Education expenditure as percentage of gdp

Annotated Bibliography

Written by B. Guy Peters, a leading authority in the field, this comprehensive exploration of the political and policy making roles of public bureaucracies is now available in a fully revised seventh edition, offering extensive, well- documented comparative analysis of the effects of politics on bureaucracy. Updates to this edition include:

• All new coverage of public administration in Latin America and Africa, with special attention paid to the impact of New Public Management and other ideas for reform

• An examination of the European Union and its effects on public policy and public administration in member countries, as well as an exploration of the EU as a particular type of bureaucracy

• A renewed emphasis on coordination and the role of central agencies • A thorough assessment of ‘internationalization’ of bureaucracies and con-

cerns with the role of international pressures on domestic governments and organizations in the public sector

• Coverage of the wide- ranging impacts of the 2008 economic slowdown on public bureaucracies and public policies, and the varied success of govern- mental responses to the crisis.

Drawing on evidence from a wide variety of political systems, The Politics of Bureaucracy, Seventh Edition, continues to be essential reading for all students of government, policy analysis, politics, and international relations.

B. Guy Peters is Maurice Falk Professor of American Government at the University of Pittsburgh, USA.

“The seventh edition of this popular textbook provides readers with a com- prehensive and updated discussion of challenges and recent developments in the field of public bureaucracy. Modern public administration is placed in its political and intellectual context and analyzed in a skillful manner with insights into the challenges and opportunities of big contemporar y govern- ment.” Per Lægreid, University of Bergen, Norway

“At a time when political parties and politicians in democratic nations seem tone-deaf to concerns citizens have with government, Peter’s classic text brings welcome insights into the inner workings of public institutions and the gargantuan changes that have occurred over the last forty years.” Jill L. Tao, Incheon National University, South Korea

“A comprehensively updated edition with impressive coverage of public administration, topic-wise and globally. A wealth of comparative insights and analysis. Essential reading for all who seek to understand the structures and dynamics of the state, government, and governance in diverse contexts.” Ian Thynne, Australian National University, Australia

The Politics of

Bureaucracy

An Introduction to Comparative Public Administration

Seventh Edition

B. Guy Peters

Seventh edition published 2018 by Routledge 711 Third Avenue, New York, NY 10017

and by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN

Routledge is an imprint of the Taylor & Francis Group, an informa business

© 2018 Taylor & Francis

The right of B. Guy Peters to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.

All rights reser ved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.

[Fourth edition published by Longman 1995] [Sixth edition published by Routledge 2010]

Library of Congress Cataloging-in-Publication Data Title: The politics of bureaucracy : an introduction to comparative public administration / B. Guy Peters.

Description: Seventh Edition. | New York : Routledge, 2018. | Includes bibliographical references and index.

Identifiers: LCCN 2017035021| ISBN 9780415743396 (hardback : alk. paper) | ISBN 9780415743402 (paperback : alk. paper) | ISBN 9781315813653 (ebook)

Subjects: LCSH: Public administration. | Bureaucracy. | Comparative government.

Classification: LCC JF1501 .P43 2018 | DDC 351–dc23

LC record available at https://lccn.loc. gov/2017035021

ISBN: 978-0-415-74339-6 (hbk) ISBN: 978-0-415-74340-2 (pbk) ISBN: 978-1-315-81365-3 (ebk)

Typeset in Centur y Old Style by Wearset Ltd, Boldon, Tyne and Wear

https://lccn.loc
v

Contents

about the author vi

1 Public Administration and Governing 1

2 Political Culture and Public Administration 31

3 Recruiting Public Personnel 79

4 Problems of Administrative Structure 123

5 The Politics of Bureaucracy 163

6 The Bureaucracy and Political Institutions 193

7 The Politics of the Budgetary Process 227

8 The Politics of Administrative Accountability 259

9 Administrative Reform 301

10 The Politics of Public Management 323

bibliography 347

index 379

v i

About the Author

B. Guy Peters is Maurice Falk Professor of American Government at the University of Pittsburgh, USA. He has also ser ved as a research professor at the University Center for International Studies (UCIS), as a senior fellow at the Canadian Centre for Management Development, and as honorar y professor at City University of Hong Kong. He is author of Public Administration: Research, Strategies, Concepts, and Methods (Routledge, 2015).

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C h a p t e r 1

Public Administration and Governing

The Modern Public Sector 3 The Growth of Government 7 The Growth of Administration 14 Countertrends in Government Growth 23 Summary 27

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I began the first edition of this book with the statement that government has become a per vasive fact of ever yday life and that, in addition, public administra- tion has become an especially per vasive aspect of government. This statement remained true despite the long terms in office of a number of conser vative govern- ments in many industrialized nations (Ronald Reagan and the two George Bushes in the United States, Margaret Thatcher, John Major and then David Cameron in the United Kingdom, Helmut Kohl and then Angela Merkel in Germany). These governments were joined later by right- of-center governments in unlikely places such as Denmark and Sweden. Despite their rhetoric, these governments were never able to reduce the size and influence government to any significant degree. Many contemporar y governments from the political left are not the same types of social democrats as in the past. Most of these governments have accepted many of the same premises about the need to reduce the size of government, and have made concerted attempts to reduce the role of government in the lives of their citizens. Social Democratic governments all over Europe, with the possible exception of France, have adopted some of the same rhetoric of the “Third Way,” albeit in var ying degrees. Government is not the enemy that it was, and is, to some conser vatives but neither is there much acceptance of the “tax and spend” behavior of left governments in the past, even in the Scandinavian governments. What is true for the industrialized democracies is especially true for coun- tries of the former communist bloc, and for many developing countries in Africa, Asia, and Latin America. The political systems in central and eastern Europe expe- rienced almost total transformations of their governmental structures to reduce the intrusiveness of government and to permit greater personal freedom – economi- cally as well as politically (see Verheijen, 2007). These changes in values have been accompanied by radical transformations of the public sector. The changes included numerous public enterprises being privatized and public employment being down- sized. The countries of Africa, and especially Latin America, experienced significant pressures from international donor organizations to reduce the size of the State and utilize more market mechanisms. While following that “Washington Consensus” for some years, many countries have returned to more inter ventionist styles of government. In the extreme, countries such as Venezuela and Bolivia have adopted a limited form of socialism, while others such as Uruguay have returned the State to a more central position. Despite the best efforts of political leaders, however, an enhanced role for the public sector appears to persist in many countries, and in some cases that role even continues to increase. Leaders of governments have usually found government more difficult to control than they had believed before taking office. This chapter will attempt to document briefly the generalization – if indeed any documentation is required – that the public sector is difficult to control and even more difficult to “roll back.” Indeed, as the state is rolled back in some ways it almost inevitably must “roll for ward” in others. Privatizing industries – especially public utilities – will mean that those industries will have to be regulated in some way to ensure that the public is treated fairly (Majone, 2005). The large- scale privatization occurring in Eastern Europe has meant that legal principles like property rights and con- tracts, as well as regulator y mechanisms, must be created by government. In other

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countries, where the central government has assumed a smaller role in society, lower tiers of government have accepted enhanced roles, and in some cases whole new tiers of government have been created (Hor vath, 2000; Loughlin, 2001). In all of these cases, governments remain involved in the economy and society, just in less obvious ways. The growth and contraction of government have become objects of substan- tial scholarly research (Tanzi and Schuknecht, 2000). Attempts to change the size of government have also become a rallying cr y for political activity, whether the attempt is to expand or to contract the public sector. Any number of explanations have been advanced for the growth and persistence of the public sector. Likewise, the expansion of the public bureaucracy has been conceptualized as either a by- product of the general growth in the public sector or as a root cause of that growth. Further, if government is not able to decrease its size and its influence in a society, the blame is often placed on an entrenched public bureaucracy. For example, the expanding role of the European Union in the daily lives of the citizens of the now 27 member countries is often phrased in terms of expansionar y ideas of the “Euro- crats” in the European Commission (Trondal, 2010). On the other hand it is important to place contemporar y public administra- tion in its political and intellectual context, and the increased concern about the magnitude and impact of government remains an important factor in shaping the current debate about the public sector, and about public administration. At home, governments seeking to provide better and more equitable ser vices to the public must also be conscious of the resistance of the public to taxation. Internationally, the international financial community is skeptical of a large public sector and exerts an influence through the bond and currency markets, including in industrialized democracies such as Greece, Spain, and Portugal.

