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Module: Public Management and Organization Development Sub-Module1:Public Management Trends and Administrative Reform Contents Introduction: Public Management and Administrative Reform 1 I. The Evolution of Urban Management Techniques in Japan 3 1. Urban Management before the War 3 2. Urban Management in the Years of Rapid Growth after the War 4 3. Urban Management in the Aftermath of the Fiscal Crunch 6 II. The NPM Tide and Features of NPM 9 1. The Post-bubble Recession, Adverse Demographic Trends, and Fiscal Crisis 9 2. The Features of NPM 10 3. The Spread of NPM and the First Stirrings of Administration Reform 11 III. Cases of NPM-style Reform in Japan 13 1. Shizuoka Prefecture 13 2. Mie Prefecture 14 3. Fukuoka City 14 4. Yokosuka City 15 IV. Methods and Directions of Reform 15 1. Budgetary and Public Accounting Reform 15 2. Application of Market Principles through PFI 17 3. Local Independent Administrative Agencies 18 Conclusion: The Limitation of NPM 18 Tables and Figures Figure1.Number of local public corporations established 8 Public Management and Organization Development Sub-Module1 Public Management Trends and Administrative Reform Sub-Module1:Public Management Trends and Administrative Reform Introduction: Public Management and Administrative Reform Activities of public administration have two aspects: its external functions, which are performed as part of the government’s core mission of running society through delivering services; and its internal functions, namely properly managing the bureaucratic institutions responsible for the first aspect so that they can perform that job more efficiently. Because the modern science of public administration started out as the study of how to steer the bureaucracy, the term management in this context originally referred exclusively to administrative management conducted internally to ensure the efficiency of institutional action at the policy implementation stage. Today, however, it has come to mean specifically public management — steering bureaucratic institutions so that they are better able to respond at all stages of the policy cycle, from formulation to implementation and evaluation. This shift in the central focus of the discipline of public administration occurred in the wake of the oil crisis of the 1970s. Finding themselves in dire financial straits, the developed countries mobilized the traditional techniques of public administration, such as slashing budgets and staff, in an attempt at cutback management; but these steps proved inadequate, and more fundamental reforms could not be avoided. By the 1980s administrative and fiscal reform had become part of the common political agenda of the developed countries. The British government committed itself to harnessing market mechanisms through deregulation and privatization; in the area of public administration, meanwhile, it decoupled policy formulation and implementation, and vested the agencies charged with responsibility for the latter with greater autonomy over staffing and finances. At the same time it identified performance targets for these agencies in Citizen’s Charters, and set itself the goal of establishing a new system of evaluating performance by monitoring whether or not those targets were met. The tide of reform spread to Australia and New Zealand, and the United States too pursued a similar course. In Britain, which spawned the trend, no fundamental change occurred in the basic direction of reform even after the Labor Party replaced the Conservatives in power. The wave reached Japan as well: in 2001 the government established its own system of independent administrative agencies on the British model, and mandated the implementation of policy/program evaluations by all the government ministries. Since the 1980s, one consistent feature of administrative and fiscal reforms has been the urge to place greater trust in and stimulate market mechanisms. But consider the other - 1 - Public Management and Organization Development Sub-Module1 Public Management Trends and Administrative Reform side of the coin: the fact is that the modern state expanded its functions in the first place because markets triggered a host of social problems that people looked to government to solve. In the real market, conditions of perfect competition were never achieved, for there inevitably arose monopolies, oligopolies, and the like — what economists call “incomplete market.” And even if conditions of perfect competition had existed, whatever ability the market had to correct itself would not have been enough to overcome external diseconomies such as pollution or cleavage between the rich and the poor — a shortcoming that economists call “market failure.” The inability to trust totally in the workings of the capitalist economy was the very reason that the modern state grew in size and expanded its scope of action. Now, however, mainstream thinking has reversed course: there is incessant anxiety over the bloated state of the public sector, and government comes under constant attack for its shortcomings and inefficiencies, such as the way in which overregulation stifles private sector initiative. It is now argued that government suffers from an innate defect that might, on the model of the economists’ “market failure,” be called “government failure.” But existing government services cannot be abolished altogether; therefore the services traditionally provided directly by government have in so far as possible been transferred to a medley of non-government players including companies and NPOs, while the government increasingly concentrates on designing and coordinating this diverse network of public service providers. This fresh approach, along with the thinking behind it, has come to be styled “New Public Management” (NPM); and in describing the changing view of what the government’s role should be, commentators speak of the shift “from rowing to steering” or “from government to governance.” Observers of public administration today thus are more interested in the question of public management, which pertains to the interaction between the bureaucracy and the environment in which it operates, than in that of administrative management, which pertains to the bureaucracy’s internal functioning. This chapter surveys the impact of the NPM trend on local governments in Japan. To clarify the differences between NPM and traditional approaches to public administration and finance, it will first be necessary to review past action by local governments. Section I, therefore, examines the experiments of urban management techniques in Japan. Section II gives a brief account of the NPM tide sweeping Japan at the turn of the twenty-first century and enumerates the features of the concept. Section III describes several cases of what are regarded as NPM-style reforms in different prefectures and municipalities. Section IV examines several widely discussed methods of reform to be found in the NPM toolbox, and maps out the future direction of reform. Finally, a - 2 - Public Management and Organization Development Sub-Module1 Public Management Trends and Administrative Reform limitation intrinsic to NPM is discussed. It is worth noting that the private sector is ill equipped to take over such classic government functions as national defense and policing. It is not these core functions that NPM advocates privatizing or contracting out, but rather more peripheral ones. This chapter, therefore, tends to focus on the periphery of local-government services, where a certain degree of corporatization or outsourcing is feasible. I. The Past Experiments of Urban Management in Japan The term public management is not particularly new: a journal of that name was already being published in the U.S. in the 1930s. In Japan, too, the concept of public management took root before World War II as urbanization progressed. This section reviews the historical transition of urban management methods in Japan, the most striking characteristic of which is that, for better or for worse, they have since before the War been predicated on cooperation between the public and private sector. 1. Urban Management before the War When the Meiji government was formed in 1868, it faced the urgent task of modernizing the country. The immediate priorities were to perform an accurate assessment of the country’s lands and population and to establish a national system of compulsory education; but having few financial resources at its disposal, the new regime had to depend on the cooperation of traditional community organizations to establish a household registration system and build primary schools. The job of running the registration system was left to prominent locals who had been appointed as village headmen or deputies; money to erect schools was raised from donations by local residents and proceeds from the sale of publicly owned forests. The new government’s modernization program had to rely on community organizations dating back to the previous era to get jumpstarted. The next task at hand was transplanting modern industry to Japan and nurturing its seeds. But the amount of private capital available in the country was nowhere near enough that the market could accomplish this on its own; so Japan adopted a policy of setting up government-run corporations in the armaments and light industry sectors, as well as state-owned enterprises like the post office, the telegraph and telephone service, the tobacco monopoly, and Japan National Railways. These government enterprises were eventually

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