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1 Public and social services provision in European countries From public/ municipal sector to market liberalisation and then what? Hellmut Wollmann [email protected] (tentative) draft paper to be presented to the EGPA workshop to be held in Speyer on September 10-12, 2014 Berlin August 2014

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Public and social services provision in European countries

From public/ municipal sector to market liberalisation – and then what?

Hellmut Wollmann

[email protected]

(tentative) draft paper

to be presented to the EGPA workshop

to be held in Speyer on September 10-12, 2014

Berlin August 2014

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1. The issue: The “external” reorganisation of the public sector in European

countries: Whence to where?

During the 1980s and 1990s neo-liberal policy concepts, New Public

Management maxims and the European Union’s market liberalisation drive have

profoundly shaped and promoted the discourse and practice of public sector

modernisation throughout European countries. This applies, on the one side, to

the “West European” countries (in the following: WE countries) where, unto

the 1970s, the “advanced” welfare state was characterised by the predominance

of the public sector in the conduct of public functions, and, on the other sides, to

the Central Eastern European (in the following CEE countries) countries which,

until the collapse of the communist regimes, were marked by the omnipresence

of centralist Socialist State and administration in the exercise of all public

functions. Hence, the “starting conditions” from which the public sector

modernisation took off differed fundamentally when the WE countries since the

1980s and the CEE countries since the 1990s were exposed to largely similar

modernisation-geared factors and forces, that is neo-liberal and NPM-fed

modernisation discourses and impulses as well as the EU market liberalisation

drive.

Within the scope of the public sector and its modernisation an analytically useful

distinction can be made between “internal” and “external” re-organisation (in

line with the COST Action guidance paper). While regarding the WE countries

the former is directed at remoulding the traditional (“Max Weberian”)

administrative fabric of public administration by introducing “managerialist”

(New Public Management) principles (and regarding the CEE countries at

dismantling the centralist administrative apparatus), in its “external” dimension

public sector modernisation is targeted at reorganising the implementation and

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delivery of public functions, particularly the provision of public and social

services, by transferring and “outsourcing” them to external agents, be they

public, private, “mixed” or non-profit, essentially by way of market

competition.

The following paper will focus on the “external” re-organisation of the public

sector by singling out and addressing the provision of public utilities (to wit,

energy, water and waste) and (personal) social services (such as elder care). In

doing so, it is assumed that these service sector and their conduct constitute such

crucial components and segments of the overall profile of public functions and

activities that their analysis will render significant insights in the development

and changes of the public sector altogether1,2.

Our discussion will come in three phases (on the concept of different historical

phases see Millward 2005, Röber 2009, Wollmann/Marcou 2010b, Clifton et al.

2011, Wollmann 2014: 49 ff.).

At first, in order to identify the changes that have occurred since the 1980s and

1990s, the “starting conditions” whence the subsequent development has taken

off will be sketched, that is, the “advanced welfare” in WE countries and the

“Socialist State” in CEE countries.

Second, the impact will be addressed which the neo-liberal policy shift, New

Public Management and EU market liberalisation has wielded on the

(“external”) public sector re-organisation (since the 1980s in WE countries and

since the 1990 transformation in CEE countries.

1 The paper draws on Wollmann 2014 as well as on papers (as quoted) that were presented,

within the COST Action program, at sessions of the COST Working Group I held in Potsdam

in May 2014.. 2 Furthermore, the paper draws on recent reports and analyses on service delivery in EU

member countries, see ESPU 2010, Wollmann/Marcou 2010a, Hall 2012, Bauby/Simitie

2014: 94 ff., Kuhlmann/Wollmann 2014: 172 ff..

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Third, the paper shall briefly explore whether there have been follow-up

developments (since the early 2000s), be it in mirroring a downturn and

reappraisal of the neo-liberal/NPM message or in reaction to the deepening

fiscal (“sovereign debt”) crisis.

2 Selection of services under consideration

“Public services” generally encompass energy supply, water supply, sewage,

waste management, public transport and energy provision. In Anglo-Saxon

terminology they are usually called “public utilities” while they are labelled

services publics industriels in French, servizi pubblici or servizi di pubblica

utilità in Italian and Daseinsvorsorge (literally translated: “provision for

subsistence”) in German. In European Union (EU) policy the term services of

general economic interest has been introduced. By contrast, “social services”

comprise the provision of personal social services, such as child care and elder

care.

The following comparative analysis will largely dwell on the provision of

energy, water and waste treatment (as public utilities) and on elder care (as

personal social service), while referring to other services, albeit only in passing,

where appropriate.

3.Country selection

In the country sample the UK, Germany, France, Sweden, Spain, and Greece

will be picked as WE countries, while Poland, Hungary and Croatia will be

drawn on as CEE countries (possibly with former communist East Germany

being taken up as a “special case”)

.

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4. Analytical framework

While the development of the organisational form and operational logic of

service delivery will be regarded, methodologically speaking, as dependent

variables, the explanatory scheme will be significantly inspired by the “(neo-

)institutionalist debate” (see Peters 1999, Kuhlmann/Wollmann 2014: 44 ff. with

references).

The historical variant of institutionalism highlights the “structural”

impact that institutional, political as well as, cultural traditions, through

ensuing “path-dependencies”(see Pierson 2000), may have on the further

course of “institution building” and “institutional choice”.

