achieving shared goals. They can improve incentives for performance, and check the abuse of the state’s monopoly in policy making and service delivery. Similarly, competitive or merit-based recruitment and promotion is crucial for building a capable bureaucracy. Since the model stresses a variety of non-market incentives (e.g. the law, citizen participation) that work as credible constraints for public decision makers, such sets of incentives go way beyond the recommendations of the New Public Management school for public sector change, particularly in developing countries where basic principles of, and rules for, modern government are not yet established.°

Governance and the Public Sector

Fuhr: Constructive pressures and incentives to reform

DZ 423

Rules and restraints Judicial independence

Watchdog bodies

Voice and

\,

partnerships

Merit-based recruitment and

. promotion Decentralization

Public—private deliberation councils

Competitive pressures

; Co-production with communities

Competitive service delivery

Figure 2: A range of mechanisms enhancing state capability Source. World Bank (1997a).

Figure 2 tries to capture these ideas through three overlapping circles, each defining specific sets of incentives, and related mechanisms and arrangements. Overlapping

areas stress mechanisms that are composed of two sets of incentives (such as meritbased recruitment) or three (decentralization). While providing and using such incentives iteratively defines, in a nutshell, the ‘domestic’

capability, we

will now

agenda for enhancing state

turn to the question of how rapid internationalization

and

globalization can affect such efforts.

‘INTERNATIONALIZED’ INCENTIVES TO IMPROVE STATE CAPABILITY — THE ARGUMENT There is a general consensus that globalization makes the traditional spheres of policy making and governing in sovereign states more porous. Some even stress the ‘end of the nation state’ (Ohmae 1996) within that process, and state sovereignty vis-a-vis for example international financial institutions often not amounting ‘to much more than a show’ (Williams 2000: 557). Despite recent turbulences in the international system

Ba0

Governance and the Public Sector

424

Public Management Review (Previously ‘Public Management’)

and a multiplicity of new transnational actors, however, there is a similar consensus that nation states remain, for the foreseeable future, the central (and legitimized) interface through which societal interests are transported, and key for exercising governance.’

We will start from the argument that, in the course of globalization, sovereign states come under a variety of competitive pressures ‘from within’ and ‘from outside’ their boundaries. According to the main thesis underlying the following sections, such pressures can be utilized constructively and iteratively to improve the capability and effectiveness of nation states as well as the quality of governance. Increasing globalization of political and economic processes in fact leads to new incentive structures for government institutions, quite similar to the pressures and mechanisms mentioned in our previous model, yet within an international framework. Such incentives manifest themselves in a variety of interconnected forms that, at the same time, provide the framework for the following discussions: : e

e

@

states will be confronted more effectively with demands of their citizens. Now better informed and connected through communication, there are chances to push strongly for better quality of social services, broader political participation and/or democratization. Such processes of interest articulation and aggregation vis-a-vis the state that formerly took place almost exclusively within national boundaries are now increasingly supported and strengthened through international civil society/non-governmental actors as well as through cross-country and multi-level networks among citizens; central states come increasingly under pressure exerted by subnational governments, often backed by local NGOs, which jointly push for more autonomy, in particular for a new distribution of tasks, responsibilities and public revenues, at times even for outright secession; such — formerly national — processes are now increasingly backed by international issue networks among key actors; the omnipresence of an international private sector intensifies the demand for institutional arrangements that promote market-led development and help reduce the discretion (and corruption) of public decision makers; globally operating businesses (usually in alliance with local firms) provide a broader range of options for public service delivery, and, in search of world-wide

investment

opportunities, may be able to punish ‘bad governance’ in recipient countries; @

international organizations; transnational policy co-ordination among governments and

new ‘global public policies’ may constrain policy making by nation states in several critical areas, above all in economic policies; yet the same mechanisms may help

to prevent governments from engaging in human rights violations and bringing about the deterioration of social policies, or environmental

damage.

Figure 3 tries to capture such ideas. It highlights such new ‘internationalized’ sets of incentives that work outside the boundaries of nation states, thus complementing — sometimes reinforcing — the domestic incentives and mechanisms described previously.

Governance and the Public Sector

Fuhr: Constructive pressures and incentives to reform

Sisil 425

International rules and restraints

Rules and restraints Judicial independence Watchdog bodies

Merit-based recruitment and

promotion , Decentralization

Voice and partnerships

Competitive

Public—private

pressures

deliberation councils

‘&

Co-production with

“&\ Communities

International voice... =

and partnerships

Competitive service delivery

bein International

Baas"

COMDetItve DrESSUres

Figure 3: Internationalized sets of mechanisms enhancing state capability

MULTIPLE PRESSURES AND NEW INCENTIVE STRUCTURES THROUGH GLOBALIZATION States and governments under pressure ‘from below’ — citizens and global civil society The qualitative novelty of the current form of globalization and ‘marketization’ is that, through the interplay of deregulation and technology, new options for economic and political participation become available, and increasingly accessible to large groups of the world’s population. The underlying reasons since the early 1990s are changed cost structures and, as a result, readily available technologies offered by internationally operating businesses. Once national and international competition increased, and privatization policies deepened, former state enterprises in the telecom sector started

SEyA

Governance and the Public Sector ——————————————— a

ee

0

426

Public Management Review (Previously ‘Public Management’)

to dissolve and allowed entry of new enterprises. More people managed to gain direct access to information and knowledge and found better options to share such

knowledge (see World Bank 1998a). Cultural and scientific exchange — previously limited to a country’s elites — gathered speed and intensity. Although such communication is still somewhat limited to a small segment of society — e.g. in middle income countries just about 3 per cent of the population have access to a PC, and some 10 per cent access to a telephone line® — technological change advances rapidly. Existing access problems notwithstanding, if trends continue, by 2003 the number of Internet users in Asia (even excluding Japan) may well exceed those in the USA.” Moreover, access is being sought by a critical group, namely the better-off urban middle classes that are the most active in influencing national public policy making. The fact that in today’s world more citizens are able to communicate and learn from each other has a significant impact on citizens’ perceptions and interpretations of their respective social and political environments. AT&T, Vodafone, Motorola and Siemens may have never thought about the political implications of their investments, but the effects are obvious: the communication and information side of ‘McWorld’ (Barber

1995) makes a difference to people, pretty much like the introduction of transistor radios in the 1950s in much of the developing world. Such goods and services, including their use, simply became less costly. '° Innumerable Internet lists appear to link, in particular, dynamic middle classes through the World Wide Web. Researchers in educational institutions discuss the consequences of the Asian financial crisis; urban self-help groups hold online discussions about the important role of neighbourhood organizations in alleviating poverty; US human rights organizations criticize Mexican police interventions in the Chiapas highlands; Chiapas’ Zapatistas, in turn, feed them through their own

homepage;

and, despite government's attempts to screen Internet

use, China's new middle classes increasingly surf the Web. Communication is nonhierarchical and multi-directional. Whoever logs on, no matter where, can participate in global communication. In addition, new audio-visual technologies crop up which permit communication in situ, in ‘real time’ and in groups. High school and university education — costly for developing countries — may soon be altered significantly. In such non-hierarchical communication networks, the consequences for hierarchical

relations between citizens and their (elected or self-proclaimed) representatives are critical. Citizens learn about the living and working conditions of others and share their experiences. Developments at a distance draw nearer, developments nearby advance towards remote locations. It appears reasonable to assume that, in such communication networks, patterns of political articulation are modified, leaning

towards increased civic participation and participatory policy formulation. As Hirschman (1970) notes, through better communication citizens become more aware of both new ‘choice’ and new ‘voice’ options vis-a-vis their nation state, their government representatives and their local administration. An increasing number of citizens experience precisely this today, and act subsequently.

Governance and the Public Sector

3)

Fuhr: Constructive pressures and incentives to reform

While

in Europe, Japan and North America,

technological

developments

427

may

soon allow for a new quality of communication among citizens and governments (‘e-government’ options) and, to a certain extent, accountability of elected officials,'' it is still too early to assess the political implications of such communication in developing countries. Yet, it seems fair to assume that public institutions, in general, appear to be faced with growing pressure in terms of performance and legitimacy,

which goes far beyond national boundaries. In any case, better informed (and possibly, developed countries, are

then, better educated) citizens, similar to their role in the key to better governance, particularly when governments — — decide to engage in better listening and partnering with back to some of the issues later. But developments do not stop here. Interestingly, such

powerful

international

non-governmental

(non-profit)

notably at the local level such groups. We will get processes

organizations

are backed by

(INGOs)

that

articulate their voice more vigorously than ever. What has been emphasized already in

the early 1970s, within the interdependency debate (Keohane and Nye 1972) and again in the analysis of transatlantic relations (Risse-Kappen 1995), also holds for other areas of international relations and development co-operation. With one important addition: today’s developments are supported and deepened through new technologies (Warkentin and Mingst 2000). Several ‘local chapters’ of INGOs are, in fact, formed as a result of the presence from

a national

context

of an international (Greenpeace,

association,

Amnesty

which in turn

International,

originates

Transparency

Inter-

national). Formerly ‘closed’ groups of citizens now become part of an organized or spontaneously arranged international and ‘global civil society’ (Lipschutz 1992). Through their demands — such as for environmental and resource protection, human rights, social standards, political freedom to name a few — such networks exert a rather unique pressure on national governments and public administrations to perform differently. Typically, they enhance the effectiveness of both interest articulation and aggregation, given that the same person can be simultaneously active in multiple forms and at various societal levels. A natural scientist may be working within a group of like-minded scholars on international climate change and thus use his world-wide university contacts. At the same time, he may be actively involved in the work of an environment NGO and, as member of a political party, elected to the local council. As a member of a scientific community he transports environmental knowhow via the international level (e.g. to developing country contexts), but he also exercises multiple pressures vis-a-vis his own and other governments through his NGO and his political party work. Moreover, being a member of a powerful international (issue) NGO, such as Transparency International, makes active citizens less vulnerable to government pressures or outright repression, as demonstrated clearly in recent anticorruption policies in Sub-Saharan Africa." Such multi-level networks can be mobilized even more effectively once private sectors, other national governments and international organizations join in. Early examples are the anti-apartheid movements in South Africa in the 1980s, and nowadays

534

Governance and the Public Sector

428

Public Management Review (Previously ‘Public Management’)

campaigns to ban landmines or to support underprivileged groups in LDCs, for example through income transfers to Kenyan small farmers through direct marketing of coffee, thus often breaking up publicly financed protectionism or clientelism. INGOs such as Freedom House draw international comparisons of freedom of press and opinion, and Amnesty International rates respect for human rights in individual countries. Both influence the international media, which in turn has a significant impact on the respective national context and its political process. How much longer can the sixty-six countries rated as having a press that is ‘not free’ in 1999 (Freedom House 2000: 36) cut some 2.4 billion people off from international media and information flows, particularly in the light of the simultaneously envisaged economic opening of most of those countries? In a nutshell, such multi-level networks flexibly encompassing individuals and NGOs world-wide can serve as powerful incentives for governments to listen more carefully to what citizens say, to act appropriately and more swiftly.’

States and governments under pressure ‘from within’ — subnational actors and governments For decades decentralization has been regarded as a hot topic in development, particularly for central government policy makers. Many countries today are on a dual track towards greater market orientation and decentralization to local-level authorities

(Bennett 1990); and subnational governments are on the move as well. Decentralizing the public sector is high on the agenda of many governments in Africa, Asia and Latin America. During the mid-1990s, some seventy countries world-wide had begun with decentralization policies expecting improvements in the allocation, management and mobilization of resources, a higher quality of service delivery, greater accountability and, eventually, more balanced economic and social development (World Bank 1995). Moreover, recent debate has stressed the importance of decentralization and ‘localization’ being complementary to ‘globalization’.'* Ohmae (1990), for example, points out that globally operating corporations no longer select their locations solely on the basis of country-specific criteria. Instead, they increasingly consider particular conditions within subnational units and regions. According to Ohmae, corporations seek out markets with populations of typically about to 5-20 million and per capita incomes of about US$10,000. As Kanther (1995: 154) argues, education and continued training of the work force, sound local administrations as well as reliable public—private sector partnerships at subnational level become key criteria for many of today’s foreign investments,

thus encouraging

in a certain

way, the development of

‘region states’ (Ohmae 1993). One interesting and recent example may be Indonesia where decentralization is likely to change the way foreign investors bargain, with provincial and local governments now having more control over companies in their jurisdictions.

Governance and the Public Sector

Fuhr: Constructive pressures and incentives to reform

D1) 429

This shift will be especially important given Indonesia's vast natural resources, and the role that agro-industry is expected to play in the country’s recovery. Initially this could be a bureaucratic nightmare for investors. ‘It will be

messy at first, {. . ] but this will eventually work itself out because the regions will have to compete with each other.” But how will they compete? Some investors worry (and others hope) that local authorities will become new centres of corruption, even as the central government tries to clean up its act. But it could work the other way.

Local governments might start trying to market themselves as more transparent and friendly than the next locality.

Either way, as local governments gain influence, multinationals will now have to pay closer attention to the

environment and local communities."

In addition to the investment-specific, market-driven factors, there are two more factors. First, the failure of central planning and state interventionism provided new opportunities for local actors; and second, the reduction in collective security and defence costs, due to the end of the bipolar world system, made subnational decision

makers rethink intergovernmental relationships, and whether to remain (and in what form) part of a larger states — republics or federations. Even secession seems to become an option for some of them.'* In the recent past, internationalization provided new opportunities for subnational governments and administrations to embark on several astounding reforms, kickstarting ‘quiet revolutions’ (Campbell 1996). Many prepare for the new dynamics of international competition in their own ways. In part, new decision makers professionalized their administrations in the context of political liberalization. Many outsourced services, invested in education and strove for investment-friendly legislation (Cabrero Mendoza et al. 1995; Campbell and Fuhr 2001). In the Brazilian state of Ceara, Tendler (1996) talks about ‘good government in the tropics’, based on new government—citizen relationships; for the last couple of years, Latin American mayors have met regularly at the Conferencia de Alcaldes; community organizations coordinate their activities through the respective regional co-ordination bureaux of the International Union of Local Authorities (IULA) and foreign research centres (such as the University of Birmingham) provide comprehensive Internet services which enable local decision makers to access relevant information."’ This is not to say that subnational governments are per se better governments. We have discussed elsewhere the potential benefits and perils of increased decentralization, and that good results from a move to the local level do not come automatically. '* Matching services to local preferences can lead to lower transaction costs (particularly information costs), efficiency gains and incentives to local economic development. But even where a service might, in principle, seem a candidate for local provision, the benefits and costs of decentralization will vary by setting. And experience suggests that it is unlikely to work unless there are effective institutional arrangements to foster accountability at the local level, and fiscal restraint between local and national governments.

The issue at hand is, once again, the new competitive arrangements among levels of government emerging from or strengthened by globalization (see Wolf 2001: 186),

536

Governance and the Public Sector

430

Public Management Review (Previously ‘Public Management’)

with two potentially beneficial effects. On the one hand, such subnational pressure may lead to a new division of tasks among levels of governments, allowing national governments to concentrate on ‘core tasks’ and ‘essentials’. Similar to our arguments put forward previously, such new arrangements may enhance effectiveness. On the other hand, and besides the direct benefits from horizontal incentives towards local governments to perform better, globalization may provide them with opportunities for a ‘horizontal integration’ into the world economy which can encourage local governments to become more competitive, occasionally even ‘systemically competitive’ (Altenburg et al. 1998). Both trends typically move in opposite directions and have, therefore, different implications, given that ‘globalization is boundary-eroding and localization is boundarystrengthening’ (Rosenau 1997: 81). While the nation state is faced with political pressure both in terms of performance and legitimacy, the “local state’ may attain a new bargaining position, strengthened possibly by a growing number of international investors as well as through closer communication

with citizens.

States and governments under pressure ‘from outside’ — private sector actors The debate in the 1970s about the pros and cons of foreign investments and the activities of multinational corporations in developing countries converges in one aspect: whether or not private companies in the developing world bring about ‘benefits’ or just ‘costs’ depends on the particular political and economic framework in host countries. Multinational corporations invest and transfer resources as well as know-how abroad only when certain local conditions are met. And those conditions can be influenced positively and beneficially by governments

and administrations, as numerous countries have been able to prove. Whether they are able to do so depends on the prevailing institutional capacities.

Which conditions are those? Ultimately, all rules that make up a market economy, such as secure property rights, protection of foreign investments, legal and contractual security. This argument can be turned around, and it can be reasoned, as Ohmae

(1990: 11-13) did, that the absence of such conditions may well permit some forms of short-term (e.g. speculative) involvement of international corporations; however, it does not provide the framework for long-term private investment sought by most developing countries. Long-term investment through such companies requires the

above, plus credibility in government, in particular sound macro-economic management; a somewhat liberal and participatory political system that can foster stability and effective labour market policies.

International businesses regard the presence of such conditions and a certain degree of ‘good governance’ as crucial prerequisites for becoming involved. Otherwise, they

Governance and the Public Sector

Fuhr: Constructive pressures and incentives to reform

yl 431

can ‘punish’ those particular countries by investing reluctantly, withholding resources altogether or pulling out resources rapidly,” The question arises whether the international private sector and its close links to the

national private sectors can truly serve as a corrective device for ‘bad governance’ and, thus, enforce a certain compliance with the basic rules of market economies. The question can partly be answered by posing a counter-question provocatively: were highly corrupt practices by local ‘public-private partnerships’ in banking, and highly negligent supervision of banks and financial institutions, such as in the case of SouthEast Asia, not severely sanctioned? Was

it not precisely the increasing integration of

financial markets which acted as a magnifier of underlying structural defects (World Bank 1997b: 25; Wolf 2001: 189), reflecting the ‘capture of liberalization . . . [and] either the “sins of omission” or the “sins of commission” ’?7° International agencies entrusted with assessing the creditworthiness of individual countries, states/provinces and municipalities (such as Standard & Poor’s Ratings) are already performing a similar ‘disciplinary’ function. In dealing with developing countries, ‘financial markets resort to a combination of higher risk premia, greater collateral and shorter duration agreements to address the risk of non-compliance’ (Kapur and Webb 2000: 1). Consequently, high-risk borrowers face higher borrowing costs. Even in fully dollarized economies, such as Ecuador since early 2000, dollar deposits and loans can differ significantly from international rates — reflecting, ultimately, government

(in)capacity for macro-economic

management and for servic-

ing its debt.”! Private capital markets and private investors, thus, may provide a new framework and new types of incentives for more effective and transparent public financial management. Such capability, in fact, may be the key to attract capital from surplus-countries in the future — just imagine the criteria that guide the flow of, roughly, about a third of the US$2.6 trillion that US pension funds alone are likely to

invest in developing countries during the next five years (Burki 2000: 5); then imagine that more people in developed countries will possibly opt for articulating preferences in allocating funds from ‘their’ pension funds. All those potentially beneficial institutional arrangements within developing countries do not, of course, evolve automatically. But globalization seems to advance the discussion about — and the demand for — such institutional arrangements, including those that can help mitigate adverse social effects,” distressingly only after severe crises, rather than during market expansion and boom phases. It was not until after the peso crisis in Mexico that the debate on the perils of artificially (and politically driven) high exchange rates and the necessity of banking regulation spread to Argentina and Brazil; it was only the financial crisis in Asia that triggered a new wave of discussions about the overdue modernization of financial sectors and a reform of national bank supervision, including a more market-driven (self-)regulation (Bery and Garcia 1997: 7-10), improved international co-ordination of such regulatory mechanisms (World Bank 1997b: 8) and social safety nets. After all, the crisis also advanced the discussion about better co-operation among governments plus the need for ‘global public policy’

Governance and the Public Sector

538 432

Public Management Review (Previously ‘Public Management’)

networks (Reinicke 1998). The latter consist of international (‘tripartite’) co-operation between public, private and non-governmental actors in ‘issue areas’, and make constructive use of globalized actors, thus also overcoming the limits of traditional government policies. Sure enough, globalization in many cases encouraged private sectors acting jointly with other global actors, in particular INGOs, to invest smartly and innovatively in LDCs, thus often inducing domestic policy change. Most known are the partnerships

some US firms established with Transparency International. They jointly worked on a reform of international bribery practices and towards anti-corruption activities in LDCs, in particular in Sub-Saharan countries. Other international partnerships helped

circumvent corrupt price-setting in agriculture (both by elites and governments), while, at the same time, contributing to sound environmental practices, neglected so far by government.” Last but not least, there are some indications that private business is increasingly concerned about deadlock in government negotiations on environmental policies (such as climate change), encouraging some to innovative practices within their own agenda.”* Some argue that, in case the recent Kyoto protocol fails to regulate global emission reductions effectively, some businesses may opt for direct arrangements with developing-country governments as well as with European and Japanese governments, and start with action rather than wait for broader international

(governmental)

agreements.

Still in the beginning,

but with some

likelihood

of

progress, are private sector initiatives to support development efforts and provide finance in regions suffering from prolonged crisis.°° Private sector-driven globalization, in essence, has provided new opportunities that can help make national governments rethink their own policies, or has simply offered better alternatives.

States and governments under pressure ‘from outside’ — international organizations, international networks and regimes More openness can help secure were expected and a smoothly

and co-operation — according to functionalism theory since Mitrany — prosperity and peace among nations. And international organizations to provide a framework and develop rules to ensure such co-operation ‘working peace system’. In practice, however, it has never worked that

easily.

In response to the debt crisis, for example, international financial institutions (IFIs) such as the World Bank, the International Monetary Fund and regional development banks adopted firmer lending practices and tighter conditionalities for financial packages.

Such practices were, on one side, a major impetus for many developing countries to change economic policies from state-led to a more market-led development. On the other side, they have also led to severe adjustment crises in many countries, above all in those that did not have appropriate institutional structures in

Governance and the Public Sector

Fuhr: Constructive pressures and incentives to reform

D9 433

place to mitigate effectively the social costs associated with such transitions, to prevent

new rent-seeking arrangements in the public sector and to (re-)regulate newly emerging private enterprises. For the same reasons, economic recovery was often disappointing or unsustainable, particularly in Sub-Saharan countries (see Kapur and Webb 2000). The World Bank’s own assessment of the effectiveness of its projects came to the conclusion that aid indeed can make a big difference, but only when both appropriate institutions and conducive

policies are in place.”®

Such conclusions have led IFlIs to focus more directly on institutional development

and governance issues (e.g. World Bank 1997a; Burki and Perry 1998) and to finance respective research and projects. Expectations regarding the potential role of IFlIs are still high, even for those criticizing them. GRCs (governance-related conditionalities) well applied by IFls ‘could help to empower people and nations’; they could ‘hold governments’ feet to fire if they violate their own constitutions, laws and legislation rather than pressing for new laws and legislation drafted from the outside’ (Kapur and

Webb 2000: 18).

