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Word for Wednesday: managerialism (again)

July 16th, 2003

Nobody agreed with my attempt two weeks ago to link neoliberalism, and particularly ‘new public management’ with the ideology of managerialism, and the supporting academic ‘discipline’ of management as embodied most notably in MBA programs (for more on the reason scare quotes are appropriate see this piece by Henry Farrell).

I agree that the two are superficially dissimilar, and that their practitioners do not have much to say to one another. I also concede that my supporting argument, resting on the proposition that the two are united in opposition to professionalism was inadequate. Still, I believe it is an empirical fact that the two are generally found together and this fact can be given a theoretical basis. So I’m going to reformulate my argument.

The central assumption of new public sector management is that, if organisations are given the right (financial) incentives, they can deliver socially desirable outcomes without reliance either on direct political control or on any assumption that the organisation is committed to some concept of public service. In practice, in the sentence above the first occurrence of ‘organisation’ should be replaced by ‘managers of organisations’ while the second refers to the members of the organisation considered collectively.

So new public sector management embodies the hypothesis that managers can ensure that organisations pursue whatever objectives are determined for them by policymakers choice of incentives. From a free-market viewpoint, the most congenial way this hypothesis could be satisfied would be for the incentives to be transmitted from top management through the levels and departments organisation. In effect, this would imply a system of piecework with the prices mirroring the incentives chosen by policymakers. But if everything could be done by piecework, there would be no need for the organisation and particularly no need for the senior managers.

So in practice, new public sector management applies direct incentives only to top management and assumes that there exist a set of generic management skills that can produce the desired outcomes even when the individual interests of the organisation’ staff are not directly tied to those outcomes. So, new public sector management depends on managerialism.

The converse link is weaker, particularly since managerialism is first and foremost a private sector doctrine. However, it’s clear that, even in the private sector, managerialism and neoliberalism reinforce each other. Managers clearly get more of the autonomy they want in a neoliberal policy setting, and neoliberal policies of Îlight-handedâ regulation are justified by the assumption that, provided the rules of the game are set correctly, unfettered managerial discretion will yield the best possible outcome.

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  1. July 16th, 2003 at 18:44 | #1

    The other link is that neoliberal governments seem to be obsessed with concentrating power in the executive, especially the chief executive and their staff, to the detriment of parliaments and cabinets. All power to the chief executive is the direct corollary of managerial discretion.

    Margaret Thatcher exemplified TINA politics and TINA cannot long survive in an assembly designed for deliberation and reflection because alternatives do exist and do emerge in debate. Her successors at the helm of neoliberal governments have devoted most of their energy (despite embarrassing pre-election commitments) to ensure ever-greater centralisation of power. To argue otherwise is a palpable absurdity. (Sorry)

    It’s no accident that all three coalition government have now fallen back on variations of blaming the staff, other governments or the intelligence agencies. Ultimately all they’re doing is admitting the buck does not stop where they claim it does.

  2. stephen bartos
    July 16th, 2003 at 19:58 | #2

    the term “new public management” is a fairly recent coinage (from memory – I am posting from home without the benefit of my references – first used by Christopher Hood in 1991). I agree that in essence the characteristics of NPM can be linked to managerialism in broad: common themes of NPM include stressing the importance of incentives, a bias towards market mechanisms, and extensive devolution of responsibility to mangers of public sector organisations. In the 1980s and early 1990s we saw a considerable convergence in public sector practice internationally, inspired by some case studies of the successes of NPM type approaches in countries such as Australia, and by the application of management studies to the public sector. The downsides of the approaches, especially if taken to extremes, tended to be overlooked in such case studies. Thus we saw a general move in the same sorts of directions in anglophone, scandinavian and latin countries. France and francophone countries in general tended to maintain their traditions of dirigiseme, and the NPM tendencies to devolution in particular were anathema to notions of the importance of control from the centre. For the most part though NPM concepts formed the centrepiece of most thinking about the public sector not only in many countries but in multilateral institutions such as the OECD and World Bank.

    The interesting question posed by John is whether this can be linked to neoliberalism. I think that link is more tenuous. Both conservative and nominally left leaning governments adopted many of the approaches of NPM – notably the Hawke government in Australia – and it is hard to discern any direct ideological link. Some of the precepts are clearly compatible with the neolib agenda; in particular, there is a strong individual rather than systems focus in NPM, with a concern to give responsibility to individuals, and hold them accountable as individuals.

