Paradoxes in Public Sector Reform: An International Comparison [1 ed.] 9783428507986, 9783428107988

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J. J. HESSE / C. HOOD / B. G. PETERS (Eds.)

Paradoxes in Public Sector Reform

Abhandlungen zur Staats- und Europawissenschaft Herausgegeben von Joachim Jens Hesse

Band 1

Paradoxes in Public Sector Reform An International Comparison

Edited by Joachim Jens Hesse, Christopher Hood and B. Guy Peters

Duncker & Humblot · Berlin

Bibliografische Information Der Deutschen Bibliothek Die Deutsche Bibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über abrufbar.

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Preface

As the study of administrative reform has progressed - or at least continued over the past several decades, worthy descriptive studies of those changes have accumulated across a number of countries. This volume represents an attempt to push the analysis beyond that first generation of studies to focus on the paradoxes or unintended effects of those reform efforts. So, as we explain in the introductory chapter, this book does not try to provide a detailed description of administrative change in the fourteen administrative systems considered, but to look selectively at those changes from a "paradox perspective". It focuses on the apparently surprising or unintended aspects of administrative reform. Paradoxes, like much else in administrative science, are highly dependent on context. Exactly who sees what as a paradox depends on their frame of reference. Apparent failure of administrative systems to adapt to dramatic changes in their environment may seem paradoxical to those who expect administrative structures to closely reflect environmental conditions, but not to those who expect persistence of initial form. Apparently laborious attempts to 'fix what ain 7 broke", on the other hand, may seem paradoxical from the second perspective, but not the first. We discuss both sorts of phenomena in this book, as well as other paradoxes that we identify in the first chapter. Most of the administrative systems discussed in this volume are those of advanced, industrial democracies. This "sample bias" arose for several reasons. Perhaps the most important was the already substantial corpus of published material about the wealthy democracies that could serve as a basis for moving to a paradox perspective. But we include one case of an administrative system being constructed from those existing within its constituent parts (the European Union), and we analyse two cases of transitional and developing countries - the People's Republic of China and the former socialist countries of Central and Eastern Europe. Such administrative systems seem just as likely to document reform paradoxes as the wealthy democracies. Indeed, they may well be more likely to exhibit such paradoxes, given that for the developing world much of the administrative reform being implemented has been activated by exogenous actors, such as the World Bank, in connection with conditionally on "good governance" arrangements. The general point is that the paradox perspective merits as close attention in the developing world as it does in the developed countries.

6

Preface

A book of this type takes some years to produce and the commentaries on the experience of the various country cases we consider are not intended to provide an up-to-the minute account of the state of play in administrative reform, but rather to offer an analytic perspective. Many of the contributors found it helpful to organize their analysis under a set of headings that included reference to a country's stage of development, its cultural biases and traditions, the institutional framework surrounding the public sector, the way that resource issues have shaped administrative reform, the extent and ways in which administrative reform has become "professionalised" (rather than an ad hoc activity), and the role of policy entrepreneurs and politicians in shaping the process. Other chapters, however, have focused on a narrower set of analytic themes. As we say later, we intend this volume to open up the discussion of paradoxes in administrative reform rather than amounting to the end of the conversation. But even this early exploration required the time and resources to bring together experts to discuss administrative reform from a paradox perspective, and we have a number of individuals and organizations to thank for their support of this project. Funding was supplied by Oxford University and the three Berlin Universities. Also, Nuffield College, Oxford and the International Institute for Comparative Government and European Policy in Berlin were congenial venues within which to meet and discuss the papers in a series of conferences. Alison Bateman, Florian Grotz and Alexander Somoza supplied helpful support in the process.

Berlin, January 2003

Joachim Jens Hesse, Christopher Hood and B. Guy Peters

Table of Contents

Introduction: Public Sector Reform - Soft Theory and Hard Cases Joachim Jens Hesse, Christopher Hood and B. Guy Peters

9

The Failure of Managerial Reform in a Managerial Society: Public Sector Reform in the United States B. Guy Peters

25

Paradoxes of Administrative Reform in the People's Republic of China John P. Burns

53

Reform in Japan's Public Management: The Changing Role of Bureaucrats, Paradoxes and Dilemmas Akira Nakamura

77

Paradoxes of Public Sector Reform in Australia and New Zealand John Halligan

97

From Public Bureaucracy State to Re-regulated Public Service: The Paradox of British Public Sector Reform Christopher Hood

127

Administrative Reform Programmes and Institutional Response in Norwegian Central Government Per Lœgreid and Paul G. Roness

149

When the Bottom Line is the Bottom Line: Public Sector Reform in Sweden Jon Pierre

183

8

Table of Contents

Stability Turned Rigidity. Paradoxes in German Public Sector Development Joachim Jens Hesse

197

Substance Came with Little Hype. Public Sector Reform in the Netherlands Theo A. J. Toonen

215

Paradoxes in Public Sector Reform: The Case of France Guy Carcassonne

251

Paradoxes of Administrative Reform in Italy Giacinto della Cananea

273

Regional Paradoxes of Public Sector Reform in East Central Europe Attila Ägh

289

Paradoxes in EU Administration Dionyssis Dimitrakopoulos and Edward C. Page

317

Conclusion: Paradoxes in Public Sector Reform - a Comparative Analysis Joachim Jens Hesse, Christopher Hood and B. Guy Peters

335

Subject Index

353

List of Contributors

355

Introduction: Public Sector Reform - Soft Theory and H a r d Cases By Joachim Jens Hesse, Christopher Hood and B. Guy Peters

I. The "Paradox Perspective" on Public Sector Reform We are often said to live in an age distinguished by preoccupations with public sector reform. Whether or not that perception is true (and only historians of the future will be able to say that with any sense of perspective), it is certainly an age of public sector reform-watchers. Library shelves groan and email inboxes clog up under the volume of attempts - by academics, consultants and international bodies - to chronicle public sector reform efforts across different states, draw out what are claimed to be their general or "paradigmatic" features and celebrate or criticise those paradigms. The international reform-watching industry has reached a point of development where it is impossible to give a comprehensive citation of the literature (now including a bewildering number of websites and virtual networks as well as conventional print sources) describing and accounting for public sector reform. (For a few specimens out of a huge population of literature describing public sector reform developments see Zifcak 1994; Aucoin 1995; Olsen/ Peters 1996; Hesse 1997; Barzelay 2000.) Mapping out unexplored territory in this way - to establish who did what and why in the "reform age" - is certainly an important and necessary task for comparative public administration scholars. But in this book we seek to develop a rather different perspective. We do not aim at adding to the maturing literature that is primarily concerned with describing which reforms were undertaken in different countries, what those reforms were intended to achieve or the adequacy or otherwise of the values that animated them - though we do need to go over some of that ground in search of our quarry. (A further substantive discussion of these reforms is contained in the concluding chapter.) Rather, the main aim of this book is to explore in comparative perspective the paradoxes of public sector reform - the developments in the reform process that were surprising, unintended or ironical. In other sciences, identification of paradoxes can be a sign of development, and our claim is that the study of comparative public sector reform has matured to a point where a paradox perspective merits attention.

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Joachim Jens Hesse, Christopher Hood and B. Guy Peters

Such a perspective on public sector reform is by no means new. Many of the classic writings on bureaucratic developments, both country-specific and comparative, have focused on surprising or ironic features of attempts at reform, modernisation and restructuring. Well-known examples include: Alexis de Tocqueville' s (1949) account of how post-Revolutionary France, ostensibly seeking to sweep away the discredited techniques and approaches of the ancien régime , only succeeded in perfecting and developing them; Hans Mueller's (1984) account of the development of civil-service examinations in Prussia and Britain as a case of two societies adopting the same reform instrument for diametrically opposite social purposes; Edward Katzenbach 's (1958) account of why the most technologically advanced state on earth (the United States) was the last major military power to abandon horse cavalry as a serious element of its military arsenal after World War II; Peter Blau' s (1955) classic account of the way performance measurement unintendedly produces goal displacement; and Thoenig and Friedberg's (1970) account of the unintended centralising effects of decentralisation policies in France. But the contemporary wave of public sector reform - the much-discussed move to the "postbureaucratic paradigm", "New Public Management" or "economic rationalism", often claimed to be global or international in character - has been surprisingly little explored from such a perspective, even though it is potentially rich in material for paradoxseekers. Exceptions to this neglect are beginning to appear, for example in Robert Gregory's (1995) work on the unintended effects of the "production" metaphor in New Zealand's public service reforms, Per Lœgreid's (1994) account of the paradoxical effects of pay for performance in an egalitarian culture, and Moshe Maor's (1999) account of the "managerial paradox" (see also Hood 2000). Though we do not claim to have invented the paradox perspective on public sector reform, our aim in this book is to develop - or redevelop - it and apply it on a comparative basis to exploring reforms of the recent past. The term "paradox" is used in a broad sense here. The word is conventionally defined by dictionaries as an "apparent contradiction" which is capable of being resolved or understood (such as the "observer paradox" due to which observation itself changes the object of investigation), but more generally as something which is apparently absurd or contrary to received opinion. We can draw a parallel with the identification of paradoxes of management by Charles Handy et al. (1994; see also Cameron!Freeman/Mishra 1993). For example, it is commonly claimed that public sector reform is imposed on all countries by global imperatives of economic efficiency. But if that is true, how can we understand how some administrative systems that seemed barely to function at all (such as the Italian case) escaped effective reform in the 1980s, while systems that seemed to be on a quite different plane of efficiency and effectiveness (such as the Australian case) were reformed within an inch of their lives? We shall be much concerned with malade imaginaire reform paradoxes (and the opposite)

Introduction

11

in this book, but we include several other ones, such as the "winner's curse" paradox and the associated paradox of the advantages of coming second, as identified by Thorstein Vehlen (1939), the "crédulité des incrédules " paradox discussed by Christopher Hood in this volume (that is, the propensity of reformers who are "hard nosed" and sceptical in one dimension and credulous in another), and paradoxes associated with behaviour apparently at odds with the conventionally-understood characteristics of a state system. Examples of that behaviour are Patrick Dunleavy's (1989) "paradox of ungrounded statism" for post-World War II Britain, and the end of the "Swedish model" under economic pressures in the 1980s and early 1990s (Rothstein 1996). We do not draw a strict dividing line between paradoxes and related phenomena, though a development of the paradox perspective would require further differentiation of types. Related phenomena include "puzzles" (a word sometimes used to denote artificially contrived problems with a determinate solution, like a jigsaw puzzle, but often used in a looser sense that overlaps with paradox as considered above), or "difficulties" (problems that may have no apparent solution, such as problems that no theory can explain) (see Weldon 1953). Paradoxes may also be related to the well-known phenomenon of administrative dilemmas and polylemmas (cases where χ and y cannot both be chosen at once), in so far as those dilemmas are not recognised by the actors in the reform process, leading to consequences they do not anticipate. And paradoxes are closely related to the unintended consequences of social action involving unanticipated side- and reverse-effects (cf. Merton 1968; Sieber 1981; Hirschman 1991). Exploring public sector reform from a "paradox" frame yields a different perspective from orthodox chronicles and critical discussions of change programmes. It moves us away from short-term case-by-case reportage to considering changes in each state against a longer time-frame and a comparative perspective focusing on its distinctive qualities, and from a focus on intended effects to a focus on unintended effects. In that way it helps to expose the "deep structures" of administrative systems and their underlying tensions. The paradox frame further illuminates the extent to which decisions about reforms go beyond simple rational calculations about the public sector to reveal something of the "deep structure" of politics in these various countries.

I I . Types of Reform Paradoxes Paradoxes come in several varieties, and there is more than one way of describing the variety. For instance, we could distinguish political from managerial paradoxes, paradoxes of perception from paradoxes of substantive action, paradoxes of internal process in organisations from paradoxes of external ac-

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tion. We found examples of all those types in the material collected by our authors. For convenience, however, here we arrange the paradoxes in conventional system-analytic categories, as paradoxes of "input", paradoxes of "process" and paradoxes of "output". These three categories overlap, but they constitute an analytic point of departure. Further, these categories demonstrate some of the political forces that maintain paradoxical forms of administration in the face of both internal management problems and external challenges.

1. Input Paradoxes The first type of paradox in reform arises from the inputs into the process. That is, the way that external environmental or habitat conditions are perceived or addressed in reform, and the extent to which reform strategies match the "objective" conditions in the environment. Governments have the task of analysing the pressures for change and the ways in which they should respond to those pressures. Therefore, the way in which they interpret the conditions in their administrative systems and the needs for reform will produce some unexpected and paradoxical results. It is not unusual for large organisations to misperceive their own environments (cf. Earl 1984), and even their own behaviours, but there are a number of cases described in this book in which governments seem to have made loosely comparable misperceptions of the needs for administrative reform and the appropriate strategies to achieve the stated purposes. Such apparent misperceptions may result from a cognitively faulty self-image, or from political reasons, but in either case appear to amount to a response that does not readily fit a system's environment. As we think about governments not responding to their environments, one of the more interesting of these input paradoxes can indeed be styled "malades imaginaires ", meaning that some countries that by most standards are quite successful in governing, or have already undertaken extensive reforms, feel a strong need to reform even more. In our cases the Netherlands and Australia fit into this category. Both countries have been successful in adapting their administrative systems to changing demands gradually over time, but yet during the spate of reforms in the 1980s and 1990s their leaders appear to have felt as if they needed to reform even further. Our commentators on these developments point to the opportunity costs of this continual and apparently hypochondriac "popping of reform pills and potions", but do not concern themselves with possibly counterproductive "iatrogenic" effects (HogwoodlPeters 1985) of the continuous reform on system effectiveness. The opposite paradox might be termed "santé imaginaire ". That is, some countries can be argued to have persisted in their well-established but apparently dysfunctional patterns while reform and change goes on all around them.

Introduction

13

Among our cases, Italy seems to be the most obvious example of this phenomenon. Giacinto della Cananea points out the difficulties that would-be reformers face there, but also demonstrates that there was some general denial among relevant decision-makers that anything really needed to be done until remarkably late in the day, in spite of extraordinary levels of public concern about public service quality. On Joachim Jens Hesse's account, the German public sector appears to have displayed some of this paradox as well; up to the mid-1990s, when some other OECD countries were in a ferment of public sector reform, Germany looked like a patient who was constantly undergoing a check-up but never proceeded to treatment or medication. Finally, Japan appears to have a little of both types of input paradoxes in its reform history. This internal contradiction in the Japanese response to ideas of administrative reform is much more evident after the Asian economic and political crises of the late 1990s than at the time at which Akira Nakamura first wrote the paper on Japan. On the one hand, the Japanese government has been perceived as extremely successful (at least in economic terms) during the postwar period, and is often cited as one of the principal reasons for the relative success of the Japanese economy, particularly in international trade {Johnson 1982). Even during that time, however, there was a "malade imaginaire " effect, expressed in a number of reform efforts. On the other hand, there are some apparent fundamental problems in the structure and performance of that government that did not become apparent until the system was placed under the strain of the Asian crisis and the continuing recession in the Japanese economy. The tinkering style of reform has persisted from the past without attacking the basic structural problems - a case of "santé imaginaire " for not dealing with problems root and branch as apparently needed. Thus, the system in the past seemed almost invincible from the outside, but displayed severe internal weaknesses. As noted, governments may not even respond to their own histories and conventional patterns of governing as they attempt to reform. The most obvious case here is the United States that has adopted relatively little of the managerialist agenda found in other countries, as shown by Guy Peters in this volume. Yet this "managerialist deficit" has occurred in a country that historically has both stressed making government more business-like and is also the home of many of the public and private sector management gurus used to guide reforms in other systems, such as Osborne and Gaebler (1992; on the US as the home of management gurus see Huczynski 1993). Likewise, the legalistic pattern of governing social and economic life in the United States does not appear in the reforms that have been adopted, with most of them being implemented through executive action rather than through the legislative process.

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Joachim Jens Hesse, Christopher Hood and B. Guy Peters

2. Paradoxes of Process A second category of paradoxes of reform arises from the process of reform itself. That is, the procedures through which governments go about making decisions about reform and then implementing them pose apparent contradictions about those same reforms. The most obvious cases here are what might be termed " N I M B Y " (not in my back yard) paradoxes. That is, the reforms being implemented may have some good ideas about making government more efficient and effective, but the reform processes being utilised violate many of the same precepts. The most obvious cases of these N I M B Y reforms arise around the issue of evaluation. One of the principles guiding many reform initiatives is that of performance and performance appraisal in the public sector. A reformed government is supposed to evaluate what it does and attempt to ensure that high standards of quality are being achieved. This pattern was very evident in the Scandinavian cases in which there was a strong emphasis on evaluation of programmes but little concern about evaluating the impacts of the reforms themselves. It also tends to be seen with respect to almost all central agencies that drive reforms and downsizing, but often increase their own personnel and budgets. Another manifestation of these process paradoxes occurred with respect to autonomy. In a number of cases there was an emphasis on devolution and granting autonomy as a result of the reforms. The reform process itself, on the other hand, tended to be more centralised and to establish templates for other organisations that could be violated only at their peril. This paradox is most evident in the United States where the Gore reforms stressed "empowerment" of public organisations and employees, although there was a very clear idea about the organisational formats to which that empowerment had to lead. It may be that to produce effective large-scale reform in government, central direction is required, but it is paradoxical that autonomy was to be produced by such a topdown method.

3. Output Paradoxes Public sector reform has long been known to be a fertile source of "output paradoxes" in the form of nil effects, unintended side-effects or even consequences that are the reverse of what the original architects of reform wished to achieve (cf. Sieber 1981). In principle, we could conceive of an array of at least nine possible effects of public sector reforms, as indicated in Table 1.

Introduction

15

Table 1 Nine Possible Effects of Public Sector Reforms

Impact on major goal Positively effective (Main goal achieved)

Ineffective (No effect)

None (no side-effects) (1)

(3)

(2)

Simple effectiveness

Effectiveness bonus

(operation according to plan)

(objective reached with reinforcement of other goals) (5)

(4)

Simple futility (e.g. "all talk and no action" in reform programmes)

Negatively effective (Reverse effects)

Impact on other goals Side-effects Positive Negative

(7)

Simple perversity (outcome the very opposite of the aim)

withEffectiveness a jeopardy

plus

(objective reached with some sacrifice of other goals) (6)

Futility but with a Futility plus jeopardy bonus (main target untouched but positive side-effects) (8)

Perversity a bonus

(main target untouched but negative side-effects) (9)

but withPerversity jeopardy

(perverse effects on target but positive effect elsewhere)

plus

(perverse effect on target plus other negative effects)

A full scientific test of paradoxical outputs would involve a systematic categorisation of cases across space and time within that array to identify how commonly the surprising or unintended effects ((2) through (9) in the table) occurred relative to the intended effect (1). The difficulties of conducting such a test through a large data-base in conventional hard-science mode are however formidable. The outcomes of reform are not simple historical events and the "history" can be told in many different ways dependent on the political and intellectual biases of the narrator. So the data that needed to form the raw material of any such characterisation are inevitably more or less contaminated and biased - particularly, but not only, when they come from official sources with selfjustifying axes to grind. The cases described in this book cover much of this array of potentially paradoxical effects of administrative reform. The architects of public sector reforms (such as the "managerial" reforms introduced in Australia and New Zealand) understandably tend to see the results of their efforts as cases of types (1) and (2) in the table above. Even independent academic assessments sometimes reach such a conclusion, as with Guy Peters ' provisional assessment of the success of the "TQM" reform efforts in the US bureaucracy in achieving its pro-

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Joachim Jens Hesse, Christopher Hood and B. Guy Peters

claimed goals. Theo Toonen's account of how the Dutch style of administrative reform, achieving "substance with little hype" is arguably a "case 2" outcome, in that he depicts a pattern in which success in one reform initiative helped to produce the conditions for success in other reforms. Not all of the outcome paradoxes observed by our narrators fit into the "benign" categories of the top left of our table, however. For instance, a standard line of criticism of the Antipodean managerial reforms is that they produced effectiveness plus jeopardy (case 3), achieving the main goal (greater efficiency and productivity) at the cost of other values (cf. Yeatman 1987). In discussing the New Zealand reforms, John Halligan notes some of the negative sideeffects that those reforms may have produced in the medium and longer term including declining public service cohesion, administrative gridlock and "reform fatigue" and even weakening state legitimacy through increased public cynicism resulting from the managerial revolution. Other critics of the landmark New Zealand case have also offered a "case 3" diagnosis, pointing to negative side-effects of the reforms. Alan Schick (1996) identified loss of flexibility and increased transaction costs as a negative side-effect of the "contract" system, and Robert Gregory (1995) argues that the "contract" framework unintentionally leads to even more serious side-effects by treating all forms of public service as production-type operations capable of being fully documented and observed. Indeed, Gregory's critique comes close to locating the effects of the New Zealand reforms as cases of types (6) and (7) in the table above, in that he argues the system produces goal displacement as well as seriously negative side effects. While negative side-effects appear in many of the accounts of reform in the book, several cases of simple futility (case 4) are identified. For the Italian case, Giacinto della Cananea describes how ostensible privatisation measures failed to produce the intended "retreat of the state" and how reforms - originally intended to make politicians concentrate on goal-setting and bureaucrats on taking full responsibility for policy implementation (a central theme in "managerial" public sector reform) - were rendered nugatory. This was due to the collision between politicians and bureaucrats, with both being reluctant to accept the mentioned demarcation of roles and responsibilities. Another case of "futility" is the "announcement politics" that have figured large in German public sector reform, as discussed by Joachim Jens Hesse. And for the USA, too, Guy Peters notes that attempts to transform the federal bureaucracy under the Reagan and Bush presidencies produced surprisingly little effect, amounting to less than had been achieved under the apparently less radical Carter presidency. A more subtle form of futility is Akira Nakamura's observation that attempts to broaden the advice base to the Japanese Prime Minister by creation of special assistants have little prospect of attracting any candidates other than serving bureaucrats to those positions, because of the rigid lifetime employment regimes applying to

Introduction

17

universities and other potential sources of special assistants from outside the bureaucracy. Indeed, futility is so frequently encountered as an outcome of public sector reform that it should probably be seen as a normal rather than paradoxical result. A paradoxical element only enters when such an outcome is observed for a system under massive internal and external pressure to reform, as in the Italian case. Such outcomes serve to qualify conventional assumptions about the extent to which strong environmental pressures necessarily prompt institutional change (as in Meyer and Zucker' s (1989) theory of "permanently failing organisations"). However, more complicated types of futility are also noted by the narrators of our reform cases. For instance, Guy Peters argues that the US case has elements of the "futility but with a bonus" effect (case 5). By that he means the failure to achieve radical overall restructuring of the public service of the type seen in New Zealand or the UK may be laying the foundation for more effective long-term transformation of the US system. Several other authors argue for a variant of this classic "tortoise and hare" paradox. In contrast, an important case of futility plus jeopardy (case 6) is identified by Giancinto della Cananea. He notes how ostensible budgetary simplification in Italy in the 1990s not only failed to cut down the excessive number of "chapters" (the aim of the reform) but also had the effect, unintended by the Parliamentary architects of the budget reform, of strengthening the grip of the Treasury on departments rather than giving them more autonomy from Treasury control. Simple perversity (case 7) also figures in several of our reform narratives. They include Christopher Hood's account of how ostensible attempts to make managers "free to manage" in the UK public service produced ever-more detailed regulation and a growing army of inspectors and overseers while the numbers of "doers" markedly dwindled within the public bureaucracy. Giancinto della Cananea notes how measures intended to simplify and speed up administrative action unintendedly produced further delay and complexity through increased litigation and decreased transparency. John Halligan stresses that making programme evaluation mandatory across Australian Commonwealth government in the 1980s had the opposite of the intended effect, weakening evaluation as it became bureaucratised. And, observing an outcome that seems to come somewhere between futility and perversity, Per Lœgreid and Paul Roness note an "autonomy paradox" in Norwegian public sector reform. This paradox describes the tendency of attempts to increase flexibility by devolving administrative powers to produce instead standardised local solutions, because "autonomy" triggers a diffusion process in which administrative units become more alike rather than more diverse. Not surprisingly, perhaps, our narrators offer fewer cases of the more exotic types of perversity in the bottom right-hand categories of our table. But in pub2 Hesse

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Joachim Jens Hesse, Christopher Hood and B. Guy Peters

lie sector reform the "perversity but with a bonus" outcome (case 8) can sometimes occur through a form of "loser's blessing". "Loser's blessing" is the opposite of the well-known phenomenon of "winner's curse" in economics - the disadvantages that can follow from pioneering or early success, as noted earlier. "Winner's curse" is a paradox that some of our contributors have observed, notably Joachim Jens Hesse in his account of the German case, showing how early success in achieving a modern bureaucracy created obstructions for later reform. The opposite, "loser's blessing", comes when reverse effects of reform efforts pave the way for "second chance" learning to produce more effective reform at a later date. Such an analysis has been applied by Christopher Hood ( 1996) to account for the way the reverse effects of attempts to reshape the public sector by the Heath Conservative government in the early 1970s produced a learning effect when the Conservatives returned to power in the late 1970s. In this volume, a possible candidate for case 8 is John Burns ' account of the unintentional "upsizing" of the Chinese bureaucracy, when downsizing was the ostensible aim. Although that outcome was perverse at one level, it was associated with a positive outcome at another as being part of the state structure was able to establish the infrastructure for a market economy, such as bankruptcy regulation and national tax collection. The final possible outcome on our table - perversity plus jeopardy (case 9) hardly figures in most of the accounts by our narrators. Perhaps the closest we come to such an outcome is Guy Carcassone's account of "the strong state in chains" paradox for the French case, with each attempt to reform the state making it more dysfunctional, as the juridification of policymaking and conflict resolution overwhelms the whole society. Christopher Hood's account of "double whammy" effects of the unintended regulatory explosion within the UK state - when arms-length regulation and central direction both increase, in contrast to the "freedom to manage" rhetoric of official accounts of public sector reform - also verges on "case 9" territory. What this brief analysis shows is that the cases discussed in this book range over much of the array of possible "output paradoxes" in public sector reform set out above. What we cannot say on the basis of the cases described in this book is what the overall incidence of the different types of paradoxes are across public sector reform efforts as a whole. And given that paradoxes are to some degree in the eye of the beholder, as noted earlier, there is an inter-coder reliability problem familiar in any social science categorisation exercise. We would need multiple coders to establish how widely the perception of paradox by our individual narrators was shared, and whether other coders would pick up paradoxes that our observers did not stress. The few examples of "case 9" paradoxes in our collection may reflect the relative rarity of such outcomes, or the disinclination of most of our narrators to "paint grey on grey". But what we can say is that the more you look at comparative public sector reform experience, the

Introduction

19

more output paradoxes you can see. Up to now comparative analysis of public sector reform has not looked hard or systematically enough for such effects.

I I I . Are Paradoxes Resolvable? The formal definition of a paradox given above is an "apparent contradiction". This means that if we as academics can understand that the contradiction is indeed only apparent, then we can simply resolve the paradoxes in our minds. But to the extent that paradoxes are resolved in the real world of politics and administration, the mechanisms of resolution may be somewhat different, and certainly more difficult. Those real-world mechanisms for paradox resolution may include shocks, policy reversals, or simply the passage of time. In many instances, however, politicians may not want to resolve the paradoxes; the contradiction may have become deeply embedded in the administrative system so that attempting to resolve them might upset delicate political balances, hence there may be a need for crises or external shocks to jolt the system into accepting the need for more effective change.

1. Shocks and Crises as Resolution Mechanisms for Input Paradoxes Shocks and crises appear to be the main resolution mechanisms for what we earlier termed "santé imaginaire " input paradoxes, or bad fit between systemic responses and the environment. That was arguably what resolved the "input paradox" of Italy's non-existent public sector reform programme in the face of evident administrative failings in the 1990s, or the pre-reform New Zealand "input paradox" of the early 1980s - of a settler-capitalist country that had adopted an economic regulatory system causing it to be dubbed "the Poland of the South Pacific". Absent shocks and crises, forces of inertia may sustain a " santé imaginaire " paradox for a long period. It remains to be seen whether the need to adopt the whole machinery of government to the European challenge does for German public sector reform what the sleaze revelations of the early 1990s did for the Italian case. Germany may have been able to maintain a lessreformed public sector so long as its currency was dominant in Europe, but after becoming a part of a larger currency area, the opportunities for sheltering apparent inefficiencies in administration may be lessened (for a contrasting view on fiscal squeeze as a spur to deep change see Laughlin 1991). If a paradox is to be resolved with the assistance of a crisis, the outcome may be either a "soft landing" or a "hard landing". In the former case there is an option to overcome the crisis through normal political means and the perceived 2*

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Joachim Jens Hesse, Christopher Hood and B. Guy Peters

paradoxes within public administration can be resolved readily. In the case of Germany a soft landing appears to be possible, with the Länder and local governments already beginning to adapt to the increased demands on the system, and the central government perhaps following in due course. Italy too, despite the turmoil in the system, has been able to make rather effective reforms and, among other things, to meet the requirements for entering the Euro.

2. Reversion to Type as a Resolution Mechanism for Bad-fit Input Paradoxes Crisis may be the midwife of input-paradox resolution, but process itself commonly consists of policy reversals, and in some cases those reversals involve a reversion to type that removes the "bad fit". The Thatcherite era in the UK removed much of the Dunleavy "ungrounded statism" paradox referred to earlier by downsizing direct state provision, as discussed in Christopher Hood's chapter on the UK in this volume. In the case of the United States, there was according to Guy Peters a substantial lag before the US adopted many of the managerialist techniques that had become common in other countries, but in the end this paradox was terminated by the adoption of legislation such as the Government Performance and Results Act. According to Peters , a number of other strands of reform had diverted attention away from the basic managerial values in the society, and those values were finally asserted. The need for Swedish Social Democrats to take the Left Party into government following the 1998 election may mean some return to the Swedish model. In general, "bad fit" paradoxes of type appear more readily resolved by reverting to type than do those of degree. This is especially the case when a system has under-reacted, and needs to address fundamental problems in the system with more than reform band-aids. In these cases more extreme measures may be needed, e.g. some form of crisis. The experiences of Japan after the time period covered in the paper in this volume indicate that the attempts to address major problems with minimalist solutions may not do the job at all. The tendency to adopt band-aid solutions may be heightened when some aspects of the system (in the case of Japan the economy) are performing well. In this case the palliative solutions have not addressed more fundamental problems that continue to affect governmental performance.

Introduction

21

3. New Paradoxes for Old? Resolving One Paradox and Creating Others A long-standing observation by students of public administration (Simon 1947) and administrative reform {Peters 1998) is that the remedies imposed for perceived problems often generate new, and opposite problems. This outcome also appears to be common for attempts to resolve paradoxes in reform; in many cases resolving one paradox creates another. For example, Christopher Hood argues in this volume that the UK resolved the "ungrounded statism" paradox over the Thatcher/Major/Blair era but replaced it by another paradox of a heavily-regulated public sector. It is as if Germany adopted the managerialist reforms pursued in some other European countries, only to create a new input paradox of employing an administrative style being completely out of character with the legalistic tradition of German administration. Moreover, there appear to be some paradoxical situations that, if anything, become even more paradoxical when attempts are made to resolve them. Such processes approximate the findings of the famous "Hawthorne Effectobserved in experiments in the Hawthorne Works of the Eastern Electric Company in Chicago from the late 1920s to the early 1930s, in which any intervention to change the workers' conditions, regardless of its nature, produced increases in productivity {Roethlisber gerì Dickson! Wright 1939). The administrative reform equivalent includes cases where every additional change, irrespective of its nature or the extent to which the system has already been reformed, appears to have a positive effect on the functioning of the bureaucracy. The opposite pattern is the administrative reform equivalent of the well-known phenomenon of any attempt to adjust air-conditioning to make it worse, as may apply to the Canadian case according to the comparison of the US and Canadian reform cases in this volume. A possible policy conclusion is that governments are often better advised to live with some paradoxes rather than risk swapping them for others. But at this stage we can only make such judgements in retrospect. We do not yet have sufficient comparative understanding of administrative reform processes to do more. But the papers contained in this book provide some suggestive pointers to pitfalls and unexpected elements in public sector reform, and hence form a first step to fuller understanding the paradox perspective that this book highlights.

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References

Aucoin, P. (1995). The New Public Management: Canada in Comparative Perspective. Montreal: IRPP. Barzelay, M. (2000). The New Public Management: Improving Research and Policy Dialogue. Berkeley, CA: California University Press. Blau, P. M. (1955). The Dynamics of Bureaucracy. Chicago: Chicago University Press. Cameron , Κ. S JFreeman, S. Ì./Mishra , Α. Κ. (1993). "Downsizing and Redesigning Organizations", in: G. P. Huber and W. H. Glick (eds.), Organizational Change and Redesign. New York: Oxford University Press, 19-65. Dunleavy , P. J. (1989). "The United Kingdom: Paradoxes of an Ungrounded Statism", in: F.G. Castles (ed.), The Comparative History of Public Policy. Cambridge, Polity Press, 242-291. Earl , P. E. (1984). The Corporate Imagination: How Big Companies Make Mistakes. Brighton: Wheatsheaf. Gregory , R. (1995). "Accountability, Responsibility and Corruption: Managing the 'Public Production Process'", in: J. Boston (ed.), The State Under Contract. Wellington: Bridget Williams Books, 56-77. Handy , C. B. (1994). The Age of Paradox. Boston, MA: Harvard Business School Press. Hesse, J. J. (1995). "Comparative Public Administration: The State of the Art", in: J. J. Hesse and T. A. J. Toonen (eds.), The European Yearbook of Comparative Government and Public Administration, Vol. 1/1994. Baden-Baden: Nomos, 523-549 — (1997). "Rebuilding the State. Public Sector Reform in Central and Eastern Europe", in: J.-E. Lane (ed.), Public Sector Reform: Rationale, Trends and Problems. London: Sage, 114-146. Hirschman , A. O. (1991). The Rhetoric of Reaction. Cambridge, Mass.: Belknap Press. Hogwood , B. W./ Peters, B. G. (1985). The Pathology of Public Policy. Oxford: Clarendon Press. Hood , C. (1996). "United Kingdom: From Second Chance to Near-Miss Learning", in: J. P. Olsen and B. G. Peters (eds.), Lessons from Experience. Oslo: Scandinavian University Press, 36-70. — (2000). "Paradoxes of Public-Sector Managen al ism, Old Public Management and Public Service Bargains". International Public Management Journal 3, 1-22. Huczynski , A. A. (1993). Management Gurus. London: Routledge. Katzenbach , E. (1958). "The Horse Cavalry in the Twentieth Century: A Study in Policy Response". Public Policy 1958, 120-149. Laughlin , R. (1991). "Environmental Disturbances and Organizational Transitions and Transformations: Some Alternative Models". Organization Studies 12/2, 209-232. Lœgreid, P. (1994). "Norway", in: C. Hood and B. G. Peters (eds.), Rewards at the Top. London: Sage, 133-145. Maor , M. (1999). "The Paradox of Managerial ism". Public Administration Review 59, 5-18.

Introduction

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Merton . R. Κ. (1968). Social Theory and Social Structure (enlarged edition). New York: Free Press. Meyer , M JZucker, L. (1989). Permanently Failing Organizations. Newbury Park: Sage. Mueller , H. E. (1984). Education and Monopoly. Berkeley: California Press. Olsen, J. ? J Peters, B. G. (eds.) (1996). Lessons from Experience. Oslo: Scandinavian University Press. Osborne , DJGaebler, E. (1992). Reinventing Government. Reading, Mass.: AddisonWesley. Peters , B. G. (1998). "What Works? The Antiphons of Administrative Reform", in: B. G. Peters and D. J. Savoie (eds.), Taking Stock. Montreal: McGill/Queens University Press, 78-107. Roe t hi is berger , F. J ./Dickson, W. ] ./Wright, Cambridge, Mass.: Harvard University Press.

H. A. (1939). Management and the Worker.

Rothstein, Β. (1996). The Social Democratic State: The Swedish Model and the Bureaucratic Problems of Social Reforms. Pittsburgh: University of Pittsburgh Press. Schick, A. (1996). The Spirit of Reform: Managing the New Zealand State Sector in a Time of Change. Wellington: State Services Commission. Sieber, S. (1981). Fatal Remedies. New York: Plenum. Simon, H. A. (1946). "The Proverbs of Administration". Public Administration Review 6, 53-67. Thoenig, J.-C ./Friedberg, E. (1970). La création des directions departmental es de l'equipement. Paris: CNRS. Tocqueville, A. de (1949). L'Ancien Régime. Oxford: Clarendon Press. Veblen, T. (1939). Imperial Germany and the Industrial Revolution. 2nd ed. London: Seeker and Warburg. Weldon, T. D. (1953). The Vocabulary of Politics. Harmondsworth: Penguin Books. Yeatman, A. (1987). "The Concept of Public Management and the Australian State in the 1980s". Australian Journal of Public Administration 46/4, 339-353. Zifcak, S. M. (1994). New Managerialism: Administrative Reform in Whitehall and Canberra. Buckingham: Open University Press.

The Failure of Managerial Reform in a Managerial Society: Public Sector Reform in the United States By B. Guy Peters

"Most schemes of political improvement are very laughable things." Samuel Johnson

I. Introduction The comparative project for which this paper was written was prompted in part by the observation that the 1980s and 1990s were decades of widespread, and often fundamental, reform in the public sector. This characterisation was true of the OECD world, and was even more true of countries that were undergoing the transition from more authoritarian to more democratic forms of government. If we had observed only the United States, however, until the election of the Clinton administration this would not have been a conclusion that would have readily jumped to mind. There were a number of attacks on the public sector during the Reagan and Bush administrations, but these turned out to be largely ineffectual due to more ideological rhetoric about the evils of government than fundamental change. It was not before the Clinton administration came into office that the government took on the task of pressing reforms on the system.

1. Change in the Reagan and Bush Years At least one of the efforts at change during the Reagan and Bush presidencies turned out to be fundamental, with the Grace Commission making recommendations that would have substantially reduced the scope of the federal government and have reduced the federal budget by at least one third. The recommendations contained within the report were, however, so divorced from the reality of the public sector in the United States that relatively few were adopted {Peters

26

Β. Guy Peters

1985a). Most of the efforts at change, however, were "tinkering", and were directed largely at the litany of "fraud, waste and abuse" {Benda!Levine 1988). They produced some real benefits for government, but certainly did not change in any fundamental sense the nature of the public sector.1 Although both were Republicans, Presidents Reagan and Bush went about the process of change differently and had rather different goals. As noted, Ronald Reagan (or at least his advisors) might have liked to change the federal government rather thoroughly. They also went about proposing and implementing those changes in a confrontational style, often using private sector personnel who were not tainted by any experience in government. George Bush, on the other hand, had more respect for the public service and had less sweeping goals and a more cooperative style. In the end, however, President Bush appears to have been the more successful, for implementing Total Quality Management in the federal government if for no other reason.2 Despite a number of efforts and a number of proposals the federal government in January 1993 was little different from that inherited by Ronald Reagan in January 1981.

2. Administrative Change in the Clinton Administration Attempts at administrative change in the Clinton administration have been much more fundamental. The National Performance Review (Gore Commission), if fully implemented, will remake government at the federal level in a number of ways. In the first instance the report advocates eliminating much of the internal regulation within the federal government so that „the managers can manage". This would mean that, among other things, the federal civil service system would be undermined i f not eliminated entirely, given that the numerous personnel regulations (some 10,000 pages) of the system inhibit flexibility and constrain managerial autonomy. Another crucial element of the Gore strategy for changing the public sector was "reinvention". This is a vague term at best, but in this context that vagueness may be a genuine virtue. This part of the programme is being implemented by permitting each year a number of organisations to "reinvent" themselves, and to decide for themselves what they believe the organisation should be doing and how they should be doing it (Thompson! Ingraham 1997). This approach to change allows the organisations involved a great deal of latitude in defining their own purposes, and also involves 1 If anything, the Carter administration (1976-1980) produced more sweeping change in government including the Civil Service Reform Act of 1978, the institutionalisation of the Inspectors General in all departments and large agencies, and the reorganisation of several cabinet departments. 2 President Bush created the Federal Quality Institute which most Americans consider an oxymoron.

Public Sector Reform in the United States

27

the members of the organisation very directly in the process of change. Thus, unlike some of the market oriented reforms implemented from the top-down in other reform efforts, this is a more "bottom-up", participative effort at change. This programme has been conceived of as a long-term effort, requiring at least ten years, so that the final impact of these changes are not yet known, but to this point it is clear that there is the possibility if not the probability of a real revamping of the system. In defining our expectations of the Gore Commission and its impacts on government we should be careful to remember that American government has an amazing capacity to convert proposals for fundamental change into incremental adjustment. The history of reform from the Brownlow Commission through the two Hoover Commissions and then into the present time is that reforms tend to be reduced to the lowest common denominator. The Gore Commission, by using personnel from within the civil service itself and excluding Congress, attempted to deflect the incrementalist tendencies (see Peters 1996).

3. Benchmarking Public Administration in the United States Public administration has changed less in the United States than in many, or most, other developed democracies. That statement appears correct, given as yet the absence of major structural changes such as "Next Steps", but there certainly have been important transformations. The use of the several benchmarks developed for comparative analysis can provide a means of better gauging the degree and nature of the changes that have occurred in public administration in the United States.

II. Isolation or Integration of the Public Services One belief of Americans is that their government should not be remote and bureaucratic. That view was most clearly expressed by President Andrew Jackson in his defence of the "spoils system", and continues to be heard today. Despite a belief in "government by the people", the federal public service - especially at the top - does not really mirror American society.

1. The Isolation of the Public Service Career from the Private Sector (a) Lateral Entry. The government of the United States historically has had greater connection with the private sector than in most other countries. The "spoils system" did not end with the passage of the Pendleton Act in 1883, establishing the federal civil service. That piece of legislation covered only a

28

Β. Guy Peters

small proportion of federal employees and, despite successive expansions over the decades, by the time of the Eisenhower administration only about 75 percent of federal employment was covered by merit requirements {Johnson!Liebcap 1994). One element of public employment that remained mostly filled by recruits from outside the career civil service is senior policy and management positions in the federal government. The "government of strangers" {Heclo 1978) continues to dominate Washington, and indeed the power of the in and outers has tended to increase since the Reagan administration. 3 Even with the history of external recruitment into government, there has been a significant shift in the pattern of employment in a number of federal agencies. Paul Light (1996), for example, has discussed the "thickening" of the federal government in the United States, with the gradual accretion of levels of politicised managers and advisors, and is concerned with the lessening of accountability that this style of management appears to introduce. Patricia Ingraham , James Thompson and Elliot Eisenberg (1995) provide additional evidence on the insertion of new layers of politicised controls into federal agencies, especially in agencies with a higher political profile. Unlike programmes of lateral recruitment in many other countries, the emphasis in the United States remains on recruiting outside policy advisors more than recruiting managers. The civil servants on the other hand have, if anything, become more concerned with management.4 That role has remained legitimately open to them and the civil servants appear willing to devote more of their time and energy to organisational issues and less on analysing and advocating policy concerns. There is relatively little tradition of "pantouflagë " per se in the United States, the public sector not having the positive reputation that makes its members valuable employees outside government. Individuals who come from the private sector to work in Washington, however, tend to remain for only a limited time. They often come because they believe that their careers can be enhanced by government experience. Lawyers from Wall Street, for example, often find that they can profit from some time in the Security and Exchange Commission. Also, there has been a greater flight of senior federal employees to the private sector from the Reagan years onwards, as pay and conditions of service have declined, and the respect for careerists in Washington with it. (b) Racial and Gender Composition. A second aspect of the relationship between the public service and society is the representativeness of the public service {Meier 1975; Peters 1994: 87-92). In all industrialised democracies this 3

The exception was to some extent the Bush administration which tended to rely more on the career civil service. 4 The general down-playing of policy concerns from the time of at least the Reagan administration onward has tended to make policy a less interesting pursuit for most public servants.

Public Sector Reform in the United States

29

relationship involves issues of gender equality, and in the United States also involves very pronounced issues about the ethnic representativeness of the public service. The American civil service does not have the élite traditions of many European services. Graduates of Purdue are more likely than graduates of Princeton to populate the federal service. That having been said, however, the senior civil service historically has composed largely of white males.5 There have been pressures for the civil service to be a "model employer" and to hire more women and minorities. At one level, this programme of equality has been a success, with the federal civil service now being almost exactly half female, and having a much higher proportion of minority group members than in the general population. The figures demonstrating the over-representation of women and minorities in the public sector are largely deceptive. If we look only at the senior positions in the civil service, there is a marked absence of representativeness, especially for the members of minority groups. The good news, however, is that there has been movement towards greater representativeness, with a marked shift towards employment of women and minorities, even from the 1970s and early 1980s. In addition, if we look at the mentioned "in and outers" they appear also to have become somewhat more representative of the population in general. These are not the type of administrative changes usually associated with the reform projects of the 1980s and 1990s, but they are marked alterations in the nature of the public service in the United States.6

2. Use of Alternative Service Delivery Systems Again, the distinctiveness of service provision in the United States makes shifts in the role of public sector somewhat more difficult to discern. There are almost no policy areas in which government has had a monopoly7, and there is a history of public and private involvement in almost all policy areas (see Peters 1985b). For example, despite the importance of public education for socialising large numbers of immigrants and creating greater social homogeneity, there has been strong private sector involvement in providing education. That role has

5

One of the early studies of the public service in the United States is called "Men Who Ruled". 6 The shift in these values also can be seen in the composition of Presidential cabinets, even under more conservative Republican presidents. 7 Even defence could be said to involve several million private sector employees producing the hardware used by the Department of Defence.

30

Β. Guy Peters

been especially evident for Roman Catholic schools at the elementary and secondary levels, and for a large numbers of private colleges and universities at the tertiary level.8 Likewise, although health care is usually conceptualised as a private sector activity in the United States, over 40 percent of total spending for health comes from the public sector - a percentage that increases annually.

3. Decentralisation As well as utilising the private sector extensively, American public administration is also decentralised to state and local government. State and local public employment has been increasing relative to federal employment for most of the post-war period. Despite the political rhetoric about the power of the Washington bureaucracy, if we want to find big government in the United States we have to go to the state capitals and to the city halls. The degree of decentralisation can be seen in a number of crucial policy areas such as education, health and social welfare. In all these areas the federal government has a minor role in public employment, with a much larger role in funding these services. As is true in most federal governments, the actual implementation of domestic programmes is a function of sub-national governments, regardless of where the money for the programmes comes from.

I I I . The "Ruliness" of Public Sector Organisations The basic question here is the extent to which the public sector is governed by uniform rules. One major change in the public sector in many regimes is the break-up of uniform and rule-driven systems of management in favour of the more personalised systems presumed to be characteristic of the market sector.

1. Personnel Management There have been some important changes in personnel management in the federal government. As a part of the reforms coming out of the work of the Gore Commission (Peters/ Savoie 1994) the 10,000 pages of personnel rules administered by the Office of Personnel Management were dropped, in favour

8 Despite the constitutional separation of church and state there are a variety of mechanisms through which the public sector is able to support parochial education. A number of the best known American universities are either private (Harvard, Yale, Stanford) or church related (Notre Dame, Georgetown, Wesleyan).

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of allowing every organisation to make its own rules, consistent with merit principles. Many organisations who had to make their own rules simply readopted the old rule book, but the concept of a unified set of rules governing hiring, firing and promotion in the civil service is gone.9 These changes in personnel policy are major components of efforts to "deregulate government" (Dilulio 1994). The above having been said, however, some aspects of personnel management are unchanged. The pay system remains largely uniform, even for personnel recruited from outside government. All positions ranked at the same level are assigned the same basic level of pay. There are opportunities for bonuses, but the unwillingness of Congress to fund those adequately for the Senior Executive Service {Benda!Levine 1988) has taken most meaning out of pay for performance. The other major divergence from the idea of pay uniformity is "special rate hires" to compensate certain types of employees - primarily professionals, such as physicians, for whom even the top salaries in the public service could not compete with salaries in the private sector.

2. The Nature of the Rules As indicated by the above discussion, there are at least two levels of rules governing public employment. First, there is some significant legislation, such as the Pendleton Act (1883), Classification Acts (1923 and 1949), and the Civil Service Reform Act (1978). Most of the rules governing the civil service are executive orders and regulations made by the Office of Personnel Management, or before that the Civil Service Commission.10 Given that these rules are made as delegated legislation, they can also be revoked relatively easily. There is no mention of the civil service in the Constitution, other than a vague reference to the ability of the president to appoint "inferior officers". The other major piece of legislation that governs the public bureaucracy is the Administrative Procedures Act (APA) of 1946 {Freedman 1980). This Act governs a number of activities of the civil service, including rule-making and rule-adjudication. The APA is also important for accountability and specifies a number of requirements for conduct of public business. Other legislation affect-

9

That principle had to some extent been weakened earlier by successful challenges of the fairness to minorities and women of the PACE exam used to recruit employees. The agencies were then to give the right to devise their own means of recruitment (Horner 1992). 10 The Civil Service Reform Act of 1978 divided the former Civil Service Commission into the Office of Personnel Management responsible for managing the civil service and the Merit System Protection Board responsible for adjudicating claims of violation of the merit principles underlying system.

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Β. Guy Peters

ing accountability includes amendments to the Administrative Procedures Act in the form of the Freedom of Information Act and the creation of Offices of the Inspector General in all large organisations during the Carter Administration.

3. The Unity of the Public Service (a) Employers. The best way to conceptualise the unity, or lack of it, of the federal civil service as an employer is to discuss the different pay systems within the federal service. These function as, in effect, different employers within the federal government and, as noted, remain in place despite the deregulation of other aspects of the pay system. The large majority of public employees are paid through the General Schedule11, covering most career white collar employees within the bulk of the executive branch (over 900,000 employees). There are, however, at least five other categories of importance: 1. The Wage System. This scheme (some 370,000 employees) covers bluecollar employees in executive departments. 2. The Executive Schedule. This scheme covers non-career public employees, primarily the "in and outers", as well as cabinet secretaries and other top executives. 3. The Senior Executive Service. Covers the top positions in the career civil service (the former "supergrades" of GS 15-18). 4. The Postal Pay System. Covers the over 700,000 employees in the US Postal Service. 5. Other Pay Systems. A variety of other pay systems including those of the Central Intelligence Agency, the Tennessee Valley Authority, and the US Public Health Service. (b) Budget Units. The federal budget process, and the resulting budget document, are highly decentralised. Each executive agency within the cabinet departments and the independent executive agencies is treated individually in the process, even i f it works through a cabinet department in the first instance. Each organisation is given an independent budget and it is difficult for a cabinet department to reallocate funds, even among organisations within its own control. Congress utilises the budget as a major instrument of its control over the executive branch and is, therefore, reluctant to permit greater budgetary freedom.

11

The standard way to refer to members of the federal civil service is through their position (from 1-15) on this pay schedule, e.g. GS-8.

Public Sector Reform in the United States

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Despite the success in enhancing the freedom of public organisations in the management of personnel allocations, there is less freedom to utilise public money. Further, the politics of the budget process is organised around small units agencies and even programmes - and it is to those units that interest groups press their claims and provide their political support. Again, this decentralisation of public finance is a long-standing feature of American politics, largely unaffected by numerous attempts at budgetaiy or administrative reform. Additional reforms of budgeting will be in the direction of greater centralisation, e.g. the line-item veto for the president.

4. The Nature of Output Controls The budgetary and management process of the United States government remains centred on inputs, rather than on outputs, for control. The federal budget is a central part of the control process, with a detailed line-item budget used to exert control over the agencies.12 These budgetary controls extend both to the amount of money available to agencies, as well as to the number of personnel they are entitled to hire. There has been some loosening of the personnel controls as a part of the attempts of the Gore Commission to make American government less dominated by rules (NPR 1993), but these changes have been rather slow and halting. There are also ongoing attempts to develop output measures for the operations of government in the United States. The budget document now includes measures of the outputs of the organisations whose funding is under consideration, but there is little or no direct linkage between those measures and the level of funding provided, and only a limited attempt to utilise the indicators to gauge the efficiency of organisations. There is also a history of substantial evaluation research, but those measures of outputs, and withinputs, are not connected directly to the process of budgeting. This under-utilisation of evaluation represents to some degree the competition for control over the bureaucracy between substantive and appropriations committees in Congress. Prior to initiating the Gore reforms, coordination and control within the public sector had been managed through a number of central agencies - the Office of Personnel Management (OPM), the General Services Administration (GSA), the Office of Management and Budget (OMB), and the White House. To those agencies should be added the (at least) four Congressional committees that su-

12

That is to say, the budget document divides appropriations into a number of input categories, such as personnel and equipment, and again moving resources among them can be difficult (especially outside the Department of Defence). 3 Hesse

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Β. Guy Peters

pervise each agency.13 The aftermath of Gore, as well as some on-going patterns of change in the federal government, have reduced the involvement of both the OPM and GSA, and to accentuate the role of OMB. Congress and its committees have remained a constant in oversight, with potential conflict between the committees and between those and the other control agencies. Further, several Congressional equivalents of central agencies - the Congressional Budget Office (CBO) and General Accounting Office (GAO) are also players in the game of overseeing the public bureaucracy. It must be said that to some extent the power of all of the central agencies executive and legislative alike - have tended to wane since 1980. This loss of influence is especially pronounced if we focus attention upon their role in using policy analysis as a means of evaluating existing policies and planning new ones. The power of those analytic techniques has tended to be supplanted by ideology and the use of "partisan analysis" to justify programmes. The change in analytic styles is evidenced in part by the downsizing of GAO, especially on their policy analytic side. An organisation that has gained a great deal of respect in Washington for the quality and impartiality of its work has now had many of its claws dulled by the implementation of a more partisan agenda.14

5. Pay for Performance As noted, there is limited pay for performance in the federal government of the United States, despite several attempts to implement that programme. There is a legislated plan for a performance-based reward system for the Senior Executive Service and to some extent also for middle-management, but the failures of Congress to fund some of the programmes adequately, as well as some implementation difficulties (Eisenberg/ Ingraham 1993), have rendered the programme largely inoperative. Further, to the extent that these programmes have been implemented, they are often considered illegitimate by the participants in government.

13 There is a substantive committee and an appropriations subcommittee that exercises overview over each agency. In some instances, especially when there is a crisis or a scandal, more than those four will try to involve themselves on oversight. 14 The claws have been dulled but not pulled entirely, and the organisation still does provide useful analytic work for anyone who wants to use it.

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IV. Overall Regulatory Style The fundamental nature of the presidential institutions and the "separated system" {Jones 1995) in the United States places a number of demands for greater control of the executive on the legislative and judicial institutions. We have already pointed out that Congress and its committees play a crucial part in the control of the public sector. The courts are also important in control. The United States does not use a system of administrative courts as do many European countries, but there is a system of administrative law, again based in large part on the Administrative Procedures Act of 1946. The courts must decide if agencies are acting in an "arbitrary and capricious manner", or acting ultra vires . Over time the courts have tended to place more demands for disclosure and consultation on agencies. Demands of "hybrid rule-making" (coming from Vermont Yankee ), for example, require greater justification for administrative decisions (see Gormley 1987, but in contrast Schoenbrod 1995). There are also a number of mechanisms for public consultation and control in American government. Most such mechanisms reside at the state and local government levels, but even at the federal level there are requirements for popular participation. For example, even in informal rule-making by administrative agencies, there are opportunities for public consultation, while formal rulemaking requires extensive involvement. Also, a number of activities of government agencies require open public hearings that may be determinate. Despite the rhetoric common at this time, bureaucracies would encounter some difficulty if they attempt to "run roughshod" over the private sector.

V. Summary Evidence, both quantitative and impressionistic, presented here points to the relatively slow and insignificant change in public administration in the United States. While the public service of the United Kingdom, New Zealand and perhaps even some Scandinavian countries might not be instantly recognisable to someone who left it a decade ago, the civil service of the United States probably would be. Certainly some aspects of administration have changed, but the basic structures and processes are almost untouched. Even with the deregulation of hiring and firing, the principles of the merit system remain in place, and many older procedures have simply been adopted by individual agencies to which authority for personnel has been devolved. Why has there been relatively little change in the American bureaucracy? One of the most important answers is presidentialism and the role that Congress plays in controlling executive branch agencies. Also, American political culture is so suspicious of government that changes that appear to enhance the autonomy of government, and especially the *

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Β. Guy Peters

autonomy of the federal bureaucracy, are questionable in the eyes of the public, as well as for many politicians. Also, there has been no political leader, other than perhaps Vice President Gore, willing to invest a significant amount of time in administrative change. Thus, the usual litany of "institutions, ideas and individuals" all have something to contribute to understanding a lack of change in the system.

VI. Paradoxes of Change in the United States The business orientation of social and political life in the United States and the widespread use of managerial language within society would lead one to expect that American public administration would be heavily influenced by managerialist thinking. Indeed, we might expect the public bureaucracy of the United States to be among the most advanced in the world in utilising the techniques that have become associated with the "New Public Management". The reality, however, is that despite the widespread managerialist and private sector rhetoric there has been relatively little infusion of even basic managerialist technology into the federal government. In comparison to other governments especially other Anglo-American democracies such as the United Kingdom, Canada and Australia - public management in the United States still appears rather antiquated.15 Leaders in the United States frequently have talked about managerial changes during the 1980s and 1990s, but have never produced changes of the magnitude of "Next Steps" in Britain, or the Financial Management Improvement Program in Australia, or even the earlier Improving Managerial Authority and Accountability in Canada. This chapter will examine, and then attempt to explain, this apparent paradox in American government. When we discuss apparent failings of managerialism at the federal level, we should also point to the successes of this "revolution" at the state and local levels. This is in many ways a more important locus for success, given that approximately 80 percent of all public employees in the United States work in sub-national governments. Further, these governments are responsible for administering many federal programmes, especially social programmes such as Medicaid and welfare. 16 This administrative arrangement means that even if managerialism is not very well developed at the federal level, many significant

15 This again, is more true of the federal government than of state and local government for reasons that will discussed below. 16 The further devolution of welfare (Aid to Families with Dependent Children) to the states, after the welfare reform of 1996, will place even greater pressures for efficiency and modernity on the states.

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federal programmes are actually delivered in this presumably more efficient manner. State and local governments tend to be responsible for programmes that are more amenable to managerialist practices than are many programmes of the federal government - other than those that already are administered by subnational units. Most of the examples of successful "entrepreneurial government" presented in Osborne and Gaebler' s now famous book (1992) come from subnational governments. The programmes of these governments tend to have more clearly identifiable results than do many, or most, federal programmes and, thus, state and local managers can more readily measure outputs and then improve programme efficiency. Further, sub-national governments have not been as heavily burdened with internal rules and regulations as has the federal government - even before they introduced the newer managerial techniques - and hence those managerial techniques could be introduced with less disruption to established personnel and management programmes. Therefore, the (recent) historical conception of the federal government as the most progressive element17 of American government has been reversed, it is now playing catch-up with state and local governments.

V I I . Managerialism Lost The public sector in the United States traditionally has been more open to the private sector than have the public sectors of most other countries. This openness is seen most clearly in the frequent movement of senior managers and policy advisors back and forth between the two sectors (Heclo 1978; Mackenzie 1987). In addition, much American thinking about the public sector has been conditioned by private sector thinking. For example, the Brownlow Commission wanted to make the President a chief executive, much like the president of a major corporation {Arnold 1986). Likewise, Chester Barnard, whose writing influenced public sector management, was an executive of Bell Telephone who used his business experience to prescribe reforms for the public sector as well as private business (see Williamson 1996). Significant managerial and budget reforms in the public sector, including PPBS, MBO and ZBB, were all imported from the private sector and then applied to government. 18

17

"Progressive" here means up-to-date with fads and fashion of the time rather than implying about whether real social progress is being achieved. 18 PPBS - Planning, Programming, Budgeting Systems; MBO - Management by Objectives; ZBB - Zero-Based Budgeting.

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All the above having been said, the United States appears to lag behind many other Western countries, including those which traditionally have paid much less homage to the private sector (Rouban 1993; Goni 1993), in adopting managerialist techniques which have become common in government during the 1980s and 1990s. There are several definitions of the contemporary strain of managerialism, most recognising that the term is multi-faceted and contains a variety of elements - including some elements of ideology. In general, however, the meaning of managerialism is that greater efficiency in the public sector can be obtained through application of private sector techniques and values. The techniques generally involve reducing the impact of internal rules and procedures in public administration in order to permit individuals and organisations to become more entrepreneurial in the execution of their tasks. Further, the managerial approach advocates "empowering" the lower echelons of public organisations, as well as clients of those organisations, to make many of their own decisions.19 Finally, managerialism also implies the use of markets or marketlike mechanisms as the means for allocating resources even within the public sector. There is a sense in managerialism that administration should be separated from politics both structurally (again "Next Steps" in Britain and "corporatisation" in New Zealand) as well as in practice (Chapman 1996). There has been a tendency for government leaders to attempt to appropriate more of the policy making function for themselves and their ideological allies, and to relegate more of the burdens of management to their civil servants. The political pressures on the civil service tend to reduce the influence of civil servants at one stage of the policy process, but enhance their powers at the implementation stage. With those enhanced powers in implementation also goes enhanced accountability, so that the confusion over responsibility for outcomes, that can result in systems of public administration in which policy and administration are fused, is less likely to occur in a managerialist arrangement. Even if the techniques for public sector reform are not derived directly from the private sector, they generally share the perspective of private management that simple economic efficiency is the primary goal (see Horn 1995). Further, managerialism tends to be hostile to the familiar canons of public administration and its reliance on hierarchy, permanence, relatively rigid personnel systems and the like (Stewart/Walsh 1992). Managerialist reforms intend to make public sector management more flexible, more oriented toward results rather than procedures, and oriented toward service to clients rather than adherence to more conventional standards of legal and financial probity. Producing results and creating cus-

19

The concept of "empowerment" plays a significant role in the Gore Report (see below) and the subsequent reforms flowing from it.

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tomer satisfaction are more important measures of organisational and individual performance than are conventional procedural and legal standards. Operating under that broad definition of managerialism, the US federal government has yet to become very managerialist, especially when compared to counterparts overseas. This is not because of any absence of attempts to implement managerial reforms. The Civil Service Reform Act adopted during the Carter administration can be conceptualised as an early step toward managerialism, albeit with mixed results (IngrahamlRosenbloom 1992). The Act did create the Senior Executive Service (SES) and provided for the merit pay at a variety of levels in the civil service. The bonuses that were supposed to compensate SES members for the risks involved in taking those jobs (loss of job security) were not, however, funded and President Reagan used the powers in the Act to appoint a large number (ten percent of the general SES) of political executives {BendaiLevine 1988). The result was a severe loss of morale in the senior civil service and the early retirement of a large number of those employees; an average of eleven percent of the SES members in office left each year from 1980 through 1986.20 The dissatisfaction with the rewards of public office persisted after the Reagan years (Wilson 1994). In addition, President Carter's generally technocratic style of governing appeared well suited to managerialism and his ZBB budgeting programme, as well as several of the reorganisation plans adopted during that time (Szanton 1981) appeared to have clear managerialist elements at their heart. The Reagan and Bush administrations invested a good deal of effort attempting to improve managerial performance in the federal government (Moe 1990). This effort was guided in large part by their ideological assumptions that the private sector exemplified good administration. For example, President Reagan initiated a number of programmes, such as the Grace Commission in 1982, "Reform '88" (also in 1982), and the President's Council on Management Improvement (1984), that had clear goals of making federal management more similar to that of the private sector (Caiden 1991: 216-20; Massey 1993). The President's Council on Management Improvement, for example, proposed such steps as improved credit management, financial management, improvement of procurement practices, and in general "deregulating government" at the federal level. Likewise, the Productivity Improvement Program initiated in 1986 had the goal of improving government productivity by 20 percent in 1992. Interestingly, however, this emphasis on productivity gains was not supported by increasing the capacity of the management component of the Office of Management and Budget. Rather the management side of OMB lost ground relative to

20

Some of this was natural attrition - retirements, deaths, etc. - but there was an increased loss of talents due to flight from federal government employment.

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the budget side and its emphasis on simple budget cutting (Caiden 1991: 220222). The assumption appeared to be that if budgets were cut then managers would have to find a way to increase productivity sufficiently to provide the services required (or at least demanded) with decreased amount of money. These Republican administrations also invested a great deal of effort in reforming the public personnel system. These reforms appeared to have two main purposes. The first was to alter the perceived relationship between politicians and civil servants in making public policy and to produce civil servants managers rather than policy advisors (Ingraham 1987). Civil servants were told that their advice on policy was not needed, or even welcome, and that they often were isolated from policy decisions. This relational change also was associated with an increasing emphasis on ideological criteria in the selection of the political appointees and with attempts to impose greater political control over civil servants. The second purpose of the personnel reforms was to make policies and practices surrounding the rewards of public office function more like those in the private sector. In particular, there was a good deal of emphasis on the implementation of the merit pay proposals introduced when Jimmy Carter was President. The assumption was that traditional means of paying the civil service subsidised mediocrity and that competition for rewards would generate a more productive and efficient work force. These reforms have not had all the positive effects anticipated, so that the loss of morale may not be compensated by productivity gains (Ingraham 1993). One possible exception to the characterisation of the United States as being less successful in implementing managerial reforms is the use of Total Quality Management (TQM) in the federal government. This methodology appears to have been adopted to a somewhat greater extent in the US than in other governments (Swiss 1992). The Federal Quality Institute was created to spread the idea of quality throughout the federal government. The adoption of TQM, however, may itself be antithetical to other reforms associated with managerialism. For example, the competition and individualism inherent in pay-for-performance are very much in opposition to the collective values contained in the quality movement (Durant/ Wilson 1993). The Government Performance and Results Act of 1993 is an attempt to follow on some of the strands of quality management, with a greater emphasis on organisational as opposed to personal action and without some of the "baggage" associated with TQM (Ingraham 1996).