By contrast the actor- centred variant (see Scharpf 1997) emphasises the

“voluntarist” influence which the decisions and interests, political “will

and skill” of the relevant political and economic actors may exercise on

the future institutional course. Under certain conditions (particularly in

the case of regime shifts or government shifts), this can amount to a

deviation and rupture from a “path-dependently” staked out trajectory.

Moreover, discursive institutionalism (see V. Schmidt 2008) accentuates

the (political, ideological etc.) discourses whose constitutive beliefs and

concepts set the stage for shaping and legitimising decision-making in the

national as well as international policy arenas..

5. Guiding question: convergence or divergence?

The guiding question of the following comparative account and analysis will be

whether (and why) the development of the organisational and the operational

logic of public and social services delivery has shown convergence or

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divergence. Because of wide scope of countries, service sectors and phases

which shall be addressed in the paper the arguments are bound to be brief, if not

cursory.

6. “Starting conditions” until the 1980s respectively 1990s

As highlighted earlier, the “starting conditions” from which public sector

modernization has taken off during the 1980s and 1990s differed fundamentally

between “West European” and Central Eastern European (CEE) countries as

will be briefly recalled in the following.

1.1.“West European” countries

Historically in most “West European” countries the provision of public utilities

and social services was largely under the responsibility of the local authorities in

what historically came to be called “municipal socialism” (see Kühn 1991,

Wollmann 2014: 52 ). For the provision of public utilities municipal companies

were established of which in Germany the Stadtwerke were exemplary.

With the expansion of the national welfare state which unfolded in the early 20th

century and climaxed during the 1960s and early 1970s the provision of public

utilities and social services was largely regarded a key responsibility of the

public sector. This development was rooted in the (as it were “social

democratic”) belief that the conduct of the public services in the “best interest”

of the citizens was most adequately ensured by having them rendered by the

public sector, be it state or municipal and its public personnel either directly (“in

house”) or indirectly in organisational forms that remained closely integrated in

the public administration proper giving it a somewhat organisationally

“monolithic” stance.

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In the following this development shall be illustrated by calling up the service

fields and countries under consideration.

Energy. In some key countries it was politically decided (in UK in 1946, in

France in 1947 and Italy somewhat later in 1962) to “nationalise”, that is to

bring under state control the energy provision which until then was largely in the

hands of the local authorities. Due to the reforms effected since 1945 by the

incoming Labour government the U.K. came to epitomise the (post-war) public

sector-centred (centralized) wselfare state in Europe.. In France and Italy the

energy market arrived at being dominated by the State-owned energy company

(EdF respectively ENEL). In Sweden energy provision came to be divided

between the State-owned company (Vattenfal) and smaller, largely municipal

companies. In post-war West Germany where any nationalisation was a far cry

for the ruling bourgeois conservative federal government the energy market

continued to be dominated by private energy companies while municipal

companies (Stadtwerke) kept playing a significant role.

Water In line with the historical development in most countries water provision

continued to be managed by the local authorities “in house” or through

municipal companies. France deviated in that, in a practice that emerged during

the 19th

century, many (of the in the majority very small) municipalities

“outsource” or “delegate” (gestion déléguée) the operation of water provision to

outside private companies in what has been termed the “French style

privatisation” (see Citroni 2003). In Spain most of the (also quite small)

municipalities have follow the French model of “delegation” (see Bauby/Similie

2014: 106). A conspicuous exception was the UK where the Labour government

in 1973 extended its nationalisation drive also to the water sector .

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Waste

Unto the 1980s the collection and management of waste remained a

responsibility of the municipalities in most European countries.

Social personal services

In the U.K., exemplifying the belief that public personnel would be best

qualified and motivated to perform these services (“self-sufficiency”, see

Stewart 2000: 51) “social services for the elderly emerged as the largest of the

activities of local authority social services departments” (Bönker et al.

2010:100) which expanded to become, as was critically observed, “municipal

empires” (Norton 1994: 378). Similarly in Sweden social service provision was

seen a vital task of local government (see Montin 2014). In France, in the

context of the decentralization reform of 1982, the responsibility for social

service provision was (somewhat contradictorily) transferred from the

municipalities (as it were “de-municipalised”) to the departments (in their State

administrative dimension). In the U.K., in Sweden and France the non-profit

sector was largely sidelined in social service provision for country-specific

political and institutional reasons.3

By contrast, in Germany, following from the “subsidiarity principle” that is

rooted in the 19th

century “social doctrine” of the Catholic Church and has been

explicitly recognised by federal legislation in 1961, the personal social services

have been rendered predominantly by (non profit) voluntary (see Bönker et al.

2014). In Italy, in a similar subsidiarity tradition and because of the persistent

lack a pertinent country-wide legal framework the provision of personal social

services has been largely left to local governments and, from the 1970s, to the

3 In France the seclusion of the voluntary sector dates back to an anti-clerical doctrine guiding

the French Revolution, while in Sweden it goes back to a “hidden contract” (see Wiksström

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regions as the services are rendered to large extent by non-profit organisations

and in the family context (see Bönker et al. 2010: 104 f.,)

6.2. CEE countries

In their pre-Communist history the CEE countries largely shared the trends of

European local government systems, including the role which the local

authorities played in the provision of public utilities and social services.

