Public enterprise and privatization in a new century: evolving patterns of governance and public management.

Author:Wettenhall, Roger
 
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Abstract

This article serves to introduce the symposium in three interrelated ways. It begins by noting the genesis of the project and acknowledging the need for caution in making predictions. It then addresses several issues and concerns of historical, contemporary, and likely future significance to public enterprise and privatization. These include the advent and implications of new public management (NPM), the extent to which privatization by way of divestment has won public acceptance, the emerging modes and styles of governance, and the changing role and capacity of the modern state. It ends by highlighting the thrust of the discussions in the next five articles which provide relevant perspectives of national, regional and global importance.

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Genesis of the Symposium

This symposium had its genesis in the course of discussions at a panel on "The State of Privatization Around the World" at the annual conference of the American Society for Public Administration in San Diego in April 2000. The panel was organized by Ali Farazmand to explore current and likely future developments, issues and concerns in the field of public enterprise and privatization. The presentations addressed experience in Australia, Britain, Iran and the United States. Big differences between the US approach and that of the other countries considered were immediately apparent, as the US discussion focused on contracting out as the main form of privatization, while the others dealt mostly with the divestment of public enterprises.

After the panel discussion, Peter van der Hoek, the editor of this Journal, suggested that the matters canvassed in the panel discussions might be taken forward as a symposium that would examine trends in public enterprise and privatization at the turn of the century and consider likely futures as we move into the new century. A connection was quickly established between some members of the panel and the then Working Group on Public Enterprise Management and the Public-Private Mix of the International Association of Schools and Institutes of Administration (IASIA), of which we were the co-chairpersons. (1) We have organized and edited other symposia for the IASIA Working Group, and several of the authors in this symposium have presented papers at IASIA conferences and/or written for other IASIA publications. We are now pleased to present the outcome of the most recent work in this number of the Journal.

On Predicting the Future

Not surprisingly, predicting the future is a difficult exercise. On reflection, however, it is obvious that most exercises in "futurology" are concerned with the present as well as the future in that they seek to discern current trends and estimate how those trends will move into the future. A standard dictionary definition explains that futurology involves "the prediction of the future as a result of systematic analysis, esp. by the study of present day trends in human affairs" (TMD, 1981: p. 728).

Here it is relevant to draw attention to two salutary cautions spelled out by Hood, who has done a considerable amount of public administration/public management stargazing of this sort. First, he offers the general warning that "prediction is a dangerous game":

Only a generation ago, Schumpeter confidently predicted that the growth of public bureaucracy was 'the one certain thing about our future'. Had that eminent economist been spirited back to life forty years later, he would have found UK civil service staffing barely half the size that it had been when he wrote that sentence. A similar surprise would have awaited the spirits of distinguished pundits like Burnham and Robson who saw the rise of public enterprise as a permanent long-term trend. No one predicted the age of privatization or foresaw that the UK would return to regulated private ownership for virtually all of its major public utilities barely a generation after the nationalization boom of the 1940s. Likewise, no one predicted the onset of procompetitive regulatory reform in several key economic sectors from the late 1970s or the pattern of tax structure reform which spread across the OECD countries in the 1980s (Hood, 1995: p. 165, with internal references omitted). The second caution follows Hood's earlier identification of five public administration "megatrends" in the 1990s: attempts to peg back the growth of government; the internationalization of public administration; automation/computerization; privatization; and the rise of "new public management" or NPM (Hood, 1989). He observes that each such trend can be seen as a

reaction against the negative aspects of its opposite ... To the extent that much of the intellectual history of public administration involves swings of the pendulum among a limited set of alternative basic precepts, we might expect that in time the negative aspects of each of today's trends may come to make the positive aspects of its currently unfashionable alternative seem attractive ... Most ideas in public administration have an earlier life and times, and return and recurrence is a notable feature of its intellectual dynamic (Hood, 1995: p. 180, with internal references again omitted). Of course some exercises in prediction ignore these hazards and potential circularities. But the exercises go on, and probably some of them have much more than explanatory and preparatory value. They may well contribute to the actual shaping of future developments, to the strengthening or weakening of trends currently building up, and so on. Peters' (1996) book entitled The Future of Governing: Four Emerging Models may well have this sort of influence.

The contributors to this symposium sensibly avoid the traps in over-confident predicting. In the event, there is little in the way of stargazing. What is said is based on a firm grasp of relevant history, with basic extrapolations from existing experience of likely developments or challenges to come in the foreseeable future.

Public Enterprise and the Advent of NPM

There is nothing new about governments undertaking developmental and business-type activities. In one way or another, all kinds of government have been doing it ever since the dawn of organized government, and this has involved almost continuous drawing and redrawing of the boundaries between the public and private sectors. Especially since the emergence of systems of representative and responsible parliamentary government, it has also involved the search for organizational forms appropriate to the activity of public enterprise (sometimes called state-owned enterprise or government business enterprise). This has often led to the devolving of the management of these enterprises from ministers and their central departments to semi-autonomous forms such as public or statutory corporations and government-owned companies.

These corporations and companies have managed a great variety of services for the governments that have used them. Through the 19th and 20th centuries, they have most often been encountered in the provision of utility or infrastructure services like public transport, electricity and telecommunications. For a variety of reasons, many countries (even away from the centrally planned economies) have also used them for production and/or marketing in industries such as oil, minerals and agriculture, and for the manufacture of steel, fertilizers, automobiles and other vital commodities. They have been used too in vast developmental schemes, constructing and then operating facilities such as those in the Tennessee Valley, Damodar Valley, and Snowy Mountains regions of the US, India and Australia, respectively.

Across the world, there has been much variety in the operating conditions of such corporations. Many have held monopoly rights in their industry or service sectors; but many others have competed with private operators in their sectors. Employing enterprise staffs under the public service systems of owning states was soon recognized as a primitive arrangement: mostly the corporations were separated from those systems and thus enabled to develop staffing arrangements appropriate to their particular functions. Likewise they were mostly separated from central budgets and enabled to operate their own accounting systems, so that the central budgets merely reflected transactions between them and owning governments such as capital provided, loans made and (sometimes) losses funded, as well as dividends, tax payments and interest on loans received. Proverbially, many were regular loss-makers, but many others were profitable and proved good investments for owning states. Many were able to raise capital from private sources, though usually with government guarantees. It is beyond question that, as a class, many of these corporations made highly significant contributions to economic and social development. Some became international operators, extending their services and investments to other countries and sometimes joining in international partnerships.

In some countries the organizational form of the stockholder company was preferred, with the government holding all stocks in the case of a fully publicly-owned enterprise. This form allowed stockholding mixes to occur, and not infrequently governments joined with private interests to establish mixed (public/private) enterprises. In most of the Anglo-Saxon countries the public or statutory corporation (created by a special statute which serves as its operating charter) was usually preferred. (2) However, as NPM-type thinking has taken hold, that preference has largely been displaced by a preference for the company form, which is closer to private sector practice. The shifting of public enterprises from the statutory corporation form to the company form has been a leading feature of recent NPM reform in the Anglo-Saxon countries (though not in the US), along with the disposal of many of the existing public enterprises through a process...

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