Dexter Whitfield Public Services or Corporate Welfare Rethinking the Nation State in the Global Economy Pluto P Press LONDON • STERLING, VIRGINIA First published 2001 by Pluto Press 345 Archway Road, London N6 5AA and 22883 Quicksilver Drive, Sterling, VA 20166–2012, USA www.plutobooks.com Copyright © Dexter Whitfield 2001 The right of Dexter Whitfield to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Whitfield, Dexter. Public services or corporate welfare : rethinking the nation state in the global economy / Dexter Whitfield. p. cm. Includes bibliographical references and index. ISBN 0–7453–0855–4 (hc) — ISBN 0–7453–0856–2 (pb) 1. Welfare state. 2. State, The. 3. Privatization. 4. Globalization. I. Title. JC479.W483 2000 320.1—dc21 00–008744 ISBN 0 7453 0855 4 hardback ISBN 0 7453 0856 2 paperback 10 09 08 07 0605 04 03 02 01 10987654321 Disclaimer: Some images in the original version of this book are not available for inclusion in the eBook. Designed and produced for Pluto Press by Chase Publishing Services, Sidmouth, EX10 9QG Typeset from disk by Stanford DTP Services, Northampton Printed from PDF files in the European Union by TJ International, Padstow, England To Dorothy Calvert Contents List of Tables and Figures x Abbreviations xii Acknowledgements xiv Preface xv Introduction: The Global Corporate Agenda 1 The seven-issue corporate agenda 3 The nation state 15 1 Public Goods, Public Risk and Power Struggles 19 Global and national public goods 19 Global risk or risky business 22 Competition, power struggles and alliances 26 Reconfiguring the state–market–civil society paradigm 33 2 Nation States: Facilitating and Accommodating Globalisation 37 Globalisation, regionalisation and the nation state 37 How the state facilitates globalisation 46 Privately financed infrastructure and sustainable development: mortgaging the future 53 States make markets 60 Globalisation of Public Management 62 3 Modernising the State: A Third Way for Competition 63 The roots of transformation and modernisation 63 The objectives of transformation and modernisation 66 Role of the state 71 Financing the state 85 4 Modernising the State: New Organisation and New Management? 101 Organisational structure of the state 101 Managing the state 114 viii PUBLIC SERVICES OR CORPORATE WELFARE 5 The Emerging Corporate-Welfare Complex 130 Resilience to change 130 New challenges for the welfare state 133 The Third Way welfare state 141 Pensions and social security – the global market 147 The new corporate-welfare complex 155 6 The Price of Neo-Liberal Modernisation 165 Macroeconomic impact 165 Asset stripping and high transaction costs 167 Employment impact 174 Democratic accountability and user/employee involvement 178 Fragmenting the state 180 Equality and social justice 182 Quality of service 183 The performance state paradigm 185 Ownership and control 189 Partnerships 191 The effect on state capacity 197 7 The Nation State in 2020 204 New world (dis)order 205 The corporate or minimalist state 210 The enabling or partnership state 212 The third sector or social economy state 215 Other models 219 8 Redesigning the State – A New Public Order 221 The state in capitalist society 221 The core functions of the state 224 Extending democratic accountability and new models of governance 229 Taxation of income, consumption and corporate profits 231 Reversing marketisation and privatisation 233 New financial and regulatory architecture to control capital 240 Promoting civil society, citizenship and the social economy 247 Maintaining universal welfare systems 248 Reducing poverty through empowerment, redistribution, equalities, regeneration and control of development 249 Creating jobs and quality employment 250 Imposing corporate governance and social accountability 250 Maintaining macroeconomic stability and investment 252 CONTENTS ix 9 A New Public Service Management 253 Principles of public service 253 A blueprint for a new Public Service Management 258 Corporate policies, values and public service ethos 259 Democratic accountability and communications 261 Social Justice Planning and Auditing 262 Innovation, redesign and capacity building 269 User and employee/trade union involvement 270 Strategic researching and planning social and economic needs 275 Quality systems and performance review 277 Monitoring, evaluation and learning environment 278 Public sector networks, partnerships and strategic sourcing 279 Quality employment & training 282 10 New Strategies and Alliances 284 Bibliography 287 Index 306 List of Tables and Figures TABLES 1. Changes in average taxation in OECD countries 12 2.1 Gross global