    However, some elements of NPM are more general – for example, I find it difficult to see how an argument that the public sector should aim to be efficient is strictly a neoliberal one. And the issue of increasing the exposure of the public sector to competition is also not clear cut (I could go on if anyone wants to contest this).

    In the end though, I wonder whether this debate is more academic than real; in my recent research I have found that the concerns of NPM are not at the forefront of contemporary management practice in the public sectors of a large number of countries, and that instead of the convergence of the 1980s and 1990s we are now eentering a period of divergence in public sector practices around the world.

    stephen

  3. July 16th, 2003 at 20:41 | #3

    I think you can argue that NPM is the offspring of neoliberal policies – certainly in Eastern Europe, Thatcher-era privatisation is still the model for all the privatisation and EU-sponspored programmes (no sign of it falling out of favour anytime soon).
    However, the image of the mythical ‘private sector company’ in the mind of public sector NPM-ers perhaps owes more to what was in the Harvard Business Review in the 50s and 60s, than what you find there today, which is articles about autonomy, strategy, and more touchy-feely subjects – like ‘empowerment’. This kind of rhetoric is pretty absent in the NPM world, where it’s much more about targets accountability and control, which is presumably what makes it so appealing to ‘third way’ politicans. A good example is on education – neoliberals would want more privatisation and greater real autonomy, judgement on outputs etc, NPMers want the kids tested every year on a centrally defined programme (control is still central, but repsponsibility is decentralised).

    Stephen – is your research available on the net?

  4. Homer Paxton
    July 16th, 2003 at 20:54 | #4

    John, There is a big difference between managerialism and what is taught in MBA schools.
    Most shools lecture on a theory Y and it is theory X which is always in operation in Corporate Australia.

    Moreover managerialism as exhibited in the private sector and neo-liberalism are imcompatible as neo-liberals do anything to boost the market whereas remuneration in managerialism
    depends on market imperfections and distortions.

    You are taught that M&A destroy shareholder value yet what do most graduates do M&A work!!

  5. July 16th, 2003 at 21:34 | #5

    I hope to get back to this thread, but for now just want to note that the date from which NPM was coined is at least a somewhat arbitrary starting point, and at the most somewhat loaded.

    The more or less settled history of the ideas and practices etc that came to be bundled up in NPM is conventionally understood to have been inaugurated with the UK’s Financial Management Initiative (FMI)(1982) and, in Australia, the Financial Management Improvement Program (FMIP)(1983). While there is an often interesting/often arcane and still not fully disclosed pre-history, dating at least from the Fulton report in the UK (1968) and the Coombs report in Australia (1974) (and even reaching through to the adoption of the Drucker ‘management by objectives’ program in the US defence dept under Nixon), I think most sources will agree that (1) the 1982/83 moves were the crucial ones that took managerialism over the top, and that (2) the international shift toward neo-liberalism from the mid-70s is the fundamental pre-condition and internal inspiration.

    By the time NPM was coined the debate was well and truly under way, and the term’s most obvious function was to distance the ideas/practices from the pejorative meanings that were by 1991 already enveloping ‘managerialism’ and ‘new managerialism’.

  6. stephen
    July 17th, 2003 at 10:47 | #6

    to take this further; yes, cs is right, the label NPM occured well after most of the 1980s leforms had been implemented. As is often the case, by the time a label is invented the phenomenon is already some years old.

    On the antecedents of NPM in neoliberal thought, I suggest it would be hard to argue that the Coombs report was a neoliberal document, and as cs suggests, much of the FMIP was foreshadowed in that report.

    What I think could be argued more strongly is that NPM and neoliberalism share ancestry – that is, there is a link but it is a bit more subtle than direct causation. Arguably much of NPM is inspired by agency theory and public choice theory, either explicitly (as in New Zealand’s reforms) or by implication. NPM thus saw principal agent problems being addressed via the incentives route and the public choice theme saw questioning of reliance on market failure as a rationale for public sector intervention and positing the possibility of government failure as well. At the same time as these approaches were developed, many of the adherents of public choice theory were strongly pushing a case that the public sector was growing out of control and needed to reined in. The influence of economics schools in the US (Chicago in particular) was important here.