Initial euphoria, however, has waned in the meantime. Most IFIs now acknowledge that such processes would need more political sensitivity and better expertise, probably new operational procedures and, above all, much more time (World Bank 2000b; Fuhr 2001). Moreover, IFIs would need significant structural reforms to address governance issues effectively in the developing world (Solimano 2000; Woods

2000). Such problems notwithstanding, IFIs and other international organizations (e.g. UNDP 1997) have stressed repeatedly that improving governance is critical to the effectiveness of aid, thus also challenging countries with a bad track record, as evidenced in the case of Kenya for example. In Latin America IFls played a somewhat more accepted role, assisting in the management of adjustment policies and disbursing new loans. As far as the actual repayment of debt by the public and private sector is concerned, it was often far more important for IFIs as well as for bilateral and multilateral organizations, to provide a predictable and stable framework which helped rescheduling debt, and put economies back on a growth track. The individual instruments applied often had a disciplinary effect in terms of new debt generated; they helped to establish better public fmancial management,” in particular more effective revenue and expenditure controls, better auditing procedures, higher tax collection, multi-year budgeting and, of late, initiatives to curb corruption. The EU’s Maastricht criteria exerted a similar supranational pressure towards fiscal adjustment and policy reform, which is supposed to have a constructive impact on overall financial and macro-economic management. And this holds true not only for member countries, but to a great extent for countries with EU candidacy. # Given highly polarized and fragmented systems of political parties and interest groups in many developing countries, there is an additional function international

organizations (similar to bilateral donors) performed. These actors were instrumental in bringing local actors together and assisting them to agree upon and design

540

Governance and the Public Sector

434

Public Management Review (Previously ‘Public Management’)

appropriate strategies for reform (Haggard and Webb 1994), more recently (thanks to NGO pressure) with the involvement of beneficiaries and stakeholders. They served as catalysts and brokers, shared lessons learned from implementing reforms in other countries, and assisted in adapting them to new contexts.” They also helped initiate domestic discussions on sensitive issues such as the need to invest in social sector development and poverty reduction, establish independent central banks, strengthen the rule of law and the judiciary, fight corruption and protect the environment. Today’s debt reduction strategies, for example, once forcefully put on the agenda by

INGOs and some OECD countries, now require recipient countries to provide both a credible commitment to and real action towards poverty reduction. One may (and should) question its success up to now, but the debate is on. Paradoxically, given world-wide concerns about IFIs and international aid in general, such organizations now seem more concerned and more committed to addressing poverty effectively (see

World Bank 2000a) than many LDC governments themselves. This holds to a large extent for addressing ‘social standards’ in developing countries as well. © Closer aid coordination, backed for example by the World Bank (World Bank 1999), helped advance such debate within the donor community, although overall results leave much to be desired. A further aspect of the discussion refers to the role of international organizations in fostering agreement among world governments on accepting core human rights, and, increasingly, the rule of law. One obvious example is the EU which requires new member countries to safeguard human rights. For example, Turkey is unlikely to be permitted access unless it significantly alters repressive practices against its Kurdish minority. Such external constraints, similar to other cases presented, can thus prove beneficial for internal processes geared to reforming or abandoning such practices. While the existence of global human rights is somewhat questioned, particularly by a couple of Asian governments, de facto acceptance of such principles, due to global economic integration and global communication, seems to be steadily increasing. * This applies similarly for international co-operation to monitor closely and intervene jointly in countries where gross human rights violations are occurring.” International organizations, moreover, have been among the few that helped transport the idea of core judicial principles in LDCs, such as independent judiciaries,

professionally run courts, secure property rights, etc. Such activities were initially linked to securing the fundamentals for private sector development in LDCs, but have

since covered more generally the idea of the ‘rule of law’ (Rowat et al. 1996). The extraterritorial indictment of former president and general Augusto Pinochet in Spain and other EU countries, for example, demonstrates such globalized concerns on legal

action beyond the nation state. After all, these were (former) Chilean citizens, who now found access to an alternative conduit for legal action via European legal institutions. A similar concern was raised by relatives of victims in the case of Tiananmen Square. 33 As mentioned in our previous section, international environmental policies became revamped as well. It is no longer government officials and designated technical advisors

Governance and the Public Sector

541

Fuhr: Constructive pressures and incentives to reform

435

within ministries who engage in dialogue. Nowadays, it is flat network structures and new types of international ‘regimes’ which are becoming more and more active. They originated in the forestry sector, marine and coastal protection as well as in climate control, and comprise NGO experts, scientists, environmental groups and progressively more private sector representatives. Many such networks were initiated through financial support from international organizations. The Kyoto climate conference, for example, demonstrated how flexible and output-oriented such structures

can be. The fact that market-based strategies and solutions are on the rise nowadays, rather than governmental ‘command and control’, continues to be viewed as a success — by most parties involved. Whether such networks are able to deepen the environmental discussion in developing countries remains to be seen. There is reason to believe, however, that emerging public-private partnerships plus scientific co-operation in this sector are indeed influencing domestic agendas and decision makers within this group of

countries. This seems to hold in particular for the local level (as shown by the Agenda 21 movement) where the effects of failed environmental policies are most evident; but also for the more recent Kyoto mechanisms, in particular the mechanism’ and ‘activities implemented jointly’, that may provide national as well as international private businesses in developing Similar policy networks and initiatives could also become

‘clean development lucrative options for countries. relevant and com-

plementary to official development co-operation (see note 25). Such arrangements, often financed by international organizations, have already been considered for Palestine, Bosnia and once in Chiapas, Mexico. If the respective actors were able to get involved in such initiatives in a meaningful way, new opportunities for effective sectoral and local co-operation could be tested. Building a multi-level developmental initiative in conflict regions such as Chiapas, with international organizations serving as umbrella bodies and considerable support from private investors and local NGOs, could stimulate new horizontal networks and partnerships, empowering small farmers, landless peasants and the poor. It would give disadvantaged groups a competitive

advantage vis-a-vis repressive government officials and local elites, and (backed by NAFTA) help them access North American markets directly. International organizations, and associated public—private networks, hence could be instrumental in giving the poor more voice and better choices, and they could also help get a domestic agenda of reform going. Equally important developments currently occur at intergovernmental level, that is through agreements among governments on certain policy areas. Some of these practices may actually become more interesting in areas where international organiza-

tions or broader international agreements seem to be difficult to achieve (due to the bargaining power of major participants) or simply be lagging behind de facto developments. As mentioned previously, failure to ratify the Kyoto protocol would probably trigger several inter-state agreements applying similar mechanisms to reduce emissions, also in co-operation with developing countries.

542

Governance and the Public Sector

436

Public Management Review (Previously ‘Public Management’)

Intergovernmental efforts towards rule-setting or harmonization, of rules — due to increased globalization — are most obvious in the area of economic policies (e.g. within the G-7) or taxation.** They also reflect shared concerns of consumers in those countries, such as banning the trade of goods that threaten species, biodiversity, habitats or the environment in general, goods produced under exploitative labour standards, etc. Agreements to address money laundering, corruption and human rights

violations are other examples of ‘international rule-setting’ and policy co-ordination likely to constrain arbitrary action by individual governments.

CONCLUSIONS Contrary to widespread pessimism as to the effects of globalization on nation states and the quality of governance in developing countries, this contribution has stressed — provocatively in many respects — that many features of internationalization and globalization can serve a positive purpose in terms of improving public policy making and strengthening state capability. We argued that globalization acts as an additional layer of incentives to enhance public sector performance similar to arrangements within nation states. Smart integration may thus open — rather than foreclose — options

for ‘good government’. We discussed four ‘constructive pressures’ stemming from globalization, and the new opportunities that could be seized constructively by citizens and governments in the developing world: first, better-informed and better-connected citizens are likely to push their states more strongly towards better public management, better service provision, broader political participation and democratization. Such formerly insulated processes are now increasingly supported and strengthened through international civil society/non-governmental actors as well as through cross-country and multi-level networks among citizens. Second, states come increasingly under pressure exerted by subnational governments, often backed by local NGOs. Such pressure may help redefine state tasks (revenue and expenditure authorities) among levels of government, while, at the same time, subnational governments have a new menu of options to attract foreign investment and improve the effectiveness of public institutions as well as the quality and timeliness of service delivery. Third, global investment strategies by private businesses increase the demand for appropriate institutional arrangements within developing countries. Some features suggest such enterprises to look out for credible and reliable government policies. In the absence of such conditions private actors are likely to abstain from investing, thus punishing ‘bad governance’. Fourth, international organizations, in particular IFIs, have been instrumental in addressing public sector modernization and tried to introduce fiscal discipline and limit

discretion in the management of public finance in many developing countries. De facto

Governance and the Public Sector

543

Fuhr: Constructive pressures and incentives to reform

success

has

Moreover,

been

limited

though,

particularly

in Sub-Saharan

African

437

countries.

such organizations have sponsored global public policy networks

in areas

such as human rights, environment, social standards, etc. In addition to such efforts, globalization has increased

the demand for policy co-ordination and co-operation among individual states, which in turn has induced the emergence of a variety of new rules, codes of conduct and standards that may help constrain arbitrary action by individual countries. Such potentially beneficial institutional arrangements enhancing state capability and

governance quality within developing countries do not, of course, evolve automatically. Globalization, though, often acts like a magnifying glass, advancing the discussion about and the demand

for such institutional arrangements.

ACKNOWLEDGEMENTS This article is an extended version of a lecture given at the BMZ/GTZ

Colloquium on ‘Globalization: Opportunities and Challenges for Development Cooperation’ in December 1997 (published in the conference’s Papers and Proceedings).

NOTES 1

See on the overall debate Holton (1998) and, within a broader historical perspective, Mann

(1997). Interestingly, there is not much debate on this aspect. Fred W. Riggs, for example, emphasizes positive features of globalization, particularly in terms of Internet-based information flows and

networking among public administrations, yet (as in previous decades) limited options for “exporting government’. See more on his home page at http: //www2.hawaii.edu/~fredr/glopa.htm. Ali Farazmand

(1999) sketches different features of globalization that influence public

administration,

albeit rather pessimistically. Klaus Koenig (1999:

139-41), while stressing

opportunities, seems divided on overall effects on developing countries’ administrations and respective governance

quality.

The broader definition of ‘governance . . . encompasses the activities of governments, but also includes the many other channels through which “commands” flow in the form of goals framed, directives issued and policies pursued’ (quoted in Rosenau

2000:

181).

The following arguments and figures are, to a large extent, quoted and taken from drafts of the 1997 World Development Report The State in a Changing World (see World Bank 1997a: overview and Box 1) of which the author was a core team member. In this respect, special thanks go to my former colleagues Ajay Chhibber, then director of the Report, Brian Levy and Sanjay Pradhan. While the former is broadly debated in the literature on the development of US political institutions, the latter goes more into the underlying political dynamics of institutional

development, stressing interest articulation and political bargaining among key players that

subsequently agree on new rules. Such (actor-centred) analysis is still far from being satisfactorily reflected in the recent debate on institutional development in LDCs.

544

Governance and the Public Sector

438

Public Management Review (Previously ‘Public Management’)

In this sense the ‘transformation of governance paradigms and modalities’ is more complex than maintained in Bardouille (2000). Instead of a pure introduction of NPM principles (criticized strongly by Schick 1998), we rather observe an odd mixture with other macro models (see Peters 1996) in the developing world. ‘See, for example, Rosenau (1997; 173); Micklethwait and Wooldridge (2000: 143-63). Garrett

(1998: 793) correctly stresses that the current debate on the constraining effects of globalization and the loss of national autonomy is very similar to the one back in the eighteenth century about the domestic repercussions of international economic integration. In Sub-Saharan Africa during the late 1990s 0.7 per cent of the population had access to a PC and 1.4 per cent to a telephone line. In Latin America and the Caribbean the respective proportions are some 3 per cent (PCs) and 12 per cent (telephone lines); while in the USA 46 per cent can access PCs and 66 per cent telephone lines. All data is taken from the World Bank’s World Development Indicators 2000. One must not forget that, according to the same

source, the waiting time for new telephone lines is about 5.5 years in low-income countries

(and some 4.8 years in Sub-Saharan Africa), reflecting in part inefficiencies in SOEs in those countries and access problems for international competitors. Many expect mobile phones to bridge existing gaps more rapidly, covering also some of the rural areas and poorer strata.

Such efforts in developing countries are increasingly assisted by both non-profit organizations and businesses (e.g. Microsoft). Access Media International, quoted by The Economist, “The Tiger and the Tech’ (3 February

2000). 10

In a certain way, options for bi-directional communication for an increasing number of the world’s population have improved similar to the process of modernization during the 1950s

that has thoroughly changed, and made obsolete, hierarchical communication in traditional

societies (i.e. among indigenous populations through the landowners). See more broadly Deutsch (1953) as well as Singelman’s (1981) notion of a communication ‘triangle without base’. See, for example, GAO

(2000); furthermore ‘Come see for yourself!’ and similar articles on

developments in Latin America (in IDB America May—June 2000); and World Bank (2000b: 28, Box 10), 12 13

See Keck and Sikkink (1998) and World Bank/ WBI (1999). Of course, one has analysed such pro- or contra-networks more deeply. A more recent example of an effective ‘defence’ was the 1997 campaign against the Multilateral Agreement on

Investment (MAI) proposed by the OECD in order to protect foreign investments, or the WTO

summit at Seattle in December

1999. Examples indicate that NGOs

and individual

members who, at the time, rallied against NAFTA, were now, with the help of the Internet, able to campaign more forcefully against the MAI (see Kobrin 1998; Warkentin and Mingst 2000). In the case of the Seattle meeting, the conference, although strongly hampered by nongovernmental protests, was (contrary to a widespread perception) eventually suspended due to

members’ inability to reach consensus in some key areas and to launch a new trade round. See GAO

14

(1999; 9).

15

See Bennett (1990); Jun and Wright (1996); Yusuf et a/. (2000). For a more critical review see Mander and Goldsmith (1996: Part IV). The Economist, ‘Indonesia. Investment Rules’ (28 October 1999).

16

See, for example, Buchanan (1990). There are numerous examples of secessionist movements around the world: in Quebec, Canada; the Lega Nord of Italy; Guayaquil in Ecuador; Santa Cruz de la Sierra in Bolivia; on several islands in Indonesia; the northern part of Ivory Coast é

545

Governance and the Public Sector

Fuhr: Constructive pressures and incentives to reform

439

to name a few. Alesina and Spolaore (1997: 1027) point out that the world-wide trend towards democratization has led to more fragmentation of nation states, leading to more secession and an inefficient size of states. 17

Surprisingly, Internet services are already well known, and used, even in smaller municipalities of Latin America. up fast as well.

Likewise, municipalities in other regions of the world seem to be catching

18

In particular World Bank (1997a: ch. 7) and more recently Burki and Perry (1999).

19

Wei (2000) emphasizes that globalization deepens the ‘natural openness’ of countries, thus raising the opportunity costs of tolerating a given level of ‘bad governance’, and providing new impetus for countries to fight corruption.

20

Haggard (2000: 32); the first case could be mitigated through better bureaucratic capacity; the

second case needs more fundamental institutional and even political reforms (see Haggard 2000: 32). 21

‘The financial markets are essentially disinterested in the size and scope of government. Their

primary concern is whether the government balances its books’ (Garrett 1998: 824). 22

See, for example, Stiglitz (1999); Haggard (2000: 183-216). Garrett (1998: 824) points out that ‘the coupling of openness with domestic compensation remains a robust and desirable

solution to the problem of reaping the efficiency benefits of capitalism while mitigating its costs in terms of social dislocation and inequality’ Creating such arrangements, again, requires state

capability. 28

An interesting example of a multi-level network that both addresses income transfers and environmental concerns within extended public/private/ NGO partnerships consists of small farmers growing ‘shade coffee’ in protected areas of Chiapas, Mexico; environmental and

humanitarian NGOs working in the same region; the US-based Conservation International (CI); the World Bank; and the US-based firm Starbucks that powerfully commercializes shade coffee 24

through its branches in the USA. Despite its public stance, Exxon Mobil:

has been quietly investing large sums of money in technologies that will do much to address climate change: cleaner fuels, energy efficiency, fuel cells and the like. In more conciliatory moments, (Mr Raymond, CEO of Exxon Mobil] even hints he has an open mind about global warming. If the world’s biggest purveyor of fossil fuels ever accepts openly that global warming is real, that may turn out to

be more important to the planet than any Kyoto deal... . (The Economist, ‘Big Business Bows to Global Warming’ (2 December 2000))

25

Such initiatives could take on the form of ad hoc coalitions, which (like in the autumn of

1997) brought together representatives of international and German aid agencies, NGOs and private actors. This Daimler-Benz-sponsored ‘Southern Africa Initiative of German

Business’

attempted to set up a special programme for a particular region, which also focused on a

mobilization of private resources and investments in the region. 26

See World Bank (1997a; Figure 5, 1998b: 35). See also Collier (1999).

Dh

See more broadly Burki and Perry (1998) and Taliercio (2000).

28

A variety of EU-financed Phare pre-accession technical assistance programmes helped countries to get reforms under way. See, for example, the chapters on “EU Accession Management’ in a

couple of Eastern European countries in Nunberg (2000).

Governance and the Public Sector

546 440

Public Management Review (Previously ‘Public Management’)

oS)

See, for example, World Bank (2000b); However, Peter Spink, highlighting Latin America, is critical of the fact that many state reform programmes appear largely imitated and lack proper

30

31

adaptation. See Bresser Pereira and Spink (1998). See on the issue Rodrik (1997; 29-34). A good example of international organizations addressing for example child labour in developing countries creatively, and (so far) more effectively, has been UNIDO’s partnerships with businesses that ensure working children attend school regularly. Interestingly, ‘social labelling’ in some OECD countries has beneficial effects both for domestic political dialogue, and de facto improvements in working conditions. See, for example, Jacobsen (1999) and for an overview “The World is Watching’, The Economist 5 December

1998.

By joining. . . treaties, most governments have now signed on to the idea that human rights clearly limit their sovereignty, and create obligations to the entire community of states . . . Eventually, a government's claim to sovereignty may depend on whether it respects the basic human rights of its citizens . . .

(Survey of Human-Rights Law, 5 December 1998, quoting Theodor Meron (New York University): 16) 32

These days, the question is how the capacity of the institutions involved, and in particular their credibility and acceptance, as well as their deterrence and sanctioning potential, can gradually

be improved (Damrosch 1993). The issue of external intervention in civil wars, however, is discussed ambivalently. Elbadawi and Sambanis (2000: 16) for example point out that such intervention by international organizations and military forces often led to a longer duration of such wars. 33

According to the New York Times (1 June 1999: Al) the relatives stressed that ‘if the Chinese legal system fails them, they will seek an international legal forum, like a UN tribunal or a court in a sympathetic country, that will investigate the government actions and assess blame’.

34

See Rodrik (1997: 81) and Taliercio (2000). Also Oxford Analytica Brief ‘Tax Coordination’ 12, 13, 16 October 2000; and ASIP Newsletter on ‘Budget Harmonization’

1999).

(No. 19, October

“

REFERENCES Alesina, A. and Spolaore, E. (1997) ‘On the Number and Size of Nations’. Quarterly Journal of Economics,

112:4 pp!027—56.

Altenburg, T., Hillebrand, W. and Meyer-Stamer, J. (1998) Building Systemic Competitiveness: Concept and Case Studies from Mexico, Brazil, Paraguay, Korea and Thailand, Berlin: Deutsches Institut fir

Entwicklungspolitik. Barber, B. R. (1995) Jihad vs. McWorld, New York: Ballentines Books. Bardouille, N. C. (2000) ‘The Transformation of Governance Paradigms and Modalities’. Round Table, 353:January pp81—106. Bennett, R. J. ed. (1990) Decentralization, Local Governments, and Markets: Towards a Post-Welfare Agenda, Oxford: Oxford University Press. Bery, S. K, and Garcia, V. F. eds (1997) ‘Preventing Banking Sector Distress and Crises in Latin America’. Proceedings of a Conference held in Washington, DC, 15-16 April 1996. Washington, DC: The World Bank. Bresser Pereira, C. and Spink, P. eds (1998) Reforming the State: Managerial Public Administration in Latin America, Boulder, CO:

Lynne Rienner Publishers.

547

Governance and the Public Sector

Fuhr: Constructive pressures and incentives to reform

441

Buchanan, A. (1990) Secession: The Morality of Political Divorce from Fort Sumter to Lithuania and Quebec,

Boulder, CO; Westview

Press.

Burki, S. J. (2000) ‘From Globalization to Localization’ in S. J. Burki and G. Perry (eds) Annual World Bank Conference on Development in Latin America and the Caribbean 1999; Decentralization and Accountability of the Public Sector. Washington, DC: The World Bank.

Burki, S. J. and Perry, G. E. eds (1998) Beyond the Washington Consensus: Institutions Matter, Washington, DC: The World Bank. eds (2000) Annual World Bank Conference on Development in Latin America and the Caribbean 1999: Decentralization and Accountability of the Public Sector, Washington, DC: The World Bank. Cabrero Mendoza,

E., Garcia del Castillo, R. and Gutiérrez Mendoza, M. (1995) La Nueva Gestion

Municipal en México: Analisis de Experiencias Innovadoras en Gobiernos Locales, México DF: CIDE.

Campbell, T. (1996) Innovation and Risk Taking: The Engine of Reform in LAC, Washington, DC: The World Bank. Campbell, T. and Fuhr, H. eds (2001) Does Decentralization Work? Case Studies on Innovative Local Government in Latin America, Washington, DC: The World Bank.

Collier, P. (1999) ‘Learning from Failure: The International Financial Institutions as Agencies of Restraint in Africa’ in A. Schedler, L. Diamond and M. F, Plattner (eds) The Self-Restraining State: Power and Accountability in New Democracies. Boulder, CO: Damrosch,

Lynne Rienner.

L. F. ed. (1993) Enforcing Restraint: Collective Intervention in Internal Conflicts, New York:

Council on Foreign Relations. Deutsch, K. W. (1953) Nationalism and Social Communication: An Inquiry into the Foundations of

Nationality, Cambridge: MIT. Elbadawi, 1. and Sambanis, N. (2000) External Interventions and the Duration of Civil Wars, Washington,

DC: The World Bank. Farazmand, A. (1999) ‘Globalization and Public Administration’. Public Administration Review, 59:6 pp509-22. Freedom House (2000) Press Freedom 1999, New York: Freedom House. Fuhr, H. (2001) Public Sector Modernization and Improving Governance in Latin America — Lessons from a

Decade of World Bank Assistance, Washington, DC: The World Bank (in preparation). GAO (General Accounting Office) (1999) World Trade Organization. Seattle Ministerial: Outcomes and ‘Lessons Learned, Washington, DC: GAO.

———

(2000) Electronic Government: Federal Initiatives Are Evolving Rapidly But They Face Significant Challenges, Washington, DC: GAO.

Garrett, G. (1998) ‘Global Markets and National Politics: Collision Course or Virtuous Circle?’. International Organization, 52:4 pp787—824.