V I I I . The Sources of Failure As noted, there appears to be a basic paradox of a government with managerialism seemingly at the foundations of its thinking, but with very little manage-

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rialism in practice. There seem to be at least three reasons for the existence of this paradox. These reasons relate to the political culture of American government and to the institutional conflicts that define and motivate some aspects of its politics. In the case of public management, it appears that the structural aspects of institutional politics (Weaver!Rockman 1993) may have overwhelmed the value considerations that also are important to neo-institutionalist analysis (March! Olsen 1989). In particular, the separation of powers central to the American presidential system of government tends to make the exercise of active managerialism more difficult than it appears to be in other institutional settings. Control of public administration is but one of many issues arising in the continuing struggle over power between the two political branches of government. 21

1. Political Culture The first, and arguably fundamental, reason behind the failure of managerialism in American government is the political culture of the country. For managerialism to be successful, government has to enjoy a good deal of autonomy both in defining its goals, and public administration must enjoy some latitude in deciding upon the means for reaching those goals. Further, managerialism appears to require that government is seen as a worthwhile enterprise and as a potentially useful means of addressing social problems. None of these cultural values appear present in American political culture. Americans historically have had very little respect for government as a mechanism for addressing important social and economic problems, and that attitude appears to have been accentuated during the 1980s. The assumption remains that if government provides a service then it will do so inefficiently and ineffectively. Further, there is the even more negative assumption that since government is indeed heavily influenced by special interests, public decisions will not be "in the public interest" 22. The historical pattern of decentralisation and agency independence has tended to accentuate this belief (Lowi 1979). As a result, there has been little reason for the average citizen to support an active, autonomous and managerialist government. Further, politicians have found that they could be successful in appealing to voters on the basis of the popular distrust of government. 21 David Rosenbloom (1983) rightly points out that the courts also have a increasing role to play in shaping management in the federal government, but that branch does not appear to come into play much in this particular issue. 22 Regrettably, some of the actions of the Clinton administration have reinforced this belief among many Americans.

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2. Congressional Micro-Management A second cause for the failure to adopt more managerial practices in the federal government is the persistent micro-management of the federal bureaucracy by Congress. This problem was at the root of the failures of earlier reforms, such as programme budgeting and, later, zero-base budgeting {Schick 1978). Congress wanted to perpetuate its own control over the budget, and thereby over agencies, by retaining the traditional line-item budget system. The committees and subcommittees of Congress would have lost a good deal of their power i f the analytic complexities central to technical budgeting had been implemented. Although not covered by contemporary conceptualisations of managerialism, the earlier reforms, i.e. PPBS, would have had many of the same consequences i f implemented fully. Those reforms would have resulted in increased discretion for both political and administrative elites in the executive branch. Congress would not accept that, although the Gore reforms were beginning to address some of the constraints of the budgetary process. An independent role for Congress in decisions about public management is a peculiarity of presidentialism and American politics. In addition to the extremely important question of budgetary control, Congress has become involved in management in a number of other ways {Kettl 1992). One of the avenues of congressional involvement has been the use of oversight by committees and subcommittees to examine the decisions of individual agencies {Aberbach 1990). Congress has been willing to substitute its own judgement for that of agencies, regardless of particular policy or management goals of the agency and its managers.23 Control over administration and policy is yet another means through which Congress can serve their constituents and improve their own chances for re-election {Arnold 1990). Thus, the capacity for agency independence and autonomous action that appears essential for successful managerial practice is almost impossible to obtain from a legislature that finds it advantageous to be so closely involved in supervising day-to-day administrative decision making. Congress also limits the capacity of the executive to act more managerially by exercising joint control (with the President) over administrative restructuring. In most political systems the executive can restructure the cabinet, or certainly alter the structure of government below the cabinet level, if he or she thinks it desirable. The executive does not have the independent capacity to make these changes in the United States, as the organisational struggles of Presidents Carter and Reagan (as the most recent examples of Presidents with

23

This have been true even in policy areas such as defence which might have been expected to have a good deal of autonomy (Kettl 1992).

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ambitions for major reorganisation) have indicated (Szanton 1981). The federal government already has a great deal of the structural decentralisation (Seidmanl Gilmour 1986) that has been the purpose of structural change in the United Kingdom and New Zealand, but compared to these more contemporary versions of decentralisation the American agencies actually remain rather tightly attached to their executive departments. Congress has also retained substantial control over the policy making capacity of administrative agencies and, thus, further limited managerial autonomy within the executive branch. 24 The most obvious restrictions of this variety have been the legislative veto provisions written into many laws (Craig 1986). These provisions have enabled Congress to prevent the implementation of agency regulations i f one house disagrees with the provisions. Although the courts have voided some of legislative veto provisions (INS v. Chadna), Congress continues to include them in laws as a means of limiting the capacity of agencies to stray too far from legislative intentions. Most legislative veto provisions are concerned with the substance of policy rather than with administration and management per se. They are, however, one more indication of the degree of micromanagement imposed by Congress and of the difficulties that federal managers have in exercising managerial discretion. Congressional involvement in administration also has tended to stress a rather peculiar form of service to consumers. Even though the traditional "iron triangle" conceptions of the policy making institutions of American government are now outmoded, Congress often attempts to resurrect them. Thus, the definition of service to clients becomes one of particular services to particular clients as voters and members of interest groups, rather than service to citizens in their role as citizens. This is a danger in any conceptualisation of the citizen as a "client" or "consumer" (Pierre 1996; HoodlPeters!Wolman 1996) but may be a particular danger in the United States, given the independence of Congress in selecting who will receive the services and their role in channelling services to particular citizens. Finally, Congress has not been very helpful in adequately funding the managerialist programmes that do exist within the federal government. This is seen most clearly in the failure to fund the bonuses contained in the Senior Executive Service and other merit pay systems; only approximately ten percent of the money needed for implementation was made available, producing another blow

24

A contrary view is that Congress has delegated too much of its authority to administrative agencies (Schoenbrod 1993).

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to the morale of the civil servants. 25 While it is debatable whether personnel programmes of this sort could be effective in motivating employees as intended under the best of circumstances, it almost certainly could not work when they are underfunded. Congress (with the cooperation of the President) has continued to provide only about ten percent of the money required for the bonus programme to work as intended.

3. Presidential Involvement in Administration Congress is by no means alone in its frequent involvement (or meddling) in administration. The President and the Executive Office of the President also have been heavily involved in the micro-management of public organisations. While their involvement may appear to be more justifiable, given that the public bureaucracy as part of the executive branch is hierarchically responsible to the President, frequent presidential attempts to control organisational management appear to have been counterproductive. A President may want to improve management within the executive branch of government, but frequent incursions into the day-to-day operations of agencies may actually subvert management. Agency personnel can not have the freedom to manage and then be judged by results when they have to be looking over their shoulders at the White House. This schizophrenia of Presidents about the role of management in the executive branch was especially evident during the Reagan administration. On the one hand, that administration initiated a number of programmes that could have improved federal management significantly. Few, if any, of these programmes were innovative in any startling way, and some such as the Grace Commission, may have been misguided (Peters/ Savoie 1994). There was, however, a stated desire to improve the quality of public management practiced in Washington. The programmes dealt with, among other things, some of the worst areas of over-regulation within government, such as purchasing rules and some of the restraints on personnel flexibility within the civil service. On the other hand, the Reagan administration also invested a great deal of time and energy in denigrating the civil service as an institution and questioning the capacity of individuals within the service to do the type of work needed to make government work effectively. If one dominant tenet of managerialism is that the managers must be empowered to manage, then a set of politicians who do not believe that their career civil servants are capable of managing effec-

25 The evidence appears to suggest that although the loss of expected rewards was significant in the disaffection of the civil service, other factors were more important. In particular, the loss of respect and influence appear to have been more significant.

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tively are unlikely to encourage or permit managerialist reforms. Empowerment is all the less likely when at least one official of the Office of Personnel Management argued that government really did not need "the best and brightest" but rather could get by with mediocrities (Culler 1986). Again, comments of this type would make it difficult for even the most dedicated public managers to be enthusiastic about their jobs and for them to make the type of commitment needed to be good managers. For example, when asked during the mid-1980s, well over half of the senior managers in the federal government would not have advised a young person to join the federal civil service. The administration appeared to create a self-fulfilling prophecy about the inadequacies of the American civil service. The imposition of a non-managerial style of governing by the Reagan administration went well beyond mere words. The pressures to politicise the civil service, particularly the Senior Executive Service, tended to place as much discretion as possible in the hands of the political appointees and as little as possible in the hands of career public managers. First, that administration used fully the provisions of the Civil Service Reform Act of 197826 to appoint political loyalists to general positions in the Senior Executive Service. Along with other actions by the administration described above, this had the effect of alienating many experienced and capable public servants and reducing the calibre of the career civil service. In addition, there was a conscious policy, promulgated by officials in the White House such as Fred Malek, to keep the permanent civil servants "out of the loop" on major decisions and to reduce their information and with that their capacity to participate in any major decisions (see Bendai Levine 1988). Again, if one purpose of managerialism is to provide agency leaders with the capacity to manage their own organisations, then the Reagan administration did a good job of defeating any effective movement in that direction. The real action of government would go on above the heads of the civil servants, with political criteria dominating over managerial ones. The manner in which the Reagan and Bush administrations went about the task of running government had much of the rhetoric of managerialism, but the practice was almost the antithesis of what managerialism has come to mean. In particular, there was a tendency to build in layers of administrators, especially of political appointees loyal to the President in power, to exercise control. Thus, American public organisations tended to be top heavy, or at least heavy in the middle, while the emerging pattern of public management in most countries was to minimise the hierarchical levels within organisations. The Gore Commission

26

I have elsewhere referred to this legislation as "Carter's gift to Reagan".

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advocated, therefore, a severe cut-back in the middle management ranks of the federal government, and with that the empowerment of workers at lower levels. The failure to implement a true managerialist agenda reflects a failure of coherent leadership by the Reagan administration. This is especially true when its performance is contrasted with that of other government leaders of the time, especially Margaret Thatcher (Jenkins 1988; Marsh!Rhodes 1992). Whereas the Reagan view of the civil service and managerialism was somewhat vague and schizophrenic, the Thatcher government had a clear agenda that, from the time of the MINIS reforms introduced in the Department of Environment by Michael Haseltine, had a clear managerial direction. Margaret Thatcher was no more a friend of the civil service than was Reagan, but differently from Reagan understood that government could not really function without an effective civil service. The trick was to make that civil service behave in the way she wanted it to behave, and she was largely successful. President Reagan was never able to alter behavioural patterns within the civil service, but only engaged in long and fruitless struggles over policy control with his own public sector. The civil service and its supporters in Washington did not take these attacks from the Reagan administration on their position in American public life lying down. One of the most important of the counter-attacks came from the National Commission on the Public Service (the Volcker Commission). This Commission was headed by the former head of the Federal Reserve Board and comprised many distinguished former public servants and members of the private sector. The principal purpose of the Commission was to point to the need for an effective civil service if government wanted to be effective. Indeed, if the administration's demands for improved efficiency in government were to be achieved, then the civil service would have to be improved rather than denigrated and stripped of talent. One study of the Reagan policies pointed to the negative impact that the diminished quality and morale of the civil service had on management (Durant 1992).

IX. Managerialism Regained? In much conventional writing about the public sector it is assumed that parties of the political left are friends of the civil service and consequently are less concerned with managerialism and efficiency in government. That characterisation did not appear true in the United States, as the Clinton administration seemed dedicated to infuse more managerialist thinking into the federal government. The continuing implementation of the recommendations of the National Performance Review, or Gore Commission, is central to that effort (Peters! Savoie 1993). In this case, however, the use of managerialist techniques did not appear to be directed toward diminishing the role of government and the

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civil service as it was during the Reagan administration. Rather, the intention of the Clinton administration appeared to be to strengthen the capacity of government to achieve its stated purposes. The remedies offered by the Gore Commission were hardly novel but rather represented the conventional catalogue of managerialist ideas and techniques. The recommendations included such relatively simple things as cutting red tape in government, putting the customers of government first, empowering the lower-echelon employees of government to achieve results, and identifying the basic functions and processes of the public sector. These were, for the most part, good pieces of advice for any organisation dealing with the public and were not dissimilar to some of the ideas for reform advanced by previous administrations. 27 What was different, in part, was that there appeared to be a stronger commitment by the President and the Vice President actually to implement the ideas. What was also different with the Gore Commission was the commitment of at least a part of the civil service itself to the goals and methods of these reforms. This involvement of the civil service stood in marked contrast to the reforms of the Reagan and Bush administrations that tended to be imposed from above with the intention of controlling the discretion, power, and prerequisites of the civil service. The Gore reforms emphasised the importance of the civil service in governing, while at the same time arguing to reduce the number of civil servants and altering some the hierarchical management practices with which the civil service had become accustomed. Furthermore, the Gore Commission took a good deal of advice from state and local governments that had already gained substantial experience in implementing entrepreneurial reforms of the type proposed by the National Performance Review. As noted above, Osborne and Gaebler , whose book served as at least a part of the inspiration for the Gore Commission, drew most of their examples from state and local levels. Many of these governments had introduced a number of practices that are associated with managerialism. Likewise, several states - most notably Texas with its own Texas Performance Review - had already undergone large scale, and largely successful, efforts to introduce improved managerial practices into government. 28 The Winter Commission also

27

One could easily trace some of the ideas back to the Bronlow and Hoover Commissions. See Peters (1996). 28 Interestingly, prior to the federal government forming the Grace Commission most states had their own cost control commissions using similar methodologies. At the state level, however, these commissions were able to produce relatively greater savings because of the somewhat simpler programmes and smaller delivery systems.

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discussed general questions of administrative reform and quality at the state level {Ehrenhalt 1993). These state government programmes have included such things as extensive deregulation of the internal practices of government, e.g. personnel, purchasing and budgeting, as well as contracting out a number of functions {Barzelay 1992). They also included cultural change in government towards a "customer" orientation {Ford Foundation 1988). The leaders of these state efforts were then loaned to the federal government and became instrumental in animating the discussion at that level {McNeely 1993). Further, several of them have remained involved with the implementation of the recommendations of the Gore report even after they have returned to their state governments. Leaders of state and local governments have also been examining their own management practices, despite their substantially greater participation in managerial change during the past decade. The Winter Commission was organised to survey existing management practices in these governments, and then recommend positive changes {Ehrenhalt 1993). Its advice was very similar to that of the Gore Commission for the federal government. The emphasis was clearly on making government provide services to its clients and making it do so in as efficient and responsive a manner as possible. These governments should be able to advance their standards even more, given the relatively identifiable outputs of this level of government as compared to the federal government. At least at this level of government, managerialism turned out to be alive and well in the United States, and it also showed signs of life at the federal level. To be successful, attempts at introducing managerialism at the federal level will have to overcome the numerous political constraints we have discussed above. More concern with management may also generate substantial political advantages in the current climate, given the absence of interest in significant policy initiatives, and the need to make the best use of available resources human and financial. The future of public administration is likely to be one of more concern with managerialism, albeit a managerialism adapted to the particular cultural and institutional demands of the United States.

X. Summary American government appears designed for implementing managerialism in the public sector. The administrative structure has been decentralised for a number of years, and there is a strong strand of managerial thinking in the society. The paradox is that American government, especially the federal government, has lagged far behind other democratic governments in the adoption of managerial reforms. The language of managerialism has been adopted but the

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practice generally has not been. That apparent paradox can be explained in part by an American political culture that places a very low value on the public sector and assumes nonfeasance, and/or malfeasance, by government. The paradox can also be explained by the felt need of both Congress and the President to exercise close control over public administration. This desire to some extent springs from the cultural attributes, and reflects the political gains that can be made by seeming to control public administration. The problem is that all of these factors tend to reinforce the incapacity of the American system to govern effectively and have become virtually self-fulfilling prophecies. The Clinton administration has attempted to break the bonds of political control over bureaucracy, but ran counter to a long historical tradition as well as to a well entrenched set of political incentives to ensure that the bureaucracy follows the directions of the President. The success of the attempts to "reinvent government" will be a test of the political will as well as of political savvy.

References Aberbach, J. D. (1990). Keeping a Watchful Eye. Washington, D.C.: The Brookings Institution. Arnold , P. E. (1986). Making the Managerial Presidency. Comprehensive Reorganization Planning, 1905-1980. Princeton: Princeton University Press. Arnold , R. D. (1990). The Logic of Congressional Action. New Haven: Yale University Press. Barzelay , M. (1992). Breaking Through Bureaucracy. Berkeley: University of California Press. Benda, P. MJ Levine, C. H. (1988). "Reagan and the Bureaucracy". The Bequest, the Promise and the Legacy, in: C. O. Jones (ed.), The Reagan Legacy. Chatham, N.J.: Chatham House, 102-142. Caiden, G. (1991). Administrative Reform Comes of Age. Berlin: de Gruyter. Chapman, R. (1996). "The Separation of Policy and Administration". Public Policy and Administration 11, 57-82. Craig, B. H. (1986). The Legislative Veto. Boulder, Col.: Westview Press. Culler, T. W. (1986). "Most Federal Workers Need Only be Competent". Wallstreet Journal, 21 May. Dilulio, J. J. (1994). Deregulating Government. Washington, D.C.: The Brookings Institution. Durant, R. F. (1992). The Administrative Presidency Revisited. Albany: State University of New York Press.

4 Hesse

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Durant , R. F ./Wilson, L. Α. (1993). "Public Management, TQM, and Quality Improvement: Toward a Contingency Strategy". American Review of Public Administration 23,215-245. Ehrenhalt, A. (1993). "The Value of Blue-Ribbon Advice". Governing 6/11. 47-56. Eisenberg , E. ¥ J Ingraham, P. W. (1993). "Analyzing the Pay for Performance Literature: Are There Common Lessons?". Public Productivity and Management Review 17, 117-128. Ford Foundation (1988). Innovations in State and Local Government 1987. New York: Ford Foundation. Freedman, J. O. (1980) Crisis and Legitimacy. The Administrative Process in American Government Cambridge: Cambridge University Press. Goni, Ε. Ζ. (1993). "Many Reforms, Little Learning. Budgeting, Auditing and Evaluation in Spain", in: A. Gray, B. Jenkins and B. Segsworth (eds.), Budgeting, Auditing and Evaluation. New Brunswick, N.J.: Transaction Books, 115-138. Gormley , W. T. (1989). Taming the Bureaucracy. Muscles, Prayers and Other Strategies. Princeton, N.J.: Princeton University Press. Heclo, H. (1978). A Government of Strangers. Washington, D.C.: The Brookings Institution. Hood, C J Peters B. G JWollman, H. (1996). "Sixteen Ways to Consumerize the Public Sector". Public Money and Management. Horn, M. (1995). The Political Economy of Public Administration. London: Sage. Ingraham, P. W. (1987). "Building Bridges or Burning Them? The President, The Appointees and the Bureaucracy". Public Administration Review 47, 425^35. — (1993). "Of Pigs in Pokes and Policy Diffusion: Another Look at Pay for Performance". Public Administration Review 53, 348-356. — (1995). "Quality Management in Public Organizations: Prospects and Dilemmas", in: B. G. Peters and D. J. Savoie (eds.), Governance in a Changing Environment. Montreal: McGill/Queens University Press, 239-259. Ingraham , P. W./ Rosenbloom, D. (1992). The Promise and Paradox of Civil Service Reform. Pittsburgh: University of Pittsburgh Press. Ingraham, P. W./Thompson, J. R./Eisenberg, E. F. (1995). "Political Management Strategies and Political/Career Relationships: Where are We Now in Washington?". Public Administration Review 55, 263-272. Jenkins, P. (1988). Mrs. Thatcher's Revolution: The Ending of the Socialist Era. London: Pan. Johnson, R. ΝJLibecap, G. D. (1994). The Federal Civil Service and the Problem of Bureaucracy. Chicago: University of Chicago Press. Jones, C. O. (1995). Politics in a Separated System. Chatham, N.J.: Chatham House. Kettl, D. F. (1992). "Micromanagement: Congressional Control and Bureaucratic Risk", in: P. W. Ingraham and D. F. Kettl (eds.), Agenda for Excellence: Public Service in America. Chatham, N.J.: Chatham House, 86-112. Light , P. C. (1996). Thickening Government: Federal Hierarchy and the Diffusion of Accountability. Washington, D.C.: The Brookings Institution.

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Lowi, T. J. (1979). The End of Liberalism. New York: Norton. March, J. G JOlsen, J. P. (1989). Rediscovering Institutions. New York: Free Press. Marsh, D./Rhodes, R. (1992). "Implementing Thatcherism: Policy Change in the 1980s". Parliamentary Affairs 45, 33-51. Massey, A. (1993). Managing the Public Sector. Aldershot: Edward Elgar. McNeely , D. (1993). "The Big Audit". State Legislatures 19/6, 14-18. Meier , K. (1975). "Representative Bureaucracy. A Comparative Assessment". American Political Science Review 69, 526-542. Moe, R. C. (1990). "Traditional Organizational Principles and the Managerial Presidency. From Phoenix to the Ashes". Public Administration Review 50, 129-140. National Performance Review (1993). Creating a Government That Works Better and Costs Less (The Gore Report). Washington, D.C.: Government Printing Office. Osborne , DJGaebler, T. (1992). Reinventing Government Reading, Mass.: AddisonWesley. Peters, B. G. (1985a). "Administrative Change and the Grace Commission: Are the Cuts Worth It?", in: C. H. Levine (ed.), The Unfinished Agenda of Civil Service Reform. Washington, DC: The Brookings Institution, 19-39. — (1985b). "The United States: Absolute Growth and Relative Decline", in: R. Rose et al., Public Employment in Western Countries. Cambridge: Cambridge University Press, 228-261. — (1994). The Politics of Bureaucracy. 4th. ed. New York: Longman. — (1996). "The United States", in: J. P. Olsen and B. G. Peters (eds.), Lessons from Experience: Experiential Learning in Administrative Reform. Oslo: Scandinavian University Press, 113-145. Peters, B. G ./Savoie, D. J. (1993). "Reinventing Osborne and Gaebler. Lessons from the Gore Commission". Ottawa: Canadian Centre for Management Development. Pierre, J. (1996). "The Marketization of the State: Citizens, Consumers, and the Emergence of the Public Market", in: D. J. Savoie and B. G. Peters (eds.), Governance in a Changing Environment. Toronto: University of Toronto Press, 55-81. Polliti, C. (1990). Managerialism and the Public Services. Oxford: Blackwell. Rosenbloom, D. (1983). Public Administration and Law. New York: Marcel Dekker. Rouban, L. (1990). "La modernisation de l'Etat et la fin de la spécificité française". Revuefrançaise de science politique 40, 521-554. Schick, A. (1978). "The Road from ZBB". Public Administration Review 38, 177-180. Schoenbrod, D. (1993). Power Without Responsibility. How Congress Abuses the People Through Delegation. New Haven: Yale University Press. Seidman, H./Gilmour, R. (1986). Politics, Power and Position. New York: Oxford University Press. Stewart, J./Walsh, K. (1992). "Change in the Management of Public Services". Public Administration 70, 499-518. Swiss, J. (1992). "Adapting Total Quality Management (TQM) to Government". Public Administration Review 52, 356-362.

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Szanton , P. (1981). Federal Reorganization. Chatham, N.J.: Chatham House. Weaver , ΚJRockman, B. A. (1993). Do Institutions Matter? Washington, D.C.: The Brookings Institutions. Wilson , P. A. (1994). "Power, Politics and Other Reasons Why Senior Executives Leave the Federal Government". Public Administration Review 54, 12-19.

Paradoxes of Administrative Reform in the People's Republic of China By John P. Burns

I. Introduction Administrative reform in the People's Republic of China has a long history, stretching from attempts in the 1950s to streamline and downsize the country's newly created institutions set up to manage a centrally planned economy. Not until 1993, however, when leaders began restructuring the state to meet the needs of a market economy, has administrative reform appeared likely to succeed. Beginning in 1993, in a significant departure from previous reforms, the government embarked on the first thorough and radical reappraisal of the role of the state. The public sector, for the first time, came under tremendous pressure to change. By 1996, substantial achievements had already been scored: through mergers, transfers of functions, corporatisation, and the establishment of new quasi-governmental agencies, the size of the central government shrank from 127 to 67 agencies, that employed 20 percent fewer personnel ( WHB , 15 June 1995). Similar restructuring was carried out at provincial and local levels. To be sure, previous administrative reforms have also scored impressive short-term results. What makes the 1993 to 1996 reforms (and the policies pursued thereafter) different, however, is that the incentives to reform were stronger than they had ever been before. China's state, designed for a centrally planned economy, had to make way for radical changes to suit the market economy. China's approach to administrative reform both follows and departs from approaches adopted elsewhere. On the one hand, because the goal of administrative reform is to restructure the state for a market economy, China's reforms have been carried out in the same globalising, market context found overseas. Thus, common pressures such as economic and fiscal problems, internationalisation of the economy, pressures for regional integration, and technological change provide part of the context of administrative change in China. On the other hand, China's continuing pursuit of public ownership and the country's political traditions have been reinforced by the primacy given to the political order or the state in East Asian societies. While domestic political contexts have

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changed in many other countries, resulting in some cases from pressure to democratise, China has thus far been able to resist this trend. Still, the Chinese political system is not immune to newly emerging global issues, such as, environmental protection. In search for solutions to its administrative problems, Chinese leaders have looked to the experience of other countries for reference. They have examined, in particular, the relationships between the government and the economy in industrialised countries. They have been careful, however, to design solutions "with Chinese characteristics" that meet the needs of their own political and economic system. These have been defined, first, as the need to maintain the one-party monopoly system and the hegemony of the Chinese Communist Party (CCP) and, second, the need to maintain political stability in the transition from rule by the founding father generation of leaders. Administrative reform in China has developed paradoxically in several respects. First, under central planning and administrative controls, when theoretically the state has greater capacity to manage affairs as it sees fit, administrative reforms largely failed, while under market conditions, when theoretically the state has less control, administrative reform appears more likely to succeed because the incentives for reform are stronger. Second, China has adopted market reforms, which significantly reduce the role of the state, while at the same time attempting to maintain relatively high levels of public ownership (through the vehicle of state-owned enterprises) within a strong and expansive state tradition. Third, contradictory pressures for decentralisation and centralisation appear to exist at the same time. On the one hand, authorities have decentralised decision making on investments, foreign trade, and a host of other areas, while attempting to re-centralise control of public finance and banking. Finally, paradoxically China's rapid economic development, while it has seen liberalisation in society, has not led, at least not yet, to greater démocratisation. Administrative reform in China is examined from the perspective of stages of development, cultural perspectives and traditions, institutional variables, resources, professionalisation of reform, and the role of policy entrepreneurship and political will. We conclude with a discussion designed to benchmark China's experience. By administrative reform, we mean a process that deliberately seeks to improve organisational performance by changing decision-making institutions, including their structure and process, and the attitudes and behaviour of decisionmakers (see Caiden 1991; Quah 1976). The scope of administrative reform and the extent to which it has achieved its objectives or improved administrative performance are subjects to be investigated empirically.

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I I . Stages of Development An analysis of China's experience of administrative reform since 1949 demonstrates that until 1993, administrative reform achieved only short-term objectives. Attempts to streamline the government were usually followed by the rapid growth of government agencies and personnel, which in turn prompted renewed efforts to streamline. China, thus, was caught in a vicious cycle of overstaffingdownsizing-overstaffing, from which the country appeared unable to escape without fundamental reform of the economy. In addition, a review of the past 50 years or so reveals that policy makers experimented with both centralisation and decentralisation: a cycle of decentralisation, to overcome the rigidities of centralisation was followed by a period of re-centralisation, to correct what was perceived by the centre to be too much localism. Generally speaking, China's developmental experience has followed the stages of development posited by Huntington for established one-party systems: a revolutionary or transformative phase (1949-1959), dominated by a charismatic leader with a social, economic, and political agenda of fundamental transformation that leaves the country with profoundly weak institutions; a consolidation phase (1960-1978), during which emerging stronger institutions, managed by experts, struggle to free themselves from the control of the charismatic leader; and an adaptation phase (1979-present), during which the party gives up some ground to management by experts and professionals, and a protopluralism may emerge in society {Huntington 1970). Reform needs have varied with stages of development. During the adaptation phase, as China has moved from a centrally planned to a market economy, the needs of reform have changed dramatically. From the founding of the People's Republic of China in 1949 until 1954, the Chinese Communist Party sought to consolidate its power. To do this, it carried out comprehensive land reform and then, beginning in 1953, collectivisation. A new administrative state, modelled on the Soviet Union, complete with bureaucracies to formulate long term and short term plans, set prices, determine investment priorities, and manage all aspects of the economy was established during the period {Schurmann 1966). Authorities also institutionalised China's "cadre" personnel system, formally modelled on the Soviet system. This system was characterised by a unified corps of administrators, managers, and professionals, who were managed by the party's Organisation Department, and who occupied positions in government, the party, mass organisations (such as trade unions), service units (such as hospitals, schools, and research centres), and economic enterprises {Lee 1991). By 1989, China employed 31 million cadres, 16.4 percent in administrative agencies (including government), 42.4 percent in service units, and 41.2 percent

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in economic enterprises (China Personnel Yearbook 737).

Editorial

Office

1991:

To consolidate its power in the aftermath of a four-year civil war ( 1946— 1949), the party re-centralised administrative power. This was accomplished by creating a new layer of administration, regional governments and party organisations, that linked China's 30 provinces to the capital in Beijing. When the power of these new regional entities began to threaten Beijing's control, they were abolished in 1956 (Schurmann 1966). The second period, 1955 to 1959, was characterised by a dramatic increase in the speed of collectivisation, prompted by the leadership's belief that output could be boosted through re-organisation and the reliance on normative incentives (Schurmann 1966). During the Great Leap Forward (1958-59), authorities decentralised management of the economy to provincial-level governments and economic enterprises to stimulate growth. In a frenzied political campaign to boost output, the planning and statistical systems completely collapsed. Administrative reform during the period focused on attempts to cut administrative costs, which had grown quickly under the weight of re-centralisation during the earlier period. By December 1955, for example, 48 State Council agencies had abolished more than 2,200 offices and sections. Large numbers of cadres were transferred, re-assigned, and re-deployed to economic enterprises or sent down to grassroots units. As a result of streamlining, central party and government agencies reduced the number of their employees by 43 percent and 40 percent respectively (Harding 1981: 91-95). Further reductions in the size of the central administration were made in 1958-59, to realise the objectives of decentralisation. Indeed, from 1957 to 1959, the total number of State Council agencies fell from 80 to 60 (Burns 1993: 1354). Similar cuts were made at local levels. The failure of the Great Leap Forward (China suffered severe economic dislocation from 1959-1961) and the damage it caused to China's central planning apparatus, prompted a re-centralisation of the economy from 1960 to 1968. A layer of regional party organs was established to monitor provincial governments. As the state planning apparatus was strengthened, the central government again grew quickly: from 1960 to 1965 the State Council bureaucracy, for example, grew from 60 to 79 agencies, while the number of employees increased from 36,000 to 50,000 (Burns 1993: 1354). The Cultural Revolution (1969-1976) witnessed a savage attack on "bureaucracy" and "bureaucrats" 1 led by Mao Zedong and leftists within the party 1 In Chinese, "bureaucracy" is translated as guanliao zhuyi , which has only negative connotations - red tape, formalism, rigidity, and so forth. More neutral references to bu-

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and fuelled by widespread social discontent. During this period, most incumbent officials were dismissed from their posts and spent time as virtual prisoners in grassroots units in the countryside. Decisions about the economy were once again decentralised to newly created provincial "revolutionary committees" and lower level ad hoc-bodies. The central state was severely cut back {Harding 1981: 284-295). From 1969 to 1970, in one year alone the number of State Council agencies was cut from 78 to 32, and many of the remaining agencies were placed under military administration {Burns 1993: 1354). Rebuilding the state during the 1970s was slowed by severe internal conflict among China's political élite. When Deng Xiaoping emerged as the victor in these political struggles in 1978, he sought to consolidate his power by embarking on rapid recentralisation of the state and re-employment of all the victims of the Cultural Revolution. Huge numbers of previously dismissed officials found new jobs. As a result, from 1977 to 1981, the State Council expanded from 56 agencies to over 100. The number of employees of the State Council, which had reached a low of 10,000 in 1970, shot up to 51,000 by 1981 {Burns 1993: 1354). Similar re-hiring of Cultural Revolution victims occurred at local level, as well. As the central leadership rebuilt the state apparatus, the leaders also sought to shore up their legitimacy, which had been badly tarnished by the Cultural Revolution. To do this, the party embarked on a series of far-reaching economic reforms, the first of which was the decollectivisation of agriculture. This move dramatically improved living standards for China's rural poor who in 1980 made up 80 percent of the population. From 1981 to 1993, the government carried out further reform of the economy that took decentralisation as its centrepiece. In the "open door policy", local governments were given much greater autonomy to manage foreign investment and to engage in foreign trade. A system of tax treaties permitted local governments to retain substantially more revenue than previously. In general, local governments greatly expanded their control over the economy during these years. The party also recognised that the bureaucracy, now overstaffed, inefficient, and inappropriately skilled was in desperate need of reform. In 1982, authorities implemented for the first time a fixed-tenure system, that retired two million elderly officials nationwide {Manion 1993). Faced with budget deficits, the government also embarked on another round of administrative streamlining, cutting the number of State Council agencies from 100 to 61, and the number of State Council employees from 51,000 to 30,000 {Burns 1993: 1354). Similar reaucracy, refer to organs or organisations, jigou or jiguan. The Cultural Revolutionaries attacked "bureaucracy" and "bureaucrats".

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cuts were made by local governments. However, by 1987 the State Council was once again employing 50,000 officials. The authorities also took the first steps to re-establish a legal system and set up mechanisms for resolving administrative disputes according to law during the mid-1980s. Then, in 1990, an Administrative Litigation Law was enacted that permitted citizens to seek redress in the courts against unlawful state interference with their personal freedom or property (Epstein!Cho 1995: 6.30). A network of administrative courts was established within the judiciary at all levels to implement the law. A new State Compensation Law has permitted citizens to claim civil liability against government officials who have committed wrongful acts. Under the law, the state is required to accept responsibility for compensating injured citizens. Further reform of the economy has focused on China's huge state-owned enterprise sector, which has lumbered along inefficiently assisted by generous state subsidies. Making these enterprises competitive without massive politically unacceptable levels of urban unemployment has been a major challenge. During the 1980s, however, China took major steps toward a market economy decontrolling most prices and granting enterprises considerable autonomy over personnel, finance, prices, and investment decisions. Indeed, in 1992, the CCP adopted a "socialist market economy" as its goal. Since the early 1990s, the inappropriateness of China's state apparatus, set up for a centrally planned economy, has been increasingly obvious. From 1990, the government began a comprehensive review of the role of the state that has had widespread consequences. The 1993 reform plan that emerged was fundamentally different from all previous plans - it took restructuring for a market economy as its goal, not simply downsizing to cut administrative expenses. As a result, since 1993, some agencies, such as those in charge of macro-economic management of the economy - taxation, audit, statistics, and planning/forecasting - have been expanded and strengthened. Others, such as those that previously produced capital and consumer goods - for example, government agencies in charge of heavy industry, chemicals, light industry, and textiles - have been abolished, their functions turned over either to economic enterprises or to new, quasi-governmental trade councils/associations. Thousands of new government-owned corporations have been set up at central and local level to take over the functions of these agencies. Streamlining the administration continues to be a goal, but it is not the principal objective. Changing the functions of government to serve a market economy has replaced it (Central Organisation and Establishment Commission General Office 1993: 6-9). Civil service reform has also found its way onto the agenda of preparing the state for a market economy. Under a new regulatory framework, formally adopted in 1993, China's civil servants have for the first time since 1949 been

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openly recruited in labour markets through competitive examinations {Ministry of Personnel 1993). Authorities plan to pay civil servants according to prevailing rates in newly emerging wage markets, as well. Civil service training has also been revamped to improve the capacity of civil servants to serve the new economic system. We can explain China's cycles of centralisation, de-centralisation, and recentralisation in terms of the country's huge size and attempts to establish a centrally planned economy. Tight central control undermined local incentives for development, led to goal displacement as localities blindly fulfilled quotas, and stifled growth. De-centralisation, however, often led to wasteful local government spending and, especially in the 1980s, high levels of inflation. China's move toward a market economy in which government will play only a policy making and regulatory role may dampen the cycles. Cycles of administrative expansion, downsizing, and renewed expansion, which characterised China's attempts at administrative reform until 1993 were also a product of the country's socialist system and centrally planned economy. Because all productive activity was managed by the government, bureaucracy grew as a result of new demands, technologies, and products, that in a market economy, would be managed at least in part by the private sector. In China, however, these new developments were all managed by the state, which put constant pressure on government to expand {Wu 1990: 34^12; Wong et al 1995: 119-121). Nowhere in our discussion is development toward democracy mentioned. Indeed, China's formal political institutions have changed little during the past 45 years {Lieberthal 1996). Modelled on those of the Soviet Union, they are characterised by monism - the unitary management and control of all significant interests and institutions in society by the Chinese Communist Party. With economic reforms, however, the party's capacity to control the economy has declined and a new pluralism has emerged in society {White 1993: 217-229). This has been reflected to a very limited extent by a more activist role for China's People's Congresses {O'Brien 1990: 168-172). Still, no other political force has emerged to challenge the hegemony of the CCP. In spite of sporadic protests in China's cities in 1978-1979, 1981, 1986, and 1989, the party remains firmly in control of China's political life and shows no signs of sharing power with any other force. Indeed, there is no credible alternative to the CCP. I f democracy means a multi-party system with competitive elections, real choice for voters, and election outcomes that can influence policy, then China is no more democratic now than it was in 1949. Bureaucratic and to a lesser extent popular support for administrative reform influences the success of reform, however. For example, opposition from within the party stalled civil service reform (introduction of the fixed tenure system

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was delayed from 1980 to 1982 as a result) and delayed the introduction of administrative restructuring in 1992-1993. Strong bureaucratic opposition, however, indicates that the reforms were perceived to be real.

I I I . Cultural Perspectives and Traditions In spite of China's cultural conservatism and the predominance of the state, the country has carried out in recent years a thorough re-examination of the role of the state and has turned over huge areas of activity, previously managed exclusively by the state, to new organisations, including state corporations, trade councils and associations, or non-profit service units. Confucianism and administrative values, such as consensus decision-making, have shaped the process of making policy on administrative reform. China's historical tradition has given primacy to the political order; valued bureaucratic rule; and valued recruitment into the bureaucracy, based on achievement criteria. Not surprisingly, then, China's administrative reforms continue within this tradition. Historically, Chinese civilisation has given primacy to the political order or to the state, a characteristic of other East Asian civilisations, as well (Schwartz 1987). This has meant that the political order has been more central and more weighty than the economic order or religious order. As Schwartz has pointed out, in China traditionally "the political order presides in principle over every area of socio-political life" (ibid.: 3). In traditional China, the most power and highest social statuses were reserved for officials of the imperial household. A highly complex and differentiated hierarchy of officials linked the Emperor to the people. The political and social status of all organisations and agencies nationwide were determined according to their bureaucratic rank. From at least the Song Dynasty (960-1279 A.D.), the state recruited officials based on achievement criteria (Lo 1987). The sons of both rich and poor families alike competed in civil service examinations, that focused for the most part, on their ability to understand the Confucian classics that dwelt on the moral duties of leaders, statecraft and state-society relations. The examinations were held in the national capital and lasted over several days. Many people spent their entire lives preparing for the examinations. Given that all the good things in life were available only to officials, the stakes for families were particularly high. Academies to train the intellectual élite of the nation were set up throughout the country to prepare candidates for the examinations. Although recruitment to office later became corrupted (merchants, for example, by the late Qing Dynasty could buy official positions), still, for centuries, the predominant mode of entry into official status was achievement oriented. Although the system broke down

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and was abolished during the late 19th century and early 20th century, the CCP came to power in 1949 in a country steeped in a bureaucratic tradition. China's adoption of an open, achievement oriented recruitment system in 1993, then, may be seen as a return to some aspects of an earlier tradition. Official and popular values also helped to shape the context of administrative reform in China. Taken together they have legitimised a top-down approach to reform, that acknowledges popular participation (via the "mass line" 2 ) in the implementation of reform. Confucianism supports authoritarian rule and places a premium on hierarchical loyalty. According to surveys conducted by Pye, Chinese believe that "those in authority should be like teachers and fathers, who explain carefully what should be done, but then leave it up to those who are learning to show initiative and demonstrate their desire to do the right thing" {Pye 1981: 187). Surveys reveal strongly paternalistic orientations among Chinese civil servants that are shared by the general population. Administrative values also play a role. Probably the most important value in this area is consensus decision-making. The structure of power in China can best be seen as a strategic balance between top party leaders in Beijing, and powerful provincial elites. Each needs the other and lobbies the other for support {Shirk 1993). This characteristic of the political system means that no progress on administrative reform is possible without consensus. When opposition has emerged, as for example, when Deng Xiaoping, China's former paramount leader, proposed a fixed-tenure personnel rule in 1980, policy could only move forward after careful negotiations with party elders to build a coalition of support for the policy. Coalition building took a further two years, during which time the potential retirees were offered pensions equivalent to their full salaries; all other benefits that they currently enjoyed; and access to all official documents. This extraordinary deal was reserved, however, for those who "joined the revolution" before the CCP came to power in 1949 {Manion 1993).

2

According to Leninist theory and Mao Zedong's thought, decisions should be taken on the basis of "democratic centralism" and "the mass line". Democratic centralism permits wide discussion of policy options, but requires that minorities support majority decisions. In practice, the theory has legitimised party central decision making and has required all local units to zealously implement these decisions. "The mass line" requires authorities to consult the masses on policy options. However, it gives to the party the sole authority to make policy. After policy is made, it should be implemented in noncoercive ways by persuading the masses of the appropriateness of policy. All correct policy (policy that serves the long-term "objective" interests of the people) should be supported, according to this view. See Mao Zedong ( 1962).

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IV. Institutional Variables Institutional variables, such as China's unitary state and political monism have had an influence on the reform capacity of the state. As we have seen, China's unitary system has permitted cycles of both centralisation and decentralisation, and permitted experiments with administrative reform under the guidance of the centre. Local governments in China, however, have less flexibility to initiate reform than do local governments in a federal system. Formally, China's political system is a unitary, one-party monopoly. A single civil service system links the capital with provincial and local governments. Although provinces have been delegated powers to manage their economies, this has been only a delegation, which could be (and has been) adjusted or rolledback at any time. China's new market economy has, however, made such rollbacks more difficult to achieve in practice. Authorities are trying to establish macro-economic management institutions to manage the market from Beijing, however. The impact of these arrangements on administrative reform have been predictable. First, reforms in each case have been led by the centre. They have been carried out first in the centre, although provincial governments have been authorised to experiment with reforms in pilot sites once the centre has taken the decision to embark on reform. Second, the centre has laid down mandatory rules and regulations that all local governments must follow in administrative reform. For example, in the arena of organisational restructuring, central authorities require each province to establish certain core agencies. Beyond these required agencies, provinces have discretion about the establishment of others. Although there may be some negotiation in practice, establishment quotas are determined centrally (Gu!Burns 1996). China's political system is also monist (Rigby/Harasymiw 1983). Monist political systems are characterised by the absence of a separation of powers within the state, and the absence of pluralism in state-society relations. This has also shaped the context of administrative reform in China. First, it has meant that administrative reform policy is made by the CCP. Generally, neither the legislature nor the judiciary shape administrative reform policy or its implementation. Of course, the CCP puts the policy to the legislature for endorsement (and occasionally some legislators in recent years abstain or vote against it), but passage of the reform proposals is virtually a foregone conclusion once consensus has been achieved among the party élite. Second, China's nascent private sector vanished in the 1950s with collectivisation. There has, thus, been no private sector or NGOs for the state to co-operate with in either the formulation or implementation of administrative reform policy. The state has been the sole actor in this arena. Although there are signs of emerging pluralism evident in the mid-

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1990s, a more market-oriented China, the "private sector", such as it is, is officially sponsored and heavily dependent on the state. China's informal system resembles other mature one-party systems {Huntington 1970). Generally, they are characterised by bureaucratic pluralism, policy made through bargaining and negotiation, consensus decision making, and factionalism. These political dynamics, however, are confined to space within the party. Although 54 million people are members of the CCP in China, they make up less than five percent of the total population. Real participation is confined to this self-selected group.

V. Resource Base China's resource base has acted both as a spur to reform and as a facilitator of reform. On the one hand, budget deficits have motivated officials to streamline administration on a number of occasions since 1949. China's economic growth in the 1980s, however, has also permitted the economy to absorb those made redundant in the latest round of downsizing and restructuring. China's attempts to streamline or downsize its administrative apparatus has, of course, been motivated in part by the need to cut administrative expenses. Generally, these moves have followed periods of rapid growth in budgetary expenditure, and growing budget deficits. In 1982, for example, after recording huge deficits in 1979 and 1980 (17 billion yuan and 12.7 billion yuan respectively), authorities attempted to downsize the central government apparatus. Similarly, the growing deficits of 1986 and 1987 were followed by further attempts at streamlining in 1988 {State Bureau of Statistics 1995). In the 1980s and early 1990s, attempts to downsize government were carried out during periods of rapid economic growth. During the twelve years 1982-93, for example, real gross domestic product increased by more than ten percent in 1983, 1984, 1985, 1987, 1988, 1992, and 1993 {Asian Development Bank 1994). High rates of growth have provided opportunities for re-employment of those made redundant during streamlining. China is now richer than before, and its economy is better able to absorb the dislocation that administrative reform brings without affecting stability. Although China's human resource base for administrative reform has suffered from low educational levels, there have been dramatic improvements in recent years. Still, by 1989 less than 60 percent of all administrators, managers, and professionals employed by the central government were university graduates. At local level, the incidence of university degrees is much lower (22.2 percent for provincial governments and 16.0 percent for county and township governments) {China Personnel Yearbook Editorial Office 1991: 738). Recent data

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from the State Commission for Public Sector Structure and Establishment Administration (SCPSSEA), the agency charged with managing the re-structuring of the state, show comparable educational levels. In 1996, 73 percent of the 64 "cadres" employed by the SCPSSEA were university graduates (indeed, 20 percent of this group had Master's Degrees). Thirty-five percent of the staff were under the age of 35, while those 35 to 50 years of age made up about 47 percent {GutBurns 1996). Educational levels for employees of local branches of the State Commission were undoubtedly lower, however. China's new civil service reforms aim to fill all new posts with university graduates. Data from recruitment exercises in 1994, 1995, and 1996, held under the new rules, indicate that virtually all successful applicants had university degrees. Indeed, many had advanced degrees as well {Ministry of Personnel 1996). As China has integrated its economy with the world economy, authorities have investigated the experience of overseas countries to manage their economies. Study tours to all of the OECD countries have permitted government officials to examine a variety of topics related to government management of a market economy. Government officials, increasingly with university education, certainly have the capacity to understand the experience of administrative reform overseas, even though the context of reform is radically different from their own. Although consultancies supported by the IMF, World Bank, and UNDP have provided China with external advise, these interventions have had relatively little impact. Rather, the government has been sensitive to the specific needs of the state in China to maintain the CCP in power, maintain a large stateowned economy, maintain political stability, and maintain economic growth. This context has prevented the adoption of models from overseas.

VI. Professionalisation of Reform Although overall policy making for administrative reform remains the prerogative of the CCP, China has established other organisations that are committed to reform and that possess institutionalised capacity to carry out reform. These agencies are charged with implementing reform policies. They also draft reform proposals for party consideration. Since 1949, administrative reform in China has been overseen by the party's Organisation Department. Because administrative reform has been driven by a party agency in a one-party monopoly system rather than by treasury bureaucrats or politicians operating in a multi-party system, improving efficiency and effectiveness has often not been the primary goal of reform. The differences are ones of degree, however. In multi-party systems, although administrative reform may serve political goals, there are checks and balances to help to ensure that the worst excesses of patronage politics and corruption are avoided.

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Organisations such as the SCPSSEA3 and the Ministry of Personnel, which are responsible for implementing party policy on government restructuring and civil service reform respectively, have grown in professional capacity in the 1980s and early 1990s. Although they have been re-organised several times and their status changed from time to time (both were abolished during the Cultural Revolution, for example, when their work was taken over by the Organisation Department), both have institutional histories stretching from the founding of the People's Republic in 1949. In the 1980s, both agencies were led by officials committed to reform. There is some evidence that they have lobbied the central party leadership for more and faster reform. For example, during the late 1980s, previous Minister of Personnel, Zhao Dongwan, apparently pushed the question of establishing a new civil service system with senior party leaders, many of whom thought the reforms went too far toward establishing a Western-style civil service system with weakened party control (Lam!Chan 1995). Although there is some evidence of a reform ethos in these agencies, still, their leaders are thoroughly integrated into the party leadership and travel with its mainstream. Their concurrent roles is evidence of this integration. For example, the Minister of Personnel is also concurrently a Deputy Head of the party Organisation Department, and a permanent member of the SCPSSEA, which is headed by Premier and Politburo Standing Committee member, Li Peng. Because China has not used financial levers to manage reform activities, such as those that are available to an economic system that relies on hard budget constraints, its administrative reform institutions appear to have relatively weak capacity to implement reform. This explains the cycles of growth - downsizing - growth and chronic overstaffing that have characterised Chinese government institutions for the past 50 years in spite of the existence of agencies such as the SCPSSEA. Fearful of the impact of restructuring on political stability, the party continues to move cautiously. Institutionalised reform agencies are also those that are staffed through open competition, reward good performance, operate through standardised, predictable, regular, and open procedures, and that employ universalistic rules and regulations that are effectively enforced. China's reform agencies, like public bureaucracy in many parts of the world, fall short when measured against these criteria. As in other formal organisations, seniority is important for promotion, performance appraisals are inadequate tools for measuring performance, and

3 The SCPSSEA is responsible for approving establishment levels, functions, and organisational structure for all party, state, and service units throughout China. It is a party organ, and is assisted by joint party/state commissions set up at provincial and local level throughout the country.

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personnel procedures are often not transparent. This is particularly so for the promotion of leading officials, such as division and bureau chiefs, and ministers.

V I I . Policy Entrepreneurship and Political Will In China's centralised and authoritarian political system, leaders play a critical role in defining political agendas. In each stage of administrative reform in China, the party Politburo has put reform on the agenda, shaped its contents, and monitored its implementation. During the 1980s reform era, former paramount leader Deng Xiaoping's call for reform of the leadership system, delivered to the Politburo in August 1980, illustrates the importance of leadership in the setting of reform agendas {Deng 1984: 302-325). In 1986, Deng pushed political and administrative reform once again. Deng and his allies were also responsible for re-shaping the reform agenda in the light of political setbacks, such as the 1989 Tiananmen incident. The Chinese political system continues to value the rule of strong leaders rather than the rule of law {Lieberthal 1995). The charismatic leadership of Mao Zedong, China's founding father, did not provide fertile ground for developing strong institutionalised reform agencies. In so far as China has moved away from charismatic leadership, stronger reform institutions are now possible.

V I I I . Benchmarking China's Experience The above discussion provides data to benchmark China's experience of administrative reform along a number of dimensions. (a) Differentiation. As we have seen, a consequence of the way the CCP came to power, namely, through revolution, was the party's successful penetration of society. Party organisations were set up throughout the country, and for the first time, formal party-controlled governments were established at the grassroots. Party penetration of society left no room for an autonomous state. State and society were one {Nee 1989). The Chinese system then permitted no "private sector". A uniform and integrated personnel management system was set up that covered all (urban) organisations - the "cadre system". Typically, university graduates, most of whom were engineers, were first assigned jobs in the state-owned enterprise sector. After spending some time there, they could be posted either to government or party positions. Because there was an integrated "cadre" management system, careers typically involved postings in several sectors. As individuals specialised in certain functional areas, they might remain in that area for their entire career, moving from personnel management, for exam-

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pie, in an enterprise, to organisation work in the party, to personnel work in the government, and so forth (Lee 1991). Driving China's post-1993 administrative reforms is the intention to radically change this system. First, the reforms seek to draw a clearer boundary between state and society, that will give the state the autonomy it needs to regulate the market. Second, this reform is being accomplished by setting up a new civil service system that is separate from the "cadre" system. Recruitment into entry level positions in the civil service is now only possible through open, competitive examinations (Ministry of Personnel 1993). Lateral transfers into the service at middle and senior levels is possible, but only after the performance of "cadres" has been assessed, and they have gone through extensive training in institutions such as the National School of Administration in Beijing. These moves, then, seek to isolate the civil service, provide it with its own management system, and give it the autonomy it needs to perform its new functions. The policy seeks to reduce the pull of personal relations, or guanxi , on personnel decision making, by closing the boundaries between state and society. In this regard, the Chinese experience is moving in the opposite direction from reforms in many other countries. Official policy in China has encouraged gender equality and ethnic representation in the bureaucracy. Still, women are overwhelmingly concentrated in socalled "women's work" functional areas, such as education, welfare, and public health, and in lower-ranking jobs. Only 16.3 percent of women cadres work in administrative agencies, such as government organs (China Personnel Yearbook Editorial Office 1991: 737). China is a multi-ethnic society and counts approximately six percent of its population as ethnic minorities. Through affirmative action, the number of administrative "cadres" from ethnic minority backgrounds is almost eight percent. Ethnic minorities do much less well in economic enterprises (3.7 percent) where affirmative action has been less rigorously pursued (China Personnel Yearbook Editorial Office 1991: 737). The legitimacy of government in national-minority areas, mostly strategically important border provinces, is widely seen to rest in part on placing individuals of ethnic minority backgrounds in positions of power. China's socialist, centrally planned economy provided for services to be delivered by a variety of state agencies. Some services, such as postal and telecommunications services and rail services, were delivered directly by central government departments and their local branches. Other services were delivered by work units, arranged according to a hierarchy. At the top with the most generous benefits, were party and government agencies and state-owned enterprises. These organisations provided comprehensive social welfare for their employees and dependents, including housing, hospital care, pensions, day care, schools, and so forth. These services were all funded out of work unit budgets. 5:

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Lower down on the hierarchy were the employees of urban collective enterprises, for whom the provision of services was less generous. Finally, rural workers, near the bottom of the hierarchy, owned their own homes, and were provided education and health care by local public authorities, funded through direct and indirect taxation. Left out of these arrangements were the army of transient and temporary workers, who were generally left to fend for themselves ( Wälder 1986). During the heyday of central planning, the good things in life (including essentials such as food ration coupons) were distributed only through the work unit. This led to heavy dependence on work units, and work unit leaders. With the emergence of labour markets in the 1980s, the system is breaking down. Most goods and services, including housing are now available in the market. A core part of China's post-1993 administrative reforms is to separate the functions of government and economic enterprises. According to this thinking, if government and/or the market can supply public services, then the burden on economic enterprises can be lifted and they can become more competitive. Globally competitive enterprises are essential for economic development. Still, progress in this area has been very slow. Most urban housing is still owned by work units or the state, simply because wages in the city are too low to enable urban workers to buy their own accommodation. Most education and public health services continue to be provided by local governments or economic enterprises. (b) Rule-driven processes. Although all public employees in China have been employed on (implicit) contracts,4 generally speaking, they are not employed on individualised written contracts. Exceptions have been large numbers of town and township officials employed on fixed-term contracts since the mid-1980s. Efforts to expand the contract system to the economic enterprise sector have been largely successful, however. The rules governing the management of "cadres" including civil servants, are contained in 18 volumes, published by the Organisation Department and the Ministry of Personnel at the rate of one volume of about 1,000 pages per annum. In addition to these regulations for cadres, separate regulations for civil servants have been promulgated since 1993. These include the Provisional Regulations on State Civil Servants, and several subsidiary regulations on specific aspects of civil service management, including performance appraisal, promotion, rewards and discipline, "avoidance" (rules to prevent nepotism and corruption), and so forth. Provincial and local governments have their own sets of general "cadre" and civil service regulations, drafted according to the central 4

A contract is said to exist in the common law if an individual performs some duty in exchange for remuneration, regardless of whether the contract is written or unwritten.

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regulations. If anything, the system is over-regulated. To overcome the rigidities and formalism of the regulations, cadres cultivate "good personal relations" with personnel managers. This has sometimes led to abuses of the system. Under China's centrally planned economy, all officially approved organisations received distributions from the "national budget" or local budgets incorporated into the national budget. No effort was made to separate the party from the government in budget terms. With economic reform, however, authorities have tried to wean economic enterprises away from the state budget. Although some 40 percent of state-owned enterprises are operating at a loss, and budget subsidies for state-owned enterprises still account for some 50 billion yuan per annum ( Wu 1992), many enterprises do not receive funding from the state budget. Under the post-1993 reforms, as we have seen, authorities have experimented with a variety of organisational forms for managing the affairs of state. First, some services, such as the monopoly providers of postal and railroad services, are provided directly by government agencies. These also include taxation, audit, banking, statistics collection, and planning agencies, that are necessary to macro-manage the economy, and regulatory agencies, for example, to regulate the new securities and futures exchanges. There is no plan to make these agencies more "market driven". Second, other services, such as urban health care, are provided by the huge service unit sector. Although service unit budgets are provided for in the national budget, officially, service units are not government agencies. They operate on a variety of modalities, that range from profit-making to non-profit orientations. Third, as we have seen, some government agencies, such as the ministries of space and aviation, have been turned into state corporations and urged to operate in the market. These corporations were provided with funding from the state budget for a fixed number of years, were given their autonomy, and were told to become competitive and profitable.5 I have no data on the extent of their success, however. Fourth, some government agencies, such as light industries and textiles, were transformed into trade associations or councils. Their mission was to regulate the tens of thousands of large, medium, and small producers in this area. These producers were usually owned by local governments, or in joint-ventures partnered with private or overseas investors. Government bureaus continue to measure performance, based on input and throughput data. Although the Ministry of Finance and the State Audit Administration play some role in monitoring performance, they are very weak. Management systems are dominated by the CCP. Clear evidence of this can be seen

5

Interviews with managers of these corporations revealed that they were highly impressed with the monopoly characteristics of their competitors overseas, and with the degree of state protection and subsidies provided to them by foreign governments.

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in the personnel field, where for years, the party instructed finance departments to pay the salaries of thousands of state employees for whom there were no officially established positions. Although official policy is "pay according to work", which supports performance-based pay {LUZhu 1993), and bonus systems have been established especially in economic enterprises, they have often been abused through misplaced egalitarianism (Walder 1986). This is especially true in government agencies where performance appraisal systems are weak and unreliable. Consequently, bonuses, where they are distributed, have sometimes been distributed to everyone in the work unit, regardless of performance. In other cases, authorities have discovered that even technically bankrupt enterprises have continued to pay bonuses to their employees. (c) Regulatory style. China's monist political system centralises control in the hands of the CCP. Through its control of the personnel appointment system (the nomenklatura ), the party exercises its influence on the legislature, judiciary, audit bodies, and all other organisations {Burns 1989). This does not mean, however, that the Chinese state is monolithic. Indeed, it can best be seen as a kind of "fragmented authoritarianism" {Lieberthal!Oksenberg 1991), that encourages bargaining and negotiation among competing bureaucracies {Lieberthal! Lampton 1992). Competition between the ministries of electronics industry and the posts and telecommunication authority over the regulation of satellite dishes and mobile phones are a case in point. Such competition has existed for decades in virtually every area of economic management. Competition has not resulted in better service for consumers, however. Rather it has resulted in confusion: In the above case, consumers are unclear about the legal status of satellite dishes. Discipline within the public service is provided by codes of conduct, established by the Organisation Department and the Ministry of Personnel. Agencies such as the party's Central Commission for Discipline Inspection and the government's Ministry of Supervision, recently merged, are charged with ensuring that cadres obey party discipline and state laws. They investigate cases of corruption, bureaucratism, malfeasance, and other disciplinary problems, and recommend to the employer various penalties to be imposed for those found guilty of infractions. Serious cases are handed to the procuratorate and the judiciary for prosecution. China's professional organisations are still in their infancy. Although organisations of journalists, accountants, statisticians, engineers, and so forth, have been established, they are officially sponsored, and come under the party's budgetary and personnel management control. In some cases they have adopted codes of conduct, but they are an insignificant part of managing conduct in the Chinese public service.

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In sum, then, China is moving away from generic management and is seeking to establish a specific management regime for the civil service. Further, administrative reform in China seeks to expand the role of the government in the provision of social services, which previously had been provided by work units. China's administrative reforms do not seek to replace rules with managerial discretion. Rather they seek to set up rules specific to the civil service. In spite of the huge volume of regulation, however, managers continue to have considerable discretion in such personnel areas as promotion. To a considerable extent, reformers in China have sought to separate market-type management, which they see as appropriate for enterprises, from bureaucratic management, which they continue to see as appropriate for government administration. There is little innovation in traditional government departments, which so far remain hierarchical, monopolistic, measure performance in traditional ways, and fail to reward excellence.

IX. Conclusion: Paradoxes of Administrative Reform Several paradoxes can be identified in the case of administrative reform in China. First, since the mid-1980s, China has begun to replace its centrally planned economy with a market economy. The market economy has curtailed the role of the state. Transactions which previously were handled administratively are now handled by markets. China's administrative reforms at their core are geared to restructuring the state for a market economy. At the same time, however, China's administrative reforms call for the continued maintenance of an extensive public sector, centred largely around the country's 100,000 state-owned enterprises (SOEs), the largest 11,000 of which in 1992 contributed 67 percent of tax revenues. In 1994, SOEs contributed 43 percent of China's total industrial output value and employed nearly 45 million workers, or nearly 68 percent of the entire urban industrial work force (State Statistical Bureau 1995). In spite of the fact that from 30 to 50 percent of SOEs are running at a loss, and many are virtually bankrupt, authorities are fearful that winding them up will produce unacceptably high levels of unemployment in the cities. During the mid-1990s, subsidies for these companies cost the state from 30 billion to 50 billion yuan per year. Although China promulgated bankruptcy legislation as early as 1986, the policy has sparked intensive opposition within the party, and has been implemented in relatively few cases. The special treatment for China's SOEs can be explained by: (1) the leader's fear of instability induced by high levels of unemployment in the cities; (2) the strategic importance of China's cities and industrial base for the CCPs power. Most party members are located in the

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cities: To destroy their livelihood would be to attack the party itself; and (3) ideological and traditional value preferences favour a strong and expansive state. Second, China's administrative reforms in the 1980s have been characterised by both decentralisation and centralisation. On the one hand, beginning in 1980, to gain support for its economic reform package and to stimulate the initiative of local areas, the central government decentralised management of fiscal responsibilities to provincial governments {Shirk 1993: 149-197). The central government then signed revenue sharing agreements with provincial governments, that in practice were based on bargaining. These arrangements, together with new policies that permitted SOEs to retain more profits for their own use, squeezed government revenue as a percentage of GNP. These revenues fell from 35 percent of GNP in 1978 to 20 percent in 1988 (ibid. : 151-152). 6 Although the policies of decentralisation have continued, at the same time, reformers have re-centralised in some areas. As part of the reforms, authorities have, for the first time, set up a central tax collection system to boost revenues. Previously all taxes were collected by local governments, which then bargained with the centre to determine the amount to be turned over to it. Reformers have also strengthened the banking system by requiring that most banks extend credit based on commercial rather than policy (or political) considerations. A network of policy banks has also been set up. Yet the central bank, the People's Bank of China, continues to play multiple roles as regulator, policy maker, and commercial/policy banker. A third paradox centres around the links between economic reform and political structure in China. Although China has experienced nearly two decades of economic reform, and society has witnessed some liberalisation in line with market reforms, the political structure appears to be largely unaffected. The country continues to be managed by a formally Leninist political system, under the leadership of the CCP. The country has not get moved, as some might have predicted, in the direction of more democracy and autonomous political participation. Sporadic protests in 1978-1979, 1981, 1986, and 1989, that called for more democracy, have been suppressed by the authorities.

6

According to Hu Angang, a researcher at the Chinese Academy of Sciences, government revenues in high-income countries averaged about 40 percent of GDP while in low-income countries they averaged about 23 percent. If we disaggregate central and local shares, the central government in China in 1994 only claimed 3.9 percent of GDP, down from 5.4 percent in 1993. By comparison (according to Hu) the ratio for central government spending to GDP in the US was 19.8 percent; Germany was 30.8 percent; France was 41 percent; Brazil was 28 percent; and India was 15 percent (South China Morning Post , 9 June 1995).

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This paradox helps to explain the unique road to administrative reform taken by China. Because of the political need to maintain the hegemony of the CCP and China's socialist system, and because of China's ideological and traditional preference for a strong and expansive state, administrative reform has not taken the anti-state, pro-private sector orientation found in other countries. Yet, substantial reforms have been realised and the country has moved considerably toward its goal of realising a market economy. Economic performance in China during the past 20 years or so has been exceptionally good. The 21 st Century may well be China's Century, which would vindicate China going down its own road to administrative reform.

