Refocusing the Lens
The rational, male, technocrat, quantitative, goal-dominated, cost-benefit driven, hierarchical, short-term, pragmatic, materi- alistic model must give way to a new kind of leadership based on different assumptions and values.
Charles Garofalo,Leadership and Ethics, 1996
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Chapter 28
Neoliberal Economics, Public Domains, and Organizations: Is There Any Organizational
Design after Privatization?
Alexander Kouzmin and John Dixon
CONTENTS
Introduction ... 668 Defining the Public Domain ... 669 The “New World” Order: Divergence or Convergence?... 671
Area 1: The Constituent Elements of Public Domains in Contrasting
Jurisdictions ... 673 Area 2: Optimal Sizes For Governments and the Issue of Divergence... 674 Area 3: The New Architecture of the State — The Economic Sovereign
and the Political Local... 675
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668 Handbook of Organization Theory and Management
Area 4: Risk and Citizenship — Policy Wickedness in a Global Age ... 675 Dogma and Ideology in Economism ... 676 The Imperialism of “Public Choice Theory”: Economic Rationalism Beyond
Markets ... 683 The Economistic Perversion of Organizational Complexity ... 686 The Managerial Meta-Myth... 690 Simplistic Functionalism in Regressive Organizational Design ... 693 From Organizational Illiteracy to Policy Ineptitude in Economics ... 696 The Dilemma of Privatized Public Services... 700 A Philosophical Framework for the Analysis of the Privatization of Public
Services... 701 Threats from Contending Perspectives on Privatized Public Services ... 702 Governance Issues for Avoiding Unprofitable Terminations ... 706 Achieving Tenable Privatized Public Services... 708 Conclusion ... 710 References ... 713
Introduction
At a time when the Bretton Woods institutions are increasingly concerned about “reinventing” governance and building institutional capacities, the new millennium is an appropriate moment to refocus public discourse and policy-making debates about the complexities of market-state depen- dencies and emerging public-private partnerships. Building social solidar- ity, trust, and political legitimacy is a new priority in many developed and transitional polities (World Bank 1997). The emerging willingness to reas- sess the instruments and practices of economic liberalism in dif ferent political milieus also raises many significant questions about the limits and enhanced capabilities of the state, let alone the business corporation, to be an effective manager of the public interest (Schultze 1977; Kettle 1994;
Kouzmin 2002).
The last 20 years have seen the fundamental restructuring of many public sectors. Policy makers have increasingly looked to markets to overcome political conflicts triggered by the perceived increase in the scarcity of resources. The “hollowing out” of the Keynesian welfare state and the widespread acceptance of the idea of “less state and less taxes”
raises serious policy questions of social resilience and the governance capacities in these diverse jurisdictions (Boyer and Drache 1996). Con- ventional wisdom about the convergent effects of economic globalization gives further weight to these, especially in light of the fact that significant differences in public-policy responses tend to be ignored. This neglect of apparent divergence in policy outcomes and expenditure practices — especially in labor market strategies — underscores the need to audit
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critically, in comparative and sectoral ways, systematic differences in the management of market failure and the social distortions flowing from enlarged markets (Berger and Dore 1996; Dixon and Kouzmin 1994a;
Dixon, Dogan, and Kouzmin 2002).
Research will need to be guided and informed by a double hypothesis:
the first is the emergence of a markedly smaller state, but one with more- complex functions for the 21st century (Kouzmin and Jarman 1999, 2002).
The possibility for the emergence of new policy capabilities for different market economies is a primary research question. Our thesis is that this important research can only occur with strategic changes in the functioning of the state — the need to become a “smart state” consisting of institutions that learn, that effect long-term and strategic change, and that create high- quality and crisis-sensitive models of policy reasoning (Kouzmin 1988, 2002; Kouzmin and Jarman 1999, 2002).