Gilpin, R. (2000) The Challenge of Global Capitalism: The World Economy in the 21st Century, Princeton,

NJ: Princeton University Press. Haggard, S. (2000) The Political Economy of the Asian Financial Crisis, Washington, DC: Institute for International Economics. Haggard, S. and Webb, S. eds (1994) Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment, Oxford: Oxford University Press. Hirschman, A. O. (1970) Exit, Voice, and Loyalty: Responses to the Decline in Firms, Organizations, and States, Cambridge: Harvard University Press.

Holton, R. J. (1998) Globalization and the Nation State, New York: St Martin’s Press. Huntington, S. (1993) ‘The Clash of Civilizations’. Foreign Affairs, 72:3 pp22-49. A Case of Human Rights vs. State

Jacobsen, M. (1999) ‘Between Globalization and Localization: Sovereignty’. Global Governance,

5:2 pp203-19.

Governance and the Public Sector

548 442

Public Management Review (Previously ‘Public Management’)

Jun, J. S. and Wright, D. S. eds (1996) Globalization and Decentralization: Institutional Contexts, Policy

Issues, and Intergovernmental Relations in Japan and the United States, Washington, DC: Georgetown

University Press. Kanter, R. M. (1995) ‘Thriving Locally in the Global Economy’. Harvard Business Review, September— October pp151—60. Kapur, D. and Webb, R. (2000) Governance-Related Conditionalities of the International Financial Institutions, Geneva:

UNCTAD.

Keck, M. E. and Sikkink, K. (1998) Activists Beyond Borders: Advocacy Networks in International Politics, Ithaca, NY: Cornell University Press.

Keohane, R. and Nye, J. (1972) Transnational Relations and World Politics, Cambridge:

Harvard

University Press.

Kobrin, S. J. (1998) ‘The MAI and the Clash of Globalizations’. Foreign Policy, 112 pp97—8. Konig, K. (1999) Verwalcungsstaat im Ubergang: Transformation, Entwicklung, Modernisierung, Baden-Baden:

Nomos.

Lipschutz, R. (1992) ‘Reconstructing World Politics: The Emergence of a-Global Civil Society’. Millennium: Journal of International Studies, 21:3 pp389-420.

Mander, Jsand Goldsmith, E. eds (1996) The Case Against the Global Economy and for the Turn Toward the Local, San Francisco, CA: Sierra Club Books. Mann, M. (1997) ‘Has Globalization Ended the Rise and Rise of the Nation-State?’. Review of International Political Economy, 4:3 pp472—96.

Micklethwait, J. and Wooldridge, A. (2000) A Future Perfect: The Essentials of Globalization, New York: Crown Publishers. North, D. C. (2000) ‘Big-Bang Transformations of Economic Systems: An Introductory Note’. Journal of Institutional and Theoretical Economics,

156:1 pp3—8.

Nunberg, B. (2000) Ready for Europe. Public Administration Reform and European Union Accession in Central and Eastern Europe, Washington, DC: The World Bank.

O'Donnell, G. (1996) ‘El impacto de la globalizacion economica en las estratégias de reforma institucional y normativa’. Unpublished document, Washington, DC: Inter-American Development Bank. , Ohmae, K. (1990) The Borderless World: Power and Strategy in the Interlinked Economy, New York: Harper

Perennial. ——

(1993) ‘The Rise of the Region State’. Foreign Affairs, 72:2 pp78—87.

(1996) The End of the Nation State, London: Harper Collins. Peters, B. G. (1996) The Future ofGoverning: Four Emerging Models, Lawrence: University Press of Kansas. Polidano, C. (2000) “Measuring Public Sector Capacity’. World Development, 28:5 pp805—22. Reinicke, W. (1998) Global Public Policy: Governing Without Government, Washington, DC: Brookings Institution

Press.

Risse-Kappen, T. ed. (1995) Bringing Transnational Relations Back in: Non-State Actors, Domestic Structures and International Institutions, Cambridge: Cambridge University Press.

Rodrik, D. (1997) Has Globalization Gone Too Far?, Washington, DC: Institute for International Economics. Rosenau, J. N. (1997) Along the Domestic—Foreign Frontier: Exploring Governance in a Turbulent World,

Cambridge: Cambridge University Press. (2000) “Governance in a Globalizing World’ in D. Held and A. McGrew

(eds) The Global

Transformation Reader. An Introduction to the Globalization Debate. Cambridge: Polity Press.

Rowat, M., Malik, W. H. and Dakolias, M. eds (1996) Judicial Reform in Latin America and the Caribbean: Proceedings ofaWorld Bank Conference, Washington,

DC: The World

Bank.

Governance and the Public Sector

549

Fuhr: Constructive pressures and incentives to reform

443

Schick, A. (1998) “Why Most Countries Should Not Try New Zealand's Reforms’. World Bank Research Observer, Singelmann,

13 pp123-31.

P. (1981) Structures of Domination and Peasant Movements

University of Missouri

in Latin America,

Columbia:

Press.

Solimano, A. (2001) Can Reformed Global Institutions Help Developing Countries Share More in the Benefits of Globalization?, Washington, DC: The World Bank.

Stiglitz, J. (1999) “Must Financial Crises Be This Frequent and This Painful?’ in A. Pierre-Richard et al. (eds) The Asian Financial Crisis. Causes, Contagion and Consequences. Cambridge: Cambridge University Press. Strange, S. (1996) The Retreat of the State: The Diffusion of Power in the World Economy, Cambridge:

Cambridge University Press. Taliercio, R. R. (2000) ‘Administrative reform as credible commitment:

the link between revenue

authority and performance in Latin America’. Unpublished paper, Cambridge: Harvard University. Tendler, J. (1997) Good Government in the Tropics, Baltimore,

UNDP

MD:

Johns Hopkins University Press.

(1997) Governance for Sustainable Human Development, New York: UNDP.

Warkentin, C. and Mingst, K. (2000) ‘International Institutions, the State, and Global Civil Societv in the Age of the World Wide Web’. Global Governance, 6:4 pp237—57. Wei, S.-J. (2000) Natural Openness and Good Government, Washington, DC: The World Bank/ Development Research Group. Williams, D. (2000) ‘Aid and Sovereignty: Quasi-States and the International Financial Institutions’. Review of International Studies, 26:4 pp557—73.

Wolf, M. (2001) ‘Will the Nation State Survive Globalization?’. Foreign Affairs, 80:1 pp178—90.

Woods, N. (2000) ‘The Challenge of Good Governance for the IMF and the World Bank Themselves’. World Development, 28:5 pp823-41.

Werld Bank (1995) Better Urban Services: Finding the Right Incentives, Washington, DC: The World Bank. —— (1997a) World Development Report 1997: The State in a Changing World, New York: Oxford University Press. ——

(1997b) Private Capital Flows to Developing Countries: The Road to Financial Integration, Washington,

———

DC: The World Bank. (1998a) World Development Report 1998: Knowledge and Development, New York: Oxford University

——

(1998b) Assessing Aid: What Works, What Doesn’t, and Why?, New York: Oxford University Press.

——

(1999) Review of Aid Coordination and the Role of the World Bank, Washington, DC: The World

——

Bank/ Operations Evaluation Department. (2000a) orld Development Report 2000/2001: Attacking Poverty, New York: Oxford University

——

(2000b) Reforming Public Institutions and Strengthening Governance. A World Bank Strategy, Washington,

Press.

Press.

DC: The World Bank/PREM Network. World Bank/ World Bank Institute (1999) ‘Action Programs in Brief: Towards Collective Action to Improve Governance and Control Corruption in Seven African Countries’. Work-in-Progress by the Country Teams of Benin, Ethiopia, Ghana, Kenya, Malawi, Tanzania and Uganda. Background paper for the 9th Annual International Conference Against Corruption, Durban, South Africa, 10-15 October. Yusuf, S., Wu, W. and Evenett, S. eds (2000) Local Dynamics in an Era of Globalization, New York:

Oxford University Press.

[27] Globalization, Governance, and the

Political-Economy of Public Policy Reform in East Asia MARK BEESON*

In the wake of the crisis that developed in East Asia during 1997, perceptions of the region have been transformed. Critics claim that East Asian political practices and economic structures must be reformed ifthe region is to prosper in an era ofglobalization. In short, the region must adopt a different sort of public policy, one associated with an influential agenda of “good governance.” This paper critically assesses this discourse and the predominately “Western” assumptions that underpin it. It is argued that, not only is this reformist agenda likely to be resisted by powerful vested interests, but the institutional infrastructure to support such a style of governance is inadequately developed in East Asia.

Prior to the crisis that engulfed East Asia! in the latter part of 1997, the countries of the region were noted for the distinctiveness of their public policies and for the unprecedented speed of their economic development. In the wake of the crisis, political practices and economic structures that had formerly been sources of admiration and wonder rapidly became objects of criticism, if not derision. This transformation in popular perceptions is remarkable and revealing enough in itself. Of greater significance for the purposes of this paper is the fact that such revisionist interpretations of the former “miracles” were accompanied by detailed critiques of the supposed shortcomings of Asian-style capitalism and various suggestions about what was required to rectify them (for an influential example, see Camdessus). Amongst the most frequently cited criticisms was that Asian business practices were not only often corrupt, but also fundamentally unsuited to an era characterized by relentless and increasingly pervasive processes of “globalization.” In short, the East Asian crisis was caused by—and revealed glaring flaws in—the region’s structures of governance. “Globalization” and “governance” have the dubious distinction of being two of the most widely and loosely invoked signifiers in recent political and economic

discourse.

Consequently,

the first part of this

paper will attempt to bring a little definitional clarity to these concepts before placing them in the context of important unfolding debates about *Griffith University

Governance: An International Journal of Policy and Administration, Vol. 14, No. 4, October 2001 (pp. 481-502). © 2001 Blackwell Publishers, 350 Main St., Malden, MA 02148, USA, and 108

Cowley Road, Oxford, OX4 1JF, UK. ISSN 0952-1895

Governance and the Public Sector

482

MARK BEESON

the most appropriate forms of public policy for the contemporary era. The rest of the paper is dedicated to developing a number of arguments: First, I suggest that, in the context of debates about reforming postcrisis Asia, the concept of governance often serves as little more than a normatively loaded shorthand for market-oriented reforms designed to fundamentally reconfigure East Asia’s distinctive political-economies. Second, I argue that if, by contrast, we think about the concept of governance as an analytical tool that helps unpack the complex way in which political, economic, and social activities are organized, then it seems likely that the market-oriented reform agenda that emerges from the normative discourse of “good” governance will be resisted by adversely affected stakeholders. Indeed, when seen in this more analytical light, it is not even clear that the reforms being advocated are necessarily any better than the practices they are intended to supplant. It needs to be remembered that, until recently, many East Asian countries were considered to have functionally superior “state capacities” that seemed to accelerate economic development and generate specific advantages for indigenous corporations. At the very least, these debates merit revisiting. Therefore, the bulk of the paper is taken up with a consideration of East Asian modes of governance and the potential implications that a predominately “Western” reformist discourse might have for them. The third and final argument I develop as a consequence of this discussion is that, whatever the merits of the emergent reform agenda might be, the majority of East Asian countries simply do not have the requisite political structures—especially a well-developed, institutionally diverse, and independent civil society —with which to implement neoliberal forms of governance, even if they wished to do so. GLOBALIZATION AND GOVERNANCE

In the first section of this paper, I briefly indicate the different ways in which the concepts of globalization and governance have been employed. The central contention here is that both of these notions are not only essentially contested concepts but—particularly in the case of governance—are utilized as part of reformist discourse, which, if implemented, will have profound implications for existent political and economic practices in East Asia. Globalization

These days, it is difficult to read a piece of academic or journalistic writing that does not invoke the idea of globalization. The concept’s very ubiquity suggests that it captures some particular and important quality of the contemporary era. However, I do not intend to attempt to review this voluminous literature here.? Rather, I simply point out that globalization is a notion with multiple and often competing meanings and

2p!

S52

Governance and the Public Sector GLOBALIZATION, GOVERNANCE, AND THE POLITICAL-ECONOMY

483

emphases. Despite this ambiguity, it is important to recognize that the idea of globalization may be utilized to legitimate particular policy initiatives as the only possible responses to apparently ubiquitous and implacable challenges to governments and business. As Philip Cerny (1997, 258) has pointed out, whatever the specifics of globalization may be, one of its most important qualities in terms of public policy is as a powerful discourse

that shapes domestic

and international

debates,

a process

which may change the state’s role to one of an “enforcer of decisions and/or outcomes which emerge from world markets.” A good deal of debate exists between those observers who see processes of globalization as irrevocably reducing the authority and power of states (Ohmae; Strange 1996) and those who claim that, not only is

there nothing especially new about globalization (Hirst and Thompson), but the idea that it has reduced state capacities is a “myth” (Weiss). Yet

even those observers who remain skeptical about the implications of globalization generally acknowledge important secular changes in both the organization and the sheer scale of contemporary patterns of economic activity. Whether it is increasingly internationalized production structures (Dicken) or the unprecedented historical integration and massive expansion of global financial markets (Strange 1994), governments around the world find themselves confronted with a rapidly evolving and challenging environment in which to try and construct public policy. For the nations of East Asia, globalization—understood here as the reconfiguration of global production structures and the intensification of flows of capital—presented a series of potential opportunities and unforeseen dangers, as the crisis itself demonstrates.

On the one hand,

East Asian nations—especially the second- and third-tier industrializing economies that followed in Japan’s pioneering wake—were able to take advantage of increased flows of foreign direct investment and the reorganization of global production to accelerate domestic economic development (Gangopadhyay; Ruigrok and van Tulder). On the other hand, it has become painfully apparent that the increased flows of indirect or portfolio investment that built up particularly during the 1990s are capable of flowing rapidly into or out of economies, with potentially devastating results (Beeson 1998; Winters). The transformation of global financial structures is not simply emblematic of the new world economic order; it presents particular challenges for states that have benefited from their ability to control and direct capital flows. However, before examining these questions in any detail, it is important to consider the other key element of the postcrisis reformist agenda: governance. Governance

Like globalization, the notion of governance is elusive and contested. Paradoxically enough, as Marie-Claude Smouts (81) points out, “the more seriously governance is taken, the less content it has.” Nevertheless, it has

Governance and the Public Sector 484

MARK BEESON

been utilized by a number of influential agencies and actors to promote a particular reform agenda that has major implications for the governments of East Asia. It is important, therefore, to briefly trace its emergence and attempt to isolate its central assumptions. Although definitions of governance may often have more to do with contingent political and economic realities than they do with any timeless or essential qualities of optimal political management, this does not make them any the less interesting or important. Not only do such conceptions open a revealing window on the contemporary zeitgeist, but they also direct our attention to important questions of public management. Given the World Bank’s importance as one of the most influential advocates of “good” governance, a brief consideration of its evolving position highlights some important aspects of this debate. The World Bank has developed one of the most influential formulations of governance, particularly the “good” variety. As the key intergovernmental body charged with promoting economic development in the postwar era, the Bank was in an especially powerful position to influence the policy decisions of governments seeking its financial assistance. Bank officials used financial leverage to force “structural adjustment” packages on borrowers designed to encourage specific economic, political, and even social reforms in line with what it considered to be appropriate policy (George and Sabelli). It is important to recognize how transformative such reform programs were designed to be, and how reflective they were of an essentially ideological position toward economic development. In short, the Bank was intent on fundamentally transforming the established social order in parts of Africa and Asia, which was taken as an anachro-

nistic obstacle to effective governance and economic efficiency, and imposing a form of global liberalism in its place (Young). Before considering some of the assumptions that underpin these reform packages, a couple of points are worth emphasizing. First, the Bank’s own ideas about development have evolved and reflect wider changes in the international system, especially the overall security setting in which postwar development occurred (Berger and Beeson). As strategic imperatives have receded following the end of the Cold War, a less ideologically constrained debate has developed about the content of economic policy in the contemporary era. This leads to a second point: it has become increasingly clear that there is no single, unambiguously “correct” form of good governance or public policy in the contemporary era. The disagreement that emerged between the Bank and the International Monetary Fund (IMF) about the best way of responding to the Asian crisis clearly demonstrates that even those charged with managing the evolving international economy were uncertain how to proceed. This marks a significant and revealing departure from the unanimity and one-size-fits-all prescriptive approach that has hitherto characterized the policy prescriptions of such powerful institutions.

3)2)3)

Governance and the Public Sector

554

GLOBALIZATION, GOVERNANCE, AND THE POLITICAL-ECONOMY

485

Nevertheless, until relatively recently the World Bank utilized the concept of governance in such a way as to suggest that there was a selfevident agenda of reform centered on the free operation of markets embedded in a supportive political and legal framework. Almost a decade ago, the Bank (1991, ii) suggested that “good” governance primarily involved providing key public goods, namely “the rules to make markets work efficiently, and .. . correcting for market failure.” At that time,

good governance meant establishing markets free of government interference. The state’s role was simply to establish a secure legal and institutional environment in which markets could flourish, and to do those things that markets could not. In an East Asian context, this meant dis-

couraging the sorts of “interventionist” policies that had been associated with the region’s rapid rise. However, the Bank’s conception of governance ‘was clearly at odds with historical reality, as even its own landmark report into East Asian development implicitly acknowledged (World Bank 1993). Whatever current difficulties countries like Japan may be experiencing, there is clearly no doubt that the so-called developmental state which it pioneered, and which proved such an influential role model through much of the rest of East Asia, has been a central component

of the region’s

remarkable transformation. In a rather unfortunate piece of timing, the Bank’s (1997, 46) annual assessment of world development, subtitled The State in a Changing World, clearly acknowledged this, suggesting that “the

East Asian miracle [sic] shows how government and the private sector

can cooperate to achieve rapid growth and shared development.” Indeed, just prior to the crisis, the report’s authors were arguing that “for human welfare to be advanced, a state’s capability—defined as the ability to undertake and promote collective actions efficiently—must be increased” (World Bank 1997, 3; emphasis in original). Global Governance

Yet, despite this belated recognition of the state’s importance in the region, one of the most important questions to emerge in the wake of the crisis is whether East Asian states will be able to maintain their former levels of competence and capacity, let alone increase them. One of the key factors that will influence this outcome occurs at the intersection of the globalization and governance discourses. A major aspect of the globalization phenomenon,

over and above the more

“economic”

changes noted

above, has been the transformation of authority relations and political practices within and across national jurisdictions. It is at this point that the notions of globalization and governance coincide. Simply put, if governance is broadly understood as “all those activities of social political and administrative actors that can be seen as purposeful efforts to guide, steer, control, or manage

(sectors or facets of) societies” (Kooiman, 2),

then the basis upon which this is occurring appears to be in the process of

Governance and the Public Sector 486

MARK BEESON

fundamental transformation. Governance is no longer something that states acting in isolation can hope to achieve (Rosenau 1995). Globalization is systematically changing the way governance occurs. On the one hand, key regulatory processes are increasingly being undertaken by private sector actors, particularly in areas requiring specialist

knowledge.* Even where governments may be the nominal architects of or signatories to key international agreements, policy is often shaped by influential private sector actors (Sell). These new organizations and actors

are in addition to existing intergovernmental agencies such as the World Bank, the World

Trade Organization,

the Bank of International Settle-

ments, and the IMF, which have already circumscribed the autonomy of individual states. At the same time as these generally supranational bodies have emerged, the position and authority of the nation-state has been further undermined by forces from “below.” The emergence of transnationally organized nongovernmental organizations (NGOs) has placed further pressure on states and led some commentators to claim that such forces presage the emergence of a global civil society that will force states to be more responsive to a number of other, formerly marginalized, actors (Wapner). Whether this proves to be the case or not, such ideas are already on the

declaratcry agendas of key international organizations. The United Nations (UN) is now at the forefront of debates about forms of governance that might be more appropriate for an era characterized by processes of globalization. “Global governance,” the UN’s Commission on Global Governance (2) suggests, is the sum of the many ways individuals and institutions, public and private, manage their common affairs. It is the continuing process through which conflicting or diverse interests may be accommodated and cooperative action may be taken. It includes formal institutions and regimes empowered to enforce compliance,

as well as informal arrangements that people and institutions either have agreed to or perceive to be in their interests.

Significantly, this perspective involves much less emphasis on states, and much more on the variety of “institutions and regimes” associated with contemporary forms of political organization and rule. In short, it is the sort of political system that Rosenau (1992) has described as “governance

without government.” In an era characterized by multiple centers of authority and influence, in which states are simply one—albeit an extremely powerful—actor engaged in a continuing attempt to maintain or encourage an order that reflects and furthers its perceived interests, the process of governance cannot be understood simply as a function of state actions. Indeed, just defining the interests of “the state,” when “domestic” political space is penetrated by cross-cutting internal and external influences and when even indigenous actors may have widely competing interests that reflect their own integration into the international system, is a highly problematic exercise (Beeson 2000a; Picciotto).

D9)

556

Governance and the Public Sector GLOBALIZATION, GOVERNANCE, AND THE POLITICAL-ECONOMY

487

Such theoretical caveats have proved no barrier to the development and increasing influence of the evolving discourse of good governance. One of the discourse’s most significant elements is an increasing focus on the role of civil society. Kanishka Jayasuriya and Andrew

Rosser (16)

argue that the increasing preoccupation with civil society displayed by influential institutions such as the World Bank is a central element of an emerging “post-Washington consensus.”° The new consensus seeks to extend and complement the former emphasis on market reform by developing a “political counterpart,” centered on the expansion and consolidation of civil society. However, despite this overt recognition of the importance of politics, Richard Higgott (34) argues that the new governance agenda emerging from the post-Washington consensus has “largely stripped questions of power, domination, resistance, and accountability from the debate. .. . There are no problems that governance cannot contain or ‘govern away.”” In other words, the idea of governance promoted by organizations like the World Bank, while becoming increasingly sophisticated and less narrowly economic, continues to be couched in a highly technocratic register that appears fundamentally at odds with wider social, political, and economic realities.