However, these institutional trajectories of decentralised operational patterns

were broken off after 1945 when communist regimes were established and

(Stalinist) State model was imposed in which the public utilities came to owned

and operated by the central State while social services were in part delivered by

State enterprises. In Hungary, under the communist regime the public utilities

(water, sewerage, waste, public transport etc.) were in state ownership, but

formally in the responsibility of the local councils (see Kuhlmann/Wollmann

2014: 188)

7. Shift to neo-liberal policies and NPM towards marketisation and

privatisation of service provision since the 1980s respectively 1990s

7.1. WE countries

The neo-liberal criticism of and attack against the (advanced) welfare state and

its public sector – centred model of service provision came particularly on two

scores (see Kuhlmann/Wollmann 2014: 172 ff. with references).

2000) concluded between the then ascendant Social Democrats and the “voluntary” sector

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For one, the tasks of the advanced welfare state were seen excessive and needing

to be cut back to the format of a “lean state” which, insofar as tasks were

retained, should not carry them out itself, but just “enable” their conduct.

Second, the hitherto all but monolithic structure of the public sector should be

fundamentally remoulded by, in the internal structures, shifting from “Max

Weberian” hierarchical rigidity to private sector derived managerialism and,

externally, by replacing the “in house” and administratively integrated provision

of services with “outsourcing” them to organisationally distinct providers

through the introduction of the “purchaser-provider” split and of competitive

tendering (see Grossi et al. 2010, Grossi/Reichard 2014).

The neo-liberal policy shift got its initial powerful political and discursive thrust

in the U.K after 1979 under Margaret Thatcher’s conservative regime whence it

spread first to other Anglo-Saxon and subsequently also to other European

countries.

Since the mid-1980s, following the adoption of the Single European Act of

1986, the European Union embarked upon its market liberalisation drive to

create a single European market by 1992 geared to the “four fundamental

freedoms” of movement of persons, goods, services and capital. With regard to

the provision of services the EU was eager to achieve this through directives that

are to be transposed into national legislation by the member States. Such EU

directives aimed at introducing competition in the energy sector (see Wollmann,

Baldersheim et al, 2010:176), set quality standards for drinking water in the

water sector (see Citroni 2010) and effecting the waste sector by stipulating a

“waste hierarchy” (including recycling, the re-use and use of waste for energy

production) (see Dreyfus et al. 2010: 146 ff.).

)..

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Energy sector. In the U.K., in anticipating (and in fact serving as a model and

stimulus for) the EU’s subsequent market liberalisation intervention the

Conservative government under Margaret Thatcher proceeded in 1989 to

privatise the country’s (since 1949 State-owned) electricity sector. International

energy companies, such as France’s EdF and Germany’s RWE and E.on became

minority shareholders of the newly created private companies (see Drews 2008:

51). In Italy in 1999 the State-owned energy giant ENEL was, at first, turned

into a private law stock market listed company and subsequently sold a

significant share of its stocks to institutional and private investors, reducing the

share of the Italian State to 30 percent. By contrast, throughout the 1990s, the

French government appeared reluctant to comply with the EU’s market

liberalisation drive, probably in order not to impair the EdF’s position as a key

player and champion on the national and international energy markets. Finally,

in 2004, in responding to the EU’s Acceleration Directive of 2003, France

moved to transform EdF into a private law stock market listed company, but

made sure that the French State retained 84 percent of the stocks. In

Germany’s energy sector which was since long dominated by regional (largely

private sector owned) energy companies while the municipal companies

(Stadtwerke) still held a noticeable share of the local markets the federal

legislation meant to liberalise the energy market had a somewhat ironic effect: It

triggered a wave of company mergers which resulted in the emergence of the

“Big Four” (RWE, E.on, EnBW and Sweden’s State owned Vattenfal), whereas

the municipal energy companies (Stadtwerke), faced with the “Big ones”, lost

ground to the point of foreboding a “demise of the Stadtwerke”

(“Stadtwerkesterben”).

Water provision. In the wake of the neo-liberal policy shift in the U.K. the water

sector that had come under state control in 1973 was entirely privatised in

England and Wales while remaining in public ownership and operation in

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Scotland (for a comparative overview see Lieberherr et al. 2014). In France

where, dating back to the 19th

century, the municipalities have “outsourced”

(“delegated”, gestion déléguée) the water management to private providers this

practice ( labelled “French style privatisation”) has been further expanded

during the 1980s, as cities like Paris and Grenoble that until then retained

municipal operation decided, under right wing and neo-liberal minded council

majorities, to equally “outsource” their operations (see Hall/Lobina 2001).. As a

result the “big three” water companies (Veolia, Suez and SAUR) further

enlarged their dominance in the national (and international) markets (see

Bordonneau et al.2010: 134). While in Germany the water services continued to

be operated mostly by the municipalities “in house” or through their (about

7.000) Stadtwerke (see Citroni 20010, VKU 2010: 13), private water companies,

first of all the French “heavy weights” Veolia and Suez and the German “big

shots” RWE and E.on advanced in the country’s water market by acquiring

(minority) shares in municipal companies, most conspicuously in Berlin and

Stuttgart (see Libbe et al. 2011).

