The future of public sector reform

Developing countries do need to reform aspects of their public sectors. Many have done so, reducing the size of their workforces and cutting budget deficits. The range of reforms is outlined in box 4.2.

But if reformers want to make greater progress in future, they will need to look more closely at local circumstances and apply more appropriate remedies. Many of the principles of reform assume that there is some standardized or ideal form of government - and that even if this has not yet been achieved, there is some global process of convergence as all countries move from Old Public Administration (OPA) to New Public Management (NPM).

Many of the poorest countries have yet to achieve the OPA stage. They lack a professional civil service and rely more on patronage and informal systems. In these circumstances, trying to transform the existing arrangement into an NPM system may create little more than an empty managerial shell.

These reforms also assume that there is a right size for the state: small. It is argued, for example, that state expenditure will always crowd out private investment. Certainly, over-expenditure and excessive borrowing can undermine price stability. But where there has been little industrial development, state expenditure can also build the infrastructure that will attract private investors.

Another argument is that state growth will require higher taxes, which will undermine incentives and discourage people from keeping their funds in the country. However, most of the poorer countries have very low rates of both corporate and income tax. All governments should try to keep their budgets balanced; but when the poorer countries are in trouble, it is more likely to be because of their weak position in global markets - as they are blown off course by collapsing commodity prices.

Reforms of the public sector cannot simply be managerial or technocratic exercises. They need to be firmly grounded in what citizens see as the mission of their state. The state’s mission will inevitably vary according to local circumstances and the stage of development. At its heart, the mission is not managerial; it is social. People want to move toward societies that are more prosperous, equitable and harmonious. Having ambitious managerial targets may be a part of this - but only a small part. Indeed, focusing too rigidly on market reforms is likely to perpetuate the incidence of failed states, civil wars and developmental stagnation.

The basis for any reform must be broad political consensus. While public sector reforms may appear technical, they are always highly political and conflictual. Few governments in crisis-ridden developing countries had a popular mandate for the policies that the IMF and the World Bank required them to carry out. Most of these countries are also grappling with complex problems of democratization - trying to lay the ground rules for the way their societies are governed.

Even industrialized countries that have entrenched democracies and single-party governments have struggled with these changes. Many of the developing and transition economies have not only fragile democracies, but also fragile governments. In most cases, the leading parties in government do not have parliamentary majorities. Given the fractured nature of political systems, and the ambiguous or contentious mandates of governments, it is hardly surprising that there is only a weak commitment to reform.

The reform of public services can only succeed when it is an integral part of overall democratic reforms - each reinforcing the other. This means having parliamentary parties that pursue broad social interests, supplemented with a free press and an independent judiciary. The aim should be to deepen and defend the civil rights of citizens, who will then be in a much better position to demand the highest standards from their politicians and from all public servants.