Contingent Governance

The notion of governance, then, seems to have two quite distinctive functions. On the one hand, it can be seen as a continuation of a normatively

loaded agenda that has long been associated with the promotion of “development” in what used to be known as the Third World. It is an agenda that, critics argue, is at best reflective of an especially influential North American brand of rational choice theory (Leys), at worst a deeply ideological template for a specific sort of political and economic transformation modeled on the market economies of the Anglo-American nations (Cooper and Packard). On the other hand, the sorts of issues that the governance discourse raises do have some “technical” aspects. Clearly, some arrangements for achieving particular goals may be functionally superior to others. This is not to suggest, however, that there is a universal form of governance that will be equally applicable or efficacious in all circumstances. On the contrary, governance in this “analytical” sense has the merit of providing a conceptual framework within which diverse forms of political and economic organization can be compared and contrasted.° One of the striking qualities of even the most sophisticated—indeed, especially the most sophisticated—discussions of governance is that they invariably spring from the experiences of the “developed” or industrialized West. The complexities of governing in an era characterized by processes of globalization has led a number of observers to focus on the impact of new forces above and below the state, and to consider the effect

of such influences on the structure and operation of national governments. For example, R. A. W. Rhodes (14) has argued that contemporary

Governance and the Public Sector

488

MARK BEESON

forms of governance amount to a completely new process of governing, one that involves “self-organizing, interorganizational networks characterized by interdependence, resource exchange, rules of the game, and significant autonomy from the state” (emphasis added). While this may provide an important and appropriate basis for theorizing about change in European structures of governance, particularly at a time when authority and responsibility are being intentionally transferred from individual states to supranational bodies, it is not clear how relevant this model is

outside of a specific European context. Rhodes (7) argues that a sort of “differentiated polity,” characterized by the “functional and institutional specialization and the fragmentation of policies and politics,” is coming to define government in countries like Britain. Yet for such a polity to exist, let alone operate successfully, it must be embedded in an appropriate matrix of supportive institutions that can either fulfill new roles associated with the transnationalization of economic activity or perform functions formerly undertaken by individual governments. In the context of the European Union (EU), such a reconfiguration of the state and the way it operates is clearly possible. New forms of “indirect” government that rely on a “new breed of specialized agencies and commissions operating at arms’ length from central government” are not only possible, they are being actively encouraged by member states (Majone, 152). In an East Asian context, this sort of institutional infrastruc-

ture and requisite degree of autonomy from the state simply does not exist in the same way (Beeson and Jayasuriya). Contemporary patterns of governance in East Asia are significantly different from their European counterparts as a result. Consequently, the variety of possible future patterns of governance and the prospects for implementing the sorts of policies advocated by the likes of the World Bank are constrained. To understand the precise obstacles to future reform and the current determinants of East Asian governance structures, it is important to unpack the institutional framework within which such practices materialize. For all the attention the globalization phenomenon receives, one of the most striking paradoxes it highlights is the persistence of highly distinctive forms of economic organization, despite apparently ubiquitous “external” competitive pressures. In short, there is a good deal of evidence to suggest that, not only do major differences endure at various social, political, and economic levels, but such differences remain signifi-

cant determinants of comparative economic outcomes (Beeson 1999a; Berger and Dore).

To understand the bases of these differences—and important caveats about the continuing theoretical utility of “national economies” notwithstanding’—it is useful to isolate the various institutions that distinguish one national political space from another. In an important statement of this approach, J. R. Hollingsworth and R. Boyer (2) suggest that what they call a “social system of production” contains a number of key social, economic, and political institutions, from business structures

DD,

558

Governance and the Public Sector GLOBALIZATION, GOVERNANCE,

AND THE POLITICAL-ECONOMY

489

and financial markets to the norms and values that provide “recipes for action.” This formulation aids in understanding the various components of a national production system that remain distinctive and thus account for the continuation of different forms of capitalist organization. It also suggests that the elements of a social system likely either to prove to be obstacles to reform or to make the imposition of new, encompassing systems of governance highly problematic may be discerned by examining such institutions in specific national or even regional settings. The second half of this essay undertakes such an examination in the East Asian region.® GOVERNANCE IN EAST ASIA

Political economists have long argued that attempting to neatly separate the political from the economic and the state from the market, is an inher-

ently artificial exercise. From a political-economy perspective, the unifying insight is that “markets and political authorities [are] part of the same, integrated ensemble of governance, not... contrasting principles of social organization” (Underhill 2000, 4). If this is a useful orienting framework

in general, in an East Asian context it is quite simply essential. East Asia’s structures of governance and distinctive social systems of production have emerged in such a way as to make any attempt to compartmentalize economic and political processes highly problematic, if not futile. Therefore, a political-economy perspective is especially useful in the context of this essay, for two reasons. First, it highlights possible points of resistance to a specifically market-centered or neoliberal discourse of governance. Second, it lends weight to the overall argument I am trying to develop here: that the highly distinctive, politically and economically integrated structures of East Asian governance systems will not only make them resistant to change, but may render them incapable of operating along neoliberal lines even if there is a strong desire to do so. The East Asian developmental experience illustrates two key properties of institutional development. First, national institutions grow out of their specific environments, with all the contingent pressures and incen-

tives that implies. As a consequence, institutions—and, more generally, patterns of economic and social development—assume a degree of “path dependency” that not only reflects past struggles and accommodations, but also delimits the contours of future possibilities (Hall; North). Second,

there is nothing inevitable about the sorts of institutions that emerge as a consequence of such historical processes, or about their demise in favor of some more “efficient” model. Particular institutions survive because they fulfill the needs or further the interests of the most powerful actors within any social milieu (Murphy, 25). Furthermore, institutions may continue to be influential even when they are clearly no longer appropriate or effective when judged by the (admittedly subjective and elusive) notion of the collective public good. They do so because “[e]xisting institutions can generate powerful pressures for governments to persist with policies that

Governance and the Public Sector 490

MARK BEESON

are favored by the constellation of interests that initially supported their ascent to power, even if the power of these interests has declined, and

even if this has deleterious consequences for macroeconomic performance” (Garrett and Lange, 54).

This is clearly the situation that many observers, particularly the IMF and supporters of neoliberal-style reform more generally, would claim exists in East Asia. Whatever the merits of East Asian modes of development may have been, the suggestion is they are clearly outmoded and in need of reform, as they are contributing to, rather than alleviating, the

region's problems. Even if this analysis is correct, which is in itself debatable, a closer examination of the region’s institutions suggests such reforms will not be easily achieved. The East Asian Developmental State

Japan is both the most important economic actor in East Asia and the originator of one of the region’s most celebrated and analyzed innovations: the developmental state. While the history of the developmental state is by now well enough known to need little elaboration here,? a number of its features are worth briefly highlighting, as they have been widely imitated throughout the region, and the establishment of new patterns of governance will inevitably necessitate some reform of the institutionalized relationships that are associated with East Asia’s political economies. The first point to emphasize is that economic activity in Japan has historically been coordinated or planned, rather than simply left to market forces or the uncoordinated actions of private sector actors, as has generally been the case in the Anglo-American economies. Japan’s ruling elites believed that the disadvantages of “late” development were best overcome by systematically guiding the course of indigenous industrialization. Famously, this process was overseen by a technocratically competent bureaucracy, which enjoyed a degree of “embedded autonomy” (Evans), something that allowed them to promote targeted industries in the long-term “national interest,” free from the danger of capture by vested interests. On the one hand, the bureaucracy had elaborate linkages with well-organized business groups, which allowed for the effective implementation of various industry development plans. On the other, it had key policy tools—particularly access to cheap capital—that gave it sufficient leverage over business to get its way. Whatever current problems Japan may be experiencing, this model of East Asian governance, centered on state-led development, was clearly brilliantly successful, not just in Japan but in important acolytes like South Korea and Taiwan. A number of important qualifications should be added to this highly stylized and truncated sketch of the developmental state. First, the Japanese model has never been reproduced in precisely the same way anywhere else in the region. The recent crisis graphically highlighted the

IY

d

Governance and the Public Sector

60

GLOBALIZATION, GOVERNANCE, AND THE POLITICAL-ECONOMY

491

difference between what might be broadly described as Northeast and Southeast Asian patterns of governance (Beeson and Robison). Generally, the degree of bureaucratic competence and independence has not been nearly as great in the south as it has in the north. The other point to emphasize is that, even within Japan, the vision of infallible bureaucrats

selflessly working in the national interest was always something of a myth (Calder). Yet it is equally important to re-emphasize that, despite its current difficulties, the particular institutional configuration associated with the developmental state, especially its ability to coordinate economic activity, appeared to give Japan—or, more accurately, Japanese companies—a significant edge in an era of relentless international competition. The key questions are whether what observers like Weiss and Hobson describe as Japan’s superior “state capacity” is either sustainable or useful in a globalized economy, or whether Japanese public officials would willingly relinquish the relationships and practices associated with this model even if it is not. While these are clearly difficult questions to answer definitively, a number of pertinent points that may influence the success of the neoliberal reformist agenda can be made. Although the effectiveness of some key policy tools has been steadily undermined by processes of globalization, especially the integration of international financial structures and the concomitant availability of capital (Leyshon), this has not dissolved the close links between bureaucrats and business. As Japan’s notoriously corrupt construction industry demonstrates, massive amounts of public funding continue to be channeled into projects of dubious benefit because of entrenched politico-business relationships (McCormack). This is not a uniquely Japanese phenomenon. Korea is an example of a

Northeast Asian country where even a government seemingly intent upon market-centered reform in the wake of the crisis—partly as a consequence of significant external pressure—has found it extremely difficult to reform its Japanese-inspired industrial conglomerates, the chaebols (Lee). Not only are the chaebols key parts of the domestic economy, arguably making them too big to fail (Woo-Cummings 1997, 64), but they are also fundamental elements of Korea’s brittle accommodation between capital and labor. In other words, even if the distinctive relations between

government and business that characterized the developmental state in Korea and Japan are no longer appropriate, as critics claim (Moon and Rhyu), it is entirely possible that they will continue because they are so deeply institutionalized. Moreover, even when they do change, there is no reason to expect that they will necessarily converge on the sort of neoliberal model that is at the center of the reformist governance dis-

course (Beeson 1996).

The same conclusions may be drawn in Southeast Asia. Although all the countries of Southeast Asia have felt the direct effect of Japanese corporate investment, and some, like Malaysia, have self-consciously emu-

lated the developmental state paradigm, these are not the only potential

Governance and the Public Sector

492

MARK BEESON

points of resistance for would-be reformers. In addition to the embedded influence of the Japanese government

and private sector (Hatch and

Yamamura), a form of Chinese capitalism has become a crucial compo-

nent of Southeast Asia’s indigenous patterns of governance (Whitley). Primarily associated with the 50 million or so “overseas Chinese” dis-

persed throughout Southeast Asia, this distinctive form of economic organization is heavily dependant on family and personal relationships (gaunxi), rather than the sorts of “transparent” commercial practices that are routinely associated with “good” governance. Given the uncertainties confronting businesses of any sort in Southeast Asia, Chinese capitalists have gained a distinct competitive advantage by using personal relationships to overcome the difficulties posed by a potentially unreliable or even hostile operating environment (Woo-Cummings 1998). These sorts of localized, highly distinctive institutional responses to collective action dilemmas are potentially formidable obstacles to the establishment of a transparent, market-based economic order. Further complicating the reform process is the fact that successful Chinese businesspeople, especially in Malaysia and Indonesia, have protected their positions by securing the political patronage of indigenous elites (Robison; Searle). The general point to emphasize about East Asia’s distinctive business systems is that they are contingent, responses to the challenge of organizing economic activity that are institutionalized and socially embedded. Moreover, as Marco Orru, Nicole Biggart, and Gary Hamilton (363) point

out, such distinctive and diverse patterns of economic coordination “are not corruptions of technically ideal organizational forms, but represent qualitatively distinct conceptualizations of what constitutes appropriate economic activity ... To be ‘technically efficient,’ firms must consider and comply with the institutional setting in which they are embedded.” Political Obstacles to Reform in East Asia

If the organizational logic of business in East Asia is an imposing obstacle to reform, more overtly political factors present even greater challenges. Although, as I have suggested, the political and the economic are inseparable, especially in East Asia, it is ultimately political actors who establish the regulatory framework within which economic activity occurs. Some of East Asia’s political structures and practices make achieving reform extremely problematic. At one level, this is because the ruling political

elites and many of the most important economic actors may—as in the case of Malaysia—be one and the same (Searle). In such circumstances,

the temptation for power-holders to construct and defend economic rules of the game that favor their own interests is often irresistible. The sorts of political clientelism that tend to emerge in such relationship-based systems effectively “impede . . . the emergence of the kind of handsoff institutional separation which underpins the relationship between state and civil society in more advanced forms of democratic polity . . .”

561

562

Governance and the Public Sector GLOBALIZATION, GOVERNANCE, AND THE POLITICAL-ECONOMY

493

(White, 214). Consequently, patterns of political activity in the region often not only make reform difficult, but make the establishment of “dif-

ferentiated polities” and governance through arms-length, independent agencies of a sort that occurs in Europe well-nigh impossible (Rhodes, 7-8). Simply put, neither the existent institutional infrastructure nor the region’s indigenous political traditions make such practices either feasible or universally welcome. It needs to be remembered that the process of nation-building is a relatively new and often incompletely realized project, especially in the southern part of the region. Moreover, East Asia has had to cope with the often traumatic and—particularly for China —humiliating penetration of Western capitalism, followed by the even more abrupt decolonization process. Exacerbating this sense of vulnerability and insecurity was East Asia’s role as a crucial site of Cold War contestation, something that, as Richard Stubbs points out, profoundly

influenced the development strategies and strategic outlook of the emerging economies of Southeast Asia in particular. East Asian perceptions of security embrace economic issues as well as narrower strategic questions, and they emphasize the continuing importance of the state in securing such a stable environment as a consequence (Beeson 1999b). Not only did mercantilism become a central component of state-led development in these circumstances, but so too did authoritarianism—something that was tolerated, if not actively encouraged, by the United States because of its overarching strategic concerns.

Authoritarian rule in East Asia is not simply a historical curiosity. While not as widespread or uncompromising as it once was, the institutionalized legacy of authoritarianism places constraints on the possible forms of political order that may emerge in the region, and presents a major obstacle to patterns of governance that are predicated upon the existence of a fully functioning and independent civil society. One of the distinguishing qualities of political rule throughout East Asia is that it has generally been much closer to a corporatist than a pluralist model (Schmitter 1997). Schmitter (1979, 22) argues that what he calls “state corporatism” has been “ a defining element of, if not a structural necessity for, the antiliberal, delayed capitalist, authoritarian, neomercantilist

state.” In such a system various interest groups are subordinated to state bureaucratic power, elections are nonexistent or plebiscitary, and ideo-

logical contestation is nonexistent. In some parts of the region—China is the most important and obvious example—this sort of description is clearly still valid. China has simply not had a history that encourages either political contestation or the emergence of a civil society independent of state control (Wakeman). Even in Japan, which is an established industrial power and a nominal democracy of some standing, a form of “soft” authoritarianism has been closely associated with economic development (Johnson 1987), and the country has experienced virtually unbro-

ken one-party rule in the postwar period.

Governance and the Public Sector 494

MARK BEESON

It might be objected that, while these may be legitimate historical points, such political practices will prove unsustainable in the face of an irresistible wave of democratization (Huntington). Not only is the democratic transi-

tion process looking increasingly fragile of late, particularly in Southeast Asia (Vatikiotis), but even where political reform is occurring, it is not necessarily leading to the expansion or consolidation of independent civil societies of a sort associated with liberal forms of governance. As Garry Rodan (95) points out, even a country as economically developed as Singapore has seen an expansion in the “realm of the state through the extension and refinement of the mechanisms of political co-optation.” This is important for two reasons. First, it suggests that simple teleological extrapolations from “Western” experiences should be treated with caution. Second, the continuing control of—or intrusion into—all areas of national political space by a number of East Asian states means that, not only do alternative centers of power find it difficult to establish themselves, but there is little scope for nonstate organizations or agencies like trade unions to develop effectively or independently of state control (Deyo). This is a potentially crucial absence and obstacle to the development of new modes of governance, as “the organized working class [has] appeared as a key actor in the development of full democracy almost everywhere” (Rueschemeyer, Stephens, and Stephens, 270). The Persistence of Difference

Despite all the attention that is paid to the emergence of global civil society and the possible internationalization of political processes (Wapner), it should be emphasized that this remains, at best, a rudimentary development

in an East Asian context. NGOs—widely considered to be a central component and dynamic of civil society of any form—are not only frequently co-opted by governments, but may actually be controlled by them, generating the oxymoronic curiosity of government-organized NGOs (GONGOs) (Riker). Not only should we not assume that NGOs are necessarily “progressive” political forces (Morris-Suzuki), but we also need to remember that

their political effectiveness is largely dependent upon a state-defined regulatory framework (Clarke). Importantly, in an East Asian context, the institutional infrastructure that might permit alternative modes of governance, particularly in the form of independent policy networks that exist outside of state control, simply do not exist in the same way that they do in places like Western Europe (Beeson and Jayasuriya). In other words, because states in East Asia still generally jealously guard their independence and seek to maintain control of political structures and processes that may umpinge on their autonomy, they resist any notion of “pooling” sovereignty. This helps to explain not only the “Asian way” of consensus, limited direct cooperation, and noninterference in domestic affairs, that continues to char-

acterize transnational organizations like ASEAN and even the more broadly

based Asia Pacific Economic Cooperation (APEC) forum (Acharya), but also

563

Governance and the Public Sector GLOBALIZATION, GOVERNANCE, AND THE POLITICAL-ECONOMY

495

why someone like Malaysian Prime Minister Datuk Seri Dr Mahathir Mohamad would attempt to resist the impact of globalization processes by imposing capital controls (see Beeson 2000b). Although it is not possible to explore the political dynamics of its economic policies here, the Malaysian experience highlights a couple of more general points that are worth emphasizing. First, the divergence of opinion expressed about the wisdom of these policies serves as another powerful reminder that there is no consensus about “best practice” public policy in an era of globalization. The apparently universal imperatives of globalization are mediated differently in specific national institutional contexts, producing significantly different outcomes. This suggests that governments may retain more policy discretion and autonomy than some observers would

claim, and that, as a consequence,

differential state

capacities still matter. Despite the problems currently afflicting a number of East Asian nations, therefore, there may still be powerful incentives not

to completely dismantle the distinctive structures of governance have underpinned the region’s economic expansion.

that

Second, it should be stressed that even phenomena that superficially seem imbued with universal, abstract qualities—and that may be central

to any putative reformist agenda—may be transmuted by contingent political forces. What Jayasuriya calls “statist,” as opposed to liberal, legalism is closely associated with the sorts of corporatist political structures that continue to distinguish many East Asian societies. In such circumstances, Jayasuriya (180) argues that “statist legal architecture leads to the building of legal institutions that fuse the civil society and the state. Within the statist perspective, judicial independence is a matter of autonomy within rather than from the executive” (emphasis in original). In other words, the political space and supporting legal institutional infrastructure that is the assumed ontological bedrock of much “Western” political theory, and that informs so much of the reformist agenda that external agencies are seeking to impose on East Asia, is either not present or operates in a manner that serves and is dependent upon the state, rather than on civil society. A final point to note is that, despite the widely held expectations about the inexorable spread of democracy that accompanies economic reform in the good governance discourse, such a process may be undermined by the very global processes such initiatives seek to encourage. One of the great ironies of the globalization phenomenon

is that, at precisely the

same moment that East Asia is being encouraged to embrace democratization and political liberalism, globalization itself appears to be funda-

mentally undermining democratic structures of governance and the capacity of national governments to represent the interests of the people within the political space over which they claim authority (Cerny 1999; Rodrik). Given that one of the central arguments of the promoters of “Asian values” before the crisis was that they were the basis of functionally superior social systems to those of the supposedly disintegrating

Governance and the Public Sector

496

565

MARK BEESON

“West” (Mahbubani), such debates may be heard again. Indeed, it needs to be recognized that even one of the principal targets of the reform agenda—corruption—may,

in some

circumstances,

continue

to serve

a functional purpose and actually be integrally connected to economic development (Hutchcroft, 639). This is not to condone or defend such

practices, simply to point out that there may be powerful forces resisting reform above and beyond narrow self-interest, especially where alternative structures of economic governance are poorly established. CONCLUDING REMARKS

Establishing good governance in East Asia will not be easy. Local political and economic elites often have powerful incentives to resist reforms that may directly threaten existing privileges. Even without overt political resistance, patterns of economic coordination that have become institu-

tionalized over long periods, are deeply socially embedded, have proved effective, and may often still enjoy a degree of legitimacy are also likely to prove resistant to change. There is, however, an even more fundamental reason for remaining

skeptical about the embrace of good governance in much of East Asia: it is still an open question whether Anglo-American forms of capitalism and market-centered patterns of governance are necessarily superior in the

long-term to their East Asian counterparts. Even during the economic boom of the late 90s in the U.S., fundamental doubts were expressed about its sustainability. (The Economist), breathless accounts of the “new”

economy notwithstanding. Even if U.S. dynamism rests on something more substantial than a stock market bubble, the benefits of economic

expansion have been accompanied by major disparities of incomes and life chances. Such a potentially divisive form of capitalism has few admirers in East Asia. Moreover, it needs to be remembered that, before the cri-

sis, there was almost universal] praise for the seemingly superior performance and organization of East Asian economies—factors that some observers contend remain potentially significant and enduring sources of international competitive advantage (Lazonick; Weiss). If, as seems likely, East Asian economies recover their former dynamism, it is

hard to imagine that the potentially divisive agenda of reform associated with neoliberal governance, which is intended to systematically undercut East Asia’s competitive advantages and establish a liberal, market-based capitalism (Bello), will not be more vigorously resisted.

This is not to suggest that there are not significant pressures that will continue to encourage such reforms. Clearly, these exist. Whether it is the overt political leverage and opportunism of the IMF or the U.S. or the subtler but equally telling reconfiguration of economic activity in an increasingly integrated world economy, powerful forces are redefining national political economies. What we need to recognize is that whatever form such new structures of governance take in East Asia, they will reflect existent,

566

Governance and the Public Sector GLOBALIZATION, GOVERNANCE, AND THE POLITICAL-ECONOMY

497

contingent realities. This means that not only will regional political and economic forces impart a degree of path-dependency, but they will also fundamentally delimit the sort of governance that is possible. An independent, functional civil society, replete with autonomous NGOs and dynamic social movements operating independently of the state, cannot simply be imposed or wished upon the region. Even if such social formations do emerge, it is not at all obvious that a form of Anglo-American, neoliberal governance will be the inevitable consequence. On the contrary,

if the history of East Asia suggests anything, it is that the style of regional development will continue to be powerfully shaped by East Asians, and that East Asian responses to globalization may continue to be very different from those found elsewhere. ACKNOWLEDGMENTS

I would like to thank Governance’s anonymous reviewers for their perceptive comments and Phil Kimmet for research assistance. NOTES 1.

By “East Asia,” I mean Japan, China, South Korea, Taiwan, and the coun-

2.

Foracomprehensive and insightful overview of the literature, see Held et al.

3.

The acknowledgement of the positive role of state intervention might have been more fully recognized if the sponsors of the report—the Japanese government—had had their way. As Robert Wade demonstrates in his analysis of the Bank’s report on East Asia’s development experience, interpreting economic “reality” is a highly political exercise, which mirrors the distribution of power in the wider international system. See, for example, Geoffrey Underhill’s (1997) examination of the regulation of the securities industry in Europe. The original Washington consensus was outlined by John Williamson, who suggested that “good” policies were based on: fiscal discipline, privatiza-

tries of the Association of South East Asian Nations (ASEAN).