privatisation proceeds 1990–8 48 2.2 FDI from privatisation (asset sales) in developing countries 1989–94 51 2.3 Growth of cross-border mergers and acquisitions in privatised service sectors 1991–7 52 2.4 Signed project deals by country, 199657 2.5 Investment in infrastructure projects with private participation in developing countries 1990–8 58 2.6Growth in private cross-border flows to infrastructure 59 3.1 Privatisation typology 76 3.2 Summary of privatisation in Britain between 1979 and 1997 79 3.3 Privatisation and transfer of services and agencies (1990–2000) 80 3.4 State expenditure as a proportion of GDP 86 3.5 Changes in provision, finance and decision of public/private welfare 88 3.6Infrastructure privatisation in Britain 93 3.7 Sector analysis of PFI projects in Britain 95 3.8 Financial impact of health PFI projects 96 4.1 New public service markets in Britain 119 5.1 Ageing of population in major industrialised countries 2000–30 135 5.2 Social welfare public expenditure in selected OECD countries (% of GDP, 1993) 138 5.3 Health expenditure in various industrialised countries (1998) 139 5.4 Comparison of public/private welfare state costs in Sweden and USA (1990) 140 5.5 Asset value and allocation of European pension funds (end 1996) 151 5.6European pensions costs (projection as a % of GDP) 152 5.7 Types and purpose of corporate welfare 160 5.8 Cost of US tax breaks for business and investment in 2000 161 5.9 State support for private infrastructure projects 162 6.1 How public assets in Britain were undervalued 168 x TABLES AND FIGURES xi 6.2 Service price increases (in real terms) 170 6.3 Change in public sector employment (headcount, thousands) 174 6.4 Complaints in privatised services 184 6.5 Capital cost of PPP hospital projects 191 6.6 Hospital construction and availability costs 192 6.7 Partnership and private finance failures 194 8.1 Different types of state capacity 227 8.2 Goals of economic and ecological sustainability 246 9.1 The key characteristics of Public Service Management 256 9.2 The evaluation context 280 FIGURES Intro. The ‘E’ model of government 10 3.1 A political economy typology of transformation and modernisation 71 3.2 Methods used to privatise services 90 3.3 The spiral of public sector decline and opportunity for capital 96 5.1 The corporate-welfare complex 156 8.1 The core functions of the state 225 8.2 The organisational and operational framework of the nation state 231 9.1 Key components of Public Service Management 259 9.2 Social Justice Planning and Auditing model 265 9.3 Income and expenditure flows to and from the local economy 268 Abbreviations APEC Asia-Pacific Economic Cooperation ASEAN Association of South East Asian Nations BID Business Improvement District CCT Compulsory Competitive Tendering CDC Community Development Corporation DETR Department of the Environment, Transport and the Regions DfEE Department for Education and Employment DSO Direct Services Organisation DSS Department of Social Security EAZ Education Action Zone EU European Union ERM European exchange rate mechanism ESOP Employee Share-Ownership Plan FDI Foreign direct investment FT Financial Times FTE Full-time equivalents GATS General Agreement on Trade and Services GATT General Agreement on Tariffs and Trade GDP Gross domestic product GGFD General Government Financial Deficit G8 Group of 8 leading industrialised countries HAZ Health Action Zone ICC International Chamber of Commerce ICT Information and communications technology IFC International Finance Corporation ILO International Labour Organisation IMF International Monetary Fund MAI Multilateral Agreement on Investment MERSCOUR Southern Cone Common Market (Latin America) MIGA Multilateral Investment Guarantee Agency NAFTA North American Free Trade Agreement NAO National Audit Office (UK) NATO North Atlantic Treaty Organisation NGO Non-governmental organisation xii ABBREVIATIONS xiii NHS National Health Service (UK) NPR National Performance Review OECD Organisation for Economic Cooperation and Development PFI Private Finance Initiative PLC Public Limited Company (UK) PPP Public–Private Partnership PSDR Public Sector Debt Repayment (UK) PSNB Public Sector Net Borrowing (UK) Quango Quasi-autonomous non-governmental organisation (UK) REC Regional Electricity Company SAL Structural Adjustment Loan SERPS State Earnings-Related Pension Scheme (UK) SOE State-Owned Enterprise SJPA Social Justice Planning and Auditing TANF Temporary Assistance for Needy Families TNC Transnational corporation TQM Total Quality Management UK United Kingdom UN United Nations UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme