School of Management Arto Haveri Local Government Change in Finland – Reflections on New Governance

2 How the idea of local government has changed in Finland? 1.The era of self-government ideal - municipalities as civil society and counterforce (1865 Local Government Act to 1930’s) 2.The era of welfare municipality - municipalities as part of the welfare state service machine (started already in 1930’s, the golden age from the end of 1960’s to the beginning of 1980’s) 3.The era of transformation/turning point - no grand narrative, search for new role (s) (from the start of 1990’s →) 2

Typology of local government roles View on autonomy View on the appropriate role of public sector Municipalities have intrinsic value as self- governing communities Municipalities have instrumental value as service providers Minimalistic Municipalities as local communities -Governing model: changing - Inhabitants of a municipality select governing model and service assortment according to their local needs -The difference between municipalities is highlighted - Localism (theory of public choice vs. communitarianism) Municipalities as service purchasers - Governing model: markets - Municipalities role is narrow and limited to specific services - Inhabitant of a municipality = customer/consumer - New Public Management Interventionist Municipalities as arenas of governing - Governing model: networks, meta-governance - As a part of decentralized system autonomous municipalities have important role in coordinating local activities - New Public Governance Municipalities as service producers - Governing model: hierarchy - Municipalities must produce similar services to everybody regardless of place and time - The similarity of municipalities is highlighted - Bureaucracy, institutionalism,

Typology: from the era of self-government ideal to welfare municipality View on autonomy View on the appropriate role of public sector Municipalities have intrinsic value as self- governing bodies Municipalities have instrumental value as service providers Minimalistic Municipalities as local communities -Governing model: changing - Inhabitants of a municipality select governing model and service assortment according to their local needs -The difference between municipalities is highlighted - Localism (theory of public choice vs. communitarism) Municipalities as service purchasers - Governing model: markets - Municipalities role is narrow and limited to specific services - Inhabitant of a municipality = customer/consumer - New Public Management Interventionist Municipalities as arenas of governing - Governing model: meta- governance, networks - As a part of decentralized system autonomous municipalities have important role in coordinating local activities - New Public Governance Municipalities as service producers - Governing model: hierarchy - Municipalities must produce similar services to everybody regardless of place and time - The similarity of municipalities is highlighted - Bureaucracy, institutionalism,

Typology: The era of turning point View on autonomy View on the appropriate role of public sector Municipalities have intrinsic value as self- governing bodies Municipalities have instrumental value as service providers Minimalistic Municipalities as local communities -Governing model: changing - Inhabitants of a municipality select governing model and service assortment according to their local needs -The difference between municipalities is highlighted - Localism (theory of public choice vs. communitarianism) Municipalities as service purchasers - Governing model: markets - Municipalities role is narrow and limited to specific services - Inhabitant of a municipality = customer/consumer - New Public Management Interventionist Municipalities as arenas of governing - Governing model: meta- governance, networks - As a part of decentralized system autonomous municipalities have important role in coordinating local activities - New Public Governance Municipalities as service producers - Governing model: hierarchy - Municipalities must produce similar services to everybody regardless of place and time - The similarity of municipalities is highlighted - Bureaucracy, institutionalism,

6 H N M Own production, municipal agencies Municipal companies, public utility Privatization, vouchers Partnerships, self-supporting citizen Joint ventures, public private companies Purchase of services/outsourcing Inter-municipal cooperatives Grants for third sector organizations Change of municipal management in hybrids Agency management Network management Community leadership Corporate management Management by contracts H= hierarchies M = Markets N= Networks

Expenditures in social and health care (2000, 2004, 2008 and 2009, million EUR) Change % (deflated) Public producers % Private producers ,4 Public and private together ,8 Source: National Institute for Health and Welfare 2009

Personnel increase in social and health care (1992, 2000, 2004, and 2008) Change % Public producers ,3 Private producers ,6 Public and private together Source: National Institute for Health and Welfare 2009

How this is reflected in governance and management practices of local authorities? Shift from hierarchy –based management to markets and desired shift to network-based Use of (some sort of) purchaser-provider model has become more common Municipalities can more often be regarded as corporate local authorities Number of municipal owned companies ( in , inter-municipal organizations and special districts has increased “Managerial modernization” -increasing application of cost accounting, internal contracting, performance measurement Citizens’ role as “consumer/customers” is highlighted

Proper role for local citizen from the point of view of hierarchies, markets and networks Inhabitant as (active) citizen Inhabitant as (passive) stakeholder/owner Inhabitant as customer/consumer Own production, municipal agencies Municipal companies, public utility Privatization, vouchers Joint ventures, public private companies Purchase of services/outsourcing Inter-municipal cooperatives Grants for third sector organizations

What is wanted: Case Lantula as an example of third sector activity In the town of Sastamala, Lantula village, third sector has actively taken responsibility for welfare of village of 350 inhabitants Village association organizes events and activities to kids as well as youngsters and elderly. As one example, the village activist collect elderly people every Friday to weekly recreational day. The village activists take care of all practical work and the village association is also responsible for the economy of the events and activities, the town of Sastamala supports financially the village association.

ConsPros Markets -The problem of quasi- markets (markets don’t work properly) -Development work, especially in long service chains -Monopolies, siloization -Monitoring costs -Increasing awareness of competition and costs -Efficiency when markets work truly -Development of local business competencies in services Hierarchies -Stiffness of the structure, weak learning ability -Weak ability to foster commitment and social cohesion -Transparency, responsiveness - Endurance, decision making ability Networks -Decision making in conflicted situations -Transaction costs -Transparency, responsiveness -Flexibility, informality Actors are able to create meanings which is reflected in social cohesion and commitment Some research based experiences on the pros and cons of different governance approaches 12

The present situation and existing challenges Some disappointments and plenty of doubtful talk about the new governance, especially markets (outsourcing) The rising political discourse concerns the third sector and big expectations are sot to it and active citizens Municipal organizations not clearly market not network - based, models, but hybrids with complex and unfinished structures Difficult to predict from the current situation whether it will lead to any more paradigmatic and enduring model of governance and management A lot will depend on the success/failure of current reform in local government structures