4. 5.

tion, financial and trade liberalization, openness to investment, deregula-

6.

7.

8.

tion, and a general concern with increasing the “transparency” of economic and political processes. Iam indebted to one of Governance’s anonymous referees for emphasizing the importance of this distinction. Anumber of authors have questioned whether discrete national economies are any longer meaningful representations of reality or theoretically useful in an era characterized by greater transnationalization and an erosion of national boundaries. See Bryan and Beeson (2000a). Again, Iam conscious that by employing catchall expressions like “the East Asian region” I may be guilty of imposing or assuming a unity that does not exist. Conscious of the force of such critiques (see Dirlik, for example), I shall

9.

attempt to use nationally specific illustrations of my arguments wherever possible. The seminal work is by Chalmers Johnson (1982), but see also Beeson (1999a, chapter 3).

Governance and the Public Sector 498

MARK BEESON

REFERENCES

Acharya, A. 1997. Ideas, Identity, and Institution-Building: From the “ASEAN Way” to the “Asia-Pacific Way.” The Pacific Review 10:319-346. Beeson, M. 1996. Asia’s Disparate Political Economies and the Prospects for pete anion! “Convergence.” Asian Journal of Public Administration 18:

41-167.

. 1998. Indonesia, the East Asian Crisis, and the Commodification of the Na-

tion-State. New Political Economy 3:357-374. . 1999a. Competing Capitalisms: Australia, Japan, and Economic Competition in

the Asia Pacific. London: Macmillan. . 1999b. States, Markets, and Economic Security in Postcrisis East Asia. Asian Perspective 23:33-52. . 2000a. Globalization and International Trade: International Economic Policies and “the National Interest.” In P. Boreham, G. Stokes, and R. Hall, eds.,

The Politics of Australian Society: Political Issues for the New Century. Frenchs Forest: Longman. _____. 2000b. Mahathir and the Markets: Globalization and the Pursuit of Eco-

nomic Autonomy in Malaysia. Pacific Affairs 73:335-351. Beeson, M., and K. Jayasuriya. 1998. The Political Rationalities of Regionalism: APEC and the EU in Comparative Perspective. The Pacific Review 11:311-336. Beeson, M., and R. Robison. 2000. Introduction: Interpreting the Crisis. In R. Robison, M. Beeson, K. Jayasuriya, and H.-R. Kim, eds., Politics and Markets in

the Wake of the Asian Crisis. London: Routledge. Bello, W. 1998. East Asia: On the Eve of the Great Transformation? Review of Inter-

national Political Economy 5:424-444. Berger, M., and M. Beeson. 1998. Lineages of Liberalism and Miracles of Modernization: The World Bank, the East Asian Trajectory, and the International Development Debate. Third World Quarterly 19:487-504. Berger, S., and R. Dore, eds. 1996. National Diversity and Global Capitalism. Ithaca, NY: Cornell University Press. Bryan, D. 1995. The Chase across the Globe: International Accumulation and the Contradictions for Nation-States. Boulder, CO: Westview Press.

Calder, K. E. 1988. Crisis and Compensation: Public Policy and Political Stability in Japan, 1949-1986. Princeton, NJ: Princeton University Press. Camdessus, M. 1998. From the Asian Crisis Toward a New Global Architecture. Ad-

dress to the Parliamentary Assembly of the Council of Europe, Strasbourg, June 23. Available online at . Cerny, P. 1997. Paradoxes of the Competition State: The Dynamics of Political Globalization. Government and Opposition 32:251-274. . 1999. Globalization and the Erosion of Democracy. European Journal of Political Research 36:1—26. Clarke, G. 1998. Nongovernmental Organizations (NGOs) and Politics in the Developing World. Political Studies 46:36-52. Cooper, F., and R. Packard. 1997. Introduction. In F. Cooper and R. Packard, eds.,

International Development and the Social Sciences: Essays on History and Politics of Knowledge. Berkeley: University of California Press.

Deyo, F. 1997. Labour and Industrial Restructuring in South-east Asia. In G. Rodan, K. Hewison, and R. Robison, eds., The Political Economy of South-East Asia: An

Introduction. Melbourne: Oxford University Press. Dicken, P. 1992. Global Shift: The Internationalization of Economic Activity. London: Paul Chapman. Dirlik, A. 1992. The Asia-Pacific Idea: Reality and Representation in the Invention of Regional Structure. Journal of World History 3:55-79.

567

568

Governance and the Public Sector GLOBALIZATION, GOVERNANCE, AND THE POLITICAL-ECONOMY

499

Economist, The. 1998. America’s Bubble Economy. April 18:11-12. Evans, P. 1995. Embedded Autonomy: States and Industrial Transformation. Princeton, NJ: Princeton University Press. Gangopadhyay, P. 1998. Patterns of Trade, Investment, and Migration in the Asia-Pacific Region. In G. Thompson, ed., Economic Dynamism in the AsiaPacific Region. London: Routledge. Garrett, G., and P. Lange. 1996. Internationalization, Institutions, and Political

Change. In R. O. Keohane and H. Milner, eds., Internationalization and Domestic Politics. New York: Cambridge University Press. George, S., and F. Sabelli. 1994. Faith and Credit: The World Bank’s Secular Empire. London: Penguin. Hall, P. 1986. Governing the Economy: The Politics of State Intervention in Britain and France. New York: Oxford University Press. Hatch, W., and K. Yamamura. 1996. Asia in Japan’s Embrace: Building a Regional Production Alliance. Cambridge: Cambridge University Press. Held, D., A. McGrew, D. Goldblatt, and J. Perraton. 1999. Global Transformations. Stanford, CA: Stanford University Press. ‘

Higgott, R. 1999. Resisting the Imperialism of Economics: The Theory and Practice of International Political Economy in an Era of Globalization. Conference paper for The New Agenda for International Relations, September 9-10, University of East Anglia. Hirst, P., and G. Thompson. 1996. Globalization in Question: The International Econ-

omy and the Possibility of Governance. Cambridge, UK: Polity Press. Hollingsworth, J. R., and R. Boyer. 1997. Coordination of Economic Actors and Social Systems of Production. In J. R. Hollingsworth and R. Boyer, eds., Con-

temporary Capitalism: The Embeddedness of Institutions. Cambridge: Cambridge University Press. Huntington, S. 1991. The Third Wave: Democratization in the Late Twentieth Century. Norman: University of Oklahoma Press. Hutchcroft, P. D. 1997. The Politics of Privilege: Assessing the Impact of Rents,

Corruption, and Clientelism on Third World Development. Political Studies 45:639-658. : Jayasuriya, K. 1999. Law, Capitalism, and Power in Asia. London: Routledge. Jayasuriya, K., and A. Rosser. 1999. Economic Orthodoxy and the East Asian Cri-

sis. Paper presented to the Australian Political Studies Association Conference, September 27-29, Sydney. Johnson, C. 1982. MITI and the Japanese Miracle: The Growth of Industry Policy 1925-1975. Stanford, CA: Stanford University Press. . 1987. Political Institutions and Economic Performance: The GovernmentBusiness Relationship in Japan, South Korea, and Taiwan. In F. Deyo, ed., The Political Economy of the New Asian Industrialism. Ithaca, NY: Cornell University Press. Kooiman, J. 1993. Social-Political Governance: Introduction. In J. Kooiman, ed.,

Modern Governance: New Government-Society Interactions. London: Sage. Lazonick, W. 1998. Organizational Learning and International Competition. In J. Michie and J. G. Smith, eds., Globalization, Growth, and Governance: Creating an

Innovative Economy. Oxford: Oxford University Press. Lee, C. S. 1999. Political Economy. Far Eastern Economic Review July 22:49. Leys, C. 1996. The Rise and Fall of Development Theory. In C. Leys, ed., The Rise and Fall of Development Theory. London: James Currey. Leyshon, A. 1994. Under Pressure: Finance, Geo-economic Competition, and the

Rise and Fall of Japan’s Postwar Growth Economy. In S. Corbrige, R. Martin, and N. Thrift, eds., Money, Power, and Space. Oxford: Blackwell.

Mahbubani, K. 1993. The Dangers of Decadence: What the Rest Can Teach the West. Foreign Affairs 72:10-14.

Governance and the Public Sector

500

MARK BEESON

Majone, G. 1997. From the Positive to the Regulatory State: Causes and Conseene of Changes in the Mode of Governance. Journal of Public Policy 17:

McCormack, G. 1996. The Emptiness ofJapanese Affluence. St. Leonards, New South Wales, Australia: Allen & Unwin. Moon, C.-L, and S.-Y. Rhyu. 2000. The State, Structural Rigidity, and the End

of Asian Capitalism: A Comparative Study of Japan and South Korea. In R. Robison, M. Beeson, K. Jayasuriya, H.-K. Kim, eds., Politics and Markets in the Wake of the Asian Crisis. London: Routledge.

Morris-Suzuki, T. 2000. For and Against NGOs: The Politics of the Lived World.

New Left Review 2:63-84. Murphy, C. N. 1994. International Organization and Industrial Change: Global Governance Since 1850. Cambridge: Polity Press. North, D. C. 1990. Institutions, Institutional Change, and Economic Performance.

Cambridge: Cambridge University Press. Ohmae, K. 1995. The End of the Nation-State: The Rise of the Regional Economies. London: Harper Collins. Orru, M., N. W. Biggart, and G. G. Hamilton. 1991. Organizational Isomorphism

in East Asia. In W. W. Powell and P. J. DiMaggio, eds., The New Institutionalism in Organizational Analysis. Chicago: University of Chicago Press. Picciotto, S. 1996. The Regulatory Criss-cross: Interaction between Jurisdictions and the Construction of Global Regulatory Networks. In W. Bratton, J. McCahrey, S. Picciotto, and C. Scott, eds., International Regulatory Competition and Coordination: Perspectives on Economic Regulation in Europe and the United States. Oxford: Clarendon Press. Rhodes, R. A. W. 1997. Understanding Governance: Policy Networks, Governance, Re-

flexivity and Accountability. Buckingham: Open University Press. Riker, J. V. 1995. Contending Perspectives for Interpreting Government-NGO Relations in South and Southeast Asia: Constraints, Challenges, and the Search for Common Ground in Rural Development. In N. Heyzer, ed., Government-

NGO Relations in Asia: Prospects for People-Centered Development. London: Macmillan. Robison, R. 1997. Politics and Markets in Indonesia’s Post-Oil Era. In G. Rodan, K. Hewison, and R. Robison, eds., The Political Economy of Southeast Asia: An Intro-

duction. Melbourne: Oxford University Press. Rodan, G. 1996. State-Society Relations and Political Opposition in Singapore. In G. Rodan, Political Oppositions in Industrializing Asia. London: Routledge. Rodrik, D. 1997. Has Globalization Gone Too Far? Washington, DC: Institute for

International Economics. Rosenau, J. 1992. Governance, Order, and Change in World Politics. In J. Rosenau

and E. Czempiel, Governance Without Government: Order and Change in World Politics. Cambridge: Cambridge University Press. . 1995. Governance in the Twenty-first Century. Global Governance 1: 13-43. Rueschemeyer, D., E. H. Stephens, and J. D. Stephens. 1996. Capitalist Development and Democracy. Cambridge: Polity Press. Ruigrok, W. and R. van Tulder. 1995. The Logic of International Restructuring. London: Routledge. Schmitter, P. 1979. Still the Century of Corporatism? In P. Schmitter, ed., Trends

Toward Corporatist Intermediation. Beverly Hills: Sage. . 1997. Civil Society East and West. In L. Diamond, ed., Consolidating the Third Wave Democracies. Baltimore: John Hopkins Press. Searle, P. 1999. The Riddle of Malaysian Capitalism: Rent Seekers or Real Capitalists? Sydney: Allen & Unwin.

569

Governance and the Public Sector

570

GLOBALIZATION, GOVERNANCE, AND THE POLITICAL-ECONOMY

501

Sell, S. K. 2000. Big Business and the New Trade Agreements: The Future of the WTO? In R. Stubbs and G. Underhill, eds., Political Economy and the Changing

Global Order, 2"4 ed. Oxford: Oxford University Press. Smouts, M.-C. 1998. The Proper Use of Governance in International Relations. International Social Science Journal 155:81-89. Strange, S. 1994. From Bretton Woods to the Casino Economy. In S. Corbridge, R. Martin, and N. Thrift, eds., Money, Power and Space. Oxford: Blackwell.

. 1996. The Retreat of the State: The Diffusion of Power in the World Economy. Cambridge: Cambridge University Press. Stubbs, R. 1999. War and Economic Development: Export-oriented Industrialization in East and Southeast Asia. Comparative Politics 31:337-355. Underhill, G. R. D. 1997. Private Markets and Public Responsibility in a Global System: Conflict and Cooperation in Transnational Banking and Securities Regulation. In G. R. D. Underhill, ed., The New World Order in International Fi-

nance. London: Macmillan. . 2000. Conceptualizing the Changing Global Order. In R. Stubbs and G. Underhill, eds., Political Economy and the Changing Global.Order, 2"4 ed. Oxford: Oxford University Press. United Nations Commission on Global Governance. 1995. Our Global Neighborhood. Oxford: Oxford University Press. Vatikiotis, M. 2001. Trouble at the Top: Asia’s Blundering Leaders. Far Eastern Economic Review January 11:14-19. Wade, R. 1996. Japan, the World Bank, and the Art of Paradigm Maintenance: The

East Asian Miracle in Political Perspective. New Left Review 217:3-36. Wakeman,

F. 1993. The Civil Society and the Public Sphere Debate:

Western

Reflections on Chinese Political Culture. Modern China 19:108-138. Wapner, P. 1995. Politics beyond the State: Environmental Activism and World Civic Politics. World Politics 47:311-340. Weiss, L. 1998. The Myth of the Powerless State. Ithaca, NY: Cornell University Press. Weiss, L., and J. M. Hobson. 1995. States and Economic Development: A Comparative Historical Analysis. Cambridge: Polity Press. White, G. 1996. Civil Society, Democratization, and Development. In R. Luckham

and G. White, eds., Democratization in the South: The Jagged Wave. Manchester: Manchester University Press. Whitley, R. 1991. The Social Construction of Business Systems in East Asia. Organization Studies 12:1-26. Williamson, J. 1994. In Search of a Manual for Technopols. In J. Williamson, ed.,

The Political Economy of Policy Reform. Washington, DC: Institute for International Economics. Winters, J. 2000. The Financial Crisis in Southeast Asia. In R. Robison, M. Beeson, K. Jayasuriya, and H.-R. Kim, eds., Politics and Markets in the Wake of the Asian

Crisis. London: Routledge. Woo-Cummings, M. 1997. Slouching Toward the Market: The Politics of Financial Liberalization in South Korea. In M. Loriaux, M. Woo-Cummings, K. Calder,

S. Maxfield, and S. Perez, eds., Capital Ungoverned: Liberalizing Finance in Interventionist States. Ithaca, NY: Cornell University Press.

. 1998. All in the Family: Reforming Corporate Governance in East Asia. Current History December:426—430. World Bank. 1991. Managing Development: The Governance Dimension. Washington

DC: The World Bank. ____. 1993. The East Asian Miracle: Economic Growth and Public Policy. Oxford: Ox-

ford University Press. . 1997. World Development Report: The State in a Changing World, 1997. Oxford: Oxford University Press.

,

Governance and the Public Sector

502

MARK BEESON

Young, T. 1995. “A Project to Be Realized”: Global Liberalism and Contemporary Africa. Millennium 24:527-546.

Hell

[25] Governance Reform in Thailand: Questionable

Assumptions, Uncertain Outcomes BIDHYA BOWORNWATHANA*

This article examines the nature of governance reform in Thailand. The argument is that Thai citizens are not especially benefiting from the public reform initiatives of Thai governments because government reformers made four questionable assumptions about reform which have in turn produced uncertain outcomes and provided the opportunity for government reformers to avoid responsibility for their reform choices. First, the reformers support the belief that a global reform paradigm with ready-made reform packages exists which can be easily transplanted in the Thai public sector. Second, the reformers prefer to define success largely as reform output rather than reform outcomes or long-term reform consequences. Third, Thai government reformers have overemphasized the efficiency aspects of the new public management at the expense of other governance goals. Fourth, governance reform in Thailand has been portrayed as a managerial problem instead ofa political one. The author supports his arguments by drawing on theoretical debates in the international literature on administrative reform,

and relating these debates to the Thai case. Governance reform in Thailand is still at an early stage, but the role of unintended consequences is important to administrative reform. Furthermore, the Thai case may reflect governance reform in other countries as well. Governance reform in Thailand is still at an early stage. But it is not too early to conclude that the assumptions governments in Thailand have

made about reform and theix avoidance of responsibility for the consequences of their reform choices have meant that Thai citizens are not

especially benefiting from the public sector reform initiatives of recent governments.

Four major assumptions are held by the government reformers.! These, however, are not well grounded in the realities of Thai society.

First, there is a belief among Thai government reformers that a global reform paradigm with ready-made reform packages exists that can easily be transplanted into the Thai public sector. Second, reform outcomes

and long-term reform consequences

among government

reformers

are neglected because the reformers prefer to define success largely as

*Chulalongkorn University, Bangkok, Thailand Governance: An International Journal of Policy and Administration, Vol. 13, No. 3, July 2000

(pp. 393-408). © 2000 Blackwell Publishers, 350 Main St., Malden MA 02148, USA, and 108 Cowley Road, Oxford, OX4 IJF, UK. ISSN 0952-1895

Governance and the Public Sector

394

BIDHYA BOWORNWATHANA

reform output. Third, Thai government reformers have emphasized especially the efficiency aspects of the new public management (NPM) as the most important objective of reform. Fourth, government reformers tend to portray governance reform as a managerial problem instead of a political one. I discuss each of these assumptions in order by drawing on theoretical debates in the international literature on administrative reform, and relating these debates to the Thai case. A brief background on the development of the Thai polity, however, is presented first. THE DEVELOPMENT OF GOVERNANCE REFORM IN THAILAND

Administrative reform has been around as a subject for centuries in Thailand. But the idea of reforming the Thai public sector in accordance with the principles of the governance paradigm and the new public management (Rhodes 1996; Bowornwathana 1997a) is novel. For example, down-

sizing and privatization have been major policies of Thai governments only since the decade of the 1980s. But the major impetus for governance arrived very recently with the promulgation of the new 1997 Constitution which contains clauses in full support of the development of the governance paradigm in Thailand. The 1997 Constitution allows citizens to gain more control over the public sector. New governance institutional arrangements such as the ombudsman office, the national anticorruption office, and the administrative court system are mandated to facilitate the growth of a stronger, more transparent and open democratic society. At the same

time, the economic

crisis of 1997 has hastened the need

for Thailand to have good governance in both the public and business sectors. A key condition laid out by international funding agencies such as the World Bank, the International Monetary Fund, and the Asian

Development Bank is that public sector reform in Thailand must be carried out in accordance with the principles of good governance (Royal Thai Government 1998; World Bank 1999). As Thailand moves into the twenty-first century, the Thai political sys-

tem is changing from a traditional polity originally dominated by bureaucrats and later on joined by businessmen (labeled first as a bureaucratic polity, and later on as liberal corporatism) to a new “civil” polity where citizens predominate as owners of government, and the public sector is run and organized under the principles of the governance paradigm. Ina civil polity, the central government becomes smaller, and the civil society stron-

ger. Power is moved outwards from the central government to the civil society and the market. The transformation process to a future civil polity also gradually replaces the monopoly held by the typical hierarchicalministry system to provide public services in the public sector with a new system of more

autonomous,

flexible, and efficient public agencies as

service providers. According to the new performance standards of a civil polity, government must be effectively accountable, open, and transparent. A civil polity

WE

574

Governance and the Public Sector

GOVERNANCE REFORM IN THAILAND

395

is also especially concerned with the issue of fairness in public services and the adherence to the new international codes of behavior and ethics (Bowornwathana 1997a). In the new civil polity, citizens, rather than the traditional bureaucratic elite and businessmen, are to exercise power.

Though the old patron-client bonds may remain important in Thailand, a new form of social arrangement called “partnerships” will play a central role by engaging the civil society to form partnerships among themselves, with the government, and with the private sector. Governing in a civil polity, it is proclaimed, will be less based on bureaucracy and more on such partnerships, nonbureaucratic organization designs, markets and contracts, external accountability, and social fairness. The management of

public affairs will be focused on strengthening various kinds of partnerships across sectors (Thynne, 376-377; Farazmand 1999). All of these future changes may sound like a radical departure from the old polity toa new one based on a completely new political culture. However, one has to keep in mind that Thailand still has a long way to go. Governance reform for a civil polity has just started. Whether the change process will be gradual or volatile depends on Thailand’s ability to blend traditional elite preferences with the new governance values. QUESTIONABLE ASSUMPTIONS, UNCERTAIN CONSEQUENCES

The direction governance reform is beginning to take in Thailand contains questionable assumptions and uncertain consequences. In other words, reform decisions and strategic choices are being made under questionable assumptions. There is, furthermore, a great deal of uncertainty as to whether the intended consequences, even if they could be pinpointed, will

be achieved. Outcome uncertainty is obviously even greater about the unintended consequences of governance reform.’ I explain below the four major assumptions held by government reformers in Thailand. Assumption 1: The Existence of a Global Reform Paradigm For Thai government reformers to believe in the universality of an admin-

istrative paradigm is nothing extraordinary. Yet the question of whether a new global reform paradigm for the public sector exists is becoming a central topic of discussion. If the claims of a global reform paradigm such

as NPM are justified, governance reform becomes an easier undertaking. A successful reform strategy adopted by a particular country can then be transferred to other countries regardless of their contextual differences. The diffusion of governance reform would then be a matter, for example, of imitating the executive agencies and citizen charters of Britain, the administrative court of France, the ombudsman office of Sweden, and the Freedom of Information Act of the United States. At a more general level, it is perceived that the new public management reform initiatives that have worked well in Western countries such as the United Kingdom, New

7)

Governance and the Public Sector

396

BIDHYA BOWORNWATHANA

Zealand, Australia, and Canada also should work smoothly in developing, and even in other developed, countries.

