Public Services Reform: Understanding the context – Public Vs. Private and Local Vs. Global?

The Coca-Cola logo is an example of a widely-r...

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As we wait for the delayed Public Services White Paper, now scheduled for publication in July, this week, I want to share two articles which caught my attention, captured my imagination and provide a basis for reflection. The first article by Gary Sturgess, in the Ethos Journal, published by the SERCO Institute, looks at emerging global trends in public services. The second article in the Washington Post talks about Indian outsource providers bringing jobs home to North America, close to customers.

SERCO is a global services provider, and the first article argued that the trend towards globalization of services was increasing. The article provides some good insights into the development of public services around the World. initially, I struggled with the article, looking for a deductive or compelling central logic. On a second reading, I took a different approach and considered the article from the vantage of inductive analysis.

For me, the article should have been anchored in neoliberal theory, which provides a rich economic and political framework and supports the globalization of public services thesis. New readers to my blog might be interested in previous articles on neoliberalism and its impact on public services:

Had the article been anchored in neoliberalism, it could then have looked at primary or secondary research and either tested the neoliberal hypothesis or come up with an inductive model to explain the analysis.

Whilst the article started out by stating that the trend towards globalization was increasing, there was little evidence of standardization and commodification of public products and services. For example, Coca Cola is a truly global product.

The article cited three fundamental barriers towards increased globalization of public services:

  1. Historical factors
  2. Cultural factors
  3. Political considerations

In many respects, the article provides a compelling argument in favour of localization of services, rather than globalization.

Moving on to the Washington Post article, it was interesting to read about examples of Indian outsource providers positioning call centres in Wall Street, next to customers, and employing the more disadvantaged Americans, without college degrees and from ethnic minorities – the cost of employing disadvantaged Americans in New York was challenging the labour cost arbitrage advantage of going offshore to countries like India.

So what are the lessons for the Public Services White Paper? It seems that the Government should establish which services are core and those should stay in public ownership and public sector management (operated efficiently). Non-core services should be opened up to competition, in line with neoliberal theory – cost considerations should be carefully balanced against service delivery models and required quality assurance. Services that can be truly commoditized (like Coca Cola), will be open to globalization – other services will need to explore localized delivery, as well. The critical question becomes: “Is the reference market local or global?”

Will David Cameron and George Osborne become the Pioneers of Third-Wave Neoliberalism, just like Thatcher and Reagan Pioneered First-Wave Neoliberalism?

Former British Prime Minister Margaret Thatcher

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English: David Cameron's picture on the 10 Dow...
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To remind the reader, the strap line for this blog is “Towards greater reflection and insight”.

Last week’s blog, combining public news and personal reading, seemed successful so I have repeated the formula.

This week, I want to focus on the following public news themes:

The common thread to the blog is my own further reading on neoliberalism. This week, I have completed Steger and Roy’s excellent book entitled “NEOLIBERALISM A Very Short Introduction, published by Oxford University Press (the Very Short Introductions series is highly recommended).

Let’s start with David Cameron’s speech, which is well worth reading but this blog is not about NHS Reform per se. What made me reflect this week was the headline “Sticking to the Status Quo is not an Option”. Having been reading about Thatcherism under Neoliberalism, this reminded me of Margaret Thatcher’s famous “This lady is not for turning speech” at the Conservative Party Conference, in Brighton, in 1980. I would encourage the reader to read Margaret Thatcher’s speech and compare it to David Cameron’s – with a gap of thirty years, different context and challenges, it is interesting to dwell on both the similarities and the dissimilarities.

Now I want to introduce Benedict Brogan’s excellent insights. I was interested in his Cameron quote of the three “musts” for the Conservatives to win the next election, namely:

  1. Economic Growth
  2. Public Sector Confidence on the NHS, and
  3. Liberal Democrats Continuing to Support the Coalition

However, it was Benedict Brogan’s conclusion which really caught my attention, namely “he (David Cameron) gives every impression of being a politician who has had enough of revolution, and now wants results”.

The final public news theme concerns this week’s focus on the IMF, following the arrest of Dominique Strauss-Kahn (DSK), the Head of the IMF (until he resigned on Wednesday night). The evolving DSK story is not directly relevent to this blog. What captured my attention and imagination was that the IMF is the High Church of Neoliberalism and DSK was, until Wednesday night, the High Priest of Neoliberalism. Now, there is intense  speculation as to the next Head of the IMF.

I thank the reader for his/her patience, whilst I introduced the various news stories and my reflections but now I propose to spin a common thread, looking at neoliberalism. I shall not bore the reader with detailed discussion of neoliberalism but it would be helpful if the reader has read last week’s blog.

Steger and Roy describe the two waves of neoliberalism:

  • First Wave  dominated by Thatcherism and Reaganomics – Thatcherism “unleashed a comprehensive set of neoliberal reforms aimed at reducing taxes, liberalizing exchange controls,  reducing regulations, privatizing national industries, drastically diminishing the power of the labour unions” – strongly anti-Keynesian and pro-Monetarism.
  • Second Wave was characterized in the 1990s by Clinton’s market globalism and Blair’s Third Way.

Unfortunately neoliberalism was severely criticized and discredited in the global financial crisis of 2008. In January 2009, Nicholas Sarkozy, French President, declared “Laissez-faire is finished” and in April 2009 Gordon Brown, UK Prime Minister, argued “the old world of the Washington Consensus is over”. The Washington Consensus (synonymous with neoliberalism”) was dominated by the IMF, the World Bank, and other Washington-based international economic institutions and think tanks – with the Federal Reserve close at hand. Economic orthodoxy and soft loans were offered to the developing world and more recently, financially troubled European economies, like Greece, Ireland etc. Unfortunately, the strong medicine generally brings much pain to poorer and weaker members of society, with potentially vast financial rewards to the wealthy. I have started to notice a number of commentators offering alternative medicine for Greece, for example  Der Spiegel argued in favour of a Marshall Plan (a Keynesian remedy).

Steger and Roy concluded that neoliberalism was still smouldering and looked towards a third-wave neoliberalism (built on Keynesian principles) being a distinct possibility for the second decade of the 21st century. This brings me back to David Cameron and George Osborne who have applied very strong medicine to the UK economy but are still trying to be compassionate. According to Benedict Brogan, George Osbourne holds enormous power. If Cameron and Osborne are successful they could well become the pioneers of “third-wave neoliberalism”. To be successful Cameron and Osborne will need to focus on Benedict Brogan’s concluding comment and focus on results. Results are difficult territory for governments. This blog believes passionately that success will only be achieved if the Government deploys Professional Interims and reverses Catch 22 practices.