The Modern Public Sector

The above paragraph was written as if the “size of government” could be clearly and unambiguously measured (see OECD, 2007). In fact, it is a fundamental feature of contemporar y government, especially in industrialized societies, that the bounda- ries between government and society – between what is public and what is private – are increasingly vague. As a consequence of that imprecision, any attempt to say unambiguously that government is growing or shrinking is subject to a great deal of error and misinterpretation. For example, by some measures the government in Russia would be larger in 2000 than it was prior to the collapse of the former system because taxes are now higher as a proportion of Gross Domestic Product (GDP) than under communism (Stepanyan, 2003). Further, the imprecision in measuring the size of the public sector can be utilized politically to make arguments about the successes or failures of incumbent governments to exercise proper control over the public sector. In an era of skepti- cism about the public sector and resistance to taxation, the issue of controlling the public sector is often important politically (Van de Walle and Bouckaert, 2003). Opposition politicians find it ver y convenient to argue that their opponents have let the public sector “run amok” and can usually muster some evidence to support

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that assertion. Likewise, incumbent politicians can gather their own evidence to demonstrate that they have indeed been good stewards of the public purse. Several examples of the difficulties in measuring the magnitude of the public sector may help to clarify this discussion. One obvious example is the role of the tax system in defining the impact of government on the economy and society – an impact that is not adequately assessed by most measures of the size of govern- ment. In the United States, for example, subsidies for housing through the tax system (primarily through the deductibility of mortgage interest and local property taxes) exceed direct government expenditures for public housing by more than 200 percent; this despite numerous attempts at “tax reform” (see Farley and Ellis, 2014). Likewise, although the United Kingdom has had a substantial public pension program, tax relief for private pensions schemes exceeds £3 billion (but see Wil- davsky, 1985). Similar tax concessions are available to citizens of the majority of industrialized countries, with some of the highest nominal tax rates accompany- ing some of the most generous tax concessions. All of these tax loopholes influ- ence economic behavior and amount to government’s influencing the economy and society just as if it taxed and spent for the same purposes. Tax concessions are not, however, conventionally counted as part of the size of the public sector, as expendi- tures for the same purposes would be. Government loans are another means through which government can influ- ence the economy without ostensibly increasing the size of government. In the majority of industrialized countries governments make loans to nationalized indus- tries that often are not repaid; these defaulted loans do not always show up as an item of public expenditure (Stanton, 2001). Even loans to individual citizens, for example to farmers, or to small businesses, often are not counted as expenditures, given the assumption that eventually they will be repaid. The involvement of gov- ernment is even more subtle when, as in the United States, governments offer guarantees for private loans to companies in financial difficulty or to students who want to go to college. Such arrangements involve the actual expenditure of little or no public money but, again, produce a significant effect in the economy. Not only do expenditures and other uses of financial resources fall on the boundar y between the public and private sectors, but organizations do as well. There has been a significant increase in the number of quasi- public organizations in most countries during the postwar era. In order to provide organizations with greater flexibility in making decisions, or to subject them to greater market disci- pline, or to protect them from potentially adverse political pressures, or simply to mask the true size of government, organizations have been created that straddle the public–private fence. In some instances these organizations are created anew as government enters a policy area for the first time – for example, the Corporation for Public Broadcasting in the United States. In other instances organizations that existed previously as a part of government are “hived off ” to a quasi- independent status, as many of the numerous Next Steps agencies in the United Kingdom (James, 2003). That agency model has since been copied in a large number of other countries (Verhoest and Van Thiel, 2012). In addition to the obvious measurement problems these quasi- governmental organizations create, they give rise to even more important problems of account- ability. As they have been divorced from direct control by government to some

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extent, the conventional political and legal means for enforcing accountability (see Chapter 8) may no longer be applicable (Considine, 2001). The result is that these organizations (and the politicians who are responsible for them) have opportuni- ties for abuse of powers. Further, given that they are at once public and private, the average citizen may find it difficult to ascertain who really is responsible for the ser vices they provide. Somewhat paradoxically, as governments have sought to appear smaller and more efficient, the resultant confusion and perceived lack of accountability may cause even greater harm to their reputations with the public.

Public Spending

Although we now can see that it is difficult or impossible to measure the magni- tude of government definitively, we can still gain insight into the changes that have taken place in the role of government by examining figures for public expenditure. This variable is the most widely used measure of the relative size of government and represents perhaps the most visible portions of governmental activity. A better insight about the size of the public sector can be found in the relationship between government expenditure and GDP, a standard measure of all the marketed goods and ser vices produced in an economy. As seen in Table 1.1, there are marked differences among nations in the propor- tion of GDP devoted to public expenditure. The most obvious differences are between the less- developed and the industrialized nations. Even the less- developed country with the highest level of public expenditure (Kenya) spends much less as a proportion of GDP than does the United States, which spends the least among the three indus- trialized countries in the table. Of course, a sample of only seven countries is prone to great error, but similar findings probably would be present were there a much larger sample of nations. In addition, there are differences among the industrialized coun- tries and among the less- developed countries. For instance, Sweden spends over 80 percent more in the public sector as a proportion of GDP than does the United States.