Successful stories about the New Zealand reform have tempted reform-seeking governments all over the world to think of New Zealand as the exemplar of successful administrative reform under the label “the new public management” (NPM). Numerous trips are made by govern-

ment reformers from various countries to New Zealand to visit reform units of the New Zealand government. Upon returning from their study trips, government reformers push for reform proposals which, to a great extent, follow the foreign reform blueprints that they were exposed to during their visits. British public sector reform experience has provided another example for several countries, particularly the Commonwealth nations, to follow. There is a growing skepticism among scholars, however, as to whether

there is really a global reform paradigm with universal applicability. Skeptics argue that one should not assume that a particular country’s successful reform model automatically can be transplanted into another country and become an instant success. Mohan Kaul concluded, for example,”A significant lesson [to] be drawn from the Commonwealth experiences is that while global concern exists about the nature of civil service reforms, there is no unique solution or approach” (Kaul, 149). Christopher Pollitt and Hikka Summa similarly argued that a uniform “one-track” picture of public sector reform is inaccurate (Pollitt and Summa). And Allen

Schick warned that while the New Zealand model has attracted worldwide attention through its extensive reforms, countries with different national administrative traditions should not emulate New Zealand’s reforms

(Schick). Still another eminent

scholar, R. A. W. Rhodes,

ex-

pressed skepticism: “Whether the New Zealand model can or should be transplanted [or even whether] NPM is a new ‘global paradigm’ because

its ideas are ever changing and internally contradictory.” Rhodes notes: “To compound the problem, the similarities between reforms in different

countries are often superficial, masking significant difference” (Rhodes 1999, 122). Finally, another scholar, Alasdair Roberts (1997), in a study of administrative reform in the United States, pointed out that the perfor-

mance-based organizations (PBO) plan provides some obvious challenges

to the assumption of universality. Roberts argued that the American PBO plan will not work as well as Next Steps has in the United Kingdom. This is, among other things, due to important differences between the American congressional system (in which the legislature has the ability to interfere at will in administration) and the British parliamentary system,

differences in political culture and perceptions about the legitimacy of the national bureaucracy, and differences in the relative power of various actors such as public employee labor unions. The proponents of a global reform paradigm admit that though significant country variations exist that may make uncertain the overall suitability of the paradigm for different regimes, the fact is that NPM measures

576

Governance and the Public Sector

GOVERNANCE

REFORM IN THAILAND

397

have been widely implemented in many countries (Mascarenhaus; Peters and Savoie 1994; Caroll; Galnoor, Rosenbloom, and Yaroni, 394; and Masser). In practice, countries undertaking administrative reform search for examples from other countries that will provide them with new ideas

and reform models. Though government reform is a series of significant renovations that differ substantially from one nation to the next, reformers in different countries can learn from one another. Therefore, one should not be surprised to discover that officials from the National Performance Review of Vice President Al Gore of the United States want to learn

about the United Kingdom’s experiences with NPM. Nor should one be surprised to learn that the ideas in Thatcher’s Next Steps initiatives were

derived from the Swedish model (McDonald, 37-56). And one might observe that British executive agency initiatives appear under different labels in various countries; for example, crown entities in New Zealand,

special operating agencies in Canada, free agencies in Denmark, and performance-based organizations in the United States. Besides NPM,

another possible contending global reform paradigm

is “good governance.” Supporters of good governance are loan and aid donor agencies such as the World Bank, UNDP, Asian Development Bank, International Monetary Fund, OECD, and ODA, and developed countries such as the United States and the European Union countries. The recent economic crisis in the Asia region has provided these inter-

national funding agencies with a golden opportunity to pressure Asian countries for administrative reform based on good governance in return for loans and aid. Like NPM, good governance has become a worldwide phenomenon (ODA 1993; World Bank 1994, 1997; UNDP 1995, 1998;

OECD 1995; and ADB 1999), and has provided the Thai government with an opportunity, under the banners of international funding agencies, to

impose changes on the traditional Thai bureaucracy. The debate as to whether a global reform paradigm exists in public administration has implications for the thinking and practice of administrative reform in Thailand. Government reformers in Thailand tend to assume that reform blueprints from developed countries can be success-

fully put into practice. But as the reform literature indicates, disagreements exist as to the validity of the claim of a global reform paradigm. But there are reasons why Thai government reformers have inclinations to support a global reform paradigm. First, government reformers, politicians, and bureaucrats are overwhelmed with all kinds of work besides doing administrative reform. They do not work full-time on reform. Thus, they do not have the time to

thoroughly work on reform or build an in-depth understanding of the problems and needs of the Thai bureaucracy. Politicians and their political parties do not have their own reform team. Selected central bureaucrats work part-time on reform. They, in turn, do not have enough in-depth knowledge of the problems or feasible administrative reform solutions

in Thailand. Their ability to assist elected politicians is rather limited.

Governance and the Public Sector

398

Furthermore,

BIDHYA BOWORNWATHANA

many bureaucrats

are eager to do administrative reform

work because it enhances their leverage in bureaucratic politics. For example, they may see an opportunity to gain more directive power over other agencies. The fate of agencies depends often on reform proposals they submit to the elected politicians for approval. Bureaucrats’ hidden agendas are not always compatible with government reform policies. Second, the 1997 economic crisis, having opened the door for international funding assistance for public sector reform, in turn, has provided

economic incentives for government reformers to participate. Consultant fees, funds for research projects, free field trips abroad, and funds to organize conferences are examples of activities that may generate extra income and prestige for those involved in reform work. Needless to say, most Thai government reformers are eager to show interest and adopt reform packages backed by international funding agencies. Adopting a global reform paradigm is a good choice, from this perspective, because it silences domestic differences, pleases funding agencies, and presents convenient

packages of ready-made reform programs. It is also easier to convince the public about the benefits of a reform proposal that has already worked well in a developed country than to build public support for a completely new indigenous reform program. A global reform paradigm also fulfills the desire of executive politicians for fast change and success. There are several possible consequences resulting from a commitment to the idea of a global paradigm. First, the imported reform plan may not werk, and intended outcomes may never materialize. Second, unintended consequences may create new and difficult problems. However, third,

unintended consequences may take a long time to surface, thus allowing executive politicians to get off the hook. Executive politicians want fast solutions. Therefore, fourth, government reformers fail to consider the

possible unintended consequences of reform policies. To conclude, one can say that there is a vicious circle involved in doing administrative reform work in Thailand. It starts with the appointment of a reform commission and the identification of the offices in charge of reform, the decision regarding reform plans, Cabinet resolutions, utiliza-

tion of reform expenses such as field trips, research funds, organizing conferences, and administrative expenses. In the meantime, the mass media will publicize the decisions made by the Cabinet and the reform commission. While the good consequences of a reform program have not yet clearly emerged, the Thai coalition government usually collapses after less than two years in office. Then, the new coalition government will start the reform cycle again. The unstable nature of the Thai government further complicates and confuses reform work. For example, there are

several master plans for administrative reform floating around in Thailand. Some belong to previous governments. Others may originate from past Cabinet decisions. Then there is the Prime Minister’s policy address in Parliament which contains plans for doing administrative reform.

Sif

O76

Governance and the Public Sector

GOVERNANCE REFORM IN THAILAND

399

Which of these documents is then the official policy reform statement? These multiple directives obviously create confusion and-uncertainty. Assumption 2: Reform Outputs Matter,

Not Outcomes

The second major assumption held by government reformers in Thailand is that reform outputs matter more than outcomes. Examples of reform

outputs are: Cabinet approval of a master plan for reform; specific Cabinet resolutions on reform such as regulations limiting the growth of the bureaucracy; Prime Minister’s orders; rules and regulations issued by the office of the Prime Minister; the passing of a reform bill in Parliament; the establishment of a new office in charge of reform such as the Administrative Reform Commission; the establishment of a new system of

administrative courts; the ability to provide services more efficiently; the arrangement of conferences and training on réform to indoctrinate government officials about the reform policies of government; and the publication of reform documents.

Government reformers pay little attention to reform outcomes. They do not ask questions such as, Who

is going to benefit or suffer from

the reform initiatives? What new problems will the reform plan create? Are the intended consequences fulfilled? What are the unintended consequences? The reformers ask, instead, Where is the reform output? In fact,

reform may be sought for its political consequences. For example, the introduction of performance-based evaluation in Thailand may become a political instrument for one clique to get rid of the opposition clique in an organization. Reform also may be mindless. In this regard, the down-

sizing policy of the Thai government takes an across-the-board approach without considering differences in the various types of government organizations under reform. And sometimes

reform has pernicious effects.

Thus, the creation of “public organizations” in Thailand in February 1999 as a new type of organization gives chief executives more personnel and financial autonomy, and is supposed to result in a more efficient organization. But instead, the new “public organization” model has created confusion and worsened the morale of officials working in targeted agencies.

Recent efforts by the Thai central government to decentralize power to local governments have intensified corruption practices at the local level.

There are several reasons why reform consequences are ignored. First, unlike reform outputs, reform outcomes are not highly visible. Manifestation of reform outcomes takes a long time, and there are many outside uncontrolled variables involved. Second, sometimes the origi-

nally intended reform goals are unclear and conflicting. Because the reform process takes a long time, the intended goals are often forgotten, and reform decisions are eventually based on bureaucratic politics. Third, in practice, the reform outcomes

that were originally intended may no

longer fit the changing political and administrative milieu of the country. Fourth, government reformers do not stay long enough in office to

Me)

Governance and the Public Sector

400

BIDHYA BOWORNWATHANA

witness reform outcomes. They are not accountable to the reform decisions they made while in office. Therefore, they do not really care about the reform outcomes. It is not surprising to find out that government reformers, especially bureaucrats, are sometimes

so preoccupied

with

their domains and power that they forget that governance reform’s ultimate goal is citizen power and prosperity. Governance reform does not aim to prolong the existence of the bureaucratic polity or liberal corporatism which have supported the power of the bureaucratic elite and businessmen at the expense of the citizens. At the same

time, scholars have increasingly pointed out that not

enough attention has been given to the unintended consequences of reform (Boston 1999; Rhodes 1999). The current administrative reform lit-

erature suggests that there should be more concern with reform outcomes. Several leading scholars make notice of the potentially negative consequences of reform. For example, Paul C. Light (1996, 1997) has suggested that there is little evidence that the four tides of reform in the United States—namely, scientific management, the war on waste, the watchful eye, and liberation management—have been successful in making government more businesslike, less wasteful, more watchful, or more efficient and less expensive. In fact, he argued, they produce contradictory or crip-

pling reform initiatives which resulted in the thickening of government. It has been pointed out, too (Peters and Savoie 1996), that the reinventing

government movement is having a negative impact on the integrity of the public service, and that the reinvention movement invites public distrust

of government (Ruscio). Accordingly, there is also possible impact of public sector reform on standards of ethical probity within public services, particularly regarding instances of personal corruption (Gregory). Klitgaard (1997) also points out that very often most civil service reforms have adopted inappropriate strategies that have induced the collapse of government performance. International aid, Klitgaard claims, has emphasized the supply side (such as more staff, more experts, more computers, more train-

ing, more rules and regulations) of capacity building while overlooking demand. Institutional adjustment deserves more consideration as a basis for reform (Klitgaard, 487-509). One of the most serious problems, according to Lynn (1996, 13-14), now confronting the NPM movement is the lack

of good data to demonstrate the actual effects of the reforms. “Claims are plagued by selection bias, ex post rationalizations, irrefutable or unverifi-

able arguments, and the absence of either empirical or conceptual context. Hard evidence about effectiveness often cannot be obtained for a reasonable time, and in such circumstances decisions to proceed with a reform

might be made without conclusive data about its likely impact” (Lynn,

13-14). R. A. W. Rhodes pointed out that NPM is a prime example of the sour laws of unintended consequences in action. The perverse consequences of the UK reform have been felt in increased fragmentation, a loss of accountability, increased difficulties of coordination, and a decline in public service ethics (Rhodes 1998:19). M. Shamsul Haque (1998; 1999)

580

Governance and the Public Sector

GOVERNANCE REFORM IN THAILAND

401

argues that pro-market public service reforms (the inclination to restruc-

ture the public sector in favor of market forces) are likely te diminish public confidence in the public service, and thus weaken its legitimacy. Market values such as efficiency, productivity, cost-effectiveness, competition, and profitability are becoming more dominant while government values of accountability, neutrality, responsiveness, integrity, equity, responsibility, impartiality, benevolence, and justice are becoming marginal (Haque 1998,

16-17; 1999, 309-326). Finally, Moshe Maor (1999) points out that under the auspices of NPM, political executives lose control over the implementation of their policies. Such a loss, Maor hypothesizes, makes them hunger, therefore, for more control over the bureaucracy. “The striking outcome of

this process is that senior servants who are removed from policy making and thus supposed to be less political find their positions becoming more insecure due to the political executives’ desire for more control” (Maor, 5). Assumption 3: NPM Is Preferred to Governance

The third assumption of Thai government reformers is that NPM reform strategies and measures are preferred to governance reform. The objective of NPM is primarily to improve the efficiency of the public sector with management methods from the field of management and the private sector.? Meanwhile, efficiency is only one of the concerns of the governance paradigm besides accountability, transparency,

openness,

fairness, and

equity. Good governance therefore contains broader reform strategies than NPM. The objective of good governance is to strengthen the institutions of civil society, and to transform government into a more open, responsive,

accountable, and democratic system. {n this respect, new public management is a component of the broader strategy of good governance (Minogue, Polidano, and Hulme, 6). While NPM represents the Public Administration as Management paradigm (Henry, 26-52), governance is

considered by some scholars to be a new approach to public administration (Frederickson, 78-96).

There are several reasons why Thai government reformers choose NPM. First, NPM is easier to implement because it has concrete efficiency

improvement techniques derived from the management school. Examples of these techniques are: reengineering, efficiency scrutiny, market testing, ISO 9002, streamlining methods, performance measurement and

evaluation, and cost-per-unit analysis. Second, NPM

techniques have

indices that can be used to measure success or failure of reform. Thus, government reformers can claim success by showing the statistics. Third,

progress in efficiency improvement of public services can be empirically shown to the public customers. For example, requests for specific licenses now take less time for approval; paying taxes involves less paperwork; and, the issuing of citizen identification cards now takes less time. Fourth,

a customer-oriented government does not threaten the power base of government agencies. Therefore, government officials are willing to put

Governance and the Public Sector

402

581

BIDHYA BOWORNWATHANA

up signs notifying the maximum time to be spent in obtaining specific services from them. Fifth, the call of NPM for more market competition in public services opens the door for private entrepreneurs and the business elite to acquire government contracts and purchase the privatized government assets (Haque 1998, 16-17). However, scholars have warned that the efficiency paradigm of NPM

overemphasizes efficiency at the expense of other more important values, such as accountability and equality of public services. For example, in Hong Kong, Anthony Cheung (1996) pointed out that public sector reform

cannot be adequately understood within an efficiency paradigm. One serious problem emerging from the introduction of executive agencies in the United Kingdom is the blurring of ministerial responsibilities and public accountability.

Furthermore,

one can argue that what Thailand

urgently needs, like most developing countries, is good governance, not just more management efficiency. This point may be less obvious for some developed countries where accountability is more widely practiced, and

corruption better curtailed than in many developing countries.

Assumption 4: Reform Is a Managerial, Not a Political Problem The last assumption made by government reformers in Thailand is that administrative reform is a managerial problem, not a political one. Gov-

ernment reformers have failed to conceptualize administrative reform as a political phenomenon. In reform commission meetings there is not much discussion, therefore, about “who gains and who loses” from a par-

ticular reform proposal. Rather, the discussions are about the “how-to” of management reform. Under a managerial perspective, reform becomes a

matter of efficiency improvement through the application of NPM methods and the reinforcement of managerial autonomy of chief executives. There are reasons for government reformers to take such an ostensibly apolitical position. First, common

sense

tells us that it is unusual

for

bureaucrats and elected politicians to admit that their reform proposals have political motives. Government reformers always claim that their reform proposals are well-thought-out plans that are above politics and will benefit the people and democracy.

Second,

the decision to treat

administrative reform as a management problem enables government reformers to bypass the complex political and social-economic realities of the country. If administrative

reform is a management

problem, then

reform is a problem that requires only management solutions for which there is always a current stock. But if administrative reform is a political puzzle, then solutions are more difficult or sometimes impossible to find.

Certainly, there are no fashionable solutions lying around. Third, the perception of administrative reform as a management problem is favorable to the spread of NPM. Profit-seeking consultants from the private sector who have close access to loan decisions of international funding agencies such as the World Bank have accelerated the managerial perspective

582

Governance and the Public Sector

GOVERNANCE REFORM IN THAILAND

of reform with their NPM

403

ideas and pro-market reforms (Saint-Martin,

533-569). Fourth, the management perspective helps government reformers who are stakeholders to hide the political aspects of reform. When the definition of the problem is technically managerial, the question of who gets what, when, how, and why is thought to be irrelevant. On the other hand, proponents of a political approach regard admin-

istrative reform as inherently a political phenomenon. The diffusion of NPM methods must be understood as containing political motives with possible serious repercussions on the power structure of the society. In Thailand, administrative reform is highly political (Bowornwathana 1989, 1994, 1995, 1996a-d, 1997a-c, 1998, 1999a-b, forthcoming). The suc-

cess of reform consequently rests on a strong political will. But decisions about administrative reform are very much in the hands of the permanent bureaucrats. Allowing bureaucrats to reform themselves, though, creates concern about their willingness to separate their self-interests from reform proposals and their implementation. To what extent are bureaucrats likely to sacrifice their bureaucratic and career interests on the altar of any reform that threatens them? The likely answer to this question is nil. Bureaucrats, however, will have much influence over the shape of reform. In a bureaucratic polity such as Thailand, the chance for bureaucrats to control the agenda of reform, its pace, and, above all, its

execution, is high. There is legitimate concern that the reform process means dressing up “bureaucratic wolves as sheep.” The positions made available through the new governance mechanisms (such as the administrative court, the ombudsman

office, the money-laundering

office, and

the national anticorruption office) will be filled mostly by former government officials. If this is so, then the old question of “who guards the guardians” in these new monitoring agencies will be problematic, cer-

tainly in part because civil society in Thailand is still too weak to perform these monitoring functions independently and effectively. Administrative reform must be seen as a political phenomenon because

implicitly, at least, it redistributes

power

and perquisites. By

looking at administrative reform as a political phenomenon, we also are alerted to the intended and unintended consequences of reform. What happens after reform? Do the executive politicians become more powerful than the permanent bureaucrats, for example? A political focus also allows us to see the distinctiveness of doing “public” sector reform. It should lead us to question the extent to which management techniques from the private sector can be used in the public sector (Larson). A political perspective, in addition, may uncover critical aspects of reform such as the problem of corruption, which is likely the consequence of political, rather than purely administrative, dysfunction. A political perspective, in sum, will look at the political effects of reform and ask, for example,

whether political control of the bureaucracy increased or decreased after governance reform (Christensen).

Governance and the Public Sector

404

BIDHYA BOWORNWATHANA

CONCLUSION

Governance reform is moving ahead in the new century under questionable assumptions and with a high degree of uncertainty about its consequences. The decisions and actions of government in administrative reform are based on four questionable assumptions: that there is a global reform paradigm; that reform outputs matter more than outcomes; that NPM is the preferred modality of governance reform; and that, consequently, reform is a managerial rather than a political matter. The role of unintended consequences is important to administrative reform. A singular focus on management reform, however, will lead us to overlook that. That has occurred in Thailand. Indeed, it is possible that the Thai case, as presented here, may reflect “governance reform” in other developing countries, and perhaps in developed countries as well. That pattern can be described in the following way: first, look for an exemplar of reform; second, look at reform as a matter of seemingly soluble man-

agement technique rather than of seemingly insoluble issues of politics; third, assume that there is a global syndrome of administrative reform that can be borrowed; fourth, proceed on the reform path without careful evaluation of consequences, attention to detail, or the role of implementation (who is implementing what under whose guidance); fifth, proceed

under the cover that administrative reform has no implications for the distribution or redistribution of power and perquisites. While it is not clear whether the reform process as it is unfolding in Thailand has universal applicability among the developing countries, the prospect that it might is anything but remote. If that is the case, reform may be an illusion, mistaking what is peripheral for what is central. Reforming management and the bureaucracy is important, no doubt, but it is hard to imagine that such reforms will have significant effects on the improvement of society without more fundamental reforms of the governance process. Notes

1.

The term “governance reformers” is used here to refer to ministers, politicians, bureaucrats, academicians, and individuals who are directly involved

2.

in doing reform work. Usually they are appointed as members of national administrative reform committees and other related committees and as advisers to the prime minister and the cabinet on reform, and are government officials acting as “staffs” for the government to do reform work. The fact that scholars have given insufficient attention to the unintended consequences of reform is noted recently by scholars such as R. A. W. Rhodes (1999) and Jonathan Boston (1999). Another scholar, Torben Beck Jorgensen (1999), pointed out that the Danish public sector is in an in-between time: it is

moving away from the classic model, heading in no specific direction. It is a phenomenon that most Western public sectors are experiencing (Jorgensen, 565). Indeed, the difficulty with doing administrative reform work is cautioned by scholars such as Gerald E. Caiden (1999). 3.

According to Christopher Hood (1991), the doctrines of NPM are: (1) hands-

on professional management in the public sector; (2) explicit standards and

583

584

Governance and the Public Sector

GOVERNANCE REFORM IN THAILAND

405

measures of performance; (3) greater emphasis on output controls; (4) shift to

disaggregation of units in the public sector; (5) shift to greater competition in the public sector; (6) stress on private sector styles of management practice; (7) stress on greater discipline and parsimony in resource use. R. A. W. Rhodes (1996) parses NPM to two components: managerialism and the new institutional economics. Managerialism refers to introducing private sector management methods to the public sector. It stresses hands-on professional management, explicit standards and measures of performance, managing by results, value for money, and more recently, closeness to the customer. The

new institutional economics refers to the introduction of incentive structures (such as market competition) into public services. It stresses disaggregating bureaucracies, greater competition through contracting-out and quasimarkets, and consumer choice (Rhodes, 655).

References

Asian Development Bank. 1999. Governance in Thailand:+Challenges, Issues, and Prospects. Manila: Programs Department (West), Division III and Strategy and Policy Office, Asian Development Bank, April.

Boston, J. 1996. The Use of Contracting in the Public Service. Australian Journal of Public Administration 55(3):105-110.

. 1999. New Zealand’s Model of Public Management: The Promise and the Reality. NIRA REVIEW (Spring):15-18. Bowornwathana, B. 1988. Public Policies in a Bureaucratic Polity. Paper presented at the Annual Meeting of the International Political Science Association, Wash-

ington, D.C. . 1989, Transfers of Bureaucratic Elites by Political Bosses: The Question of Political versus Bureaucratic Accountability. Asian Review of Public Administration 1(1):18-37. . 1994. Administrative Reform and Regime Shifts: Reflections on the Thai Polity. Asian Journal of Public Administration 16(2):152-164. . 1995. Responses of Public Administration System of Thailand to Global Challenges. In S. H. Salleh and L. V. Carino, eds., Globalisation and the Asian Pub-

lic Sector. Kuala Lumpur: The Asian and Pacific Development Centre. 365-430. . 1996a. The Politics of Reform of the Secretariat to the Prime Minister. Australian Journal of Public Administration 55(4):55-63. . 1996b. The Phenomenon of New Ministries and the Politician-Bureaucrat Perspective. Asian Review of Public Administration 8(2):23-32. . 1996c. Political Realities of Local Government Reform in Thailand. In S. Kurosawa, T. Fujiwara, and M. Reforma, eds., New Trends in Public Admin-

istration for the Asia-Pacific Region: Decentralization. Tokyo: Local Autonomy College, Ministry of Home Affairs. 79-88.