    On Gabriel’s post, unfortunately my research is not yet on the net, but it will be after 1 August as a seminar paper to the school of business and information management at ANU. On the examples raised, I would not necessarily concentrate on privatisation as the touchstone of NPM. It was prominent in the UK, NZ and Australia, but in the US we saw a very strong NPM thread in Al Gore’s National Performance Review (“government that works better and costs less”) in which incentives and devolution themes rather than privatisation dominated.

    stephen

  7. July 17th, 2003 at 15:15 | #7

    Those who debate the link between neoliberalism and managerialism should also flick through the early chapters of Frank Stilwell’s Changing Track, published a few years ago by Pluto Press.

  8. July 17th, 2003 at 19:13 | #8

    Yes and no Stephen.

    Quite right, I don’t think you can argue that the Fulton and Coombs reports were neo-liberal documents. On the other hand, both reports recognised the great post-war expansion in public services, and directed attention to improving service management and accountability … developments from whence can be traced a movement for change and reform that culminates in the radical breaks of the early 1980s.

    Yet, to concede that the thrust for improving public service management well and truly predates the neo-liberal moment, is not at all to suggest that NPM can be easily distinguished from neo-liberalism (and, of course it follows, nor is it at all to suggest the more fanciful notion IMO that neo-liberalism and NPM are different currents that share common antecedents). On the contrary, I would suggest that a thrust to enhance management premised on the basis that the public sector had taken on a much larger service role was hi-jacked by the movement to eliminate or at least reduce these services. In short, what started out on one premise, culminated in a movement premised on its exact contradiction. This is what makes the precise history difficult to untangle, since the two currents intersected and overlapped (to which was added a good deal of deliberate rhetorical confusion, since neo-liberals often consciously and artfully sought to legitimise their proposals in terms that the ‘old guard’ had already long accepted).

    A couple of other quick comments:

    1) the identification of different coloured governments pursuing the same or similar directions does not stack up as evidence in relation to the underpinning ideologies of NPM, since one of the remarkable facts about the new managerialism is that it was adopted by all major mainstream governments during the 1980s. The party differences generally turned around the extent to which the directions were embraced, rather than differences in the inherent character of the direction. This goes to the role of privatisation. While NPM is consistent with other pressures for privatisation, it explicitly stops short … which enhances its bipartisan pretences. The difference, again however, is extent, not direction.

    2) neo-liberalism, defined as a doctrinaire insistence on market liberalism that, insofar as the two were consistent, was conflated with neo-classical economics (and diffused through think-tanks in combination principally with economics faculties … which had their homelands in the LSE and Chicago U … and, in turn, through treasuries and central world agencies), manifested not only in agency and public choice theory. Among a range of currents, one of the other very prominent sources of neo-liberalism in NPM practice was Ronald Coase’s earlier work on the theory of the firm, which paved the way for much of the NPM’s contracturalism.

    Having said that, like Gabriel, I would be v. interested in your work on the more recent divergence in public sector practices around the world.

  9. July 18th, 2003 at 09:13 | #9

    I agreed with Pr Q link of neo-liberalism and managerialism.
    In fact one can draw the bow longer, it was Gough Whitlam who introduced managerialism into the public service with his Senior Executive Service caste distinction.
    This replaced the old style Mandarins of Public Service that Ming had relied onto run the country since the year dot (who had inturn replaced the old boys network).
    Gough’s reforms were taken up by Peter Wilenski, one of the greatest proponents of private sector style managerial concetpts.
    Gough was the orginal economic rationalist so the link with neo-liberal philosophy is generic, if not admitted by various progeny.

  10. gordon
    July 18th, 2003 at 17:41 | #10

    There are a couple of less theoretical and more visceral aspects to the connection between neoliberalism and NPM. First, any managerial change (introduction of NPM, MBO, SES etc.) is often a stalking-horse for simply getting rid of noncomplying individuals. A new clique is taking over. Second, neoliberalism in its privatisation aspect represented in many cases a payoff for political supporters who wanted to get control of what they percieved as low-risk income streams which were in the possession of public instrumentalities. Where these two forces operated together, it is not hard to see how resistance by the “old guard” to seeing their organisations gutted through privatisation needed to be overcome by a “reorganisation” of some form – call it NPM if that suits. I guess you could call this a historical rather than an economic view.

  11. July 18th, 2003 at 17:50 | #11

    All makes sense in terms of public choice theory gordon. One of the ironies of PCT is that it is somehow always overlooked that there are few surer bets than that the adherents to the theory are the most likely to manifest it.

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