Privatization

The delivery of public services has always been directly connected with the stability of a country’s economy. The more stable the economy, the better the public services. In recent years, as the world slowly adjusted to the rise of global markets, many countries began transforming their public sector management (Hughes 2003).

Today, management of public services is more flexible and market-based. It has moved from to New Public Management (Hughes 2003). With this paradigm shift comes a shift in the role of government in society. It also redefines the relationship between government and its citizenry.

Together with this new orientation of public service management is the need for reforms in the whole structure. These reforms are required to strengthen services in protection, education, recreation and care (Flynn 2002). The stronger economies of the world have taken steps towards these reforms. The United Kingdom is one of these stronger economies that have progressively taken the initiative for public service reforms.

Major public service reforms began in the United Kingdom (UK) in the 1980’s under the Thatcher government (Hughes 2003). The following pages will try to explain the different reforms in UK’s public service management. It will address the bigger issues that surround it. It will identify the unique qualities of the UK reform programme and present the advantages they may achieve. Through these inferences, a more objective and balanced view of UK’s reform programme will be achieved.

Response to the UK Public Sector Reforms

The United Kingdom’s initiative to reform their public service programme is mainly due to fitting of the services with the changing demands of the times. The rise of living standards, coupled with the growing diversity of citizenry calls for the change in public services (Prime Minister’s Office 2002).

In the 1980’s, under the leadership of then PM Margaret Thatcher, the first major steps to public reforms were taken. At the center of these reforms is the wide-spread initiative to privatize services (Flynn 2002). Towards the end of the decade, management of basic services, gas, water and electricity, were transferred under private control (Flynn 2002). Apart from these, four other major government controlled corporations also were given up to private enterprises.

Privatization was not the only way to reform public service management. Soon after the turn-over of basic services to private control the central government and the National Health Services began outsourcing many of their functions and services.

In 1997 however, under the leadership of PM Tony Blair, a new campaign was launched to further reform the public service management. Public services were believed to have been suffering from under-funding (Prime Minister’s Office 2002).

However a strong economy is essential for the reforms. The Blair administration then began working on building a stronger, more stable economy.

The ultimate objective of the 1997 reforms is to provide everyone with real opportunity and security (Prime Minister’s Office 2002). In three years time, the UK finally experienced a sort of rebirth within the public services. In 2000, health services and education have never been better. Reform plans did not end here. Long-term goals to uplift standards in the areas of transport, education, criminal justice system and health were designed.

The road to these reforms has been tough. The setbacks and controversies are inevitable. There needs to be a genuine partnership between the government and people in the front line. The desire for reforms has propelled public service in the forefront of many political and social debates (Darwall 2005).

One of the biggest concerns with the current reform programme lies in policy and communication confusion (Wintour, 2007). The government is clear with its vision for reforms. However, it does not provide a coherent framework for action (Darwall 2005). While the reforms are meant to increase efficiency, the citizens do not feel this happening.

Modernized civil service is actually the consistent delivery of better services and getting the best value for public funds (Darwall 2005). The question lies on accountability for the use of these public funds. The UK’s public service history shows that bad decisions made create obligations and consequences across generations.

Debates arise because of this very reason. While one group sees the necessity of spending to provide better public services, the other fears that much spending may not necessarily increase the level of efficiency in delivering these services (Douglas, Richardson, and Dobson 2003).

The reforms brought about the founding of different agencies (Armstrong and Ford, 2000) to handle such use of public funds. However there is growing concern about the qualifications of people managing these agencies. Public servants are not necessarily managers. Improvement of efficiency requires a great deal of management (Darwall 2005). Even the best policies can easily crumble in the hands of those who are not fit to handle them.

The growing impression about these newly established agencies then is that they do not do not speed up delivery of services. On the contrary, these agencies, while under the supervision of less experienced managers, slow down the process of public service.

In fact the popular notion about these agencies is that they rather make collaboration and cooperation more difficult. The formation of these agencies is one of the most debated issues concerning the reforms.

Ethical issues are also being raised against the reforms. The shift of public service towards a market based orientation makes the definition of boundaries between what is public and what is private more difficult (Public Administration Select Committee 2002).

Interface between public sector and private enterprise is becoming more evident. Private businesses are becoming more involved in providing public services. More and more then, ethical concerns are raised.