. 1996d. Democratic Reform Visions and the Reinvention of Thai Public Officials. Asian Review of Public Administration 8(1):40-49. . 1997a. Transforming Bureaucracies far the 21st Century: The New Democratic Governance Paradigm. Public Administration Quarterly 21(3):294-308. . 1997b. Thailand: Bureaucracy under Coalition Governments. Paper presented at the International Conference on Civil Service Systems in Comparative Perspective, Indiana University, Bloomington, April 5-9. . 1997c. The Governance of the Bangkok Metropolis: The Old System, the New City, and Future Governance. In J. S. Edralin, ed., Local Governance and

Local Economic Development: A New Role for Asia Cities. Research Report Series No. 2. Nagoya, Japan: United Nations Centre for Regional Development. 87-114.

Governance and the Public Sector

406

BIDHYA BOWORNWATHANA

. 1998. Bangkok Metropolitan Administration into the Twenty-First Century: The Practice of Good Local Governance. In J. S. Edralin, ed., Metropolitan Governance and Planning in Transition: Asia-Pacific Cases. Research Report Series No. 31. Nagoya, Japan: United Nations Centre for Regional Development. 147-164. . 1999a. Administrative Reform and the Politician-Bureaucrat Perspective: Visions, Processes, and Support for Reform. In H. S. Chan and H. K. Wong, eds., Handbook of Comparative Public Administration in the Asia-Pacific. New York: Marcel Dekker. 69-77. . 1999b. Fiscal Reform of Bangkok Metropolitan Administration: From Bureaucracy to Governance. In J. S. Edralin and D. Mani, eds., F inancing Metro-

politan Development: Public-Private Sector Roles. Research Report Series No. 35. Nagoya, Japan: United Nations Centre for Regional Development. 67-92. . (forthcoming). The Politics of Governance Reform in Thailand. In A. Faraz-

mand, ed., Handbook of Comparative and Development Public Administration, 2nd ed. New York: Marcel Dekker. Caiden, G. E. 1999. Administrative Reform—Proceed with Caution. International

Journal of Public Administration 22(6):815-832.

Caroll, J. 1995. The Rhetoric of Reform and Political Reality in the National Performance Review. Public Administration Review 55(May-June):302-312.

Cheung, A. B. L. 1996. Efficiency as the Rhetoric: Public Sector Reform in Hong Kong Explained. International Review of Administrative Sciences 62(1):31-48. Christensen, T. 1999. Administrative Reform—Transforming the Relationship between Political and Administrative Leaders? Paper presented at the SOG Tokyo Conference, November 17-19.

Farazmand, A. 1999. Building Partnerships for Governance. Background Paper for the plenary session, World Conference on Governance, Manila, June 3.

Frederickson, H. G. 1997. The Spirit of Public Administration. San Francisco: JosseyBass. Galnoor, I., D. H. Rosenbloom, and A. Yaroni. 1998. Creating New Public Management Reforms: Lessons from Israel. Administration and Society 30(4):393-420.

Gregory, R. J. 1999. Social Capital Theory and Administrative Reform: Maintaining Ethical Probity in Public Service. Public Administration Review 59(1):63-75. Haque, M. S. 1998. Legitimation Crisis: A Challenge for Public Service in the Next Century. International Review of Administrative Sciences 64(1):13-26.

. 1999. Relationship Between Citizenship and Pulblic Administration: A Reconfiguration. International Review of Administrative Sciences 65(3):309-326. Henry, N. 1999. Public Administration and Public Affairs, 7th ed. Englewood Cliffs, NJ: Prentice-Hall.

Hood, C. 1991. A Public Management for All Seasons? Public Administration 69(Spring):3-19. . 1998. The Art of the State: Culture, Rhetoric, and Public Management. Oxford:

Clarendon Press. Jorgensen, T. B. 1999. The Public Sector in an In-Between Time: Searching for New Public Values. Public Administration 77(3):565—-584.

Kaul, M. 1996. Civil Service Reforms: Learning from Commonwealth Experiences. Public Administration and Development 16(2):131-150.

Klitgaard, R. 1997. Cleaning Up and Invigorating the Civil Service. Public Administration and Development 17(5):487-510. Larson, P. 1997. Public and Private Values at Odds: Can Private Sector Values Be

Transplanted into Public Sector Institutions? Public Administration and Development 17(1):123-130.

Light, P. C. 1996. Thickening Government: The Federal Government and the Diffusion of Responsibility. Washington: Brookings Institution.

585

586

Governance and the Public Sector

GOVERNANCE REFORM IN THAILAND

407

. 1997. The Tides of Reform: Making Government Work, 1945-1995. CT: Yale University Press.

New Haven,

;

Lynn, L. E. 1996. Public Management as Art, Science, and Profession. Chatham, NJ: Chatham House. Maor, M. 1999. The Paradox of Managerialism. Public Administration Review 59(1)5-18. Mascarenhaus, R. C. 1993. Building an Enterprise Culture in the Public Sector: Reform of the Public Sector in Australia, Britain, and New

Zealand. Public

Administration Review 53(July—Aug.):319-328. Masser, K. 1998. Public Sector Administrative

Reforms.

In J. Shafritz, ed., The

International Encyclopedia of Public Policy and Administration. Boulder, CO: Westview Press. 1851-1862. McDonald, O. 1991. The Future of Whitehall. London: Weidenfeld and Nicolson. Minogue, M., C. Polidano, and D. Hulme, eds. 1998. Beyond the New Public Management: Changing Ideas and Practices in Governance. Cheltenham, UK: Edward

Elgar. een J. 1999. The Australian Public Sector and the Journal of Public Administration 58(2):112-120.

New Governance. Australian

ODA. 1993. Taking Account of Good Government. London: UK Overseas Development Administration. OECD. 1995. Governance in Transition: Public Management Reforms in OECD Countries. Paris: Organization for Economic Cooperation and Development. Peters, B. G., and D. J. Savoie. 1994. Civil Service Reform. Public Administration

Review 54(Sept.—Oct.):418-425. . 1996. Managing Incoherence: The Coordination and Empowerment Conundrum. Public Administration Review 56(May-—June):281-289. Peters, B. G., and V. Wright. 1996. Public Policy and Administration, Old and New. In R. E. Goodin and H.-D. Klingmann, eds., A New Handbook of Political

Science. Oxford: Oxford University Press. 628-644. Pollitt, C., and H. Summa. 1997. Trajectories of Reform: Public Management Change in Four Countries. Public Money and Management 17(1):7-18. Rhodes, R. A. W. 1996. The New Governance: Governing without Government.

Political Studies 44(4):652-667. . 1997. Understanding Governance: Policy Networks, Governance, Reflexivity and Accountability. Buckingham, UK: Open University Press. . 1998. Different Roads to Unfamiliar Places: UK Experience in Comparative Perspective. Australian Journal of Public Administration 57(4):19-31. . 1999. Book Review: Jonathan Boston, John Martin, June Pallot and Pat

Walsh, Public Management: The New Zealand Model. Australian Journal of Public Administration 58(3):121-123.

Roberts, A. 1997. Performance-Based Organizations: Assessing the Gore Plan. Public Administration Review 57(6):465—478.

Royal Thai Government. 1998. Memorandum of Understanding between the Fiscal Policy Office of the Ministry of Finance of the Kingdom of Thailand and an Appraisal Mission of the Asian Development Bank on the Proposed Social Sector Program Loan: Discussion Draft. 16 January. Ruscio, K. P. 1997. Trust in the Administrative State. Public Administration Review

57(5):454-458. Saint-Martin, D. 1998. Management

Consultants,

the State, and the Politics of

Administrative Reform in Britain and Canada. Administration and Society 30(5):533-568. Schick, A. 1998. Why Most Developing Countries Should Not Try New Zealand’s Reforms. The World Bank Research Observer 13(1):123-131.

Thynne, I. 1998. Integrative Governance: Challenges for the Senior Public Service. International Review of Administrative Sciences 64(3):371-384.

Governance and the Public Sector

408

BIDHYA BOWORNWATHANA

UNDP. 1995. Public Sector Management, Governance, and Sustainable Human Development. New York: United Nations Development Programme. . 1998. Public Sector Management Reform in Asia and the Pacific: Selected Experiences from Seven Countries. New York: Regional Governance Programme for Asia-Pacific, United Nations Development Programme, October. World Bank. 1994. Governance: The World Bank Experience. Washington: World Bank. . 1997. World Development Report, 1997: The State in a Changing World. Oxford: Oxford University Press. . 1999. Thailand Economic Monitor, October. http://www.worldbank.or.th/

monitor

i= SENOS

er

Maa tac 0

heres ~-f

bata

vor

tal

y a = to

a P=

1

8

deel ett

—

hee

aed

Taaege

Oo. ~~ amy

OCA,

patety rev, a

xe 7

=

Tad

Pi.iles

16S

Ves

ALK,

a -

ate |e

&.

,

pie:

eae:

St

ONL

Me

Mle cht Aired

ad»

Sina

'

-) Sim

Cele Senta al Oe

(“ianOh

28

0a

O58A.

GH

6epd

cee

Ai here OR

a

Lt

Bae

6

=. y= AR

PP GAY B& OO, Adho nad

a

@,F ™

4

ot

4

oH

CE

gt

:

a?

ares

—s =

s

: 3

-

»

'

ee Py win

t/9

ee

ee

b=

‘Vertpea? i +-cer

Grea

d.4cen

OLE

:

«(ecb

ad

ee

ee

CaP

ewe

Te, C

orf eene We

aw

£9OO,

(>

bi .4

¢eo@e

Os

7

’

ba wane

(-——-4

8

aoe

=~

ee

Ge

a

wets

Fe

R.2d> a

SS!

©

[adic

Ne Sn:

De

mn

&\

=

Qaee

ao

he

a) eae2

9-4 95 6

“ae °“ae

ete .

=

ee

ge, Saigey 6 ot.

a

|

Qameners a :

Dw

ee

Get Ml s py 81 eee ‘1s

>

ee

ae

4 ree :

(ea

ater OG Se -

eat 7

wei bop

2s,

% « » §

ee

Ba Jee

o/

OD BARD Oe See ats 1

Saye

ap!

SOP

feb

a= _

Gers ~~

nee

’ (=)

2

ae

Name Index Aberbach, J.D. 468 Acharya, A. 563

Adenauer, K. 460, 462, 463, 467 Albaek, E. 207 Albert, S. 357 Albrecht, E. 470 Alesina, A. 545 Alford, J. 236 Algen, J.-M. 520 Allen, J.T. 128 Allende, President 51 Allison, G.T. 183, 197

Altenburg, T. 536 Alvesson, M. 319 Andersen, H. 23 Anderson, B. 392

Anell, A. 208 Antle, R. 354 Antman, P. 214, 215

Bartlett, B. 300 Barzelay, M. 125, 145 Baum, L. 443 Baumgartner, F.R. 205 Becker, B.L. 193 Becker, S.W. 312

Beeson, M. 552, 553, 555, 557, 560, 562, 563, 564, 566 Behn, R. 141

Bekke, A.J.G.M. 186 Bekke, H.J.G.M. 62 Bell, D. 21

Bellamy, C. 519 Bello, W. 565 Bendix, R. 129 Bennett, R.J. 534, 544 Benz, A. 65, 458

Berger, M. 553

Armour, H.O. 300

Berger, S. 557 Bernier, L522 Bertelsen, C. 219 Beiy, onKa5o)/, Bevir, M. 498 Bhagwati, J. 420

Arrow, K.J. 19

Bichard 13

Ashby, W.R. 67, 145, 146, 165, 176 Aucoin, P. 18, 125 Ayres, R. 523

Biggart, N.W. 561 Bille, L. 214

Appleby, Appleby, Aquino, Argyris,

H. Sir 10 J.O. 304 Mrs 51 C. 100

Birkinshaw, P. 27

Bishop, P. 521

Baayens, J.M.J. 186 Bache, I. 501 Bahmueller, C.E. 279

Black 19 Blackstone, T. 488

Blair, T. 505

Baker, J. 30

Blom-Hansen, J. 217

Ball, I. 380, 381, 387 Ball, R. 85

Boateng, P. 496

Blomqvist, P. 208, 209, 212, 215, 219

Banaga, A. 37, 38

Bodin 435 Bohret, C. 458, 468, 470

Banner, G. 471, 473 Barber, B.R. 526, 532

Boorstin, D. 380, 399, 434, 579, 583

Ballew 300, 302

Boisot, M. 300, 303

Bardouille, N.C. 544

Boreus, K. 215 Borins, S. 350, 457, 519

Barker, A. 164, 263, 501

Boston, J. 142, 146, 181

Barlow, J. 203

Bare Cys,

Bottcher, R. 506, 507 Bouckaert, G. 202, 480, 485 Bourdieu, P. 143, 242, 243 Bourn, M. 313, 315

Barrett, P. 246, 516, 517, 521, 522

Bovens, M. 185

Barberis, P. 496

Barnard, C.I. 142, 144 Barnett, P. 398

590

Governance and the Public Sector

Bowerman, M. 38, 39 Bowornwathana, B. 573, 574, 582

Chapman, J. 390, 391, 392, 393, 399 Charkham, J. 62

Boyer, R. 557

Chelimsky, E. 323

Boyett, I. 37 Bozeman, B. 67, 181

Chester, D. 486 Cheung, A.B.L. 581

Bradley, R. 91 Brans, M. 65

Chhibber, A. 543 Child, J. 300, 303, 311

Bratton, M. 62, 63 Brazier, A. 497 Bresser Pereira, C. 546 Bressers, J.T.A. 189

Christensen, J.G. 204, 209, 212, 214, 218, 219,

Briloff, A.J. 356 Brinkerhoff, D. 85 Brinkman 196 Broadbent, J. 350, 363 Brownlow, L. 144, 443, 446, 451, 507 Brubaker, R. 317 Bruere, H. 141

220 Christensen, T. 582 Christiansen, P.M. 204, 212, 213, 218 Christoffersen, H. 216

Clark, D. 202, 203, 489 Clarke, G. 563 Clarke, M. 6 Clasen, R. 471

Bruno, M. 430

Clayton, R. 204 Clinton, President 134, 413, 452 Coase, R.H. 109, 302

Brunsson, N. 156

Cochrane, A. 231

Bryan, D. 566

Collier, P. 545 Colville, I. 306

Bryson, J.M. 67, 85

Bryson, L. 24 Buchanan, A. 544 Buchanan, J.M. 315, 448 Budge, I. 205

Burchell, S. 296 Burki, S.J. 537, 545 Burnham 172 Burns, T. 26 Burritt, R. 239 Busenberg, G. 87

Bush, G.W. 134, 436, 452 Bushnell, A. 12 Bushnell, S. 22 Butler, R. Sir 10, 14

Cooper, F. 556 Cooper, K. 230, 233, 234 Corbett, D. 168 Core, P. 238, 240

Cousins, J. 356

Crosby, B.C. 67, 85, 144, 507 Crossman, R. 494 Crozier, M. 185, 189, 198 Cruikshank, J. 506

Cunningham, J. 489 Czempiel, E.-O. 62, 64 Daemen, H. 505 Dahrendorf 463

Damgaard, J.B. 211, 213 Cable, J: 300 Calder, K.E. 560

Damrosch, L.F. 546 Dandeker, C. 126 Daniels, A.K. 312

Callaghan 488 Cambell, C. 486

Daubjerg, C. 219 Davis, G. 514, 521

Camdessus, M. 550 Cameron, W. 399

Dawson, B.H. 313 Day, P. 18

Campbell, J.L. 62

de Bruijn, J.A. 188, 189 De Jong, A. 87

Caiden, G.E. 124, 583

Campbell, T. 535 Carmichael, D.R. 355 Caroll, J. 576 Carter, N. 18 Castells, M. 506, 507 Castles, F.G. 170, 218 Cawson,A. 190

Cerny, P. 552, 564

Champy, J. 512

de Vries, J. 193, 203

Degeling, P. 239 DeHoog, R. 111, 113 Deiderichsen, F. 208 den Hoed, P. 185 Denemark, D. 218 Derlien, H.-U. 457, 472 Desai, M. 62

Governance and the Public Sector Dettling, W. 474

Ferris, J. 120, 121

Deutsch, K.W. 67

Fesler, J.W. 136

Devlin, B. 315 Dicken, P. 552

Figueras, J. 208 Filbinger, H. 460

Dilulio, J. 121

Finlay, D. 37

Di Maggio, P.J. 74, 125, 138, 164, 167, 177, 247, 248, 257, 263 Dirlik, A. 566 Dixon, J. 231, 234

Fischer, S. 422 Fitz-enz, J. 518 Flamholtz, D.T. 300, 304 Fleischman, R.K. 250

Dixon, N.F. 28 Dobell, R. 522 Donoughue 494

DoresR2S57

Flinders, M. 497, 498, 499, 501 Flynn, N. 202 Forsthoff, E. 459, 460, 467 Fortin, Y. 345

Douglas, M. 164 Downs, A. 177, 315, 492 Downs, G.W. 21, 138

Foster, C. 486 Foucault 63, 347, 351, 353, 374, 375, 399 Fountain, J.E. 157

Doyal, L. 314 Drucker, P.E. 142, 145

Fowles, A. 243, 245 Fox, A. 167

Dunleavy, P. 35, 132, 350

Fraenkel, E. 462

Dunleavy, P.J. 17, 23, 165, 172 Punsire, A. 17; 27, 30, 65

Francis, A. 304 Francis, J. 354

Dyremose, H. 214

Frederickson, H.G. 580

Dyson, K. 459

Freeman, R. 489

Easterly, W. 430

Friedrich, C.J. 129, 462

Edelenbos, J. 87 Eden, C. 86, 92, 95

Friel, B. 146 Friend, J. 85

59]

Friedberg 189

Edwards, M. 514, 515, 522

Fuhr, H. 535, 539

Edwards, P. 247, 248 Eggerston, T. 108 Eisling, R. 482

Fukuyama, F. 232 Bulko3i Fuller, D. 233, 236, 238, 239, 245

EIU 85 Elander, I. 211

Funnell, W. 230, 234 Furman, J. 429

Elbadawi, I. 546 Elgin, D.S. 12 Ellwein, T. 457 English 399 Erhard, L. 463

Gaas J2237,,238 Gaebler, T. 15, 62, 107, 125, 130, 132, 135, 164, 165, 176, 181, 350, 396, 449 Gage, R.W. 188

Esping-Andersen, G. 204 Esposito, D. 232

Galnoor, I. 576 Gamble, A. 483, 499

Etzioni, A. 67, 450

Gangopadhyay, P. 552

Evans, M. 36 Evans, P. 482, 500, 559

Garcia, V.F. 537 Garrett, G. 526, 544, 545, 559

Ewalt, J. 85 Ezzamel, M. 245, 300, 313, 315

Geissler, H. 470 Gendron,Y. 399

Falconer, P.K. 505 Farazmand, A. 543, 574 Farlie, D. 205

George, S. 553 Gerritsen, R. 218 Giamo 218 Giddens, A. 93, 143, 248, 249, 368

Farnham, D. 202 Faulkner, D. 506

Gillett, R. 35 Gilpin, R. 526

Fayol, H. 144 Feldman, M.S. 152, 155, 156, 157 Feldstein, M. 428

Glaister, S. 85 Globcke, H. 460 Glynn, J. 38, 230, 231, 234, 240, 398

592

Governance and the Public Sector

Goddard, A. 239

Harris, M. 120

Godfroy, A. 186

Harrow, J. 35 Hartz, L. 438 Hatch, W. 561

Goldfinch, S. 398 Goldsmith, E. 446, 451, 544 Goodin, R.E. 74 Goodnow, F. 141, 442 Goodsell, C.T. 15, 181, 350, 363, 398, 399 Gordon, G. 312 Gore, A. 125, 180, 449, 576 Gore, A. Jr 142 Gorvin 170 Grace, P. 142

Graddy, E. 120 Gray 487 Gray, A. 237, 239, 244, 245 Gray, B. 87, 97, 98 Gray, J. 62 Green-Pedersen, C. 205, 206, 213, 214, 217 Greenwood, J. 87, 487, 488

Gregory, R.J. 579 Greve: G22135

Griffiths, R. 308 Grimm, D. 458, 459 Gulick, L. 141, 144, 146 Gunn, L. 497 Gunz, H.P. 507 Gustafsson, L. 214

Guthrie, J. 230, 231, 233, 235, 236, 244, 247

Hawke 232 Hay, C. 63

Hayward, J. 500 Heady, F. 127, 130, 133 Heald, D. 487 Healey, P. 85 Heath, E. 487

Heatley, A. 244 Heclo, H. 488

Hegel 459 Hegewisch, A. 168, 170 Heidenheimer, A.J. 459 Heifetz, D.A. 144

Heinrich 157 Heisler, M.O. 173 Held) Dr232, 233 Held, D.A. 566 Heller, H. 461

Hemerijck, A. 206 Hennestad, B.W. 27

Hennesy, P. 486, 488, 489 Hennis, W. 463, 469

Henry, N. 580 Hepworth, N. 37 Hessen

Habermas, J. 128, 138 Hadenius, S. 215

Hage, J. 506 Haggard, S. 540, 545 Hague, D.C. 263 Hakansson, A. 215, 219

Hakansson, H. 506 Hall, P. 558 Hall, P.A: 74

Halligan, J. 163 Hambleton, R. 85 Hamilton, A. 437, 438 Hamilton, G.G. 561 Hammer, M. 512 Hammond, T. 119 Hand, L. 485 Handy, C. 37

Hanf, K. 186, 506 Hannah, L. 20 Hansen, K. 207

Haque, M.S. 519, 579, 580, 581 Harden, I. 27, 323

Hardy, B. 97 Harman, H. 494

Harmon, M.M. 25, 184

Et

Hibbs, D.A. Jr 177 Higgott, R. 556 Hill 157 Hill, H. 471 Hilmer, F. 37, 62

Himmelman, W. 86, 87 Hindess, B. 63 Hirschhorn, R. 246 Hirschman, A.O. 165, 532

Hirst, P. 396, 552 Hobbes 435 Hobson, J.M. 560 Hodges, R. 39, 246 Hogwood, B. 497 Holliday, I. 484 Hollingsworth, J.R. 557

Hollingworth, J.R. 62 Holton, R.J. 543 Hood 350, 351, 360, 365, 373 Hood, C. 35, 39, 107, 132, 138, 180, 182, 184, 202, 203, 343, 380, 466, 583, 486, 500 Hood) G19 01S 17, 18.20.20 1592. 23 05 allots 165, 166, 168 Hoogervorst, J.A.P. 507 Hooghe, L. 482

Governance and the Public Sector

Hopwood, A.G. 244, 301 Horn, M.J. 133 Horner, T. 399

Horrigan, B. 515, 516, 523 Hoskins, K. 237 Howard 521 Huber, E. 204, 206, 216 Hudson, B. 98 Hudson, C. 212 Hufen, J.A.M. 185, 186

Hughes, O. 234, 240 Hughes, O.E. 130 Hulme, D. 580 Hult, K. 188 Hume 20, 21, 168

Humphrey, C. 232, 347, 348 Hunt, I.C. 355

Huntington, S. 449, 450, 526, 563 Hutchins, E. 157 Hutchroft, P.D. 565 Hutton, D. 399 Huxham, C. 75, 85, 86, 87, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100 Hyden, G. 62, 63

Jorgen 204 Jorgensen, T.B. 196, 583 Jubb, P. 245 Jun, J.S. 544 Kaiser, J.H. 468 Kamenka, E. 167 Kanther, R.M. 534

Kaplan, R.S. 295 Kapur, D. Karl, B.D. Kaufman, Kaufman,

537, 539 163 G. 13, 485 H. 142

Kaufmann, X.F. 66 Kaul, M. 575 Kavanagh, G. 488, 494

Keasey, K. 35, 37 Keating, M. 18, 514 Keck, M.E. 544 Kelleher, S.R. 23

Kelsey, J. 381, 386, 390, 397, 506, 507, 510 Kelso, R. 245

Kemp, P. Sir 501

Ingraham, P.W. 125, 522

Keohane, R. 533 Kettl, D. 120, 142, 144 Kettl, D.F. 136, 520

Ingram, H. 158

Keynes, J.M. 406, 407, 429

Jackson 164 Jackson, A. President 440

Khademian, A.M. 155, 156, 157 Khilnani, S. 396 Kickert, W. 396, 397, 480, 482

Jackson, M.W.

