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The Public Sector Public activity lends itself to regulation and management by collective action institutions, in particular to regulation and management by government. Private activity, in contrast, concerns the activity of one or more individuals or actors, but not the society as a whole. It would seem to follow from these definitions that the public sector is the field in which public activity takes place and the private sector is the field in which private activity takes place. But systematically distinguishing the private from the public sector is not always as easy and straightforward as these simple definitions suggest. Some private activity obviously may have direct social consequences. The decision of a private party to act in ways that may affect the society as a whole is a case in which private action extends into the public sector. Consider the case of a private enterprise which, acting out of private initiative and using only private resources, builds a factory that produces a desirable and sellable product but also damages the environment in the process. Societies widely regard this as a case in which the public sector is affected by an activity in the private sector. Accordingly, societies have developed complex patterns of interaction in which the interests of the public are protected by public sector regulation of the private sector. Societies have adopted policies and legal frameworks which have given widely different interpretations to the distinction between public and private. One of the simplest forms of the distinction between the private sector and the public sector is the bimodal model of social organization. This model distinguishes between a public and a private sector. According to this conventional distinction, the public sector involves public goods or publicly financed activities while the private sector involves private goods and private property. It is traditional to distinguish between these two sectors by noting that the management of public organizations differs from the management of private organizations in eight important respects: ·
Public organizations
enjoy uniqueness and frequently act as natural monopolies. That is, a public
organization may act as a sole producer or distributor of a good or service.
Often public organizations provide a good or service that by its nature
resists competition among suppliers. For instance, a municipal water system.
It is not feasible to have multiple water supply systems in a city. ·
Public organizations
have multiple goals. Public organizations are charged with supplying a number
of different public services simultaneously. ·
Public organizations
operate under public scrutiny. ·
Public management
usually involves multiple subordination. ·
Public organizations
often have non-professional managers who are elected or selected on the basis
of criteria other than their technical qualifications. ·
Public organizations
work within a legal context that requires them to be responsive, representative,
or to interact with specified constituencies. This enforces a different set
of constraints on their behavior than is characteristic of the private,
competitive market place. ·
Public organizations
spend public money. Spending other
people’s money is different than spending your own money. · Public organizations do not generally act to increase profits. The eighth characteristic is an important. Private organizations are designed to sell their products for a profit. Of course, not all private organizations always manage to do this. But when they do not, private organizations tend to go out of business. Private organizations resist this but under the hard budget constraints of the market place, they may not be able to continue to exist unless they can function at a profit. If a private organization cannot function by making a profit, there is prima facia evidence that the organization does not have a good rationale for existence. Public organizations, in contrast, do not exist to make a profit, they exist to provide a good or service that would not normally otherwise be provided. Consequently, even if a decision is made that a specific public organization may be costing the public more than it is worth in benefit, the organization may have a rationale for continuing to exist. While there are good theoretical and practical grounds for maintaining the traditional bimodal distinction between public and private sectors, there are also good grounds for recognizing that evolving public sector organizations have complex and changing relationships with the private sector and with society as a whole. In order to do justice to the complexity of relationships in the developed world, in emerging economies, and particularly in the transitional societies of the former communist world, it is useful to think in terms of different models of organization of public and private spheres. A more conventional model of the bimodal
organization of society is represented in table 3.2. In this “dual model” of society the public sector is generally regarded as equivalent to the government sector. As the image in the table suggests, there is an intersecting area of government activity in which the government takes precedence over the private sector. In most law governed and orderly societies, the government has a natural monopoly over the means of protecting social order. Since the responsibility of providing for law and order places most of the instruments of raw power—police, military, weaponry, and so on—in the hands of the government, the government is in a position to use or even abuse this authority. Government in some cases may extend its claim to
having the ultimate secular authority for maintaining order to other spheres
in society. For instance, it may claim
to have the authority to monitor, regulate and even regiment certain private
transactions. In such cases, particularly in transitional or emerging
societies where traditions of principles and practices are not well
established, the government may be the only party powerful enough to protect
the rights of individual parties. The government may be the only party, for instance, that can protect the sanctity and enforceability of contracts. Yet, paradoxically, any government powerful enough to protect these rights is obviously powerful enough to violate them. For this reason, the dual model of public and private sectors is widely regarded as providing insufficient institutional protection for maintaining the distinction between private and public activity. A structure based on the interaction of two parties that may have competing interests is inherently given to adversary relationships and instability. There are other reasons for concluding that the
bimodal model of social organization has shortcomings. The model does not do justice the real
complexity of societies. For instance, this model does not include
