1. STRATEGIC MANAGEMENT PUBLIC SECTOR OPERATING ENVIRONMENT STRATEGIC MANAGEMENT PUBLIC SECTOR OPERATING ENVIRONMENT Professor Stefan Markowski WYŻSZA SZKOŁA INFORMATYKI I ZARZĄDZANIA z siedzibą w Rzeszowie

2. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR  Brief History: From Under- to Over-provision  New Liberalism and Political Backlash  New Managerialism  Wishful Thinking vs Reality  Principles of Public Provision  Implications for Public Sector Institutions  Implications for Future Public Sector Design

3. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR BRIEF HISTORY: FROM UNDER- TO OVER- PROVISION  Pre-WWI socialist movements - the socialist state to provide full employment, universal access to education and health and more equal income distribution  Post-WWI new liberalism - more equitable distribution of opportunities (education, health, employment)  Great Depression - growing acceptance of government responsibility for economic stability  WWII - welfare state as war dividend

4. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR BRIEF HISTORY: FROM UNDER- TO OVER- PROVISION  Post-war welfare state reforms in the United Kingdom (national health, state education) and elsewhere (Europe, especially Sweden)  Keynesian economics - new policy paradigm with governments responsible for growth and stability  Public and merit goods - rationale of state provision (public goods, strategic infrastructure, knowledge)

5. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR BRIEF HISTORY: FROM UNDER- TO OVER- PROVISION  1950s and 1960s - period of economic prosperity and growth   rapid public sector growth (massive direct provision)   large administrative hierarchies at all levels of government  1970s end of an era   low and unstable economic growth in the West,   stagflation (inflation and unemployment, printing money)   poorly targeted welfare state provision   white elephant nationalised industries (low efficiency, resistance to change, militant unions)   massive government bureaucracy and waste

6. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR BRIEF HISTORY: FROM UNDER- TO OVER- PROVISION lPoor targeting - over- and under-provision of goods and services Costs and benefits ($) Provision (social cost) Provision (social cost) Public demand (social benefit) Over Under OverQuantity Right

7. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR NEW LIBERALISM AND POLITICAL BACKLASH  Keynesians vs Monetarists - competing paradigms of the economic role of governments  New Academic Liberalism - intellectual backlash against big governments   return of a free individual and free trade   Public Choice Economics and Principal-Agent Paradigm (theoretical reasons for government limited or non- intervention in the economy)   crowding out theories (government activities displacing the wealth producing private sector, growth-inhibiting taxes)   statistical evidence of poor government performance in most countries

8. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR NEW LIBERALISM AND POLITICAL BACKLASH  1980s Reaganomics and Thatcherism   anti-big government and anti-big bureaucracy (smaller scale of government)   less need for government intervention and less need for government spending (reduced scope of government)   reform of (service) delivery mechanisms (different mode of government provision)  1990s and beyond - new centre-right perspective on government economic management   Clinton administration   Blair’s New Labour and ‘third way’   European Union

9. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR NEW MANAGERIALISM  Old style government - massive direct and free provision of goods and services, public sector production, large administrative hierarchy, focus on process rather than output, poor targeting and evaluation of services  New Managerialism in the public sector   focus on management rather than administration or policy   focus on outputs and outcomes (ie, performance rather than process, output targets, flexible and tailored provision )

10. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR NEW MANAGERIALISM  New Managerialism in the public sector   devolution of bureaucracy (‘let managers manage’)   user pays principle and cost recovery through quasi-markets   market testing to optimise output and keep costs down (contracting out, privatisation)   managerial incentives (short-term contracts, bonuses)

11. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR WISHFUL THINKING VS REALITY  New Managerialism and New Entrepreneurial Public Service   a real reform or a bureaucratic strawman?   if it is all so simple, why do we need public sector?   can public entities be entrepreneurial?   how does the ‘new entrepreneurial speak’ translate into English?

12. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR WISHFUL THINKING VS REALITY  New Managerialism and New Entrepreneurial Public Service   what is the evidence of real improvement? What are the metrics of improvement?   what is the role of government in relation to the public service? And the public? (Who is the Principal? The Agent?)   who bears the long term cost of government failure? What is the extent of government/ministerial responsibility?

13. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR PRINCIPLES OF PUBLIC PROVISION  Market under-provision: public and merit goods   public goods (non-rivalry and non-excludability) - do they exist?   merit goods - should governments provide them?  Market failure: externalities and monopolies   negative and positive spill-overs   natural monopolies (persistent scale economies)   should governments intervene?  Equity and distributional issues   should governments redistribute income, wealth and opportunities?

14. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR PRINCIPLES OF PUBLIC PROVISION  Macroeconomic stability   should governments intervene to reduce economic fluctuations (recessions, booms)?   can they improve on the market?   is it internationally feasible?  Long term economic growth   should governments intervene to promote long term economic growth (education, migration, technology, exports)?   can they improve on the market?

15. STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR IMPLICATIONS FOR PUBLIC SECTOR INSTITUTIONS  Economic guidelines for institutional designers/ reformers  -  final output/outcome principle - can it be identified? measured?  -  substitution principle - are there alternative products? services? processes? providers?  -  competition principle - is there a market? is it competitive? contestable?  -  self-interest principle - is it recognised? accepted? What incentives are needed to make it work?  Capability, authority and responsibility (should those responsible for outcomes have the authority to decide? are they competent to decide?)

16. A major research institution has recently announced the discovery of the heaviest element yet known to science. This new element has been tentatively named “Administratium.” It has 1 neutron, 12 assistant neutrons, 75 deputy neutrons, and 111 assistant deputy neutrons, giving it an atomic mass of 312. These 312 particles are held together by a force called morons, which are surrounded by vast quantities of lepton-like particles called peons. Since Administratium has no electrons, it is inert. However, it can be detected as it impedes every reaction with which it comes into contact. A minute amount of it causes one reaction to take over 4 days to complete when it would normally take less than a second. Administratium has a normal half- life of 3 years; it does not decay, but instead undergoes a reorganisation, in which a portion of the assistant neutrons and deputy neutrons and assistant deputy neutrons exchange places. In fact, it's mass will actually increase over time, since each reorganisation causes some morons to become neutrons forming isodopes. This characteristic of moron-promotion leads some scientists to speculate that Administratium is formed whenever morons reach a certain quantity in concentration. This hypothetical quantity is referred to as "Critical Morass." You will know it when you see it … (Anonymous)