The movement, which bears the name of New Public Management, and which has been sweeping across the world and transforming many bureaucratic systems since the 1980s offers a new managerial ideology model. This new model challenged the bureaucratic ideology on which modern western administrative systems have been traditionally based (Horton, 2006). The new public management (NPM) philosophy has been described as a move towards a governance approach that places emphasis on transparency, performance management and accountability of public sector employees and managers. The philosophy has been identified as “one of the most striking international trends in public administration” (Heyer, 2010). The philosophy of the new public administration added „Social Equity‟ to the equation. Fredrickson (1990) states that social equity is a phrase that comprises an array of value preferences, organisational designs and management style preferences in addition to emphasising the equality in government services, the responsibility for decisions and programs, and the responsiveness to the needs of citizens.
2.2.2.1 The theoretical background of new public management
The theoretical background of NPM is based on five microeconomic frameworks, public choice theory, principal agent theory, transaction cost theory, technical rational theory, and institutional theory. However, two had the biggest influence on NPM. These are: public choice theory and principal agent theory. Public choice theory, in particular, had a huge influence in the thinking and development of political science, public policy and public administration over the prior two decades (Heyer, 2010). A number of different terms have been used to describe public choice theory, including social choice theory, rational choice theory, the economics of politics, and the Virginia School. The main principle of the theory was that people were believed to be rational and that they were dominated by self interest. The theory also sought to minimise the role of the state and limit the discretionary power of politicians (Gorringe, 2001). It was believed that because politicians had abused their power, this power could be minimised through the restructuring of budgets and performance arrangements. As a result, government departments separated their policy making functions from the delivery of their service (Heyer, 2010).
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The second main framework, principle-agent theory, is based on the notion that social and political life can be understood as a series of “contracts” (or agreed relationships) in which one party (the principle), enters into exchanges with another party (the agent). Usually such a contractual relationship is based upon the agent agreeing to undertake specific or various tasks on behalf of the principal and being compensated for the results (Gorringe, 2001).
2.2.2.2 The rise of new public management
NPM was one of the major public sector reform approaches that many western nations as well as many developing countries adopted during the last three decades. The rise of NPM is the outcome of a number of factors. The environment of the early 1980s was a time of great domestic and international upheaval with extensive economic, political and social changes occurring simultaneously across a number of countries (Casey, 2009). The political emphasis placed upon the public sector was to do more with less, which required public sector managers to critique their structures, budgets and service delivery processes (Gorringe, 2001). There was also increasing pressure from the public for the public sector to be more accountable for the use of public funds and to deliver better and more focused services (Gillespie, 2006).
Despite the pressure across western nations to review their bureaucracies, the adoption of NPM was uneven across governments and across sectors within same governments. For example, NPM was more readily accepted in New Zealand and the United Kingdom when compared to the United States. Moreover, a number of western nations, principally within Europe, only adopted selected features of NPM, while others embraced a managerial ethic without introducing NPM completely (Butterfield et al., 2004). There are a number of possible reasons for the differing acceptance rates. The first possible reason is the different fiscal crises each western nation experienced. These fiscal crises included a period of rapid inflation. The second possible reason was that the introduction of NPM was in response to a set of special social conditions developing in the long period of peace in the developed countries since the Second World War, and the unique period of economic growth which accompanied it.
After the adoption of NPM in western society‟s serious attempts were made by many developing countries to adopt NPM, this is referred to as the globalisation of NPM. A number of explanations stand behind the globalisation of new public managementas outlined by Common (1998). These are: the NPM “missionary”; the internationalisation of new right politics; the internationalisation of privatisation; the role of international organizations; and increasing policy transfer activity. First,
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NPM had quickly become a “self-serving industry” to an army of consultants, business schools and advisers, who had helped in spreading NPM. Second, the link between the introduction of NPM and a global new right politics appears to be a strong one. For instance, NPM was adopted by Labour governments in New Zealand and Australia in the 1980s, both countries had social democratic parties in power yet both parties embraced the kind of market liberalism associated with NPM. Third, privatisation and NPM often appear to go hand in hand as policy options. Government officials, when reworking the relationship between the public and the private sectors may use the terms “privatisation” and “NPM” interchangeably, especially when the managerial techniques are drawn from the private sector. Privatisation and the spread of NPM are highly associated with the international environments that influence policy-making. Fourth, international institutions such as the OECD, European Union, World Bank, USAID have a role to play in the spread of NPM. For instance, the OECD‟s Public Management Committee produces a series of Public Management Studies which clearly intends to facilitate policy learning between member countries. As the World Bank and the IMF have an interest in ensuring “best practice”, managerial techniques are likely to be imposed on countries. International organizations have political agendas that cannot be ignored; these organizations are at the centre of a continual conflict over the control and direction of global policy. However, these organizations only exercise their power on countries with weak finances.
Although each of these points of view has their merits, the globalisation of politics generally appears to offer a neat explanation for the spread of NPM. Globalisation assumes that the exercise of political authority and bureaucratic power is no longer constrained by the boundaries of nation states. In the case of NPM, this should not lead us to the conclusion that all countries will adopt a global standard for public management. Furthermore, there is the danger that “pressures for globalisation” produce unintended consequences if applied uniformly across diverse political or administrative cultures.