References Asian Development Bank (1994). Key Indicators of Developing Asian and Pacific Countries. Manila: Oxford University Press. Burns , J. P. (ed.) (1989). The Chinese Communist Party's Nomenklatura System. Armonk, N.Y.: M.E. Sharpe. — (1993). "Administrative Reform in China: Issues and Prospects". International Journal of Public Administration 16/9, 1345-1370. Caiden , G. E. (1991). Administrative Reform Comes of Age. New York: Walter de Gruyter. Central Organisation and Establishment Commission General Office (eds.) (1993). Trends in China's Administrative Reform (in Chinese). Beijing: Economic Daily Press. China Personnel Yearbook Editorial Office (1991). China Personnel Yearbook, 19881989 (in Chinese). Beijing: China Personnel Press. Constitution of the People's Republic of China. Beijing: People's Press, 1982. Epstein , EJChong, T. C. (1995). "The Legal Reform", in: Lo Chi Kin et al. (eds.), China Review 1995. Hong Kong: Chinese University Press, 6.1-6.34. Gu, J J Burns, J. P. (1996). Administrative Reform of Provincial-Level Government in the People's Republic of China: the Case of Anhui Province (unpublished paper). Harding , H. (1981). Organizing China: the Problem of Bureaucracy, 1949-1976. Stanford: Stanford University Press. Huntington , S. (1970). "Social and Institutional Dynamics of One-Party Systems", in: S. Huntington and C. Moore (eds.), Authoritarian Politics in Modern Society: the Dynamics of Established One-Party Systems. New York: Basic Books, 3 ^ 7 . Lam, Τ.'CJChan, H. S. (1995). "The Civil Service System: Policy Formulation and Implementation", in: The China Review: 1995. Hong Kong: Chinese University Press, 2.1-2.43. Lee, Η. Y. (1991). From Revolutionary Cadres to Party Technocrats in Socialist China. Berkeley: University of California Press.

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Lieberthal , K. (1995). Governing China: From Revolution Through Reform. New York: Norton. Lieberthal, KJLampton, David (eds.) (1992). Bureaucracy, Politics, and Decision Making in Post-Mao China. Berkeley: University of California Press. Lieberthal , Κ JOksenberg, M. (1988). Policy Making in China: Leaders, Structures, and Processes. Princeton: Princeton University Press. Lo, W. (1987). An Introduction to the Civil Service of Sung China: With Emphasis on its Personnel Administration. Honolulu: University of Hawaii Press. Manion, M. (1993). Retirement of Revolutionaries in China: Public Policies, Social Norms, Private Interests. Princeton: Princeton University Press. Ministry of Personnel (1993). Provisional Regulations on the State Civil Service System. Beijing: Ministry of Personnel. Nee, V. (1989). "Peasant Entrepreneurship and the Politics of Regulation in China", in: V. Nee and D. Stark (eds.), Remaking the Economic Institutions of Socialism: China and Eastern Europe. Stanford: Stanford University Press, 169-207. O'Brien , K. (1990). Reform Without Liberalization: China's National People's Congress and the Politics of Institutional Change. Cambridge: Cambridge University Press. Pye , L. (1981). The Dynamics of Chinese Politics. Cambridge, Mass.: Oelgeschlager, Gunn and Hain. Quah, J. (1976). "Administrative Reform: A Conceptual Analysis". Philippine Journal of Public Administration 20/1, 50-67. Rigby, T. VUHarasymiw, B. (eds.) (1983). Leadership Selection and Patron-Client Relations in the USSR and Yugoslavia. London: George Allen and Unwin. Ruhai , LJQingfang, Z. (1993). Study of China's Civil Service Management (in Chinese). Beijing: Legal Press. Schumann, F. (1966). Ideology and Organization in Communist China. Berkeley: University of California Press. Schwartz, B. (1987). "The Primacy of the Political Order in East Asian Societies: Some Preliminary Generalizations", in: S. Schräm (ed.), Foundations and Limits of State Power in Chiria. Hong Kong: Chinese University Press, 1-10. Shirk, S. (1993). The Political Logic of Economic Reform in China. Berkeley: University of California Press. South China Morning Post ([Daily] Hong Kong). State Bureau of Statistics (1995). Statistical Yearbook of China, 1995. Beijing: China Statistical Publishing House. Wälder, A. (1986). Communist Neo-Traditionalism: Work and Authority in Chinese Industry. Berkeley: University of California Press. Wenhuibao (abbr. WHB, [Daily] Hong Kong). White, G. (1993). Riding the Tiger: The Politics of Economic Reform in Post-Mao China. London: Macmillan. Wong, C. et al. (1995). Fiscal Management and Economic Reform in the People's Republic of China. Oxford: Oxford University Press.

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Wu, P. (1990). China's Government Organization Reform (in Chinese). Beijing: Economic Daily Press. Xiaoping , D. (1984). The Selected Works of Deng Xiaoping. Beijing: Foreign Languages Press. Zedong , M. (1962). Selected Works of Mao Zedong. Beijing: Foreign Languages Press.

Reform in Japan's Public Management: The Changing Role of Bureaucrats, Paradoxes and Dilemmas By Akira Nakamura

I. Introduction As it has in other OECD countries, the age of reform has finally reached Japanese shores. Until the mid-1990s, Japan has remained indifferent to reforms taking place in other states, and has resisted such concepts as the separation of policy and operation in public management. However, on 21 November 1996, the Hashimoto government decided to create an independent council to draft a programme to reform the central government. The Administrative Reform Council was to address three related issues: (1) to examine the proper function of government in the next century; (2) based on this examination, to shape a new organisational format for Japan's central government; and (3) to establish a system of augmenting the Prime Minister's leadership. On 13 December 1996, the government announced the make-up of the council, a 15-member list that surprised both media and academics. The Prime Minister was to chair the council himself, a move unprecedented in the country's post-war history, while the Minister of Management and Organisation would sit as a vice-chair. This exceptional arrangement reflected the resolve of Japan's chief executive: Prime Minister Hashimoto appeared certain that the country seriously needed a radical overhaul of public management. The council also included six academics, three journalists, and one labour union leader, as well as the presidents of Toyota, Mitsubishi Heavy Industries, and Chichibu Cement Corporation. None of the council members were experts in public administration or management; the six academics specialised in international relations, physics, and administrative law. Conspicuously missing from the council were bureaucrats, those who would be the first to be affected by government reform. On 3 September 1997, after strenuous successive fact-finding investigations, the council made public an interim report, which was, as it turned out, a bombshell, which triggered a chain of political reactions. The panel first recommended a substantial reduction of national agencies, and intended to revamp

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such mighty ministries as Construction, Agriculture and Fisheries, International Trade and Industry, and Posts and Telecommunications. These would be replaced with a Cabinet Office, ten ministries and two agencies (National Public Safety and Defence). Additionally, based on the British model, the council proposed a radical reform of the entire postal system. Japan has more than 25,000 post offices throughout the country, with two major functions: as in many countries, they deliver mail and packages, but Japanese post offices also function as banks. They are financial institutions in every sense of the term, and in fact comprise the largest banks in the country. During the mid-1990s, this arrangement has appeared to be detrimental to effective and efficient government. For reasons which will be discussed in this paper, the council proposed to dissolve the Ministry of Posts and Telecommunications and to move postal affairs to a new independent agency. The panel further submitted a plan to privatise both postal savings and postal insurance services. In many other OECD countries, politicians are often pitted against bureaucrats for control of government power, which frequently results in politician demand for public management reform. Japan's political configuration is complex. Governing Conservative Party members often spearhead a coalition of bureaucrats and various interest groups to maximize their mutual benefits. Thus, ever since the interim report hit the headlines in Japanese media, both politicians and bureaucrats have begun to work in unison to protect their vested interests, and have directed their efforts towards undermining the suggested reforms. At one point, the Minister of Management and Coordination, immediately following his resignation as vice-chair of the council stated that the draft plan, in which he himself was involved, was only a working paper and could be amended. This statement was devastating to the reform process; the Prime Minister had to publicly reiterate his commitment that the overhaul of government would be carried out as promised. This visible determination may have expedited the final proposal of the Administrative Reform Council, even though a series of compromises had to be worked out both in and out of the council. On 3 December 1997, the panel presented its final programme for government reform. As in the interim report, this plan proposed to amalgamate 22 government ministries into one office and 12 ministries. Three postal services, however, remained problematic, contestable and controversial. The final compromise proposed that postal savings, postal insurance, and mail services be handed over to a new public agency in five years, and that those workers who would transfer to the new corporation retain their status as government employees (Gyosei 1997).

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Against this backdrop, this paper first outlines three basic reasons for the political prominence of élite bureaucrats in Japan, and follows with a description of the government-inspired economic growth in the post-war period of the country. This information explains several factors, which compel Japan's need of public management reform. The final section of the paper first alludes to paradoxes and dilemmas inherent in Japanese reform efforts, and also benchmarks these attempts from a comparative perspective.

I I . The Backdrop to Japanese Reform Efforts: Bureaucrats, Politics, and Policymaking Process As in many other East Asian countries, Japan has a long history of rule by an élite group, i.e. mandarinism. Traditionally, a central bureaucracy holds significant power over various issues of national importance, and has always been a leading player in Japanese politics. Japanese bureaucracy is not of immense size, however: in fact, it is the smallest among the OECD states. Data for the mid-1990s number Japan's public officials at 4.5 million (national 1.2 million, sub-national 3.3 million), which translates to 36 civil servants per 1,000 population, compared with 72 per 1,000 in the United States (JETRO 1991: 65). Of those 4.5 million Japanese public servants, approximately 4,000 highranking personnel were highly important. Generally called Kanryo (literally, the bureaucrats), they are viewed, along with politicians and business leaders, as the people most critical to Japanese policymaking processes. These élite bureaucrats are typically graduates of the University of Tokyo, School of Law (law, in this context, referring to an undergraduate liberal arts degree). Because these public officials must pass a highly competitive screening exam before they can attain high status, they are commonly referred to as "the cream of the crop", and frequently dubbed "bullet trains" for their rapid rise on the central administration's power ladder. For three specific reasons, the status and power of the Kanryo are highly significant in Japan. The country has a long history of popular respect for the role of public officials, which conversely tends to degrade the private sector, e.g. business and commerce, as inferior. An historical saying states that "public is revered, while private is despised" (Kanson Minpi). The origin of this social view dates back to the pre-modern period known as the Edo era (1603-1867), an age of rigid social stratification. At the apex sat the ruling samurai class (contemporary public officials), while merchants were at the lower end of the community scale. Although Japanese society is no longer feudal, nor as structured, this traditional outlook subtly continues even now. The business community in Japan,

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however viable and global, is not on a par with the government, especially in terms of societal leadership; it is expected to stay subservient and to follow the lead of public authorities even in matters of economic activities. This perspective, unique to this culture, may account for Japan's prolonged disinterest in administrative reform, compared with other OECD countries. In the United States and the UK, administrative reform is often related to business concepts and operations. Privatisation and entrepreneurship form the nucleus of government reform in these countries. The reinvention of government with business overtones is one of the strong messages that reformers in many OECD countries have tried to communicate (Aucoin 1990; Peters 1995a, 1995b). Japan's national and sub-national governments have generally remained unresponsive to business management concepts of government. Occasionally a rural community receives media attention when it tries to adopt business techniques to market local commodities or to bolster its declining image, but these cases are the exception. Traditionally, most Japanese governments have been uninfluenced by business management ideas, at least to the same extent as many other OECD countries. This attitude reflects the "public revered and private despised" tradition which is ingrained in Japanese political and administrative culture. Aside from the cultural factor, the prominence of the élite bureaucrats in Japanese policymaking has a political component. The conservative Liberal Democratic Party (LDP) has governed Japan for most of the period since 1955. The LDP lost its majority in the House of Representatives only once, in 1994, briefly relinquishing its power to rival coalitions. However, in 1995, the LDP succeeded in forming an effective alliance with several minor groups, sending its leader, Ryutaro Hashimoto, to the Prime Minister's pedestal. Ever since, due mainly to internal schisms, forces opposed to the LDP have been rapidly degenerating. LDP rule is, it seems, again here to stay. Central agencies have developed a close rapport with this semi-permanent LDP government. This relationship takes two different forms. First, a large number of élite bureaucrats frequently change careers in their mid-fifties and run for elective office under the LDP banner. In the 1996 election for the House of Representatives, 115 former bureaucrats ran for the 500 Lower House seats. Of these, 74 candidates (15 percent) were successful. In the Upper House, 1995 data show that of 252 seats, 30 members (twelve percent) were former bureaucrats. The Ministry of Construction topped the list for both houses. Eight Council members came from the Construction Ministry, six from the Ministry of Home Affairs, and five from the Ministry of Agriculture, Forestry and Fisheries. These bureaucrats-turned-politicians in the legislature represent and protect the interests of their former agencies.

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It is important to note that these figures belie the actual political power these former bureaucrats possess. Although their numbers are not large, these onetime public officials frequently surpass other LDPers in administrative knowledge and policy expertise. For this reason, it is not rare for these former bureaucrats to rise to the position of party president and take the premiership of the country. Of the 24 Prime Ministers in the post-war period, ten fall into this category. Even without rising to power in the party, former bureaucrats can influence LDP politics, as in the case of Masaharu Gotoda. Gotoda, formerly a member of the Home Affairs Ministry, held a long professional career in the country's police administration. As a member of the House of Representatives, he served as Chief Cabinet Secretary under the Nakasone administration in the early 1980s. Even after retirement, he retains prominence as the man to whom successive party leaders pay tributes and from whom they seek advice (Nakamura 1997:120). Over the years, the LDP itself has developed several prominent policy experts within its camp. Ryutaro Hashimoto, the incumbent Prime Minister at the time of writing, is one case in point. Hashimoto was interested and active in welfare issues since he was first elected to the House of Representatives in 1963 at the age of 26. He therefore accumulated tremendous knowledge and expertise, and was considered one of the most important politicians regarding welfare programmes. There are other similar LDPers, known for their policy command in such vital domestic issues as agriculture and public works. These policy specialists in the LDP tend to develop complex and interesting relationships with specific national agencies. For instance, several LDPers maintain contacts within the Ministry of Construction, and are therefore sympathetic to the needs of the public officials in this Ministry. Essentially, they have become loyal to the Ministry and have spearheaded a mini-coalition between public officials and construction industries. The record demonstrates that different policy areas, notably agriculture, construction, and postal and telecommunication, tend to form such mini-coalitions, which have been highly effective, especially in times of financial re-entrenchment. When the Finance Ministry tries to cut the budget, these mini-coalitions led by LDPers and supported by public officials and related industries, function to protect their mutual vested interests. This is one of the more cogent reasons why past Japanese administrative reform has often been undermined to the point of failure (Inoguchillwai 1987). Finally, Japanese élite national bureaucrats play a critical role in policy process, because of three different discretionary administrative powers they possess. As in many other democratic states, national legislators are responsible for enacting new laws or policies. However, these new acts or programmes provide only a framework or skeleton. Before they are implemented, details and procedures of execution must be spelled out. In Japan, this process is executed by administrative guidelines, cabinet orders, agency circulars, or official notices 6 Hesse

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all written by the bureaucrats. The central government rationalises this practice by noting that it fulfils the original intent of the law or the programme that is to be faithfully carried out by both local governments and private enterprises. In addition, Japanese central bureaucrats hold various licensing and approval powers. These regulations, numbering more than 10,000 items, range from the approval of the Ministry of Agriculture, Forestry and Fisheries over the volume of rice each farmer may produce to licensing authority by the Ministry of Health and Welfare on marketing a new medicine. These regulations are so extensive in Japan that a leading supermarket chain had to clear more than 42 different government controls before it could open a new branch. These regulations cost the supermarket at least one hundred million yen, subsequently added to consumer prices. It is no wonder that consumer items are extraordinarily expensive. Extensive government regulations can cause market mechanisms to fail to function. Japan's unique form of intergovernmental relationships has also contributed to the power of bureaucrats. Article 94 of the post-war constitution states that "local public entities shall have the right to manage their property, affairs and administration and to enact their own regulations within law". Despite this local autonomy provision, the pre-war legacy of strong central control persists. One primary mechanism is an administrative practice referred to as "agencydelegation", an essentially jurisdictional term in Japanese public administration. Under this concept, for financial and other purposes, prefectural and local executives often become agents of the national government, and are required to implement central policies on its behalf. A large number of social health and welfare policies fall into this category. For example, although the daycarenursing programme is a municipal service, the Ministry of Health and Welfare generally prepares detailed guidelines for local governments, who are subsequently required to hire a fixed number of nurses for each daycare centre they operate. Similarly, when a city government builds a new daycare centre, the national government provides subsidies on a formula basis; the recipient local authority must then conform to national standards for space and facilities. Under Japanese centralised governance, it is difficult, if not impossible, for local governments to initiate projects or programmes which may exceed established national precepts (Abe 1994: 55-79). In addition to agency delegation, Japan's central government controls local entities by several other means. The national government customarily sends deputies to prefectures and major metropolitan governments as "deputised (secondment) personnel". National bureaucrats often hold a number of important managerial posts in these governments. By the late 1990s, 950 national public officials assume posts at the managerial level or above in the sub-national units of government on a temporal basis. Of the different ministries, the Ministry of

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Construction outstripped the others, having more than 238 secondment personnel in their ranks. The Ministries of Home Affairs (189) and Agriculture, Forestry and Fisheries (151) followed.

Table 1 Number of Deputised Personnel Working in the Sub-national Governments (by Agency) Ministries

Construction Home Affairs Agriculture Police Health/Welfare Transportation Education Trade Environment Finance Labour Ect. Total

Numbers

238 189 151 92 91 54 39 33 15 13 11 24 950

Source: Asahi Shimbun, 2 April 1997.

Prefectural government usually provides two or three vice-governors as deputies to the elective governor. However, a high-ranking bureaucrat from the central government customarily assumes one of these appointed positions, usually a member of the Ministry of Home Affairs. Similarly, it has become increasingly obvious that the elective governorship has also been taken over by former career bureaucrats of the national administration. According to figures of the mid-1990s, of 47 governors in Japan, 26 were former high-ranking public officials of various central ministries. Again, the Ministry of Home Affairs dominated the list: 16 governors of Japan were former members of this important office. The central government further maintains control over local finance by means of subsidies. Most local governments in Japan depend on various grants from the central government for a little less than half their budgets. Japanese prefectural governments draw major financial resources from two sources, resident tax and corporate business tax, while other local governments rely on both resident and real estate levies. 1995 data demonstrate that local taxes accounted for 40.9 percent of total local finance, while block (19.6 percent) and categorical grants (15.5 percent) made up 35.2 percent of the total income of Japan's sub-national governments. Once the additional 13.7 percent of local bonds is 6*

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added, local government finance appears somewhat dismal, and demonstrates their reliance on outside sources (Shibata 1993). Table 2 National Dependence of Japan's Local Finance

Local Tax Formula Block Grant User Fees and Others Miscellaneous Categorical Grants Bonds Source: ChihoJichi

40.9% 19.6% 1.8% 8.5% (70.8%) 15.5% 13.7% (29.2%)

Yoran 1995.

The central government in Japan defends the use of these methods of control, by noting that they help to standardise welfare and health programmes, which, it holds, ought to be uniform across the country. To assure this uniformity, the national government believes that central control is essential, and contends that without their involvement, economically fragile localities might fail to provide adequate services for their residents. In the eyes of the central administration, the equalisation of different social services should precede local autonomy and decentralisation.

I I I . The Rise of a Producer-oriented Society and the Plight of Consumers in Japan Japan's post-war economic expansion has been engineered mainly by the central bureaucracy, which laid out specific policies and programmes which the private sector has followed. This government-led economic expansion has been quite effective: under the tutelage of the national agencies, Japanese big business has expanded to become a leading member of the international economy. The country is now replete with giant corporations. Among others, Toyota, Sony, Nikon, Toshiba, and Hitachi vividly illustrate Japan's post-war economic accomplishment. Japan's economic presence stands in strong contrast to the situation in the 1950s and 1960s. For example, in the late 1950s, Toyota exported an auto named "Toyopet" to American consumers. Unfortunately, being technologically limited, the car could not manage US highways. At higher speeds, the hood would begin to blow up, and the engine would smoke. The Americans called this car not a "Toyopet" but a "Toy Pet," and ridiculed it, saying that it was

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probably made of leftover beer cans. In this economically fragile period, Ford, Volkswagen or any other foreign automaker might have wiped out the Japanese auto industry, had they been allowed to penetrate the country's market. Instead, with the blessing of the Liberal Democratic Party, Japanese national agencies protected the vulnerable auto industry with an extensive fence of regulations. These protective measures, including high tariffs, effectively kept out foreign competitors. Owing much to this type of government guardianship, Japanese industries steadily gained confidence and eventually secured their excellent place in the international market. Japan's economic success has, nonetheless, generated social and administrative liabilities. One of the most critical has been that the central government appears to have become the victim of its own success, has gradually grown too cumbersome and powerful to be efficient. Noting critical flaws in public management, a growing number of Japanese have begun to question the validity and wisdom of government-centred economic engineering. From the perspective of Japanese consumers, post-war growth has only benefited large industries, and has turned the country into an extremely producer- and product-oriented society. Much of the public feels that ordinary consumers have not necessarily gained from the country's economic accomplishment, and cite examples to prove the financial predicament of ordinary citizens. In Japan, consumer items are expensive compared with other industrialised countries. It has become legendary to note that a coffee shop in Tokyo charges US$ 5 for a cup of coffee, or that a downtown hotel bills US$ 35 for a simple ordinary breakfast. Housing costs in Japan are horrendous, especially in metropolitan regions. An ordinary piece of residential land in Tokyo costs ¥ 560,000 (US$ 4,300) per square meter, approximately 60 times that of New York City. To acquire a single housing unit in Tokyo costs 12.9 times the average annual income, compared with the ratios of New York and London of 2.9 and 6.9 respectively. Consequently, the average urban Japanese must live on a tiny lot. Each dwelling unit probably averages less than 100 square meters in such metropolises as Tokyo or Osaka. It is no wonder that the Japanese are often disparaged as living in rabbit hutches (Keizai Koho Center , Japan-1998: 100). Such day-to-day problems as high consumer prices and incredible housing costs stem from the same root cause, which is an intrinsic part of Japan's investment-oriented economy. This "investment economy" has two inter-related components, i.e. public and private investment, in which the post offices, referred to earlier, play an important part. As noted, Japanese post offices serve two different functions, operating as a general postal service, and as banks. People can deposit, save, and withdraw money in post offices. In fact, for many years, post offices in Japan provided

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higher interest rates than the city banks and encouraged individual depositors to do business with them. Commercial banks were primarily for major industries; the government provided incentives for individuals to make financial transactions in the post offices. The monetary resources collected by the nation-wide post office network have largely anchored Japanese post-war expansion. Indeed, these funds are called "the second national budget" in Japan. For fiscal year 1998, the funds collected by post offices were estimated at ¥ 57 trillion (US$ 438.4 billion); the separate general budget outlay of government stands at ¥ 77 trillion (US$ 592.3 billion), which shows the enormity of the postal funds of Japan. Beginning in the mid-1950s, the central bureaucracy began to siphon off public monies to fund a number of giant public works projects. In one of the first, the "Pacific Belt Development", the government targeted areas in the region from Tokyo to the southern tip of Kyushu Island. Along this route, it constructed several mammoth industrial complexes (called Kombinate in Japan), assuming that these sites would play a major role in Japan's rapid industrialisation. This government-sponsored project created an important threshold for the nation's economic expansion in the 1960s and beyond. The government has tried to utilize the same investment technique for a number of other national projects, including the 1964 Olympic Games. In conjunction with the Games, the government not only spent hugely to refurbish Tokyo's metropolitan area, but also dispersed funds to construct the famous "Bullet" train (Shin Kansen) and several highways. The objective in these projects was constant: to foster economic expansion. As many international events as possible have since been invited to Japan, including the 1970 World Exposition in Osaka, and the 1972 Sapporo Winter Olympics, as well as a score of other sport events or expositions. In 1997, a giant project was started to sponsor the 1998 Winter Olympics in Nagano, and in recent years major efforts have been made to organise the 2002 Football World Cup. In all cases, the public sector has funded these international events, and in most cases, the central administration has been pivotal in both developing the idea and implementing the event. Private investment has provided another dimension to Japanese post-war growth. For many years, the government has encouraged private enterprises to borrow from commercial banks to invest in capital formation. As long as resources go towards new factory construction or new equipment, the government has been generous and allowed the firms to write off these expenses as a business tax loss. Consequently, instead of paying taxes, Japan's private corporations have tended to invest in real estate to support proposed plant expansion. In this scenario, city banks have been willing to lend funds to private firms, usually taking either the stock or the real estate of these corporations as collateral. Sig-

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nificantly, the price of both experienced a continuous rise during the post-war decades - until only a few years ago - , and thus never failed the banks. One consequence of the investment-oriented economy has been a constant rise in land price. Occasionally, land has become the easy target of speculators and has gone out of control as in 1987, generating astronomical price spirals. In the last several years, land price has stabilised as speculation subsides; nonetheless, as already indicated, for ordinary Japanese consumers, even the price of a small lot remains beyond their means. Unfortunately, rent for housing and office space in Japan is also expensive. Consequently, when people drink coffee in a downtown hotel in Tokyo, they must, even as they deplore the high price, recognise that they are drinking not only the coffee, but also the rent of the hotel (Nakamura 1992). In light of these problems, consumers are increasingly questioning the wisdom and competence of public management, and unfortunately, for the bureaucrats, such public feelings seem to be vindicated. During the late 1990s, the mass media have exposed a number of cases of central agency mismanagement. The central government has, for instance, used funds accumulated by the postal service to finance enormous public works projects with dubious objectives and controversial outcomes. One of the most frequently cited examples is an airport constructed in a rural region. This facility, located in the middle of farmland, cost billions of yens to construct, but is used only once or twice a year. The growth of "special purpose public corporations" offers a further example. In order to facilitate the operation of public policies, central ministries in Japan often create independent "special purpose" corporations. Japan Highway Public Corporation, for instance, was founded in 1956 as an operating arm of the Ministry of Construction; similarly, the Employment Promotion Corporation was created in 1961 as an extension of the Labour Ministry to seek reemployment for displaced coal mine workers. By the mid-1990s, 92 of these public corporations existed at the central level, and have been connected with several appalling problems. Government subsidies and investment funds usually finance these public entities. Although some of them generate funds from user charges, in most cases, these organisations have not made any profit. The Japan Highway Public Corporation, in fact, has accumulated enormous debt, which totalled more than ¥ 22 trillion (US$ 169.2 million) in 1995, despite financial help from the government. Revenue from highway driving tolls throughout the country is not applied to this debt, but are used for highway development. I f its present financial condition persists, many specialists worry that the Highway Corporation will soon become another Japan National Railways: going bankrupt only to be rescued by additional government funding from taxes.

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Further, the Japan Highway Public Corporation has developed a large number of subsidiary enterprises. A specific law was passed to authorise the foundation of the parent corporation itself; its subsidiaries, however, are private corporations. The Highway Public Corporation can establish auxiliary organisations as it deems fit, which, as private firms, are not legally bound by government regulations. In 1995, there were 67 of these subsidiaries, including Highway Service Incorporation and Rest Area Services. These private firms operated more than 171 restaurants, 311 convenience stores, and 193 gas stations in rest areas along the toll ways. In fiscal year 1995, these 67 subsidiaries with more than 26,000 employees made net sales of ¥ 545 billion (US$ 4.192 billion), which defines the problem: these private firms prove to be highly profitable. The restaurant business alone garnered at least ¥ 2.9 billion (US$ 22.3 million); nonetheless, these private firms have not transferred any earnings to the debtridden Highway Public Corporation except for small token amounts. Strange as it seems, very few people have pointed out that the stocks of these private enterprises come from the tax funds that subsidise the Japan Highway Public Corporation. These subordinate group organisations have also been found out in yet another questionable practice, which may bear directly on the integrity of élite bureaucrats in the central administration. One of the more compelling excuses for the creation of these auxiliary organisations stems from an established routine among élite bureaucrats, who customarily retire by their mid-fifties, in order to expedite personnel flow. The average life expectancy for a Japanese male being 76, these retiring public officials seek another job. Some opt to run for office, but the majority "descend" to the private sector to become executives of leading business firms. Still others "descend" and find post-retirement job opportunities in a subsidiary of the public corporations. This practice of public officials taking a second job in the private sector is called the "Descent from Heaven" in Japan (Inose 1997: 87-128). In the case of the Highway Public Corporation, its private auxiliary organisations receive a large number of retiring public officials from the parent organisation, as well as from the Construction Ministry. These retiring public officials usually become executives, if not president, of the subordinate corporations. Further, in many cases, they transfer from one subsidiary to another, in order to make room for new groups of departing bureaucrats from the parent organisations. This practice, generally referred to as "Migrant Birds", usually results in a substantial severance fee for the transferring official. In one case, a former viceminister in the National Land Development Ministry netted a total of ¥ 55 million (US$ 423,000) in severance pay when he left his office to become Chairman of the Board of the Japan Highway Public Corporation. Eventually vacating this post and moving to the Highway Facilities Association, he collected another ¥ 39 million (US$ 300,000) as severance pay from the Highway Public

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Corporation. Four years later, he again stepped down from his post in the Japan Highway Facilities, and received an additional ¥ 26 million (US$ 200,000) for these short years of service in the Association. One of the problems in Japanese central bureaucracy is that both the "Descent from Heaven" and "Migrant Birds" practices have become a widespread and entrenched part of public management. These tactics, exclusive to public officials, are now so consolidated that few have questioned their legitimacy; most central bureaucrats appear to nonchalantly take these privileges for granted. It is no wonder that Japan is frequently described as "heaven for public officials".

IV. Paradoxes and Dilemmas in Japan's Implementation of Administrative Reform Japan is a democratic state. Among other things, the country guarantees freedom of speech, expression, and assembly. However, Japanese democracy has been called the "Spectator Democracy". Large numbers of Japanese are ideologically conservative and politically passive, believing that public management should be left in the hands of bureaucrats. They think that cadres of the country's best and brightest steer government performance; consequently, in the eyes of the people, little should go wrong in government administration. Nonetheless, even for the conservative and quiescent Japanese, recent media revelations disclosing a serious lack of responsibility and accountability on the part of the country's central bureaucracy have proved bizarre and mindboggling. As already indicated, Japanese consumers bear extremely high prices, while their living environment lags behind those in other advanced industrialised nations. Taking these conditions into account, the Japanese public regards the handsome lifestyles of their civil servants as appallingly arrogant. Consequently, an increasing number of people have come to believe that the behaviour of public officials must change radically, and have, therefore, finally begun to voice criticism against both the Liberal Democratic Party and its surrogate, the bureaucrats in the central government. Public outcry for administrative reform is mounting in Japan. It is due to this general discontent that Prime Minister Hashimoto decided to initiate administrative reform of the central government when he took office in 1996. He originally proposed six different governmental reforms: (1) a structural realignment of the central government; (2) a reformation of the financial system and reduction of budget deficits; (3) a transformation of the economic system and deregulation of government controls; (4) an overhaul of social welfare programmes; (5) decentralisation of central powers; and, (6) a reform of the country's educa-

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tional system. Hashimoto's predecessors had already taken up some of these reforms, however in some, notably educational reform, had made no or little headway (Muramatsu 1998). Of the six issues, deregulation is one of the most critical. As much as their foreign trade partners, the Japanese themselves feel that the free market mechanism often fails to function, due mainly to numerous government controls. Many Japanese consumers view excessive government regulations as the major cause of high prices for goods and services in the country. To respond to these criticisms, the government formed the Committee for Administrative Reform (Gyosei Kaikaku Iinkai) as a consultative body to the Prime Minister in December 1994. The Committee's major responsibility is to devise plans for deregulation. Since its formation, the committee has submitted several recommendations to the Prime Minister, which provided the basis for deregulation guidelines issued by the government in 1995. These guidelines state that controls will be removed on a total of 1,100 services by the year 1999. These include 86 housing and real estate controls, 53 regulations over information industries, 120 items covering distribution systems, 168 controls over the trucking industry, 240 items of import licensing, and 83 controls over finance and insurance markets. Some of them have already been implemented, for example, regulations governing cellular phones and cable TV. Deregulation in these fields has generated a new demand for business and new types of job opportunities (MC News 1995:4). There are several problems, however. Auto-inspection offers one example of the type of paradox, which complicates Japanese attempts at reform. In Japan, car owners must bring their autos to a garage for inspection three years after the initial purchase and every two years after that. The inspection is expensive, about ¥ 250,000 (US$ 2,000), and takes at least a week, during which the owner is without the car. This regulation is a legacy from the 1950s when Japanesemade cars were defective, and frequently malfunctioned. Since Japanese autos have improved in quality, the government should be able to dispense with this unpopular regulation. However, two matters are pertinent. First, there are at least 1,000 public officials in charge of this regulation. Second, there are approximately 500,000 garages in Japan specialising in auto inspection, and employing more than 2 million workers. Under the circumstances, deregulation could create a large number of unemployed. Consequently, the prospect of deregulating this control seems dim, as opposition will certainly be mounted. Decentralisation creates another significant issue. Despite a constitutional guarantee of local autonomy, central agencies control sub-national government affairs: centralisation is the traditional hallmark of Japan's intergovernmental relationships. However, responding to public complaints against the excessive centralisation of power, the national legislature passed The Law for the Promo-

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tion of Decentralisation (Chiho Bunkeri Suishin Ho) in May 1995. This legislation called for the formation of a seven-member Committee for the Promotion of Decentralisation, with a mandate to prepare a specific plan for decentralisation in five years. In October 1997, it submitted its fourth interim report to the Prime Minister. This fourth report forms the basic shape of the future plan. Decentralisation is approaching an important threshold in Japanese public management (Nishio 1996). The decentralisation issue demonstrates another policy dilemma arising out of Japanese reform efforts. There are 3,300 local units of government in Japan, including such mammoth organisations as the Tokyo Metropolitan Government and Osaka Prefectural Government. In addition, there are many small and medium-sized local governments. Some of them suffer from decreasing populations and the decline of industry, especially those in rural sectors of the country. These small and medium sized units are often financially fragile and administratively weak. For financial resources, most of them depend on various subsidies from both national and prefectural governments. In one case, in the northern part of the country, a small city faces a constant drain of younger residents. They leave the town, usually for Tokyo, seeking better educational or job opportunities; consequently, the area has primarily an older population, for which the local government must raise funds to maintain various programmes for the aged. However, industries have also been deserting the town, depleting an important source of its income. Although both academics and mass media stress the democratic value of decentralisation, for such economically and socially declining areas, it could prove to be a nightmare. Rural residents are aware that local autonomy will not increase the area's population, nor will it help generate public funds. They are, in effect, afraid that decentralisation will be detrimental to the well being of the region, and in fact may eventually wipe out their area altogether. As a result, even though decentralisation is politically important, discussion has been confined to the central level, with local units of government as bystanders to the polemic, so far. In some instances, local government officials have openly asserted that they need more funds, not more responsibilities. Thus, decentralisation presents one of the conspicuous paradoxes in current reform efforts in Japan. To begin the reform process of downsizing, the Hashimoto administration created the Administrative Reform Council in November 1996. From the outset, the ideas were far-reaching. Streamlining the national government was a primary concern of the Hashimoto cabinet. The Prime Minister was personally interested in reducing the power of the Ministry of Finance, as well as reorganising and revitalising the function of the Prime Minister's office. All of these downsizing reforms presented further paradoxes, stemming partly from Japanese cultural traditions.

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The Administrative Reform Council, chaired by the Prime Minister, presented the final reform plan on 3 December 1997. The plan proposed to reduce the number of central ministries from 22 to 13 by 2001. (The initial plan, reflecting reforms in New Zealand, intended to reduce the number to 10.) Of various amalgamations proposed to accomplish this aim, one of the most important attempts to eliminate the Ministry of Home Affairs, Posts and Telecommunications Ministry, and Management and Coordination Agency, and to amalgamate them into a Ministry of General Affairs. Similarly, the Construction Ministry, Ministry of Transportation, the National Land Agency, and the diminutive Hokkaido Development Agency are to be united to become the National Land and Transport Ministry. This plan generates a number of giant ministries, which presents a paradox. Under present conditions, these new, enormous agencies could amass huge regulatory powers and become awesome organisations. In fact, open opposition from the central bureaucrats has been conspicuously absent, as these public officials were aware that the reform proposal would augment, and not reduce, their power and authority. One of the serious flaws in the Hashimoto plan was his haste in finalising the reform idea. As later development indicated, he should have waited until deregulation and decentralisation took root in the country. Unlike similar ministries in other OECD countries, the Japanese Finance Ministry has two important powers, which have made this agency one of the most critical in the central bureaucracy. In Japan, the Ministry of Finance is responsible for both fiscal policies and financial affairs. The Ministry has lately committed several policy blunders, and in fact, now appears unable to steer the nation's financial and monetary policies. In the early 1980s, the ministry failed to recognise that Japan's economy had become overheated. Equity and real estate markets began to erode by the end of the decade. The ministry stepped in to control the still booming, but "bubble" economy, but too late, and as a result has been associated with the detrimental consequences to the nation's economy. The popular press characterised the Finance Ministry's intervention efforts as lukewarm - too little, too late. Given these developments, Prime Minister Hashimoto hoped to transfer financial responsibility from the Finance Ministry to a newly created independent organisation. Opposition to the idea was vehement and consolidated, and the separation of the Ministry's functions failed to carry through. The bureaucrats roused the LDPers and orchestrated their joint disapproval effectively. This coalition effort seems to have succeeded in maintaining the Ministry of Finance as a fiefdom: both financial and fiscal functions remain in the same ministry. Finally, as a major reform move, Hashimoto wanted to rejuvenate the office of the Prime Minister. In Japan, the Prime Minister's political status has been

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notoriously weak. His primary functions, to coordinate various interests and to iron out conflicts among rival factions, mean that he is seen as a nominal leader; real power is in the hands of the leaders of several factions in the Liberal Democratic Party. Administratively, too, Japan's chief executive is relatively impotent. By law, he cannot submit his own agenda to cabinet meetings. Joint sessions of Vice Administrative Ministers screen the agendas of all cabinet meetings. Further, all decisions in cabinet meetings are made by unanimous consent, the Prime Minister's vote carrying the same weight as that of other cabinet members. Several of Hashimoto's predecessors, notably Nakasone, tried to alter this situation. Hashimoto's final plan proposed the creation of a new Chief Executive Office by combining the Prime Minister's Office, the Economic Planning Agency, and the Okinawa Development Agency. This new office was to be patterned after the Executive Office of the President of the United States, developing a system of special assistants to the Prime Minister to solidify his policymaking role. Further, the Prime Minister was to be empowered to initiate his own agendas at cabinet meetings, and the voting rule changes, replacing unanimous consent with a majority. The proposed system of special assistants to the Prime Minister, to act as a policy consulting body created a paradox specifically related to Japan's unique cultural heritage. This concept works well in the United States, where persons constantly change professions with few or no social problems. In Japan, lifetime employment is the rule: a college professor, for example, who leaves academic life to become a special assistant will not be able to return to academia, as is the case for those who work in the private sector. Given these cultural constraints, not many people, however competent, would be willing to serve as assistants. Ironically, then, chances are high that bureaucrats will assume these posts, in which case the role and function of the Prime Minster will not undergo any radical shift. The final paradox: the introduction of a majority vote rule to Japanese cabinet meetings may actually diminish, rather than enhance, the power of the Prime Minister's office. In Japan, cabinet members usually represent the interests of various factions in the governing party. Under these circumstances, majority rule will transform cabinet meetings into a battleground for rival factions, and will not necessarily produce rational and objective decisions.

V. Concluding Remarks and Benchmarking Japan seems ready to undertake the task of government reform. Both decentralisation and deregulation are on the public agenda, while the reduction of the

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central agencies has begun to arouse public attention. These reform ideas can put Japan finally on a par with other OECD states. The realignment plan for the central government, ostensibly at least, seems similar to experiences in the United Kingdom and New Zealand. One element missing from the Japanese attempt at reform is enthusiasm for the creation of a business-oriented government, despite the inclusion of corporate presidents on the Administrative Reform Council, and Japan's post-war history of economic (i.e. business) expansion. As discussed, this disinterest probably stems from Japan's political culture. Although the idea of reform has come to the table, scepticism also abounds. Some point out the concerted effort on the part of national bureaucrats, who act in unison in their attempt to thwart reform efforts. Others fear the power of entrenched vested interests, which also work against public management reform. For these reasons, although administrative reform is now a national issue, many feel pessimistic about its prospects. Japan's past experience indicates that government reform is a complex and extremely difficult task to achieve. However, public objection to government as it is now will grow; the Japanese experience seems to indicate that administrative reform is inextricable from the démocratisation of the country. Until and unless Japan succeeds in reforming its central government, the country will face serious political and social problems in the coming decades and beyond.

References Abe, H JShindo, M JKawato, S. (1994). The Government and Politics of Japan. Tokyo: University of Tokyo Press. Aucoin , P. (1990). "Administrative Reform in Public Management: Paradigms, Principles, Paradoxes and Pendulums". Governance 3/2, 115-137. Christopher , R. C. (1983). The Japanese Mind. Tokyo: Charles Tuttle Company. Gyosei, Κ. K. (1997). Saishu Hokoku (Final Report). Holmes, MJShand, D. (1995). "Management Reform: Some Practitioners Perspectives on the Past Ten Years". Governance 8/4, 551-578. Inatsugu, H. (1996). Nihon no Kanryo Jinji Shisutemu (The Personnel System in Japanese Bureaucracy). Tokyo: Toyo Keizai Shinpo Sha. Inoguchi, T. / Iwai, T. (1987). Zoku Giin no Kenkyu (A Study of the Rise of Tribal Politics). Tokyo: Nihon Keizai Shimbun Sha. Inose, N. (1997). Nihon Koku no Kenkyu (A Study of Japan). Tokyo: Bungei Shunju. Institute of Administrative Management (1996). Administrative Management and Reform in Japan. Tokyo: Institute of Administrative Management.

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JETRO (Japan External Trade Organisation) (1991). U.S. and Japan in Figures. Tokyo: JETRO. Jichi Daijin Kanbo Bunshoka (ed.) (1995). Chiho Jichi Binran (A Handbook of Local Governments). Tokyo: Jichi Daijin Kanbo Bunshoka. Johnson, C. (1982). MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975. Stanford, CA: Stanford University Press. — (1995). Japan: Who Governs? The Rise of Developmental State. New York: W. W. Norton and Company. Jun, J. S J Wright, D. S. (eds.) (1996). Globalization and Decentralization: Institutional Contexts, Policy Issues, and Intergovernmental Relations in Japan and the United States. Washington, D.C.: Georgetown University Press. Laurence , H. (1996). "Regulatory Competition and the Politics of Financial Market Reform in Britain and Japan". Governance 9/3, 311-341. Mainichi Shimbun Shuzai Han (ed.) (1994). Kasumigaseki Shindoromu (Pathologies in Japanese Bureaucracy). Tokyo: Mainichi Shimbun Sha. Masujima , Τ JOuchi, M. (1993). The Management and Reform of Japanese Government. Tokyo: The Institute of Administrative Management. MC News, June 1995. Muramatsu, M. (1998). "Hashimoto Gyokaku ο Koete" (Beyond the Hashimoto Reform). Chuo Koron, January 1998, 50-60. Nakamura , A. (1990). "Different Faces with a Familiar Style: From Bureaucratic Dominance to Conservative Party Governance in Japanese Public Policy Making". Journal of Management Science and Policy Analysis 7/3, 192-210. — (1992). "Environmentalism and the Growth Machine: The System of Political Economy and 'Kogai' Control in Japan". Governance 5/2, 181-196. — (1996a). "The 'Tokyo Problem' and the Development of Urban Issues in Japan", in: J. S. Jun and D. S. Wright (eds.), Globalization and Decentralization: Institutional Contexts, Policy Issues, and Intergovenmental Relations in Japan and the United States. Washington, D.C.: Georgetown University Press, 191-203. — (1996b). Bunken Rongi no Kokusai Hikaku to Wagakuni Bunken Ron no Tokushoku (Japan's Debate on Decentralization: Cross-National Comparison of Devolution of Powers). Unpublished Paper Presented at the Annual Conference of the Japanese Society for Political Science, Sapporo, Japan. — (1997). "Seijika to Kanryo" (Politicians and Bureaucrats), in: Idem (ed.), Kanryo Sei to Nihon no Seiji. Tokyo: Hokuju Shuppan, 115-131. Nihon Keizai Shimbun (ed.) (1994). Kanryo: Kishimu Kyodai Kenryoku (Bureaucratic Power under Stress). Tokyo: Nihon Keizai Shimbun Sha. Nishio , M. (1996). "Recent Trends in Decentralization in Japan", In: S. Kurosawa, T. Fujiwara and M. A. Reforma (eds.), New Trends in Public Administration for the Asia-Pacific Region: Decentralization. Tokyo: Local Autonomy College, Ministry of Home Affairs, 2-14. Osborne , DJGaebler, T. (1992). Reinventing Government. New York: Plume Book. Peters , B. G. (1995a). What Works? Sorting Out Contradiction in Fifteen Years of Reform. Montreal: Canadian Center for Management Development: Research Paper, January.

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— (1995b). "Introducing the Topic", in: B. G. Peters and D. J. Savoie (eds.), Governance in a Changing Environment. Montreal: Canadian Center for Management Development, 3-19. Shibata , T. (ed.) (1993). Japan's Public Sector: How the Government is Financed. Tokyo: University of Tokyo Press. Uchida, K. (1993). "Chiho Bunken to Seido-Pairotto Jichitai-Ichiji Shitei Shinsei Ichiran: Kaisetsu" (Applications for Pilot Local Governments: An Interpretation). Jichi Soken, 19/9.

Paradoxes of Public Sector Reform in Australia and New Zealand By John Halligan

Once the study of reform focused on the obstacles, because the recorded cases were limited and implementation of comprehensive reform was infrequent (e.g. Caiden 1969; March/ Olsen 1989). The reform era - essentially the 1980s and 1990s - has been notable for reform success in that major reforms have been implemented and the impact on public services and administration internationally has been immense (although such generalisations make no normative judgement about the value of specific reforms). This consideration of two "successes" addresses the attendant paradox and its several elements. According to the paradox of success, the reforms that compose that success are dispensable and transient. Australia and New Zealand engaged the attention of international observers during the 1990s for their public sector reforms (Hood 1996; Polliti! Bouckaert 2000). New Zealand offered a new model that displayed a number of unique features. The Australian reforms were sufficiently similar to be comparable in many respects, while otherwise providing a distinctive approach to reform. Combining the two cases in one chapter is appropriate, yet the same paradoxes neither fit both countries comfortably nor do they justice to their separate experiences, although the paradox of success seeks to explore the common elements. Australian public administration has been subject to major systemic and comprehensive reform since the early 1980s. As this period was either free of, or relatively undisturbed by, changes of government, the reforms evolved. In changing, Australia embraced managerialism in the 1980s (Considine!Painter 1997), and has since moved towards marketisation. Since this process has been developmental, several stages have been passed through, and despite steady change for many years, reform has continued to be on the agenda. A specific paradox derives from this process: that a reform programme modestly conceived with no grand plan or long term design, could eventually lead to fundamental reform. In this case incremental change produced paradigm change. The second paradox specific to this experience is that Australia has been among the 7 Hesse

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smallest states in the OECD - as measured by outlay against Gross Domestic Product - but has been among the most active reformers. New Zealand, an administrative backwater in 1984, presided over by an eccentric conservative government, produced within several years one of the most remarkable reform programmes internationally. In contrast to Australia, New Zealand might have had more reason to reform its public administration (its outlay, as a percent of GDP, was the second largest in the OECD in 1985), but that does not account for the dramatic response of the mid-1980s. In contrast to Australia, New Zealand chose major and rapid change, becoming the crucible for reform of a striking kind (the circumstances of which have been addressed frequently in the literature: e.g. Boston et al. 1996). The basic questions here centre on the unique qualities of the reforms - those that reflected the economic theories espoused by the Treasury (1987) - and whether they were necessary in the long run or mainly significant for "kick-starting" and focusing reform? A related paradox is that despite New Zealand's being hailed so reverently during the 1990s, it became increasingly apparent that it had lost reform direction and was performing indifferently in several key respects. The paradox of success suggests that the well-documented attainments of Australia and New Zealand were ephemeral. The new frameworks were never fully implemented and were either displaced (Australia) or allowed to ossify (New Zealand). The excesses of reform provoked reactions, and the seeds of further change. Constant change means that specific successes are rapidly obliterated and hard to document. By the new century the long term fate of the great experiments were becoming clearer. Radical reform was running up against limits in both countries. In New Zealand, a U-turn was becoming likely, while Australia's second generation programme had arguably peaked with greater balance in reform design being sought. This chapter explores the experiences of the two countries through the dimensions of the comparative framework. 1 It examines the apparent convergence between the two countries as the 1990s progressed: in one, the market focus became more a management one; in the other, the management focus became more market oriented. The analysis of the paradoxes is linked to the patterns of the change within and between the two countries. The conclusion addresses the paradox of success in both.

1 This treatment concentrates on the national level because of the complexities of and variations within the federal system between the eight states and territories.

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I. Reform in Australia and New Zealand The last twenty years have been remarkable for the level of public sector change in both countries, in particular, the magnitude and breadth of the reforms. The wave of reform surfaced in the early to mid-1980s during the second of two periods of intensive change in their histories (the first being the 1880s to 1920s). Both have been characterised by experimentation and attention to system design and identified with antipodean laboratories of social and political change.2 Reform in the second period was rapid, systemic and comprehensive in that specific reforms were applied across the public sector and a full range of measures were implemented. What differentiated the 1980s from the 1970s was the rejection of traditional administration and its replacement by a package of reforms based on management and market. Reform was sustained over a long period, from 1983 for Australia, and 1984 for New Zealand. Despite these similarities between the two countries, major differences existed with regard to the frameworks, institutional designs and the reform processes, the most significant being in the realm of ideas with new institutional economics exercising great influence in New Zealand in the formative stages.

1. Reform Stages and Strategies The reform sequence in the two countries covered similar ground but in different ways. In New Zealand's case the process was fairly explicit and largely sequential. Corporatisation was followed by privatisation plus reform of the core public service. Intergovernmental reform (focusing on local government) and financial management reform were next, and subsequently attention centred on the "non-commercial" welfare state. The legislative basis was established by three Acts which also reflected stages in reform - the State-Owned Enterprises Act 1986, State Sector Act 1988 and Public Finance Act 1989 - which respectively laid the basis for corporatisation (and subsequently privatisation), departmental and public service reforms and financial management changes. An extension of this agenda was the Employment Contracts Act 1991 and the Fiscal Responsibility Act 1994. For Australia, the process was somewhat different in terms of the sequence and the more protracted development of initiatives. The main elements of the

2

The New Zealand Labour Government's economic and social programme between 1935 and 1946 must also be noted for major specific, if not systemic, changes (see Roberts 1987). 7*

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reform programme focused initially on the core public service and improving financial management, followed by corporatisation and later privatisation. The flagging reform momentum in the mid-1980s produced new directions linked to the emerging micro-economic reform agenda. Australia concentrated much more on the core public service reform, because the need for corporatisation was less pronounced than in New Zealand, and privatisation was resisted more. The legislative basis was significant at different points (e.g. the Public Service Reform Act 1984; Public Service Act 1999). The 1990s were marked by a new stage in reform and two conflicting agendas in both countries. The first was to drive aggressively against the boundaries of accepted practice. New Zealand, building on the foundation laid by the principles adopted in the 1980s, extended its applications, including separating out delivery roles in sectors such as health, although the augmentation of the management focus was significant. For Australia's part, its disinclination to grasp some principles emphatically and to rely on gradualism meant that it eventually moved into a further phase that placed greater emphasis on the market and contractual relationships. The other pressure reflected the reaction to economic rationalism. Both countries had to confront the unintended social and political consequences that seemed likely to attenuate the reform impact, and trenchant debates about the value of specific reform agenda (Kelsey 1995; Easton 1999). The process of moving towards a new framework was not as obvious to the participants as it became with hindsight; neither did a framework emerge fullblown in a single flourish but over several years. There is no doubt though that the elements of a model first expressed in the mid-1980s by the New Zealand Treasury in conjunction with key politicians, laid the foundation for the New Zealand programme of reform (Treasury 1987; Douglas 1993). For Australia, the development of a management framework took longer, and resulted from combining a strategic focus with experimentation that balanced principle and pragmatism (Halligan 1996a). In the realm of ideas, a number of theories were drawn upon, the first being managerialism, in the sense of the application of new management principles (e.g. devolution and performance). Public choice theory exercised greater influence in New Zealand than Australia, through the concern with avoiding provider capture and decoupling organisational roles. Agency theory and transaction cost economics were more significant in New Zealand (Boston et al. 1996; Boston 1998), although they became accepted over time in Australia.

2. Australian Reforms 1983-1999 The reforms are reviewed through four broad agendas covering political control, management, markets and organisation. The Labour government (1983-

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1996) favoured the public sector while pushing it heavily towards the private sector; the Coalition government (1996-1998) favoured the private sector but recognised the need to maintain a strong core public service. The directions that emerged in the 1990s were fundamentally different from the initial decade of reform in important respects. There were also other fundamental changes that in part reflected broader patterns of change and a shift from the initial emphasis on management reform to market-based change. The election of the conservative Coalition government in 1996 accelerated the emerging trends, initially focusing on cutting the size of the budget deficit and the level of staffing, and then on fundamental changes. /. Political control and direction. An early priority of the new Labour government in 1983 was the re-establishment of ministerial control and greater responsiveness from the public service to government policies and priorities. This was part of a political framework that sought to increase "democracy" by allowing the minister to have greater influence through ministerial advisers while diminishing the roles of the public servant. Measures were introduced to reduce permanency, the monopoly on advice to ministers, and independence (Halligan! Power 1992; Wilenski 1986). This recurrent theme was affirmed by the second Labour prime minister of the reform era, who observed that a central reform objective was ensuring that the government belonged to the elected representatives, with ministers deciding priorities (Keating 1993). For the departmental secretary and senior public service, the increasing reliance on contracts in the 1990s was to be instrumental in exacting responsiveness (Halligan 2001). 2. Management reform. The Financial Management Improvement Program (FMIP) dominated the reforms of the 1980s and was designed to produce more efficient use of resources (Keating!Holmes 1990; Campbell!Halligan 1992; TFMI 1993). FMIP was an umbrella concept for a standard managerialist lineup centred on corporate and programme management, corporate planning, programme budgeting and performance evaluation. Implementation occurred through changing the budgetary and regulatory environment and developing management systems and practices. The package was viewed in terms of two complementary strands: providing the means to "let the managers manage" by facilitating the devolution of management control; and requiring the managers to manage through ensuring effectiveness and accountability. The centrepiece, programme management and budgeting, was designed to assist in assessing programme development and implementation relative to objectives. Three other elements were the use of forward estimates, efficiency dividends and reformulation of the senior public service in 1984 as the senior executive service. The latter was a service-wide group that was to be internally mobile managers, invigorated by external recruitment and readily redeployed.

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3. Market reform. The first phase (centred on the 1980s) produced importation of private sector practices and techniques, including commercialisation, asset management, purchasing reforms, risk management and user charging. Commercialisation was closely associated with the transition of a department to a user-pays or fee-for-service operation, and the establishment of internal business units. The contracting out of work became standard practice, with all departments to varying extents engaging in it. The rapid increase was at the expense of in-house staff (Howard 1996; Industry Commission 1996). Outsourcing, centred on the performance of specialised technical services (e.g. information technology) by the private sector, was extended more broadly in the late 1990s to corporate services. The desire to improve the efficiency of business enterprises became central to the government's programme of microeconomic reform. There was a gradual move towards private sector models, the company form of incorporation being chosen for several enterprises. For the first decade of reform the government was inclined to preserve enterprises within the public sector, while promoting greater competition. Improved productivity and efficiency were reported for the public service and enterprises (e.g. TFMI 1993; JCPA 1995). The second phase received its greatest impetus from the Hilmer Report on National Competition Policy (NCPR 1993), and was a product of the micro-economic reform agenda, which first emerged in the mid-1980s. It covered various sectors of the economy, but by the mid-1990s was concentrating on the national rationalisation of utilities and the benchmarking of performance. A programme of major asset sales was finally launched in the late 1980s by the Labour government, the main rationale being reductions to the budget deficit, but the pace of activity was constrained by party opposition to privatisation (divestments were only A$ 1,813.4 million for 1986-1990, rising to A$ 7,507 million for 1991-1995). Under the Coalition government, the process of selling assets accelerated: divestments amounted to A$ 41,763 million for 1996-1999 (calculated from Wettenhall 2001). Privatisation and outsourcing of government functions extended to new areas in the late 1990s. One of these was the creation of Job Network to replace existing labour market assistance with an employment market for placement based on competition between private, government and community providers who operate under contract (Considine 2000). A comprehensive review of departmental activities was instigated under a performance management approach using tools such as competitive tendering and contracting, and focusing on separating out departmental corporate services. The privatising of support services attained its strongest expression with information technology, which was being outsourced on a whole-of-government basis (ANAO 2000).

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4. Internal organisation. In other respects the functions and organisation of the state were transformed. Until recently, Australia remained attached to combining policy and implementation roles because it offered effective feedback from those delivering services. Thus the major reorganisation of the machinery of government in 1987, produced "mega" departments: 28 becoming 18 portfolio departments. A major change in the mid-1990s was the acceptance of decoupling policy and execution. In part this reflected the influence of ideas about contestability and the possible benefits, such as greater choice of providers, operational flexibility and improved accountability. The old model of delivery of services by government agencies was being replaced by a focus on providing frameworks, managing change and oversight of the public interest (Kemp 1997). Under this framework, the public service moved towards the separation of functions, greater role specialisation, a focus on contributing to policy development, implementing legislation and providing oversight of service delivery. Departments contracted in scale as their roles changed to being mainly policy, with service delivery shifting to special agencies and external providers. The most significant innovation was the creation of Centrelink in 1997, a multi-functional one-stop shop that provides integrated cross-portfolio services to several departments under purchase agreements (Vardon 2000). A new mix of decentralisation and accountability was implemented. The core public service was moved to a new framework based on a deregulated personnel system as part of workplace reform under the Workplace Relations Act 1996. A new Public Service Act 1999 re-conceptualised the framework for employment and management of the public service to allow workplace efficiency and flexibility, and to replace a large body of prescriptive, regulatory, detailed and complicated legislation. Employment powers were now devolved to heads of agencies who make their own determinations about employees' terms and conditions of employment. The devolved environment is balanced by enhanced public accountability (of secretaries to ministers and parliament) which includes an annual report by the Public Service Commissioner (1999) on the state of the public service. The Act spells out the public service ethos by stating key values including the merit principle, public service's apolitical character and prohibition of ministerial direction of staffing decisions. 5. Management frameworks. Two management frameworks have been officially articulated: the new "management" focus of the 1980s and the outcomes framework of the late 1990s, both having a financial management basis. Having acquired the FMIP, a set of management reforms was implemented over time. The official version of the management framework was subsequently articulated in terms of cabinet responsibility for strategic directions and objectives, financial planning and management flexibility for meeting the objectives,

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incentives to improve management performance, and public servants' accountability to ministers for achieving objectives. This framework was argued to have a "consistent, logical and integrated structure", that applied to financial management, industrial relations and people management (Sedgwick 1994: 341). By the late 1990s, a new framework was emerging that built on but supplanted the previous one because of its perceived limitations. The agenda was now being depicted as an "integrated package of reforms" that covered financial arrangements, public service and workplace relations each with a new legislative basis (Boxhall 1998a, 1998b; DOFA 1998). The elements included a deregulated personnel system that was more comparable to the private sector, a core public service that focused on policy, regulation and oversight of service delivery; and contestability of delivery of services with much greater use of the private sector (Kemp 1998; PSMPC 1998). Within a philosophy emphasising private sector primacy, choice for consumers and purchasers, and the use of market mechanisms, the relationship between the public and private sectors had been reworked with fewer roles for the public service.

3. New Zealand Reforms 1984-1999 The New Zealand model combined standard management reforms with some distinctive features supplied by the ideas derived from public choice and institutional economics, which addressed inter alia agency and transaction costs. In the sequence of reforms that followed the advent of the Labour government (1984-1992), reform of the core public service followed privatisation as an early agenda. National (1990-1996) extended these reforms, and was succeeded by a National-led Coalition, and from late 1999, the Labour-led Coalition. The treatment of the reforms is organised in terms of the model plus four broad agendas of political control and direction, management, markets and organisation. 1. Public management models. The new model, which seem to spring almost fully fledged in the mid-1980s, had a number of objectives including improving allocative and productive efficiency, enhancing programme effectiveness, improving public accountability, and reducing expenditure and the core public sector. There were several main principles and policies. As a general rule, activities that can be performed better by the private sector and NGOs should not be retained in the public sector. Commercial activities in the public sector should be organised like private companies. The objectives of all types of government organisations should be explicitly stated. The separation of responsibilities should occur where there are conflicts (e.g. commercial and noncommercial functions), where the roles are distinctive (such as ministers and chief executives of departments), and where different functions are involved

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(e.g. purchaser and provider; policy advice and regulation). Public services should be subject to the principle of contestability and competitive tendering. Government administration should be designed to minimise agency and transaction costs. The policies included a reliance on incentives for enhancing performance, written contracts for a range of activities, simplicity in accountability relationships, and decentralisation of decision-making on operational matters (Boston et al. 1996; Boston 1998; Treasury 1987). The late 1990s version of the public management model summarised the model in terms of three main components: setting strategic directions, decentralised management for achieving results and accountability and control, plus review and adaptation (SSC 1998). 2. Market reform. The principles were first applied through corporatisation and privatisation. A number of trading functions - e.g. coal and telecommunications - were still within ministerial departments. The State-Owned Enterprises Act 1986 established the legislative framework for enabling trading departments to become corporatised. It defined objectives, incentives and a new operating environment for state-owned enterprises, which were to operate like a business and demonstrate comparable performance in terms of efficiency and profitability. A number of government department and trading activities were converted into enterprises. Corporatisation eventually became seen as a step towards privatisation by which public assets were transferred to the private sector. The main reasons appeared to be fiscal (e.g. reducing public debt) and efficiency. Over twenty public organisations (or major assets in some cases) were privatised, including the national airline, a tourist hotel, telephone services, an insurance company, and banks (Mascarenhas 1991; Boston et al. 1996: 65-67). Receipts from privatisation were, as a proportion of GDP, higher than those in the UK and Australia. The evidence of efficiency and productivity is explicit for corporatisation and privatisation, which delivered profits, reduced prices, introduced market mechanisms and improved the measurement of costs (Scott 1996: l%\Spicer et al. 1996). Of particular significance was the increasing reliance on contracting out the delivery of services to private and voluntary sector providers. The new contractualism was prevalent in health and welfare sectors, but its applications could also be seen in other areas of government activity where there were relationships between two or more parties (Boston 1995; Boston et al. 1996). The new wave of reforms in the early 1990s, inter alia sought greater efficiency and flexibility in health care delivery and reduced politicisation of resource allocation decisions. The reforms were designed to produce a contract system of health care, similar to that of the United Kingdom. Regional health authorities contracted with crown health enterprises and other providers to supply services (OECD 1996), an experiment ultimately recognised as a failure.

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3. Management reform. The State Services Act 1988 produced changes with constitutional implications. The objectives were improved management efficiency and effectiveness and provided for improved autonomy and greater accountability of managers, but it also redefined the relationship between ministers and department heads (discussed below). A range of financial management reforms was introduced under the State Sector Act and the Public Finance Act, two distinctions being central: that between inputs, outputs and outcomes (with the emphasis now being on outputs), and the definition of government roles as either the purchaser of outputs from agencies (whether public or private) or the owner of agencies with an interest in the return on its investment. The financial management reforms were designed to improve efficiency and accountability. They were similar to Australia's FMIP, but their differences included the contractual relationship between ministers and chief executives, the distinction between purchase and ownership, and that between outputs and outcomes (Scott!Bushnell/Sallee 1990: 155-156). The new system of financial management was also regarded as unprecedented because it introduced accrual accounting to core departments to assist with monitoring government's ownership. Another innovation, the Fiscal Responsibility Act 1994, sought to make budget accounting more transparent. Decentralisation was an important element, being applied to the human resource functions of the central personnel agency (State Services Commission) in favour of line departments, and also within departments.3 A senior executive service (SES) was also created, but confined to the level below chief executives. Senior executives were appointed on contracts of up to five years. 4. Political control and direction. The redefinition of the relationship between ministers and departmental chief executives (CEs) was one of the most startling innovations: political and managerial roles were separated with outcomes associated with ministers and outputs with chief executives. The minister selected the outcomes, and purchased outputs from the chief executive, who selected the necessary inputs. This arrangement was meant to allow the CE to be held accountable by the minister for departmental results. The relationship was contractually based: the government purchased outputs from departments, while at the same time was defined as the owner. The renamed chief executives (previously permanent), held contract appointments based on performance agreements and became subject to annual performance reviews. The chief executives' extensive responsibilities included the appointment of departmental staff, a process which was meant to be thereby

3

The local government system was also restructured and its modes of operation, function and culture subjected to changes.

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insulated from political influence in order to maintain the tradition of the nonpartisan public service. The strategic capacity of government was a neglected element in the NZ model, producing short-term policy focus and inattention to the collective side of government. The capacity to direct centrally became a key issue in the 1990s, because of the vacuum left through the emphasis on vertical relationships between ministers and chief executives (taking 1995). The Logan Report (1991), addressed the strategic capacity of government, leading to medium and long term planning and the introduction of strategic result areas (SRAs) and key result areas (KRAs) for specifying government priorities and focusing performance. An official review found this approach to be working (Schick 1996), but weakness in planning and results became apparent (Scott 1999; Upton 1999), and by 2000, they appeared to be a dead issue. In contrast with Australia, there was a lack of reliance on well-developed ministerial offices. Ministerial suspicions of senior departmental advice in the 1980s led them to rely less on the public service and more on political appointees in their offices. But National used them less, and the position was not institutionalised 0taking 1995; Martin 1997; Halligan 2001). Some reforms in effect "depoliticised" government activity (see Gregory 1998 on "fencing off' the political and technocracy) and detached ministers from being held responsible for public actions. Managerial accountability was developed while the political responsibility of ministers became more tenuous. Politicians had, according to former ministers, lost decision making and become "underpowered" (Lange 1998; Upton 1999; also Boston et al. 1996; Gregory

2001). 5. Organisation. The core public service was also subjected to the new principles in reformulating the departmental structure, the two most important being the separation of responsibilities for policy and delivery, and the identification of specific functions with specialised organisations. In addition to the three central agencies (Prime Minister and Cabinet, State Services Commission and Treasury), there were now a series of mainly policy ministries and a number of mainly delivery departments, and several which combined both. There were some qualifications: some ministries were small and focused on policy, while others were not entirely stripped of other functions, and the division between operations and policy was more pronounced in areas such as housing and transport. It was only in a few fields (e.g. health) that the purchaser/provider functions were differentiated. The verdict on the structure appears to be divided, one critique being that the separation and disaggregation produced a fragmented core public service (Boston et al. 1996); another objection was that residual organisations (i.e. other than departments and enterprises) were untouched (Gill 2000).