There is growing clamor to cultivate and strengthen the ethical considerations in public service management. It is important to ensure that ethics are not lost or put aside, especially at a time when services are being delivered in new ways by new providers (Public Administration Select Committee 2002).

In public service there should always be a way to check impartiality, accountability, trust, equity and probity. This is the key to keeping the ethical considerations in public service management whilst implementing its reforms.

From the time of PM Thatcher in the 1980’s to the reform programme of PM Blair in 1997, the UK public sector has underwent alterations both in policy and implementation. However caution has been taken. Reforms have been worked on reforms slowly. Unrestrained expansion usually results in policy failure (Lane 1993). Both the government and its citizenry agree.

There is no doubt that reforms are a welcome idea for everyone. The promise of better services being delivered more efficiently and consistently can be actualized (Public Administration Select Committee 2002). The government is confident about their plan. The have laid down the strategies to achieve them. Even then, the citizenry is skeptical. There are many issues surrounding these reforms.

The government admits there are hurdles along the way of reforms. The journey towards better services is long and hard. But the government has a strategy. It addresses the questions of improving national standards, devolution of responsibility, increasing flexibility and providing better choices (Prime Minister’s Office 2002).

The citizens are waiting patiently. So far, reforms have been implemented but the issues still remain. Somehow the general impression is that the strategies set by government are not being translated into actual action (Public Administration Select Committee 2002).

Some improvement in the areas of education and health has been achieved. The question is, is it enough to address the growing demands of society?

The citizenry of UK sees very little results from the reforms. They seem to pale in comparison with the growing demands of an ever evolving society. Successful reforms are transformational. This only means that the impact of these reforms should be strong enough to affect all areas of life.

Unique Qualities of UK Public Sector Reforms

 While the UK’s reforms remains heavily debated and scrutinized, there is no doubt that it is one of the most dynamic. In public service history, the UK programme has been one of the most studied. Many parallelisms have been made on the reforms. Many other similar programmes have been initiated based on its working history.

The reforms are based on the three important E’s in public service management. They are economy, efficiency, and effectiveness. This is one unique characteristic of the UK programme.

The wide-spread privatization instituted by the Thatcher administration applied this premise (Flynn 2002) in all the transactions. Before the Cable and Wireless turn-over in 1981, a comprehensive study on its advantages was conducted to prove its viability under these three considerations.

Apart from this unique way of assessing possible changes in servicing, the programme has proven to be very resilient. It has withstood challenge in the past. And it continues to withstand challenges today. Even the strongest challenge against its agenda control and policy review (Parsons 1995) could not deter the progression of its reforms.

In fact it is this very same resiliency that brought about a big improvement in health care. The persistence in the area of health reforms provided increase in health care workers by at least 40,000 in seven years.

There are two working concepts of the UK Public Sector Reform Programme, the “best value review” and “comprehensive performance assessment” (Harris, 2003). These two working concepts provide a basis for check and balance of the reforms.

This is unique to the programme. It also sets the tone on how reforms should be made. The UK government works very closely with organizations like Reform to objectively assess the veracity of the reforms. It is through studies conducted by organizations like Reform that insures that equity and environmental impact are not overlooked in the formulation of reforms.

Ha-Joon Chang is a Cambridge heterodox economist, who specializes in development economics and the abject poverty of the Third World countries. Trained at the University of Cambridge, he has served as a consultant to the World Bank, the European Investment Bank, and various United Nations agencies. Since 1992 he has also served on the editorial board of the Cambridge Journal of Economics, he is the author and contributor of many researches in economics.

The objective of this essay – to review his views described in his controversial new book “Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism,” and to compare it with the more traditional views where it possible. Bad Samaritans Mostly in his book Ha-Joon Chang appeals to his opponents, orthodox economists, and generalists in particular. Ha-Joon Chang has wide personal experience because he was born in the country that was one of the poorest on Earth that time. The new book starts with the description of economic downturn in Korea after the Korean War.

It is hard to believe, but the famous Samsung Company that time was subsidized by sugar refining and textile enterprises. Another big company, Pohang Iron and Steel Co. , or POSCO, which now is the third largest steel company in the world, was state-owned and couldn’t get the support from the World Bank. Analyzing the development of other economics in the 1960s, the author notices that Japanese government refused to follow the politics of free trade that time and this decision had a positive impact on Japanese car manufacturing industry.