Table 1.1 Public expenditure as a Percentage of Gross domestic Producta

Country 1960 1970 1980 1985 1990 1998

united States 27.5 30.3 33.4 33.2 34.1 34.0 united Kingdom 33.1 33.2 42.2 42.8 41.9 43.4 Sweden 28.7 37.1 57.2 51.9 48.8 49.9 Singapore 11.9 12.8 23.5 39.2 31.5 33.2 Colombia 8.4 16.2 14.9 17.1 16.4 18.9 Kenya 11.5 16.2 20.4 30.1 32.2 34.6 india 11.4 14.1 18.0 25.2 24.0 23.6

Sources: united nations, Statistical Yearbook (new york: united nations, annual); united nations, Yearbook of National Accounts (new york: united nations, annual); World Bank, World Tables (Washington, dC: World Bank, annual).

note a Gross domestic Product at market prices.

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In addition to the differences among the countries, the rate of increase in public expenditure appears substantially higher in the less- developed countries than in the industrialized countries. India has almost quintupled the percentage of GDP devoted to public expenditure over the 38 years from 1950 to 1988, while Colombia has more than doubled the percentage during that time. Kenya almost tripled its percentage of GDP in the public sector from 1960 to 1990, although the increase has virtually stopped. The rate of increase in spending has been almost as rapid in Sweden as in the less- developed countries. The rate of growth of public expenditure has been much more modest in the other two industrialized coun- tries, and has slowed or stopped in Sweden. A major exception to the increasing size of the public sector has been in Singapore, a “newly industrializing countr y,” where the public sector has increased ver y little and there has been a great deal of emphasis on ensuring a good business climate for its rapidly growing private sector (Evans, 1995). Part of the reason for the relatively lower rate of public expenditure in the less- developed countries is that so much of their GDP comes from agriculture and especially subsistence agriculture, as is apparent in Table 1.2. This means that there are fewer “free- floating resources” in the economy that are readily taxed. The other way of saying that is there are fewer tax handles for government to use in extract- ing resources. A cash transaction is easier to tax than if someone is simply growing his or her own crops in order to eat, or is trading by barter. If we calculate the level of public expenditure in relation to the secondar y and tertiar y sectors of the economy (manufacturing and ser vices, respectively), we get a somewhat different picture of the rate of public expenditure in the less- developed countries. Using this calculation, Table 1.3 shows that Kenya, India, and Colombia spend about as much in relation to their readily extractable GDP as does the United States. Thus, the less- developed countries do tend to make rather substantial public expenditures when the difficulties of resource extraction are considered. In the terminology of Almond and Powell (1966), since the extractive capabilities of these countries are weak, so too are their distributive capabilities. These data, while only illustrative, point out that government is a big “busi- ness,” and continues to grow, albeit more slowly than in the recent past. Even in

Table 1.2 Proportion of Gross domestic Product derived from Primary Sector of economy (Agriculture, forestry, and fishing) (Percentage)

Country 1960 1970 1980 1985 1990 1998

united States 4 3 3 2 2 2 united Kingdom 4 3 2 2 2 1 Sweden 7 4 3 3 3 3 Singapore 4 3 2 2 1 1 Colombia 32 26 26 18 16 16 Kenya 38 30 30 29 26 23 india 47 41 31 30 28 26

Sources: united nations, Statistical Yearbook (new york: united nations, annual); united nations, Yearbook of National Accounts (new york: united nations, annual); World Bank, World Tables (Washington, dC: World Bank, annual).

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the less- developed countries, with their smaller public sectors, a minimum of one dollar (or whatever monetar y unit) in seven goes into public expenditure. In the United States – among the least expenditure- prone of the developed countries – this figure is one dollar in three in the public sector. However, we must remember that when government spends money, it is not shoveled into a hole somewhere in Washington or Nairobi; the expenditures provide education, hospitals, highways, police protection, and the whole range of government ser vices that most citizens require. In addition, especially in the less- developed countries, these funds can be used to promote economic growth. In those developing countries, government must function as a principal source of capital accumulation for future economic growth, and some successful Newly Industrialized Countries (NICs) such as South Korea and Brazil have had state- led development (Evans, 1995). In the more developed economies human capital appears to be the dominant issue in economic growth and government plays a crucial role in providing and/or promoting education and training. Thus, simply reducing the size of the public sector is not necessarily the recipe for promoting economic growth as is sometimes assumed on the political right; at times the effect may be quite the opposite.