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According to the official assessment, difficulties arose with the roles of ministers, chief executives and senior managers in terms of ownership. Departments were pulled in opposite directions by ministers' ownership and purchase roles, with the latter dominating (particularly through the annual purchase agreement) (Schick 1996).

I I . Factors Shaping Reform 1. Cultural Traditions and Institutional Variables Australia's and New Zealand's cultural legacy, geographic location in the Asian-Pacific region and political and administrative traditions have been important. As former British colonies, they inherited the principles of the Westminster model, which exercised a continuing but declining influence. The similarities and common elements include responsible government with a parliamentary system based traditionally on two major parties, a political executive chosen from members of the majority party in parliament, and an apolitical public service consisting of permanent professionals. Features of the British administrative tradition that have been present in Australia included "pragmatism, relative honesty and secretiveness, though there are also important differences" (Spann 1979: 33). Other distinctive features, such as the developmental role of the state of the late 19th and early 20th century, receded with time and the advent of the welfare state. The range of public sector functions has been extensive in New Zealand as a consequence of Labour during the 1930s, but less so in Australia (for reasons explained by Castles et al 1996). It is generally accepted that Australia and New Zealand fall within a weak state tradition. In addition to the Westminster heritage, the main institutional factoring shaping Australian reform has been the US-influenced federal system. Reflecting geographic and historical circumstances (in particular, the existence of six British colonies), Australia acquired a federal system of government now consisting of the national level and the intermediate tier of six states and two territories. The states have constitutional rights and broad functions, although the imperatives and principles of cooperative federalism ensure that the two levels must work together in many areas (Painter 1998). The existence of the federation means that nine governments were independently responsible for reform of their spheres, and they did not proceed in unison, although federal effects were apparent (Painter 1988, Halligan 1996b). Responsible government and adversarial politics have been significant in both Australia and New Zealand. Their executive-centred systems provided

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conditions favourable to reform of administration. In a cabinet-dominated system the parliament normally supports the majority party. While the Australian upper house (the Senate), has not produced government majorities in recent decades, this has presented relatively few brakes on the overall direction of reform. New Zealand has acquired a reputation (at least until the 1996 change to the electoral system), for having the fewest constraints on executive power of any OECD country. It has a unitary structure with dependent local government, no upper house, an unwritten constitution as well as responsible government CMulgan 1997). One party, Labour, has governed Australia for most of the reform period (1983-1996). The conservative Coalition, in office since 1996, accelerated and broadened the agenda. In New Zealand, the two formative terms of Labour (1984-90) were succeeded by National (1990-1996) which extended the reforms, and then a National-led Coalition, and eventually a Labour-led Coalition (from late 1999). The government styles were starkly different in the 1980s: the "corporatism" in Australia contrasting with New Zealand "commercialism"; and prime minister Hawke's consensual approach in Australia differing from the "crash through" style of the NZ iconoclast, Minister Douglas (Campbell!Halligan 1992; Castles et al 1996; Mascarenhas 1996). That social-democratic parties should preside over the dismantling of systems has been the subject of much debate: there was the "paradox of deregulatory change [being] pursued under the auspices of Australasian labour movements, which, in their earlier development, had played such an important role in fashioning distinctive state institutions" (Castles et al 1996: 1). Australian Labour came to office in 1983 with a recently-negotiated accord with the union movement, which in turn facilitated the reform process, with some exceptions, by working closely with the Labour government. The New Zealand union movement lacked the influence of its Australian counterpart and was unable to resist effectively the radical labour market changes of the 1990s. A move towards renewing of civil society is apparent under NZ's new Labour government. Australia also provided an environment in which the "femocrat" could flourish more than other countries, a phenomenon that had a few echoes in Scandinavia but was otherwise a distinctive product of Australia traditions and activism (Sawer 1996; Eisenstein 1996). The early Labour commitment to equity which remained a secondary reform strand as economic rationalism grew owed something to Wilenski (1986).

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Both countries emerged in the 1980s from a long period characterised by heavily regulated economies and a commitment to using the public sector for providing the services of a welfare state. There was increasing concern with the condition of the economy (e.g. deficits) and the functioning of the public sector (e.g. lack of managerial skills and poor performance of public enterprise). In both cases fiscal difficulties played a significant part, and financial deregulation of both economies produced intensified pressures for public sector reform. In both countries a package of reforms was promoted by a new government with a mandate and determination to launch a reform programme. The internationalisation of the Australian economy in the 1980s proceeded first with deregulation of the financial system in 1983, followed by interest rate controls and banking. The collapse in commodity prices and the decline in the terms of trade produced a balance of payments crisis in 1985, and the "banana republic" declaration of the Treasurer. The crisis was a significant turning point because it recognised the structural problems in the Australian economy. Since then restructuring and international competitiveness dominated the policy agenda (Kelly 1992). Microeconomic reform became a primary objective of government and the public sector was required to play its part. For New Zealand the crisis was most acute with a budget deficit, balance of payments deficit, inflation and structural imbalances. A programme of economic liberalisation was launched of which public sector reform was one element. The major directions of reform to the public sector reflected these broader programmes of economic reform eventually leading to a transformation of the roles of the state. Of two key roles - the fiscal state and provision of goods and services - there were reductions in the size of the state and contractions in the direct provision (Bell 1997). Public sector reform was largely driven and certainly sustained by economic problems. Internationalisation of the economy through financial deregulation produced intense pressures for public sector reform. With mounting economic demands the reform programme was extended and enlarged.

3. Endogenous or Exogenous Influences Prior to the reform period, the two public services were relatively closed systems, with fairly tightly drawn boundaries and clear differentiation of the public service from the private sector and the political sphere. Debate and experimentation in the 1970s to 1980s prepared the systems for change and the recepiiveness to influence from other sectors, public and private (Halligan 1996a; 1996b; Roberts 1987). Bureaucratic learning occurred within the public ser-

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vices, and it was clear by the 1980s that traditional administration was not adapting sufficiently to handle the demands being placed on it. In Australia, a bipartisan view emerged that the management skills of the senior public service were deficient and undervalued relative to their policy and administrative skills. The New Zealand Treasury presented its views in reports to incoming governments in 1984 and 1987 (Treasury 1987). Once the system boundaries were breached, the absorption of environmental influences was greater except where new orthodoxies stifled learning. The international influence was distinctive but changing. Australia and New Zealand had been externally oriented because of colonially induced reactions and the inclination to scan the experience of larger kindred systems with similar cultural and linguistic traditions (mainly in the British Commonwealth). At the various stages of its reform programme, Australia drew on Britain (e.g. Financial Management Improvement Program, efficiency scrutinies and charters) and the United States (senior executive service) (Halligan 1996b). New Zealand was influenced by management change in the same countries, and the transplanting of economic theory was explicit, although the transfers were less explicit. There was also considerable trans-Tasman movement of ideas and some quite explicit borrowings (e.g. New Zealand followed Australia in adopting a senior executive service; Australia acquired corporatisation and accrual budgeting from New Zealand). Increasingly in the 1980s, the salience of international organisations became more apparent, in particular the OECD provided a centrepoint for debate about management improvement (OECD 1997). The Australian federal system was also important for the introduction, testing and diffusion of reforms among the state and national governments. The Australian Labour Party was a major mechanism for diffusion of reforms in the 1980s because it was organised on a federal basis and controlled most governments at the state and national levels. New conservative governments subsequently developed their own approach based on a commission of audit (Halligan!Power 1992\ Halligan 1996b). Private sector practices strongly influenced the reform programmes as governments resorted to business advisers as changing conditions placed greater pressures on it. Official reports were published which saw the need to refashion the public service to reflect private sector modes of operating and managerial skills. A private sector consultant was appointed as head of the Australian Efficiency Scrutiny Unit in 1986, which recommended the principles used by successful private sector organisations. New Zealand's Roger Douglas was a purveyor of business in government. Central agencies recommended the use of private measures, such as user charging and risk management. Increasingly, much of the private sector advice came from management consultants employed by agencies (Boston 1996; Dornberger! Hall 1996). In the 1990s,

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there was inter alia insourcing, outsourcing, reengineering and quality management.

4. Policy Entrepreneurship and Political Will In both countries there was a Labour Party agenda to reassert the role of the political executive because of a concern with insufficient ministerial direction over departments and whether policy change would be executed by officials used to lengthy terms under their opponents. There was questioning of the bureaucracy's capacity to respond to their aspirations for change (Roberts 1987; Boston et al. 1996; Wilenski 1986). Ministers played strategic roles in intervening in and supporting the reform programmes (e.g. reform directions were heavily influenced by New Zealand Ministers of Finance: the initial structural changes between 1984 and 1988, see Douglas [1993]; and between 1991 and 1993). Beyond this, however, there were differences in approach (Halligan 2001) and the type of actor driving and sustaining reform. The Australian reform programme was driven by a foremost concern of Labour with political control both an end in itself and a means to implementing party policy. This required a redistribution of power between the public service and the political executive. A number of lessons were learnt by the Labour government experiment (1972-1975). Peter Wilenski (1986), the most influential figure in reform of this time, contended that the reasons behind the nonimplementation of the reform proposals of the 1970s were attributable to the neglect of political factors. The implementation of the agenda after 1983 was because Labour had learnt from the failures of the past and the prerequisites for reform were present. Three means used to enhance the power of the Australian political executive were: strengthening the capacity and resources of the centre and its effectiveness in establishing policy directions and priorities (with the Department of the Prime Minister and Cabinet becoming the centre of a network of influence: Campbell!Halligan 1992); developing ministerial resources and policy roles, the ministerial adviser becoming an important addition to the political executive extending the influence of the minister's office, and being incorporated in governmental processes; and greater political influence over the appointment of senior officials, although ministers were generally not prepared to engage in overt appointments (Halligan!Power 1992). New Zealand relied much less on well-developed ministerial offices (apart from initially under Labour) and the ministerial adviser position was not institutionalised in the same way (baking 1995; Martin 1997). The prime minister's department has remained underdeveloped compared to Australia, although the agency has evolved.

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The most significant influence on New Zealand's management reform directions was Treasury and its post-election briefings 1984-1990. Under the influence of the Chicago School and armed with a well-developed framework ( Treasury 1987), it set the agenda along with an inner cabinet and sympathetic minister. For much of the reform period, Treasury maintained policy advocacy of its preferences and intolerance of alternatives (Gregory 1998; Shaw 1999).

5. Professionalisation of Reform The redesigning of the two public services was in the hands of a few key bureaucrats strategically placed in the relevant central agencies. However, the roles of the central agencies passed through several stages as the new set of arrangements for managing the public service was evolved, each reflecting a turning point in the reform programme. The Australian Public Service Board was once the most important agency in the management of the service, but experienced attrition of its responsibilities, culminating in its abolition in 1987. In the latter part of the 1980s, and also a decade later, the departments of Finance and Prime Minister and Cabinet (DPMC) were most responsible for implementing reform. The Department of Finance expanded its financial management role to become the lead agency in managing change. The secretary of DPMC inherited from the Public Service Board the role of advising on secretary appointments and became chair of the new Management Advisory Board, established to advise the prime minister about public service change. Four mechanisms for guiding the implementation of change within a corporate and strategic management approach were significant following the 1987 reorganisation: reformulating the relationship between central agencies and line departments through "devolution" of specific resource decisions; the use of networks of central influence for guiding change and maintaining a corporate approach (senior appointments being based more on central agency experience and commitment to change); the role of key players, with the secretaries of Finance and Prime Minister and Cabinet becoming identified with the main reform strands of restructuring, financial management and managerialism (Codd 1991; Keating 1989); and finally the emergence of collective processes involving groups of senior executives at various levels to provide support and advice on significant management issues (Halligan 1996a). In New Zealand's case, Treasury remained the preeminent central agency for the first decade. The State Services Commission (SSC) dwindled in significance beyond the important role of chief executive appointments. A central vacuum existed for much of the 1990s that was costly in terms of sustaining reform. The

8 Mosse

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resurgence of the SSC after the mid-1990s led to it acquiring the "ownership" role and to the production of several sophisticated commentaries on reform as part of the advocacy of a reflective capacity. But it was still heavily focused on its primary role of monitoring chief executives. The reconstitution of the central agencies was flagged as a means of greater coordination and corporate engagement (SSC 1998).

I I I . Paradoxes of Reform The Australian and New Zealand reforms have been regarded as highly successful by the international community (e.g. Gore 1993; Office of Auditor General of Canada 1995; OECD 1997). The New Zealand model won particular recognition, because its framework was acknowledged as the most sophisticated and intellectually coherent: "a carefully crafted, integrated, and mutually reinforcing agenda", which was upheld for "its conceptual rigour and coherence" 0Boston et al. 1996: 3; Hood 1990). Australia and New Zealand have accomplished more public sector change than most international reformers, yet this was based on reforms first implemented over ten years ago. By the late 1990s, both systems were seen to be in need of reform ( Upton 1999; Kemp 1998). A number of problems exist with determining success. A sympathetic observer, concluded that the empirical evidence was relatively limited (OECD 1996), and others have dwelt on the challenges to systematic evaluation (Halligan 1997a; Boston 1999). Yet by the end of the 1990s questions needed to be asked about success, leaving aside debates about the validity of the new approaches (ConsidinelPainter 1997) and the heavy social costs (Kelsey 1995; Easton 1999). Following the country analyses three questions are addressed: sustaining reform, costs of successful reform, and the transience of reform.

1. Australia

The first Australian paradox is about the relationship of the public sector to the economy, and whether scale affects the propensity to reform. Australia has been highly active in public sector reform even though it is the second or third smallest state in OECD (the indicator of downsizing of public sectors is the changing scales relative to GDP as shown by selected OECD statistics on government outlay), and the need could expect to be less pressing compared to other countries. Other "Anglo" high reformers have had more reason to reform because of the scale of the public sector (United Kingdom) or the size of the departmental public service (New Zealand). The Australian public sector has

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been much smaller than most OECD countries for some time, yet Australia has arguably been the most active reformer relative to the size of the state (Table 1). However, it is also clear that size and reform activity do not necessarily relate well. Cutbacks alone do not demonstrate a fully effective reform programme, and large public sectors do not necessarily indicate lack of reform (even the UK which has engaged in extensive reform has not changed that much in terms of these figures) (Table 1). That reform is not necessarily a product of a large public sector as indicated by the case of the United States (although a late starter) as well as Australia. That there is less to reform, does not preclude the need for it. Reform may also be driven less by the conditions of the public service and more by broader economic conditions, of which government administration is one element. Table 1 General Government Total Outlays for Selected OECD Countries (as percentage of nominal GDP)

1985

1990

1995

2000a

Over 50

Sweden France Denmark

63.3 52.1 58.0

59.1 49.8 56.0

65.6 54.3 58.8

58.1 53.5 52.5

60.7 43.8 57.1 47.0 46.0 44.4 [62.4]b

53.6 45.4 54.1 45.1 46.7 41.8 48.8

53.6 57.9 51.3 49.8 46.5 44.4 38.8

49.9 48.6 47.3 46.3 41.2 40.6 40.4

31.6 36.5 32.9

31.3 34.8 32.8

35.6 36.2 32.8

39.1 33.3 31.1

Medium: 40-49

Belgium Finland Netherlands Germany Canada United Kingdom New Zealand Low: 30-39

Japan Australia United States !l

Estimates and projections. The New Zealand figures for 1985 were not calculated on the same basis as those for subsequent years (OECD 1997).

The OECD category "General government" excludes public enterprises. Excluded are countries that have become members of OECD since 1994. Sources: OECD. Economic Outlook no 64. December 1998; OECD. Analytical Databank.

Caution is also required in using these statistics for although the figures show the changing size of government outlay relative to GDP for individual coun8*

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tries, the finer details about the key elements are missing. The composition of the public expenditure is important: in contrast to the publicly financed programmes of Western European countries, in Australia "state intervention is more indirect, shaping the parameters of formally private spheres of activity" (Castles 1997). Despite Australia's reputation within OECD as one of the smaller public sectors, and that extensive reductions to the public service had already occurred, Australia's first neo-conservati ve government at the national level during the reform era, had its belated turn at reshaping the state. The government reported that when it came to power in 1996, it found a budget deficit of A$ 10.3 billion for 1995-1996. By 1998-1999, it could claim a surplus of AS 2.7 billion, the first since 1989-1990. The size of the public service has declined since the mid1980s (from 180,893 in 1986 to 1 13,268 in 1999), much of this occurring under the Coalition government. The second paradoxical element relates the scale of reform to the process by which reform proceeded and the relationship between incremental and paradigm change. In Australia's case incremental change produced radical paradigm change. The traditional approach to reform was to have a major inquiry, extensive recommendations and a plan. Change was otherwise generally incremental. How were the initiatives in the 1980s different? Major reform was achieved by not seeking to introduce major changes (in contrast to New Zealand's substitution of a new framework). The mid-1980s can be viewed as a period in which central agencies diagnosed needs, surveyed departments, developed case studies of management practice and reviewed experience (Halligan 1996a). As Weiler summarised the process (1993: 227), the objectives of management by results were "essentially practice driven. They have emerged piece by piece, out of the administrative trials of the 1980s [...] The steps have been small; they have usually been open to discussion and negotiation". The Task Force on Management Improvement (1993: 6) described the reforms as "a combination of broad policy objectives, long-term strategies and specific one-off or ongoing changes". Successful reform was not then usually the result of a discrete activity or a single plan, but composed of a series of actions which added up to a relatively coherent programme and stretched across several stages with success depending upon review, refinements and consolidation. The framework developed over several years, the processes not being as clear to the participants as they became with hindsight. There are different tasks to perform in moving towards working through and implementing reform, and different orders of change can be distinguished: adaptation and fine tuning of accepted practices, at the most basic level; the adoption of techniques; and the set of ideas that comprise the framework guiding action. The interpretative framework specifies policy goals and the potential in-

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struments for attaining them. Major reform involves changes to all components (Hall 1993: 278-279). Some changes contribute to the development of a new paradigm (approach to political direction, the reduction in public service discretion and the centrality accorded to management) while others serve to implement the new framework (new techniques, such as performance improvement).

2. New Zealand For New Zealand, the basic questions centre on whether the unique reforms (those that were radical and driven by economic theory) were necessary in the long term, and calculating the political cost of economic change. Two strands to the reforms have been identified: the path breaking and unique reliance on institutional economics, and the management dimension, which came to greater prominence in the 1990s (Schick 1996). By management reform was meant allowing managers discretion and making them accountable for the results. Schick argues that this managerial approach, made up of conventional concept, produced most of the improvements of the last decade, and that these changes could have been introduced without the novel elements. Most middle and senior public servants believed that freeing up the ability to manage was the most significant change, with some indicating that this alone accounted for approaching 75 percent of the results (Schick 1996: 19, 23). If New Zealand is essentially about management reforms - which are not different from Australia - how do they significantly differ? There is not doubt that institutional economics, and the central agency for change, Treasury, played a determining role in shaping the reform agenda and process, and were responsible for the early and rapid achievements (Boston et al 1996). But was the contribution therefore more one of process than of substantive reforms? Schick (1996: 19) observes that the elaborate argument in Government Management (Treasury 1987) is essential for "understanding how the reforms have unfolded, but not necessarily critical to an explanation of what they have accomplished". The remarkable pace of change has been otherwise extolled by participants as the key to the reforms (Douglas 1993; Mascarenhas 1996). It is the unique elements of the New Zealand system that reflect institutional economics: viz the decoupling of policy advice and implementation and the centrality given to contractualism. Contracts provide some of the distinctive strengths as recounted by Schick (1996) and others (Boston 1995): the specification of outputs; contestability; the accountability relationship between ministers, chief executives and public servants; and the focusing of performance on individuals rather than organisations.

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Some of these areas have also been those under most challenge: one being the fragmentation of the public service into many, often marginally viable, policy and delivery units, and another is the consequences of contractual ism. The trade-off between high transaction costs and the benefits have been debated. The accountability demands have produced departmental overload and increasing costs over time. It remained unclear whether these high costs outweighed the positive features, and what were the consequences of the conflict between management and market principles. In the longer term, the role of institutional economics may have declining significance, but it can still claim to have provided the cutting edge element. The acceptance of the propensity to innovate and the need to impose a 'hard edge' to reforming are difficult to achieve. As for the second question, Labour government reforms in New Zealand and Australia were designed to rectify the loss of political control and the failures with implementing government policy. Yet, reform led to markets increasingly replacing hierarchies headed by politicians and the question of political control and legitimacy was undermined. This was most explicitly the case in New Zealand. Some reforms in effect "depoliticised" government activity, and detached ministers from being held responsible for public actions. Managerial accountability developed while the political responsibility of ministers became more tenuous (Martin 1995: 37-^2; Boston et al. 1996: 359-360). According to a former prime minister, politicians abandoned the power of decision making and becomes irrelevant if the market decides (Lange 1997-1998: 12). The radical reform of the public service and broader economy led politically to stalemate in the longer term. The failure to obtain electoral mandates and support for radical change in New Zealand led to cynicism about politicians and alienation from the system of government. The response was a voter revolt and rejection of the political system, the most fundamental retaliation being the support for a new electoral system that was believed to be more sympathetic to voter expectations. A referendum in 1993 rejected the first-past-the-post electoral system in favour of Mixed-Member Proportional System. New Zealand's first election (October 1996) based on the new system of proportional representation produced a coalition government and instability (the minor partner opposing aspects of the NZ model), and record disapproval in opinion polls (up to 90 percent). Political engagement with the public service system has continued to be problematic. Politicians have not appreciated the value of the tools available (and were unable to handle responsible for outcomes as was originally envisaged), yet perceived public servants to be insufficiently responsive.

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3. The Paradox of Success New Zealand and Australia had ambitious reform programmes, often operating at the frontier of what was thought to be possible for a national public service. The programmes involved comprehensive reform, the reconstruction of all key dimensions of complex systems. Reform success becomes challenging under these circumstances for even specific reforms involve tradeoffs against other objectives or design elements (Polliti/ Bouckaert 2000: 7; Hood 1998). The paradox of success for Australia and New Zealand can be examined through three dimensions. Two were contradictory: the need to maintain momentum with reforms (implementing and refining) and the need to supercede them. The task of launching and implementing reform needs to be distinguished from that of sustaining reform. The capacity to sustain reform directions in the longer term presents special challenges: the preconditions for reform are difficult enough to package (Polliti/ Bouckaert 2000: 185). Both countries experienced drift in the 1990s after a decade of reform. The inertia derived in part from early success with implementation, the subsequent international acclamation and the resultant complacency. Reform fatigue and political distractions were also elements. Some reforms were not fully or properly implemented, contributing in the Australian case to a revisiting of the original framework and its renewal in the late 1990s (Boxhall 1999a). New Zealand's failure to correct well-known weaknesses has been widely reported on with unfinished and outstanding questions in the areas of accountability, performance measurement and strategic management. There was a need "to debug" the less successful elements, to make modifications that would allow further development and to recognise the case for second generation reforms (Schick 1996; Boston et ai 1996; Scott 1996, 1999; Boston 1999; Gill 2000).4 Second, was the question of confronting the costs of success based on the imposition of new frameworks that either took extreme stances or contained conflicts between key principles, both contributing to the lack of balance among the components of the public service system. Success in reform was often the result of a focus on a specific dimension and ignoring the rigid dictates of reforms driven by economic theory (New Zealand) and financial management (Australia). Reform excesses eventually produce reactions (Kaufman 1956; Hood 1998). This operated at the two levels of reform content and process.

4 Several questions were finally being addressed by 1999, including ownership, the focus on the chief executive and system incompleteness ( Upton 1999: Gill 2000).

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The overall consequences of New Zealand's "contractual model of reform" were problematic in some areas: the specification of outcomes, transaction costs involved and the difficulties with identifying the government's ownership interest (Boston 1995; Schick 1996). The tradeoffs were high in other respects for distinctive reforms have corresponding weaknesses: the failed attempt to produce a unified set of career professionals through the SES and the weaknesses in the professional ethic and public service culture because of the focus on short-term questions Çtaking 1995; OECD 1996). Government zealotry in pursuing reform objectives provides another type of excess. For example, the Australian information technology infrastructure was being outsourced across the public service, the debate centring on its whole-ofgovernment character, the commitment to complete and compulsory outsourcing, and the conduct of a centralised implementation process. This was brought to a head by an Audit Office report, which detailed deficiencies in the methodology, claims, process and results (ANAO 2000). The third dimension is that highly successful reforms do not last. The basis of the new public management was rejection of the fundamentals of traditional administration that had dominated for most of the twentieth century. In the reform era, however, reform succession is compressed: a decade after the new approach to Australian public management took shape, it was being replaced by a revised system; New Zealand continued to expand, refine, and by the new millenium review the reforms, even though a framework was laid down at an early stage. The compulsion to change is drive by the internal commitment to continuous improvement and continual responses to environmental pressures in the absence of traditional boundaries for insulating the public service. The lessons of Australia and New Zealand are that success in major reform is possible in the short and medium terms but does not bring resolution of the need to change. Over fifteen years of reform laid the foundation for more, perhaps echoing the most resounding lessons from elsewhere (e.g. the popular management studies of Osborne!Gabbler 1992; Crainer 1997) that the reported cases of excellence and reinvention experienced short lives. A case can be made therefore for the transience of reform. The paradox of success is that specific reforms may be highly successful but that does not preclude further reform.

References ANAO/Australian National Audit Office (2000). Implementation of Whole-ofGovernment Information Technology Infrastructure Consolidation and Outsourcing Initiative. Audit Report No. 9, Canberra: ANAO.

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Hood , C. (1990). "De-Sir Humphreyfying the Westminster Model of Bureaucracy: A New Style of Governance?". Governance 3/2, 205-214. — (1996). "Exploring Variations in Public Management Reform of the 1980s", in: H. Bekke, J. L. Perry and T. A. J. Toonen (eds.), Civil Services in Comparative Perspective Bloomington: Indiana University Press, 268-287. — (1998). The Art of the State: Culture, Rhetoric and Public Management. Oxford: Oxford University Press. Howard , M. (1996). "A Sea Change in Staffing Mode? Commonwealth Departmental Spending on External Consultants and In-House Employees, 1988-89 to 1993-94". Canberra Bulletin of Public Administration 80, September, 75-83. Industry Commission (1996). Competitive Tendering and Contracting Out by Public Sector Agencies. Canberra: Australian Government Publishing Services. JCPA/Joint Committee of Public Accounts (1995). Public Business in the Public Interest: An Inquiry into Commercialisation in the Commonwealth Public Sector, Report 336. Canberra: Australian Government Publishing Service. Kaufman , H. (1956). "Emerging Conflicts in the Doctrines of Public Administration", American Political Science Review 50/4, 1057-1073.

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1993 Election in New Zealand and the Transition to Proportional Representation. Auckland: Auckland University Press. Weiler, P. (1993). "Reforming the Public Service: What has been Achieved and How can it be Evaluated?", in: P. Weiler, J. Foster and G. Davis (eds.), Reforming the Public Service: Lessons from Recent Experience. South Melbourne: Macmillan, 222-236. Wettenhall, R. (2002). "Public Enterprise Divestments in Australia: a turn-of-thecentury review", in: B. Ahn, J. Halligan and S. Wilks (eds.), Reforming Public and Corporate Governance: Management and the Market in Australia, Britain and Korea. Edward Elgar, 103-122. Wilenski, P. (1986). Public Power and Public Administration. Sydney: Hale and Iremonger.

From Public Bureaucracy State to Re-regulated Public Service: The Paradox of British Public Sector Reform By Christopher Hood

I. From the Paradox of Ungrounded Statism to the Paradox of Regulatory Growth Inside Government Patrick Dunleavy (1989) has written of a paradox of ungrounded statism in the UK after World War II. By "statism" he meant the UK was at that time distinctive among OECD countries in having an unusually high proportion of its workforce in direct public employment and in using direct state organisation to provide many services (such as low-income housing, health care, social welfare services) that in other countries were provided through "state-supported third sector" organisations, following some more or less explicit "subsidiary doctrine" (cf. Hood/Schuppert 1988: 19). As he puts it (Dunleavy 1989: 243), "the pattern of intervention in both the welfare state and the mixed economy was consistently statist, committed to direct governmental control of enterprises or service provision". Indeed, services directly provided by state employees at that time included not only the orthodox range of public utilities, but also public houses, a travel agency, horse-breeding stud farm and wool disinfection factory. By "ungrounded", Dunleavy meant this unusually "statist" approach to service provision was not underpinned in the British case by any particular "statist" tradition or philosophy, in contrast to the French tradition of étatist economic management (ibid: 260, or, it might be added, any developed system of administrative law). And it was "paradoxical", because the stress on liberalism and the importance of non-state institutions in much British political tradition might have been expected to lead to the opposite outcome. UK public sector reforms over the past twenty years have had the effect of substantially diminishing the "ungrounded statism" paradox. Northern Ireland (the rump "province" remaining under British rule after the partition of Ireland in 1922, which since 1969 has produced levels of political violence unparalleled in Western Europe in consequence of the cleavage between Irish nationalists and British loyalists) remains a "public bureaucracy state" to a remarkable degree. With public spending at over 70 percent of GDP (over 30 percent higher than in Britain) during the Thatcher years (Gaffikin / Morrisey 1990: 79), over a

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third of its labour force in direct public service employment and many more in tax-subsidised jobs, 1 Northern Ireland is an extraordinary public administration relic in comparative European perspective. That is a paradox in itself, given that the UK is so often portrayed as a leading "modernizer" in slimming down state organisation. But in other parts of the islands the picture is very different. For the UK as a whole, a mixture of dramatic downsizing in state bureaucracies combined with outsourcing and privatisation of public services reduced direct government employment from nearly 20 percent of the total labour force in 1974 (well above the average figure for government employment in OECD countries) to 15 percent in 1994, very close to the OECD average.2 Indeed, a (highly selective) version of "subsidiarity" doctrine became established in the UK (or at least Great Britain) as an explicit principle of institutional design over the past twenty years. In part this doctrine, encountered by British politicians through EU politics, was eagerly and consciously embraced by John Major and other Conservative party politicians to challenge what were seen as EU encroachments on national-government jurisdiction (but not UK national government restrictions on local-government autonomy). In part it was used as an implicit guiding principle (for example in checking direct state activity through five-year "prior option" reviews of all non-departmental bodies) and even emerged as part of the "Third Way" style of government embraced by the Blair Labour government, elected in 1997. The much-discussed reshaping of the state in the UK over the past twenty years left overall public spending very little changed as a proportion of total national income (according to OECD historical statistics (OECD 1996: Table 6.5)). Total outlays of UK government as a proportion of GDP were almost exactly the same - at about 45 percent - in 1994 as they had been twenty years before in the pre-Thatcher era. But, as noted above, the state was rolled back noticeably in terms of direct public employment - far exceeding what in the Britain of 1977 was seen as Milton Friedman's "impossible dream" of removing one civil servant in six from the public payroll (Hood 1994: 1). Along with that change went a programme of privatising public enterprises that attracted international attention (and mythology) and a series of attempts to improve publicsector management, packaged as measures designed to make such management

1

Source: Mc Garry/O'Leary (1995: 78) and Northern Ireland Annual Abstract of Statistics No 15, Belfast, Northern Ireland Statistics and Research Agency: Table 11.3.

p.99 and Table 11.5, p. 105. 2 Source: OECD Historical Statistics I960 1994, Paris OECD 1996. Table 2.13.

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Table 1 Nine Selected Civil Service Changes 1979-1991 Date

Name of programme

What it involved

1979

1. Efficiency scrutinies

Atfirst, one-off scrutinies in depts., later more emphasis in cross-dept. issues

1982

1985

1989

1991

1991

9 Hesse

Comment

How linked with types of regulation

Competition (by ambitious CS for Cabinet attention) mixed with review from Efficiency Units 2. Financial Identification of Development from Mix of review (by Management dept. aims, costs & DOE MINIS proextra information performance indica- gram & Efficiency held by the top/ cenInitiative tors ; move to "cost Scrutiny programme tre) & competition centres" & man(by cost centres able agement informato be league-tabled) tion systems 3. Pay Linked At first for CS Possible response to Aimed to increase to Performgrades 3-7, Grade 2 1981 CS pay strike; competition by CS ance added in 1987, with return to proposal of for pay as well as discretionary pay 1968 Fulton Report for promotion to for the highest on CS higher grades grades 4. Next Steps Creation of c. 140 Seen variously as Increase in formal programme "executive agenresponse to FMI oversight through cies" under CEOs, failure or success explication of with missions de(see Jordan 1992: documents and fined by framework 3); return to "burregulatory framedocuments agreed ied" proposals of works with Ministers 1968 Fulton Report on GS Opening up CS work Application to cen- Aimed to increase 5. Market to outside contractral govt, of 1980s competition (public Testing tors requiring govt, CCT procedures de- and private) for dept. to identify 30% veloped in local public service proof their work for govt, and NHS. Su- vision market testing (£2 perseeded by effibn. of activity mar- ciency plans in ket tested between 1994 after low take1992 and 1994) ups by depts. 6. Pay & Part of Treasury Replacement of Responsibility for grading dele- pay and grading be- shift awayfrom, de- specific pay overgation begun low senior levels tailed oversight of sight by overall 1991 and running costs redelegated to depts. CS management completed gimes; move away and agencies 1996 from contrived randomness in Treasury style Response to perceived failure of earlier large-scale CS reforms

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more "businesslike" and create more "freedom to manage" within state bureaucracies. Table 1 summarises some of the major changes introduced in UK civil service management over the period 1979-91. As the combined effects of these reforms weakened Dunleavy's paradox of ungrounded statism - outside Northern Ireland, at least - , they seem to have created another in the form of increasing regulation inside the state as a (largely unintended) "mirror-image" of attempts to increase managerial freedom in public services. Attempts to produce "government by the market" (Self \993) and "freedom to manage" through outsourcing and restructuring were accompanied by an expansion of formal regulation and oversight of state activity on a scale not seen since the profusion of public-service inspectorates in the early and mid-19th century - an expansion which continued to develop after Conservative rule gave way to the Blair Labour government after 1997 (cf. Hood/James!Scott 2000). Patricia Day and Rudolf Klein (1990) speak of an "age of inspection", Michael Power (1997) of an "audit explosion" and even an "audit society", obsessed with constant checking and verification. Geoff Mulgan (1995) argues that the popular stereotype of UK public management reform - as bonfires of government manuals and regulations, accompanied by much more discretion in the hands of managers - is inaccurate (see also Hoggett 1996). This "state regulation paradox" in part moves the UK's "administrative constitution" in the direction of Continental European traditions of more explicitly regulated state activity and away from traditions of "club-like" unwritten rules for the conduct of public business, but the form it took in the UK remained distinctive and "path-dependent". In analysing this "state regulation paradox", this paper builds on earlier work in aiming to characterise changes in the governance of the British public sector over two decades in terms of a shift among four basic approaches to controlling public bureaucracy, loosely derived from cultural theory. To what extent were attempts to increase competition in public service provision and to increase public managers' freedom to manage without having to follow blanket rules accompanied by a growth of systems of formal oversight? To what extent was such growth unplanned or unexpected? And why did it come about?

II. Four Ways of Controlling Executive Government and the "Old Public Management" in the UK Elsewhere (Hood 1996; Hood 1998a; Hood et al 1999), 1 have identified four basic types of governance within executive government, namely competition, oversight , mutuality , and contrived randomness , which roughly align with

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the polar worldviews associated with grid-group cultural theory. Competition denotes control of bureaucracies and public officials through processes of rivalry. Oversight means control through audit, inspection, authorisation, adjudication and certification or licensing; processes which in other work (Hood 1986), I have termed "comptrol". Mutuality denotes control of individuals through group dynamics, notably peer pressure, mutual ratings and surveillance, as in Ouchf s (1980) "clan" model of organisation. Contrived randomness means control through processes of chance designed to make the working environment of public officials and bureaucrats hard to forecast, for example by semi-random posting routines (Kaufman 1967, Hood 1976), unpredictable decision procedures (Rose-Ackerman 1978), or institutional arrangements which foster "random agenda selection" (Breyer 1993). All four basic elements can normally be found to some degree in any complex system of institutional control. What varies is their relative emphasis. And it can be argued that attempts to reform executive government in the UK over the past two decades amounted to very deliberate attempts to change the fundamental balance of control systems in the public sector. A repeatedly stated intention was to cut the costs and/or improve the quality of public services by increasing their exposure to competition, and to strip away what (under the Conservatives, at least) were seen as unwarranted "privileges" of the public service (cf. Hood 1995) shielding public servants from the disciplines of the market and its attendant job insecurity. A related aim was to reduce the force of collégial control in many public service professions (collegiality being seen as a force that pushed up costs and maintained restrictive practices) and increase both the opportunities and obligations on those in management positions (like headteachers) to exercise more discretion, for instance over pay, personnel and contracts. The implication was that some measure of deregulation was needed inside government as well as in the economy and society more widely. In terms of the quartet of control types noted above, the stated intention was to downgrade the force of producer-group mutuality and highlight that of competition. What the implications were for oversight, however, was never stated clearly. To put these changes into comparative perspective, some benchmarking of the point of origin is needed. For the "old public management" associated with the UK's mid-twentieth century public bureaucracy state style of public service provision (the source of Dunleavy 's "ungrounded statism" paradox), heavy emphasis was laid on mutuality for controlling middle-class professionals. Such a style operated not just at the top of the civil service (where mutuality, in the sense of reciprocal rating by a career corps whose denizens lived together as

3

Though this quartet of approaches bears some resemblance to other typologies (e.g. Peters 1996).

9*

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part of a closed community over decades, was argued by Heclo and Wildavsky (1974) to dwarf all other control processes, such as formal legislative or ministerial oversight) but also in academia, medicine, the public-service professions and even in the financial world where a tradition of unwritten rules and selfregulation tended to go with an exclusive social basis and élite socialisation processes. The pervasiveness of mutuality as a style of governance in the professions may have been distinctive to a society where (Ireland only excluded) the middle class had not been torn apart by civil war or by political upheavals of equal force to those witnessed in many of the Continental European states in the first half of the 20th century. If oversight tended to be downplayed relative to other control processes in the UK's pre-NPM ancien régime (and certainly central government was more "regulating" than "regulated"), it was by no means wholly absent. For example, in the early and mid-19th century, the UK developed a partial equivalent of the French inspections générales in the form of several central semi-independent public-service inspectorates, originating in 18th-century developments (inspectors of Irish prisons, surveyors of local income tax collectors) and applied in the 19th century to services like prisons, schools, poor law services, police and probation (cf. Rhodes 1981). Another major 19th-century development in a similar vein was the creation of the Civil Service Commissioners by Order in Council in 1855, to regulate the transition from political patronage to merit appointment in the civil service. In addition, the 19th century saw the development of more powerful and systematic public audit both at centralgovernment level (with the creation of a modern public audit office, the Exchequer and Audit Department, in 1866) and at local government level (with the move away from traditional arrangements in which local ratepayers elected their own auditors in often excessively "cosy" relationships to the establishment of a District Auditor system regulated from the centre and with powers to recommend the surcharging of local councillors and officials for unlawful expenditure). Judicial oversight, particularly of local authorities, was a frequent if selectively-applied feature of 19th-century local authority administration, with repeated application of the ultra vires doctrine (cf. Loughlin 1996; Hood et al. 1999, Ch. 5). However, in the aftermath of World War II these 19th-century "overseers" were not at the cutting edge of public service development in the sense of mounting sharp challenges to traditional practices. Public audit had become a backwater of routinised "tick and turn over" regularity practices (Normanton 1966); in central government public audit activity tended to consist of "little people" in the audit office lighting on the faults of other "little people" in departments (overpayments of grants and the like), with such issues "richocheting" up to the Public Accounts Committee of the House of Commons, where the top officials of departments, briefed by clever middle-grade officials, appeared

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4

to state the departmental position. The professional inspectorates, central to the 19th century utilitarians' plan for public service reform, had tended to become absorbed into professional producer communities. For instance, the prison inspectorate became part of the prison department after the prisons were "nationalised" in 1877, and the schools inspectorate had become part of a professional policy community by the mid-twentieth century. Similarly, the Civil Service Commissioners, normally headed by a mid-career civil servant, operated as the direct recruitment arm of the civil service and not as an arms-length regulator of merit in appointment and promotion. In addition, the law courts were in the aftermath of World War II exceptionally quiescent in terms of judicial review and judicial activism to challenge public administration and policy decisions. Competition was also a feature to some degree of the "old public management" bureaucracy. In particular, that bureaucracy, borrowing from the practices of the East India Company5 in the mid-19th century, which in turn drew on the older imperial Chinese "examination hell" tradition, emphasized competition in the form of keen rivalry among the "best and the brightest" of university graduates for appointment to, "fast stream" places in the civil service (with 50 or so hopefuls for every position). Competition for promotion on a closedcareer basis among this élite corps once appointed was also a marked feature of the traditional bureaucracy - a mechanism which has been identified by Horn (1995: 122 and 124ff.) as central to the control system of traditional bureaucracies, because it puts the onus of providing information about loyalty and good service to the organisation on those best placed to provide it (i.e. employees) rather than disciplinary procedures or output-based pay systems which put the burden of collecting information on the least-well-informed party. Elements of contrived randomness also seem to have been important in several ways as part of the control system of the "old public management" bureaucracy in the UK. Over the course of a career, commonly spanning more than three decades, it was often hard for a senior civil servant to predict where or with whom it would be necessary to work. Those promoted to the topmost rank, of departmental headship, typically did not find themselves working in the departments where they had spent most of their working lives, and likewise promotion within the Treasury, traditionally the leading central-government department outside the Foreign Office, tended to mean a move to a different division. And at the other end of the career cycle, the newly-appointed "bright

4

Source: Interview with senior National Audit Office official, 1995. The "quango" that governed India from the late 18th century (following an original contract from the Mogul emperor in 1765 to outsource part of its revenue collection operations) to the Indian Mutiny of 1857. 5

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young things" fresh from college who had succeeded in the entrance competition were often posted around their departments in a semi-random manner and encouraged to hone their analytic skills on whatever square of policy or operations the bureaucratic roulette wheel landed them on. By moving people about in unpredictable ways, the old bureaucratic structure introduced elements of novelty and challenge into the scrutiny of policy and practice. Elements of contrived randomness also figured in control of expenditure and financial operations. Traditional Treasury expenditure control of "spending departments" relied on a substantial element of unpredictability. The control system hinged on the use of Treasury powers of financial authorisation, meaning departments wishing to make non-routine appointments or embark on new projects had to approach the Treasury for permission to do so. Such requests were liable to be met by an unpredictable process of questioning from the Treasury, with authorisation sometimes granted at once, sometimes after a few perfunctory questions, but sometimes being turned into a major inquiry into a whole policy domain (cf. Parry!HoodlJames 1997). The system worked through a combination of (a) specific control "windows" through which the Treasury could look at departmental operations and aim to break through the "information asymmetry" that characterises any arms-length oversight relationship; (b) subtle alliances between the Treasury and departmental finance officers in which the latter found it convenient to use the Treasury to resist proposals within their own departments of which they did not approve; and (c) inscrutability in Treasury responses to requests for authorisations to spend which created substantial, "downside risks" for poorly-managed departments or those whose policy proposals were not robust. In the more executive realms of the civil service, like the tax bureaucracies, security services or the post office, contrived randomness often figured large too, in the form of dual key systems for handling finance linked with a routine of limited-term postings around a ramified national network (a system originating in the 18th-century Excise organisation: cf. Hood 1976). The "philosophy" underlying this traditional style of bureaucratic governance was never made very explicit, and that may explain the speed at which it buckled intellectually under the weight of "New Public Management" challenges from the 1970s, which successfully portrayed the system as an indefensibly "producerist" structure captured by public service trade unions. Nevertheless, the underlying and largely implicit philosophy of the UK's old public management regime of the 1950s and 1960s could be reconstructed and stated in terms of modern ideas of institutional rationality. From that perspective, the system embodied the belief that transactional costs in the operation of public services would be minimised by employing mutuality in surveillance (along "clan" lines, in Ouch?s (1980) terminology) as a major element of control at the top of the

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professions and at the policy level of the public service, linked with strong competition for promotion within a career corps designed to minimise the oversight costs of the public service employer (as discussed earlier), and with a substantial element of contrived randomness at several key points in the operation of the structure to discourage anti-system collusion and promote challenges to policy and practice by regular shuffling of the deck of talented bureaucrats. To the extent that any of those effects were realised by the traditional design of the UK public-service system, it is only to be expected that moves away from that design might have the effect of increasing transaction costs and reducing robustness.

I I I . The Intended Effects of New Public Management Reforms: Enhanced Competition and Managerial Freedom Much of the thrust of the reforms now dubbed as "New Public Management" during the 1980s and 1990s was ostensibly designed to add new forms of competition to the traditional forms of public-sector competition (in the form of individual rivalry for appointment, honours and promotion, and organisational competition for budgetary funds and policy responsibilities), to release managerial energies within the public sector by relaxing rules that stifled managerial creativity, and put public-sector professionals and bureaucrats under greater pressure to find ways of reducing resource inputs relative to measurable outputs and improve service quality. Five of the most notable attempts to increase competition in the public services were "ratings competition", competition for merit pay awards, competition in "quasi-markets", "lateral entry" competition for senior civil service posts, and competition through market-testing state functions. "Ratings competition" meant the development of new methods for rating the quality or efficiency of service provision by arranging different local authority services, schools, universities and hospitals in published "league tables" of "saints and sinners", according to quantitative performance criteria. This approach was pioneered for local authority services by the establishment of the Audit Commission for England and Wales in 1984, a body dominated by an accounting approach to policy analysis and intended to inject a new "value for money" ethos into the appraisal of local authorities by stressing quantitative performance indicators and pulling against the traditional professional inspectorates, which were seen by the government at that time as "captured" by professional producers ( Power 1997: 47ff.). A variant of the same approach was developed in the later 1980s for universities, first by competitive research quality ratings and then by applying the same approach to the assessment of teaching quality, and came to be extended to hospital trusts in the 1990s. Like any performance indicator re-

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girne (Blau 1955), ratings competition shaped institutional strategies, for example in schools not entering pupils for examinations where they were likely to perform poorly. That effect applied particularly where the competition was linked directly to funding on a best-to-best allocation basis (notably for universities, albeit with a complex structure of safety nets). A second new form of competition within the public sector was competition for "merit" or "performance-related" pay awards by public servants, in addition to competition for promotion. In part this development highlighted and extended previous arrangements for "special incrementation" that had always existed to some degree within the traditional classified pay structure of the public service. In part, it was a revival of an old tradition in a new form, in that "performance-related" pay had been important in many public services in the past (for instance, schoolteachers in England and Wales were paid "on performance" (exam grades) up to 1902 and tax collectors traditionally received rewards proportionate to the amount of delinquent tax collected). What was different about the performance pay schemes of the 1980s and 1990s, however, was that instead of basing pay on objectively measurable aspects of performance (like delinquent tax recovered or exam grades achieved by students), they were based on subjective assessments of performance by superordinates in a style more familiar in the business world. Formal arrangements for performance pay in that sense began in the civil service in 1984 on a limited and experimental basis; by 1996 the old centralised grading structure bad ostensibly been abolished for the "Senior Civil Service" introduced in that year (Grades 1-5), with all pay of those grades officially individualised in relation to performance, level of responsibility and marketability of skills and experience (PM et al. 1995: 35-45). Performance pay of that type also became commonplace in other parts of the public service, for example in schools and universities. A third new element of competition was the introduction of "quasi-markets", a hybrid of competition and oversight (Le Grand!Bartlett 1993). A quasi-market involves splitting "purchasers" and "producers" of public services and requiring the latter to compete to supply the "purchasers", but within rules of the game that are set by administrative regulation rather than by contract law (typically restricting the ability of the participants to litigate over "contracts"). This approach to enhanced public-sector competition was developed most explicitly for National Health Service hospitals after 1990 by setting up a "contract" regime under which hospitals competed to supply health care for purchasing authorities. Again, this approach to public service provision was not wholly new; it had (unacknowledged) antecedents in the "quasi-markets" for health care which existed under the pre-NHS regime of "approved societies" and "panel doctors" operating from 1911 to 1948 (cf. Whiteside 1997); and the Blair Labour government announced its intention of substantially modifying the system, though not removing the producer-purchaser divide. Nevertheless, these changes in-

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volved a radical restructuring of a health care system which had operated for over 40 years through an organisation which combined "purchaser" and "provider" functions in a single unit functioning as a monopolistic buyer of health care professionals, and it represented a new phase in a long series of attempts by health bureaucrats and Ministers to weaken the power of hospital consultants relative to general managers. A fourth new element of competition was the introduction of more "lateral entry" for senior positions in the civil service. After the disruptions of World War I and II (when many "outsiders" had been drawn into the civil service on a temporary basis from business or other occupations), the senior civil service had by the 1970s reverted to the 1854 Northcote-Trevelyan conception of a largely "closed-career" system, in which the highest posts were filled by competition from those who had entered the service at a junior rank in their 20s, had become steeped in the bureaucratic culture and established a reputation for "soundness", cleverness and ability to "deliver" their departments or Ministers. There were always some important exceptions to this rule, but over the last two decade or so the "lateral entry" principle has become more institutionalised for senior public service appointments, with formal advertisement (and in many cases recruitment from outside the civil service) of the Directors-General of the various semi-independent industry regulator bodies set up to oversee the privatised utilities (beginning with OFTEL in 1984) and the creation of a new breed of senior civil servants from 1989 in the form of the Chief Executives of the "Next Steps" executive agencies. The utility regulators produced a new set of key public service appointments with fixed-term tenure and open to lateral entry after advertisement, and at first the 140-odd chief executives of the executive agencies were appointed in the same way (later, rolling contracts replaced the original form of fixed-term tenure for agency CEs), with over a third of agency CEs coming from outside the civil service. By the mid-1990s the same approach, involving competition between career bureaucrats and candidates from other backgrounds, was becoming more commonly applied to senior positions in the "departmental" civil service: just under a third of all Grade 1-3 vacancies were advertised as open to all comers, with about half of those competitions leading to an appointment from outside the civil service (Civil Service Commissioners 1996: 6). By 1996, half the vacant positions in the top two grades of the civil service were being advertised, with about half of the jobs going to civil servants (Butler 1997). That meant middle-level civil servants ambitious to reach the top faced increasing competition from lateral entrants, particularly for utility regulator positions and managerial jobs like heading executive agencies. However, proposals to introduce fixed-term contracts all round for the senior civil service (advocated by some senior ministers in the John Major government) were firmly resisted and indefinite tenure remained the norm for senior departmental civil servants (see Hood 1998b).

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A fifth and final form of competition, arguably the most draconian, was that of requiring public service units to compete with others for contracts to continue performing their existing tasks (rather than competing for promotion, market share or extra pay) through market-testing or compulsory competitive tendering exercises. Such competition marked a new phase in public management through its "reign of terror" aspect, since under this regime public servants were being required to compete for their own jobs. Compulsory competitive tendering first began to be applied to an originally narrow range of local authority and NHS services in the 1980s (mainly involving manual work like cleaning or garbage collection), but was later steadily expanded to involve white-collar and professional work, like architectural services and financial management. In 1991, an attempt was made to apply the same approach to central government, involving a requirement for departments to "market test" a prescribed proportion of their activities. However, in sharp contrast to the runaway implementation of reform measures, such as the introduction of executive agencies within Departments and with the determined introduction of compulsory competitive tendering in local government, the market-testing programme for central government lagged heavily behind its targets, and formal targets were in fact abolished in 1994, being replaced by a regime of requiring departments to produce periodic "efficiency plans" to control their running costs, in which market-testing was not a compulsory component. The Blair Labour government introduced a broadly similar approach to replace CCT in local government, under the tag of "Best Value". While intensification of competition as a form of control over public service was a repeatedly-stated aim of public management reform in the UK during the "New Public Management" era, many of the changes mentioned earlier bit more severely at the level of local government and the outer reaches of the public sector than in the central core of government in Whitehall. Though lateral entry competition and competition for merit pay applied to central government (and conspicuously failed to develop in organisations like the police, in spite of proposals such as those contained in the Sheehy report of 1995), compulsory competitive tendering, heavily stressed for local government and the NHS for over a decade, appeared late and only briefly for central government departments; and likewise quasi-markets and ratings competition were little applied to central government. And the enthusiasm professed for competition and entrepreneurialism as a cure-all for public services had its limits. Nothing approaching Bentham's famous "patriotic auction" of pay for high public office (in which qualified candidates compete for how little pay they will accept for a position, or offer money to secure it) was introduced (cf. Hood 1991). Testing of the market by the state tended to be explicitly forbidden or discouraged while public enthusiasm was expressed for testing the state by the market. Public service franchises and privatisation deals often entrenched dominant providers. While there

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was explicit provision for choice by parents between competing jurisdictional arrangements for state schools (with provisions for "opting out" involving ballots of parents during the Conservative years), no such competition arrangements applied to many other local authority services, like further education which were summarily transferred to other public authorities. Competition between purchasers and providers (as in the health service) was in many cases required to stop short of litigation over "contracts". I f NPM embodied a philosophy that all public services should be competitive, its application in practice left some public services more competitive than others.

IV. Less Intended Effects of Public Management Reform: The Explosion of Audit and "Mirror Image" Regulation Moreover, there was a "flip side" to reforms designed to introduce more competition and freedom to manage into public bureaucracies, in the form of an explosion of audit and of increasing regulation inside government. As noted earlier, several commentators have drawn attention to the increased faith that was placed in auditors and inspectors as waste finders, quality police and "sleazebusters" within the bureaucracy. Between 1975 and 1995, the number of organisations engaged in regulation of government (as opposed to regulation of private or privatised business) increased by over a fifth, their claims on the public purse increased in real terms by a factor of between two and three, and their staff increased by an estimated 90 percent, over a period when numbers of civil servants decreased by over 30 percent and numbers of local authority staff fell by over 20 percent (Hood et al 1999). And the pattern continued under the Blair Labour government, with an approximate tripling of the rate of growth in new organisations regulating government during the Blair government's first 18 months in office (Hood/James/Scott 2000). During a time when governments aimed to make public bureaucracies "leaner and meaner", those who regulated those bureaucracies became anything but leaner. Spending on public audit bodies at least doubled in real terms over the last two decades; it increased by a factor of three for inspectorates of local government and grew at least fourfold in some other cases such as ombudsmen and funder-cum-regulators. The regulators grew while the "doers" declined, in an uncomfortable parallel with Northcote Parkinson's (1961) famous "Law", illustrated by growth in Admiralty clerks while numbers of battleships declined in the early years of the century. I f sustained, such a pattern would result in government services coming to resemble activities such as slaughterhouses, with bureaucratic regulators coming to outnumber the doers during the 21st century. In short, reforms intended to free up managers in public organisations and encourage competition for public services were accompanied by a dramatic and

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to some extent unintended growth of formal regulation, in the form of audit, inspection, grievance-handling, standard-setting. The growth of the "regulatory state" (Majone 1994), much discussed in relation to changes in the relationship between government and business, seems to have had an inner face in relation to government itself. But for a long time that growth was not reflected in measures to "regulate regulation" of the kind applied from the mid-1980s to the regulation of business in the UK (and in the EU, with its fiche d'impact system), by the identification of compliance costs and the attempt to make regulation more coherent and business-friendly. The compliance costs of public sector regulation were largely ignored in such arrangements, even when the Conservative Deregulation Unit was re-badged as the "Better Regulation Unit" by the Blair Labour government. Only after the Blair government's Modernising Government White Paper of 1999 (cm. 4310 1999) did any recognition emerge of the compliance costs of public-sector oversight. Regulatory growth in UK government over this period seems to have been driven by several factors: increasing concern about "sleaze" and the "proper conduct of public business" resulting in extra regulation of propriety, for example in public appointments; apparently increasing belief by both Conservative and Labour politicians in a version of Bentham's maxim that "the more strictly we are watched, the better we behave" (Bahmueller 1981, title page) for public bureaucracies; the same decreasing trust in middle-class professionals that led to the growth of formal regulation and grievance-handling processes in fields like financial services; and a mood (discussed in the last section) of restructuring public service provision by separating purchaser and provider or policymakers and "executors" and in the process turning what had once been "command" units into "regulators". It took place against a sharp decrease in public satisfaction with the overall system of UK government in opinion polls, and against a marked increase in judicial review of administration and increasing willingness by judges and law courts to intervene in policy and administrative processes (cf. Cabinet Office 1987, Cabinet Office 1994; Richardson!Sunkin 1996). While a number of the regulators of government (notably the growing army of ombudsmen) seem to have been intended to function as alternatives to orthodox judicial review processes, in many cases those regulators appear in practice to have had exactly the opposite effect, of facilitating and reinforcing a culture of litigation against public authorities (cf. Hood et al. 1999). Not only were ombudsman-type regulators (such as the Police Complaints Authority) commonly used as a launching-pad for further litigation, but the activity of other regulators sometimes prompted a similar response, such as attempts by parents to sue local authorities in the light of school-inspection data provided by the Office for Standards in Education.6 6

Source: 1997 interview with OFSTED official.

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Moreover, just as Michael Power (1997) sees audit as incapable of justifying itself in the terms it demands from auditees, the growth of regulation inside government seems to have followed a pattern that is the very opposite of the principles normally associated with "New Public Management". Regulation inside government grew in an ad hoc, unrationalised way; regulators inside government were little exposed to the performance indicator regimes they developed for their regulatory charges; unlike their cousins in the world of business regulation, they typically took no account of compliance costs (that is, what it costs for regulatees to deal with the regulator) in their operations; and they were themselves almost entirely unregulated as an "industry". Indeed, the structure of regulation for efficiency in government "seems to reflect an implicit belief that duplication, overlap and unrationalised proliferation of separate units making costly demands on their regulatory charges promote value for money - yet for service-delivery organizations those same regulators commonly argue the opposite" (Hood et al. 1999: 34). The regulatory growth that accompanied New Public Management changes in service-delivery produced an incoherent structure of multiple regulator organisations pursuing ill-defined objectives that were frequently incompatible with one another - the very features of the "old bureaucracy" which those of a New Public Management persuasion found least satisfactory. As noted earlier, that pattern of regulatory growth continued under the Blair Labour government, though modest attempts to take stock of public sector regulation began to be taken after 1999.

V. Accounting for the "Mirror-Image" Paradox Why did a process of bureaucratic reform, ostensibly driven by a desire to "debureaucratise" and free up public managers to act more "entrepreneurially", end up with more rather than less regulation in government? There is no definitive explanation of the UK's mirror-image paradox, but three "usual suspects" can usefully be rounded up for questioning. One is that the "big vision" of state services run in the image of (a particular view of) private business organisation was somehow deflected by bureaucratic self-interest. Such deflection might have taken at least two forms. "Bureaushaping" of the type identified by Patrick Dunleavy (1991) might have caused senior public servants under pressure from politicians to be more "managerial", to opt for a regulatory role instead, in order to avoid the stress of front-line management roles. Giandomenico Majone (1994) has pointed to similar motivations as fuelling the growth of the "regulatory state" at European level in government-business relationships - that is, when the public and political mood restrains other forms of bureaucratic expansion, regulation offers an alternative way of furthering bureaucratic careers. Alternatively, and more mundanely,

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middle-level bureaucrats might have turned the "big vision" into a set of formfilling, bean-counting procedures, following what Clay and Schaffer (1984: 10) termed the "bureaucratic paradox", i.e. the tendency of bureaucrats to do what is easiest or most feasible when faced with complicated "big ideas" about social transformation. Certainly it is a familiar complaint by British executive agency CEs that "we thought we were empowering people who run things, but ended up empowering people who count things" 7 or to complain about "hobgoblins in the mist (...) brandishing regulations", in the words of one senior agency head brought into the civil service from a business background. 8 Probably some of the growth of regulation inside government derived from such sources. Dunleavy's argument is that senior bureaucrats prefer collégial policy roles to management roles involving grinding routine and conflict-ridden command relationships with lower-status individuals far away from the centres of political attention, and it is true that only a small minority of the CEs of the executive agencies created since 1989 have been stereotype generalist "high flier" civil servants, who for the most part have remained in their traditional roles as, renaissance courtiers" (Sisson 1976) around Ministers in departments. But most of the regulators of government are not civil servants of that type either (though there are some exceptions, notably in the central agencies), and it is not altogether clear why regulation might be considered inherently less confrontational or closer to policy glamour or political action than direct management. Many of the new regulators, in domains such as inspecting law courts or the health service or setting down further education standards, seem hard to fit with such a perspective. Clay and Schaffens notion of the bureaucratic paradox also fits with a tendency to produce more bureaucratic machinery to deliver goals intended to involve the elimination or radical alteration of bureaucracy, as in the paradoxical development of a bureaucratic regulator devoted to the pursuit of "deregulation" by imposing mandatory reporting requirements on all government departments. However, such developments also took place in the context of strong animating ideas about the reform of "governance" from which it is impossible to disentangle bureaucratic "supply" interests. Accordingly, a different explanation for the paradox is that the mania for regulation inside government in the UK in the 1980s and 1990s reflected a wider belief that techniques borrowed from financial auditing could be generalised to domains like health or education in order to make public services more effective. Power (1997) interprets much of the boom in regulation, inspection and audit inside government not so much to "snouts in the trough" factors stemming from self-aggrandisement on the part of

7 8

Source: senior civil servant and executive agency head. John Ford, contributing to "Inside the Civil Service" BBC Radio 4, 13.01.1994.

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the big accounting firms as to a strong faith in the capacity of audit-like methods to deliver "assurance" about the quality of public services - a faith which is itself paradoxical given the highly chequered history of financial auditing in protecting against repeated financial fraud and collapse and the fact that the audit method is essentially a craft which is itself unauditable, embodying a costassurance function whose shape is impossible to ascertain (ibid.). Unquestioning trust in the power of auditing and analogous regulatory techniques that seek to operate as "control of control", linked with distrust of professional "doers", suggests a different variant of the "crédulité des incrédules "9 paradox. It seems difficult to deny the widespread existence of such a faith over the past twenty years in the UK under both main political parties, not only for the management of public bureaucracy but also in industrial quality assurance and the regulation of business (for instance, in "green audits"). Power (1997: 146) sees it as entrenched in the political culture: "audit currently operates in a regulatory space where regulators and politicians do not wish to be encumbered by systematic doubts about audit; they need to be reassured that it works or can be made to work better". But this explanation seems over-general, because it does not account for the selective nature of this culture of audit and regulation. As noted earlier, the audit explosion was far more dramatic in the outer parts of the public sector (local government, health care and quangos) than to the core of central government in Whitehall, where analogies to the clinical audits of health care in the field of policy advice were firmly resisted. If animating ideas were all there were to it, central government should have been just as much exposed to the treatment as other parts of the public sector - indeed, perhaps more so, since it began from a lower base. In fact, the opposite is the case. A third possible explanation, not necessarily incompatible with the other two, is that the growth of regulation inside government was a necessary entailment of a wider programme of public management reform, even though some reformers may not have fully recognised that entailment. On such an interpretation there was an administrative dilemma (Hood 1976) over administrative direction and arms-length regulation that was little recognised by governments either out of miscalculation or out of a preference for "denial" of the dilemma for political reasons. Specifically, the argument is that if greater freedom or discretion is devolved to managers in public services, there is a necessary "mirror image" process of greater inspection, audit and general standard-setting to counteract potential misuse of that greater managerial freedom. In that sense, any paradox of regulatory development inside government is simply that its necessity as a logical corollary of increased devolution of control over staff and resources was not

9

In the words of Lord Hailes, responding to an observation of Samuel Johnson

(Boswell 1909: 322).

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fully recognised at the outset, perhaps because the political rhetoric, at least in the early phases of the Thatcher government, tended to stress the "free to manage" theme and downplay the regulatory growth theme. A number of senior public servants in interviews interpreted the regulatory explosion inside UK government in such terms. Some linked it to a partial breakdown of the "monastic" world of Whitehall with more lateral entry bringing in "brash business types" (in words of one Permanent Secretary) into the upper reaches of the public service and consequently making it necessary to spell out the rules of the bureaucratic game more clearly for "new readers". Another senior public servant saw "regulatory denial" of the Thatcher government - the reluctance to recognise the corollary of managerial freedom - as the reason why no serious effort was made to rationalise or coordinate the work of the various regulators at a time when radical reforms were being attempted elsewhere in the public service. On such a view, the growth of regulation inside government for a regime that saw itself as deregulating and managerialising public services might be considered a consequence either of miscalculation or failure to recognise logical entailments - that NPM moon had to have a dark side as well as a light side. But even that view - which is a variant of what Sam Sieber (1981) terms "functional disruption" - may give too "linear" a perspective. The mirror image process of growing regulation as a logical corollary of growing devolution - was not a universal outcome. In case of the local government, reforms advocated by the Layfield Report of 1977 asked exactly for such a mirror-image, with intensified audit over local government accompanying increasing devolution of power from the centre. But what occurred in practice was less straightforward. While administrative development inside local authorities in many cases followed a "mirror-image" pattern - with increasing trends towards "enabling authorities" rather than local versions of "the public administration state" matched with increasing stress on arms-length regulatory oversight of outsourced or corporatised local services - the relationship between local authorities and central government did not follow the pattern expected and recommended by Layfield. What occurred in the relationship was more like a "double whammy" than a mirror image - with increased regulation in practice accompanied by increasing centralisation rather than devolution, making public service "managerial freedom" in reality that particular type of liberty in which (as in the old joke about Italy under Mussolini) "everything that isn't prohibited is compulsory" (Larsen 1980: 54). Accordingly, the "mirror-image" interpretation seems to work better in the higher reaches of government, and in other places regulation was not so much a substitute for uniform close oversight from a controlling centre as an accompaniment to it.