A second and closely related issue that bears directly on policy making is the future role of the public domain in different market economies. No state should underestimate the importance of the social dimension to economic growth and development. The reason is that it is one of the resources relied on by government to minimize social dislocation when markets expand beyond the moral and political boundaries within which they are necessarily constrained to operate (Dertouzos, Lester, and Solow 1989; Boyer and Drache 1996). In optimal conditions, public domains define the institutional capacity to bring about consensus and achieve equity and protection while creating opportunities for entrepreneurship.
They refer to assets that are held in common but cannot be brought and sold in the open market. They cover a range of economic activities that the private sector cannot deliver or can only partially effect.
The main thrust of major research undertaken in contemporary public administration will be to build on this cornerstone concept of public domains in order to audit putatively shrinking public domains and policy capacities in an age of globalization and strategically downsized govern- ments (Kouzmin 1998). Because public domains and spending practices of national and regional authorities differ markedly both within western European countries and between these countries and their Anglo-Saxon counterparts (Kouzmin and Scott 1990), they need to be empirically tracked, as this diversity necessarily frames public-policy debate in signif- icantly important ways.
Defining the Public Domain
In the “new world” order, conventional measures of government inter- vention often fail to capture the complexities of mixed economies and,
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particularly, underrepresent the strategic role of the public sector within the public domain. More importantly, these measures ignore the contri- bution of this “wider public domain” in maintaining political stability and economic growth in the face of significantly expanded markets and declining regulatory measures (Albert 1993; Kouzmin 2002).
Mainstream economics identifies the public domain merely with the consumption of public goods. The difficulty is that public expenditure structure is but one aspect, even if the most significant from a public- finance perspective. What is often overlooked is that the public sector has always been interpreted in a variety of ways and includes budgetary transactions, public enterprise, public regulation, and similar kinds of concerns (Musgrave and Musgrave 1984; Stiglitz 1986). If a narrower view is taken, it is possible to measure the size of the public sector. However, an examination of GNP share, shares of national income, and shares of transfer payments to a person’s income are important measures for many purposes. But these quantitative measures are all narrowly related to the concept of efficiency and are only one way to grasp the essential difference between private goods and the public sector.
What makes the concept of public goods limited is that it undervalues the intricacies in the creation and consumption of such goods to all citizens and stakeholders. Since these “social goods” belong to all members of society in theory, their benefits are to be shared by all, irrespective of private need. If this is so — and it is — the efficiency conditions of Pareto optimality simply do not apply or, at least, apply only in limited circum- stances (McKee 1980). While many economists do, in fact, believe that equity issues are part of economics, public-distributional questions need their own theoretical reiteration.
It is for this crucial reason that it is important to recall that the public- domain notion derives from an older view of the market economy, one premised on the idea that markets are not all-encompassing and that civil society involves a critical nonmarket sector, part private and part public.
In civil society, not all goods and services may be bought and sold (Perroux 1950). Some assets, by their nature, cannot be transferred from one owner to another. These include intangible social, collective, and political goods deemed to be nonnegotiable, and nontransferable public freedoms, human rights, government transparency, and public accountability (Perroux 1962).
In the public domain, citizens not only consume collectively these non- commodifiable goods, but also attribute utility to the social well-being these goods provide.
The challenge, after 20 years of “reforming” and restructuring in Anglo- American economies, is to review what remains of a legitimate and effective public domain, especially in light of frequent crises with macro- economic management (Hirst and Thompson 1996). Reinventions of gov-
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ernment require a close scrutiny to understand the new opportunities as well as the hidden costs of reorganization. In other political economies, the viability of public domains is also under threat from public disinvest- ment practices. This, too, demands rethinking the framework of the public domain and its role and relationship in highly contrasted, market-driven settings (Huntington 1993; Dixon, Dogan, and Kouzmin 2002).
The “New World” Order: Divergence or Convergence?