Within the Middle Eastern countries, despite the move toward government reform, the adoption of government reform initiatives remain limited, two factors, in particular, help explain the weak commitment to comprehensive reform by governments in the region. The first is the impact of soft budget constraints on the intensity of demand for reform (Vandewalle, 2003). Many governments in the region have been able to rely on revenues generated outside the domestic economy and flowing directly to the state through some combination of oil exports, remittances and foreign aid. In the past decade, this flow of resources has been sufficient to cushion the impact of economic
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stagnation and permit governments to adopt limited reforms, while postponing difficult decisions about structural adjustment and reorganization of the social contract. Secondly, governments in the Middle East have found it difficult to manage the relationship between political and economic reform. During the initial phases of economic reform in the 1980s, many governments accepted an instrumental connection between economic and political reform (Yousef, 2004).
2.2.2.3 A critique of new public management
The adoption of NPM has been subject to debate by many scholars due to reasons associated with the managerial acceptance, sector, culture, financial returns, and others. Next, brief presentation of what was noted in the literature.
The introduction of NPM has been successful in enhancing public sector organisational effectiveness and efficiency in the United Kingdom and in New Zealand, while in other western nations, the success of NPM has been limited due to the varying level of managerial acceptance. This has been due to the divergent capabilities of the managers concerned and the levels of efficiency prior to the reforms (Heyer, 2010). It is argued by some scholars that NPM is no longer recognised as a distinctive reform approach. Dunleavy et al.(2006) state that due to NPM evolving over time and the differing implementation context, NPM is now “dead”. He elaborated by saying that If NPM is now everything, maybe it is nothing and certainly not a distinctive way of managing organizations.
Others such as Dunleavy and Hood (1994) maintain that NPM had not succeeded in its prime objective of defining the core purpose of individual public sector departments. Their critique is founded upon NPM having a flexible agenda during the period of 1980 to 2000, which enabled the incremental identification of the core functions of departments. They claim that this was due to “a residualising process of outsourcing solutions being applied piecemeal to different bodies of work”
A number of scholars also state that the appropriateness of some of the components of NPM utilised by the public sector has caused rigorous debate, especially in regard to the public sector‟s adoption of private sector business specific principles. This contention is based on the view that the public sector is vastly different from the private sector and as a result, the adoption of some private sector attitudes and theories are therefore inappropriate (Heyer, 2010). Public-private distinction will be covered in section (2.2.4).
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Central to the debate on NPM is whether financial returns are achievable from this increasingly accepted framework. While success and its measurement are complex notions in a public sector context, the financial success of NPM is particularly interesting, given it has been both promoted and derided (White, 2005). In general terms, success is achieved when the strategy or policy choice taken produces the intended outcome. In the context of the public sector, a successful outcome is one which maximises the welfare of society, defined broadly as the sum of each citizen‟s individual welfare. The latter is evidenced by factors such as improved service quality, increased levels of customer satisfaction, and equitable access to services (Luke, Kearins,and Verreynne, 2011).
Although the concept of a more efficient approach to public sector management has been well received, a more comprehensive approach to NPM involving commercial and profitable operations within the public sector has also been subject to criticism. In particular, a traditional view of the public sector as inefficient and bureaucratic has resulted in much scepticism regarding the potential for profit under NPM. This scepticism is consistent with traditional property rights theory, which advances the view that the public sector is less efficient in using resources to maximize wealth. Increasingly, however, incidences of enhanced efficiency and financial success are being noted from studies of NPM practices in various countries (Khaleghian and Das Gupta, 2005). These occur alongside the achievement of social goals, with which public sector organisations are more traditionally associated.
The changes that accompanied the adoption of NPM are impacting public officials and their roles and the work they do, the ways in which they are managed, their relationships with the public and the criteria by which they are assessed, and these changes are continually evolving. As a result public service ethics are being replaced by public management logic with a corresponding identity and ethical framework for public servants. As the public service is losing its specificity and its unique role and mode of operation, being a civil servant or public official no longer has such a distinct identity (Horton, 2006). Individual civil servants are adjusting their perceptions of the collective identity, the public‟s perception of that identity and their own self-identity.
Some scholars such as Khaleghian and Das Gupta (2005) and Flynn (1995) critiques NPM on the ground that its future is not clear especially because NPM is applied to different contexts. First, there are different constitutional arrangements. In countries where there is a strong central government, with powers over the whole of the administration, centrally driven reforms are easier
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to implement than in countries where „subnational‟ government is both relatively large and constitutionally protected. Second, the neo-liberal arguments are clearly political: the use of market mechanisms as administrative instruments is not an idea free from ideological belief, which is stronger among Christian Democrats and Conservatives than among Social Democrats and Socialists. Convergence towards markets, both for service delivery and in respect of the labour market for civil and other public servants, would require an ideological commitment. Third, there are different cultural attitudes towards the role and nature of the State. The acceptability of a high level of State involvement in economic and social life has developed unevenly in Europe since the Second World War. Therefore, responses to fiscal deficits that demand a significant reduction in State activity meet different levels of resistance in different countries (Flynn, 1995).
The literature on NPM is of particular importance to the research context especially if we note that major public sector reforms have been initiated in Dubai public sector within the last decade. However, care should be taken on how to integrate such initiatives within the Middle Eastern culture. A number of points stated above such as the influence on public official identity, clarity of the future of NPM, the adoption of private sector attitudes and principles in public sector are all important in explaining some of the findings of this research as will be discussed in chapters seven and eight.