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VI. Conclusion Though much has been confidently pronounced about the causes and effects of "New Public Management" in the UK, there are well-known difficulties in such analysis. One is that (as Mao Zedong once said of the French revolution) it may simply be too early to tell what the long-term effects of the NPM changes may be (Barker 1994: 138). Another is the difficulty of separating out deliberate organisational restructuring from background change that would have happened anyway. To some, such as Bellamy and Taylor (1997), much of the N P M changes are accounted for by - indeed embodied in - information technology developments. But trying to evaluate the effect of informatisation independent of other changes in the public sector would lead us into exercises such as Robert Fogel's attempt to imagine 19th-century America without railroads - an impossible counter-factual position (cf. Fischer 1971: 16-19). Given such difficulties, this paper has avoided painting on too wide a canvas and has concentrated on only one of the possible paradoxes of "New Public Management" in the UK, the regulatory explosion taking place under a regime ostensibly devoted to a "free to manage" philosophy for public services, and continuing under its New Labour successor. Whether it is to be counted as a paradox stricto sensu is debatable. It has some features of what Weldon (1953) terms a puzzle, in that it is a deliberately made-up problem. But (unlike Weldon's puzzles) there is as yet no single or determinate solution that reconciles the apparent contradiction. It seems wrong to class it in his terms as simply a difficulty - something to be surmounted, reduced, avoided or ignored rather than "solved". But i f it is truly a paradox, it still awaits a clear solution.

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Butler , Sir R. (1997). "The Changing Civil Service". Speech to the ESRC "Whither Whitehall" Conference, Church House, London, 24.9.1997. Cabinet Office (1994). The Civil Service: Continuity and Change, Cm 2627. London: HMSO. — (1987). The Judge over Your Shoulder. 1st ed., London: Cabinet Office. Civil Service Commissioners (1976). Civil Service Commissioners' Annual Report 1995-6. London: CS Commissioners. Clay , E. JJSchaffer , Β. B. (eds.) (1984). Room for Manoeuvre. London: Heinemann. Day , ? J Klein, R. (1990). Inspecting the Inspectorates. London: Joseph Rowntree Foundation. Dunleavy, P. J. (1989). "The United Kingdom: Paradoxes of an Ungrounded Statism", in: F. G. Castles (ed.), The Comparative History of Public Policy. Cambridge: Polity Press, 242-291. — (1991). Democracy, Bureaucracy and Public Choice. Hemel Hempstead: Harvester Wheatsheaf. Fischer , D. (1971). Historians' Fallacies. London: Routledge. Gaffikin , FJMorrisey, Books.

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Heclo, HJWildavsky , A. (1974). The Private Government of Public Money. London: Macmillan. Hoggett , Ρ (199) "New Modes of Control in the Public Service". Public Administration 74, 9-32. Hood , C. (1976). The Limits of Administration. London: Wiley. — (1991). "Privatisation Good, Sale of Office Bad?". Contemporary Record 4/3, 32-35. — (1994). Explaining Economic Policy Reversals. Buckingham: Open University Press. — (1995). "'Deprivileging' the UK Civil Service in the 1980s: Dream or Reality?", in: J. Pierre (ed.). Bureaucracy in the Modern State. Aldershot: Edward Elgar, 92-117. — (1996). "Control over Bureaucracy. Cultural Theory and Institutional Variety". Journal of Public Policy 15/3, 207-30. — (1998a). The Art of the State. Oxford: Oxford University Press. — (1998b). "Individualized Contracts for Top Public Servants: Copying Business, PathDependent Political Re-engineering - or Trobriand Cricket". Governance 11/4: 44362.

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10*

Administrative Reform Programmes and Institutional Response in Norwegian Central Government By Per Laegreid and Paul G. Roness

I. An Institutional Perspective on Norwegian Administrative Reforms In this chapter we will examine the development of reform measures and reform programmes initiated in the administration of the Norwegian state since the early 1980s, and consider the various interpretations of this development.1 We will focus particularly on the aspect of devolution. Devolution may occur through a formal restructuring of the administrative process, for example by moving administrative units from ministerial level to directorate levels, or through reassigning certain tasks, or it may partly involve changes in procedures in the form of more liberal processes relating to personnel, wages, and budgeting. In the period under consideration, there has been an "institutionalisation" of administrative policy through the establishment and expansion of certain administrative units. This has been accompanied by the publication of a number of related central policy documents. In 1986, an Administrative Policy Division was established within the Ministry of Consumer Affairs and Government Administration, and a separate Ministry of Government Administration was formed in 1993.2 This ministry has been responsible for the formulation of wage and personnel policy and organisational structure, while budget and finance policy has been the responsibility of the Ministry of Finance. In addition, important administrative policy matters have also been the responsibility of the Ministry of Local Government, the Directorate of Public Management, and various other state offices and agencies. 1 This chapter builds primarily upon political science research at the LOS-Center (see for example Lœgreid 1997, Roness 1996). In addition to our own studies, we draw largely upon the works of Johan P. Olsen. We wish to thank Sandra Halverson, John Taylor, Joachim Jens Hesse and other participants of the conference on "Paradoxes in Public Sector Reform" for help and comments. 2 From 1989-1992, this Ministry also included labour affairs, and will do so again as of 1998.

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Reforms and adaptation to new conditions are not new phenomena in the administration of the Norwegian state. What is new, however, is that starting early in the 1980s, the field of administration emerged as an independent policy area with its own vocabulary and institutions, in which reform initiatives were taken up through a universal programme. We might expect that features of this institutionalisation process would be of consequence for the changes introduced. The central administrative policy documents include the modernisation programme of the Willoch government (1986), the renewal programme of the Brundtland government (1987), a White Paper on administrative and personnel policy (1992), and administrative policy memoranda from the Minister responsible for administrative affairs in the Storting (1994 and 1996). In addition, several official reports have been published in which the contents were essentially focused on administrative policy matters; for example the report concerned with improved organisation of the state (NOV 1989: 5). A central question in this regard is how close the association has been between the universal administrative policy statements and the reforms in practice. When discussing the reorganisation of the administrative system, it is important to distinguish between reform and change. By reform we mean the active and conscious attempts to change the organisational form, processes, procedures or personnel in administration. Based on this definition, we can imagine situations where reforms do not result in change, or situations where changes occur that are not the result of reform (Brunsson! Olsen 1993a). In this chapter, we will not generally be concerned with changes that are not the result of reform. We shall concentrate mainly on how reform measures can be interpreted, and whether or not they result in the changes intended. The conditions for practicing a pro-active administrative policy are that alternative forms of organisation are not be found, that such alternatives have different effects, that leaders may freely select the desired alternatives, and that specific standards are laid down for evaluating the success of failure of the reform measures. These assumptions provide the point of departure for this chapter. We will start out by describing the institutional perspective which forms the basis for analysing the administrative reforms. 3 An institutional perspective implies that over time organisations will develop an "institutional profile", comprised of those roles, regulations, routines, traditions and standardised practices which are the common feature of institutions. We expect that these characteristics will provide constraints on how the administration reacts to social changes and to politically motivated reform initiatives.

3 We refer specifically to Brunsson! Olsen (1993b), Lœgreid/Pedersen March! Olsen (1989, 1995), and Olsen (1991, 1992).

(1994, 1996),

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Thus, in order to understand reforms and changes in the administrative system, we will be concerned with the relations between the intentions behind the reforms, institutional constraints and changes in the society. The initial assumption is that institutional changes are not solely the result of political declaration and initiative; nor are they a necessary response to changes in the society. An institutional perspective would question that changes in administrative structures and procedures are a prompt and necessary acclimation to changing values, interests and resources in society, as well as being an immediate and straightforward response to political signals. The relation between administrative changes, resources and interests within environment, on the one hand, and political programmes, on the other, is less automatic, recurrent and explicit. The environment adapts to the institutions at the same time as these institutions adjust to the environment. Furthermore, institutional changes are more often a question of putting into practice what is socially acceptable or political possible, rather than undertaking what may be the best solution from a technical or professional point of view. The influence of the environment and strategic actions on structures, processes and activities will be dependent upon those routines and practices that already exist within the organisation. Over time, organisations will establish a set of standard interpretations of what may be considered vital problems and appropriate solutions. Well-established institutions may, nevertheless, employ a temporary and imperfect order. Institutions have two faces. On the one hand, they have a considerable capacity for action, while on the other, there are clear limits as to what this capacity may be used for. In many instances, such institutional limitations present a buffer in attempts at administrative reform. An institutional perspective focuses on the organisational framework within which administrative policy is formulated and practiced. Emphasis is placed on how, at a given point in time, this organisational framework enables certain actions to take place, while others remain more problematic, and also on how, over time, the framework may be changed as a result of political initiative. Based on this perspective, we would expect that institutional arrangements structure, influence and maintain an administrative policy. Institutions may influence administrative policy, but they do not determine the policy in precise terms. The actors are not constantly aware of what must be done, and even when they are, they do not always have the ability to do it. The chances for a planned design are restricted, though not to such a degree that the political actors are rendered powerless. We will focus on four explanatory factors. 4 First, how close is the normative association between the reform programme and state institutions ? Established

4

These factors were inspired by Olsen (1991).

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traditions, regulations, routines, programmes and organisational cultures result in a slower rate of adjustment than might be expected on the basis of an instrumental approach and/or ideas of automatic adjustment to the environment. We would expect that reform measures which correspond to the particular characteristics of the institution would be more easily put into practice than those conflicting with the traditional organisational culture. Second, what is the relationship between the reform programme and normative changes in society ? We would expect that reform measures which correspond to current doctrines in society on "good governance" will be more easily accepted than measures which are at variance with contemporary doctrines. The more the recognition of a problem and the proposed solutions in a reform programme correspond to what applies to those organisations considered to be well managed and a model as such, the easier it will be for the reform programme to acquire legitimacy and support. Third, to what extent are the intentions behind the reforms clear and unambiguous ? From an instrumental rational approach, one would aim at consistency of objectives. The idea is that there is a greater chance that the reformers will attain success where their intentions are focused and well formulated, and where their objectives are clear, unambiguous and non-conflicting. But this requirement is not always easy to fulfil in a multi-functional state system where activities must take account of values and considerations which are partly in conflict. One way in which this dilemma may be resolved is to permit a looser association between divergent objectives, and between objectives and practice. This would enable a range of interpretations regarding both intentions, achievements and means. Thus, unclear and ambiguous reforms are more easily put into practice, as they provide the opportunity for diverse interpretations. As a consequence, reformers may make a conscious choke to maintain many and ambiguous objectives in the reform process. What is unclear is intentionally so, precisely because this provides room for manoeuvring for actors and groups who may have partly conflicting interests. Fourth, we are interested in how reform activities are organised. Both the organisation of the reform process itself and the authority, capacity, ability, and attention of those behind the reforms will influence the results of the process. It will be of significance whether the reforms are controlled from the top or are the result of local initiative, whether they are designed as a comprehensive overhaul, or are experimental and provisional. The same applies to the various actors, how they plan their time-use and focus on diverse matters, the degree to which they are willing to devote their energies to administrative policy matters and how motivated and persevering they are. Comprehensive reforms require considerable organisational capability which can stabilise the process and take objections and opposition into account. If the ambitions of the reform do not re-

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fleet the design of the reform process, then it will be difficult to realise the objectives. This is also associated with the fact that major reforms have a tendency to attract a larger opposition. I f the reform process is not subjected to organisational control ensuring that its progress is not diverted in the short term, then a major reform might well degenerate into a series of disorderly processes, and ultimately be derailed or even rejected. It is often claimed that there is a close match between idea and action. From an institutional perspective, however, we cannot take this for granted. In situations where there is no normative association between the reform actions and the institutional identity, the association between such political administrative ideas and policy initiatives, on the one hand, and practical adjustment, on the other, may be loose, as may also be the case between the major general policy document and the sector-oriented and agency-specific reform processes. A loose association between ideas and practices will also more easily arise in situations where the traditional hierarchical methods of management, such as instructions, orders, directives, commands, and binding impositions, are replaced with more flexible and pedagogical management methods, such as advice, assistance, support, instruction, training and consultancy services. In this chapter we will argue that there has been a certain amount of "debureaucratisation" within the Norwegian central government, to the extent that the classical Weberian hierarchical form of administration has been weakened, resulting in increased complexity and freedom for local practices. The various state activities are no longer fully organised along a hierarchical chain emanating from a single centre of authority, but are incorporated into a network with strong internal cooperation. The effects of devolution have been increased complexity in central government, and an increasing number of loose associations of partly autonomous organisations with individual capacity, competence and authoritative bases for their very diverse functions. One particular question may be raised, whether Norwegian administrative policy corresponds to the dominant doctrines within the OECD, and thus reflects global trends in administrative policy developments. Such a globalisation hypothesis must be considered in the light of whether the Norwegian reform programmes have been affected by administrative traditions, administrative culture and historic associations engrained in the Norwegian welfare state. A central question is to what degree the reform plans and changes which have occurred from the early 1980s onwards in Norway represent continuity or discontinuity relative to previous periods following World War II. We will look at the degree to which the visions, interpretation of problems and action programmes represent a new direction in administrative policy.

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On the basis of an institutional perspective, our account of Norwegian reform programmes in the 1980s and 1990s is divided into four parts. First, we will consider the perceptions and interpretations of the specific problems which formed the foundation of the reform programme. What was the ideological basis for this policy formulation? To what extent did the views of the various political parties diverge? What were the origins of these visions and problems? To what extent do they reflect international problems of a similar nature, and to what degree did they arise from the individual ministries and agencies? Second, we will be concerned with the organisation of the reform processes, and the solutions and organisational models proposed. Third, we will examine the actual changes in the administration which resulted from these initiatives. To what degree did these specific projects come to fruition? Finally, we examine the role played by the various actors in the adaptation processes which have occurred. To what extent can such changes be associated with a conscious political directive, and how significant are institutional constraints?

I I . The Reform Programmes: Vision and Problem Definition 5 The reform programmes were more a loose collection of on-going reform measures and new reform ideas, than a consistent, coordinated and unified strategic plan for changing the administrative apparatus. Nevertheless, they were characterised by a singular prevailing vision. The essential element in the programme was an emphasis on an efficiency perspective, with importance given to market and management, and less emphasis on democratic principles. The programmes challenged the two Weberian doctrines which had dominated the Norwegian public administration. The first of these doctrines emphasised the special nature of public sector and underlined the differences between it and the private sector. The second doctrine claimed that a collection of general procedural regulations would delimit the bounds within which civil servants could exercise their own judgment. Administrative procedures were to be practised within precise guidelines in order to hinder any untoward exercising of power (Dunleavy!Hood 1994). The reform programmes argued that the organisational forms in the public sector should approximate those of the private sector, and that the administrative leadership should have greater latitude in determining the most effective functioning of its own area of responsibility. This implies that doctrines of administration such as the rule of law and a link in a parliamentary chain of governance were weakened in favour of the "concern model" and "managerial leadership". The basic democratic dilemma, of

5

We draw upon the works of Olsen (1988, 1991, 1992, 1993, 1996).

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how to ensure that bureaucrats have sufficient latitude to practice effective administration, within limits that secure their control, remained an unsolved problem. The rhetoric in the modernisation and renewal programmes of 1986-87 was inspired by international trends in administrative policy. The reform programmes promised better service, better utilisation of resources, higher productivity, higher attainment of goals, improved quality, better working conditions for employees, improved political control, and extended user participation. In general, the reform programmes were largely built on apolitical rhetoric of improved quality and efficiency. On the other hand, such programme manifestations lacked an explicit discussion of the extent to which the various objectives are consistent. The market-and-management vision which characterised the programme took little issue with the normative basis of the public sector. "Management" refers to a leadership from which the objectives are determined by the user or the elected officials, and the functions of the administrative leaders are to achieve these objectives using the least possible resources. There was little emphasis on values which are basic to the development and maintenance of political community. Slogans such as "it is the result that counts" re-introduced the classical division between politics and administration, and concealed the fact that people frequently consider processes, and not merely objectives or results, important. Public administration must often take consideration of many and opposing factors, and this limits the extent to which the elected representatives can define unambiguous objectives. Such factors received scant attention in the reform programmes. One main feature of the reform programmes is that the assumptions which form the basis of the market-and-management model were not defined or tested and were largely taken for granted. It is, nevertheless, important to bear in mind that the formula for more market-and-management is a hypothesis on the relationship between organisation forms and the achievement of satisfactory results, which is hardly supported by systematic data. The reform programmes showed few indications of the broad set of values and concerns prevailing in Norway after World War II. Consideration of the rule of law, the principle of public access to official records, and procedural security, control by the elected representatives over administration, professional expertise, participation of the employees and representation of interested parties in society, were to some extent overlooked. Nevertheless, tension arose between the international neo-liberal trend and the Norwegian administrative tradition, and successive governments found it difficult to express clear intentions and criteria for success in the reorganisation of public administration.

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There are important distinctions between the Norwegian reform programmes and the main trends in the international administrative policy reform movement. Firstly, visions of the decline of the public sector through privatisation scarcely featured in the Norwegian reform programmes, and a cautious step in that direction by the Willoch (Conservative) government of 1986 was rapidly put aside by the Brundtland (Labour) government a year later. The Norwegian state has historically been a legitimate and effective problem-solver, and this implied that demands for a thorough overhaul of the public sector were not as strong in Norway as in many other countries. The general consensus in Norway has been that the country needs a strong planned state with a large public sector and appropriate means of achieving "the common good". There is a long tradition in Norway of corporative arrangements being regarded as an extension of democracy and as a stabilising element in public policy formulation. The international criticism, i.e. that growth in powerful organisations with specific interests has undermined control by politicians to the advantage of the common good, did not receive particular support in Norway. One special characteristic of the administrative policy interpretation of the tasks to be confronted was the massive demand of state agencies for increased local autonomy and greater flexibility. This included both demands for a liberalisation of the general regulations within the salary and budget systems, and demands for changes in the organisational structure. In 1987, about half of the leaders and the employees' representatives in state agencies expressed a need for a more liberal approach to the general regulations. A main point of contention was that demands for equal opportunities, job security and budget control had been granted far greater priority than demands for local flexibility, efficiency and productivity in the individual state agencies.6 In this respect, international signals and local demands were similarly inclined in their press for devolution, more so than it had been the case up to the end of the 1970s. Even though the vision of market-and-management had been presented in administrative policy documents, it was never an exclusive requirement. Indeed, over time a change in emphasis could be observed in values and interests. The relatively strong market-and-management element in the modernisation and renewal programmes of 1986-87 was modified in later policy documents. The first indication of this development was the report on an improved organisation of the state (NOU 1989: 5), which considered the wide range of tasks, objectives and management regulations in the public sector. This was taken further in a White Paper on administrative and personnel policy in the state (St. meld. nr.

6 This information is based on a survey of leaders and employees' representatives in about 250 state agencies (see Helgesen/ Lœgreid 1988, Helgesen/ Lœgreid/ Mailand 1988,

Lœgreid 1991, NOU 1989: 5).

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35, 1991-92) which represented a change in emphasis from considerations of efficiency to a broader perspective, based on the principle that administration shall preserve common values associated with the nation's history and traditions. Nevertheless, a main feature of the reform process has been that activities have been disengaged from the fact that it is a democratic system which has to be reformed. Management problems have mainly been viewed as a question of cost efficiency, while democratic efficiency, i.e. the opportunity of citizens to determine their own living conditions, has been largely absent. In a discussion of visions for reform tasks in public administration it is, in our opinion, not advantageous to examine the one basic principle in terms of the other, i.e. devolution vs. central control. In practice, one is faced with a multifunctional state administration which must consider diverse demands and concerns, formulated on the basis of different principles which in themselves may be contrary. Today, we have a mixed administration, characterised by organisational pluralism, with many hybrid solutions which attempt to manage dilemmas, tensions and inconsistent demands. These visions and interpretations of the problems hardly correspond to the instrumental requirement that intentions should be clear, consistent and stable. They are ambiguous and partly inconsistent, and emphasis shifts between various aspects over time. This results in a looser association between objectives and in varied interpretations of what is essentially desired and of the extent to which the visions have been realised and problem definitions met.

I I I . Means and Measures7 With regard to the choice of instruments and measures for achieving these visions, we will distinguish between two aspects. First, in what manner are these visions to be put into practice? How were the reform processes organised, in order to realise these visions? Were efforts directed towards a complete overhaul, stage-by-stage adjustment, or experimental activities? Second, which solutions and organisation models were chosen? A central question is how the balance between central control and local autonomy, and between standard and flexible approaches is presented in the new administrative policy.

7 The means and measures which are of current interest have been broadly described in several studies including Lœgreid (1993a), Lœgreid/Rolland (1994), Olsen (1991, 1993, 1996) and Roness (1992, 1995). In addition, Groholt (1995) provides a summary of central administrative policy means and measures in this period. The references to general trends in this aspect of administrative policy are largely based on these works.

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1. Organisation of the Reform Processes In the mid-1980s, the aim of creating a more dynamic administrative policy resulted in the incorporation of administrative policy and reform measures into a single programme. The political and administrative leadership in the Ministry of Consumer Affairs and Government Administration played a central role in this task, while other actors were more loosely involved in the formulation of the policy document. Generally, public committees have become less common, and policy formulation has been taken up in internal groups in which ministerial employees have become the central actors. With regard to the organisation of the reform process, it is important to distinguish between central administrative units which were responsible for the formulation of the policy documents, and the individual ministries and state agencies which had the responsibility for carrying out the reforms. The reform programmes were formulated by the superior administrative policy agencies at the central level. But those initiatives undertaken were more advisory in nature; they were not binding directives. Of more than 70 measures in the renewal programme, only one functioned as a binding instruction, namely the demand that all state agencies should formulate an activity plan by the end of 1990. The specific responsibility for following up this directive was transferred to the individual state agencies, which, in many instances, had built up their own capacity and competence in reform activity. This might be regarded as an expression of authoritative dissolution in an area where the central powers were ineffectual in controlling the process via instructions, directives, order and hierarchical authority. The central administrative policy agencies did not have the means to ensure an authoritative follow-up. Their role was reduced to that of assistance, stimulation and motivation, rather than instruction and control of the change process. Further, the responsibility for organisational design was also transferred to the individual state agencies. Even so, whether there was anything new in this process compared to previous practice, is still open for debate. Thus, since the 1980s, changes have occurred in the manner by which administrative policy has been initiated and followed up. Initially, several campaigns were launched. Subsequently, there were comprehensive programmes covering the entire field of administrative policy. In recent years, it has been more normal to formulate guidelines for those solutions that the individual ministries and their subordinate agencies are to use within a more restricted field. This applies both for matters in which these units have greater freedom, such as salary and budgeting questions, and for matters in which they were previously able to make proposals on change themselves, for example reorganisation of the formal structure. The reform programmes argued that administrative policy should be regarded as an experiment in achieving better information and performance. The

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reform processes were to be organised such that they provided the basis for a systematic evaluation of both success and failure. Evaluation is perhaps the most modern and contemporary conception in current administrative reform, but at the same time we are faced with an evaluation paradox in the ongoing restructuring. There is a gap between the emphasis on the need for evaluation in the general reform programmes and the policy documents, on the one hand, and the failure to conduct any real evaluation of the programmes themselves, on the other. One example of this gap is the white paper on administrative and personnel policy in which much was written on the importance of evaluation, while at the same time no attempt was made to evaluate those reforms which had been in place for ten years (St. meld. nr. 35, 1991-92). The learning which had taken place had been more internal and management-oriented, rather than directed towards political learning.

2. Solutions and Models of Organisation The solutions which were advanced were largely associated with the need for a reorganisation of the public sector, in order to improve efficiency and service. As a result, the personnel were regarded as "human resources" or "human capital" which the leadership could control through various incentives. Lesser importance was attached to influence through socialisation and social identification. The demands and requirements of the people were to be mediated through price and market mechanisms, rather than through formal representation or regulatory control. The introduction of marketing principles into the public sector was intended to result in more competition and an increased range of choice for the public. The administrative culture was to be transformed through greater attention to a service culture, meaning more emphasis on results rather than on methods, procedures and regulations. Incentive and performance were to be more closely associated. In addition, a modern public administration was to attach importance to delegation, decentralisation and the use of new information technology and electronic data processing to improve flexibility. In Norway, greater attention has been paid to reforming the public sector so that it functions better, rather than the alternative of privatisation. The aim has been that the boundary between the public and private sectors should be subject to only minor changes, and that, on the other hand, considerable internal changes in the public sector should occur through various devolution measures. Even so, the Conservative and Labour parties differ in their views regarding the extent of the changes necessary and the solutions which may be considered. The Conservatives desire a greater degree of devolution and broader changes than does the members of the Labour party. However, the degree of difference between the parties is negligible, as can be illustrated by the fact that when the

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Syse (Conservative/Centre) government succeeded the Brundtland (Labour) government in 1989, they continued to build upon the renewal programme approved by the Labour party in 1987. The attempts to implement administrative policy visions and interpretations have involved changes in the formal organisational structure, alterations to the state budget system, the introduction of activity planning, and reforms in the system of state salaries. The reform programme also aimed to coordinate the diverse types of measures. Compared with the previous situation, personnel policy and salary were more closely bound to a general administrative policy and to budget reforms, and thus became a means in the reorganisation of the state. The aim was also that the comprehensive reform programmes should be closely integrated with reform measures specific to individual sectors and agencies. The main strategy from the mid-1980s was to give the state agencies greater freedom and extended authority in the allocation of resources. At the same time, these agencies were expected to demonstrate improved internal control. The underlying idea was that a greater degree of devolution should go hand in hand with the development of an improved control system by the relevant ministry and by the Office of the Auditor General. The solutions which were launched with respect to internal organisation of the central government agencies were not particularly structural in character. In contrast to previous reform measures, which were largely concerned with the relationship between ministry and directorate, and which aimed at reducing the work load of the ministry in routine matters, by building up and strengthening the directorate level, attention was now much more focused on changes in the form of association and aspects of procedure. The committee appointed to study the question of improved organisation of the state (NOU 1989: 5) concluded that the existing forms of association were satisfactory. Establishment of new foundations was not considered advisable and the focus was on conditions which could apply in organising agencies as administrative units or as a state-owned enterprise. Nevertheless, the opportunity arose a couple of years later, when the government proposed a new form of association for state enterprises through a new law (Ot. prp. nr. 32, 1990-91), which would permit greater freedom in business matters than would be the case for an administrative agency. The main model behind the procedural reforms was a management-byobjectives concept based on the principle that subsidiary bodies should be controlled through contractual arrangements which would give greater access to resources when results were satisfactory, and, similarly, reduced access when the desired results were not achieved. The concept was based on the fact that a distinction can be made between a politically dominated goal formulation process and a technical/administrative implementation process involving considerable

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freedom for the agency in question to select appropriate means. This technique was initially based on the requirement that the objectives be precise, concrete, specific and hierarchically structured with primary and secondary objectives. They were to be operational, clear, consistent and stable, such that they could function as concrete and binding criteria for evaluation. Second, more emphasis was to be given to the measurement of such results and in reporting information relating to the functions of the public agencies. Improved methods for monitoring results and for measuring efficiency were needed. These methods were to be attained through the development of a programme by which a systematic evaluation of goal achievement was established. This programme included quantitative results indicators and increased emphasis on the evaluation of the functioning of the public agencies. Third, information on the results achieved was of consequence both for resources and the organisation of these agencies. When the management-by-objectives technique was launched at the end of the 1980s, there was considerable emphasis on the first element associated with the formulation of objectives, while later modifications have focussed more on the results aspect. This shift was expressed in the concept's being redesignated from Management-by-objectives to Management-by-results. The Management-by-objectives concept was put into practice through three reform measures. The first, budget reforms 8, was introduced in 1986. The aim of these reforms was to have a state budget system which was much more aimed at increasing productivity. Increased emphasis was to be given to objective management and framework management with greater freedom in the delegation of tasks and the allocation of the budget at the local level, within the given budgetary limits. The price for increased devolution was that the agencies were required to pay closer attention to the systematic reporting of results and evaluation. This development has been furthered through new economy regulations in the state passed in 1995 which largely build on the management-by-results technique. Second, activity planning required that all state agencies were to compile a yearly operations plan, covering objectives and the allocation of resources to reach these goals. A central feature of this arrangement was the development of a hierarchy of primary and secondary objectives. At the same time, considerable priority was given to following up results, through requirements concerning registration, systématisation and analysis of cost information in the agencies. A certain amount of restructuring has taken place since 1994 in state activity planning in that through a closer connection to budgeting procedures, the measurement of

8 This section is particularly based on Mailand (1991), Lœgreid (1993a) and Stokke (1993). 9 This section is particularly based on Christensen (1991) and Lœgreid ( 1993a).

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results has come more into focus. This provides for a closer association of activity planning to the specific tasks, objectives and special characteristics of the individual state agencies. The third set of reforms were salary reforms. 10 In the early 1990s an attempt was made at a comprehensive revision of the salary system in the state in accordance with the new principles of objectives and results management. The main objectives with these salary-policy reforms were a better recruitment and increased efficiency within the individual state agencies, through restructuring in the direction of less centralised control, less standardisation and fewer collective arrangements. On the basis of a report by a committee representing the interested parties, the new salary system was introduced in 1991. The new system contained few radical changes and was largely seen as providing a balance between, on the one hand, the desire for greater productivity orientation, individualism, market-oriented flexibility and decentralisation, and, on the other hand, realistic ends, given the established power structure and salary policy norms. The same generally applied to a new salary system for some 450 top leaders who were removed from the collective salary negotiations and general salary scales. This review has indicated that the organisation of the reform process hardly corresponds to the requirements of a stable routine aimed at furthering the reform process and countering opposition to comprehensive reforms. The very ambitious reform aspirations have scarcely been reflected in the manner, in which the reform operations have been organised. Questions may be raised, as to the extent to which the reform programme actually represented an entirely new approach. This is so for budget reforms and the restructuring in salary and personnel fields, where the modernisation and renewal programmes were essentially linked to changes in methods which were already current practice. The reform programmes concentrated initially on the manner in which public administration could be better equipped to choose the appropriate means, methods and techniques. New management techniques were presented as a supplement to existing techniques and not as an alternative. The positive aspects of management-by-objectives were emphasised in comparison with the established traditional control through regulation and rules. The point was to not only think of regulations, but also of results. The outcome is a compromise between classical bureaucratic methods of control by regulation, and modern forms of management-by-objective, i.e. "result-oriented rule steering" (Naschold 1996: 66).

10 This section is particularly based on Helgesen/ Lœgreid (1995). Lœgreid (1993, 1994, 1995a, 1996), Lœgreid/ Mjor ( 1992) and Mjor ( 1994).

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This development leads to what we can refer to as the administrative policy paradox . On the one hand, the new administrative political rhetoric is simple and unidimensional. Commencing with a planning ideal, a concept for management-by-objectives is formulated on the basis of the assumption that goals may be aggregated to form a new unified utility function, or ranked in a hierarchy with primary and secondary goals. This concept is put into practice employing stable, consistent and operational objectives, with the main focus on cost efficiency. On the other hand, the administrative policy development has proceeded in the opposite direction, characterised by increasing complexity. In this development, an attempt is made to achieve a simultaneous balance between a growing number of increasingly contrasting goals and objectives. This discussion shows, moreover, that one may easily encounter diverse dilemmas when visions and interpretations of problems are to be converted into concrete actions and measures. Initiatives which initially may correspond to thoughts about instrumental measures can be seen to contain internal tensions, as was illustrated in the evaluation paradox and the administrative policy paradox. New administrative political measures are frequently seen in the light of established routines and action programmes, so that any apparent conflict between particular institutional practices and new measures is minimised. As a result, the link between administrative policy programme formulation and the specific reform measures is not always staunch or resolute. A considerable element of more susceptible pedagogical measures supports this development.

IV. Actual Changes in Organisational Forms 11 It is important to distinguish between a programme of action, such as formulated in the administrative policy document, and concrete measures and the actual changes which are being undertaken. In this section we will concentrate upon the element of devolution in administration, and account for the development which proceeded from standardisation and central control to greater flexibility and local autonomy. Those changes which have occurred in public administration during the last 15 years or so should not be underestimated. Even so, the changes have been more in the line of "tidying up" than in drastically changing the system. In this section, we raise the question of the degree to which the proposed measures associated with internal and external reorganisation, activity planning, budget reforms and salary reforms have been put into practice. 11

In several of the following sections, we utilise information from a questionnaire survey among employees in executive office positions and above in ministries and directorates in 1996 (see Christensen/ Egeberg 1997, Christensen/ Lœgreid 1997, 1998). u

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1. Implementation of Specific Solutions and Models of Organisation Internal reorganisation and specialisation. Modern ministries and administrative agencies are multidimensional. Moreover, they are divided into a number of fairly permanent sub-areas, each with its own particular organisational culture, routines and action programmes. An increasing differentiation has emerged, with clear boundaries between the various institutional spheres. This trend is observable both in the formal organisational structure and in the composition of the staff. However, this reorganisation is weakly anchored in the comprehensive policy documents for the 1980s and 1990s. During the whole of the growth period after 1945, a form of problem-solving was undertaken through the establishment of new administrative units (LœgreidY Roness 1983). As soon as a problem in society had been accepted as the responsibility of the public sector, a permanent administrative unit was established for furthering problem-solving within that area. The result is an administrative system which can be characterised as a "coral reef', comprised of layer upon layer of organisations established at various points in time, without any collective overall plan. However, over time it has become more uncommon to use this "new construction" strategy, and increasing reference has been made to the renewal of existing organisations. The organisational trend towards specialisation has both a horizontal and a vertical dimension (Christensen/ Egeberg 1997). Horizontal specialisation refers to the number of units at a particular level. For example, compared with previous periods, there have been extensive changes in the way that the ministries have been divided up. The number of ministries is the same in 1996 as it was in 1980, but, in the period after 1980, there have been new establishments, terminations, mergers, divisions and expansions. The result is 12 new ministries and an equal number of dismantled ones. This is more than double the number of corresponding developments in the period from 1947 to 1980, when only seven new ministries were established and three were closed. The same development has occurred at the divisional level, where the number of units increased from 48 in 1947 to 87 in 1980, increasing to just 89 in 1996. Vertical specialisation includes changes in the relationship between ministry and directorate. From the mid-1950s throughout the 1970s, many new independent directorates were established, and tasks and functions of other units were transferred from the ministry to the directorate. After 1980, however, it is difficult to observe any clear pattern. There are examples of both detachment of directorates from ministries (for example, the Directorate of Health), incorporation of a directorate into a ministry (Directorate for Development Cooperation), failed attempts at segregation (The Directorate of Police), and of initiatives in the direction of segregation which have resulted in an even stronger association with the political leadership (Directorate of Personnel).

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We have also witnessed clear trends towards increased specialisation, reflected in the composition of staff and job structure. 12 The job structure in the ministries has become more flexible, partly through the establishment of new levels, such as Assistant Director and Deputy Assistant Director, and not least through a strong growth in the number of advisory positions. The mobility pattern in the ministries until the 1970s remained characterised by a career structure in which staff entered the bottom rung of a closed career ladder at a young age and proceeded in stages through a life-time career within the same ministry. This no longer applies to the same degree: there is increased mobility, not least between the various sectors of state administration. Whereas in 1976, 27 percent had plans of moving on from their current ministry, the corresponding percentage in 1996 was 43 percent. Specialisation has also become manifest as, for example, ministries are no longer dominated by male legal experts. Women have made strong inroads into the job structure and a marked variation in the professional structure has also occurred, in which the number of legal experts has been reduced in relative terms during the last twenty years. The proportion of female executive officers and higher posts in the ministries has increased from 15 percent in 1976 to 43 percent in 1996, while the proportion of legal experts has declined from 38 percent to 22 percent during the same period. External reorganisation. Starting in the 1980s, questions have been raised concerning a number of state agencies and their forms of association. A couple of administrative units were reorganised as foundations, while others were transformed into state-owned limited companies. Between 1989 and 1994, such changes were carried out for 20 agencies.13 The degree of privatisation and the rise of foundations has been small: three state-owned limited companies were privatised, and one company was incorporated into an existing foundation. Eight state-owned limited companies were established, essentially through the conversion of administrative companies. The newly introduced form of association, permitting greater freedom in business matters, has been used in four instances, mostly through the transformation of administrative agencies. Some of the agencies whose status was changed were quite large, e.g. the national telephone company, the Civil Aviation Administration and State Power Systems. The impression of a complex organisational pattern in state administration was furthered by the conversion of the Post Office and Norwegian State Railways to independent companies through special legislation in 1996.

12

Information from 1976 is based upon a questionnaire among civil servants in the ministries in 1976 (see Lœgreid! Olsen 1978, Lœgreid 1995b). 13 The data is based on a survey from the Directorate of Public Management on the basis of information given in parliamentary bills 1989-1994.

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The main direction of changes in the form of association which have occurred in the last ten years is quite clear. Changes are oriented towards forms of organisation which give greater economic manoeuvrability and less political control. There is no indication of a reorganisation of the boundary between central government and other state activity which has gone in the other direction during the last ten years. Budget reforms. 14 In practice, it has appeared easier to implement the technical elements in the budget reforms than those elements concerned with goal formulation and reporting results. Following up results between the state agencies and the superior level has hardly functioned as expected in many sectors. This is particularly true between the state administration and the Parliament. Even though an improved system of reporting back to the Parliament was a central element of the budget reforms, it has been difficult to put this system into practice in a satisfactory manner (Colbjornsen 1995). The technical changes in budget routines were aimed at providing better information on goals and results achieved. These changes have been formally introduced, but result reporting has been limited in practice. One might question whether the result part of the budget reform has led to any real improvement in efficiency and resource utilisation. On the other hand, the budget reform has been successful in permitting greater flexibility and autonomy for the individual state agencies. This can be associated with the fact that the more ambiguous and conflict-ridden aspects of budget reform are more difficult to put into practice in the way in which the reformers had envisaged. Under such conditions, the particular characteristics of the separate sectors and state agencies will influence the manner in which the reform is put into practice. Nevertheless, a survey among the employees in central government in 1996 shows that the budget reforms have been of consequence for the daily functions in the ministries. Among the respondents, 27 percent of employees in middle and higher positions considered that increased autonomy and flexibility in budget matters have been of considerable significance in their own particular areas. The greatest challenges for the introduction of a management-by-results system in budgeting lie in the relationship between a political logic which aims at exposing conflicts and differences and finding appropriate political solutions on the one hand, and, on the other, an administrative logic according to which the best technical solution may be left to professional experts. One main aspect of budgetary reform is that it has occurred on a basis of economic concepts and conceptual frameworks. Little attention has been given to how these reforms 14 See Note 8 regarding actual progress and Note 11 on the survey of employees in central government in 1996.

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have impacted power and influence among various groups and administrative levels. Activity planning. 15 Of those surveyed, 80 percent of state agencies had formulated their first activity plan by the end of 1990. In 1996, only four percent of the employees in central government stated that activity planning was not relevant to their particular field, while 45 percent meant that it was of considerable significance. The view of activity planning was, nevertheless, ambiguous in the ministries. Those wishing to attach lesser importance to activity planning were virtually as many in number as those wishing to give it high priority. A closer analysis of this reform shows that the process of introducing activity planning in education and research institutions can partly be explained by a concept of myth, in which activity planning is regarded as satisfactory, not first and foremost on the basis of experience and effect, but on the basis of belief in the concept and on ideological dominance. Nevertheless, there are differences between the various types of organisation. In small and homogenous agencies, where tasks are precisely defined and easy to quantify, there is less of a problem with this concept than in larger, more loosely affiliated, agencies where the tasks are more general and correspondingly more difficult to quantify. A general finding is that many agencies in the first year were more concerned with producing a plan document than in pursuing problem-solving activities. A large part of the activity planning which had taken place contained a mechanical and conceptual element. Activity planning was first and foremost used as an internal control mechanism in the individual agency. It had a relatively loose association both upwards towards the political leadership, and outwards towards users and clients. In many instances, it appeared difficult for politicians to act in accordance with management-by-objective principles, that is, to think principally in terms of long-term planning and to stipulate overall goals while delegating individual matters and the choice of means to the administration. There are many examples where the politicians became involved in a specific matter, such as individual immigration or health cases. On the other hand, goal formulation was frequently undertaken by higher civil servants and not by the politicians. Activity plans have an unclear political status. They are not presented to the Parliament and do not form part of any party's political programme. When goal formulation and result reporting are largely left to the agencies themselves, we are confronted with a form of self-judgement which may have unfortunate implications from a democratic viewpoint.

15

See Note 9 regarding actual progress and Note 11 on the survey among employees in central government in 1996.

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Salary reforms. 16 Even though the new salary system presented a possibility for a certain decentralisation and greater local flexibility, there was both caution and reluctance in putting the new system into practice. There is still a considerable element of centralisation and standardisation in salary determination, in accordance with established traditions and existing power relationships. In 1996, only 19 percent of the employees in central government stated that increased autonomy and flexibility in matters of salary were of considerable significance for them. The central parties have been cautious in delegating financial means to local negotiations. In the first year, only 0.3 percent of the salary budget was used in this way. The increase in the number of places, where local negotiations took place was also moderate. In 1994, the total was 108 compared to 90 prior to the revision in 1990. Salary agreements between 1990 and 1994 were also characterised by central authority control, in spite of signals for extended local negotiations. At the same time, the parties have been restrained in making use of the new levels of freedom they have received. A survey in 1991 revealed that only four percent of 155 state agencies had a local salary policy as intended by the central authorities. The availability of financial means in local salary negotiations has varied broadly from one agency to another, at the same as central authorities have advised caution in the employment of local budgetary means for salaries. Tradition, established norms and power relationships have resulted in slow adjustment in utilisation of the broader space now available for local salary negotiations. There is a dynamic interplay between local and central negotiations in the way that one negotiating arrangement weakens the intentions of the other. At the same time, the central parties appear to over-compensate, in order to offset the expected effects of the subsequent local agreement, while local agreements include a compensation, to counteract those differentials which have arisen during central negotiations. In summary, a greater element of status quo remained than any of the actors had envisaged. The leadership salary system was formulated as an elaborate, centralised and formal practice of the system. Proposals for contract and salary conditions had to be sent to the Ministry of Government Administration, to be considered by a committee of central top civil servants, prior to being presented to the Minister for final approval. A moderate line has been followed with a very controlled salary development for those incorporated into the leadership salary system. Salary increases in both the private sector, state enterprises and within the collective agreement in the period 1991-93 were higher than those in the leader16 See Note 10 on actual progress and Note 11 on the survey of civil servants in central government in 1996.

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ship system, which is an indication that the more closely salary determination is coupled to the political leadership, the smaller the increases approved. The intention of reducing the salary differentials between leaders in the public and private sectors has thus not been fulfilled. In practice, the leadership salary system has largely become a salary scale for leaders similar to that existing in the state 20 to 30 years ago. Indeed, 72 percent of the leaders agreed that in practice the reform was a new salary scale for them. The impression that the system constituted an automatic transfer to a new salary scale for leaders at a somewhat higher level was the consequence of the fact that the arrangement covered all top leaders from Deputy Director upward. The pay-for-performance principle in the reform has not been fulfilled, due to a combination of limited funds, central control, standardisation and result objectives which were difficult to quantify. This part of the leadership salary system was in practice crippled. One consequence of the restrictive practice was that it has become difficult to fulfil the intentions of linking salary directly to results on an individual basis. It is difficult to use the system actively in following up results by rewarding individual performances, while at the same time a restrictive line is followed in the use of individual bonuses. The reform has been formally introduced but the arrangements and degrees of freedom which were incorporated have only been used to a limited extent. There has been more standardisation, collective bargaining, central control and application of salary scales based on position, and less flexibility, individual assessment, market orientation and performance-related salaries than the reform allowed for. The arrangement has become more a collective salary adjustment than an individual-oriented, flexible performance-related salary system.17

2. Overall Assessments In general, the reform processes have resulted in a tendency towards increased differentiation, decentralisation and autonomy, even though the development has not proceeded particularly rapid or been as comprehensive as the reformers had envisaged. Within the devolution process one may observe what may be called the autonomy paradox. Resolutions determined by the central authorities, which were intended to increase flexibility, appear to have resulted in standardised local solutions. In many instances, the opportunity for devolution

17

An evaluation in 1996 resulted in the government concluding that from March 1997 onwards, and within specific centrally determined guidelines, a certain amount of delegation would be granted to individual ministries in the question of pay for top civil servants.

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was only partly utilised. On the one hand, there are more decentralised and autonomous arrangements and agencies; on the other hand, local variations are considerably less than those available under the current guidelines. It is far from certain that the delegation and decentralisation has resulted in increased diversity. Greater autonomy enables a diffusion process just as much as an internal adjustment process. This is related to capacity, competence, motivation and frequently to the scarcity of alternative solutions. In many state agencies there is considerable doubt and uncertainty regarding the authority they possess and what the nature of such authority comprises. The traditional legal categories of alternative forms of association provide opportunity for considerable elasticity in practice, also regarding the interpretation and evaluation of the degree of freedom incorporated in the form of organisation (GrendahUGronlie 1995). The reform processes have stimulated the growth of different networks diametrical to the formal organisational boundaries, partly through the development of inter-organisational collégial bodies such as committees, and study and project groups of various forms. In 1996, 55 percent of ministerial employees were members of inter-ministerial project groups, and 39 percent participated in study and project groups with subordinate agencies. This growing network organisation has weakened the boundaries between the individual organisations, sectors and administrative levels, and this corresponds to the development of organisation theory in the direction of an open perspective in the study of organisations (Scott 1992). But at the same time, the management-by-objectives concept appears to remain as part of a closed view of organisations, where each individual organisation and its performance is to be evaluated more or less as a closed autonomous organisation, whose functions may be precisely delimited, quantified and managed (Jacobsson 1995). Effective management-by-results becomes increasingly more difficult with greater degrees of overlap between the different agencies, and less correspondence between areas of responsibility and action, as is often encountered in public administration. There are a number of common features in the reform measures which have been put into practice in the various areas of administrative policy. Particularly during the last ten years, there has been greater freedom of action for state agencies in salary determination and budget allocation. Management-by-results appears to have become part of the everyday function of administration. In 1996, about 40 percent of the employees in central government at executive officer level or above considered that this type of measure was of considerable significance for their field of interest. Fewer than one-sixth considered that such measures had little or no relevance. Nevertheless, management-by-results has not displaced management-by-rules. Only 22 percent of those asked considered that deregulation or a simplification of the rules had been of large or even fairly large consequence for their tasks, and the proportion of employees who consid-

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ered that there were clear regulations and well-established practices was as least as large in 1996 as ten years before. Among top leaders, the element of the use of rules had, in fact, become larger during the last ten years. Moreover, those parts of the "New Public Management" concept which attached importance to greater devolution in the form of market solutions and contractual arrangements had not made particular inroads in central government. Under ten percent of the employees in 1996, considered that such measures were of large or fairly large importance for their tasks. Processes of differentiation and decentralisation have been proceeding over a longer period, but have been particularly reinforced in the administrative reform programmes of the last 15 years. Even though many comprehensive measures have been carried out on the basis of these reforms, the foundation remains as a set of arrangements which are intended to apply to all governmental agencies. There is, as such, one single salary system, a single set of forms of association, and a single budgetary system for all these agencies. There are also new arrangements incorporating joint decision-making and activity plans which apply to the whole of state administration. There are, in other words, many constraints in the existing universal arrangements and guidelines. Nevertheless, the individual ministries and agencies have greater freedom than ever before to make adjustments within the framework of the universal arrangements. Management-byresults appears to have become a part of the everyday activities of the ministries. Even though greater freedom for the individual agency in matters of salary and personnel policy, and in budget and finance administration, has been coupled with increased use of management-by-results, activity plans remain largely formulated by the agencies themselves, and the results-objectives for top leaders are only generally defined. Furthermore, the degree to which management-byresults in practice is very different from the traditional rule steering, the extent to which it is an incentive system which encourages greater effort and better use of resources, and the extent to which it is a control system in respect of individuals and subordinate agencies all remain unclear. Regarding the procedural aspects of devolution, the introduction of management-by-results techniques has given local agencies greater autonomy, even though these may not have been as strong as previously thought. The liberalisation of the general regulations within the salary system and the budget system have given greater flexibility and provided greater space of action for the individual agency, than was normal within state administration until the end of the 1970s. The system has become less rigid and standardised. In practice, the extent of devolution will depend upon two conditions, first, the extent to which the individual agencies have the capacity, motivation and competence to utilise the degrees of freedom inherent in the new arrangements; and second, the degree to

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which superiors utilise the management-by-objective and management-byresults techniques as control mechanisms in relation to external agencies. Differentiation and decentralisation should be followed up by considering salary policy, personnel policy, and budget and finance management jointly. Such integration has only partly been achieved. It continues to appear that the various systems work independently of each other in the majority of state agencies. Nevertheless, there has been a liberalisation of the regulations within the individual area, while the boundaries between them are more diffuse than before, and the opportunity for a more flexible resource use is greater. This summary has shown that there is a relatively loose connection between the reform measures and the changes which have actually occurred. The reform measures passed so far must acquire substance through practice, and it appears in this respect that in many instances those measures which have been introduced were utilised to an only limited degree. Moreover, changes have also been introduced which cannot be traced back to measures based upon the modernisation or renewal programmes. In other words, we are faced with a situation in which changes have occurred that are not necessarily the result of reforms, and in which reforms do not necessarily result in change. The actual changes are more restricted and bound by established administrative cultures than are those provided for in the reform measures. The ambiguous intentions behind the reforms also imply that, in practice, reforms may take many forms, without being regarded as conflicting with the objectives of the reforms.

V. Design and Institutional Response From an institutional perspective we would expect that the reforms could be traced back to specific actions by various actors, and that their effects would be limited by internal constraints and external forces. In this section, we will examine the degree to which various central actors such as the Cabinet, the Parliament, the civil service and employees' associations have affected the results of the reform processes, and to what degree readjustments in Norwegian state administration have been characterised by Norwegian administrative traditions and prevailing international administrative policy doctrines. The Cabinet 18 has been reluctant to expend extensive resources in administrative reforms. Even though there is a government minister responsible for administrative policy, it cannot be said that this policy area has been a main area of priority for the Cabinet. It has appeared difficult for the Cabinet to remain 18

Based particularly on Lœgreid!Rolland (1994), Olsen (1996) and Roness (1992, 1995). Please refer to these works for a closer study of the effects of the Cabinet.

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concentrated on this policy area for any length of time, and many of the resources required to ensure success in this area of administrative policy are controlled by other organisations. The high ambitions of a comprehensive administrative policy have not been reflected in the specific reform processes. The Parliament 19 has not had a special role either in the overall, general administrative policy. One illustration of this is that the renewal programme was presented to the Parliament as a supplement to a white paper on the economic situation, and the debate on the white paper on administrative and personnel policy was held on the final Tuesday before the Parliament closed, immediately following an all-night budget debate and immediately preceding the annual Christmas lunch! On the other hand, following the initiative of the Parliament, an arrangement was introduced for the provision of information on administrative policy by the Minister. This initiative opened up a new arena for debate on administrative policy in the Parliament. If, on the other hand, proposals for reforms and adjustments in specific state agencies are considered, there are several indications that the Parliament has played a decisive role in the outcome. This is particularly evident in two cases during the early 1990s: plans to disengage the responsibility for police matters from the Ministry of Justice and Police, and a proposal for the reorganisation of the central health administration. In both cases, a parliamentary resolution and signals from the Parliament resulted in less comprehensive changes than both the Cabinet and the civil service had had in mind. The Civil Service. 20 Changes in administrative policy have frequently been initiated internally. To an increasing extent, the civil service has dominated the reform activities. Public employees have displaced politicians as participants in public administration reporting, while at the same time, internal reports in the administration have become increasingly comparable to reports from public committees. Individual, centrally placed, senior civil servants have played important roles as agents in promoting change and in initiating readjustments and reform processes. Even though the central administrative policy units have been expanded and strengthened, they remain politically weak, with relatively low status and problems of authority. Change initiatives have often come from below and have frequently been directed towards a specific ministry or sector. The agency leaders have emerged as strong supporters of devolution, and this attitude has gradually

19

Based largely on Roness (1993a, 1995), to which reference is made for a closer discussion of the influence of the Parliament. 20 Based particularly upon Lœgreid! Rolland ( 1994), Olsen (1996), and Roness (1992, 1995). Please refer to these works for a more detailed discussion of the effects of the civil service.

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been incorporated into the practical reform process. The responsibility for administrative reports has been largely split between the various ministries. In the period between 1972 and 1992, only one out of ten administrative reports in the NOU series (Norwegian Official Reports) came from a ministry which had the overall responsibility for administrative policy. The majority of NOU reports came from other ministries whose interests were sector-based. The Civil Service Employees' Organisations. 21 A main principle of the reform process is dialogue with employee organisations. There are few indications of a direct confrontation between the state and the civil service unions in these negotiations. The speed and extent of the changes largely corresponded to what was acceptable to the organisations, and with the exception of the Federation of Norwegian Professional Associations, the employees' associations have been sceptical towards many devolution measures. On the other hand, there has been a certain development over time among the organisations regarding the attitude towards increased devolution in the state. The Norwegian Union of State Civil Servants, in particular, has played a central role in the development of the administrative policy. Through routine professional and political cooperation between the Norwegian Federation of Trade Unions and the Labour Party, this particular Union has had direct access to the (Labour) government throughout most of its period. The unions also had considerable influence on the extent of the certain changes, particularly within the area of salary policy and specific proposals on changed forms of association for individual agencies. In connection with the reforms of the state salary system in the early 1990s, the limits for what was possible were, in practice, determined by the Norwegian Union of State Civil Servants, which, among other things, resulted in the universal salary scales being retained. On the basis of desires, expressed by the civil servant organisations, the Labour government in 1992 presented a declaration of intent on "change and security", in which employees' rights were specifically included in the salary agreement of 1994. On the other hand, the organisations have had fewer routine rights of participation in the formulation of the more general reform programmes, such as the modernisation and renewal programmes during the 1980s. Generally, the organisational framework for the formulation and practice of administrative policy has become more complex, and the national administrative policy now has several focal points. It does not have its foundation in a single ministry or agency but is associated with several administrative units. These units, for their part, have close connections to various parts of the political lead-

21 Based largely on Jacobsen (1996) and Roness (1993b, 1994). Please refer to these works for a more detailed discussion of the role of the civil service employees' organisations.

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ership. In addition to the varying degrees of institutionalisation and integration, there are the effects of both centralisation and decentralisation. Bargaining between various groups of actors concerning the practice of a salary and personnel policy occurs on the basis of a centrally formulated legal framework. Agreements with the civil service unions are reached through centrally conducted negotiations. To an increasing degree, however, they may also be conducted at the local level. Both, where bargaining is based on negotiations between the parties and where the point of departure is administrative management regulations, guidelines are frequently formulated by the central authorities as to how the arrangements shall be practiced at the local level. The main impression is that a sector-based central government has led to sector-oriented reforms. We are faced with a structured pluralism rather than uniformity and universality. 22 Administrative policy has largely been a by-product of processes and actions in many institutional arenas rather than the result of a homogenous and united strategy. The reform programmes have emerged as a collection of partly independent ideas, and many specific reforms have been carried out on the basis of ministerial and sector initiative. The style of the reforms has been oriented towards compromise, and this has given incremental results. The latter feature is also associated with the fact that reform activities have been characterised by an apolitical rhetoric. Compared with current administrative policy doctrine in Norwegian central government up to the 1970s, which was marked by strong centralisation, standardisation and management by rules, there has been a certain degree of decentralisation, increased flexibility and a larger element of management-by-objectives in recent years. This has occurred both through structural and procedural devolution, though the underlying features of the administrative apparatus have not been removed. On an international scale, Norway can be described as a reluctant reformer. 23 This is particularly due to the culture clash between market and management thinking and Norwegian administrative tradition's firm basis in management-byrules, professional expertise, norms of justice and equality, political control and bargaining practices. When little political weight is found behind a universal reform programme, this may be interpreted as lacking political basis for drastic changes of course. But Norwegian reform has been more characterised by a desire to avoid confrontation, and by a bargaining process through which solutions

22

Premfors (1996) has used the concept of structured pluralism in a paper on administrative reforms in Sweden and other OECD countries covering the same period as our chapter. 23 The comparison with other countries is based particularly on Olsen (1996), Pedersen/Lœgreid ( 1994) and Pedersen/Lœgreid/Pedersen

( 1996).

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which were acceptable to all parties were to be found. This view was expressed in connection with salary reforms. It illustrates that the reform process within the state is not merely an apolitical struggle to achieve greater cost-efficiency, but that implementation is subject to political rationale. The reforms were largely a test area for how far consensus would stretch in administrative policy change. The political dilemma arising from the reforms hindered a more normal practice along the lines which the reformers had envisaged. Compared with many other countries, there have not been large and comprehensive administrative policy changes in Norway, due, among other things, to the fact that the majority of the population accept the system of administrative control in Norway including its large public sector, bureaucratic organisation, well-organised professional expertise and corporative network with strong union participation. The administrative system we have in Norway is open for negotiation and change, but at the same time there is a set of core values which restrict the latitude for change. The reform efforts can partly be understood as a result of an administrative culture and tradition with strong equality norms and with a pragmatic reform nature. Economic crisis or a crisis of achievement is probably more important for reforms than the availability of resources. In Norway, the period after 1970 has not been characterised by economic crisis and this has truly contributed to reforms having been fairly incomprehensive. Administrative reform in Norway has been characterised less by a complete overhaul, but first and foremost by periodic maintenance. Continuity has been the main feature rather than disruption and revolution, at least as witnessed in the implementation of specific reforms. In terms of opinions, on the other hand, changes have been considerable. There has been a relatively large change in vision and formal arrangements, but the concrete tasks of implementation have been reluctant and characterised by experiment, trial measures and delegated to individual agencies. Nevertheless, over time, links between the overarching and the sector-based reform requirements have been strengthened. The same also applies to the links between demands and the actual changes made. In summary, the Norwegian strategy for administrative policy reform can be characterised as an incremental internal modernisation. A certain devolution has occurred at the local level, but at the same time there are clear indications of central management and control. We are faced with a multi-centred institutional arrangement, where devolution occurs within centrally determined guidelines which enable a somewhat larger degree of local autonomy. The reform experiments also illustrate the political limits which apply to the Cabinet and the Parliament. There has not been a strong, consistent and persistent political will for comprehensive administrative reforms. In summary, our view is that the Parliament and the Cabinet have attached little weight to the reform process which has been largely left to the civil service. Policy entrepre-

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neurship for administrative reforms has been more common among administrative leaders than among political leaders. We also believe that this is the main reason why specific reforms have proceeded so cautiously. An unclear division of tasks internally within the Ministry of Government Administration and between this ministry and others, together with a lack of means for directing subordinate agencies in the administrative policy field, has probably also contributed to limiting the intensity and momentum of the reform process. The professionalisation of the reform enterprise has not been strong. We are faced with a multi-functional state with more than one centre of political power. As in other policy areas, the Cabinet cannot carry out its functions hierarchically, but must formulate policy in association with other actors with their own power structures and aptitudes. An institutional perspective provides an alternative means of interpreting reform processes. Some perspectives, for example, emphasise the necessary adjustment to external economic forces or to political decree. An institutional perspective assumes that the clarity or ambiguity of the reforms and the organisation of the reform process will be of consequence for the results. The implementation of the reforms will, moreover, be influenced by the interpretation of performance crises and variations in the normative match between the reform programme and institutional identity, and political-administrative history and tradition. One interpretation of the presentation in this chapter is that there is room for an active administrative reform policy through planned design, although this space is limited. Reforms which correspond to particular institutional features are more easily put into practice than those which are opposed to traditional administrative culture. This implies that proposals which support local initiative and autonomy appear to have a greater effect on agencies than those which are intended to strengthen control by the superior authorities. At the same time, there is an adjustment to what internationally is regarded as "good" administrative doctrines. Several devolution measures provide examples of the concurrence between that which may be regarded as good administrative policy both internally in state agencies and in the international administrative policy environment, and such measures have favourable conditions. Moreover, ambiguous intentions behind the reforms provide occasion for different interpretations, both as regards what the actual intentions are, what has actually occurred, and why it occurred. In addition, reforms have been organised through a combination of high-level general policy initiatives, as well as local initiatives with restricted authority, competence, and available time. A hesitant and cautious reform process is the result of a complex interplay between political initiative, Norwegian administrative tradition and current international administrative policy doctrine, all of which amounts to ambiguous and diffuse intentions, and a reform process characterised by political cooperation. The aim of this process 12 Hesse

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seems to be to achieve the greatest possible support for those measures which have been put into practice. Considerable changes have occurred in the field of administrative policy since the 1980s in most OECD countries. Classical Weberian forms of administration and the Nordic model of the welfare state are no longer regarded as ideals for reform, but have been largely replaced by new administrative policy doctrines with roots in "New Public Management". According to the OECD, we are facing a change in the global conception of organisation and management of the public sector. In our view, it is pertinent to question the degree to which we, in Norway, are actually faced with a radical change of direction in respect of previous administrative routines. Our starting point was that public administration was faced with conflicting demands and expectations, and that this results in several paradoxes in administrative reform. For example, on the one hand attempts are made to improve central management, coordination and control, and on the other hand, decentralisation and deregulation are promoted. This indicates that the reform pattern of the public sector is more differentiated than it might be expected on the basis of a convergence hypothesis. The complexity of state administration is increasing, and as a consequence, greater consideration must be taken of horizontal and vertical networks and mutual associations between the various administrative levels. In this chapter, we have argued that we are not facing a paradigm change regarding forms of organisation and management, as has been maintained by the OECD (1995). We argue that the changes in Norway are reluctant and cautious (see Olson 1996). Nevertheless, there is a clear tendency towards increased devolution, which has been expressed in the increased emphasis on management-by-results techniques in the budgetary and salary systems in the state. The same tendency is evident in changes in the formal structure, not least changes in the forms of association. The great unresolved dilemma is how to achieve better democratic control and greater devolution at the same time.

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Christinsen, T./Egeberg, M. (1997). "Sentraladministrasjonen - en oversikt over trekk ved departementer og direktorater", in: T. Christensen and M. Egeberg (eds.), Forvaltningskunnskap. Oslo: Tano Aschehoug, 85-118. Christinsen , TJLœgreid, P. (1997). "Forvaltningspolitikk - mot New Public Management?", in T. Christensen and M. Egeberg (eds.), Forvaltningskunnskap. Oslo: Tano Aschehoug, 367-399. — (1997b). Den moderne forvaltning. Oslo: Tano Aschehoug. Colbjornsen , T. (1995). Resutatstyring gjennom statsbudsjettet. Bergen: Administrativt Forskningsfond, Rapport 6/95. Dunleavy , P./Hood, C. (1994). "From Old Public Administration to New Public Management". Public Money & Management 14/3, 9-16. Groholt, K. (1995). "Management og mangfold i norsk forvaltningsutvikling", in: P. Lœgreid and O.K. Pedersen (eds.), Nordiske forvaltningsreformer. Kobenhavn: Danmarks Forvaltningshojskoles Forlag, 25-49. Grondahl, 0. N JGrenlie, T. (eds.) (1995). Fristillingens grenser. Statsselskapet - styringsproblemer og reformprosesser gjennom 50 âr. Bergen: Fagbokforlaget. Helgesen, K./Lœgreid, P. (1988). Tillitsvalde og tilknytningsformer i staten. Kartlegging av profilar blant organisasjonstillitsvalde. Bergen: LOS-senter Rapport 88/4. — (1995). "Lonnspolitiske problemoppfatninger og losningsforslag", in P. Laegreid (ed.), Lonnspolitikk i offentlig sektor. Oslo: Tano Aschehoug, 55-78. Helgesen, K./Lœgreid, ?JMatland, R. (1988). Tilknytningsformer i staten. Kartlegging av profilar blant institusjonsleiarar. Bergen: LOS-senter Rapport 88/3. Jacobsen, D.R. (1996). "Personalorganisasjoner og forvaltningspolitikk i Norge", in P. Laegreid and O.K. Pedersen (eds.), Integration og decentralisering. Personale og forvaltning i Skandinavien. Kobenhavn: Jurist-og Okonomforbundets Forlag, 157-180. Lœgreid , P. (1991). "Institusjonsdrift mellom stat og marknad". Nordisk Administrativt Tidsskrift 72/4, 436-452. — (1993). "Tendensar i utviklinga av offentleg sector". Nordisk Administrativt Tidsskrift 74/3, 316-337. — (1994). "Going against the Cultural Grain: Norway", in: C. Hood and B. G. Peters (eds.), Rewards at the Top. London: Sage, 133-144. — (1995a). "Lonspolitiske reformforsok i staten", in: P. Laegreid (ed.), Lonnspolitikk i offentlig sektor. Oslo: Tano Aschehoug, 34-55. — (1995b). "Feminization of the central public administration", in: L. Karvonen and P. Selle (eds.). Women in Nordic Politics. Aldershot: Dartmouth, 229-248. — (1996). "Lokal lonn i Norge", in: P. Laegreid and O.K. Pedersen (eds.), Integration og decentralisering. Personale og forvaltning i Skandinavien. Kobenhavn: Jurist-og Okonomforbundets Forlag, 207-230. — (1997). "Modernisering Tidsskrift, 13/2, 9-120.

