Public Management in Times of Austerity

Eva Moll Sørensen, Hanne Foss Hansen, Mads Bøge Kristiansen, Eva Moll Sørensen, Hanne Foss Hansen, Mads Bøge Kristiansen

• Editorial: Routledge
• Año: 2017
• ISBN:
  9781317190615
• Edición: 1
• Categoría: Commerce
• Categoría: Gouvernement et monde des affaires

Since 2008, the world has experienced an enormous decrease of wealth. By many measures the impact of the crisis was severe. The fall in GDP, the collapse of world trade, the rise in unemployment, and the credit slump reached bigger proportions than in any other crisis since World War II. Although the economic figures seem to improve in some countries, the crisis continues being a challenging issue and is said to be one of the most important problems governments face today.

The crisis has put public finances under ever increasing pressure, and governments have responded through austerity measures such as new fiscal rules and budgeting procedures and cutbacks of public spending.

Public Management in Times of Austerity seeks to explore the austerity policies adopted by European governments and their consequences to public management. It asks how governments have implemented new rules leading to more stringency in public budgeting and financial management, and how they have cut back public expenditure. These questions are examined comparatively through case studies in different parts of Europe, and variations across countries are discussed and explained.

Throughout the volume, the consequences of the crisis and austerity policies for public management are discussed. What is the relationship between crisis and decision-making in the public sector, and how does austerity affect public-sector organisation? As the previous crisis in the 1970s resulted in a major reform movement, which was later referred to as New Public Management, Public Management in Times of Austerity look to understand whether the current crisis also leads to a wave of public management reform, and if so what is the content of this?

Part I

Introduction

1 Introduction

Eva Moll Ghin and Mads Bøge Kristiansen

The amount of wealth in the world fell dramatically from 2008. By many measures, the impact of the crisis was severe. The fall in GDP, the collapse of world trade, rising unemployment and the credit slump were worse than in any other crisis over the last 70 years (Lin and Treichel 2012, 10). Although economic figures have improved in many countries, the crisis seems to have marked the beginning of a new ‘age of austerity’¹ characterised by increased levels of (perceived) scarcity and a tougher stance on public spending. Governments have cut spending on public organisations and services and they have reformed their budgetary institutions with a view to restraining expenditure.

It could be argued that tougher attitudes towards public expenditure are likely to be accompanied by higher ambitions to spend money (more) efficiently and effectively and thus to pressure for public management reform. These changes may follow along the path of reforms that have already been pursued in the public sector for decades (Pollitt and Bouckaert 2011), but it is also possible that the sense of crisis will provide the necessary pressure for radical departures from accustomed ways of organising, managing—and reforming—public organisations and services (Peters, Pierre and Randma-Liiv 2011). Indeed, there is some precedent for significant new reforms in conditions of fiscal stringency (Hood 2010, 7), and the previous crises of the 1970s and 80s are often assigned the role as catalyst of the international wave of reforms that later became known as ‘New Public Management’ (NPM) (Wollman 2003; Pollitt and Bouckaert 2011, 6–7).

The objective of this book is to provide insight into the policies of austerity in European countries and the consequences of such policies for public management. The book reports studies of how five different European countries have managed cutbacks of public expenditure, how they have reformed their budgetary institutions, and what the consequences have been for public management. It addresses three main research questions:

1. What is the character of the changes to public management that are taking place under present-day austerity?
2. Does austerity lead to path-breaking and/or path-dependent change?
3. Why are different and/or similar patterns of change observed in different countries?

The first two questions are aimed at analysing the character and scale of changes in public management, whereas the third aims at comparing how austerity policies are implemented and the consequences they have for public management in different countries—and to offer some interpretation of the observed differences and similarities across countries.

Before proceeding further, we want to clarify our understanding of the crisis and the times of austerity, how we expect crisis and austerity to affect public management, and our reasons for focusing the analysis on cutback management and budgetary reform. We will also offer some justification for our choice of intensive case studies as a means of investigating the relationship between austerity and public management, and we will account for the structure of the book.