In other case modern famous Japanese companies could be the filials of Western companies, and nothing more. This thonking leads the reader to the concept of what Ha-Joon Chang calls the “Bad Samaritans. ” As the author described, “people in the rich countries who preach free markets and free trade to the poor countries in order to capture larger shares of the latter’s markets and preempt the emergence of possible competitors. They are saying ‘do as we say, not as we did’ and act as Bad Samaritans, taking advantage of others who are in trouble.

” Chang divides “Bad Samaritans” into two groups: first are the leaders working in the “unholy trinity” of global financial organizations: World Bank, World Trade Organization and International Monetary Fund, and second are the ideologues – “those who believe in Bad Samaritan policies because they think those policies are ‘right,’ not because they personally benefit from them much, if at all. ” The common feature of both groups is the adherence to a doctrine called “neoliberalism”, which is dominating in the global economy from 1970s till nowadays.

The worst in this doctrine, according the opinion of the author, is the fact that those countries that propagate this doctrine all over the world reject its implementation in their own economical systems. The key characteristics of neoliberalistic economics were called “Golden Straitjacket,” which is the only root to economic success according its advocates, like “unholy trinity”. They actively implement this economic policy in poor and developing countries.

As it known from the Nobel-awarded researchers of orthodox economists, the Golden Straitjacket policy struggle for trade liberalization, reducing corruption and state bureaucracy, privatization of state-owned enterprises and pensions, balancing the national budget, intellectual rights protection and other trends and policies which are intended to guarantee the stable economic growth. In real life the implementation of these policies in developing countries leads to creation of economical dependence from global financial organizations.

At the same time the most developed countries don’t implement the Golden Straitjacket policy. Ha-Joon Chang writes: “Practically all of today’s developed countries, including Britain and the US, the supposed homes of the free market and free trade, have become rich on the basis of policy recipes that go against neo-liberal economics. ” Rich countries protect their manufacturer from the foreign investments and use subsidies and protections to protect their industries. The WTO sanctions are considered by rich countries as the lesser evil.

Chang enumerates prominent men from different countries whose economic solutions became the basis of their countries flourishing. All of them struggled for the development of the national production and used protectionists’ politics. Chang notices out that nowadays the most developed countries do the same, especially the USA. He claims the Third World War has already begun and the USA tries to maintain its position as global hegemon. There are already conquered sides in this war, and one of them is the African countries. As the result of neoliberalism policy,

The living standards in Africa are falling within the recent thirty years, because IMF and World Bank run most of African economies virtually. All the features of neoliberalizm described above were implemented in African countries. As the result the struggle with corruption ruined the system of communities existed before, the struggle with bureaucracy left courtiers without the perfect executive power branch, the intellectual property protection prevented the development of sciences, and pension privatization left the elder people to the poverty.

Chang criticizes the struggle with the corruption because, according his words, “Most of today’s rich countries successfully industrialized despite the fact that their own public life was spectacularly corrupt. ” Another object of sharp critics of the author is the concept of cultural influence on the economical performance of the country. The popular idea tells that the culture if the country defined the business methods of its people and thus their economic success. First this idea is an intolerant and chauvinists’ one, second, cultural differenced fail be the main explanation for economic success.

He claims that the culture of the country is the result of economical development and not the cause. Using the chapters describing the mechanisms of economical development in different countries Chang proves that cultural explanation is just the screen to mask the real reason: the richest countries are afraid of competitors from below and do their best to annihilate the possible competition in the moment of origin. Generally, Chang writes, the policy of protectionism is absolutely normal, because it exists for ages. The problem is in hypocrisy surrounding “free trade”.

According to Chang, “Belief in the virtue of free trade is so central to the neo-liberal orthodoxy that it is effectively what defines a neo-liberal economist. You may question (if not totally reject) any other element of the neo-liberal agenda—open capital markets, strong patents, or even privatization—and still stay in the neo-liberal church. However, once you object to free trade, you are effectively inviting ex-communication. ” Analyzing the existing situation on the global market, Chang concludes that the golden straitjacket fits the healthy countries only.