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Lœgreid, P./Mjor , M. (1993). Toppsjefar og leiarlonsreform i staten. Bergen: LOSsenter Rapport 9303. Lœgreid , PJOlsen, J.P. (1978). Byrâkrati og beslutninger. Bergen: Universitetsforlaget.

12*

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Lœgreid , Ρ./Pedersen, O.K. (1994). "Forvaltningspolitikk", in P. Laegreid and O.K. Pedersen (eds.), Forvaltningspolitik i Norden. Kobenhavn: Jurist-og Ökonomforbundets Forlag, 9-28. — (1996). "Forvaltningspolitikk, partsorganisering og institusjonell endring". in: P. Laegreid and O.K. Pedersen (eds.), Integration og decentralisering. Personale og forvaltning i Skandinavien. Kobenhavn: Jurist-og Qkonomforbundets Forlag, 9-24. Lœgreid , Ψ. /Rolland, V.W. (1994). "Norge: Forvaltningspolitikkens utvikling", in: P. Lœgreid and Ο. K. Pedersen (eds.), Forvaltningspolitik i Norden. Kobenhavn: Juristog Ökonom- forbundets Forlag, 85-116. Lœgreid ', ?JRoness, P.G. (1983). Sentraladministrasjonen. Oslo: Tiden. March, J.G./Olsen, J.P. (1989). Rediscovering Institutions. The Organizational Basis of Politics. New York: Free Press. — (1995). Democratic Governance. New York: Free Press. Mailand, R. (1991). The implementation of budgetary reform. Ann Arbor: University of Michigan, Ph.D. dissertation. Mjor, M. (1994). Byrâkrati, marknad og management. Ein Studie av leiarlonsreforma i staten. Bergen: LOS-senter Rapport 9403. Naschold, F. (1996). New Frontiers in Public Sector Management. Trends and Issues in State and Local Government in Europe. Berlin: de Gruyter. Olsen, J. P. (1988). "The Modernization of Public Administration in the Nordic Countries". Hallinnon Tutkimus 7/1, 2-17. — (1991). "Modernization Programs in Perspective: Institutional Analysis of Organizational Change". Governance 4/2, 125-149. — (1992). "Rethinking and Reforming the Public Sector", in: B. Kohler-Koch (ed.), Staat und Demokratie in Europa. Opladen: Leske und Budrich, 275-293. — (1993). "Utfordringer for offentlig sektor og for statsvitenskapen. Noen sentrale sporsmâl og problemstillinger". Norsk Statsvitenskapelig Tidsskrift 9/1, 3-28. — (1996). "Norway. Slow Learner - or Another Triumph of the Tortoise?", in: J.P. Olsen and B.G. Peters (eds.), Lessons from Experience. Experiential Learning in Administrative Reforms in Eight Democracies. Oslo : Norwegian University Press, 180— 213. Pedersen , O.K./Lœgreid, P. (1994). "En nordisk modell?", in: P. Lœgreid and O.K. Pedersen (eds.), Forvaltningspolitik i Norden. Kobenhavn: Jurist- og Okonomforbundets Forlag, 249-282. Pedersen, O.K./Lœgreid, ? J Pedersen, D. (1996). "Forvaltningspolitikkens institutionelle spor", in: P. Laegreid and O.K. Pedersen (eds.), Integration og decentral isering. Personale og forvaltning i Skandinavien. Kobenhavn: Jurist-og Okonomforbundets Forlag, 257-280. Premfors , R. (1996). Reshaping the Democratic State: Swedish Experiences in a Comparative Perspective. Stockholm: SCORE Rapportserie 1996/4. Roness, P.G. (1992). Forvaltningspolitikk gjennom organi seri ngsprosessar. Ein Studie av endringsprosessar knytta til organiseringa kring saksomrâde under Justisdepartementet og Kirke- og undervisningsdepartementet i perioden 1961-1986. Bergen: LOS-senter Rapport 9206.

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— (1993a). "Stortinget og forvaltningspolitikken", in P. Laegreid and J.P. Olsen (eds.), Organisering av offentlig sektor. Oslo: Tano Aschehoug, 73-91. — (1993b). "Tenestemannsorganisasjonane si rolle i omforminga av offentleg sector". Nordisk Administrativt Tidsskrift 74/3, 264-278. — (1994). "Tenestemannsorganisasjonar og forvaltningsreformer: pâverknadsmuligheter og handlingsrom". Norsk Statsvitenskapelig Tidsskrift 10/1, 25-39. — (1995). Stortingetsom organisator. Folkevaldes medverknad ved organiseringa av den norske sentraladministrasjonen 1946-1993. Oslo: Tano Aschehoug. — (1996). "Institusjonell orden - Norge", in: P. Laegreid and O.K. Pedersen (eds.), Integration og decentralisering. Personale og forvaltning i Skandinavien. Kobenhavn: Jurist-og Okonomforbundets Forlag, 59-92. Scott, W.R. (1992). Organizations. Rational, Natural and Open Systems. Third Edition. Englewood Cliffs, N.J.: Prentice-Hall. Stokke, S. (1993). "Budsjettreformer og finansielle ressurser", in: P. Laegreid and J.P. Olsen (eds.), Organisering av offentlig sektor. Oslo: Tano Aschehoug, 119-132.

Public Reports Arbeids- og administrasjonsdepartementet AADs omstillingsplan for statlig virksomhet i 90-ârene, 1992. Forbrukar- og administrasjonsdepartementet Program for modernisering av statlig forvaltning - Moderniseringsprogrammet, 1986. Forbrukar- og administrasjonsdepartementet Den nye staten. Program for fornyelse av statsforvaltningen - Fornyingsprogrammet, 1987. NOU (1989: 5). En bedre organisert stat. OECD (1995). Governance in Transition. Public Management Reforms in OECD Countries. Ot. prp. nr. 32, 1990-91. Om lov om statsforetak. St. meld. nr. 35, 1991-92. Om statens forvaltnings- og personalpolitikk.

When the Bottom Line is the Bottom Line: Public Sector Reform in Sweden By Jon Pierre

I. Background: The Politics of Public Sector Reform in Sweden Sweden is in many ways an especially intriguing case of public sector reform, given that this sector has for most of the post-war period been one of the biggest (in relative terms) in the Western world. The public service grew rapidly during the early post-war period in order to provide the administrative vehicle for the emerging welfare state. This strange mix of redistribution of wealth through extensive welfare state programmes, on the one hand, and a marketbased capitalist economy, on the other, has intrigued a number of foreign observers (see e.g. Heclo/Madsen 1987; Milner 1989). Also, the combination of a strong and sustained economic development for most of the post-war period and public sector spending remaining a priority among the dominant Social Democrats over several decades created the best imaginable conditions for the bureaucracy to expand and to develop extensive professionalism in a wide range of policy-areas. Therefore, the public sector has been the epitome of the Social Democratic post-war project of social reform (Rothstein 1996), and attacks from the non-socialist opposition on bureaucratic inertia and inefficiency were frequently fended off on an ideological level. Secondly, for the past decade or so, the Swedish case has displayed a series of severe cutbacks and reassessments in the public service and the transfer systems. Much of the post-war public sector expansion (including rapidly growing transfer systems) rested on a continuous growth in the economy; the logic of welfare state funding is that programmes are financed by discounting parts of the future annual growth in the economy. However, as the economy encountered serious structural problems in the mid-1970s and 1980s, this funding mechanism generated a huge budget deficit over a very limited period of time. In order to alleviate this problem, a number of politically delicate measures were implemented, including cutting back in welfare state programmes and public sector expenditures more generally. In addition, from the mid-1970s, Social Democratic predominance has largely disappeared, although the party certainly remains a leading player in Swedish politics (Kr aussi Pierre 1990).

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Thirdly, the high tax levels associated with an extensive welfare state such as that of Sweden indicate that the legitimacy and support for the public sector is a potentially very salient problem. The Social Democratic electoral defeat in 1976 was interpreted largely as caused by a growing frustration with red tape and a disconnection between taxes and the perception of the services provided by the public bureaucracy. Indeed, much of the "renewal of the public sector" project during the 1980s (Gustafsson 1987; Pierre 1993) aimed at restoring citizens' support for the public sector. Finally, the case of Swedish public sector reform displays very clearly the problems of institutional change in politically sensitive contexts. Given the close ideological, political, and symbolic relationships between the Social Democrats and the public sector, cuts in this type of public expenditures triggered a complicated process of self-reassessment within the Social Democratic Party. While the tenor of the official discussion was that substantial gains could be made from enhancing the efficiency of the public bureaucracy without necessarily jeopardizing core ideological functions of the public sector, most concrete measures to this effect disclosed both that large-scale lay-offs at all tiers of the public sector were unavoidable and, also, that the Party's ambivalence to engage in this reassessment was a significant factor in policy making. These changes were of such a magnitude that they could not be accommodated within the existing ideological framework of the Social Democratic Party pertaining to the role of the public sector. Much of the debate on these issues therefore addressed fundamental issues, such as to what extent clients should pay fees for public sector services, and to what extent private businesses should be allowed to offer competitive services in traditional public sector service areas, such as day-care centres for children (Feldt 1991; Mellbourn 1986). Thus, opposition to this policy emanated primarily from within the incumbent party and not from the political opposition. Despite the political and symbolic nature of the public sector, however, there has always been a very strong credo in Rechtsstaat ideals and values guiding the public bureaucracy. The development of the Swedish civil service was much inspired by continental European models - as in much of Europe, bureaucracy preceded democracy in Sweden as well - , and the notion of a civil service guided by impartiality and a strict set of rules has traditionally been quite strong. This remained the case during the forty-some years of Social Democratic rule. However, the stale bureaucratic modus operandi was sometimes accused of preventing the reformist Social Democracy from employing the public sector for its purposes, something which in some policy-areas, such as the labour market, led the Party to find other strategies to generate change. Recruiting bona fide Social Democratic supporters to new agencies was one such strategy (Rothstein 1996). Interestingly, this strategy provided substantial support for the Social Democrats during the debate in the 1970s and 1980s about a "politi-

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cised" bureaucracy initiated by the non-socialist parties; the Social Democrats could convincingly show that very few public sector employees were political appointees and that the public sector still operated under its traditional legal system. To be sure, to the extent that the Swedish civil service has had a political "bent", it has been in favour of the Social Democrats, partly because it is the Party catering to the interests of public sector employees, and partly because Social Democrats may have been more inclined to working in the public sector compared to non-socialists. That said, Rechtsstaat values and legality have proven quite resilient to "New Public Management" thinking in the bureaucracy. Although a number of market-based reforms have been implemented by governments with a leftist ideological orientation, in Sweden as in the rest of Scandinavia (Olsen 1991) the blending of these ideals with the legalistic culture has not been without problems and frictions. The implementation of such reforms has to factor in the extent to which such ideals are consistent with the history and culture of public bureaucracy (Peters 1996: 115f.). For instance, while all participants of the current debate on the future of public agencies in the delivery of services seem to subscribe to the idea of making the public service more effective and efficient, there is much less degree of consensus on how to define and operationalise these objectives, let alone on how they are to be attained. This chapter suggests that recent public sector reform in Sweden - its strategies and objectives - reveals a slightly different perception among the politicoadministrative élite compared to the more traditional values accorded to the public service. Given the severe fiscal crisis which the country has experienced since the late 1980s, cutting public sector expenditure has become the overarching objective. Indeed, reducing this type of public spending has been deemed so important that the government de facto has become willing to compromise some of the core values which traditionally have been accorded to the public sector. This means that public sector restructuring (or modernisation) in Sweden is a project conducted at institutional, political, and ideological levels and the concrete manifestations of reform have to be viewed in this perspective. Also - and indirectly related to the first point - , this chapter argues that public sector reform was implemented in a fairly unprofessional way. The initial steps of the reform process indicated a strong reliance on the public sector to resolve its own problems. Thus, management by objective - defining cut back in percentages of total agency expenditures and leaving it to the agencies to make their own decisions about where to cut back - became the modus operandi throughout most of the 1980s. While this supposedly is a way to allow for professional expertise within the bureaucracy to restructure their organisation according to their norms and ideals, it also is a convenient way for elected officials of finding the easy way out by not targeting specific programmes or institutions. The government's unwillingness to guide the restructuring process

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could well be related to the ideological tension within the party. Several indications that the chosen strategy failed to accomplish the stated objectives did not prompt the government to reassess its method of restructuring the public bureaucracy (Östergren 1995). Another indication of poor implementation of the cut-back strategy was the reaction by the civil servants towards the strategy of managing the cutbacks. Management by objective backfired to some extent because large groups of public sector employees did not seem to think the government capable of defining relevant objectives. Civil servants felt that they did not enjoy any visible political support during the process of change and were left to carry the blame and critique for the consequences of the cut-backs. The result was growing cynicism among senior civil servants towards policy makers and the political élite (PBS 1995).

I I . Stages of Development In a broad-brush account of the development of the Swedish public sector, we can identify three different and fairly distinct phases. The first phase - covering the time-period from the creation of the bureaucracy up until the 1930s - saw the gradual development of the civil service. Much of this took place, as mentioned earlier, in a pre-democratic society. The origins of a reasonably structured bureaucracy in Sweden can be traced back to the mid-17th century; with a less strict definition we could push this date even further back in time. The main role of the bureaucracy at this time was to provide an administrative instrument for the process of bringing together the state and also to sustain the country's war efforts in Europe. In the 18th and 19th centuries these roles gradually changed as the state matured, cities expanded, and the emphasis on rule by law became more emphasised. Most importantly, the advent of universal suffrage (1911 for men, 1921 for women) and parliamentary government (1917) introduced the notion of a responsive public bureaucracy. Through the politically turbulent 1920s, highlighting a series of Cabinets replacing each other in a fashion not too different from the Weimar Republic, the responsiveness of the bureaucracy was probably a minor problem, because the values of the élite did not significantly challenge those indigenous to the civil service. However, with the election of the (minority) Social Democratic government in 1932, this pattern changed. The Social Democrats brought with them a new political and administrative philosophy based on a more active role of the state in the economy and society at large. With regard to the governance of the economy, Ernst Wigforss advocated a state strategy similar to that of his contemporary John Maynard Keynes to help in taking the country out of the Depression (Hall 1989). As regards the labour market, the Social Democrats en-

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visaged a much more active role for the public sector than previously (Rothstein 1996). This new and politically more active role of the public bureaucracy in the Swedish society marks the beginning of the second phase in the development of the public sector. This phase roughly covers the time-period from the early 1930s up until the early 1970s. It was, albeit in a fairly modest way at first, the beginning of the expansion of the public sector. However, much of this growth would not occur until after World War II. The main significance of this second phase was that it depicted a more activist role for the bureaucracy. Not very surprisingly, this did not come about without opposition from the civil service. The division between ministries and agencies (see below) served to some extent as a shield for the bureaucracy from these new political signals and directives. The Cabinet's response to this bureaucratic reluctance was simply to change the institutional order by creating new agencies and staffing them with people sympathetic to the new politico-administrative project. As mentioned before, this proved particularly successful in the labour market. Thus, this second phase also witnessed if not a politicisation of the public bureaucracy so at least the development of new models of political responsiveness. The change took place within the existing legal framework of the civil service; thus, Rechtsstaat and Weberian ideals still prevailed as the overarching system of values for organisational design and administrative routines. Any deviation from this model would surely have triggered massive critique from the non-socialist opposition - possibly also from the civil service - for "politicising" the public bureaucracy. Finally, the second phase - through the post-war period up until the early 1970s - saw the bureaucracy rapidly expanding in the area of social services. The welfare state expansion was mainly a phenomenon of the 1960s and 1970s, when both transfer systems and the institutional apparatus to administer them grew rapidly. The post-war period up until the mid-1970s thus highlighted a rapid expansion of the public sector, primarily at the level of the agencies. The number of public sector employees also increased dramatically. In addition, local governments expanded in organisation, staff and budgets, partly because of a profound reorganisation of local authorities and partly because the nation state placed increasing responsibilities on them, particularly due to the implementation of a wide range of welfare services (Gustafsson 1995). This period was the heyday of the Swedish public bureaucracy, enjoying an expansion in order to provide public services and operating in a sympathetic political milieu (Ruin 1991). The third and last phase of development covers the time-period from the mid-1970s up to date. This period saw, first, the building up of deficits. To some extent, the imbalances were caused by the increasing number of public

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sector and welfare commitments in the transfer systems. Another contributing factor was the increasing number of public employees at all levels of government. However, the main factor explaining the economic problems was related to the nature of welfare state funding. As mentioned earlier, welfare programmes are normally funded by discounting anticipated growth in the economy. As soon as this growth becomes negative the welfare programmes tend to generate budget deficits. This problem was exacerbated by an increasing number of people collecting unemployment insurance money and the state's aid to declining industries, as was especially the case in the latter part of the 1970s and early 1980s (Henning 1987). Thus, a recession impacts the welfare state in different ways: in terms of decreasing tax revenues, in terms of increased welfare expenditures, and also because of the technique of financing welfare programmes. This new situation triggered a debate both within the Social Democratic Party and between the Social Democrats and the non-socialists on how to address these problems. For the latter parties, the problem was more complicated than their ideological stance might indicate. Large-scale dismantling of welfare programmes and services coupled with tax cuts was not an option because it would have fuelled the Social Democratic argument that only they could guarantee the future of the welfare state. The same logic forced the non-socialist governments between 1976 and 1982 to support declining industries in order to prevent rapidly increasing unemployment. For the Social Democratic Party the situation was even more complicated. It drew much electoral support for its defence of the welfare state and also among public-sector employees who amounted to somewhere between 1.5 and 2 million people, which equals about a quarter of the population or roughly about a third of the total workforce (Larsson 1993: 254). A large part of the problem facing all political parties was the sheer size of the public sector. During the 1980s this sector controlled some 60-65 percent of the GNP. While a substantial part of this were simply transfers, they were equally (or more) politically delicate to touch as other types of public expenditures. Thus, the problem was essentially twofold: reducing expenditures through the transfer systems and reducing other expenditures, including both costs for staff and also state commitments to industries in crisis, constituting a significant economic burden for the public sector between the mid-1970s and the mid1980s.

I I I . Cultural Perspectives and Traditions We have already touched upon some of the specific cultural features of the Swedish public sector. The phenomenon of a Rechtsstaat type public bureauc-

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racy enjoying substantial autonomy and engaged in the implementation of such a political project as a comprehensive welfare state is clearly intriguing. The same model of bureaucracy embedded in a less re-distributive regime would be more predictable, as would a more ostensibly politically "steered" public bureaucracy implementing welfare state programmes. A quick glance around Western Europe shows that Sweden shares some of these features with her Scandinavian neighbours as well as with Germany. However, as soon as we add the conspicuous autonomy of the agencies (see below) we see differences between Sweden and this group of countries. Slightly paradoxically, the long tenure of Social Democracy during the 20th century (1932-1976; 1982-1988; 1994-present) has probably helped safeguard the neutral nature of the public bureaucracy. It is not a very bold theory to look at the historical development of the public sector in Sweden as based on a historical compromise, in which the Social Democrats could proceed with the expansion of the public sector, as long as it did not include a manifest increase in the degree of politicisation of the civil service, e.g., increased ministerial control over the agencies or an increased number of political appointees. This compromise should not be mistaken for a consensus on the broader issue pertaining to the desirability of a (tax-funded) expansion of the public sector. To the contrary, there has been a continuous debate between Social Democrats and the non-socialist parties over these issues. What the historical compromise theory does suggest, however, is that in the politics of public administration there may well have been such a tacit agreement that the non-socialists would ill accept a growing public sector as long as the civil service remains a depoliticised, Rechtsstaat type of bureaucracy. The significance of culture comes into play at two different levels and in two different forms. First, at the level of the polity, culture in the present context refers to popular perceptions and role expectations of the public bureaucracy and civil servants. Obviously, much of these perceptions and expectations are expressed in terms of political support for different political parties. However, many of these systems of values become institutionalised and more part of the political culture than in the day-to-day political debate. As the non-socialist parties found when they assumed office in 1976, policy objectives such as full employment and extensive welfare programmes had become part of the political culture above and beyond partisan differences. The 1980s and 1990s saw a rapidly growing support for a lifestyle which is more individualistic and based in ideals indigenous to the economic sphere of society, compared to the values heralded during the 1950s and 1960s. This gradual change further called into question the monopoly of the public sector as supplier of a wide range of services. Secondly, culture could refer to the intra-organisational "life" of the public bureaucracy. As most organisational theorists argue, changing the structure of

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an organisation is an easy project compared to that of altering the organisational culture. For a variety of reasons, this could be assumed to apply more to public than to private organisations (see, e.g., Egeberg 1984); the organisational culture is codified and much more visible in a public bureaucracy. Moreover, most modern public services are characterized by a higher degree of transparency as well as a culture, based on values, such as serving the public, offering legal security, equal treatment, and so on (Peters 1989). There seems to be some degree of resistance among public sector employees towards bringing in "New Public Management" models of public service production and delivery. Welfare state ideals and an egalitarian ideology remained strong within agencies; the notion of perceiving and treating citizens as clients or customers to some extent ran counter to the strictly legalistic nature of the Swedish public sector. Moreover, pay for performance was implemented for large groups of public employees, albeit not without controversy (Sjölund 1989). Finally, public sector reform fed into the debate on the consequences of decentralisation and increased local and regional autonomy. Strong national institutions were seen as necessary to warrant equal standards across the country. Obviously, all of these matters relate - directly or indirectly - to the overarching issue of what should be the future role of the bureaucracy and the state more generally. It is clear that the outcome of this debate will reflect the subtle cultural change which is currently underway in Sweden.

IV. Institutional Variables Sweden is a unitary state with extensive decentralisation to local governments (Petersson/Söderlund 1994). The decentralisation has increased contacts between ministries and the Riksdag on the one hand and local authorities on the other, bypassing the agencies. Search for a new role has been conducive to administrative reform. A key feature of the Swedish system of government is the clear, historical separation between ministries and agencies. Ministries' main responsibility is drafting bills to the Riksdag while agencies implement public policy. Thus, the current system of government in Sweden highlights three different clusters of institutions, all enjoying substantial discretion in relationship to the other two. Ministries and the Cabinet are the nexus of political power; agencies with extensive autonomy in the implementation of public policy; and local authorities, such as the agencies involved in policy implementation in a large number of areas (and in this capacity to a great extent acting as the local tier of the state), but also with extensive capabilities in which they enjoy substantial autonomy vis-àvis higher echelons of government. The organisation of the agency level was

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profoundly revised and reassessed in the 1990s. Some agencies were merged; others were abolished altogether. The role of the agencies clearly changed, as local governments were given more extensive authority in most policy areas. To some extent, the ideas behind the original design of the system of government - a strict division of powers have been perverted since agencies grew much quicker than the ministries. Thus, while the ministries have not grown very much in terms of staff, the agencies have enjoyed a rapid expansion and can today well be said to control just as much policy expertise as the ministries ( Vedung 1992). The 1990s witnessed a debate on whether agencies should be made more politically responsive and democratically accountable (see Pierre 1995; Ruin 1991), but so far no major changes have been implemented. Given the growing interest in other countries to develop agencies, such as the Next Steps project in Britain, it remains ironic that Sweden, from time to time, debates the abolition of such an arrangement. As Olof Ruin says in his assessment of the Swedish system of government (1991:78): "It would be paradoxical if Sweden itself were to be in the process of abandoning its special administrative model at the same time as the traditional advantages of the model are perhaps beginning to be recognised abroad." Thus, despite extensive debate on what should be the proper and democratically speaking best relationship between ministries and agencies, the agencies remain quite autonomous vis-à-vis the ministries. Their main current challenge, given the increasing direct contacts between the Riksdag and local governments, is to find a new role which can help legitimise their future existence.

V. Resource Base We have already several times touched upon the issue of changes in the resource base of the public sector. The important observation in the present context is that it was the fiscal crisis being the key trigger for administrative reform since the mid-1980s. Certainly, this pattern can be found in many other countries. However, the fairly sudden but quite powerful change in the resource base, coupled with the peculiar institutional arrangements of the Swedish government, contributed to the political and administrative handling of the cutbacks and reassessments in the public bureaucracy and the transfer systems. A frequent observation was that several of the most costly public sector commitments - primarily social welfare transfer systems - were "structural" and hence not susceptible to significant cost reductions in the short-term perspective. This forced the government to explore other means of reducing public expenditures such as institutional changes at the agency level and lay-offs of public sector employees.

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VI. Professionalisation of Reform This leads us to a discussion concerning the degree of professionalisation in the public sector reform process. The initial stages of reform, which were part of the "renewal of the public sector" project, had a clear political charge to the extent that they served not least to restore some of the lost confidence in public services. Unlike the reforms later, during the 1980s, these reforms were hence not primarily triggered by economic factors. The deregulation of local authorities, which was one important component of the "renewal", gained substantial momentum in its initial phases but soon - and certainly not very surprisingly encountered fierce resistance from the sectoral ministries whose influence and control was at stake. The Ministry of Public Administration which guided the "renewal" soon found itself surrounded by enemies in the Cabinet (see more below) and the net effect of this part of the "renewal" programme should not be exaggerated (Lindgren! Strömberg 1994). The latter part of reform relied, as mentioned earlier, to a large extent on a management-by-objective strategy. To some extent, this strategy was appropriate, since it capitalised on the expertise among the agencies and local governments. Also, given the relaxation of command over local authorities, it would have been difficult - and perhaps also politically unwise - to reclaim control at a time when expenditures are to be strongly reduced. However, had not the issues been so politically sensitive, a higher degree of micro-management and political presence in the reform process would most likely have yielded more efficient cost reductions and a higher degree of staff involvement. The institutional support for the reforms, such as the creation of the "State Renewal Fund" to encourage and fund projects exploring new models of administration and service production, seems to be more symbolic than real. If it is true that administrative reform aiming at saving money is costly (Czarniawska-Joerges 1992), the same paradoxical (or "paralogical") argument can be made with regard to the degree of political presence in the process of change. Reform in autonomous institutions seems to require a higher degree of political "steering" than is the case in more traditionally politically controlled institutions. There are a couple of reasons why this should be the case. First, in the Swedish case at least, the extraordinary nature of the task required extraordinary measures to manage the change. Standard management techniques were not geared to solve this new type of problem. Second, in order to maintain morale and trust within the civil service, staff need to be protected from criticism for actions which are caused by factors beyond their control. Unfortunately, the cost-reductions were conducted largely through standard management models, something which most likely was both inefficient and detrimental to public sector morale. Public servants expressed a strong disbelief that ministries had the

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capacity and knowledge to formulate goals and relevant for agencies in a management by objective model (PBS 1995).

V I I . Policy Entrepreneurship and Political Will Individuals at all levels of government were instrumental in triggering and formulating goals of administrative reform. However, the strong collective nature of political representation and policy making in Sweden reduced the leeway and hence the significance of policy entrepreneurs. The only conceivable exception to this rule would be Bo Holmberg, a Social Democrat appointed Minister of Public Administration after the 1982 election. Previously a full-time elected official in county politics, Holmberg was in many ways the architect of the "renewal of the public sector" campaign. In the initial stages of the project, Holmberg could rely on the full support of the party leadership and the Cabinet. However, he played a risky political game, challenging huge vested political and administrative interests. As soon as the finer details of the project became known, particularly the idea of deregulating sectors of local government, there was immediate opposition from sector ministries and their political allies. Holmberg's political career took a nose-dive and he left the government a couple of years later.

V I I I . Conclusion: The Bottom Line Strategy of Public Sector Reform In all political systems, the size and role of the public sector tells us much about the ideological orientation of dominant political forces and the salience of collective institutions and re-distributive policies. Therefore, in political contexts such as the Swedish, the type of public sector reform which has been taking place for the past 20 years or so becomes a highly politically charged process, that is to say, managerial strategies alone will not suffice to bring about the necessary changes unless they are supported by changes in the value system defining the public sector as the manifestation of the welfare state. The Swedish case of administrative reform was problematic, because at least initially the government sought to bring about such changes without addressing the broader ideological issues.

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References Bladh, A. (1987). Decentraliserad Statsforvaltning (Decentralised State Public Administration). Lund: Studentlitteratur. Czarniaiawska-Joerges, B. (1992). "Den offentliga styrningens paradoxer" (Paradoxes in Political Control), in: Ministry of Public Administration (ed.), Forskning om den Offentliga Sektorn (Research on the Public Sector). Stockholm: Allmänna Förlaget, 39-52. Egeberg, M. (1984). Organisasjonsutforming i offentlig virksomhet. Otta: Aschehoug/ Tanum-Norli. Feldt, K.-O. (1991). Alla dessa dagar... I Regeringen 1982-1990 (All those days...In the Cabinet 1982-1990). Stockholm: Pan. Norstedts. Gustafsson , A. (1995). Kommunal Självstyrelse (Local Government). Stockholm: SNS Förlag. Gustafsson , L. (1987). "Renewal of the Public Sector in Sweden". Public Administration 65, 179-192. Hall , P. A. (ed.) (1989). The Political Power of Economic Ideas: Keynesianism Across Nations. Princeton, N.J.: Princeton University Press. Heclo , HJMadsen, H. (1987). Policy and Politics in Sweden: Principled Pragmatism. Philadelphia, Pa: Temple University Press. Henning , R. (1987). Näringspolitik i obalans (Industrial Policy in Imbalance). Stockholm: Allmänna Förlaget. Publica. Krauss , E. S. K./Pierre, J. (1990). "The Decline of Dominant Parties: Parliamentary Politics in Japan and Sweden During the 1970s", in: T. J. Pempel (ed.), Uncommon Democracies: The One-Party Dominant Regimes. Ithaca and London: Cornell University Press, 226-259. Larsson , T. (1993). Det Svenska Statsskicket (The Swedish System of Government). Lund: Studentlitteratur. Lindgren , LJStrömberg, L. (1994). "The Swedish Case: Political Change and Administrative Resistance", in: H. Baldersheim and K. Stählberg (eds.), Towards the SelfRegulating Municipality. Aldershot: Dartmouth, 21-40. Mellbourn , A. (1986). Bortom det Starka, Samhället: Socialdemokratisk Förvaltningspolitik 1982-1985 (Beyond the Strong Society: The Social Democratic Politics of Public Administration 1982-1985). Stockholm: Liber. Milner , H. (1989). Sweden: Social Democracy in Practice. Oxford and New York: Oxford University Press. Olsen, J. P. (1991). "Modernization Programs in Perspective: An Institutional Perspective on Organizational Change". Governance 4, 125-149. Östergren , J. (1995). Svensk Förvaltningspolitik i Förändring (The Changing Swedish Politics of Public Administration). Gothenburg: School of Public Administration, University of Gothenburg (mimeo). Peters , B. G. (1989). The Politics of Bureaucracy. 3rd ed. New York: Longman. — (1996). The Future of Governing: Four Emerging Models. Lawrence, KS: University of Kansas Press.

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Petersson , Ο./Söderlind, D. (1994). Förvaltningspolitik (The Politics of Public Administration). 2nd ed. Stockholm: Allmänna Förlaget. Pierre , J. (1993). "Legitimacy, Institutional Change, and the Politics of Public Administration in Sweden". International Political Science Review 14, 387-401. — (1995). "Governing the Welfare State: Public Administration, the State and Society in Sweden", in: J. Pierre (ed.), Bureaucracy in the Modern State: An Introduction to Comparative Public Administration. Cheltenham: Edward Elgar Publishing, Inc., 140-160. Rothstein , Β. (1996). The Social Democratic State. Pittsburgh: University of Pittsburgh Press. Ruin , O. (1991). "The Duality of the Swedish Central Administration: Ministries and Central Agencies", in: A. Farazmand (ed.), Handbook of Comparative and Development Public Administration. New York and Basel: Marcel Dekker, Inc., 67-80. Sjölund , M. (1989). Statens Lönepolitik 1966-1988 (The Government's Pay Policy, 1966-1988). Stockholm: Allmänna Förlaget, Publica. Vedung, E. (1992). "Five Observations on Evaluation in Sweden", in: J. Mayne (ed.), Advancing Public Policy Evaluation: Learning From International Experiences. Amsterdam: Elsevier Science Publishers, 71-84.

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Stability Turned Regidity. Paradoxes in German Public Sector Reform By Joachim Jens Hesse

I. Introduction The almost unanimous perception of the (West) German political system is that is has been very successful since 1949 in securing political stability, economic success and public welfare. After the experience with a totalitarian regime had exposed fragmentation and polarisation as the essential weaknesses of the Weimar Republic, the Parliamentary Council aimed at creating a stable constitutional framework for the second German Republic by introducing an elaborate system of checks and balances. To this end, the immediate post-war years saw, apart from continuity in some elements of the administrative structure, a new political order intended to foster democratic behaviour and to allow for responsive government and a policy based on the rule of law. Co-operative federalism, liberal corporatism, the "Rechtsstaatsprinzip " and the "social market economy" (soziale Marktwirtschaft) have since been rightly regarded as a fortuitous combination of ingredients, adding up to what was later even termed "Modell Deutschland". The public sector, and public administration in particular, have played a crucial role in underpinning the new order. Two interrelated factors are particularly noteworthy in explaining the successes of the newly established system. The first relates to the proven ability for institutional adaptation in a changing environment without radically altering make-up or function. The second factor concerns the aptitude to "steer a middle course" in reaction to "alleged" paradigm shifts in economic thinking and/or perceptions of the role of the public sector. Neither fully embracing Keynesian macro-economic steering, nor wholeheartedly following neo-liberal reform agendas, public policy was able to cope with the most pressing demands without relying on excessive modes of regulation, steering, guidance and control - or its fashionable counterparts. In all, the formulation of public policy has proven responsive to change while displaying a level of consistency in delivery that allowed for a stable socio-political environment.

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This chapter seeks to evaluate the present ability of the German public sector to react to a rapidly changing environment, characterised by growing ideological prejudices against the state and budgetary expansionism; economic pressures caused by stagnant revenues and fiscal resistance; internationalisation/Europeanisation of the economy and especially of industrial and financial markets; new technological challenges; and a political environment which is changing under the impact of new social challenges. To do so, past performance and structural characteristics of the governmental system will be analysed, followed by an examination of external challenges to the public sector and an attempt at highlighting the most pressing reform needs. The result of these considerations will be used to identify reform options for Germany, before taking a speculative view on future public sector development. The discussion will be informed and to some degree guided by a number of paradoxes observed at the outset. Ultimately, these will lead to a sceptical assessment of the continuing stability of the German public sector.

II. Paradoxes in Public Sector Reform: The German Case There are a number of paradoxes to be identified within the German case: By comparison, Germany's public sector and especially its administration have often been perceived as an archetype of stability and reliability. Not least following Weberian doctrines or, if one likes, Prussian state traditions, the structural and procedural elements of German public administration were thought to serve as a backbone of the Bonn Republic and as a guarantee of its stability. Elements of the legal and institutional structure of German public administration have been copied in a number of Western European environments and parts are still being used to model the fledgling democracies in Central and Eastern Europe. But, contrary to the widespread perception abroad, Germany appears to be lagging behind the international development in administrative reform. Both the central machinery of government and intergovernmental arrangements have proven difficult to adapt to a rapidly changing environment. This is why some domestic observers are beginning to view German public administration as a latecomer in comparative perspective. While such different perceptions of the German public sector may provide a paradox on a cognitive level, reformers themselves are faced with an operational paradox. The much hailed stability appears to have produced resistance to change that in turn leads to a situation in which functional deficiencies may outweigh the benefits to be derived from the said stability. When realised and felt by a public once accustomed to efficient policy-making, implementation and - above all - service delivery, stability may thus produce instable outcomes.

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Given the lack of significant administrative reform, one witnesses by now a growing search for solutions that might overcome functional deficiencies that have become only too apparent. In doing so, the debate tends to disregard the indigenous administrative cultures and historical legacies, aiming in part uncritically in following "models", as put forward by "New Public Management"modes within the Anglo-Saxon countries or attempts at rejuvenating local governments in cities such as Christchurch, Tilburg or Phoenix. Not being used nor being forced to compare the own achievements with the successes and drawbacks of reform attempts within other environments, there is no tradition in identifying "best practice" or "most similar contexts". On the political level, there also is a conspicuous paradox in that public sector reforms in Germany are characterised by a striking mismatch of political intentions/initiatives and policy outcomes. "Ankündigungspolitiken " (symbolic politics) tend to replace much needed reforms. Policy-development did in very many cases not impact on the given machinery. Pressing needs were, for a long time, accommodated within the established institutional setting. In some cases, limited adjustments were unavoidable due largely to the financial repercussions of non-decision. However, more often than not, reform pressures were "decentralised" as fiscal squeeze was passed "down", compelling local and regional governments to engage in administrative reform. Federal and Länder administrations were largely unaffected, despite the fact that the need for structural reform turned out to be rather pressing here as well. As most of the reform activities worthy the name are taking place within the localities, one can detect mounting reform pressure from "below" rather than a purposive reform drive from "above". As regards the few reforms implemented - as opposed to mere declarations of intent - , normative objectives tended to produce volte face outcomes. For example, decentralisation initiatives were quickly followed by tendencies to recentralise; attempts at de-regulation triggered policies of re-regulation; and measures to enhance the autonomy of administrative units led to a strengthening of control mechanisms. Normative and functional demands did not really meet. The routines of the intergovernmental game mostly allowed for a significant redirecting of reforms, often resulting in ineffectual "cosmetic" adjustments.

I I I . Stages of Public Sector Reform: Unfinished Agendas Since 1945 Looking at public sector reform since the end of the Second World War, the most noteworthy feature is the fact that despite an almost perpetual debate, only very few changes were enacted. Several stages are to be distinguished:

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During the 1950s, the total commitment to reconstruction did not really allow other issues to be brought to the fore of the public debate. In rebuilding institutions, Bund and Länder more or less followed established routines and allowed for continuity. Federalism was recreated under the impact of the Western allies, while public functions were systematised and (re-)allocated to Bund and Länder. Emphasis was placed on establishing the new political order and on creating those intermediary institutions necessary to allow for an exchange of political elites. Together with the predominance of economic reconstruction, these tasks did not allow for a further deliberate approach at changing or modifying the administrative machine. It served its purpose and remained unchallenged. During the 1960s, the stimulant of reconstruction came to a halt without really threatening economic growth, thanks to a great increase in exports. This development could be described as a process of "normalisation" in so far as public policies were no longer dictated by the pressing needs of the post-war years but rather by policies crucial to other West European environments as well. Inevitably, the population started to compare achievements, and public criticism - hitherto a negligible variable - gained weight. Yet, the domestic political order withstood its first substantial test. The transition of power (from the CDU/CSU/FDP government to the Grand Coalition between the Christian Democratic parties and the Social Democrats) came to be perceived as a part of normal democratic development. Public sector reform and administrative issues played a role only in so far as a minor territorial reform and an attempt at creating a new financial basis for intergovernmental arrangements were successfully implemented - benefiting from the technocratic mood of the decade and the according room for manoeuvre. The need for enhanced intergovernmental coordination was acknowledged with the extension of horizontal co-operation supplemented by processes of vertical co-ordination and control between institutions of the different levels. However, these initiatives, in fact, formed the only successful attempts at administrative reform in the history of the Federal Republic. More ambitious reform projects failed, such as the introduction of integrated and legally binding planning systems or the reallocation of competencies between the federal, the Länder , the regional (Mittelinstanzen ) or the local level. Discussions about introducing human resource management were inconclusive. During the 1970s, emerging social cleavages, growing economic disparities, and a changing overall attitude towards political institutions began to challenge established routines. Severe economic problems, reflecting a world-wide process of structural change and leading to steadily growing unemployment, were aggravated by new cleavages in an increasingly differentiated society. Though similar challenges had to be faced by most developed economies (and hence may serve as temporal benchmarks for comparison), for West Germany they

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provided the first real test of the reform capacity of the now fully-fledged political system. And it is also here that first signs of the paradox of "stability turned rigidity" became discernible. The now Social Democratic-led government reacted by introducing seemingly far-reaching reforms. "Modernising the state" as a reaction to growing functional demands, while at the same time democratising it in response to a number of recently emerged social cleavages, posed a double challenge. A number of domestic reforms were introduced in response, but failed due to over-ambitious approaches and/or first fiscal squeeze. Of particular consequence was the failure to secure functional reforms advocated to decentralise a substantial share of responsibilities to sub-central governments in order to complement territorial reforms conducted earlier. Neither did the plans for comprehensive civil service reform materialise; according recommendations were silently shelved after failing to secure the necessary constitutional amendments. In all, the rhetoric of the modernisation decade was not followed by successful policies to rejuvenate the machinery of government. Apart from a few attempts at accommodating participatory demands and very limited organisational reforms in response to the changes brought about by new information technologies, there was hardly an impact on German public administration. Since the mid-1980s, West Germany was, as compared to the United States, Britain and France, striking for its lack of new policy initiatives, despite the triumph in 1983 of the Conservative coalition government. The continuation of previous policies was particularly surprising, since neo-conservatism struck a responsive ideological chord and dominated the rhetoric for some time. Yet, the incoming government did not change the basic policy approach; the central machinery of government and intergovernmental arrangements remained unchanged; attempts at privatisation and de-regulation were almost non-existent before being implemented on a comparatively modest scale towards the end of the decade. As its predecessor, the government seemed to favour incremental adjustment and deliberate experimentation over programmes for large-scale change. One key result of this continuity was that it became a common perception that in the German case changes in government led to only insignificant policy adaptations. Indeed, the institutional-administrative framework of Germany's domestic political order neither required nor encouraged structural changes as observed in the United Kingdom or the United States. The institutional setting seemed to militate against overly ambitious reform attempts, allowing for gradual adaptation and avoiding abrupt shifts. Administrative reform did not take place; management initiatives were discussed but remained unimplemented. Only at the local level, governments were forced to experiment with reforms largely as a result of the increasing vulnerability of their revenues, but even here without much of a structural change.

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IV. Structural Characteristics, Intervening Variables, and Countervailing Forces in the German Governmental System Summarising this brief overview, it becomes obvious that institutional adaptability is to be perceived as a crucial category in explaining (West) German governmental stability and administrative performance over forty years of its existence. The term is meant to refer to the polity at large, embracing its legal environment, its basic political or quasi-political institutions, ranging from governmental authorities and intermediary organisations to formally autonomous but highly political institutions, such as the Bundesbank (Federal Central Bank) or the Bundesverfassungsgericht (Federal Constitutional Court), and a number of public-private bodies, created to overcome special cleavages and disparities. The key characteristics of the system as developed on the basis of the 1949 Constitution included the following: (a) The separation of the legislative, political and administrative powers between central, regional (Länder) and local levels; (b) procedural integration of the three levels in decision-making, programme development, and implementation ("co-operate federalism"); (c) a high degree of functional déconcentration of state power at the central level, with not only a considerable degree of departmental autonomy, but also the establishment of functionally and politically autonomous bodies. Such functional differentiation complements territorial decentralisation; (d) an economic system in which free-market elements clearly dominated, but were combined with a strong emphasis on co-operation, collaboration and consensual decision-making between employers, employees and the State ("liberal corporatism"); (e) a high degree of centralisation and integration in the area of social organisation, which contrasts with the functionally and territorially dispersed statehood. This applies both to the party system and to the sphere of interest groups, where centralisation is particularly marked for employers associations and trade unions; (f) the absence of large-scale regional disparities, social conflicts and ethnic cleavages, implying a social homogeneity which facilitated institutional stability; (g) gradual institutional change and adaptation, supported by a low turn-over in governments at both federal and state levels. Although coalition government was more or less the norm, this nevertheless produced stable administrations; and

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(h) an emphasis on legality, a well-established civil service, and bureaucratic processes, which tended to constrain the scope of action but rarely led to longterm blockages. Whilst the political system of the Federal Republic could thus be characterised as a stable system of checks and balances, the institutional setting of the former German Democratic Republic took a very different course. Following the principle of "democratic centralism", real state power was both functionally and territorially centralised. Whereas the formal framework for the exercise of state functions was differentiated, actual power was concentrated in a small number of central state and party organs. In legal terms, a sphere of local government did exist, but local authorities operated under the dual subordination of central state organs and the centralised party bureaucracies. Economic activities were comprehensively state-guided and controlled. Likewise, independent social organisations were virtually non-existent, with a partial exception of the established churches. Summarising the (West-)German experience, it is not difficult to see that the public sector produced stability and reliability, but was certainly not open to reform. Gradual adaptation provided the staple rule of the game, reform initiatives were blocked within the intergovernmental system, and did not reach the level of being sufficiently operational to be implemented. As long as economic success and institutional stability allowed a broader public to create a seemingly undeterred loyalty to its political system, adaptation proved sufficient to overcome potential cleavages or factual disruptions/disparities. The German case, until 1989, is, therefore, a case of limited but successful internal adjustment.

V. Externally Induced Change: The "Double Challenge" of Unification and Europeanisation The late 1980s have thrown up new challenges that demand potentially more far-reaching adaptations on the part of the German public sector. These involve, first of all, the impact of unification; secondly, the adaptive pressures that result from the ongoing process of European integration; and thirdly, new contextual conditions and functional demands (coping with economic and structural change, demographic shifts and socio-cultural cleavages) which seem at odds with a number of established governmental practices. Both in quantitative and qualitative terms, these three developments, especially i f seen in combination, pose a novel challenge to the German polity. Suddenly, Germany is faced with being no longer a "semi-sovereign state", built upon a stable political administrative system and, in foreign affairs, shielded by the Western allies, but a leading European power that seems in urgent need to define its own position on the world stage and to overhaul its governmental and administrative system at

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the same time. This has led to fears that the quality and the scale of the challenge might overstretch the adaptive capacity of the system. The decisive challenge of unification, Europeanisation and changed functional demands lies in the fact that they combine internal and external pressures, and thereby call for both macro-and micro-political reactions. Such pressures can not, in principle, be limited to single areas or levels of the political machinery. Instead, they ask for policies which might encompass the system of governance as a whole and contain legal, institutional and procedural elements. The challenge extends to the social bases of Germany's political system as well. Despite quick adaptations, it became apparent here that political parties, interest groups and the media were not prepared for the "shock" provided by German unification, while the impact of Europeanisation had been underestimated anyhow. In this context, unification implied, first of all, the extension of West Germany's complex legal system to the new Länder , which were established during the last months of the GDR's existence. The adoption of West Germany's system during this process has sometimes been criticised as a way of "colonising" Eastern Germany. There was, however, little choice. The political pressures under which the unification process took place scarcely allowed for the development of a distinct legal, political and administrative system that would have been applicable solely to one part of the country. As regards the institutional framework, West Germany's established structures were by and large transplanted to, and copied in, the new Länder. As a result of this wholesale and largely unadjusted adoption, some of the structural problems and inefficiencies which had been identified in West German federalism before unification have now been compounded and magnified. Interregional distributional problems have worsened at a time when resources available for compensating disparities have become scarcer. Consequently, there is a fear that unification might change the structure of the new political order by giving rise to a further centralisation in the federal system. This, in turn, has led to renewed demands for territorial reform, which many hope might result in financially, economically, and administratively more viable states (Länder). In sum, the establishment of a new political order on the territory of the former GDR can be described as a process of transplanting an established institutional framework, tried administrative practices and the associated organisations of interest mediation. In principle, the unification process might have offered the historically unique chance to re-examine Western experiences as well and to avoid some of the acknowledged shortcomings of the Western model in rebuilding the Eastern Länder. In practice, the rapid pace of unification did not permit a more gradual process of adjustment and adaptation. On the other hand, the growing acceptance of basic elements of the new political institutional order

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suggests that the described mode of "institutional adaptability" worked even under these historically unprecedented conditions. Whilst struggling with unification, the impact of the simultaneous process of Europeanisation on the day-to-day workings of large parts of the German administrative system has been rather limited. Although some critics interpret this absence of change as a failure on the part of the public sector to adjust in organisational and procedural terms to European realities, it might also be argued that the actual adaptive pressures associated with Europeanisation have been less marked so far than is sometimes assumed. In accordance with the latter view, the impact of Europeanisation would be limited to a number of organisational measures and adjustments in certain key institutions and policy areas. The establishment of special units in charge of European affairs, be it in the form of European affairs ministries at the Länder level or the creation of "European Units" in particular departments, parties, and interest groups, could, accordingly, be interpreted as an attempt to adjust to European demands in the traditional manner. The changing circumstances over the last years, however, indicate a different likely development. It stresses the both quantitative and qualitative changes brought about by the on-going Europeanisation process, affecting almost all policy areas. There is, suddenly, an awareness that the routines of national policy-development and implementation will not suffice to cope with transnational (global) developments. This is not confined to financial markets but includes future infrastructural requirements, human capital and most of the procedural routines developed in crucial policy areas. There is by now a growing recognition that the traditional modes of steering and control have to be reconsidered especially in the light of a reduced national ability to regulate crucial tasks (iSteuerungsillusion ). The perception of national policy making both at the Bund and Länder level undergoes respective changes: supranational demands and functional necessities are to be taken into account to a much greater degree than before. That, in turn, tends to undermine the positive routines of the German administrative system further, thus contributing to existing problems not only of performance, but also of legitimacy and acceptance.

VI. Main Areas of Reform In distinguishing between territorial reforms, an evaluation of public tasks (Aufgabenkritik :), an overhaul of the institutional setting, and a discussion concerning resources and personnel, it is easy to detect that the policy of smallscale adjustment is still prevailing within the German system. Despite the mounting pressures outlined above, the government seems reluctant to abandon the incremental approach to public sector reform. Although it became rather obvious during the last five years that the successful model of

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West Germany's federalism has not been able to absorb the striking disparities encountered after recreating the five Länder on the territory of the former GDR, territorial reforms seem unlikely. The identity-creating function of re-establishing the new Länder is best documented by the outcome of a referendum on the fusion of Berlin and Brandenburg. Despite various functional advantages of a larger territorial unit, the population of Brandenburg refused a merger with the capital, obviously afraid of an expected patronisation. Given the outcome of this referendum, other plans to overhaul the federal system are currently being shelved. These include the integration of the city-states of Hamburg and Bremen into the surrounding Länder , and the amalgamation of smaller Länder, such as Saarland and Rheinland-Pfalz. It may be argued that German federalism is characterised by a very specific - and not least historically founded - structural rigidity, and that it thus eludes comparative analysis. Yet, the public sector can nevertheless be shown to lag behind, if compared to private sector development and the organisational structure of intermediate organisations. Here, one can detect first signs of an emerging "new federalism" in which co-operative arrangements and institutional amalgamation increasingly disregard Länderboundaries. While the top-down approach at over-hauling German federalism seems to hold little promise, sectoral pressures may thus be working to reform the system from "below". As regards public tasks (,Staatsaufgaben ), Germany always experienced difficulties in functional reforms, i.e. a reallocation of competencies between the Bund , the Länder , special regional authorities and the local level. Parliamentary commissions failed several times in developing policies that would have met with the consensus of the leading parties and the population. Marginal adjustments during the 1960s and late 1980s do certainly not qualify as "administrative reform". Neither is the track record of German governments regarding deregulation and privatisation an impressive one. Though the localities were successful in shedding some of their load of responsibilities by cut-back, retrenchment and contracting-out, privatisation and de-regulation initiatives on the Länder and Bund levels have, until relatively recently, been rare occurrences despite a political rhetoric which suggested otherwise. Yet, the pressure of European de-regulation and liberalisation of specific markets (in some cases combined with corresponding GATT/WTO obligations) has led to some advances in this field. However, as the prerogative of the European Court to impose fines on non-compliant EU-member states may indeed speed up the process of de-regulation, it is worth noting that the bulk of public tasks continues to be determined at the national and sub-national levels. Most may never require an opening-up to European competition - the impetus for redefining the boundary between the public and the private sector remains a distinctly national reform project.

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Concerning reforms of the institutional set-up , some of the Länder tried to reduce the number of ministries/departments, without succeeding in decreasing the staffing level of public servants and public employees significantly. On the federal level, plans to streamline the governmental machinery remained on paper; they did not really reach the level of implementation. One witnesses, therefore, a "bottom-up"-approach at institutional reform in Germany. Whereas the localities succeeded in reacting flexibly to new demands and a significantly changed environment, Länder and especially the federal level (Bund) were, and are, slow in realising the importance of reform. Of all reform projects, a redefinition of the number and the responsibilities of federal ministries would perhaps be the least affected by "checks and balances" - as it is constitutionally the Chancellor's prerogative. Nonetheless, the need for bargaining within coalition governments effectively rules out even this "easy" option. At the same time, the necessity to engage in a more far-reaching reform of the governmental/ administrative setting is clearly documented in the budgetary problems Germany is faced with since 1992 at the latest. The costs of unification and a significant slow-down of the national economy made cut-back policies inevitable. Whereas the government escaped in 1993 and 1994 unavoidable policies to curtail public spending, it is now forced to react much more decisively and has done so. During this process, post-war Germany is by now seriously reviewing basic social provisions, cutting for the first time in its history into the social safety net to a significant extent; the social climate and the established ways of consensus-building are, as a result, under unprecedented threat. Things got worse by the budgetary stringency associated with securing Germany's early entry into European Economic and Monetary Union. Growing uncertainty and social tension are, therefore, the price to be paid for the overlap of these two policies. The "reform overload" following from these developments is further documented in the growing awareness of the necessity to reduce the number of public servants and public employees significantly. The rather pampered German public service cannot, therefore, escape serious scrutiny. As the very generous pension schemes are no longer to be financed out of the state budget, the debate has progressed as far as to include the suggestion that only a core of public servants should remain, taking care of necessary regulative policies, whereas the bulk of public activities ought to be handled by employees, or, to a much lesser degree, be contracted-out. However, the system of checks and balances - entrenched as much in German political culture as it is solidified in institutional and intergovernmental relations - grants "quasi-veto powers" to many a political and societal interest group; and nowhere does the resulting paradox of "stability turned rigidity" become more apparent than in the case of the public service. The legitimate effort to safeguard one's interest becomes an unmerited reform blockade if the actor in question is both the subject and object of reform.

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V I I . Options for Reform Given the legacy and the current state of public sector performance, and the expectations arising from that, administrative reform in Germany is confronted with the difficult task to reconcile a substantial review of its basic features with an attempt to preserve as much of its stabilising function as possible. Three options are to be distinguished: More of the same/business as usual·. This option sees the given difficulties as a temporaiy development that is to be understood as short-term and cyclical. One ought to concentrate, therefore, on minor reform initiatives that aim to preserve the positive effects of the system's stability by adapting institutions and procedures to the changing environment. It is rightly argued, however, that this "business as usual" attitude may not suffice as the economic expectations will not allow to "smooth over" structurally consolidated problems again and to pacify anti-reform constituencies in the usual manner. Preserving the system's essentials/piecemeal approaches : A slightly more rigorous attempt at reform tries to capitalise on the growing public consensus about the need for public sector reform. This approach is to be distinguished from the adaptation option in that it aims to follow a longer-term vision, acknowledging that the system needs a significant overhaul in a number of its key characteristics. The option hopes that if the structural conditions and countervailing influences of and within the German governmental system are taken into account, and problem areas are approached one by one, it promises to preserve much of the highly valued stability without "throwing the baby out with the bath water". On the other hand, this approach might founder due to the mentioned complexity of the German policy process. Joint-policy making, the much cherished consensual model and the still quasi-corporatist way to involve intermediary institutions effectively provide those most affected by individual reform initiatives with the mentioned "quasi-veto". A leap forward/comprehensive reform : Finally, advocates of a comprehensive public sector reform argue that the mounting back-log of reforms (Reformstau) combined with the ever increasing external pressures can no longer be approached either by adaptation or piecemeal evolution. This option aims, therefore, at a comprehensive overhaul of the administrative machinery. The almost simultaneous approach to each of the problem areas identified above opens up the possibility of a coherent set of mutually supportive reforms. Opponents to this approach argue that comprehensive reforms are undoubtedly extremely difficult to enact within the German context. Given the experiences with previous "non-reforms" and the structural characteristics of the German system, combined with the realisation that reform initiatives cannot be accompanied by compensatory payments at a time of resource squeeze, this model may well aggravate distributional conflicts.

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V i l i . On the Future of the Public Sector in Germany: A Speculative View The German case to induce public sector reform is interesting in that it shows for decades an almost unchanged set-up that worked without the need for reform. Given the legal and institutional environment after 1945 (that the country owes not only to the influence of the Western allies, but also to a number of mostly overlooked continuities), the system functioned without major deficiencies. Intergovernmental arrangements provided a smoothly running governmental machineiy, a broad public consensus allowed for stable policy making and solid implementation, a corporatist decision making model tied various societal actors to the state. This way, (West) Germany succeeded in becoming almost a model, i.e. an established system of checks and balances that exploited the positive functions of multi-level government and public administration to secure unprecedented wealth and stability. Fuelled by an almost uninterrupted economic recovery and based on broad public acceptance, public administration just functioned. It provided the services as needed, saw to the implementation of necessary interventionist policies, and acted as a flexible early warning system as regards economic and social developments. Given this legacy, the respective governments hoped for an on-going process of in-built adaptation and did not engage in serious reform attempts. That situation changed almost dramatically from 1989 onwards, as the double challenge of unification and Europeanisation altered the rules of the game. Suddenly, established institutions looked old, distributional conflicts grew to an extent unobserved so far, the accepted routines of decision making were questioned by most societal actors. Now, the governments were faced with a reform overload that they seemed not able to cope with so far, as it challenges too many of the established routines almost simultaneously. Looking at the demand side of public sector reform, it is widely recognised that many of the mentioned features of German public administration seem no longer adequate for coping with both unification and the economies of scale brought about by Europeanisation and globalisation. At the same time, the public, for years accustomed to ask more from the public purse and to get it, started to realise that public sector reform is inevitable. Although this has not led to a new consensus yet, as the different segments of society facing difficulties are reluctant to engage in a "solidarity pact", it looks as if the broad public seems to agree that the old system outlived its purpose and that therefore reforms are inevitable. The supply of reform initiatives, on the other hand, is conspicuous only in its near absence. Though many reform options are being discussed in the broader debate, few are actually introduced into the political process. Those which do 14 Hesse

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reach the decision making level are being watered down to the point of being abandoned. The political structures of the country are not yet able to cope with the demand. This discrepancy between demand for and supply of public sector reform is largely due to the structural characteristics and countervailing forces mentioned. They restrict the room for manoeuvre of those who attempt to advance a public sector reform programme. The price to be paid for the much hailed stability inherent in the German administrative system now appears to be rising to a level, at which the characterisation of the Federal Republic as a sclerotic "giant tied down" can no longer be viewed as an overly polemic expression. "Rejuvenating the machinery of government" seems an unlikely outcome of the present debate, since the required resources are not really available. That is why "breaking with tradition" is considered the only option. As the mentioned contextual conditions remain the same and the demand for public administration reform is growing at a rate at which the political decision making process will and can no longer tolerate "vetoes" on the supply side, structurally more important reforms seem likely. It is at least not unreasonable to assume that, given the growing consensus on the need for reform in the post-1989 period, political parties now seek to capitalise on this demand-led process of reform by explicitly including comprehensive reform plans in their programmes. The question remains, however, whether the growing public awareness of the problem will ensure that programmes do not remain mere declarations of intent. Political will on issues of administrative reform is still somewhat of a scarce resource in the German political process. Admittedly, it may not be possible for a small group of determined individuals to resolve the paradox of "stability turned rigidity" by promoting a clear vision or ideology. The strength of political will required to engage in a comprehensive reform programme in Germany may have to be far greater than elsewhere, as it first has to disentangle the web of institutionally safeguarded or constitutionally guaranteed interests. A true "Reform Chancellor" would have to be more ruthless in dismantling institutions than Margaret Thatcher, more skillfull at winning over interest groups than Ronald Reagan, and more cunning in dealing with his party and the electorate than Roger Douglas - a combination which it is unreasonable to expect. It may therefore need specific political circumstances, such as a Grand Coalition, to advance policies that go beyond the patching up exercise. Additionally, a more comprehensive approach to public sector reform may have both intended and unintended consequences. Such a reform initiative might reach the level of a more ambitious privatisation programme, further attempts at deregulation, or a reduction of social provisions to reach the (much lower) European average. The economic downswing clearly indicates that in the absence of such reforms, Germany will not be able to compete on an equal foot-

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ing with the US/Canada, Japan, and its main European partners/rivals in a further internationalised economic setting. To understand that and to reach a new consensus on the policies necessary to allow for according reforms might change the political climate in the country. The intended outcome of public sector reform could, therefore, lead to the unintended result of a significantly changed political and social environment/climate. The German case seems, therefore, a "success story" turned into a comparative (and hence competitive) disadvantage - due to the reluctance to learn from experience (both domestically and internationally) and the resulting inability to react in time to changed conditions. The degree of stability achieved by the Federal Republic has been remarkable, though what was sought, hoped for and found after the Second World War has turned into a seemingly insurmountable obstacle to reform in view of the economic, political and social "double challenge" of unification and Europeanisation. Instability may yet be the paradoxical result of the determined search for stability: (a) Comprehensive reform - if it is as rigorously pursued as seems necessary threatens to undermine a social and political consensus built on decades of established routines in public sector performance, interest group participation as well as unprecedented levels of service provision. (b) A continuing inability to reform the public sector, on the other hand, may indeed lead to the veiy same result, as forced cut-backs affect service provision indiscriminately, policy-making stagnates and functional deficiencies lead to patchy policy implementation. There seems to be no middle course to be steered. Yet, steering a middle course is exactly what the "German model" is exclusively geared to select.

References Aber bach, LOJDerlien , H.-U JMayntz, R JRockman, B.A. (1990). "American and German Federal Executives - Technocratic and Political Attitudes". International Social Science Journal 42/1, 3-18. Andersen , UJWoyke, W. (eds.) (2000). Handwörterbuch des politischen Systems der Bundesrepublik Deutschland. 4. Auflage. Opladen: Leske + Budrich. Aucoin, P. (1990). "Administrative Reform in Public Management: Paradigms, Principles, Paradoxes and Pendulums". Governance 3/2, 115-137. Bandemer, S. ν./Blanke, BJNullmeier, FJWewer, waltungsreform. Opladen: Leske + Budrich.

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Ellwein, Th. (1994). Das Dilemma der Verwaltung. Verwaltungsstruktur und Verwaltungsreformen in Deutschland. Mannheim: BI-Taschenbuchverlag. Ellwein, ThJHesse, J.J. (eds.) (1985). Verwaltungsvereinfachung und Verwaltungspolitik. Baden-Baden: Nomos. — (1997). Der überforderte Staat. Frankfurt/Main: Suhrkamp. Ellwein, Th./Holtmann, E. (eds.) (1999). 50 Jahre Bundesrepublik Deutschland: Rahmenbedingungen, Entwicklungen, Perspektiven. Opladen/Wiesbaden: Westdeutscher Verlag. Fürst, D. (1987). "Die Neubelebung der Staatsdiskussion: Veränderte Anforderungen an Regierung und Verwaltung in westlichen Industriegesellschaften", in: Jahrbuch zur Staats- und Verwaltungswissenschaft 1987, Baden-Baden: Nomos, 261-284. Fulbrook, M. (2000). Interpretations of the Two Germanies. 2. Auflage. Basingstoke: Macmillan. Gemeinsame Verfassungskommission (1993). Bericht der Gemeinsamen Verfassungskommission. Zur Sache 9315. Bonn: Deutscher Bundestag, Referat Öffentlichkeitsarbeit. Grimm, D. (ed.) (1994). Staatsaufgaben. Baden-Baden: Nomos. — (1994). Die Zukunft der Verfassung. 2. Auflage. Frankfurt: Suhrkamp. Helms, L. (ed.) (2000). Institutions and Institutional Change in the Federal Republic of Germany. Basingstoke: Macmillan. Hesse, J.J. (1987). "Zum Stand der Verwaltungsvereinfachung bei Bund und Ländern". Die Öffentliche Verwaltung, 474ff. — (1995). "Comparative Public Administration: The State of the Art", in: J. J. Hesse and T. A. J. Toonen (eds.), The European Yearbook of Comparative Government and Public Administration, Vol. 1/1994. Baden-Baden: Nomos, 523-549 — (1997). "Rebuilding the State. Public Sector Reform in Central and Eastern Europe", in: J.-E. Lane (ed.), Public Sector Reform. Rationale. Trends and Problems. London: Sage, 114-146. — (2002). Staatsreform in Deutschland: das Beispiel der Länder. Neun Untersuchungsberichte zur Situation in Hessen, Nordrhein-Westfalen, Brandenburg. Schleswig-

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Holstein, Mecklenburg-Vorpommern, Rheinland-Pfalz, Sachsen-Anhalt, BadenWürttemberg und Bayern. Berlin: de Gruyter. Hesse, ì.ì./Benz , Α. (1990). Die Modernisierung der Staatsorganisation. Institutionenpolitik im internationalen Vergleich: USA, Großbritannien, Frankreich, Bundesrepublik Deutschland. Baden-Baden: Nomos. Hesse, J.JJEllwein, T. (1997). Staatsreform in Deutschland - Das Beispiel Hessen. Gutachten für den Bund der Steuerzahler Hessen. Berlin/Wiesbaden. — (2003). Das Regierungssystem der Bundesrepublik Deutschland. 9. Auflage. Berlin: de Gruyter. Hesse, i.J./Hood, Ch./Peters, B.G. (1999). Paradoxes in Public Sector Reform: Soft Theory and Hard Cases. Ms. Oxford/Berlin. Hoffmann-Riem, W ./Lamb, I. (1994). "Negotiation and Mediation in the Public Sector The German Experience". Public Administration 72/3, 309-326. Isensee, J. /Kirchhof, P. (eds.) (1987-2000). Handbuch des Staatsrechts der Bundesrepublik Deutschland. 10 Volumes. Heidelberg: Müller. Johnson, N. (1983). State and Government in the Federal Republic of Germany. The Executive at Work. Oxford: Pergamon. Knemeyer, F.-L. (2000). "10 Jahre kommunale Selbstverwaltung in den „neuen Ländern": von der DDR-Kommunal Verfassung zu eigenständigen Länderselbstverwaltungsgesetzen". Die Öffentliche Verwaltung 53/12, 496-501. König, K. (1997). Modernisierung von Staat und Verwaltung: zum neuen öffentlichen Management. Baden-Baden: Nomos. König, K. ! Siedentopf, H. (eds.) (1997). Öffentliche Verwaltung in Deutschland. 2nd ed. Baden-Baden: Nomos. Lane, J.-E. (1994). "Ends and Means of Public Sector Reform". Staatswissenschaften und Staatspraxis 6/4, 459-473. — (ed.) (1997). Public Sector Reform. Rationale, Trends and Problems. London: Sage. March, J.G./Olsen, J.P. (1984). "The New Institutionalism: Organizational Factors in Political Life". American Political Science Review 78, 734-749. Maurer, H. (2000). Allgemeines Verwaltungsrecht. 13th ed. München: Beck. Naschold, F./Bogumil, J. 2000: Modernisierung des Staates. New Public Management in deutscher und internationaler Perspektive. 2nd edition. Opladen: Leske + Budrich. OECD (1997). Issues and Developments in Public Management: Survey. Paris: OECD. Renzsch, W. (1991). Finanzverfassung und Finanzausgleich: die Auseinandersetzungen um ihre politische Gestaltung in der Bundesrepublik Deutschland zwischen Währungsreform und deutscher Vereinigung (1948-1990). Bonn: Dietz. Sachverständigenkommission für die Neugliederung des Bundesgebiets (1973). Vorschläge zur Neugliederung gemäß Artikel 19 des GG. Bonn. Schäfers, B. /Zapf, W. (eds.) (2001). Handbuch zur Gesellschaft Deutschlands. 2nd ed. Opladen: Leske + Budrich Scharpf, F.W. (1991). Die Handlungsfähigkeit des Staates am Ende des zwanzigsten Jahrhunderts. Köln: Max-Planck-Institut fur Gesellschaftsforschung. Schuppert, G.F. (1981). Die Erfüllung öffentlicher Aufgaben durch verselbständigte Verwaltungseinheiten. Göttingen: Schwartz.