Times of Austerity

This book is about public management in times of austerity. While ‘austerity’ can refer to government efforts to reduce budget deficits through expenditure cuts or tax increases, for many the term carries connotations regarding an ideological preference for quick expenditure cutbacks (Hood, Heald and Himaz 2014, 5). Other recent publications have therefore focused on ‘the politics of fiscal consolidation’, referring to political efforts aimed at the ‘reduction of budget deficits and debt accumulation, by expenditure cuts and revenue increase’ (Kickert and Randma-Liiv 2015, 52) or ‘the politics of fiscal squeeze’, similarly referring to ‘efforts made by politicians and governments to correct the public finances by raising taxes or cutting spending or a mixture of the two’² (Hood, Heald and Himaz 2014, 4). We prefer to use the term austerity because it is widely used in both academic publications (e.g. Diamond and Liddl 2012; Lodge and Hood 2012; Blyth 2013) and in public discourse to denote both a course of government policy and a political and psychological climate that results in a ‘tough stance’ on public expenditure. We do not mind the term’s connotations towards a preference for expenditure cutbacks, and we are more interested in the implementation and management aspects of austerity than the previously mentioned publications that deal with the politics of fiscal consolidation or squeeze.

This book views ‘times of austerity’ as something that has grown out of the global financial crisis and as a set of policies that have been adopted by all of the European countries at more or less the same time (with the possible exception of oil-rich Norway; see Kickert and Randma-Liiv 2015). We understand the global crisis as consisting of several stages (cp. Kickert 2012; Kickert and Randma-Liiv 2015, 26ff). In the first stage, the banking—or financial—crisis, banks and other financial institutions faced serious problems and bankruptcy. To avoid the collapse of the financial system, governments stepped in and ‘bailed out’ their banks with large sums of public money. The second stage, the economic crisis, was characterised by falling national product and rising unemployment. It led some governments to take stimulus measures such as relieving taxes or increasing public expenditure (e.g. through forwarding investments). The third phase, the fiscal crisis, began as a result of debts incurred through bank takeovers in many countries and deficits resulting from stimulus measures and the effect of automatic stabilisers in times of economic decline. Governments responded by consolidating their fiscal balances by reducing public expenditure and/or increasing taxes. The fiscal crisis remains acute in some countries, whereas in others it has given way to more permanent attitudes of stringency towards public spending; that is, austerity. According to Kickert and Randma-Liiv (2015), we may also speak about a fourth phase of the crisis, the Eurozone crisis, when a troika of international economic institutions organised bailouts for Greece, Ireland, Portugal and Cyprus under conditions of severe budget cuts and reforms.

We thus understand austerity to be a course of policy that is adopted by governments more or less voluntarily in response to or justified by the fiscal crisis. Austerity policies are intended to reduce debts and deficits by holding back and reducing public expenditure but may also prepare the public sector for future challenges, such as the socio-demographic changes related to ageing (Lodge and Hood 2012). We focus primarily on cutbacks in the public sector rather than reduced government transfers to the private sector, as we are interested in the role and consequences of austerity for public management. Austerity policies may also concern institutional reforms that are meant to strengthen the position of ‘budget guardians’ vis-à-vis ‘advocates’ in budgeting. In other words, we view the crisis and austerity policies such as cutbacks and budgetary reform as drivers for public management change.

Public Management in Times of Austerity

The term ‘public management’ may be understood as referring to decisions about the activities involved in running public-sector organisations and to the structures and procedures (i.e. institutions) of the public sector and its organisations. ‘Public management’ overlaps with ‘public administration’, but compared to the latter term it denotes a modern, reformed approach to running the public sector in which public officials are not just responsible for administering legal rules but are also expected to use professional management techniques from the private sector. Following Pollitt and Bouckaert (2011, 77), we focus on selected components of public management, including financial management, personnel management, organisational restructuring and performance measurement.

The first aim of the book is to understand whether and how austerity leads to centralisation and a stronger focus on coordination, coherence and organisational scale advantages in public management consistent with the alleged transformation of NPM in the direction of ‘post-NPM’ reform (Christensen and Lægreid 2007; 2011). The second aim is to understand whether austerity constitutes a ‘critical juncture’ that opens a window for major change in public management, consistent with the interest in crisis in historical institutionalism. The third aim of the book is to understand how the interplay between the economic conditions and political and administrative institutions influence austerity and changes to public management. The book is informed by a broad institutional framework in which historical institutionalism in particular looms large. The three main aims of the book are further outlined in the following section.