This policy allows production distribution between countries, and poor countries are forces to specialize in the sector s that “offer low productivity growth and thus low growth in living standards. This is why so few countries have succeeded with free trade, while most successful countries have used infant industry protection to one degree or another. ” Thus, the free trade, according the Chang, is a fiction and the tool for rich countries and “unholy trinity” for redistribution of wealth. Conclusion

The views of Ha-Joon Chang to the development of global economy nowadays are contradictory and don’t correspond to the mainstream in the economical science. However there are many writers and scientists with the same mind who share Chang’s ideas that the ideology of free trade and its implementation are two different things, and the first of them can be used as the powerful tool of economical influence. Reference Ha-Joon Chang. 2007. Bad Samaritans:The Myth of Free Trade and the Secret History of Capitalism. Bloomsbury Press

Discuss, in the light of the economic changes that have occurred within the UK in recent years, whether it is still correct to describe the UK economy as a mixed economy. In the real world it is fairly easy to assess how ‘mixed’ an economy is. Economists simply look at the percentage of a country’s Gross Domestic Product (GDP) that is devoted to government spending and also by looking at how much tax is devoted to the nationalised industries. Currently, the UK devotes about 40% of its GDP to government spending.

That extra 10% means that the health service is more comprehensive, as is the welfare state, although it can be argued that both are in decline. The first because the demand for health care grows much faster than the average growth rate of the economy, partly due to the need to introduce new technology as it is invented. The second because of the huge increase in claimants (the unemployed, for example) plus the increase in the number of pensioners relative to those in work. Though, previously during the 1970’s and early 1980’s, the GDP, which was devoted to government spending, was much higher.

This was until Privatisation occurred, when the Conservative governments under Maggie Thatcher developed the policy of Privatisation. Privatisation means the transfer of economic activity from the public sector to the private sector. The Financial secretary of the government Mr Nicholas Ridley, expressed the commitment of Privatisation when he said, “It must be right to press ahead with the transfer of ownership from state to private ownership of as many public sector businesses as possible… The introduction of competition must be linked to a transfer of ownership to private citizens and away from the State.

Real public ownership – that is ownership by people – must be and is our ultimate goal (Treasury 1882). On this view the transfer of economic activity from the public to the private sector was made a desirable objective. This idea was also supported by supporters of the supply-side policy. Privatisation would expose industries to market forces which would increase competition and choice as well as lower prices. Due to this many companies were sold of to the public sector these included BP, British Gas, BT and British Rail. The conservative Party also emphasised wider share ownership.

The more people that have shares the more likely a free market economy it is going to be. By the year 1996, share ownership had spread to 22% of the adult population, having been only 7% in 1981. This increase in share ownership is largely due to privatisation. The conservative government dropped down the share prices one or two pence lower then they were supposed to be sold for. This let people buy a share of a company and have a claim in how the economy is run. There was almost 90% of the employees in privatised companies becoming shareholder in their own company.

Privatisation has also been a method of reducing the PSBR (Public spending borrowing requirement). The finance of external borrowing by the nationalised industries is regarded as public expenditure. This then ceases when these firms have industries have become privately owned. Sale of these assets increases government revenue. Over the years 1979/80-1995/96, the Treasury gained i?? 64. 5 bn. from asset sales. Privatisation enabled budget surpluses of the late 80’s and curbed the size of budget deficits in the early 1990’s .

Privatisation proceeds have reduced PSBR as proportion of GDP by more than 1.5% during the late 1980’s and by a smaller percentage in other years. Also, in 1979 the nationalised industries cost the taxpayer i?? 50 million per week but in 1992/93 those companies paid almost i?? 60 million per week to the exchequer. After looking at the affects, which Privatisation has had on the economy in recent years, there has been much greater ownership of factors of production in the economy, this includes more individual control of firms in the economy after the sale of nationalised industries, this is one reason why the U. K.’s economy has swayed from being a more mixed economy to a more free market economy.

Another reason why the U. K. ‘s economy is no longer exactly a mixed economy is because there has also been less GDP devoted to government spending and after Privatisation occurred there was less tax allocated to nationalised industries. The UK currently devotes only 40% of its GDP to government spending, Privatisation has cut back the amount of GDP devoted to government spending from 50% – 40%. This is another reason to explain the reason how the UK has changed from being a mixed economy to being a more free market in recent years.