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Substance Came with Little Hype. Public Sector Reform in the Netherlands By Theo A. J. Toonen

I. Introduction: Between "Dutch Disease" and "Polder Model" "Strange, how silently a unique system finds its end."1 Many sectors of government and government operation, and thereby the Dutch public sector as a whole, underwent a complete overhaul in the last 10 to 15 years. For quite some time, however, many of these sectoral changes and functional reforms went unnoticed in the broader debate on administrative and public sector development. Of course, there was an interest in and strong academic and political debate on budgetary reforms and retrenchment policy. There were occasional models and government programmes (on deregulation and privatisation) that caught the attention of a wider audience. The city of Tilburg achieved international acclaim for their businesslike approach to the management of local government; there were others as well. But, for quite a while, the overall impression was that the Dutch governmental system was slow to change - if even capable of it. Political scientists traditionally presented the Dutch case as an example of "institutional sclerosis" and conservatism (Andeweg 1989; Daalder 1989). The persistent question was: continuity yes, but how much change? Administrators and politicians complained about the entropy, slowness and the lack of solid reform capacity in the Dutch "consensus system" of deliberation and accommodation (Duyvendak; RBB 1996). They had numerous cases to illustrate and substantiate their claim. There were abundant examples of official government reform programmes that failed to produce any tangible outcomes. These accounts stretch out over a long period of time. Many standard illustrations of "nonreform" within of the Dutch public sector go back to the early 1970s.

1

C.D.M. Brans, ex-director Catholic Broadcasting Association, De Volkskrant, 1 July 1997.

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Proposals for change and reform - and there have been many - seemed to meet an equally abundant resistance to change, thus keeping the system in its place. Institutional reform plans and efforts to modernise and "democratise" government at national, local and regional level were notoriously ineffective. Often they were simply discontinued while still in the design stage, a process that in many instances took much longer than outside observers deemed necessary. Not only in terms of the "traditional" institutional types of reform, but also in terms of the more recent reform paradigms of the late 1980s-early 1990s, the system did not seem to change much. Since the early 1990s, the neo-managerial dimensions of the reforms of the Dutch public sector have been recognizable from the outset. By the mid-1990s, the Dutch case was consistently classified or rated, not as a front-runner, but neither as laggard in the public sector reform game. On balance, however, and from the perspective of those who for a long time only considered the neo-managerial NPM-type of reforms as the "real" one, ongoing reforms in the Netherlands seemed not very spectacular, much less breathtaking, all encompassing or consistently pursued. The "failure to reform" - in institutional and in managerial terms - contributed to the image of a government system with very modest adaptive reform capacity. Many of the manifest economic, government budget and public policy problems - there was even talk of a structural "Dutch disease" - were attributed to this "stickiness" of the system, its "entropy" and its inability to reform. This situation changed almost overnight. In the media, both national and international, there was suddenly talk about "a Dutch model" of public sector reform a "Polder Model" (e.g. The Economist , 12 October 1996; The Wall Street Journal, 27 December 1996; Le Monde , 18 November 1996; Le Nouvel Observateur , 3 October 1996; Frankfurter Allgemeine , 20 September 1996; Die Zeit, 13 September 1996; Die Zeit , 10 January 1997). In the general perception, the Netherlands changed into an internationally acclaimed hallmark of what was to become known the "Third Way"-type of reform: improving economic and public sector performance by introducing monetarist and neo-liberal economic conceptions while keeping a strong social profile in terms of social policies, employment and labour market policies. By the mid-1990s, the Dutch system exhibited a solid economic performance - both in terms of absolute EMUstandards, as well as relative to Germany, being considered as all-important benchmark for the Dutch economy. This development was sustained in the second half of the 1990s. The Dutch economy performed within the European top not only in monetary terms, but also in terms of relative job creation and strong economic growth for years in a row under conditions of moderate inflation. The surprise about the model is that it seemed capable of combining budgetary restructuring and the reduction of deficits and government expenditures, with low inflation, low interest rates and gradually increasing employment - reducing previously high levels of unem-

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ployment to figures way below the European average. It proved to be an early example of the Third Way in public sector reform. Gone were the stories on the Dutch disease, even though accounts of when and how it was cured were hard to find. Also, in the broader European perspective the Netherlands suddenly became "a model". Civil servants and politicians from all over the world, looking for the Holy Grail, flooded the country. Entrepreneurial academics quickly cashed in on "the Dutch Miracle" (Visser/He merijck 1997). All of this change happened to the country, much to its own surprise: in public opinion and the media, in politics, in academia and among the administrative élite. It is important to realise that the Dutch Model was initially 'discovered' by foreigners, not by the Dutch. The hitherto dominant trend in the Netherlands was to criticise the system for almost all the institutional features that would later be hailed as the Polder Model. Many Dutch observers and "insiders" are still sceptical about the existence and appreciation of something like a Polder Model. The events, however, have caused people to look at public sector developments in a different way and reconsider what has actually been going on over the past 15 years. With the advantage of hindsight, people began pointing at certain "crucial" events in the early 1980s. For example, the so-called Agreement of Wassenaar, where government, employers and unions in the longstanding tradition of tripartite, neo-corporatist decision-making negotiated a "social contract" to trade a sustained reduced wage policy by unions and employers in exchange for the reduction of governmental expenditures and - as a consequence - a lowering of taxes. At the time, however, such social contracts were made on a yearly basis. They were part of the rituals of the Dutch neo-corporatist process. Many of them had previously been referred to as examples of ineffective reform plans in terms of " A l l talk, no action" type of statements. For a long time, the Agreement of Wassenaar went undetected in any other way than as yet another one of the obligatory and ritual statements considered inherent to consensual and consociational Dutch politics. In retrospect, the appealing "success" of the model, however, resulted in the re-invention of its own fathers, own symbols, like the Agreement of Wassenaar, and own institutional logic. Key figures in the story on the Polder Model are the then Prime Minister Ruud Lubbers and the then Labour Union Leader Wim Kok. Ten years later, the latter would become the much praised and utterly pragmatic Social Democratic Prime Minister of the first (and second) "Purple Coalition". This coalition combined conservatives, neo-liberals and social democrats, excluding the Christian Democrats from power for the first time in modern Dutch political history. The reconstruction of the origins of the Dutch Model also suggested critical turning points and consecutive steps, which -

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again in hindsight - might explain the model and the process of reform. The process is described, explained and may be rationalised by "backward mapping". The reality is that nobody really saw its international success and periodical effectiveness coming until after it occurred. The paradox that the Dutch case represents to the international community of public sector and administrative reform analysts is therefore that, for once, substance came with little hype . Public sector reform is typically the domain of Big Statements, Grand Schemes and determined political leaders promising the world to their nations. Many paradoxes of public sector reform follow from the logic that political rhetoric and government promises are not supported by operational policy choices. The paradox of the Dutch case is that the operation of the system showed more capability for change and reform than the politicaladministrative establishment had dared to publicly dream of. Underneath are some additional, derived paradoxes. The case seems to indicate that many observers have traditionally been studying the " A l l hype and no substance"-type of reforms. This implies that reform sciences like political institutional analysis, rational policy analysis, and organisational analysis - paradoxically - contributed to the neglect of the empirical substance of public sector reform in the Netherlands. This gives rise to another potential paradox. If public sector reform - that came with little hype - indeed had substance, unnoticeably it might effectively have been changing - re-forming - some of the structural and institutional conditions which may explain the success of the model. The current hype about the "miracle" of the Dutch Model runs the risk of turning into an inability to perceive, study and understand the need for and substance of future reforms within the Dutch public sector. Paradoxes, understood as seeming contradictions, are analytical tools. They need to be explained. Paradoxes disappear when put into the right contextual and explanatory perspective. In this contribution we aim at explaining the "paradox of the unnoticed reform" which the Dutch case represents. A large part of the performance of the Dutch Model has to be attributed to economic and financial factors, particularly a restricted overall wage policy since the early 1980s agreed upon by unions, employers and government, as well a consistent, sustained and seemingly effective effort over the same period to bring public expenditure under control. What is often overlooked, is that, both directly and indirectly, this raises questions about the administrative and institutional dimensions of public sector reforms and their meaning in the larger picture of Dutch economic development. It is now observed as a fact, but it is actually a paradox in itself, that the government managed to keep its promises inherent to the Agreement of Wassenaar. At the time, nobody presented the need, much less an overall plan, for substantial public sector reform. What has been the "hidden hand" to guide - in this case - not the market, but government? How important

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are administrative structures and traditions for explaining paradoxes of public sector reform? We start by describing, in general terms, the nature of the reforms (Section II). Subsequently, we will analyse some underlying patterns and institutional variables (Section III). In Section IV, we present some concluding remarks about reform in a consociational system.

I I . Public Sector Reform in the Netherlands It is not easy to give a complete and exhaustive overview of reform initiatives that have passed the scene in Dutch public administration since the late 1970s. There is much more to Dutch public sector reforms than "agencyfication" or "privatisation". Anyone who looks at the reforms of the Dutch administrative and public sector system from the view of management reform will only get a restricted and possibly even distorted picture of developments. From a generic PA perspective, ongoing management reforms are important, but are not, perhaps, the most striking developments. In any case, they only explain one element of reform within a larger reform pattern. There is hardly a sector within the Dutch sphere - both functionally and territorially defined - that has not witnessed serious institutional stress and attempts at administrative reform of some sort or the other over the past few years. From law enforcement to social assistance, social security and social welfare policy, from public health to the agricultural and farming sector, from the media to the educational system, from labour market policy to social housing, and from public sector labour relations to mental health care it is difficult to find a policy area which has not been confronted with organisational crises, administrative accidents, surprising "sudden developments", or the erosion and undermining of the role of traditional institutions and subsequent reorganisations and reforms. Recurrent parliamentary investigations took place since the middle of the 1980s in areas such as housing subsidies, the failure to effectively produce a new passport, social security, social assistance, criminal justice and police, and the financial policy regarding the new independence of housing corporations. In the different cases the conclusions had a familiar ring: it is everybody's fault, but nobody in person is really to blame. It is the fault of "the system". More than once these parliamentary investigations revealed cases of "institutional failure". Very often this was the starting point of efforts to reform, reorganise or modernise this system as a whole. It is also not yet clear what direction the public sector reform movement in the Netherlands will take. It is obvious that considerable changes occur in the intergovernmental system and relationships among governments, within the former "neocorporatist" governance structures between state and society, and

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within the relationships of national, regional and local governments with the extended network of social organisations at the "midfield" between state and market (Toonen 1996; Toonen et al 1996). In Dutch policy-making, the traditionally very important interface of the "para-governmental" civil society organisation and the governmental institutions of the administrative state is bound to go through substantial changes and subsequent reforms. It has to be staged against an autonomous reform development, which is implied by the historical and - for many core businesses of government policy - still highly relevant process of institutional de-pillarisation, starting in the late 1960s, but in some sectors only in the late 1980s and during the 1990s. Developments at the end of the 1990s have finally reached formerly untouchable policy domains such as education, the media, the almost sacred national broadcasting system, the organisation of the "green front" (which in the Netherlands means farmers), the institutional organisation of labour market policy, the health care system, social security and social assistance. Formerly strong and untouchable institutional bulwarks like regional employment offices and local social security offices and their national institutions suddenly face a far-reaching reorganisation. Similar events have taken place within many other traditional sectors of government activity: local housing corporations, social assistance, health insurance, police, criminal justice, public transport, elderly care, local school systems and education. Many of these institutions and organisations are by now attempting to reposition themselves as "social entrepreneurs". In an effort to provide something of an overview, we will look at the reforms that have occurred since the early 1980s and try to describe them from four different angles: - reform of budget, organisation and management, - reform of policy and decision-making, - reform of public sector structure and institutions, and - administrative transformation. A l l of these reforms are characterised by a degree of intentionality. But one characteristic experience is that in a system of reform by negotiation, like the Dutch case, the outcomes are seldom congruent with the originally stated purposes. Seen as a comprehensive enterprise, it is also important to observe that there has been no overall blueprint, doctrine or reform design underlying the process. One could even observe that there is something strange about the Dutch debate on modern public sector reform. "Managerial approaches" are superficially criticised as the official reform doctrine, particularly by academics, as well as perfunctorily advocated in some other areas, particularly in the world of management consulting. The empirical situation is much more mixed. There is no official "public sector reform ideology" of the government, much less a

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managerial one. Managerial initiatives, when effectively implemented, are blended into the system in such a way that much of the academic criticism has very little to do with the reality of reform. There are bad cases of reform and then there are, of course, better ones. The implementation of the reforms, not the concept, ought to be the focus of academic research. This is often not the case. Many of the reform initiatives in the Dutch case have to be understood as a by-product of an adaptation process to larger historical and international changes. Despite the fact that reorganisations do occur at various levels of government, there is not one model which is being implemented. Even the individual national ministries, despite efforts to integrate them into a "general governance service", very much follow their own plan.

1. Budgetary and Managerial Reforms The driving force that reduces all developments and reforms to one common denominator is the reform of the government budget and public sector finance. Although many new governance philosophies have been developed - and the new management thought left its imprints - , these have followed as rationalisations, they have not led the events. This applies in particular to the notion of "rolling back the state". While it is true that government expenditures have been reduced as percentage of GNP, this is more the outcome of an effort to balance the budget and to reduce a considerable budget deficit, which had developed over the 1970s, than to replace government by the market. The privatisation movement has been modest, in comparative terms, and state involvement in Dutch society is probably as strong as ever; it is that the structure of this involvement has changed and is still in the process of changing. Even though there was no centrally prescribed policy or systematic overview, it is clear that governments at various levels within the system went through major internal reorganisations during the 1980s. In the course of this process, modern managerial concepts have caught on. They form, for example, the leading modernisation philosophy, from which municipal social assistance agencies are being modernised and innovated under a revised, more decentralised legal system giving local governments more discretion in implementing national social assistance policy. The corporate model has become very popular at provincial and municipal levels and this typically required the integration of formerly departmentalised organisational structures into integrated management boards. However, several municipalities attached different meanings as to what precisely the corporate models meant for their own political and administrative organisations.

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At the local level, privatisation in the sense of contracting out facility services (catering, administrative services, architectural services, maintenance services, etc.) has become a rather widespread practice. In the process, many municipal and provincial utility corporations have been transformed into independent corporations, sometimes under the influence of national policy. It seems the internal market idea has not caught on very well, although contract management has become a frequently applied management tool. In the reorganisation of the social security system, privatisation, market-testing and contracting out have become important organisational principles for the "back-offices". Facility services and administrative support units have been privatised - with a transition period - and are supposed to be offered to municipal "core agencies" on a competitive basis. The use of managerial techniques in professionalising the business-process aspect of administrative organisations and policy processes, stressing client orientations and integrating fragmented services into one municipal "shop" or "window", has increased dramatically. But at the level of the system as a whole, managerial innovation is clearly still in an experimental stage, with some municipalities and some sectors within municipalities far ahead (Tilburg and Delft are the classical examples) and others clearly more reluctant or even uninterested. At the national level, several ministries have introduced corporate-like models to replace the traditional divisionalised patterns, but there is certainly not one model that is being followed. The same applies to efforts at "agencyfication" and the creation of core departments. This has been on the agenda throughout the 1980s. Whole lists of units to be transformed into independent agencies have been produced, but the outcomes were modest. In 1997, some 15 new agencies were recorded as being established since 1994. In interpreting this, one should be aware that the Netherlands experienced already a long and extensive tradition of "functional decentralisation" and outsourcing government activities to non-profit and not-for-profit third sector organisations. These units fall outside the definition of an "agency", which is defined as an independent governmental organisation, based on contract management. In the early 1990s, the creation of core departments within a more generalised national civil service was officially announced. However, the Dutch structure proved still very fragmented, with a high degree of autonomy to individual departments. Attempts at agencyfication have been observed in some cases. The Ministry of Education has even externalised parts of its strategic policy development. The results seem, however, to reflect more of a reaction to traditional organisational patterns than the adoption of a new philosophy. In some cases the Ministry of Agriculture, for example - developments reflected the changes in corporatist state-society relations in a broader institutional setting. Just as striking as the creation of independent agencies are efforts of some departments

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to create new "interactive" governing and steering systems vis-à-vis the implementation field. A larger part of the administrative reforms has to be attributed to the budgetary reforms initiated in the early 1980s, largely continued into the 1990s, and stepped up in the early 1990s with the Purple Coalition. Although there is more to it, large parts of the national and local government reforms are budget driven. The "sliced cheese method", i.e. incremental proportional reductions of governmental budgets, has been used throughout the 1980s, both in the national budgets as well as in central-local finances. Revenue-sharing in the 1980s also meant the sharing of cutbacks to local governments. The cumulative effects of the according savings and "efficiency measures" often called for reorganisation or institutional reform. Apart from the internal restructuring, budgetary measures were the dominant force behind decisions to "contract out" or "privatise" as well. The financial-budgetary motive to get items off the governments budget and thus to achieve "public sector savings" has probably been a more important motive behind various privatisation schemes than the pursuit to strengthen the market or reap the benefits of competitive tendering. The budgetary pressures on the ministries have caused them to pay attention to the modernisation of their administrative processes, departmental organisation and management structures. In this process, modern managerial thoughts have certainly started to play an influential role, even though there is often a disparity between intention and outcome. Some departments have embraced the notion of becoming a "core department". But one should be aware that much of the executive work of ministries traditionally was already conducted by forms of "functional decentralisation" (i.e. carried out by independent administrative agencies which, historically, already existed in abundance) or "territorial decentralisation" (Dutch municipalities have traditionally assumed an important role in carrying out national policies). The newly formed "independent agencies" have been a way to try to formally remove a major source of expenses of the ministries budget or payroll, thus meeting bureaucratic "downsizing targets". Decentralisation and "agencyfication", in fact, often became book-keeping exercises instead of structural reforms. An important source of public sector savings were public sector salaries. After relatively strong cutbacks in government wages over a considerable period of time, as compared to the private sector, the limits of a savings policy with respect to direct expenditures came into sight. This made social security the big spender and therefore the logical target of subsequent savings and financial control. Government wages were cut drastically in the early 1980s and retained moderate growth ever since. Particular groups with a particular "market-position" (pilots to the Dutch harbours, IT specialists, architects, etc.) were often "laid

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off', i.e. "privatised", not for all the ideological reasons associated with "marketisation of public services", but in order to be able to pay more market conform prices to the professionals involved. Privatisation has clearly been a tool for personnel management. For example, the Dutch harbour pilots, "privatised" but not "marketised" in the mid-1980s, are now recognized as having made a "good deal" in terms of wage policy. The official reform philosophy was different at the time. An evaluation of the privatisation of several other former government monopolies is likely to show the same outcomes. Since the early 1990s, the formerly completely centralised collective wage bargaining system for the public sector as a whole has been replaced by a more differentiated "deconcentrated" model in which several institutional sectors (national government, provincial government, municipal government, police, military, education and schools) are now being treated as separate areas for public sector labour relations and wage bargaining. In this manner, more flexibility was created allowing for adaptations in collective wage development depending on the budgetary and political situation in any give sector. Again: a structural reform very much along the lines of the Human Resource Management (HRM) textbooks actually took place as a consequence of a basically budget driven reform policy. The overall reform pattern seems to be that at all levels of government the budgetary strain caused by a rather robust, strict and restricting policy over a number of years induced administrative organisations to engage in reform and to seek recourse to innovating public budgeting and accounting techniques. This has occurred throughout the system as a whole, even though it is a reform process of "varying speeds". Many individual local government and departmental units are lagging behind. The introduction of performance management has increasingly become a tool to try and increase government productivity. Managerial reforms have been abundant, but they have largely been the consequence, not the source of public sector reform.

2. Reforms of Policy- and Decision-Making The retrenchment policies of Lubbers I, which benchmark the turning point in Dutch public sector development, started out with the "Big Operations" in 1982. There were a variety of reform initiatives very similar to the Thatcher agenda in the United Kingdom during that period. Some of these programmes continued throughout the 1980s. Their aim was to quantitatively and qualitatively re-evaluate activities within the public sector. They included: reconsideration (encompassing revaluation schemes of governmental activity), deregulation, decentralisation, privatisation, retrenchment; the "-2% Operation" (a two

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percent-cutback on ministry personnel four years in a row), and the reorganisation of the public service. The results have been mixed and contradictory. In retrospect, it seems that the re-evaluation schemes in which civil servants were asked to list options for change and policy reform - to rethink government "without (immediate) strings attached" for their personal or organisational positions, have been particularly productive. These exercises became thresholds of innovating ideas for year to come. At local and regional levels, many of the same types of measures have been tried under the heading of "core business" discussions, which nobody prescribed but which at times washed over the country. They were less effective because they were less open ended and "free-minded". An important - if not the most important - domain of public sector reform in the Netherlands is the reform of its welfare state. Since the beginning of the 1990s, attention has concentrated on social security: social insurance, social assistance, and disability laws with a clear effort at reducing policy entitlements and pay schemes. The foundations of these policies were laid in the 1980s when the reform of the Dutch welfare state was advocated by many observers, but never materialised. The dominant political and social forces were too much against it, although there were signs for a collaborative effort of labour organisations and employers to restructure the system together with the government. It should not come as a surprise that the success of the Polder Model critically depends on changes being brought about within the transfer payments schemes of the 1990s. It took two parliamentary investigations, however, one on social insurance and one on social assistance policy, to take the initiative in restructuring the policy and administration of the welfare state. By that time, the slogan "rolling back the state" had lost much of its already minimal appeal of the early 1980s. Still, the social reforms have continued. In the 1980s, direct expenditures received more attention. Trying to get the transfer payments under control actually became a major government goal in the early 1990s. Two thirds of the public sector expenditure in the early 1980s consisted of redistributive transfer payments in the area of social insurance, unemployment and (locally administered) social assistance. Direct government expenditures (including salaries and investments) have, of course, risen in absolute terms since the 1950s, but hardly at all in relative terms. They have stabilised over the years at around 18-20 percent of GNP. The workers disability programmes (1967), in particular, had inadvertently been built into a generous system for hiding unemployment. During the 1970s and 1980s, many employers laid off workers - often with their consent - by putting them into these generous welfare schemes. The result was that by the 1990s, the Netherlands counted about 15 percent of its disabled workers as part of the labour force (compared to for example eight percent in Sweden, four percent in the USA and six percent in Germany) (Cox 1996). 15 Hesse

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Important savings have been realised by redefining entitlements in (various) welfare and social assistance policies and their strict enforcement. At the same time, a change in philosophy took place, transforming the traditional image of a welfare "safety net" into that of a "trampoline". Various programmes were being implemented; actors at all levels (labour offices; social insurance agencies; municipal social assistance services) within the social security system contributed to an activation policy aimed at constantly reducing the volume of entitlements and beneficiaries. The new policies sought to provide better links between labour markets, economic policies and social security benefits, thus trying to enhance the "outflow" of the welfare system. More than the service function, the "gatekeeper function" of municipal social assistance agencies to welfare programmes was being stressed. Not all developments within the public sector have been defensive. It is important to observe that new strategic choices have also been made or are being prepared for decision-making, particularly in the area of spatial planning and regional economic development. Since the end of the 1980s, these areas have been characterised by an explicit choice to "spatially target" economic and infrastructural investments in the big cities, as well as some seven to ten - depending on the definition - regional districts around larger municipalities across the country (Toonen/Glim 1995; Glim/Toonen 1996). By the end of the 1980s, and partly under the influence of the formation of the Single European Market ("Europe 1992"), new industrial and economic strategies were being developed to strengthen the international position of the Dutch economy. Some of this translated into administrative and intergovernmental questions, particularly where the urban economy was central as part of the chosen strategy. In a European perspective, the Netherlands was a latecomer in this respect. Most European countries rediscovered the importance of the urban economy and their urban regions for economic revitalisation in the early 1980s, and tried to adjust regional policies and administrative capacities accordingly (Hesse/Benz 1990). This brought along all kinds of reform needs in terms of physical planning, urban finances and the redistribution of general revenues to selected targeted areas to favour the central cities. The Netherlands began following this path in the mid-1990s under the heading of a "big city policy". Apart from substantial policy changes in goals and policy entitlements, there has been an interesting development towards what many consider a different style of "interactive" policy-making, characterised by a more co-producing attitude of policy-makers towards stakeholder groups. It is, however, a question of whether this is a real innovation or merely the continuation of an old Dutch (consociational) tradition in new clothes. In any case, this mode of policymaking is done more explicitly and consciously these days than ever before. The bottom-up development of interactive policy-making is exemplified by an

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important programme, which started out at the local level at the end of the 1980s and gradually expanded into an officially adopted national policy of "social renewal". More than just new goals and content, this programme was characterised by a new mode of working between governments and citizens, which now takes place on a project and neighbourhood basis. It has resulted in different "models" for the innovation of local and neighbourhood government organisation. Not content, but the style of governance changed. This programme has partially inspired many other forms of interactive or bottom-up policy formation, increasingly applied also units of government on a project basis. The interactive approach has been tried out as a new way of making the great locational, infrastructural and urban spatial decisions that the Netherlands is facing in the first decade of the 21 st century. Problems of congestion (environment, housing, mobility) threaten the Western region of the country - the Randstad area - that is traditionally the "engine" of the Dutch economy. It contains the Dutch main ports (Rotterdam Harbour; Amsterdam Airport Schiphol) and the four largest cities of the Netherlands (Amsterdam, Rotterdam, The Hague, Utrecht), which play a crucial role in the international economic strategy of "The Netherlands Inc.". What started out as an operational technique for managing at the street-level in the neighbourhoods, has developed into a macro-approach of strategic management for the intergovernmental system. In the first years of the 1980s, the Lubbers government began implementing its cutback policy to reduce government deficits. Although it would still take almost a decade to see real effects, municipal governments immediately felt the impact. A relatively large proportion of public savings was unilaterally translated into cutbacks of central-local financial transfers, forcing municipalities to drastically cut back their expenditures. Municipalities were granted the right to introduce user charges and other methods of making citizens pay for certain services that used to be free. Central government cashed in on these "local savings" beforehand. They included the expected returns for local user charges and "efficiency gains" already in the reduced financial transfers for local governments. Just as in Britain, local governments reacted furiously to this strategy. They were not angry about the cutbacks as such, but more about the fact that they had not had the opportunity to influence national government decision-making on how budgetary cutbacks in the local context were to be carried out. By the end of the first Lubbers government, frustrations in central-local relations were very substantial indeed. Dutch local governments have very few formal ways of influencing national politics, but unlike in the UK, there are many informal, "Napoleonic" types of interrelationships between various levels that local governments can turn to their advantage. There are numerous interdependencies built 15*

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into the system of the Dutch "decentralised unitary state" (Toonen 1990) which make central government departments keenly aware that "steering" in the Netherlands is not a unilateral affair. In addition, a deeply rooted need for coalition politics means that political alliances can sometimes be formed across the various layers of government, thus creating a more consensual context for resolving functional central-local conflicts. The start of the second Lubbers government marked the beginning of a different procedural approach towards these interdependencies. A hitherto legally unknown phenomenon, an "administrative agreement" signed between the Prime Minister on behalf of the government and the Director of the Dutch Association of Municipalities (VNG; a private, non-governmental institution which always speaks and negotiates on behalf of all Dutch municipal government), symbolised the new way of doing business in central-local relations. Although the content of the agreement was highly symbolic, it marked the beginning of a new stage. Initial widespread cynicism gradually made way for appreciation of this development. The "administrative agreement" still has no clear legal status, but has developed into a form of political covenanting that has expanded like an oil slick at all levels of government, both horizontally and vertically. The concept of "the negotiating government" was gradually catching the attention of Dutch public lawyers (Stout/Hoekema 1994). Since the second half of the 1980s, many cutback promises or sectorial reorganisations by local government in exchange for deregulation or other compensatory measures by national departments have been sealed by a covenant. Even the strong redistribution proposals for the general revenue-sharing system, favouring central cities and urbanised areas at the expense of suburbs, while heavily disputed, were the outcomes of a largely informal and in any case not legally institutionalised joint decision-making process based upon mutual consultation of central with local governments and among local governments themselves. One could easily speak, at least at the surface, of an informal reform of central-local relations. It has also affected the establishment and implementation of the Dutch efforts to deal with the revitalisation of the urban regional economy. By the early 1990s, this amounted to an official regional reform policy, which had officially been abandoned only a few years before. Since then, a de facto régionalisation process, targeting particularly at the strengthening of the economic and social position of urban centers, has been a characteristic feature of emerging central-local negotiations and reform processes.

3. Institutional Reforms It may be analytically possible and useful to make a distinction between public sector savings and policy-reforms, on the one hand, and institutional re-

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forms, on the other (cf. Lane 1995). The Dutch case suggests that in the world of public administration, the two categories are closely intertwined. Notable examples of policy reforms amounted to institutional reforms. Examples are: a "revolutionary" decentralisation of public housing; a "historical" reorganisation and régionalisation of the police; the decentralisation and privatisation of public transport; a complete reconstruction of the agricultural sector; decentralisation and strong managerial reforms of welfare and cultural policies at local levels; (failed) reforms of the health care sector (the Simons plan); and a substantial and up to that point incomprehensible decentralisation of primary education and the school system. The latter is an important historical development within the formerly completely nationalised educational structure of the pillarised system. The public organisation of primary education was at the heart of the historical controversy within Dutch politics. The reconstruction of social assistance policy carried out by municipalities is another example and may be seen as part of an effort to completely restructure the institutional nature of the Dutch welfare state. This reconstruction also affects the "third sector" which had already become the target of reform initiatives in various other policy areas. The third sector is currently a battlefield of social and bureaucratic interests. The restructuring and (partial) privatisation of social security/social insurance, both in terms of entitlements as well as institutional organisation, supervision and control, and the restructuring of labour market policies, institutions and governing structures, also on the basis of (partial) privatisation and territorial reorganisation, amount to substantial institutional reforms within the Dutch welfare state. Furthermore, the logic of the attempts at administrative decentralisation within social assistance policy amounts to a considerable intergovernmental reform of the structure of central-local financial relations, supervision, control, and of the intergovernmental management system. Central-local financial relationships in general have undergone substantial reform. The much hailed reduction of the number - be it not the volume and relative share in total transfers of categorical grants in the course of the 1980s has been a by-product of retrenchment, cutback and efforts to off-load the central government departments by pursuing decentralisation policies. This reform pattern is broader. A rather fundamental redistributional reform of the general revenue sharing system in favour of the central cities and at the expense of more affluent suburbs has been negotiated among national and municipal governments. It has been implemented, despite strong resistance from the "losers". It is important to note that the associations of local government have been closely involved in designing these rather substantial national government policy reforms and that the foundation for this consensual process to financial reform was laid in the mid-1980s, at the time of the first General Ad-

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ministrative Agreement of government and municipalities in exchange for a more interactive approach promised by the same agreement. Structural reform was implied by and embedded in policy reforms. There is a continued local government reform process going on that is not being presented as such, but which by now amounts to a scale enlargement of local government, which may easily measure up to the much discussed Scandinavian, Belgian or German reforms in the 1960s and 1970s. Dutch official local government reforms "failed" at that time. Over the past decade, the number of over 800 municipalities has been reduced to just below 500 municipalities, and the number is still going down, with several new plans still in the pipeline. After the UK and Sweden, the Netherlands now has among the largest local governments in Western Europe measured by the average number of inhabitants (>30,000). In addition, there has been a silent but spectacular reduction of the number of Water Boards that manage to keep our feet dry, but which are much neglected by the managerial and policy-oriented parts of the academic community. The number of Water Boards, locally responsible for the quality and quantity of water management, dropped from over 800 to about 60 within a period of a decade, an extremely short time span in the light of their centuries long existence. During the 1950s, the system still consisted out of more than 6,000 units. An institutional reform and external démocratisation has been imposed upon them. Both reforms indisputably amount to the most revolutionary changes of this institution in its 800 years of existence. Other important institutional reform initiatives deal with the legal-institutional structure of the Dutch Rechtsstaat (Scheltema 1995). There is a ongoing substantial reform of the judicial branch in the Netherlands, embracing both private as well as administrative law components. This reform is a response to internal and managerial demands and complaints about overload, procedural errors, trial delays, etc. Rulings from the European Court on the (perceived) lack of independence of Dutch administrative courts have further stimulated these efforts. The most important reform thus far entails the codification of the general system of administrative law, with potential "revolutionary" consequences for the operational management of government and administration at various levels within the system. The reform, among other things, insures the protection of citizens against government decisions. This means that several issues that have to be regulated in other countries by special "Citizen Charters" will also take place in the Dutch case, but they will be hidden as part of a much larger and integrated operation in administrative law system. It will easily be overlooked by scholars of "public management" who are typically not interested in matters of administrative law. From a comparative perspective, it will therefore be a most worthwhile exercise to analyse ongoing administrative law reforms from a

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managerial point of view and to compare outcomes to the New Public Management reforms in other countries. The fact that there may be no "Citizen Charter" in the Netherlands does not mean that the "customarisation" of the citizen is not going on in a different manner. A final example of a comprehensive institutional reform is the total overhaul of the advisory council system - the former "iron ring" around the government. The whole system was abandoned with one single law - nicked-named "the desert law" - which, apart from few exceptions, put an end to the whole patchwork of advisory councils around government. It replaced the old structure by a formally rationalised and trimmed-down new system in which - for the time being - every ministry has only one or two councils left. The agendas of the councils are no longer set by the experts and societal interests represented in the advisory council, but by the departments. The whole operation only took three years to be formulated and implemented. The system had been the object of strong and sustained criticism and ineffective reform efforts for over 25 years. This example of comprehensive and radical reform contrasts sharply with what is more characteristic for the reforms at this level of analysis. It is a striking feature of public sector reform in the Netherlands that amidst all of this activity - with mixed results and outcomes - reform failures have to be recorded with respect to the "official" administrative reform policies. The most prominent has been the (failed) reform of regional government and metropolitan policy; several others could be added (Toonen 1997). In addition, recurrent and politically calls for efforts to reconstruct the national civil service over the past twenty years have resulted in only very modest attempts to form a "pool of civil servants" for recruitment in the "general administrative service". Constitutional innovation, referenda, reform of the electoral system, the introduction of an elected major, different local government executive structures, and many other "state-innovations" are on the political agenda and have been intensively discussed. So far, they have largely failed, led to marginal results, or will still be debated in ten years.

4. Institutional Transformation These modest results of official policies in "reshaping the state" contrast glaringly with the obvious transformation that some very traditional state institutions have undergone. Within the same formal structure, several institutions of government have experienced a remarkable "facelift", almost without "reform", but by using existing prerogatives much more effectively and, therefore, becoming much more visible and administratively relevant. Particular institutions with an "auditing and control function" (general auditing office; ombudsman; central planning (research) agencies) have gained considerable weight and importance

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over the past ten years. There is a perception about a (slightly) different role of the First Chamber/Senate in the national legislative process ("the need for amateur politics in an increasingly professionalised political system"). Recently, there has also been a wave of parliamentary investigations suggesting a different attitude of parliament toward government. Old, constitutional prerogatives are again being utilised. They had almost been forgotten in a political system where - consociational - tradition and political necessity dictated that "government governs" and Parliament used to act accordingly by adopting a rather passive mode of operation.

5. Results, Outcomes and Effects Given the constitutional design of the Dutch system and its political functioning, the main question regarding politics and administration in the Netherlands will probably continue to be: "How much Change?" (Daalder/Irwin 1989). The system of governance is indeed characterised by a high degree of "institutional conservatism" (Andeweg 1989), but for the same reasons one might also want to speak of "institutional resilience", flexibility and adaptiveness. In the past, "consociational" characteristics of systems of governance have been heavily criticised, particularly for reasons of democracy (e.g. Barry 1975). In the meantime, the consociational model has acquired the status of an acceptable form of democracy. Attention has shifted to the functional performance and capacity of Westminster, neo-corporatist and consociational systems (Lijphart 1994; Lane 1996: 211). In terms of performance and outcome, the Dutch reforms cannot easily be presented as "all hype, no substance". To the contrary, a rather pragmatic, sometimes even deliberately incremental and chaotic experimental mode of reform has produced a system which in many respects no longer resembles the traditional picture of public administration in the 1970s - much less the 1960s or earlier. It has produced a considerable departure from the status quo in many sectors of government. The system is still very much in flux, dragging all formerly untouched areas into a piecemeal but steady and, at times, rather quick modernisation process. In this context, we could look at the development of the budget deficit, employment and transfer payments. The budget deficit has steadily decreased from 3.8 percent in 1994, to 3.3 percent in 1995, and 2.7 percent in 1996. Employment has increased substantially since the mid-1970s. At the same time, the percentage of the non-working population in the age group 15-65 years has decreased from almost 48 percent in 1983 to some 35 percent in 1995 (Miljoenennota 1997: 32). Also, the total amount of transfer payments (entitlements) have been reduced in recent years, following two decades of steady increase. It should be noted, however, that the hype in the Dutch debate has been

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on the government-market dichotomy, but that the substance from an administrative point of view is the reform of the third sector. This sector has traditionally been an integral part of the Dutch administrative state structures for the implementation of public policies and the delivery of public services. International economic pressures, so obviously felt in a very open "trade"economy, have clearly triggered the Dutch reforms. The further breaking down of very traditional institutions and the organisational - administrative - remains of the pillarised society has supported it. The latter is, to a degree, an autonomous Dutch process being not applicable to the explanation of reforms in other countries. But it should be noted that the processes of breaking down traditional institutions and the pressures of economic internationalisation and Europeanisation, might have a broader explanatory power in a comparative perspective. I f we look at the reforms from a functional perspective, they have in sum been pretty effective. The economic situation in the first half of the 1980s was not very rosy. Inflation was six to seven percent, unemployment rates above ten percent, interest on public debts twelve percent and a budget deficit of the size that it was once labeled by The Economist the "Dutch Disease": one of the largest government deficits within the OECD, increasing annually. The long-term economic outlook was rather bleak. It was a devastating concept, which did not miss its impact in the political and economic debates. Ten years later the image of Dutch economy is quite different. To many observers it came as a surprise that in October 1996, the same Economist labeled the Netherlands the most successful country in Europe in terms of economic performance - it now spoke of a "Dutch Model". In the mid-1990s, the Dutch economy grew with almost three percent, inflation rates have been stable around two percent for a decade. Unemployment came down to six percent with job creation figures still rising. It is still unacceptably high, but it puts the Netherlands in a comparative perspective among the top three best performing countries. Interest was around 6.3 percent at the capital market and 2.6 percent shortterm. The national debt was at around 75 percent GNP, being still too high but steadily going down to 60 percent and below that "line we dare not cross". The total of public expenditures was reduced from 63 percent (GNP) in 1985 to 54 percent in 1996. Government deficit was down to 1.8 percent by the end of 1997. The government deficit was reduced to a degree that the Netherlands was among the few countries to meet the EMU (Economic Monetary Union) criteria quite before the deadline. The Dutch Guilder was among the strongest currencies in the world. The President of the Dutch National Bank became first President of the European Bank. The general economic outlook is still strong. The Dutch economy is generally considered to have stepped out of the shadow and to have by-passed the performance of the German economy. German economic

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institutes hailed Dutch government for its consistent savings policy and its attempts at reducing unemployment. International interest is generated, also for the way, in which the administrative and budgetary reforms have been handled. A budget deficit has been replaced by a budget surplus, creating a whole new political "problem" for the Dutch government. Economising has played an important role in the reforms. Increasing efficiency and productivity have been stressed as key values in the 1980s. But they were also stressed in the "rationalisation and démocratisation" movement of the 1970s, the streamlining and "rationalisation" movement of the 1960s, the "professionalisation and rationalisation" movement of the 1950s and all governmental reform-policies before World War II, including of course the retrenchment committees (bezuinigingscommissies) in the 1930s. The importance of managerialism and "business approach to government" cannot easily be belittled and is not something of only the last ten to 15 years. It is by far the most popular "no nonsense" approach in practice, among civil servants and (most) politicians, whatever Public Administration professors may have to say about it. But it is not the single most relevant feature of Dutch public sector reform. Policy reforms and institutional transformation contributed their share to the outcome. Using indicators other than economic performance, the reform outcomes are more difficult to detect. There are numerous examples that privatisation or contracting out under conditions of (virtual) monopoly only contributes to rising costs and higher wages in the service sector. But this, of course, is what privatisation theory has tried to teach us all along. The interesting question is, why this part of the neo-managerial bible is so often neglected when decisions are being prepared. More in general, the Dutch case underlines that a neo-managerial approach at the operational level of government requires an appropriate proper embedding at the procedural and institutional levels of government and administration. Strikingly enough, the introduction of neo-managerial techniques in the Netherlands has contributed to the return of traditional administrative issues in the mid-1990s as well: administrative integrity; accountability; supervision; control; trust in government and reliability of bureaucracy. The reason for this is obvious: many of the "managerial" reforms induced by the financial and policy reforms resulted in ill-designed procedures and institutional structures leading to various problems of democratic control and public accountability. Many of these are, by now, being remedied, not by undoing the managerial reforms, but by adapting procedures, supervision and accountability structures to the newly arisen situation. Managerial reform did not replace administrative reform, but on the contrary - made reform of the administrative process a necessity, in order to make the managerial reforms work in terms of legitimacy and democratic control.

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Aiming at performance-oriented management within the procedural and institutional context of a (still) compliance-oriented supervision is bound to ask for trouble, as several parliamentary investigations have indicated by now. Equally, much welcomed interactive modes of operation of agencies require a new interpretation of bureaucratic ethics and administrative integrity, in order to avoid getting caught up with a stifling "political correctness" threat. The development toward a more "interactive" administrative system has raised fundamental questions on the role, position and methods of working of electoral bodies at various levels of government. A l l these questions seem to constitute the second or even third generation reform questions arising out of the recent history of public sector development. Reform policies are often their own cause. Introducing neo-managerial techniques is therefore clearly not only about efficiency. It is also about new forms of accountability, legitimacy, rectitude, government credibility, and organisational reliability. The question is not whether we can forget about accountability in government and administration, but how to organise it in a different way. In the Dutch context, the Managerial State is not replacing, but actually revitalising and renovating the principles of the Administrative State. Is not "market testing" a contemporary attempt at organising "due process"? Probably the most important challenge to the system is finding renewed ways to "empower the people". So far, the reforms have been strongly oriented towards the production and service delivery side of government. They have been civil servant and government oriented. Despite experiments with citizen panels and user fora, it is clear that the organisation of the "public demand side" of government is lacking. For a country of minorities, with a strong tradition of accommodation and allowing for pluralism, the system has a hard time in adequately incorporating new ethnic groups and minorities into the system of public participation, a problem particularly acute in the urban areas. According to representative surveys, people are reasonably happy and very satisfied with the general quality of service delivery of government, but totally dissatisfied and right out cynical about politics. This finding is a serious blow for those believing that better government services and increased functional performance will automatically lead to a better appreciation of politics. It suggests some interesting analytical questions as well: is the performance of politics to be measured in different terms than the performance of "the institutions for public service delivery"? And what about the profile of local government? The steady and continued drive to scale enlargement - often supported by "locals" themselves - is the consequence of the off-loading of central government and the decentralisation of executive functions. Since the early 1970s a substantial number of municipalities has been amalgamated. By 1980, only 811 municipalities were left

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(compared to 1,015 in the early 1950s). Continued amalgamations in the 1980s and early 1990s resulted in 636 municipalities in 1994. And this process has not yet finished. A reduction to less than 500 will take place at a later stage. Together with the professionalisation of the service providing function, this creates pressure towards scale enlargement. What does this do to state-citizen relationships? Dutch local government is clearly facing an identity crisis. What do the local governments want to be? A vital and dynamic political subsystem with effective problem solving capacity? A large scale public service provider? Or the small scale representative of the local community? Local governments usually say the latter, but act more like the second. They should aspire for the first. The constitutional setting still views them as representatives of the local community, in charge of organising local demand, identifying problems and contracting for services. Reality is different. It is predictable that the policy reforms and amalgamation policies of the 1980s and 1990s will trigger a debate on institutional reform of local governments. Several identities are now united within one municipal structure. This is bound to cause difficulties and tensions, particularly regarding adequate management of the collective demand side. It sometimes seems that citizens have already decided to opt out and organise their interests their own way.

I I I . Putting Dutch Public Sector Reform into Perspective

1. Stages of Reform Current developments have to be placed in a long-term as well as a shortterm perspective. The long-term development refers to the changes in the sociocultural and political context of the Dutch administrative system, generally known and extensively described as the pillarised system of consociational democracy and the corresponding politics of accommodation (Lijphart 1968; Daalder 1971). In terms of public sector development and administrative system, it has encouraged the emergence of the peculiar Dutch variety of the welfare state (De Swaan 1988), described elsewhere as "the welfare society" (Toonen 1987). It now seems that a major reform of this system is being implemented. On the basis of changes in the type of government interventions it was recently proposed to study the development of the Dutch welfare state in five stages (SCP 1995: 15): 1. the constructive stage: 1850-1955; 2. the expansionist stage: 1955-1970;

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3. the ordering stage: 1970-1982; 4. the reconstructing stage: 1982-1990; 5. the re-evaluation stage: 1990-present. The developments described in this chapter refer to the period between 1982 and the mid-1990s. They can partly be attributed to a relatively autonomous, and more long-term historical pattern of change and transformation of the Dutch social, cultural and political system. This pattern is generally subsumed under the heading of "pillarisation" and "depillarisation". This transformation process eventually takes us back to the middle of last century and then still renders useful insights for analysing and understanding contemporary developments (for an overview, see Toonen 1996). The more recent stage in this process of cultural and sociological transformation started in the late 1960s. The process of depillarisation fundamentally changed first the cultural landscape, then the sociological structure and subsequently the political organisation. Although it is not always perceived like this, we may observe that the process has now also reached the most robust and resilient parts of the former state structure: the institutional structures and administrative systems as a part thereof. A large part of the public sector reforms during the 1990s consists of harvesting the efforts to change procedural, institutional, and organisationalcultural characteristics of the traditional administrative organisation. The political apex of depillarisation was the inauguration of the Purple Coalition of Social-Democrats and Conservatives (Liberals) in 1994. For the first time in modern parliamentary history, the formerly predominant "confessional" (Christian Democratic) political parties were not represented in the ruling government coalition. The traditional - pillarised - sociological and political landscape of the Netherlands had already fundamentally changed by the end of the 1970s, early 1980s. The decade that followed is characterised by what, for a longer time, seems to have been a somewhat "hidden" reform of the administrative structure of the public sector. Our hypothesis is that the administrative reform of the 1980s and 1990s, and its necessity, is rooted in the same socio-cultural processes as the earlier political and sociological "reforms" of the 1960s and 1970s. But they have been urged, affected, sped up and, in parts, even been triggered by the pressures that characterise the short-term developments, i.e. the recessionary climate in Western European economies during the 1980s and 1990s. Recent economic developments, therefore, become a second, more short term and - for the Dutch system as a whole - more exogenous contextual factor

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to be taken into consideration in phasing an ongoing modernisation process of the political and administrative system. This development includes the pressures for the EU-member states associated with the emergence of the Single European Market and the development of the European Monetary Union (EMU). The short-term perspective, therefore, contains the financial, budgetary and economic situation which has been in the background of many public sector reforms in western societies since the late 1970s. Although older in background, in retrospect, many people in the Netherlands would take the year 1982 as the starting point for the current reforms when the first Lubbers Cabinet of Conservatives and Christian Democrats announced its reconstruction and retrenchment plans. Developments since then have been characterised by a curious mix of long-term and short-term concerns in the organisation of the Dutch public sector. The short-term budgetary stress not only started a new innovation and learning process, but at the same time put so much pressure on the system that various institutional remains, inherited from a long tradition of pillarisation, consociationalism and neo-corporatism, could actually be removed after many years of institutional survival. At the same time, the reforms and innovations which were brought about by the short-term change pattern, have been molded by characteristics of the longstanding tradition of pluralism, accommodation, deliberation and pacification.

2. Cultural Heritage and Institutional Structure: Consociational Democracy and the Consensus State The current Dutch constitution as framework for politics and public administration is among the oldest in Europe - in 1998 it celebrated its 150th anniversary, and to some it is even forty years older. The constitution was designed to provide a robust, resilient and adaptive general framework, constituting a system of governance (Thorbecke 1826: 14-15). It should provide a stable, generic institutional context for a varied and dynamic process of "historical evolution, development and growth" (Toonen 1990; Toonen/Hoetjes/Hendriks 1995). The historical development of plural Dutch politics has brought the ideal of the "organic state" - a dynamic and living constitution - close to reality, much closer probably than the founding fathers of the Dutch constitution in the first could have imagined. For a student of public sector reform, however, systems like these pose several analytical problems, particularly from a comparative perspective. Encompassing institutional reforms are uncommon in these types of "organic" systems operating on the idea of a flexible and "living constitution".

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Fundamental changes and transformations may thus take place without legislation, and sometimes even without Parliament actually paying attention. The initiative to reform is spread out over the system. There are many points where systems change and reform may originate. A stable and predictable institutional infrastructure is believed necessary to avoid hold out and free rider problems and therefore to counteract strategic behaviour, joint decision-traps, immobilism and deadlock. In the concept of the organic state, it is precisely institutional stability which - when circumstances require - may foster rapid change and adaptation. To be sure, institutional stability is not the same as lack of dynamics and change. To the contrary, the stability is demonstrated in times of turbulence. Negotiated Reform. Changes and adaptations occur through series of negotiations and joint decision-making processes in multilevel institutional settings - or they get trapped and deadlocked within them. The Dutch system should be perceived as a negotiated order. The unitary nature of the state should not obscure that changes within government largely occur through negotiations, also across "vertical" levels of government. As indicated before, the style of Dutch intergovernmental decision-making, for example, has gone through a remarkable shift in course of a few years, and at the end of the 1980s looked rather different than at the beginning of the decade. It has provided the basis from which to proceed since then. Also the state-society interface, which plays such an important role in understanding the Dutch Model, is characterised by a deeply rooted bargaining model. Hemerijck (1998) identified seven factors or mechanisms to help in understanding the "success" of the Dutch Model. First, the small open economy requires the Netherlands, just like other small countries, to be flexible in adapting to changes in the international economy. Second, the strong Christian- and social-democratic political traditions in the Netherlands provided the ideological basis for translating a sense of crisis and international economic dependency into argument in favour of social solidarity. Third, wage-leadership in sectoral negotiations are important. Contrary to the USA, sectoral corporatist institutions in the Netherlands generate co-operation and consultation, thus creating a flexible and stable labour market. Fourth, through strongly rooted negotiation procedures it is possible to discuss issues such as policy reform, infrastructural services, technological innovation, recasting social security, etc. next to the central wage negotiations for which these procedures had initially been designed. Fifth, economic expertise is brought together in a tripartite body (the Social Economic Council) comprised of representatives from the labour unions, the employers and the government, and operates as an important link in preparing and legitimising social-economic policy. Sixth, path dependency plays an important role, in the sense that social partners and government are hardly pre-

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pared to reform the existing institutional structure - developed in the course of this century - for something new. After all, the actors involved had longstanding experience with this negotiation model, and it did bring success, in the past as well as now. Finally, social capital proves to be important. Actors involved in this reform process experience a sense of mutuality, and networks of civic involvement are in place. Hemerijck concludes that corporatist institutions do not have to inhibit market conformity; rather, they can constitute adequate moral, social, political and economic action and thus provide important input to societal co-ordination and the market. While these factors/mechanisms appear to be theory, they did work effectively in the 1980s and 1990s in streamlining the Dutch economy. The Treaty of Wassenaar of 1982 between unions and government, regarding an expansion of restricted wage policies as the principal instrument to help employment recover, and reform public expenditure in exchange for improved conditions to preserve social security, serves as the perfect illustration. The increasing female employment rate and the growth employment in general since the early 1990s are another testimony to the "success" of the Dutch Model. The complicating factor for comparative analysis is, of course, this endogenous Dutch development, which has deeply rooted socio-political structure: the process of pillarisation and depillarisation. The latter has been drastically changing both society and government. After having affected cultural and sociological structures in the 1960s and political structures in the 1970s, it finally also reached into the structure of (corporatist) state-society relations and the administrative domain in the 1980s. The typical administrative dimension of pillarisation and Dutch consociationalism often escaped attention in the past. The welfare state and its administrative substructures have largely been constructed in the context of the pillarised society. Although expansion of the welfare state really started when the heyday of pillarisation was almost at an end, the pillarisation in its formative stages has had a profound impact on the nature of its administrative structures. And as in Germany, though to a lesser degree, large parts of governmental tasks are actually being carried out by nongovernmental, non-profit organisations that historically belong to one of the subsections (pillars) in which society was sociologically and politically divided: "there is in the Netherlands a specific relationship between government and non-governmental organisations, in which both play an important role in society and in which both are dependent on each other" (Van der Ploeg 1995: 17). In many cases, rules are traditionally not being enforced or the levying of contributions - like agricultural levies in the context of the European Union - , are not being conducted by government bureaucracy, but by non-governmental organisations. Many tasks in withing the area of cultural, educational, sports or welfare policy, which in other countries are carried out by government organisations (or public schools) are conducted by the third sector in the Netherlands.

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"The relation of government to non-governmental organisations working in the public field is not only characterised by subsidising planning initiated by the government. Characteristic for the Dutch model is also that government develops its policy in co-operation with the non-governmental organisations, especially the umbrella organisations (which represent the executive nongovernmental agencies). Non-governmental organisations are stimulated to play an advocacy role; that doesn't prevent them from obtaining government support. This support is not supposed to be an act of generosity but a sign of responsibility of the state for a balanced development of society" (ibid. : 20). Privatisation - and, for example, the private government of public money is therefore by no means new to the Dutch administrative system. "Agencyfication" - to the extent in which it does occur - may easily be understood as part of an old tradition in the Dutch welfare state and its administrative substructures (e.g. Van Poelje 1931). The transfer of executive tasks to relatively independent agencies (in Dutch: functional decentralisation) should certainly not have to be so striking to an informed observer, as it would be for a British counterpart in his or her national and cultural context. Given this traditional organisation of policy networks, it may explain why many institutional reforms in the Netherlands are part of sectoral changes and frequently "divorced" from official "administrative reform policy". Many welfare state functions were nationally legislated, but carried out by the social institutions of pillarisation, and administered by a collegium of representatives of employers, unions and "the Crown" (i.e. the state). Reforming policies in a substantial way usually amount to reforming institutions and interagency linkages as well, particularly i f you talk about real cutback and savings. In the Netherlands, many reforms that in other countries would be an intra-organisational matter, bring state-society and inter-organisational linkages into play.

3. Resource Base: Budget, Personnel and Expertise While national government expenditure hardly increased between 1950— 1986, transfer payments (transfers to sub-national governments, social security) increased rapidly from 14.7 percent in 1950 to 47.2 percent in 1986. Hence, the fact that total public expenditure as a percentage of the GNP more than doubled from 31.5 percent in 1950 to 67.2 percent in 1986, is to be attributed largely to social security. Even since the mid-1980s, budgetary reform and, as a consequence, public sector reform has been aimed at these sectors, rather than the management of central government departments. The reform was primarily aimed at programmes and policies, more at the third sector rather than the government. Social security in the Netherlands is traditionally the shared responsibility of government and social partners. 1 Hesse

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When disaggregating the development of sub-national government expenditure according to type of sub-national government, we can see that in absolute terms, municipalities in 1989 "consumed" 86 percent of available resources. While their expenditure has increased 12-fold since 1960, the expenditure of provinces increased 24 times and the expenditure of Water Boards 20 times. This illustrates the grown importance of sub-national government in the Netherlands. In this light, it is no surprise that decentralisation, reform of central-local finances and of central-local relations in a more co-operative direction (policyagreements) were part of the overall reform movement in the 1990s. The mild decline of total public expenditure since the mid-1980s can be ascribed to serious cutbacks in personnel size. In the entire public sector, some 714,000 people were employed in 1980, equal to approximately 14.9 percent of total employment. This increased to 742,000 in 1986 (15.8 percent of total employment). Since then, it declined to 734,000 in 1990 (14.7 percent), and this trend continued into the 1990s through privatisation and further retrenchments. The Netherlands is one of the few countries where public employment has gradually declined since the late 1980s: -1% (1987), -1.2% (1988), -1.5% (1989), -1,2% (1990), -3,1% (1991) and -1.4% (1992). At the same time, professionalism of the civil service increased through the growth of pre-entry training facilities (public administration departments were created in 1976 in Twente and in 1984 in Leiden/Rotterdam) and the marked growth of post-entry training opportunities (i.e. the Netherlands School of Government in The Hague, 1990 or the Dutch Government Training Institute). Also, government at all levels increasingly involved external experts and consultants since the 1970s.

4. Policy Entrepreneurship and Political Will Politics does matter in understanding reform. An important "innovation" of Dutch politics and public administration, which confirms the overall image of reconstruction, has been induced by the voters. The 1994 general elections brought an unprecedented coalition of conservatives ( W D ) , neo-conservatives (D'66) and Social Democrats (PvdA) into power, leaving the Christian Democratic Party (CDA) in the opposition. For the first time in this century, the socalled confessional parties, the former guardians of the pillarised system, were not represented in government. This event has generally been read as the last sign that the days of political pillarisation were definitely over. 2 Old structures 2 The segmentation of Dutch society in four different cultural and political subsocieties on religious (Protestants and Catholics) and socio-economic grounds (labour and conservatives) dominated politics for over a century and started to fade by the end of the 1960s.

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needed to be molded in new forms. This historical process meets the contemporary need for economic restructuring and for redefining the welfare state. International economics has been the drive and the need to (implicitly) deal with this Dutch historical legacy. The historical tradition of the consensus state has affected the shape of ongoing public sector reforms. One would perhaps expect that the official "state reform", "governmental reorganisation" and "administrative modernisation policies" would ride high on this wave of political innovation, induced by the electorate. And indeed, in the mid-1990s, political rhetoric was filled with it and several committees have been installed under the umbrella of the Speaker of Parliament (Deetman) to develop proposals for "administrative innovation" and "state modernisation". At its inauguration, the Purple Coalition expressed a vested interest in constitutional reform and administrative modernisation, and to further pursue the initiatives already developed in the previous governmental period. It is precisely these types of "official" state reforms that have generated the least tangible results to date - if they have been anything else but paper. This seems to fit a more general pattern over the past fifteen years: formal, institutional reforms have abundantly been discussed and even proposed, but generally not been implemented. The vehicle for public sector reform has been policy and (subsequent) management reform. Institutional reform requires even more fundamental, sometimes even constitutional debates. Not an easy task in a plural consensus-society and, therefore, often evaded. In consensual processes, political leadership plays a crucial role. Not in terms of the "strong leader" advocating or demanding a system-wide change, but rather in terms of diplomacy, building bridges and taking the responsibility of political risk of formulating the compromise, on the right time and the right moment. Sometimes, the role of the leader is simply to break through a political taboo, formulate an issue and get it on the political agenda at the moment nobody with vested interests dares to take that (political) risk. At this point, one may mention, for example, the important role that Prime Minister Lubbers (1982-1994) played at a few crucial moments. Starting with the 1982 Treaty of Wassenaar, he set the tone for far-reaching government reforms. He did not shy away from using strong statements to attract attention of all actors (such as: "The Netherlands is sick"). Cautiously, but with a determined and systematic approach, he provided leadership to the reform process. He did not operate in a top-down manner, but - as one would expect from a Christian Democrat - used the consensus model. Later, Prime Minister Kok (who was Minister of Finance in the Lubbers Cabinet, as well as Vice Prime Minister) basically continued that style of leadership within his Purple Coalition.

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5. European Integration Public sector reform was induced by fiscal stress and government deficits that were influenced to a large degree by international economic developments. While one could argue that the initial impact of global economic changes since the 1970s motivated reform, the acceleration of European integration from the mid-1980s onwards has become as important an influence. Domestic reforms were increasingly justified by reference to the consequences of the creation of a Single European Market for national policies. Not only have member states been required to transpose and implement EU-legislation into their national laws, increasingly they have had to operate in a transnational rather than a statecentric arena. How this has affected the internal operations of governments is yet to be investigated. One impact of European integration is clear though. For decades, public industrial enterprises enjoyed a natural monopoly and were under close government control. The creation of the internal market possibly encouraged massive privatisation, such as in the areas of public transport, telecommunications and postal services in the Netherlands. The introduction of the monetary measures to qualify for the EMU has been an important source of pressure to stay on the public sector reform track through large parts of the 1990s, even when the immediate economic pressures of the early 1980s were no longer so apparent. At the same time, the European legal regime has indirectly caused important administrative reforms, for example an increased role of the independent judiciary in the public domain at the expense of (internal) administrative courts.

IV. Conclusion: The Reform Paradox in the Dutch Case Since the beginning of the 1980s there has been a varied, but definite and irreversible pattern of transformation, reform and modernisation of the public sector in the Netherlands. It is hard to say how much of this accounts for the drastically improved economic record, or at least improved economic image, over the same period. A very substantial part of the economic development has to be contributed to the very restricted wage policy that government has been able to negotiate with social partners (employers and labour unions) over most of the same period. Some observers are afraid this "low wage policy" may be detrimental to the innovative capacity of the Dutch economic system in the long run. Focusing on public sector reforms as such, it may be observed that many different reform initiatives have been taken at all levels of the governmental system. Some failed miserably, some constituted a "revolutionary" departure from

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previous structures and practices, and some have been brought about without the general audience and politicians even noticing. The overall picture seems to be that during the 1980s, step-by-step, managerial changes have been introduced which, in the course of the 1990s, gradually amounted to a situation in which the Netherlands entered a period of more radical transformation. But it is hard to say how much change exists in a permanently changing system. The important lesson from the Dutch case is about how systems change. Indeed, the Netherlands seems to have been one of the "European countries with their specific administrative problems which might well escape international scientific attention unless they somehow relate to the mainstream Anglo-Saxon discussion" (Der lien 1992). Stated differently: "There is a danger of seeing the administrative world through Anglo-American spectacles: the administrative reform movement - when it exists - has a checkered record on closer inspection" (Wright 1994: 117). Administrative reform comes in different guises. Some systems reform by a legislated reorganisation of their institutions. Some types of systems change, modernise, or even transform in a basically non-legislated and adaptive manner. In analysing public sector reform within the latter systems, one needs to know what to look for. The still ongoing reforms have been substantial and of profound importance to the overall (sociological, political and economical) performance of the public sector in the Netherlands. Interestingly enough, OECD or World Bank Public Management accounts do not register, 'monitor' and recognise these kinds of reforms in a proper way. The pragmatic, step-by-step nature and the lack of a blueprint or overall reorganisation philosophy in the Dutch case leads to observations due to which "revolutionary developments and innovations" are reported next to "failing reforms" and "institutional sclerosis". The paradox is that both observations are valid. The Dutch case may help to remind us that within certain administrative systems far-reaching reform may be brought about by adopting policies of incremental change in an attempt to continuously adapt to an ever-changing environment. Failing reform policies may be observed in conjunction to radical transformation patterns. The success or failure of a reform policy is not an indication of effective public sector reform or successful public sector reform. There are, indeed, many planned and unplanned, foreseen and unforeseen, positive and negative effects. Reform, at least in the Dutch case, should not be approached as too rationalistic and instrumental a process (goals, means and results). In Dutch reform programmes goals exist primarily to be negotiated. They are not the external standard for the process, but are frequently an endogenous vehicle for reform. Political symbols are important in a consensual reform process.