In Italy, in 2009, under the right-wing Berlusconi a legislative provision (so

called Ronchi Decree) was introduced that was designed to promote

privatization in the water sector, including the entry of international water

companies. However, this process was halted by the national referendum held

on June 8 2011 that ruled out the privatisation of water. In Greece the water

provision lies with two large State owned companies in Athens and Thessaloniki

(such as the Thessaloniki State Water Utility, EYATH) and (180) small

municipal companies with (until recently, see however below 8.2.1 ) only

marginal private sector involvement (such as a 5 percent share of Suez in

EYATH) (see Tsekos/Triantofyllopoulou 2014)

Solid waste In the waste sector significant changes have been effected by EU

directives which stipulated market opening particularly for the (economically

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profitable) industrial waste. In most countries a delivery model emerged which

include public and delegated management, with public, mixed or private

operators, From amidst the private sector companies which are particularly

eager to get hold of the management of the lucrative industrial waste

increasingly large internationally operating companies (such as the French

companies Véolia and Suez but also their Spanish and German likes) stand out.

With regard to municipal (“household”) waste, in France, Germany and the U.K.

public and private operators “have a roughly equal role in municipal waste

collection and processing” (Bauby/Similie 2014: 209).

Personal social services Well unto the 1980s in the delivery of personal social

services, such as elder care, essentially two different institutional patterns were

pursued in WE countries, that is, a local government-centred pattern (with

traditionally little voluntary sector involvement), for instance in the UK and in

Sweden, on the one hand, and a “subsidiarity”-based primacy of voluntary/non-

profit sector involved, such as in Germany and also in Italy, on the other. These

path-dependently persistent different patterns, each fixing a kind of monopoly in

service provision, gave way, during the 1980s and 1990s, under the onslaught of

the neo-liberal market-liberalisation discourse and imperative, to the convergent

market opening for the provision of personal social services by all providers, be

they public, private-commercial or non-profit. Notwithstanding such convergent

trend, country-specific features have persisted, such as in Sweden the still

prevalent position of local level personnel (see Montin 2014) and in Italy the

web of charity associations and cooperatives as well “arguably the most

important engine of change in Italy… the spread of ‘grey’ care by migrants”

(Bönker et al. 2010: 114).

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7.2. CEE countries

Following the collapse of the Communist regimes the entire politico-

administrative structure underwent a complete institutional transformation. As a

basic feature of the centralist Socialist State, the public utilities (energy, water

etc.) were in State ownership and were carried out by public units under central

government control while personal social services, such as kindergartens, homes

for the elderly were provided, in part, by State enterprises.

After 1990, the secular institutional transformation of the entire politico-

administrative fabric has been driven, for one, by the adoption of the European

“classical” politico-administrative model, including decentralized local

government which, to some degree, also meant linking up with the pre-

communist institutional past. Moreover the institutional transformation was

strongly influenced by the “neo-liberal” and “New Public Management”-guided

modernisation concepts and imperatives which at that time ran rampant in their

“West European” counterparts and were “imported” by Western consultants.

Finally, EU policies, including its market liberalisation drive have increasingly

impacted on the institutional transformation in CEE countries as since the mid-

1990s eight CEE countries, also comprising Poland and Hungary, entered in

negotiations with the EU about their accessions under the so-called Copenhagen

criteria before their accession was finalised in 2004.

Energy. Following the system change in CEE countries the energy sector at first

remained in State ownership and operation. Subsequently the State companies

were transformed (“organisationally privatised) into private law companies and,

in line with the EU’s “unbundling” principle, organisationally separated in

generation, transmission and distribution/supply functions. In Hungary in 1995 a

large-scale privatisation measure has resulted in most of the transmission and

distribution/supply companies being taken over by private investors (see EPSU

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2010: 243), By contrast, in Poland the largest energy company is still owned 85

percent by the State (see EPSU 2010: 359).

Regarding the reorganisation of the other public utilities (water, waste etc.) in

CEE countries similar institutional and sequential patterns have been pursued as

in their “Western” counterparts. Following the massive transfer

(“municipalisation”) of State owned assets to the local authorities the latter have

often, in a first step, transformed (“corporatised”) the municipal (“in house”)

units into organisationally self-standing, but still municipally owned municipal

organisations/companies which in CEE countries are called “budgetary

institutions”. In a subsequent step private law companies (such as limited

companies) have been established that provided the institutional access for

private investors to become shareholders and for the formation of mixed

(public/municipal-private) companies (see Kuhlmann/Wollmann 2014: 188, see

Horvath 2014 Hungary and Mikula 2014 on Poland). At the same time, under

growing financial pressure and prompted by NPM –inspired outsourcing and

marketisation concepts, the municipalities have increasingly proceeded to

outsource (functionally privatise) public services to private providers through

concessions and contracts.

A prime example of the progressing functional privatisation can be found in

Hungary’s water sector (see Tittor 2008: 296). Until 1990, there were 33 state-

operated regional water companies which after 1990 were turned over to the

local authorities. Today exist a total of 377 municipally-owned (highly

fragmented) water companies which have outsourced water provision to private

and in particular foreign companies (Veolia, Suez, RWE, E.on etc.) (see

Kuhlmann/Wollmann 2014: 198, Horvath 2014).