The Growth of Government

Forgetting for the time being that the concept of “government” is difficult to measure in quantitative terms, we can proceed to inquire just why this institution – or set of institutions – increased in size and power after the end of World War II. There was a massive increase in the peacetime role of government after that war. In some European countries this reflected a pattern begun before the war, but there was at the time the resource base, and political will, to construct a larger and more influential role for government. The experience of the public sector during the past several decades has been somewhat more ambiguous. During the period of conser vative rule in the United States, Canada, and the United Kingdom (among others) the public sector was

Table 1.3 Public expenditure as a Percentage of readily extractable Gross domestic Product (Secondary and Tertiary Sectors)

Country 1960 1970 1980 1985 1990 1998

united States 28.6 31.3 34.4 33.4 34.2 34.2 united Kingdom 34.5 34.2 43.2 42.9 42.0 44.6 Sweden 30.9 38.7 59.0 52.2 49.5 51.1 Singapore 14.7 13.4 24.0 40.0 38.9 33.2 Colombia 12.4 21.6 20.0 20.8 19.6 20.1 Kenya 13.1 22.9 29.1 42.4 43.5 44.6 india 21.5 24.0 27.6 36.0 33.3 32.6

Sources: united nations, Statistical Yearbook (new york: united nations, annual); united nations, Yearbook of National Accounts (new york: united nations, annual); World Bank, World Tables (Washington, dC: World Bank, annual).

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able to resist many efforts to reduce its size. Even in countries such as the United States and the United Kingdom that had a decade or more of conser vative govern- ment, there was little or no reduction in the scope of government, when measured by public revenues or expenditures as a percentage of GDP. When the political pendulum again swung back toward the left, there was surprisingly little will to expand government revenue and spending. The new version of the left accepts a much more limited role for government – at least financially – and often depends upon closer alliances between the public and private sectors to influence economy and society (see Giddens, 1998). There are almost as many answers to the question of why governments grow as there are scholars concerned with the subject, but several fundamental approaches can be used to relate that growth to the growth of public bureaucracy. Also, these same answers must be examined to determine whether government can also downsize in response to demands that the public sector become a less per vasive and intrusive aspect of life.

Entitlements

One dominant explanation for the growth of the public sector is that governments extended a variety of “entitlement programs” to their citizens during bountiful eco- nomic times and have been unable to rescind these entitlements as the economy has become less buoyant. These programs have become a form of property for their recipients (Reich, 1964). Examples of these programs are social security, public health insurance, and housing subsidies. These programs are especially dif- ficult to curtail when they are supported by an earmarked tax that gives citizens the impression of actually purchasing something akin to an insurance policy. Enti- tlement programs constitute a major portion of the expenditures of government – approximately 50 percent in the United States, 55 percent in the United Kingdom, and over 60 percent in Sweden. Further, when there are pressures to reduce public expenditures for either political or economic reasons, in the 1980s and now in the twenty- first centur y for example, the proportion of total public spending devoted to entitlement expenditures tends to increase rapidly as discretionar y expenditures are reduced. Entitlement programs in and of themselves would not necessarily produce increases in the relative size of the public sector were it not for the demographic shift occurring in almost all industrialized societies, and some of the less developed. These societies are aging, with a higher proportion of the population retiring each year. In addition to pensions, the elderly tend to consume more medical care per capita than do younger people, so expenditures for public medical care programs are also likely to increase as populations age; on average a person over 65 uses twice as much medical care as one 45–65 years old. This shift in the age structure of industrialized countries is quite rapid. For example, in the United States, which remains a relatively young countr y with just over 15 percent of the population over 65 as compared to over 22 percent in Sweden and 24 percent in Switzerland, the over 65 component of the population is increasing more than twice as fast as the population as a whole. The projected increases of the over 65 population shown

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in Table 1.4 will place a great deal of pressure on public expenditures in the years to come.

Fiscal Pressures

The nature of public sector economics also tends to increase the size of the public sector relative to the rest of the economy. This proposition was advanced in its most extreme version by Adolph Wagner (1890) and has come to be known as “Wagner’s Law.” The basic idea is that, as the economy of a nation grows, a larger proportion will be devoted to the public sector. The logic underlying this proposition is that, as the economy grows, the basic subsistence needs of the population will be met and consequently money for private consumption will have declining marginal utility. A number of empirical studies have found only slight support for this contention, and some scholars have argued that political pressures tend to keep public expen- ditures at the lowest acceptable level, rather than permit them to increase along with economic growth (Berr y and Lower y, 1987). Further, the experience of rapid economic growth in the 1990s appears to be that individual desires for consumption are virtually insatiable.