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Also in terms of public sector reform, the Netherlands represents the typical case of a consensus democracy. Much innovation comes from within or "from the bottom up". The typical pattern in a consensus model is that once the parties most concerned reach agreement, implementation is being possible, only in case of ongoing disagreement higher echelons within the system become involved and move the issue up hierarchically. Ultimately, only the truly controversial issues, that could not be resolved elsewhere, will reach the highest levels for resolution and consent and become "politicised". The strongly politicised issues are very visible and attract the most attention. But they are the least likely to be resolved at short notice. The paradox, which the Dutch model represents, is that in a consensus system, normally only the most controversial reform proposals may reach the status of official national public sector reform policy. Given their controversial status, these "official" reforms - surrounded by all the political hype - are the ones that are most empty in terms of substance or least likely to succeed in terms of implementation. On the other hand, the uncontroversial, i.e. consensually elaborated, mutually negotiated and bottom up agreed upon reforms are "simply" being implemented. They are put into effect without ever achieving the political status of a grand reform. Effective substantial reform in a consensus system therefore typically comes with little hype. Substantially effective and successful reforms will have many fathers, and it is hard by any one particular party to politically claim the success. Politically, it is often not very rewarding to create hype around successful reform. To the contrary: creating political hype around a desired reform in a consensual system is almost a sure guarantee that it is bound to stay without any meaningful substance.

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Paradoxes in Public Sector Reform: The Case of France By Guy Carcassonne

I. Introduction In a country such as France, where the state has been patiently constructed through the centuries on a very centralised model, where there is a long tradition of a strong and broad, even intrusive public presence, almost any reform is, completely or at least partly, a public sector reform. Whatever the matter in question - schools, housing, health, radio and TV, railways, airlines, and very significant sections of trade, industry, insurance and banking - , the public sector has long been involved and, therefore, has been altered by the numerous changes that have touched these areas since the early 1980s. The problem is complicated by political circumstances. Like many other countries, France is politically polarised, two coalitions being in competition; unlike most countries, the gap between these coalitions is artificial rather than profound, each of them even trying to make people believe that it is deeper than it really is, and each coalition being defeated in every single general election since 1981. The result is that the public sector is constantly pulled from one extreme to the other. Official policies changed (if not always effectively) after a few years, many times during the 1980s and 1990s. Naturally, this does not help either coherence or continuity. A distinction ought be made, however, between those reforms that have been questioned after a change in government, and those that have not. In this respect, it is interesting to note that some of the most disputed reforms have, after being adopted, never been challenged subsequently, while others that were less controversial disappeared with their initiator. The reasons why one or another of these possibilities occurred need to be clarified, precisely because they make conspicuous the different paradoxes affecting public sector reform in France. The main paradox, in this area of inquiry, is that a strong state is able to impose its will on others, but not on its own structures. That is to say that thanks to

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its many institutions and civil servants, the state can be present and effective anywhere, on any issue, but when being reformed itself, these many institutions, these many civil servants feel threatened and use their power to counter any threat to their individual or collective situation. The consequence is two-fold. First, reforms have a better chance to be implemented i f reacting to external constraints than dealing with internal necessities, even i f being indispensable. Second, the state carries on living with a lot of services and employees that no longer perform distinct tasks but refuse both to disappear or, even, to switch to other services that lack staff. The result is that in many areas the state is fat, much more than strong, and this might explain why problems are seldom solved effectively.

I I . Stages of Development In this chapter, not every single reform or attempt at reform of the last two decades can be analysed in detail. Rather, it focuses on five case studies that share two characteristics: first, the reform has to be objectively and directly linked to public issues; and, second, the reform agenda must have had important consequences, in the short or long run.

1. Decentralisation: The 1982 Earthquake In France, the problem of decentralisation had been on the political agenda for years. As early as 1969, de Gaulle had made a disastrous attempt. Combining a visionary concept of regionally-based development with a desire for revenge against a hostile Senate, he triggered a referendum in order to implement the former and to suppress the latter. The referendum, however, failed and drove the founder of the Fifth Republic to resign. Furthermore, it had the effect of postponing decentralisation for many years, and led to the modification of its principles. The first change of power occurred in 1981, opening a "window of opportunity" for public sector reform. The main leaders, François Mitterrand, President of the Republic, the former president of a department, Pierre Mauroy, now Prime Minister and mayor of Lille, and Gaston Defferre, Minister of the Interior and mayor of Marseille, were all convinced that the reform would either happen immediately or never. Thus, the first great Act was adopted in March 1982. From one day to the other, 100 départements and 36,000 municipalities (the 25 regions were to acquire their autonomy only when their assemblies would be directly elected, in 1986) were liberated from the former control the state administration had over all of their decisions, and were submitted only, hence-

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forth, to a legal review by tribunals. Subsequently, several pieces of legislation were introduced determining the respective competencies and resources of local authorities. This reform brought about a huge change, for which nobody was properly prepared. The state administration was deeply puzzled by the necessity to redefine its role. The local leaders were frequently intoxicated with their new power. The citizens, much more spectators than actors, were a bit disoriented and no longer knew exactly who was accountable for what in this confusion, so that they went on to turn to the state for almost any problem. The initial gamble was that, in such an earthquake, the local representatives would be the only reliable pillars. It has often been said that decentralisation was introduced by the locally elected for the locally elected. Undoubtedly, it turned to be a success, provided that the actors were fast and eager to use the capacities just provided. But the price for this successful gamble was high. First, delusions of grandeur meant that some leaders found nothing more urgent than to build pharaonic centres of administration, mainly at the départemental and regional levels, which did not make the new structures very popular. Second, it became practically impossible to seriously question the number of local layers and impossible to reconsider the number and boundaries of entities at each level; a strictly uniform pattern of governance was imposed on all policy areas, regardless of specific needs of the issue concerned. Yet, while the reform had been diagnosed as the juvenile disease of decentralisation, it also created a "fertile disorder". It gave way to a new type of order, while maintaining the fertility. After a few years, the system got into its stride. Even in the area of resources, local authorities rightly claimed that they would manage their resources and expenses more rigorously than the state its budget. This conviction, however, is not unanimously shared. There is still a strong nostalgia for centralisation. This nostalgia frequently nourishes a kind of "retroproposition". For instance, recently, the Cour des Comptes proposed that the rate of professional tax (which is the most productive resource of municipalities) should be fixed nationally in order to combat the inequities among local bodies. The according imbalances are partly objective (and this is why a mechanism of compensation between richer and poorer units was already created in 1990), but they also originate from a different degree of budgetary discipline. Those municipalities that manage their resources best are able to lower their rates, thus becoming more attractive for firms seeking to relocate. By fixing a nationally uniform rate, local leaders would be deprived of one of their major powers and would depend, exactly as in the era of centralisation, on ex-

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ternal decisions, which is certainly not the best way to make them feel responsible. This type of outdated proposal and according debate might indicate that decentralisation, after twenty years, has not totally obtained nobility. It goes on being questioned, which is good, and challenged, which is dangerous, to the extent that it feeds ongoing doubts about a reform not lacking legitimacy but thoroughness.

2. Privatisation: The 1986 Tornado France experienced three waves of nationalisation, in 1936, 1946 and 1982. They led to the energy sector (electricity, gas and petrol), major banks and important industrial and financial enterprises being part of the public sector. Furthermore, in accordance with the French broad conception of services publiques , many important networks (telecommunications, railways, water supply, waste collecting and treating, school bus services, etc.) were under state control for a considerable time. The second change of power, from left to right, in 1986 was the beginning of a brutal reduction of public property. Three motives converged. The first one was ideological. It was the time when Thatcherism and Reaganism were fashionable within the French right, and there was no limit to their frenzy for privatisation, going far beyond common sense or real utility. The second motive was more pragmatic: selling some important firms, which the state had absolutely no reason to keep, would bring some money back to the budget, which was very welcome at a moment when the deficit was deep and the presidential election close. The third motive was realistic: it was obvious that the evolution of the European Community would not allow France to maintain the numerous monopolies in areas belonging to the private sector almost everywhere else. The result was that as many attempts at privatisations as the stock exchange could absorb were implemented. In order to offer these enterprises a minimum of stability, so-called "hard cores" (noyaux durs ) of shareholders were constituted. As the number of companies being able to afford a place among those shareholders was not extensive, one could very often meet the same firms, the same people, in most of the newly privatised firms and companies. This brought about one of the oddest paradoxes of the period (replicated in exactly the same way during the subsequent wave of privatisation in 1993). When the decision to privatise was made, the government appointed as chairman a civil servant supporting the process. This civil servant generally wished to keep his position afterwards and, therefore, tried to privilege any composition of the nucleus of shareholders that favoured his ambition; unless being espe-

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cially clumsy, he succeeded. But the result was that, though formally private, many major banks or big enterprises continued to be chaired by people who were accustomed to obeying the government and found it hard to act against its wishes. In fact, it took several more years to really cut the umbilical cord between the state and the privatised companies. But, beyond that, the principal consequence of the drive towards privatisation has been educational: all of a sudden, French people had to discover that almost every element of the public sector could be subject to change. Certainties were shattered, and what had always been taken for granted became brutally questionable. Previously, there were many debates about the best way of managing the public sector and providing public services, but people were not at all accustomed to wondering whether these should be public or not. What happened then was that all participants entered a rather traumatic period in which there were no stable points of reference any more. This trauma was made even worse by the fact that no definite position has been taken once and for all. Each change of government brought new dogmas. When the left came back in 1988, Mitterrand had campaigned under the strange slogan of "ηί-ηΓ (neither nationalisation, nor privatisation). It started a theoretical debate on what was called the mixed economy. But reality was stubborn, and governments had to accept (some leaders, in fact, willingly) new privatisations, imposed either by economic necessity (Renault) or European constraints (airlines), or both, most of their talent and imagination being used not to explain such necessities, which would have been educational, but to try (vainly) to convince people that this was in line with the "ηί-ηΓ dogma. All this was, of course, swept away in 1993 but, once again, the problem has resurfaced since the 1997 elections and is still (over)present on the political agenda as the controversy over Air France clearly showed. Finally, it should be added that not a single nationalisation was decided upon since 1982, and some privatisations may, at the worst, have been postponed, but not abandoned.

3. Mobilisation: The 1989 Attempt After the third change of power (1988), back from right to left again, the government had to deal with a public sector that was very uncertain about its missions, its methods, and its future. Uniformity and rigidity, as tokens of equality, had long been its key issues as far as careers were concerned. Slowness and bureaucratic heaviness, as tokens of neutrality and seriousness, had been its key characteristics as far as procedures were concerned. The Prime Minister, Michel Rocard, felt it necessary to introduce far more flexibility into the management of human resources and far more autonomy into the administrative procedures. The first aim could be achieved due to appropriate negotia-

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tions with the unions, which enabled the resolution of problems that had been on the agenda for at least two decades. But the second, finally more ambitious objective required other means. The first step was to invite all the services willing to do so, to reflect, in a collective, non hierarchical and open manner, on their missions and to try to arrive at clear, complete and shared definitions of them. The second step was to find out how those missions could be better fulfilled. The criteria of improvement were satisfaction of users, comfort of participants and respect of the principles attached to public service, all three aspects being presumed to be compatible and even mutually enriching. The third step was to find ways to improve the relationship of each service with its administrative environment, without any extra costs. Those who decided to take their chance often obtained spectacular results. The initiative came either from an active executive or from employees themselves. Those who had direct contact with users were the most imaginative and shrewd: for instance, an office of car registration, just by modifying the circuit in the way its employees proposed, could establish the legal certificates in twenty minutes, instead of the two or three days it had taken previously. Users were happily surprised, civil servants took pleasure in working in a much more relaxed atmosphere, and efficiency was obtained without spending a franc. Concerning the ways and means, it has been made possible to conclude agreements by which services could receive a global budget, instead of the traditional allowances strictly valued separately by type of expenses, and it has also been agreed that i f this could save money, it would partly be returned to the service in order to finance whatever improvement it chose. This approach was very fertile and very promising indeed. But it had a serious weakness: relying on voluntary commitment, it needed constant stimulation and encouragement, to be able to overcome scepticism in the hierarchy and passivity at the bottom. Such impetus could only be given by the government itself. This is why a change of Prime Minister was enough to make the hope collapse, the new incumbents having other priorities. Yet, the experience has continued, providing excellent results, but on a much smaller scale than might have been possible. It is all the more a pity as this was the first - and, so far, only - attempt to commit civil servants to reforms they usually refuse spontaneously.

4. Délocalisation: The 1991 Disaster As an inheritance of its centralisation, France is absurdly macrocephalic: in Paris, approximately one square meter of office out of every three is occupied by public bodies. Housing being very expensive, many civil servants have to

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live in suburbs where they suffer many of the inconveniences of a big city without enjoying most of its advantages. The cost to the state is high as well, having to own and keep in repair a very large amount of real estate. At the same time, nothing justifies the presence of many services, especially with the modern means of communication being what they are, in the capital city. Everything, therefore, militates in favour of délocalisation, so that those services which are not indispensably settled in Paris could move to other places, where they would usefully irrigate new areas, where civil servants would find a better quality of life, while town and country planning might be appreciably improved. The new Prime Minister, Edith Cresson, was convinced by these obvious facts, thinking that the slowness of change came from a lack of will. More will, then, would be enough to achieve movement. This is why she announced her decisions. A list was published, indicating where each service was planned to go, and at what date. The objective was excellent, the method absurd. Even people who were ready to move did not accept being treated like pieces on a chessboard, or being brutally transferred without their views being heard. Many of them, moreover, had real problems of a very classical nature, such as that of the civil servant whose husband or wife has a job that is impossible to move. The reaction was hard and indignant, and the protest so strong that it paralysed almost everything. It would have been necessary to negotiate, desirable to create a sort of employment exchange, possible to conceive all types of supporting measures. But for want of all that, the main result of the operation (apart from transferring ENA to Strasbourg, which certainly was not the first priority) has been to harden all positions and to discredit a policy which, nevertheless, continues to be a necessity.

5. State Reform: The 1995 Ambition During his presidential campaign in 1995, Jacques Chirac put forward the theme of what he used to call "the social fracture", denouncing the division between a wealthy and healthy France on one hand and, on the other, an accumulation of disadvantages, growing heavier by the day, weighing on a growing number of people. He explained that, independent of the economic development, the situation of disadvantaged people required a particular attention from state administration and public services. Added to the necessity of saving money and a more efficient spending of public resources, this concern led him to promote the idea of nothing less than state reform. A lot of studies, research and reports were already available. Most of them drew the same conclusions: a precise, up to date, redefinition of the responsibilities and tasks of the state would dictate many reforms, susceptible to be included in an overall plan. The 1994 report, L'État en France , offered a quite 17 Hesse

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satisfactory synthesis of former investigations, together with a whole set of proposals. Some years later, few things have actually changed, or, to be more specific, a lot of things have changed, but haphazardly, mainly under European pressure, at the rhythm and on the objects upon which this pressure has been exercised. In a considerable number of areas (airlines, communications, for example), the French public sector is undergoing rapid and substantial reform. But the criterion that makes a reform a priority is less its necessity, urgency or expected result, than the European agenda that makes it compulsory. The consequence is that, as far as general administration is concerned, few things have really changed, while much benefit might be hoped for and could be quite easily obtained. But reforms are only considered when they become absolutely and obviously indispensable, that is to say, mostly when a crisis has erupted, when the evolution is made more conflictual, when one has to operate uncomfortably, in the heat of the moment, instead of acting coolly, taking all the time required to overcome difficulties. The French government seemed to have understood that. The Cabinet treaded carefully, officially stressing the defence of public services but trying to avoid any ideological attitude towards reform. It was announced that numerous public sector jobs would be created, but they should be totally different from previous job profiles. As this was assumed to kill the culture of permanence in public employment, the government put forward its ambitions in education but, on the other hand, the minister of education made numerous trenchant (and refreshing) declarations about the illegitimate privileges of teachers, which nobody in that position had ever dared to say before, shaking the whole system (which he called the mammoth, announcing his intention to remove the fat from it). This evaluation of the development of public sector reform in France already contains a series of paradoxes: the demand for public sector reform is constant, its concrete translation is small; changes presented as the most necessary ones move little, and slowly, forward; fast and huge reforms affect activities in which few people were aware of the usefulness of an evolution, and scarcely more are immediately conscious of its importance. And, as a striking and more recent paradox, summing up all the others, the right-wing government, appointed in 1995, demanded great ambitions about a state reform it failed to achieve, while the left-wing government, appointed in 1997, declined any such intention and acted as if it were eager to reform the state.

I I I . Cultural Perspectives and Tradition On 4 December 1996, Jean Picq, the author of the report on L'État en France , resigned from his position as Secretary General for National Defence in

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order to protest against the slowness and timidity of the reforms. At the first meeting of the Council of Ministers of the new year, the President of the Republic, Jacques Chirac, expressed his wish that 1997 be "the year of the reform of the state". He concluded, thus, with a theme he had used in his electoral campaign during spring 1995. But almost two years had passed in between. It is easy to attribute this waste of time to the neglect of promises, or the frailty of political will, and these explanations do, partly, make sense. They are, however, not sufficient and ignore other, more fundamental causes which make public sector reform particularly uneasy. Any issue related to the state is traditionally sensitive in France. This is not only due to the long history of centralism but because of the fact that, unlike any other country, the nation in France has been created by the state, and not the reverse. Given a territory without any linguistic, religious or ethnic unity, with doubtful natural boundaries, the centralisation of the state has been a constant political objective throughout the centuries, the Monarchy, the Revolution, the Empire and the Republic, even including military means (or at least very authoritative ones, as the imposition of a unified language shows). This has made the country we know. The state, thus, has been the instrument of unification and, when it was achieved, continued to be its cement. Public affairs, therefore, have a special meaning and a special importance in a nation where the state is not expected to deal, as rationally and efficiently as possible, with whatever functions it has to exercise, but is weighed with symbols and frequently the object of passion more than reason. Where the state is concerned, it is the nation that is affected. To a large extent, there is a strong and common conviction that unity comes from equality, and a strong and common belief that equality cannot be actually achieved except through uniformity. Uniform, consequently, are the main features of public organisation: all services, branches, territorial authorities, civil servants, etc. answer to uniform statutory rules. This might explain why approaches at reform are quite chaotic. On the one hand, the working of administration is bitterly or aggressively criticised, the need for change is clearly felt, but, on the other, any bid to reform meets spontaneous hostile reactions, in which the intrinsic interrogations about the results expected from any modification are systematically accompanied with (if not substituted by) questions about its effects on the ground of equality: "will it not introduce differences between us", "will it not introduce differences between citizens or public service users", "why should we be the (only) ones to bear the brunt of change?". Under such conditions, any attempt to reform requires a particularly high degree of political will, political astuteness and political continuity. Or, to put it another way, this is precisely what is sorely lacking. The demand is constant, but the action, which is fitful in nature, takes the form of sudden thrusts which, if they do not give immediate positive effects, are very shortlived, and generally leave the situation worse than beforehand. Does this mean 17*

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that a special curse has condemned France to have only erratic leaders? Certainly not. But this is linked to what is left of the famous "French exceptionalism". The latter is in many areas just a memory while, in other areas, it has always been a myth without any substance and with no other virtue than the dubious one of flattering the national ego. On the contrary, if anything survives of French exceptionalism it is the conviction that France is the only developed country to be led by a part-time government. According to a long tradition, France has always admitted a plurality of offices. This creates many problems in Parliament, where it accounts for the weakness of the National Assembly. But it is even worse for the government. Before the Fifth Republic (1958), ministers could be MPs as well as mayors or members of a Conseil général. However, this did not create many problems, given that, on account of centralisation, running a local authority was no great job. In 1958, it was constitutionally decided to compel ministers to surrender their mandate in Parliament. But it did not appear necessary to make the same decision concerning their local offices. For purely electoral and local political reasons, the phenomenon has spread. During the Third Republic, before World War II, around 35 percent of the deputies had a local mandate. On the eve of last elections, the figure stood at 95 percent. Naturally, those among them who are lucky enough to be appointed to the government leave their mandate in Parliament, but they used to keep their local offices. And whenever a minister has no local function, his first concern will be to get one: only two months after becoming Prime Minister, Alain Juppé was elected mayor of Bordeaux. Out of 33 members of the former French government, only half a dozen had no electoral mandate. All the others either presided over a region, a départment , or were mayors of a city (some of them very important ones, such as Marseille or Bordeaux), or at least members of regional/departmental assemblies. It is necessary to emphasize those elements which, at first sight, seem far from the subject, because they have a direct effect on the matter in hand. They belong to the hardware of the system, and directly limit the abilities of its software. This plurality of offices has different effects on which only the main ones, relating to public sector reform, will be briefly considered here. The first effect, which has already been mentioned, is that ministers have to split their time. Whatever part of it is set aside for their local function, is at the expense of their national responsibilities; indeed, it is too frequently the case that ministers prioritise their local preoccupations over and above their participation in government. They are not all able, therefore, to acquire either the technical competence or the intimate knowledge of the issues they have to deal with, of the people they have to work with, or of any personal views that their position demands. This creates many handicaps to putting across pointed views, and even to have any. This is why ministers feel the need to employ their own advisors, who are politically sound and on whom they can rely for help. This is the only

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reason why the "cabinet (the team of these personal advisors), which is quite peculiar to this country, is so important. Here lies the second effect of the plurality of offices. In spite of recent efforts to limit the number of members to these "cabinets", bad habits have quickly returned and most of the ministers have over a dozen persons in their team. Some of them are of good, even excellent, calibre but they constitute nonetheless a kind of screen between the minister and his administration. They may have competence, but not as much as the administration itself. They may have authority, but not as much as the minister himself. And the result is that competence and authority do not coincide sufficiently often, and are married even less frequently. In matters as sensitive as public sector reform, this discrepancy makes everything far more difficult. This is the third effect. As a result of insufficient cooperation between the minister and his departments, any initiative is, in the first place, conceived by one side or the other, rather than being a joint effort. The consequences are predictable. When the project comes from the minister, the logical trilogy - to think, to decide, to announce - is generally turned back to front. When, on the other hand, the project comes from the administration, it is naturally bureaucratic and frequently self-centred. In both cases, for different reasons, it encounters the same rejection. The vicious element of the whole system is that, as long as the plurality of offices is not legally forbidden, it is politically almost obligatory that any member of government feels the necessity of an escape route for the day he leaves executive office; facing the impossibility of keeping his parliamentary mandate, he has to find another one; having obtained it, he needs to consolidate it and to discourage competition in his own camp, both preoccupations requiring a frequent and visible local presence. One might think that this analysis overestimates a trivial element - the plurality of offices - with regard to its importance for public sector reform. But, added to the intrinsic difficulty of the task, to the legitimate concerns that any attempt arouses, it may actually have considerable consequences. It is no accident that the few recent successful reforms (the most conspicuous being that of the armed forces) have been achieved by ministers who were able, by virtue of their personal local situation, to commit themselves almost completely to their national responsibilities. In fact, the final effect of the plurality of offices is, in a wider and higher perspective, symbolic in nature, not necessarily expressed but always underlying: what credibility can the government's stated enthusiasm for reform have if the members of that government do not think of (or begin with) applying it to themselves, when they could so easily do so? This may be the most relevant and original paradox in French public sector reform: those who are most aware of

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the necessity for reform, who demand it, sincerely for the most part, who have the responsibility to promote it and the legitimacy to bring it about, almost systematically exclude themselves from the indispensable sacrifices, both large and small, that they expect from others. This does not make things much easier. A first step was taken by Premier Lionel Jospin: when appointing the members of his government he stipulated that they would have to resign from their local responsibilities. They all did this, reluctantly, but they managed to replace themselves with figureheads, who were as submissive as possible, and they went on taking care of their local community as much as they did before (if not more, to keep their substitute under control). New decisions were announced on the matter, but, i f they are not courageous enough, they might only lead to the phenomenon of "puppets" becoming more and widespread, these people pretending to hold positions which, in reality, would still be occupied by the former incumbents which would go on dividing their time and attention between local and national responsibilities. French people appear to be tired of this plurality of offices, even i f they do not fully suspect its direct effect on the efficiency of politics. Reforming this absurdity might be a key to the success of other reforms, at least by virtue of the change to outdated traditions it would represent.

IV. Institutional Variables, Policy Entrepreneurship and Political Will It would be a misunderstanding to conclude from what has been written above that France is hopelessly conservative. In fact, many changes have occurred in the last two decades, as a result of which the public sector has been considerably transformed. But it is also true that there is a constant trend among French people to be very reformist for others, but very resistant to any personal change. The first of these two elements makes reformism very popular, the second one makes it very difficult. This accounts for why institutional variables, policy entrepreneurship and political will need to be considered all together in the case of France. The popularity of administrative reform makes it all the more attractive a topic in that it allows for easy political identification and permits political decisions. Administrative reform as a tool for easy political identification. The need for a party or a candidate to present clear, evocative and attractive proposals put stress on their ideas about the public sector. The subject is important - over six million people are, in one way or another, public employees, and those who are not continue to be concerned. The subject is sensitive - the central place occupied by the public sector means that it affects almost all sectors of life. The subject is well known - right or wrong, everyone has his idea about what should change, how, and why. For these reasons, each party or candidate is obliged to

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take positions on administrative reform. Occasionally, it makes a lot of sense, as was the case, for instance, when François Mitterrand promised the decentralisation he actually instituted after his election. In other circumstances, the way one defines the concept of administrative reform is less important in itself than in what it reveals, or is supposed to reveal, about one's mind and way of thinking. In both respects, it is, therefore, a convenient element of identification, for the identified as much as for the identifiers. But, in order to make this identification efficient, it has to be distinctive. Knowing that substantial proposals are difficult to conceive, it is far easier, and hence tempting, to focus on ideological inputs. The left wing is constantly prejudiced in favour of a strong state, strong administration and a broad public sector, the main concern being to make them more efficient and more human. The right wing, just as consistently, has a prejudice in favour of free private enterprise, whatever the subject in question, advocating the reduction of the public sector to its minimal functions, which themselves are judged in a very restrictive way. Between these two sketchy and extreme positions, everybody can choose the degree of reform he or she thinks appropriate, but has to show ideological affiliation. The result is that superfluous ideological impediments make any debate obscure. Instead of rational dialogues about specific proposals, the usual misunderstanding impedes any constructive discussion and hinders the consensus that could be achieved on certain issues. The final effect of this easy political identification is that it encourages top-down processes. Political party leaders are being compelled to give their opinion about public sector reform, the winner is expected to fulfil his pledges. In the meantime, with regard to both conception and execution, those who are directly concerned wait passively for the announced decisions to come or fight against them, without bothering to propose any alternative solution. Thus, a new paradox arises: it is generally after the initiator has left that his initiative has a greater chance of succeeding (even by becoming a counter-proposition to the successor's new initiative, as happened, for instance, in the cases of the postal or port authority reforms). Administrative reform as a tool for easy political decision. It may sound odd to assert that a call for reform is an easy decision. Yet, this is true for several reasons that need explanation - provided that the decision to reform does not mean that the reform is effective. Precisely because administrative issues are always present in electoral campaigns, proposals are made, sometimes debated, and systematically announced publicly. After the elections, the winners consider the electorate to have ratified each element of their programme. The obvious concerns about such a dangerous interpretation of political majorities do not matter: the ideas that have won are presumably adopted, and take advantage of a special legitimacy. Afterwards, it is just a question of institutional engineering. The Fifth Republic offers many facilities to its governments. I f passing a bill is constitutionally necessary, it will pass thanks to the disciplined support of

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the majority in Parliament. I f ever this majority shows reluctance, the Constitution provides several means of imposing decision. And, in many a case, the decision can even be made without consulting Parliament. Obstacles, then, never arise in legislature but, more often, in the street. At the beginning of the winter of 1995, Alain Juppé received a standing ovation from his majority after announcing his programme of reforms, concerning, among others, important elements of the public sector. One month later, France was paralysed by all sorts of strikes, and the government had to withdraw most of its projects. This, naturally, does not mean that a reform is impossible. It just means that governments are frequently victims of the facilities they have at their disposal. Easy decisions are made with no particular precaution, and problems arise afterwards, when the time comes to implement them. This is why successful processes have usually used institutional facilities to conclude a reform, not to initiate it. In other words, the use of force is not a short-cut. On the contrary, it has been proven on many occasions (reforming the post-office, telecommunication, the armed forces, etc.) that even the most difficult tasks can be achieved, but on the strict provision that enough time is taken patiently to explain, to talk, to negotiate, and to convince. Only the most clear-sighted ministers understand that success is at that price, which requires enough (effective) will to avoid (ineffective) use of force. Seeking immediate results is generally the surest way of meeting with resistance, while accepting that time will be lost in adjusting to the process is frequently a good investment, thanks to which a lot of time will be saved in the application of the reform. In sum, a successful public sector reform should ideally combine a series of characteristics. It should: •

be announced and briefly explained in an electoral campaign, preferably a presidential one;

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be coherent with European developments and conform to its general trends;

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be in the charge of a willing, lucid and experienced minister;

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be discussed as long as necessary inside the relevant sector and at all levels;

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integrate as many suggestions or amendments as possible, coming from the participants themselves;

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be concluded in Parliament by a bill retracing loyally all the above mentioned elements.

As one can see, there is nothing here that is utterly impossible. Nevertheless, adherence to these criteria demands so much political skill that it looks difficult to the politicians themselves who, therefore, have tried to invent short-cuts. Jacques Chirac had in mind, as de Gaulle before, to use people's will to overcome obstacles arising from political procedures. In order to do so, the Constitution was amended in 1995 to create the option of referenda on "reforms

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related to economic or social policy of the Nation and to public services that contribute to them" (new article 11). Public sector reform, thus, was elevated to a constitutional concern and matter for referenda. This illustrates both its importance and its difficulty. Though a possibly useful tool has been created in this way, it has never been used since, and will probably never be as long as the prerogative belongs to the President who politically has a lot to lose and little to win by such a procedure.

V. Resource Base Undoubtedly, economic and financial considerations have been the most powerful incentive for reform, but more for leaders than for public opinion. Expenses rising faster than GDP created shortfalls in revenue that could only be compensated by higher taxation and/or greater deficits. Privatisation offered a temporary third solution: selling substantial public assets could provide significant revenue, but in a way that often resembled situations in which people "sell the family jewels to pay the rent". This had several consequences. Firstly, people suspected that even privatisations that were fully justified had been decided upon for purely financial motives. Secondly, the resources they provided reduced the effort to reform what is really indispensable, i.e. to try to rationalise and reduce public expenditures. Thirdly, it increased difficulties and deficits, when the stock exchange was not dynamic enough to absorb the new privatisations. Above all, public sector reform was not presented as a necessity in itself (reformed services being more efficient and less expensive) but was perceived as a purely economic imperative. At the same time, the need to fulfil the Maastricht criteria took over. Therefore, instead of reforming for the sake of reform, which actually needed to be explained and was perfectly explicable, reforms have been presented first as means to fight deficits, then as preconditions for the creation of the European currency. The final result was that reforms being unpopular (due to the fact that they have been inadequately explained) were understood to be a direct consequence of European integration, thus making the latter unpopular as well. In fact, more efforts were made to have people accept higher taxation (compulsory levies have reached over 46 percent of GDP) than to try to put forward reforms that might have saved money. The public sector continues to be a very heavy burden on national wealth and dynamism, a burden part of which could obviously be relieved by appropriate changes. This process delays awareness of the necessity for reform. Many people sincerely believe that a more favourable growth of GDP would provide enough resources to afford unchanged public services and consider that there is no real need to accept painful reforms. On the

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contrary, the more taxes they pay, the less they are ready to agree to changes to the system. Finally, it is no exaggeration to state that objective budgetary difficulties have not really helped the subjective comprehension of public sector reforms.

VI. Professionalisation of Reform Reforms, not being subject of consensus, are sustained mainly by (changing) political will. Consequently, only political leaders promote them and, generally, they are no real professionals. In order to achieve what they are looking for, they rely on the efficiency of the administration which is synonymous with selfmedication. It can provide good results. And the more recent example of army reform is spectacular. But, generally speaking, simply gambling on the convergence of political initiatives and administrative willingness does not produce satisfactory results. Professionalism, though, has made a sensitive outbreak in the system. Political leaders began to hire experts and advisors for communication and public relations many years ago. More recently, administrations have borrowed the idea in order to communicate better with the public. Some of them have discovered the virtues of professionalism and became accustomed to call on external advisors for more numerous tasks (lawyers, internal communication, headhunters, etc.). Finally, the most clever administrators have understood that the areas of organisation and management can also benefit from outsiders' help, and audits followed by appropriate proposals for reform have become quite a usual process inside government and public services. This, however, does not correspond to any overall plan. Insiders are professionals of an existing organisation and are, therefore, unfit to reform it, and outsiders often continue to be perceived as intruders. Everything is left to chance: in some places real professionals will be called upon, in others motivated civil servants will try, with more or less skill, to cobble together their own service, and in many places people just pray that the wind of reform will blow somewhere else. Though this seems a pessimistic view, one must remember that things are changing quickly in that sphere, too. Local authorities are modernising quite fast. Their executives, less fossilised in their administrative habits, use all available means, and do not bother to find out whether there are precedents or not. Hiring professionals, whatever their background, for any occasion where it might prove useful, is perfectly normal today. National administrations or public services discover, thanks to local government, that external skill may be very efficient even inside what they consider to be the temples of general interest, being traditionally closed to private activities. The concern about professionalism

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has spread rapidly, but it is too early to make a substantial evaluation of its effects yet.

V I I . Benchmarking France's Experience Three momenta may be identified in the process of public sector reform in France: during the 1960s, there was intellectual concern, during the 1970s financial incentive, during the 1980s political decision. A fourth, very different element arrived during the 1990s: the growing influence of Europe. Both inside and outside government, the 1960s were a period when a lot of high-level civil servants tried to conceive and promote important reforms. A lot of studies were commissioned, many reports published, issued by public authorities (Commissariat au Plan) as well as by think tanks gathered in "clubs" (the most famous being the Club Jean Moulin). Few of them had immediate influence, but they all prepared the ground for subsequent changes. There and then the ideas of decentralisation and déconcentration were born, but still in a very Colbertist way, that is to say on the initiative of modernising civil servants far more than on the initiative of politicians - this represented a technocratic process. Useful and clever reforms might have been made then, in rather satisfactory conditions. But, with France still enjoying a high rate of growth, there was no impetus for further efforts. In fact, it was during the second half of the 1970s that things really began to change, not least due to the impact of the currency's instability and the petrol crisis. For the first time in French history, the state and the public services, which had hitherto not been seriously questioned, started to be considered a financial burden which needed to be made lighter. Under the pressure of necessity, cutting costs became an obsession. "Hunt down waste" was the fashionable refrain, in which no distinction was made between unproductive waste and investments, with all spendings being treated the same way. No overall vision guided decisions, which were made on optical financial criteria rather than on a rational basis. This at least created awareness of the fact that the traditional model of the public sector could and should not be eternal. With the 1980s came a third and decisive development. As a result of political initiatives, two radical changes were implemented: decentralisation and liberalisation. Undoubtedly, 1982 and 1986 brought sorts of revolutions that did not limit their consequences to their immediate objective but also had a considerable effect in changing people's attitude. Though the former was decided by a left-wing government and the latter imposed by right-wing governments, they converged in the idea that not everything was to be expected from the state. Even before the word was known, subsidiarity was practised. It has had enormous influence on what followed.

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On the one hand, decentralisation gave birth to new ways of thinking and acting. On the other, liberalisation (of which privatisation was only one of many manifestations) meant a constant and progressive withdrawal of the state from many activities it had either been in charge of or, at the very least, reglemented so far. Therefore, most regulations were based upon the idea of dereglementation: instead of having the public sector doing things, or deciding how people ought to do them, many acts confined their ambition to adopt sets of rules securing a minimum of order in areas turned over to private initiatives. And, in the same way that right-wing parties adhered to decentralisation, leftwing parties, without always admitting it, adopted a legislative philosophy in which mere regulation was preferred to réglementation. It may appear odd that the stages of European integration are not being considered here as an essential benchmark. Yet, it would be justified. Europe has made its way almost incognito. That is to say that, when the subject was debated, it was without awareness of the fact that European integration continued its progress. Consciousness of the importance of what has been decided at the European level, even on important matters concerning the public sector, is a recent and striking discovery. While people were simultaneously aware of what was happening during the 1960s, 70s, and 80s, they were becoming aware of the importance and diversity of "Brussels" only afterwards. In any case, it is relevant to notice that all these elements have finally converged in the same direction: making public sector reform increasingly indispensable. For all that, it has not made things easier or less divisive. And that is not the least paradox.

V i l i . Public Sector Reform Paradoxes The stronger the state, the more difficult its reform. The state is not only a legal entity, it is also a physical and metaphysical one, made up of services, people, procedures, powers, traditions, and so on. The stronger the state, the more numerous and powerful are all these elements, each one attached to what he has and fears loosing in a reform. Therefore, all the forces the state is able to mobilise for all sorts of purposes mobilise themselves against the state when a reform is at stake. Civil servants appear to be too numerous but, precisely because they are so numerous, they are strong enough to discourage any attempt to reduce their number (or, at least, reallocate them to other tasks). Civil servants appear to enjoy undue privileges but, for the same reason, it is almost impossible to challenge them. Because of the lack of change, the state has become, to a large part, inadequate without diminishing. Because of its inadequacy, the state is not really strong anymore, just fat. The effects of political will. For obvious reasons, any proposed reform being politically identified is a source of conflict. Opponents will challenge either its

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relevance, its objectives, or the method of its application. Yet, the level of conflict is not really relevant. Dissent is systematic and, therefore, does not mean much, nor does its intensity. In 1981-82, the right-wing accused the governmental majority of destroying the French nation and its unity through its policy of decentralisation. It took over nine months of discussion to pass the bill in Parliament (far more time than for the nationalisations in the same period). Only a few years later, the right-wing leaders presented themselves as champions of decentralisation and local government. In 1986-1988, the new right-wing majority implemented a major programme of privatisation which went as far as affecting firms that had been nationalised by de Gaulle himself. The left-wing opposition used all possible means to fight, or at least to delay, those privatisations. As they won the following presidential and legislative elections, one could have expected that they would undo what they had so thoroughly criticised. On the contrary, when François Mitterrand campaigned with the slogan of "neither nationalisation, nor privatisation", the first consequence was that he confirmed what had just been done. Short-term conflicts, however serious, can turn into mid- or long-term consensus. And, apart from the anachronistic case of the 1982 nationalisations, absolutely no public sector reform has ever been reversed by former opponents, sometimes in spite of their firm promises. This accounts for the successes. The failures have always been due to either lack or excesses of political will: lack of will, when members of government were afraid of reactions and did not know how to handle a problem; excess of will, when, convinced that they were right and sure of their power, they did not take the required precautions to win the approval of those who were directly concerned. But even in these cases, it is important to notice that failures have often been temporary. A lot of time has been wasted, and still is. Yet, most of the reforms are finally accomplished, when those in charge end up doing what they should have done in the first place. For instance, in January 1997, Parliament adopted, without any serious strike, an important bill on railways that had partially caused the huge social movement of December 1995. In fact, things move far more than people perceive, but many changes are made artificially chaotic or difficult by meaningless ideological baggage and/or tactlessness in social management. Hard theory , soft cases. On many occasions, French leaders have overestimated difficulties (or underestimated people, common sense or intelligence), and have postponed reforms that, properly prepared, could have been accepted far more easily than expected. Two excellent examples can be given, dating from 1990. For many years, beforehand, it had been obvious that the Post needed to be transformed from an administration to a business, which would be as modern as possible. This implied numerous changes, the most difficult one being the status of the employees. When the process started, almost everybody foresaw months of hard strikes, which would end in a politically expensive fail-

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ure. None of this happened. After long preparations inside the post office administration, the reform was approved in Parliament (1990), the legislation progressively enforced, and things moved forward very smoothly. Today, La Poste is an efficient publicly-owned firm, involved in successful competition with private players, in which it uses its national network to the best effect, after discovering the virtues of greater flexibility. The second example is the creation of the generalised social contribution (CSG), which has been a major reform in the tax system (replacing many complicated and unfair contributions, based only on salaries, by a lower general contribution, based on all income). When Michel Rocard created it, he had to face a motion of no-confidence that was defeated by only five votes (out of 577). The opposition was made up of representatives of the whole political spectrum (even many of his friends being very reluctant), motivated by the belief that French people would not accept this reform. They did. And all following governments have used this modern tool with great ease. In the cases of both the Post Office and the CSG, the difficulties were greatly overrated. Getting out by the door , coming back through the window. As mentioned, many reforms have had as their objective or as their consequence the diminution of the state and public sector presence. This has been a general trend: local governments being preferred to central administration, regulation being preferred to réglementation, private companies being preferred to public administrations, and so on. Such a system, however, requires rules that are respected by all players. Rules require enforcement. Enforcement requires judges. And judges are another face of the state. This is an aspect of public sector reform that is, unfortunately, never stressed in France. When the state withdraws as administrator, it comes back as judge. As a consequence of all the above mentioned changes, there has been an extraordinary increase in the number of cases brought to court. The legal system is overwhelmed and, while many reforms have been based on the idea that judges would be the last resort to make the new rules work satisfactorily, apparently they were not really able to do so. Part of the task is carried out by what are called "independent administrative authorities" (to oversee many sectors such as communications, the stock market, telecommunications, etc.). But their decisions may be challenged in court, too, and actually are, which means that their existence diminishes the amount of work for the legal system but does not remove it. While almost all areas of public administration have been more or less affected by reforms, the judiciary has not. On the contrary, its role grew enormously, working with the same procedures, the same features, within the same pattern, in short, the same heaviness as when its role was more limited. A sort of mortgage, therefore, is still raised on the efficiency of many public sector reforms that need regulation, theoretically warranted by judges practi-

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cally unable to do so. The state needs this reform urgently, in order to secure the others. The government elected in 1997 put it among its priorities. What is already certain by now is that judges become policymakers. Whether they like it or not, whether they are prepared for it or not, they are required to review many decisions taken by elected bodies and, often, starting from a legal basis, finally to substitute their own estimation for that of those normally entitled to make such judgements. This is one more reason why the idea of a strong state in France deserves a re-evaluation, at the very least. This leads directly to a general conclusion. Provided certain elements are present - discussions, negotiations, patience, tact, etc. - , any public sector reform is possible. But the common element of all the successful ones so far has been to improve responsibility and accountability, whether that of an enterprise or of an administration. In other words, any attempt at reform should tend to redefine responsibility and accountability, and should not seek to pre-determine how they should be exercised. On this ground, proposals may be useful, suggestions may be welcome, but one must never forget that, in the case of France, any reform requires, in one way or another, that the central state surrenders something - whether it be a competence, a procedure, a hierarchy or a property - and that this is totally inconsistent with any attempt to administer on a long-term basis what has been abandoned. Assign a mission, express a few principles, define some objectives - and nothing else. The rest, all the rest, should be left to whoever takes over responsibility. And this may not be peculiar to France.

Paradoxes of Administrative Reform in Italy By Giacinto della Cananea

I. Introduction While in some other OECD countries, such as the UK, substantial public sector reform took place in the 1980s, Italian reforms during that decade concentrated on changes in budgetary procedures. In contrast, the 1990s witnessed a large-scale series of attempts to reshape Italian government. This chapter argues, first, that unprecedented efforts were made to modernise Italian public administration, as a result not of dynamics internal to the political and administrative system but rather of external pressures. It, then, illustrates the objectives and techniques of administrative reforms. Third, it argues that a distinction must be drawn between real reforms, reforms merely announced and pseudo-reforms. Fourth, it points out that reforms were mainly the result of central government action. Fifth, it identifies and discusses two serious paradoxes generated by administrative reforms: the contrast between demand for and supply of reforms, and the contradiction between the intended rollback and the observed enlargement of the borders of the state.1

I I . The Historical Background of Administrative Reforms and Their Causes In Italy, the doctrine due to which public administration has such serious shortcomings that it must be reshaped and modernised, is an old one. But it never produced radical changes, since those conceived and realised by Cavour in the mid-19th century. 2

1

The author wishes to thank Professors Sabino Cassese, Joachim Jens Hesse and Christopher Hood for helpful comments on earlier drafts of this chapter. However, he is alone responsible for errors and omissions. 2 An excellent history of Italian public administration is provided by Melis (1996). See also Cassese (1988, 1993). 18 Hesse

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It is old, in that it was expressed by the few Italian liberals 3 as early as during the opening decades of the 19th century. In the first decades of the twentieth century, Minghetti and Spaventa stressed the need to protect public administration from political interference. Einaudi pointed out that bureaucracies were unlikely to contribute to any serious change. De Stefani, Minister of Finance in Mussolini's first cabinet, proposed that the civil service ought to be smaller and better qualified, but Mussolini's answer was that such measures would provoke a revolt, especially in Southern Italy. That doctrine was reaffirmed during the years in which the Republican Constitution was framed and (slowly) implemented (Presidenza del Consiglio dei Ministri 1948). Similar ideas were exposed by the centre-left governments which ran the country between 1968 and 1980 (the most elaborated report still being the one produced by Giannini in 1979). However, attempts to modernise public administration were not successful. For example: during the 1950s policies to decentralise state functions were without real impact on bureaucracies; the same happened twenty years later with attempts at "régionalisation". Another case in point is the approval by Parliament in 1968 of a statute constituting for the first time a specific framework for the higher civil servants, which remained a dead letter because politicians refrained from giving guidelines and administrators accepted this absence in exchange for no bureaucratic responsibility for results. In short, in spite of the transformation of Italy from a mainly agricultural and rural to an urban and industrial society, the nature of its bureaucracies was not really altered, though it grew substantially in size and responsibilities. Moreover, failure to modernise and reform the public bureaucracy helped to undermine the legitimation of the state (Cannanea 1996), as such a legitimation does not derive only from electoral democracy, but also from the effectiveness of public institutions and their compliance with the legal order. 4 During the early 1990s, public expenditure was continually increasing, and although taxes rose too, public deficits grew. 5 At the same time, public effectiveness gave rise to widespread concern in the health sector. Dissatisfaction with public services led to the transfer of patients from southern to northern (or foreign) hospitals and growing expenditure on private health care. In other 3

See Talamo {1961). An overview of the Italian situation is given by a special issue of the Revue Française d'Administration Publique (" L'Administration Italienne Aujourd'hui *), Vol. 67, July-September 1993. 5 Morcaldo (1993) shows that in 1982 public expenditure was about 36 percent of GNP in Italy, 48.2 percent in France, 42.2 percent in the UK and 43.1 percent of the EU average. Ten years later, it was 43.7 percent in Italy, 48.5 percent in France, 40 percent in the UK and 45 percent at EU level. 4

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cases, administrative procedures resulted in further costs imposed on firms: for instance, in 1991 a report published by the Ministry of External Trade estimated that administrative costs consumed two percent of Italian exports by value. Both individual users and corporations shared a common and basically negative view of public administration, as stressed in an official document (Dipartimento della funzione pubblica 1993). Although the poor quality of public services reflected a traditional emphasis on legality, this emphasis did not prevent legality from being infringed. To understand this outcome, the sheer quantity of legislation has to be considered. Excessive legislation is reflected not only in a "stock" of statutes larger than in other European countries (approximately 35,000 statutes), exacerbated by the absence of resort to legal codification. As a result, legal certainty is undermined, as Bruno Leoni (1961) pointed out, as well. 6 But legalistic oversight of administrative action did not prevent corruption, as the growth of criminal proceedings against public officials (now several hundred cases every year) shows (D'Alberti!Finocchi 1994; Della Porta! Mény 1997). Hence, the Italian administrative system suffered not only from a fiscal crisis and a specific user-unfriendliness, but also from a broader performance deficit. It was generally perceived as a failing organisation. And the growing concern expressed by citizens and firms resulted in referenda, rather than orthodox party politics, being used as instruments of reform. Referenda are provided by the Italian Constitution, and since 1974 they have been used on several occasions to determine issues concerning civil and social rights (divorce, abortion, criminal legislation, wages). In 1993, referenda were held over public sector organisation and reform. Two of them succeeded (with an 80 percent majority) in closing down the central departments of tourism and agriculture. Another called for the elimination of the functions carried out by state bodies in the field of environmental protection. The end of specific bodies and procedures for delivering public money in Southern Italy was also determined by the request of a referendum.7 These events, unparalleled in other OECD countries, reflected important changes. One is the failure of political and administrative elites to modernise and reform the public sector. Another could be called the failing legitimation of the state. A third is the growing evidence of direct attempts to reshape the state by citizens and businesses, whose general organisation, Conflndustria, actively supported these referenda. 6 Some data about legislation are shown in Dipartimento della funzione pubblica (1993). 7 The results of these referenda were published in West European Politics 16/4 (1993).

18*

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This account, however, would not be complete without considering the influence of European Community (EC) institutions. First, EC directives gradually introduced the liberalisation of public utilities in areas such as telecommunications. Second, the enforcement of the EC Treaty rules aiming at safeguarding free competition resulted in growing constraints on state aids (e.g. those given to IRI, the major public holding). Third, the tightened rules on public procurements reduced the discretion that bureaucracies could exercise. Last but not least, the rules seeking to prevent excessive public deficits and inflation provided domestic policy-makers with an external constraint, helping them to shift the blame for anti-popular changes. It is, therefore, the convergence of two kinds of external pressures, the "bottom-up" pressures from organisations of citizens and firms and the "top-down" pressures from the EU, that accounts, for the unprecedented attempts to reshape Italian public administration in the 1990s. This interpretation is certainly an oversimplification, because often such pressures are stimulated and channelled by state bodies. However, such bodies would not act unless the given pressures required it. These developments also cast serious doubt on the idea that administrative reforms tend to follow economic and social changes, albeit at a distance. Indeed, only when the perceived performance deficit (plus the budget deficit and the user-unfriendliness) became acute did Italian public institutions in general, and cabinets in particular, modify their attitude towards public sector reform.

I I I . The Administrative Reforms of the 1990s: Directions and Techniques The attempts to modernise and reform public administration from 1992 to 1998 differed substantially as a result of the varying emphasis placed on them by cabinets (more emphasis was placed on administrative reforms by the Amato and Ciampi cabinets between 1992 and 1994, less by the Berlusconi and Dini cabinets between 1994 and 1996, and a renewed, though confused, reform impulse came from the Prodi government, until 1998).8 But some objectives remained substantially stable, in spite of changing political majorities and electoral systems (in 1994, the first cabinet appointed after the introduction of a new electoral system was that led by Berlusconi); the same applies to some techniques.

8

Further details are given by Cassese (1995: 377) and Cananea (1996).

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A first objective was that of sound public finance (required by the Treaty of Maastricht). This goal implied not only the reduction of public debt and public deficit, but also two directions of reform. One was public expenditure cuts, which the Amato government sought to obtain by preventing a further growth of the four major sources of public expenditure (pensions, health, civil service and local finances; a bolder reform of pension schemes failed in 1994) and the Ciampi government tried to achieve through a more comprehensive reform of the public sector. The other was the new legislative framework for the budget (its structure was modified in 1997, when the Parliament approved a draft bill presented by the Prodi government) and for oversight of administrative action (as a result of the rules proposed by the Ciampi government and introduced by a Statute of 1994, the Court of Auditors was required to check that public administration respects the principles of efficiency and of financial balance between revenues and expenditure). A second objective, which all governments aimed at achieving, was to reduce the size of the public sector. This led to three different directions of reform. One was the suppression of superfluous bodies and committees.9 Another one, formally declared since the last cabinet led by Giulio Andreotti in 1991, was the privatisation of the "family jewels", namely public enterprises (realised mainly by the Prodi government). A further direction was deregulation, which not simply meant a reduction of rules, but more generally the effort (seldom fully successful) to eliminate the large number of plans and authorisations restricting private activities, such as trade. A third objective, constantly reaffirmed, was improving administrative techniques. This implied at least four kinds of changes: personnel management, administrative procedure, oversight of administration and public services. The status of the civil service was changed by attenuating its differences from the private sector (with jurisdiction passing from administrative courts to civil courts) and reshaping the higher civil service (though a strong difference exists, in this respect, between the rules adopted by the Ciampi and the Prodi governments). Administrative procedures - to be discussed further below - were simplified. For oversight of public bodies, ex ante scrutiny was severely reduced and internal checks were introduced throughout the public sector. Finally, public services were modified both by the obligation (established via a directive issued by Ciampi in 1994) for every agency delivering public services to adopt a specific charter (modelled on the UK Citizen's Charter), and by the creation of

9 The Ciampi government succeeded in unifying two departments, eliminating 13 interministerial committees and 75 collégial bodies. A further 22 commissions were replaced with conferenze di servizi , a procedural tool.

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regulatory authorities dealing with specific public utilities (such as gas, energy and telecommunications). A fourth general objective was decentralisation. While the Ciampi government in 1994 succeeded in giving financial autonomy to both universities and schools, the Prodi government introduced a massive decentralisation of public functions to regions and local authorities, which greatly exceeded the decentralisation realised during the 1970s. A further distinctive feature of Italian administrative reform over this period concerns technique. As a result of the excess of legislation, reforms had themselves to be approved by legislation (with the perverse 10 effect of increasing its stock). However, this effect has been limited in two ways. Most statutes introducing administrative reforms have delegated wide (and, to a certain extent, unclear) 11 normative powers to the executive. Moreover, those powers did not have to be exercised in "one shot", but could be used also for correcting decrees. In addition, remarkable efforts were made to employ techniques other than legislation (on the principle that most changes can be made without changing the law, by simply implementing existing ones). Some consisted in the use of soft-law tools, such as the Directive on Public Services (adopted by Ciampi in 1994), the ethical codes of conduct for public administrators, or the general instructions (Codice di stile) which were to be expected in all contacts with citizens. Others consisted of pilot projects (progetti finalizzati) serving as a means to test new ideas of reform. And last but not least, knowledge about public administration - a key prerequisite for any serious reform - was increased by numerous studies and reports. 12

IV. "Real" Reforms Versus Announced and Pseudo-Reforms Regardless of the legal form of reform approaches - as legislation, cabinet directives or using soft-law tools - , what really matters is the effectiveness of such measures. From this perspective, we can distinguish: (a) real reforms (either fully or partially successful, in the terms discussed in the introductory chap-

10

In the sense in which this word is used by Hirschman (1992). This point is made by Travi (1994). 12 During the years 1993-94, the Department of Public Service produced 27 reports on specific policy areas or mechanisms and six volumes of general studies. The creation of a data base on administrative procedures is another example for this improvement of information about public administration. 11

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ter); (b) reforms merely announced, but not carried out; and (c) pseudo-reforms. Some examples of each kind are discussed below. To begin with real reforms, let us consider the simplification of administrative procedures. The aim of this reform was to make processes more likely to produce substantive results (outcomes) that are satisfactory to citizens and firms. It also sought to reduce the time-limits for their conclusion, which a statute approved in 1990 requires to be set for any kind of procedure. Only in 1993, however, on a proposal elaborated by the Ciampi government, did the parliament approve a statute (connected with the yearly budget) which provided for 123 procedures to be redefined and delegated to the executive. This delegation was soon exercised: in 1994, 70 regulations were drafted (and submitted to the Council of State and to parliamentary commissions, entrusted with the power to give opinions), of which 46 were enacted. The effect was to adjust old administrative procedures (like the financial procedures, still regulated by rules introduced in 1924), to speed up decision-making, to eliminate superfluous stages of administration and to introduce ways of evaluating results. The general guidelines of reform were confirmed by further legislation in 1997. That legislation provided increased delegation of powers to simplify over 100 administrative procedures (only four regulations, however, were enacted in the following year). It also established that a yearly bill (legge annuale di semplificazione) should be drafted by government, providing new forms of action to compensate for breach of the new rules, that could be brought before the courts. Though it is probably too early to assess the success of this reform, at least three results can be pointed out. The first is increased public knowledge about all the (5,400) procedures that central departments carry out, all included in a specific data-base. A second is that the previous administrative and legal culture in which citizens and firms had to adapt themselves to administrative procedures were inverted. Third, an unintended effect should also be considered: the opposition by vested interests to administrative simplification. The changes were so substantial that organisations representing vested interests sought to prevent (or at least alter) them, by bringing actions before administrative courts. The interest groups involved included the association of traders opposing the reform of authorisations to new trading firms 13, or the association of private agencies issuing driving licenses opposing new procedures for issuing such licenses, which would make it more convenient for citizens to obtain them directly from public bureaucracies (with the odd argument that more efficient public bureaucracy could damage private interests). The growth of litigation be-

13 Surprisingly, this action was upheld by the Council of State in a judgement convincingly criticised by Cassese (1996: 434). See also Sandulli (1997: 989).

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fore courts is but a further pointer to the well-known connection between supply of and demand for justice. A contrasting case is that of privatisation and liberalisation in the field of public utilities. Although provided for by legislation since 1992, privatisations were realised more at a formal level (the transformation of public bodies into private companies) than substantially (in the sense of share sales to private purchasers, through either a direct agreement or a public offer). Though ENI (hydrocarbons) and TELECOM (telecommunications) were privatised by the Prodi government, ENEL (electricity), EPI (post) and FS (railway) remained in public hands, along with most banks. Moreover, a bill presented by the Berlusconi cabinet and approved by Parliament in 1994 obliged the Cabinet to introduce golden shares in privatised companies.14 Moreover, privatisation came into conflict with liberalisation, as the government, owning public enterprises to be privatised, had little interest in speeding up liberalisation. Two examples may shed some light on this. The first is the telecommunications case: not only did the executive (led by Prodi) defer the implementation of new EC rules, but it also deferred the introduction of the specific regulatory authority (Autorità per le garanzie nelle telecomunicazioni ), with the result that that authority could not determine the initial conditions of the market. The other case is that of highways. A 1992 bill allowed the executive to defer the date of expiry of licenses released to public bodies transformed into private companies. Consequently, when privatisation of Autostrade s.p.a. was considered, it soon became evident that the length of its licence was one of its most valuable assets. In other words, the cabinet had a strong economic interest in deferring the end of the licence. What happened is that the licence was extended (until 2038), in spite of opposition by the Court of Auditors, interpreting the decree as inconsistent with EC law. 15 Thus, legislative measures did not directly introduce real change but left its introduction to future measures. And when those measures were adopted, they were in conflict with the liberalisation component of the agenda. Finally, a case of pseudo-reforms was to be observed in the restructuring of the budget promoted by the Prodi cabinet and adopted in 1997. Budgetary procedures were modified in 1978 (due to the growing fiscal crisis of the state), but the budget was left exactly as it was in the 1920s, still following the 19th century paradigm according to which the budget must be divided into chapters

14 See Cananea (1997: 511). Detailed critiques of Italian privatisation initiatives are made by Cassese (1994: 122) and Curwen (1993: 463). 15 The decision of the Court is published in Giornale di Diritto Amministrativo , 1/1998.

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connected to the various departments and agencies, since it is primarily an instrument of parliamentary scrutiny of governmental action. To make the budget an effective financial planning instrument and provide the administrative élite with general programmes to be implemented, a new structure of the budget was adopted in 1997 after years of debate. On the face of it, an important transformation was introduced, by replacing the old "chapters" (6,000 in 1995) with "provisional units", designed to allow planning and management on the basis of general and specific objectives. However, the old chapters were not entirely abandoned, but retained as tools of control for the Treasury to use in verifying how bureaucracies spent the money being allocated. Moreover, in the first application of the reform, the new "units" corresponded exactly to the old chapters, for instance in education and health. In sum, the change was more formal than real. Indeed, the change even had unintended and perverse effects in the light of what Parliament wanted, in the form of strengthened powers obtained by the Treasury in exercising the power of the purse and checking the work of the other departments and agencies (cf. Perez 1996: 905).

V. Cabinets as the Principal Actors in Reform As noted earlier, cabinets have been crucial actors in administrative reform, channelling both the pressures coming from citizens and firms and those coming from the EC (which thus strengthened cabinets vis à vis parliaments). First, cabinets (especially those led by Ciampi and Prodi) produced, with the help of university professors and researchers as well as magistrates from the Council of State and the Court of Auditors, a series of studies where bureaucratic shortcomings and their costs were identified and remedies proposed. The definition of possible reforms was thus a function of the executive. Moreover, although all Members of Parliament had the right to propose administrative reforms, all comprehensive attempts to reshape the public sector came from cabinets (as the relaxation of cabinet initiatives in 1995-1996 shows). The definition of draft legislation was thus a province of government. As noted earlier, government also received wide delegations of normative powers to enact implementing decrees (decreti legislativi delegati ), subject only to parliamentary advice and control. These delegations placed much of the responsibility for public sector reforms in the hands of governments. This conclusion is important for two reasons. The first is that, according to the Constitution, the organisation of public administration must be based on statutes and is therefore reserved (at least as a matter of principle) to the Parliament. Although this constitutional clause has remained untouched (while the electoral system has gone through remarkable changes), the real situation is

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quite different, with the power of the cabinet over administrative reform being notably strengthened. The other reason is linked to public finance. Under EC rules (the Maastricht criteria on excessive public deficits), governments enjoy the power to determine the limits of public borrowing (thus governing public expenditure growth) and are liable for the deficits of the public sector. These rules certainly contributed to the enhanced role of cabinets in Italy, giving them the legitimacy to reshape the public sector and producing in effect a constitutional change in the status of cabinets.

VI. The Contrast Between High Demand for Reform and Low Supply The most striking paradox in the Italian public administration reform process discussed above is perhaps the contradiction between the high demand16 for and the low supply of reforms. As far as the supply side is concerned, two key features were identified earlier. Most reforms were merely announced or pseudo-reforms and reform performance differed greatly from one cabinet to another. This divergence is also reflected in the scant attention paid to administrative reforms by the parliamentary commissions entrusted with the task of defining amendments to the Italian Constitution. A first parliamentary commission was set up in 1983, to examine all possible types of reform, but it paid no attention to administration and its reports remained an object for future research (see Hine 1988: 206; Pasquino 1986: 125). Later, in 1992, when the loss of legitimation became more evident, a second parliamentary commission for institutional reforms was set up with enhanced powers, following the intention of restoring the credibility of public institutions. It might have been expected that the commission would consider popular demands for administrative reforms (indicated by the 1993 referenda results), but the changes proposed paid only limited attention to reforms and those that did were exclusively concerned with legal checks. Other important issues, such as principles of procedure, were neglected. Anyway, none of the amendments proposed were in fact adopted, partly due to the sudden ending of the parliamentary session (Cananea 1994: 101). Although history never repeats itself, it sometimes appears to do so. In 1996, a new commission for constitutional reforms was created, with the more ambi16

See Section II.

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tious objective to completely rewrite the second part of the Constitution, which regulates the organisation and functioning of the state. In the same period, referenda on these issues were proposed by private committees and regions which indicated continuing discontent with the performance of state bureaucracies. Nevertheless, the Parliamentary Reform Commission did not reflect this concern. When it presented its draft report in 1997, the report paid limited attention to the public sector. Indeed, of the only two proposed constitutional changes concerning public administration, one merely reproduced rules already established in 1948, while the other codified principles gradually elaborated by ordinary legislation.17 And the fact that, like its predecessor, this Commission did not obtain any concrete change indicates its neglect for the reform of public administration in spite of substantial popular demand for change.

V I I . Retreat or Widening of the Public Sector? A second paradox of Italian administrative reforms concerns the extent of the state. The view that the borders of the state had to be rolled back became a commonplace during the 1990s, both in public opinion and in the plans of most political parties. This doctrine reflects some ideas and interests common to other OECD countries, such as the perception of inefficiency in public bureaucracy, its propensity to create conditions for corruption, and crowding out towards the private sector. However, this view was also based on two Italianspecific features: the financial crisis of the state reflected in the highest public debt within the European Union, and the unusually large size of the public sector (especially i f all state-subsidised, or state-controlled activities were taken into account). Hence the importance of measures aiming at privatising public companies and selling public buildings. Some of these aspirations have been achieved. Private economic activities now suffer from less constraints than they did at the end of the 1980s. Most monopolies in the delivery of public services have been either eliminated or reduced. Some privatisations, too, have been carried out. The number of employees in the industrial public sector is lower than before. 18

17 A first comment on the draft project was expressed by Cuocolo (1997). See also Cananea!Napolitano (1998). 18 The general size of public sector employment also decreased. According to the Court of Auditors, it fell from 3.9 million in 1992 to 3.49 millions in 1994 (see Cecora 1997: 894).

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But there has been no real reduction in the borders of the state. We have already seen that privatisations were often deferred 19, and that both cabinets and the incumbent old monopolists made every possible effort to protect the markets of the former state enterprises against private newcomers. Two other elements are worth mentioning. First, the incumbent old monopolists also sought successfully to enlarge their grip on the economy. Instead of concentrating on their core business activities, they allied against competitors. For example, in the field of telecommunications, the open competition for the third provider of mobile telephones was won by a consortium in which ENEL (still enjoying an almost entire energy monopoly) participated significantly. Scepticism over the extent to which the state has truly retreated can also be expressed in relation to the creation of the new independent regulatory authorities. These bodies deal with interests previously unprotected, such as free competition, transparency of banks and insurance company operations, quality and promptness of public services, protection of personal data, solidity and transparency of pension funds. Hence, instead of strengthening private law tools, new public functions were introduced, thus enlarging the public domain (and with it the sphere of administrative law). Such developments suggest a twofold conclusion. Serious doubts must be cast on the simple idea of the retreat of the state. At the same time, however, it would not be correct to affirm that nothing much has changed, as if the only preoccupation were that expressed by Benjamin Constant , according to whom what really matters is the extension of public powers (