Social services

In line with the pronounced decentralisation of public functions which, in the

course of the transformation of 1990, was pursued by most CEE countries

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comprehensive responsibilities for the provision of social services have been

ascribed to the local authorities.

In the case of Hungary, the local government legislation of 1990 which probably

was the most decentralised among CEE countries laid down the responsibility of

the municipalities for the provision of compulsory social services.

About 40% of the services are provided by local authorities directly, 15 % by

public benefit companies, 5% by churches and 15% by NGO’s (see EPSU 2010:

246)

8. Development since the early 2000s

Several trajectories of institutional development can be distinguished and

identified

8.1 Downturn of the neo-liberal beliefs in the private sector and re-assertion of

the public/municipal sector

Since the early 2000’s neo-liberal belief in the superiority of the private sector

over the public sector in the operation of public functions has been shattered on

various scores.

On a global scale the world-wide financial and economic crisis which was

triggered by the bankruptcy of the Lehman Brothers bank group in September

2008 has evoked widely shared doubts in the private sector and its “free”

market” mechanisms while the merits of the public sector have been

“rediscovered”, thus “bringing the state back in”.

.

On local practical level, the local authorities and their enterprises, after having,

under the competitive pressure from private sector companies, improved their

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operational capacity in service delivery (by recruiting better, also

entrepreneurially qualified personnel, by stepping up intermunicipal cooperation

etc.), have often arrived at economically equalling, if not doing better than their

private sector competitors. Furthermore, the municipalities have been eager to

regain control over local level service provision also the pursuit of (social,

ecological etc.) interests of the “local community”. Last not least the

municipalities have “rediscovered” the chance to profits in engaging themselves

in the production of public services (particularly in the energy and waste sectors)

and to thus achieve additional budgetary revenues (see Wollmann 2014: 58 ff.

with further references) to be used to “cross-subsidise” loss-making public

service fields (such as public transport).

The disenchantment and discrediting of the neo-liberal beliefs and promises

have been also echoed and amplified by a politico-cultural value change in

favour of public/municipal service delivery. This has become manifest in

thematically related surveys and (for instance in Germany) in a array of local

referendums in which the privatisation of public/municipal assets has been

rejected in favour of retaining them (see Kuhlmann/Wollmann 2014: 200 ff.)

Finally, with regard to the intergovernmental setting in which the local

authorities operate mention should be made of the Treaty of Lisbon of

December 13, 2008 through which a “wide discretion” (sic!) has been accorded

to the local authorities “in providing, commissioning and organizing services of

general economic interest as closely as possible to the needs of the users” (see

Wollmann 2014: 60). Thus, the originally binding character of the EU’s market

liberalization drive has been conspicuously mitigated.

However, in attempting to “re-municipalise” (“insource”) the previously

“outsourced” or (asset) privatised services and related assets and in entering in

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negotiations with the private investors concerned the municipalities have often

to do with economically and financially powerful companies that are national

and international leaders and “champions” in the respective energy, waste, water

sectors (such as the French Véolia and Suez and the German RWE and E.on).

As these companies are, in most cases, keenly interested to hold on to their

position in the local markets, the municipalities are often bound to enter into

difficult struggles in which the powerful private companies have strong cards.

In internationally comparative perspective the most conspicuous example of a

“comeback” of the municipal sector in the provision of public utilities is the

energy sector in Germany where the municipal companies (Stadtwerke) which

had lost ground to the private sector energy companies have regained

operational strength and have succeeded to win back market shares (see

Wolmann/Baldersheim et al. 2010, Wollmann 2014: 60, Kuhlmann/Wollmann

2014: 201 ff.). Also in other countries (such as in Italy and France) where in the

past the municipal energy companies retained an albeit minor position vis-à-vis

market-dominating companies (in France the energy giant EdF still 80 percent in

State ownership) the municipal companies have recently made (moderate)

advances particularly in renewable energy generation (for details see Wollmann

2014:. 61 ff.)

In the water sector “remunicipalization” can be observed as well. (for an

international overview see Lieberherr et al. 2014). This is exemplified by

France where, after the time-honoured practice of the municipalities to

“outsource” (gestion déléguée) water provision to the “big three” water

companies (Véolia, Suez and SAUR) kept being expanded, recently a

development is gaining momentum in which municipalities decide to take water

provision back under their own management.imilarly in Germany some cities

proceeded to “remunicipalize” water provision after they sold their water works

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(Stadtwerke) either partially or entirely to international water companies. Both

in France and Germany such decisions to “remunicipalize” water provision

occurred largely under local political pressure, in German cities in response to

related local referendums (for details see Wollmann 2014: 64 ff.).

In Hungary, where Budapest’s Water Work had been (partially) sold (“asset

privatised”) to private investors (comprising RWE), the City’s municiipal

council decided (with a conservative – sic! – majority) to repurchase the assets

on the ground that “the private companies had abused their dominant position”

(see Horvath 2014: 12).

In Poland, responding to what was perceived as deficient performance of private

sector waste companies recently national legislation has been passed that put the

entire waste management system back under municipal responsibility and

control by July< 1, 2013 which has been termed a “waste management

revolution” (Mikula 2014).