Modern states have long recognized the socially binding importance of maintaining strong public domains (Esping-Andersen 1990). The emer- gence of the welfare state, especially in post–Second World War Europe, is the most well-known expression of this. However, the intention to improve people’s lives significantly required specific adaptations of social policy to meet the unique needs of individual countries. Public domains have underpinned social and economic development (Fallows 1994), as evidenced by the influence of Beveridge and Keynes in the United King- dom, the conspicuous involvement of the Nordic states in their economies, the social markets of France and Germany, the American adaptation of Keynesianism in President Johnson’s Great Society, and the strategic involvement of government in the “tiger” economies of Asia (Jun 2001).
For many experts, the public domain is not seen in these terms and is confused with the drive to reduce, in stark ways, the public sector — specifically, the demand to reduce public expenditure and to limit per- ceived increased government regulation of the economy. Public policy is, thus, driven by the view that if one reduces rent-seeking behavior within government bureaucracies (Kouzmin, Leivesley, and Korac-Kakabadse 1997; Johnston and Kouzmin 1998), then competitive advantage will accrue to industries and, consequently, to the economy. Within a globalized economy, it is argued that such “corporate welfare” (Kouzmin 1998: 391, 2002: 25) will be further enhanced by a dramatically smaller state presence (Bergsten 1996; Rosencranz 1996).
Such a policy position, within a globalized world, ignores important evidence that the public domain is becoming more significant and is, in fact, being redefined by forces over which public authority has little control (Dilulio 1994; Ruigrok and van Tulder 1995). States are having to confront a range of intractable issues; the result of the social consequences of globalization. For society to function smoothly, public authority will be increasingly under pressure to exercise its supervisory role “when there are no other strong social values to compete with that of money and wealth” (Albert 1993: 104). If Albert’s (1993) principal assumption is valid, public authority will be hesitant about transferring many of its
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prerogatives to the private sector. Indeed, there are many pressures forcing states to rethink the balance that society must strike with the market.
Among these are:
The local significance of globalization will require devolution of decision making and the delivery of services. The degree of dev- olution, the forms such devolution take, and its limits remain unexamined questions (Putnam 1993).
The accommodation of the information communication technology (ICT) revolution, and associated problems of access, has raised the expectation that information flows will be readily accessible for the general public. Complex regulatory practices will need to be developed in the provision of utilities, communications, and food standards (OECD 1997).
Environmental degradation and pressing issues of sustainable eco- nomic growth are creating political tensions of some proportion.
The public increasingly looks to government to exercise its fiduciary responsibilities and protect the environment from the risks and needs of short-term wealth creation (Santos 1995; Macdonald 2002).
The magnitude of the job-creation and growing income disparities are threatening the legitimacy of many governments. In light of volatile financial markets, flexible and mobile manufacturing strat- egies and “social dumping” by corporations, these new circum- stances will require states to develop proactive policy responses to manpower planning and labor market practices (OECD 1994;
Kouzmin 1998, 2002).
The politically vulnerable issue of maintaining sovereignty over cultural and identity issues in a “borderless” world has hardly been addressed (Held 1995). Transparency in government activity needs to coincide with redefinitions of active citizenship. The redefinition of citizenship in many domains to that of passive, consuming clients of state services distorts democratic expectations and obligations in serious ways. Increasingly, electorates are critical of government’s failure to reform its practices and address the costs of social exclusion (Dahrendorf 1995; Hutton 1996; Haque 1998; Ventriss 2002).
In the struggle between states and markets, it is not, ther efore, a foregone conclusion that markets have regained the upper hand. Indeed, it appears that the public domain — the nontradable social-good sector that exists in every society — is ready to make a comeback (Hertz 2002).
Still, there is much that needs clarification and empirical verification regarding the relationship between the public domain, state practices, and markets (Cable 1995; Strange 1995). For this additional reason, in the “new
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world order,” public domains need to be empirically studied because this diversity necessarily frames public-policy debate in four critical ways.