consideration of the role of private entities acting out of citizen
initiative in ways that promote public goals but do not necessarily involve
formal agencies of government. Such citizen initiative organizations (CIOs) or private voluntary organizations (PVOs) may have public goals but yet may even act in
conflict with the actions or desires of government. There is a great deal of empirical evidence that citizen initiative has historically played an important role in civil development, a role that has been widely under appreciated in most political theory. Recently it has become commonplace to refer to such organizations as non-governmental organizations, or NGOs. In some representations of society the field in which these NGOs function is regarded as separate sector, sometimes referred to as the “third sector” to stress that these are neither government organizations nor typical private organizations. They are not government organizations because they may be funded by donations from the private sector and thus not funded with public funds, they may be not subject to the standard requirements of public accountability, or they may simply not be part of the conventional government structure. They are not private organizations because they do not have rational utility maximization as their goal. The growth in importance of non-governmental
organizations in recent decades has motivated new lines of thought regarding
the role of NGOs in society in general. Some contemporary political theorists
view “civil society organizations” as the cornerstone of modern Euro-American
forms of political organization. Because theory regarding the role of NGOs is
still relatively underdeveloped there are many definitions and principles
that have not been fully assimilated in the literature of administration. In
practice, there are many inconsistencies in the ways that concepts are used
with respect to the activity and influence of NGOs. For instance, profit
making firms are also sometimes described as NGOs because they are obviously
“non-governmental organizations”, although usually these are not generally
included in discussions of public interest promoting NGOs. Thus, typically,
people use the term NGO when they have in mind non-commercial NGOs. In the If we include such public interest organizations as a “third sector,” we may develop a model along the lines of the organization suggested by table 3.3. However, there are analytical shortcomings to viewing societies in terms of the tri- sector model as well. For one, the model tends to exaggerate the importance of the non-commercial, non-governmental public interest sector. Even in societies with a thriving “third sector” the amount of employment in this sector rarely accounts for over two percent of overall employment. The overall contribution to gross domestic product rarely constitutes a significant percentage. The social product (social benefit) derived from the activity of this sector may be substantial, but it is hard to measure such things as “psychological gains,” “social reassurance,” “hope”, and so on which might be some of the most important social benefits of the NGO sector. In any event, the absolute size of the third sector even in advanced societies is usually very small and relies heavily for its support upon the successful functioning of the commercial private sector. The concept of “NGO” includes several different types of activity. It is important to be precise in distinguishing between varieties of non-governmental organization. An example of the confusion that abounds in the contemporary description of NGOs is the idea of “private voluntary organizations” that are financed by government in order to contribute to some social aim. On the one hand these state- financed NGOs are often described as non-governmental even though their funding may come in significant measure or even exclusively from the state. They are sometimes defined as “autonomous and independent organizations” because their financial records are maintained separately from those of the government financing them. But because in most societies enjoying public accountability of government funds the government must account to the public for the way it spends taxpayer’s money, these “autonomous” organizations may be carefully monitored, scrutinized and even managed by their government sponsor. In such cases these organizations are less than truly private, but not necessarily governmental. They are sometimes referred to as or “quasi-governmental organizations” or “quangos”. In some cases these organizations may be an instrument by which certain activities are carried out that their government sponsor would like to be able to disavow responsibility for or even knowledge of yet, the quango may act exclusively on the direction or suggestion of its government sponsor. Such organizations may even be brought into existence by governments for this purpose. These organizations are sometimes referred to as “government organized non-governmental organizations” or “gongos”. A dual model of private/public interaction renders only a simplistic understanding of the role and interaction of the various forms of actors in society. The tri-sector model in table 3.3 offers a more complete description of the interaction of different actors. However, the tri-sectoral model in table 3.3 represents the public sector as identical with the field of activity of the government. The tri-sectoral model would seem to assign the functions of governance of public goods exclusively to the government. However, there are alternative ways to operate, monitor and regulate public utilities. A public utility is a natural monopoly that produces a public good. While government exists as a natural monopoly with respect to certain societal functions, it does not follow that the public sector must be exclusively controlled by the government. Some governance functions—that is functions of self-regulation by certain components in the society—may be exercised more efficiently and more effectively by self- regulating organizations or SROs than by the government itself. An SRO may be structured as a public corporation. The public corporation in this case is not one in which shares are offered for sale to the public, but one that is chartered to provide a public service and is regulated by corporate governance stipulated in the charter. A public corporation may hold the public trust as the manager of a facility such as a water purification plant, a public broadcasting station, an electricity generating plant, or a trash disposal facility. The charter stipulates the ways in which the corporation must satisfy public demands and the mechanisms to assure accountability to public goals. In such a scheme, the government is removed from direct ownership and management responsibility for the facility. |
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