16 September 2005

New Public Management

'The state is denoted primarily by its monopoly of power, force, and coercion on one side and its orientation towards the public good, the commonweal or the ben commune, on the other; the business world legitimately focuses on profit maximization. N[ew] P[ublic] M[anagement], however, as it has been said, "harvests" the public; it sees no difference between public and private interest. The use of business techniques within the public sphere thus confuses the most basic requirements of any state, particularly of a Democracy, with a liability: regularity, transparency, and due process are simply much more important than low costs and speed.' Wolfgang Drechsler, The Rise and Demise of the New Public Management post-autistic economics review, issue no. 33, 14 September 2005
There is much of interest in the article. At first sight, Social Policy Bonds would appear to suffer from the problems Drechler correctly identifies as afflicting conventional attempts to replicate in the public sector the profit maximisation imperative of the business world: a narrow definition of efficiency isolated from context; and, on all the evidence, failure to deliver on its promises. 'Contracting-out has proven to be excessively expensive and often infringing on core competences of the state as well as on the most basic standards of equity.'

Since Social Policy Bonds embody the contracting out principle, how would they square up against Drechsler's, in my view, legitimate strictures against New Public Management?

The most important consideration is that a bond regime would be entirely subordinated to 'transparency and due process'. Indeed, the agreement on explict, transparent, outcomes would be the starting point of a Social Policy Bond issue. Formulating policy in terms of outcomes, (rather than, as at present, inputs, outputs, activities and institutions) would draw more people into the policymaking process. Outcomes would have to be meaningful to real people to attract consensus and support, rather than government agencies or corporate bodies. A government-backed Social Policy Bond regime would therefore aim to achieve broad social goals. Profit maximisation fails when, as in NPM, it tackles narrow objectives, where non-quantifiable social and environmental externalities can be safely offloaded onto wider society.

A Social Policy Bond could explicitly tackle some of the social and environmental problems created by profit-maximising private entities. Instead of targeting the ever-proliferating array of micro-objectives that characterise New Public Management, it could target meaningful societal goals, like better basic health and literacy outcomes, reduced crime, and a cleaner environment.

NPM fails, I believe, because of the narrowness of its vision; itself a result of its ideological origins. Social Policy Bonds, on the other hand, would be compatible with a large state, a small state or anything in between. Governments would articulate society's wishes about what people want to see done; they would issue Social Policy Bonds as a way of making sure not only that social goals would be achieved efficiently, but that they would be genuine goals defined and agreed upon by all.

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