The Character of Change: Centralisation, Coordination and Larger-Scale Organisations?

One of the most common expectations regarding the effects of fiscal crisis and austerity is that they lead to centralisation. When there is a crisis, people look to their political leaders for a response (Peters 2011), and central government actors are expected to try to exert control (Boin et al. 2008). In the public sector, centralisation is expected because budget units are given stronger powers to impose spending limits and cuts that other subunits are unlikely to undertake voluntarily (Raudla, Savi and Randma-Liiv 2013, 24–5).

Another aspect of how austerity leads to change is whether it leads to coordination becoming a higher priority in the public sector. Austerity is likely to increase the demand for the coordination of scarce budgetary resources and might also lead to increased demands for the coordination of policies as a means of increasing cost-effectiveness (Peters, Pierre and Randma-Liiv 2011).

Last but not least, austerity is likely to accelerate the ongoing search for rationalisation of public organisations through agency mergers, downsizing of back-office functions via the creation of shared-service centres etc. (Kickert and Randma-Liiv 2015, 2010ff). These organisational reforms may be conceptualised as a cost-saving device making use of (perceived) scale advantages and/or as a means of supporting the goals of centralised steering and coordination in the public sector by reintegrating functions into larger, multipurpose organisations.

Path-Breaking Changes?

Shortly after the crisis, it was discussed whether government responses to the crisis would reinforce existing path-dependencies, or whether the crisis would become the source of potentially fundamental change of the kind that we associate with a critical juncture in historical institutionalism (Peters 2011; Peters, Pierre and Randma-Liiv 2011). As a contribution to this discussion, we analyse whether austerity only leads to minor changes along the existing path; whether it reinforces ongoing reforms; whether it works against the realisation and implementation of ongoing reforms; or whether it is used as a window for fundamental changes to public management. The ambition is to add to the discussions of continuity and change in public management by offering analyses of how austerity and cutbacks affect reform trajectories in different countries, focusing on financial management, organisational restructuring, personnel management and performance measurement (Pollitt and Bouckaert 2011, 77).

Different and/or Similar Patterns of Change in Different Countries?

In addition to exploring how each country implements cutbacks and budgetary reforms we also want to offer some interpretations of why approaches vary between countries. First, economic conditions may be important for the choice of reforms and cutback strategies in the current times of austerity. For example, we expect the countries that have been hit hard by the crisis to carry out radical budgetary reform and large cutback programmes that include comprehensive changes to public management and its institutions. Second, different countries may follow different trajectories of public management reform, and we consider history to be important to understanding present choices. Third, we expect popular management ideas to influence the character of change. Fourth, the institutions of the political system may be significant for the chosen approach to expenditure cutbacks and to the centralisation of budgeting. Fifth, we expect administrative traditions, structures and regulations to influence how public management changes.

Cutback Management and Budgetary Reform

As previously argued, this book approaches its overall ambition of investigating the role of and changes in public management in times of austerity through country-specific analyses of the adoption and implementation of expenditure cutbacks and budgetary reform. Both policies have been adopted throughout Europe as a reaction to the fiscal crisis, and they both represent the overall tough stance on public spending that we associate with austerity. Both policies are implemented by public organisations and they concern the resource management of the public sector itself.

Cutback management is not a reform but a process of implementing budgetary decisions to cut back public expenditure. Cutback management may, however, also involve public management reforms such as changing organisational structures or work procedures or modes of delivering public services (Pollitt 2010). Budgetary reform can be understood as deliberate changes to budgeting institutions such as the rules and regulations according to which budgets are drafted, approved and implemented (Alesino and Perroti 1996, 401).

We refer to ‘budgetary’ institutions and reforms rather than ‘fiscal’ institutions and reforms because we are less interested in the use of taxation and spending to influence the economy and more in how governments try to steer and manage resources. At the same time, we talk about ‘budgetary’ rather ...