Personal social services

Contrary to the provision of public utilities which has recently shown moves

towards “remunicipalisation” in the provision of personal social services, such

as elder care, the process of marketisation and pluralisation of services provision

has continued unabatedly with progressive advances of private sector providers

while the public authorities have shown no interest to take the (costly) provision

of social services (for instance in institutional elder care) back under their

conduct.

8.2. Budgetary crisis.

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Some countries have been beset by a mounting budgetary crisis which has

impinged on the further course of public sector modernisation, not least on the

delivery of public and social services. This applies particularly to South

European EU member states, such as Greece, Spain, Portugal and Italy, whose

budgets have been haunted by oversized public (“sovereign”) debts. They have

come under growing pressure from the European Union demanding them to

undertake severe budget cuts and cost reductions. The so called Troika made up

of representatives of the European Commission, the International Monetary

Fund and European Central Bank has been put in place as a watchdog of the

retrenchment process. The budgetary crisis has afflicted the CEE countries as

well (see Wollmann 2014: 65).

8.2.1. New thrust to privatise public/municipal assets

Prompted by the “Troika” the countries concerned have embarked upon a new

round of privatisation. Thus. in Greece’s water sector which has so far been in

public, particularly State ownership particularly the State-owned regional water

utilities in Thessaloniki and in Athens have been singled out to be sold to private

sector (primarily foreign) investors (see Tsekos/Triantofyllopoulou 2014).

Typically these plans have ignited public protest and have - in the case of

Thessaloniki – evoked the formation of a citizen initiative braced to buy the

utility and to operate it under its responsibility4.

In Spain the comprehensive local government reform which, under the

programmatic label “rationalisation and financial sustainability of local

entities”5, entered into force on December 27, 2013 declared as a prime

objective of the reform “to promote private economic initiatives in order to

4 See The World Post, 02/01/ 2013, Greeks Stand up to Protest their water from privatization,

http://www.huffingtonpost.com/daniel-moss/greeks-stand-up-water_b_2592277.html 5 „Racionalización y Sostenibiitad Financiera de las Entidades Locales“

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avoid ‘disproportionate’ public intervention” and to abolish “municipal

monopolies ... which have been inherited from the past”6. It remains to be seen

whether and to which degree these “privatisation” plans will be realised.

8.22. Measures meant to economise and cut back public spending.

Strategies and measures designed to achieve a reduction of public spending in

the delivery of public and social services hinge on the idea of achieving such

“rationalising” and “economies of scale” effects either by “de-municipalising”

service delivery, that is, by transferring the responsibility to an upper

(supposedly more “rationally” operating) government level or by creating larger

(“economies of scale”-prone) municipal entities through amalgamation.

De-municipalisation.

In Hungary which by virtue of the Local Government Act of 1990 originally

excelled, among CEE countries, as an unusually decentralised one the new

Constitution which has been adopted under the conservative Orban government

and entered into force on January 1, 2011 has effected a large-scale re-

centralisation of the entire politico-administrative system. This shows, for one,

in the transfer (“de-municipalisation”) of important responsibilities, such as

schools and services, from the local authorities to the State and, second, in the

tightening of central government control and oversight over local authorities and

their conduct of local services (see Kovacs 2012, Horvath 2014).

Recently the „de-municipalisation“) of the delivery of public services has been

dramatically taken place in Spain when in December 2013, under the shibboleth

of “rationalisation and financial sustainability of local entities”, a law was

6 „Asimismo se suprimen monopolios muncipales que venían heredados del pasado“

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adopted through which the responsibility for basic services (to wit, waste

collection/treatment, water supply, sewage) is transferred from the

municipalities with less than 20.000 inhabitants (these are more than 90% of all

municipalities) to the upper local government level (Diputaciones), unless the

individual municipality can prove (in the Spanish legal text:: “justifique” ) that

it is carrying out the service more efficiently (“con un coste effectivo menor”)

(see Magre Ferran/Pano Puey 2014). While this radical reform still needs to be

implemented, (critical) observers agree that it would amount to depriving most

municipalities of a core of their local government functions (see Bosch/Solé-Olé

2014).

Territorial reforms

In some countries recently moves have been adopted, responding to mounting

budgetary problems, that aim at territorial reforms of the municipalities with the

declared prime purpose to enhance, by way of amalgamation, the “economies of

scale” and thus the efficiency of local level service provision.

This is exemplified by Greece, where, in the woes of a deep financial crisis, the

then socialist government in 2000 embarked on a radical territorial reform of the

municipalities (the so called “Kallikrates” reform) which, through compulsory

legislation, reduced the number of municipalities from 1.034 to 325 – with the

declared primary goal to increase the efficiency and economies of scale in the

service provision (see Hlepas 2012: 258 ff.)

In Spain the recently adopted local government reform which entered in force in

December 2013 was targeted, as one of its primary objectives, at promoting a

territorial reform of the local authorities in order “to rationalise their structures

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and overcome the atomisation of the municipal map”7 . However, the new

legislation still adheres to the traditional principle of “voluntary mergers”

(“fusión voluntaria”) depending on the consent of the municipalities concerned

and thus refrains from achieving amalgamation, in the last resort, by way of

binding legislation. (Critics agree that the decision to do without binding

amalgamation will probably doom the local government reform to failure (see

Bosch/Solé-Ollé 2013).

