Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

The “marketized state”–where’s the beef?

Posted by David Kassel on September 27, 2007

It’s hard to know what to make of an article in the current (September) issue of  PA Times, the monthly newsletter of The American Society for Public Administration, which announces that we are headed inexorably toward a “marketized state.”

The article, titled “Is State-Centered Public Administration Dead?” defines a marketized state as one in which “public purposes are achieved principally through market exchanges, and the marketplace is the principal artiter of the allocation of public resources.” 

The marketized state, according to the article’s authors, Uday Desai and Keith Snavely, is the third in a progression of governmental models over the past century—-the first being the traditional administrative model and the second the privatized model.

Most of us are familiar with these first two models.  The traditional administrative model is defined by the authors as being characterized by “hierarchical state administrative structures which have a powerful influence on molding public policy and through which programs are implemented.”   

The centerpiece of the privatized state, they note, is contracting by government for goods and services with the private sector.  Desai and Snavely add that this is more than just purchasing things from vendors, but involves shifting public service capacity to the private sector for social, management, security, cultural and many other services.

In the marketized state, government neither delivers services directly nor contracts with private firms or nonprofit agencies for services, they say.  Instead, this model:

…pursues public purposes by structuring market exchanges through which citizens select the type and quantity of the services they desire.

Desai and Snavely provide a number of examples of this, including health savings accounts that offer tax incentives to citizens to purchase private health insurance and individual accounts for the unemployed that allow them to “purchase” job and skill development training.  The authors also mention the increasing use of vouchers, tax credits, subsidies and loans, and the use of economic incentives such as pollution permit trading as examples of marketized exchanges.   Economic incentives and financial instruments are emphasized rather than government regulations  as ways to protect workers’ health and safety, prevent pollution and protect the environment, they point out.

 There’s no doubt that there has been growing interest for many years in the use of economic incentives as an alternative to regulation, particularly in the environmental arena.  But all of these examples given by the authors of market exchanges don’t appear to constitute very much of what government still does and is likely to do in the future.  Moreover, tax credits, subsidies and loans are nothing new.  Government has been providing them seemingly from the beginning. 

There’s also no doubt, as the authors assert, that there has been a steady retreat by the administrative state over the past two or more decades as the privatized state has moved in to supplant it in so many areas.  But the authors don’t present a lot of evidence to back up their contention that “current trends are towards supplanting of the privatized state by the marketized state.”

 This isn’t to say that Desai and Snavely aren’t on to an important trend.  I’d be interested in hearing their ideas as to how government could establish marketized incentives that would stimulate the private sector to repair and maintain our infrastructure, for instance, or provide high-quality care for the mentally retarded.   If those things could be done under a marketized state, there might well be an improvement over the record that’s been shown in those areas by the administrative and privatized models.


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