13, 20, 24, 25

Jackson, P.M. 257, 273 Jacobs, B. 85 Jacobs, K. 381, 398 Jacobsen, M. 546

Kickert, W.J.M. 62, 75, 135, 181, 185, 186, 188, 191, 194, 196, 198, 202, 506, 507 Kilpatrick, K. 38, 39 Kimmet, P. 566

Jann, W. 466, 470

King, S. 85 Kirk, A. 386 Kirkham, L.M. 348 Kitschelt, H. 204

Jay, J. 437, 438

Klein, R. 18

Jayasuriya, K. 556, 557, 563, 564 Jenkins, B. 237, 239, 244, 245

Klijn, E.H. 189 Klijn, E.-H. 506, 507, 510

Jacoby, H. 130 Jacquin, D. 458

i

Jenkins, K. 487

Klitgaard, R. 579

Jennings, E. 85 Jespersen, P.K. 209 Jessop, B. 21, 63 Jessop, R. 500

Klok, P.J. 189 Knott, J. 141, 159 Knott, J.H. 138 Knudsen 216

Johanson, J. 303 Johansson, J. 506 Johnson, C. 562, 566 Johnson, H.T. 300 Johnson, N. 261 Jones, B.D. 205 Jones, G. 36, 343 Jones, G.W. 23, 258, 267, 268

Koenig, K. 543 Kohler-Koch, B. 482 Konig, K. 457, 471

Kooiman, J. 62, 63, 68, 69, 70, 75, 76, 78, 79, 80, 85, 481, 554 Koontz, H. 182, 183

Koppenjan, J.F.M. 186, 188, 198 Kouwenhoven, V. 75

594 Kristensen, O.P. 213, 315 Kruger, H. 461

Kuhn, T.S. 131

Laffin, M. 230, 250 Lafontaine, O. 471 Lakatos, I. 24 Lambie, G. 87 Landau, M. 12 Lane, F.C. 28 Lane, J.-E. 206

Lange, P. 559 Langford, J. 497 Lapsley, I. 38, 39 Larkey, P.D. 21, 138 Larsen, E. 22 Larson, P. 582 Latour, B. 363

Laughlin, R. 163, 248, 249 LavesJ. 1435 157 Laville, J.-L. 87 Lawrence, P. 21 Lawrence, P.R. 26, 28 Lawrence, S. 248, 249

Governance and the Public Sector

Lindkvist, L. 319

Lipschutz, R. 533 Lipsey, D. 496 Lissack, M. 507 Locke 164 Locke, J. 438 Lohmar, U. 470 Lonsdale, J. 345

Lorsch, J.W. 26, 28 Loughlin, J. 203, 206 Lovell, A. 246, 323, 485 Low, S. 481 Lowell, J. 439 Lowndes, V. 74, 85 Luhmann, N. 65, 67, 464, 483 Luke, J. 144 Lundberg, U. 219 Lundvall, B.A. 506

Luthardt, W. 460 Lynn, L. 157 Lynn, 1. 579 Macdonald, D. 85, 393 Macfarlene, R. 87

Layfield 264, 267 Lazarsfield, P.F. 278 Lazonick, W. 565

Machiavelli 435

Lederman, D. 410 Lee, C.S. 560 Leeuw, F. 230, 323

Madison, J. 437, 438 Mae, F. 431

MacKenzie, W.J.M. 263 Macmillan, H. 486

Leftwich, A. 58, 62

Mahbubani, K. 565 Majone, G. 557

Lehman, C. 363

Major 181

Lehman, G. 237, 245

Mandell, M. 85, 87

Lehmbruch, G. 190 Lehto, J. 211 Leisner, W. 470 Lemon, M. 355

Mandell, M.P. 188

Lenin, V.. 435 Levacic, R. 37 Levaggi, R. 236, 238

Levitt, A. 356 Levitt, B. 28 evs. 219

Lewis, E. 142 Lewis, N. 27 MeysnGs556 Leyshon, A. 560

Liddle, R. 493 Lidstrom, A. 212, 216 Liebowitz, S.J. 28

Misht.IP-C5579 Lijphart,A. 194 Lilley, P. 13

Lindbom, A. 212, 216, 219

Mandelson, P. 489, 493 Mander, J. 544

Mann, H. 462, 463 Manow 218 Maor, M. 580 Marans, S. 149, 150

Marcey, W.L. 440 March, J.G. 27, 28, 156, 190 Margolis 28 Marini, F. 164 Marsh, D. 493, 506 Marshall, A.H. 273 Martel, J. 347 Martin 142 Martin, D.M. 506 Martin, J. 18, 96 Martin, S. 20, 23, 450 Mascarenhaus, R.C. 576 Mattsson, L.-G. 303 Mautz, R.K. 354

Governance and the Public Sector

Mayer 25

Moss, N. 211

Mayer, R.T. 184

Mouck, R. 233

Mayntz, R. 62, 65, 185, 469, 470, 505

Mueller, H. 177

Mayston, D. 244 McCann, J. 97 McCarthy, J. 506 McCormack, G. 560 McCulloch, B. 381, 387 McDonald, O. 576 McGraw, J.C. 142 McLaughlin, K. 505

Mukhapadhyay, T. 512 Mul, R. 345 Mulgan, R. 239 Mullen, P.M. 319 Mumford, M. 35 Murphy, C.N. 558

Nagel, J. 400

Meckling, W. 120

Meier, K.J. 157

S95

Nalbandian, J. 87, 140

;

Nannestad, P. 206

Mellors, J. 246

Napoleon 335

Meltzer, A. 425 Meltzer, A.H. 21 Mendoza, C. 535 Menendez, A.M. 410 Merkle, J. 20 Merlin, P. 77

Naschold, F. 343 Navarro, V. 318 Neilson, P. 389 Neimark, M. 300 Neimark, M.L. 348 Nethercote, J.R. 18, 23, 24, 27

Merril, V. 170

Nicoll, G. 516

Merton 198 Metcalfe, L. 9, 85 Meyer, J. 294

Nilsson, L. 215 Niskanen, W.A. 19 Nolan 34, 35, 36

Meyer, J.W. 247 Miah, N. 244 Micklethwait, J. 544 Midwinter, A. 39 Mihm 142, 147 Miles, R.E. 506 Miller, G. 141

Noordegraaf, M. 194 Norgaard, A.S. 219 Normanton, E.L. 256, 257, 272, 351, 352, 353, 354, 359, 365, 369 Norris, P. 521 North, D.C. 526, 558 INyenIs533

Miller, G.J. 138

Miller, J. 159 Miller, P. 163, 399 Milward, H.B. 157

Oakes, L.S. 364 O’ Donnell, G. 526 Offe, C. 318, 465

Mingst, K 533

Ogden, S. 38

Minogue, K. 20 Minogue, M. 580 Mintzberg, H., 365 350 Mitchell, A. 356 Mitschke, J. 471 Moe, R.C. 142, 181

Ohmae, K. 506, 529, 534, 536, 552 Olofsson, C. 282

Olsen; J.P. 27, 74; 156; 190; 203 Olsen, O. 350 O’ Malley, P. 63 Orchardv,2317232,,233), 235

Moe, T.M. 112

Ore Be

Mohamad, M. 564 Moizer, P. 347, 348

Orru, M. 561 Ortner, S.B. 143

Monaghan, C. 39

Orwell, G. 318

Montin, S. 211, 215, 216 Moon, C.-I. 560

Osborne, A. 164, 165, 176 Osborne, B. 396

Moore, M. 142, 144, 145, 159 Morrill, J. 347 Morrison, H. 488

Osborne, D. 15, 62, 107, 125, 130, 132, 135, 181, 350, 449, 514 Osborne, S.P. 505

Morris-Suzuki, T. 563 Morstein-Marx, F. 462

Ostrom 168 Ostrom, E. 448

Mosher, C. 439

Ostrom, V. 19, 22, 448

57,

596

Governance and the Public Sector

OMToolew

bon LOT

Ouchi, W.G. 299, 310, 311, 312 Packard 556

Page BC

133

Painter, C. 85 Painter, M. 165 Paldam, M. 216

Pallesen, T. 204, 209, 214, 217, 218

Pallot, J. 142, 236, 243, 245, 383, 384, 385, 387, 399 Palme, J. 219 Parker, L. 398 Parker 1b.D.230).231,.233,.235, 2365259) 244 Parsons 313 Parsons, W. 75 Patton, J. 239, 245 Peacock, A. 21 Pedersen, L. 209

Powell, W.W. 74, 247, 248 Power, M. 163, 323, 347, 348, 353, 360, 366, 371, 373, 375, 388, 392, 398, 400 Prasser, S. 27 Premfors, R. 214, 215; 219 Pressman, J.L. 507 Price, R.L. 311 Prigogine, I. 67 Provan, K.G. 157 Prowse, M. 308 Przeworski 51, 54 Purdue, D. 94

Pusey, M. 164, 170, 172 Putman, R.D. 127, 468 Quaritsch, H. 470 Quirk, P. 165

Radbruch, G. 461

Pedersen, L.D. 209

Radcliffe, V.S. 347, 352, 353, 357, 360, 376 Ranson, S. 9

Pendlebury, B. 243, 244

Raviv, A. 120

Percy, I. 36 Perkins, D. 230, 231, 234, 240, 244 Perot, R. 447 Perrault, PH. 66, 80 Perrin, J. 314

Perrow, C. 28, 300, 303, 304, 305 Perry, G. 410 Perry, G.E. 545

Peters, Peters, Peters, Peters, Petetss

B. 486 B.G. 129, 173, 544, 576, 579 G. 3, 481, 483, 498, 499 G.B. 202, 203, 206 620

Peters, T.J. 198

Philip V, King 335 Picciotto, S. 555

Pierre, J. 214, 219, 520, 480, 481, 483, 498, 499, 500 Pierson, P. 204, 205, 217, 218

Piore, M.J. 21 Plato 445

Platzky, L. 487 Plowden, W. 240, 243, 486, 488, 501 Poggi, G. 443 Polanyi, K. 304 Polidano, C. 527, 580

Pollitte EPO MUS) 20).22,5 23. 24527. S864) 165, 169, 170, 181, 182, 202, 203, 206, 2092 323. 343, 350,457,575

Ponting, C. 495 Pontusson, J. 204 Powell, J. 239

Raymond 545 Rayner 181 Reagan, R. 170, 131, 134, 435, 436 Reardon, K. 148, 149 Redfern, P. 62 Rehnberg, C. 208, 209 Reichard, C. 457, 471 Reinhard, W. 457, 461 Reinicke, W. 538 «Rhodes, R.A.W. 62, 63, 67, 75, 190, 202, 203, 480, 486, 496, 498, 499, 500, 505, 506, 5§503557,,502, 573,519, 38a, 354 Rhyu, S.-Y. 560 Richard, S.F. 21 Richards, D. 486, 488, 493, 494, 495, 501 Richards, S. 9 Richardson, J. 440 Ridgeway, V.F. 280 Riggins, RJ. 512 Riggs, FW. 129, 130, 543 Riker, J.V. 563 Riker, W. 204 Ring, P. Smith 99 Ringeling, A.B. 185, 186 Risse-Kappen, T. 533 Roberts, A. 141, 146, 159, 575 Roberts, J. 236, 248, 249 Roberts, N. 91 Roberts, S. 323 Robertson, J.C. 355 Robins, J.A. 300, 301 Robinson, D.Z. 260

Governance and the Public Sector

Robison, R. 560, 561 Rockman, B.A. 468 Rodan, G. 563

Rodriguez, F. 430 Rodrik, D. 430, 526, 546, 564 Roffey, B. 236, 237, 239, 246 Rogers, D.L. 188 Rogers, D.W. 362 Rose, L. 207 Rosenau, J. 482, 555 Rosenau, J.N. 62, 63, 64, 536, 543, 544 Rosenbloom, D.H. 576 Rosenthal, U. 186 Ross, F. 204, 205, 214 Ross, S.A. 120 Rossbach, S. 65 Rosser, A. 556

Rostgaard, T. 211 Rothstein, B. 212, 214, 215, 216 Roumani, N. 429 Rowan, B. 247, 294

Schmidt, V.A. 202 Schmitt, C. 459, 460, 467 Schmitter, P. 562 Schmitter, P.C. 190 Schon, D. 100

Schroder, G. 473

Schullerqvist, U. 215 Schuppert 17, 21 Schuppert, G.F. 474 Schwartz, H. 218

Scott, G. 170, 381 Scott, W.R. 74, 311, 312 Seargeant, J. 85

Searle, P. 561 Seers, D. 280

Seibel, W. 457 Slelhe, |e ea SellmS:K 7555 Selznick, P. 144 Senge, P. 145

Rowat, M. 540

Seri, D. 564 Shailes, F. 383

Ruigrok, W. 552

Shakespeare, W. 514

Ruscio, K.P. 579 Russell, P. 316

Shapiro, M. 136, 137 Sharaf, H.A. 354 Sharpe, E. 494 Sheingate, A. 204, 217, 219

Sabel 21 Sabelli, F. 553

Shelsky 463

Sahlin-Andersson, K. 209

Sherer, M. 316

Saint-Martin, D. 582 Sallee, N. 22 Salmon J.W. 314

Shields, T. 148, 149 Short, J.E. 512 Sikka, P. 347, 354, 355, 356, 372 Sikkink, K. 544

Salterio, S. 247 Saltman, R.B. 208 Sambanis, N. 546

Silberman, B.S. 127 Simmonds, K. 295

Sampson 486

Simon, H. 447, 451

Sandbrook 56 Sandfort, J. 157 Sappington, D. 120 Sarkissian, W. 85 Savoie 576, 579 Scanlan, L. 246

Simon, H.A. 67 Sinclair, A. 236, 239, 240, 241

Scapens, R. 236, 248, 249 Schaap, L. 505 Schaffer, B. 484 Scharpf, F. 65, 186 Scharpf, F.W. 171, 172, 202, 468, 469, 505, 506, 507 Schein, E. 96

Schick, A. 544, 575 Schiesl, M. 141 Schilling, K. 152 Schludi, M. 206 Schmidt, H. 462

Singelmann, P. 544 Sinnig 506 Sjolund, M. 167

Skocpol, T. 435, 442 Skolverket 211, 220 Skowronek, S. 442 Small, A.W. 21, 168 Smieliauskas, W.J. 355

Smith, A. 449 Smith, G. 52] Smith, M. 488, 493, 495, 498, 501 Smith, P. 38 Smith, S.R. 158 Smouts, M.-C. 552 Snellen, I. 519 Snellen, I.Th.M. 186

597

59S

Governance and the Public Sector

Snow, C.C. 506 Solimano, A. 539

Sorge, M. 429 Spann, R.N. 20

Spence, M. 120 Speyer 470 Spicer, B.H. 300, 302 Spink, P. 546

Spolaore, E. 545

Taylor, M. 87 Taylor, R.C.R. 74 Teece, D.J. 300 Teisman, G.R. 506, 507, 508

ten Heuvelhof, E.F. 189 Tendler, J. 535 Termeer, C.J.A.M. Terry, L. 142 Teubner, G. 65

193, 507

Stephens, J.D. 204. 206, 216, 563

Thatcher, M. 6, 138, 146, 170, 185, 232 Thelen, K. 493 Thomas, R. 22 Thompson, F. 121 Thompson, G. 552 Thompson, G.J. 188 Thompson, M. 164 Thompson, R.S. 300 Thynne, I. 574 . Tiessen, P. 300

Stewart, A. 232

Timonen, V. 217

Stewart, J. 6, 9, 36, 485 Stewart, J.D. 237, 238, 239, 245, 265, 267

Tinker, T. 300, 363 Tocqueville, A. 21 Tocqueville, A. de 450 Tomkins, C.R. 306 Tomlinson, J. 280 Toonen, Th.A.J. 186 Townsend 488 Tricker; R34, 35, 37 Tricker, R.I. 62 Trist, E. 85, 86, 94 Trollope, D. 244

Srinivasan, T.N. 420.

Staats, E.B. 264 Stahlberg, K. 207 Stalker, G.M. 26 Steele, J. 85 Stecr e500 Stengers, I. 67

Stephens, D. 518, 519 Stephens, E.H. 563

Stewart, M. 85, 91

Stiglitz, J. 545 Stiglitz, J.E. 407, 410, 415, 429 Stiles, P. 35 Stillman, R. 442

Stillman, R.J. 2nd 134, 135 Stoker, G. 499, 500 Strange, S. 25, 482, 526, 552 Strehl, F. 202 Stromberg, L. 207

Stubbs, R. 562 Sturgess, G. 20

Suchman, L.A. 157 Summa, H. 202, 203, 206, 207, 323, 334, 575 Susskind, L. 506

+ Trosa, S. 343

Tullock, G. 315, 448 Turley, S. 35 Turner, B.A. 28 Tyler, B. 385, 389, 390

Sutton, J. 389, 390

Underhill, G.R.D. 558, 566

Svalander, P.A. 282 Svarvar, P. 208

Urwick, L. 141, 144, 446

Svensson, H. 215

Van van van van van van

Svensson, T. 213

Sweeting, D. 91 Szebehely, M. 210

Taft, K. 364 Taliercio, R.R. 545, 546 Tarrow, S. 127

Tatenhove, J.V. 509

Taylor 183

den Donk, W. 519 der Schans, J.W. 73 Gunsteren, H.R. 29 Tulder, R. 552 Vliet, M. 70, 79 Waarden, F. 190

Vangen, S. 85, 86, 89, 90, 91, 92, 93, 94, 95, 96, 98, 99, 100, 101 Vardon, S. 518 Vatikiotis, M. 563

Taylor, A. 488, 494

Veenswijk, M. 196, 198

Taylor, B. 35

Venkatraman, N. 512 Voigt, R. 460

Taylor, F. 447, 451 Taylor, J.A. 165

von Beyme, K. 65

Governance and the Public Sector

von Staat, General Dr 462 Vowles, J. 218 Vrangbaek, K. 209

Wiebe, R. 441 Wildavsky, A. 11, 16, 28, 458, 488, 507 Wilenski, P. 24 Wilkins 311, 312 Wilkins, P. 323, 324, 342 Wilkins, R. 246

Wade, R. 62, 566 Waerness, M. 345

Wagener, F. 457

Willets, P. 66 D. 62, 64, 529 H. 165 P. 236, 245 P.F. 354 S. 493

Wakeman, F. 562 Walcott, Ch. 188 Waldegrave, W. 10 Waldo, D. 441 Walker, G. 27

Williams, Williams, Williams, Williams, Williams,

Wailis, J. 398 Walsh, K. 6, 142 Walsh, P. 387 Walters, L.C. 521

Williamson 299, 302, 303 Williamson, J. 566 Williamson, O. 99, 109 Willke, H. 474

Wamsley, G.L. 15

Willke, J. 65

Wapner, P. 555 Warkentin, C. 533 Washington, G. 437, 439, 443, 446 Wassenberg, A. 186

Willmott 319 Willmott, H. 245, 354, 355, 372 Wills, G. 438 Wilson 487, 488

Waterford, J. 136 Waterhouse, J. 300

Wilson, F. 486 Wilson, G. 486

Waterhouse, J.H. 300

Wilson, H. 5

Waterman, R. 20

Wilson, J.Q. 388

Waterman, R.H. 198

Wilson, R. Sir 486, 492, 497, 1990

Watkins, S. 151, 153 Watson, R. 38 Wear, R. 27 Weaver, R.K. 205 Webb, A. 100

Wilson, W. 141, 146, 442, 446 Winkler, D. 121 Winters, J. 552 Winther, L. 219 Winthrop, J. 434

Webb, B. 164

Witteveen, P. 185

Webb, R. 537, 539

Wolf, M. 526, 535, 537

Webb, S. 540 Weber 126, 198 Weber, M. 317 Wei, S.-J. 545 Weisbrod, B. 113

Wolfensohn, J.D. 416 Wolfish, D. 521 Woo-Cummings, M. 560, 561 Woods, N. 539 Wooldbridge, A. 544

Weiss, J. 157 Weiss, L. 482, 552, 560, 565

Worsley, P. 21 Wright, M. 35, 37, 39, 246, 300

Welch, S. 239 Westrum 28 Wettenhall, R. 163 Wever, G. 470

Wright, V. 203, 500 Wrights, D.S. 544

Whetten, D.A. 188

Yaroni,A. 576

Whetton, D. 357 White, G. 562

Yeatman, A. 23, 170, 172 Yesilkagit, K. 203, 219

Yamamura, K. 561

White, L. 440, 442

Young, T. 62, 64, 553

Whiteoak, J. 35, 39

Yusuf, S. 544

Whitley, R. 561

Zeckhauser, R. 120

Whittington, R. 93

gina

Sig” 30

nome

OFautae fl aarninn B-

S99

te

14

24) aia? ‘sl 1 owes == Cf 1 oy an alle

vr

2”

geonll® 1

of SAT ie)

if

ty oa)

oe

eee

i> 66>

.

(a7

Sh

a7

SH

>

1

al4

(? sme 2

makes

(ki

gaGw

Ge

ie

eoasie

)es2:8 >

>

ora f

-) pire

CW We

°

|

awa

2

ee

Y

ri

£)

aailtS weer

state

voi |

>.