Sharing Power: Public Governance and Private Markets.

• Author: Riordan, Timothy H.

This book is about that often-mentioned panacea to government financial problems - privatization. The author debunks the simplistic notion that privatizing is good for its own sake. He posits that contracting out is a reality that all in government must deal with, offering some theoretical and practical ideas about how to do it.

The simple privatization concept is that competition will insure a good price and a standard product, therefore eliminating all the waste that we bureaucrats work so hard to encourage. The author does not dwell on the theory that the private sector can do things more cheaply, although he offers the clear prescription as to how it is achieved. In terms of doing things cheaper in state and local government, the author states that there are not better workers in the private sector, there are simply lower wages, more flexibility in what workers are permitted to do and lower fringe benefits. Therein lie the major savings.

The author states that there is seldom a situation where the capitalist paradigm of free markets and pure competition is readily available to solve government problems. He points out that buying items like pencils, which can be easily standardized and for which there is much competition, is the best example of privatization working under that capitalist paradigm. Building nuclear submarines, when it is difficult to standardize the product and when there is little if any private-sector competition, is a great example of why the pure capitalist model does not always work.

The author therefore suggests a hybrid theory on privatization: Government will contract out certain functions; there will be some, albeit imperfect, competition; and the product frequently will be unique, not standardized, especially when it is a government service. The most important aspect of his paradigm is that we, as government managers, must know how to manage and control these relationships.

Government must become a smart buyer of private-sector services, and government officials must become smart managers of the contracted relationships. The author spends several chapters developing these concepts, and they are interesting chapters. Management of government functions...