8.2.3 (Re-)ascendency of “civil society” actors and self-help groups

The recent tightening of fiscal austerity and retrenchment measures have

impacted on the involvement of the voluntary and “civil society” sector

particularly on two scores.

For one, in order to cut public expenditures governments have made a point of

trying to shift the responsibility (and costs) for the provision of personal social

services (back) to the charitable and “societal” realm and, not least, to the family

context..

Second, in a „bottom up“ reaction to the financial and operational erosion and

thinning of personal social services protest movements, for instance the

“Indignados” (“The Outraged”) in Spain, have sprung up calling for “direct

action” to ensure social protection. Moreover, societal (“civil society”) groups

and movements have entered the local scene that intend to establish a kind of

social net work of last resort in providing emergency measures for the needy,

for instance by providing soup kitchens, free breakfasts, night shelters and the

like (see Warner/ Clifton 2013:11 with references). The “Athenistas” in Athens

and similar groups in other Greet larger cities are exemplary of this new social

7 „... racionlizar sus estructuras y superar la atomización del mapa municipal“ (Preámbulo de la Ley)

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movement. This development may be interpreted as a “bottom up” “counter

movement” (Warner/Clifton 20139) to the “excesses” of (neo-liberal) austerity

policies.

Also in the field of the provision of public services local level citizen (self-help)

initiatives have emerged beyond the traditional voluntary that engaged

themselves in taking the handling of certain public services and related facilities

in their own hands. Examples for this are the “cooperatives” or

“associations”(Genossenschaften) in Germany that operate wind turbines (see

Bauer 2014 with references). Similarly in Thessaloniki, Greece, a citizen group

that, in opposing the impending privatization of the local water works, is braced

to acquire shares of the company and to assume an operational role. Such

moves may be interpreted as the practical side and continuation of the otherwise

extended popular opposition against the privatization of public utilities as

evidenced in numerous local referendums.

9. Summary

9,1, Convergence or divergence?

Since the 1980s and 1990s, notwithstanding fundamental differences in the

“starting conditions”, the politico-administrative systems in “West European”

and Central Eastern European have shown remarkably convergent institutional

changes in that the predominance of the public sector in the delivery of public

and social services (which in the “Western European countries” was an essential

feature of the “advanced welfare state” while in the CCE countries it wss part

and parcel of the centralist Socialist State) has been replaced with an

organisational model in which the quasi-monolithic internal structure of the

public sector in the provision of services has given way, propelled by market

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liberalisation and competition, to an “externalisation” and “pluralisation” of

institutions and actors. This “pluralisaton” comprises public/municipal, private,

public-private (“mixed”) as well as non-profit (NGO’s). actors and agents

whereby to due “outsourcing” (“functional privatisation”) and “asset

privatization” the repertoire and role of private sector actors has expanded (see

Grossi et al. 2010, Grossi/Reichard 2014).. While since the early 1980s in “West

European” countries this development has been promoted largely by neo-liberal

policy and New Public Management concepts as well as by the EU’s market

liberalisation drive, the CEE countries have, in entering their secular post-1990

“transformation”, subsequently followed suit by also employing neo-liberal and

NPM concepts as well as, in the pursuit of their accession to the EU, by

anticipating respectively adopting the EU’s conceptual and institutional

framework (“acquis communaitaire”).

Notwithstanding country-specific and sector-specific variance in details, the

“externalisation” of the providers of public utilities shows a broad commonality

in the sequence and organisational patterns . Departing from the municipalities’

ownership and their (or their companies’) operation of public utilities (which

was characteristic of “West European” local government in a practice that

historically dated back to 19th century’s “municipal socialism”, while it came

into existence in CEE countries as a result of post 1990 wholesale

“municipalisation” of State ownership and operation) the institutional

“externalisation”, in first step, took the form of “corporatisation” (see Grossi et

al. 2010, Grossi/Reichard 2014) by the establishment of companies which

continued to be owned by the municipalities but were given organisational and

in part financial autonomy. (In CEE countries they came to be termed

“budgetary institutions”). In a further step such “corporatized” municipal

organisations were given a self-standing legal status, for instance as private law

limited (stock) companies. This form allowed private investors to financially

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and operationally engage themselves in such municipal companies by acquiring

shares thereof which ushered in the formation of “mixed” (public/municipal –

private) or, at last, to fully privatised companies.

Notwithstanding the different “starting conditions” (in “West European”

countries such organisational differentiation in local level service provision has

been in practice, to a certain degree, since long, while in CEE countries it

emerged anew after the 1990 transformation) the developmental patterns show

significant similarities in that for one the “corporatisation” of local government

activities has significantly advanced and that, second, the formation of legally

self-standing corporations (mostly in the form of private law limited companies)

has facilitated the entry of private investors into the previously “closed” local

markets. As the municipalities and their companies have stepped up their efforts

to hold their ground vis-a-vis the growing competition by private providers they

have increasingly resorted to intermunicipal cooperation, also in the form of

intermunicipally owned and jointly operated companies (see Bauby/Similie

2014: 106 f.).

In a similar vein, the provision of personal social services which in the previous

phase in “West European” countries was characterised by a country-specific

quasi monopoly (of the municipal sector for instance in the UK and Sweden and

of the non –profit sector in “subsidiarity”-related countries such as Germany and

Italy) and in CEE countries by a State monopoly has undergone an opening of

the service market, under the impact of market liberalisation, to private

commercial and non profit besides public/municipal providers.

In sum, in a convergent development, the previous public sector centred

(internally quasi-“monolithic”) profile of public service provision as well as the

monopoly-type structure of social service provision has been superseded by

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“externalised” and pluralised actor systems in which private actors have

increasingly advanced.

In the conceptualization and terminology of the recently dominant debate in

which “government” and “governance” are distinguished (and juxtaposed), the

previous public sector-centred (internally quasi-monolithic) profile of service

provisions may be identified as “government”, while the existence (and

predominance) of “externalised” networks of actors and providers may be

recognised and interpreted as “governance” (see, first of all, Rhodes 257, see

Jann 2002 for further references).

Since the early 2000s this developmental pattern of the provision of public and

social services has seen contradictory changes.

On the one side, as normative and operational superiority which, after the 1980s,

the neo-liberal and NPM advocacy ascribed to the private sector as being

economically more efficient than the public sector has been shattered (not least

because of practical experience and evidence belying this normative assumption

and promise) in some countries and under certain conditions a process of

“remunicipalisation” of public service provision has gained momentum as

municipalities and their companies have begun to resume operations and

facilities previously “outsourced” or sold to private sector providers. The

“comeback” of Germany’s municipal companies (Stadtwerke) in the energy

sector is exemplary of this trend..

On the other side, in the pursuit of fiscal austerity policies and under the

“Troika”-type budgetary demands in some countries (such as in Greece)) the

pressure has mounted to (further) privatise public/municipal assets. Similarly, in

the case of Spain, in order to achieve cost cuts by way of “economies of scale”

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the responsibility for basic public utilities is to be transferred (“de-

municipalised”) from the municipalities to the upper local government level.

At the same time, as a kind of “counter movement” “from bottom up” against

the austerity-related erosion of social services local protest and self-help

movements have emerged as a possible alternative providers of social services.

Hence the developmental trends that have taken shape since the early 2000s

appear contradictory depending on countries, sectors and circumstances.

10. Service provision by public or private providers?

In view of the “comeback” of public/municipal sector in public service

provision it has been argued that the latter is, as a rule, on a par with private

sector providers regarding the (economic) efficiency of their operation. This

assessment appears to follow from a goodly number of recent empirical studies

(for a broad research overview see Mühlenkamp 2013: 18)8. The balance sheet

becomes even more favourable for public/municipal provision if the “transaction

costs” of the “outsourcing” of services (costs of monitoring, contract

management etc.) are taken into account, not to speak of the negative “welfare

effects” of “privatized” service provision and the positive ones (social,

ecological etc.) ones of public/municipal provision (see Florio2004: 3419,

Mühlenkamp 2012:42. 2013:18).

However notice should be taken also of the argument that the operational

performance in service provision may depend less on the formal ownership

8 See Mühlenkamp 2013: 18 “Research does not support the conclusion that privately owned firms are more

efficient than otherwise-comparble state-owned firms”. See also Bel et al. 2010, who, on the basis of numerous

studies on water and waste services, summarize, that “our analysis provides empirical evidence that private

production of local serices is not systematically less costly than that of public”. See also Bel/Warner 2008: 1341 9 Florio 2004;341: “The main conclusion of my study is that privatization had more modest effects on efficiency

thanthe theory or property rights and other orthodox privatization theories may have expected. On the other

hand, privatization did have substantive regressive effects on the distribution of incomes and wealth in the

United Kingdom”.

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(public or private), but on the operational context of the actor and provider

concerned (whether public or private), that is, on the degree of competition and

of external accountability and performance control (see Bauby/Similie 2014:

110)10

12. “Pendulum swinging back”?

Finally the question shall be taken up which by some has been caged in the

“pendulum” image (see Röber 2009, Wollmann Marcou 2010b, Wollmann

2014), to wit, as to whether the observed moves of a “remunicipalization” of

service delivery can be interpreted as the “swinging back of the pendulum” from

private sector to municipal sector delivery, or, differently put, from a “neo-

liberal” to a “post-neo-liberal”, if not “anti-neo-liberal” state of affairs. Leaving

aside problem whether such imagery is well chosen, the question as to whether

such “reverse” movement has taken and is still taking place can, in our view,

still not be answered in a conclusive manner. For one, the countries and service

sectors inspected in this account are not comprehensive enough nor are the

empirical findings robust enough to be able to speak of a confirmed general

trend. Second, as our account indicated, the recent developments appear

somewhat contradictory. While on the one hand a “comeback” of municipal

ownership and operation in service provision and hence some “re-

municipalisation” can be noted, on the other hand moves towards further

privatisation and also “de-municipalisation” of service delivery come into view..

10

“The research shows that no single universally superior management model among the diversity of models is

in use... Many examples show that the performance of service operators under both delegation and direct

management depends on the capacity of public authorities to control the accomplishment of public service

missions and obligations whether the operator is private or public” (Bauby/Similie 2014:110

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