PUBLIC MANAGEMENT REFORMS AND NEW FORMS OF ORGANIZING. THE INSTITUTIONAL DESIGN AND IMPLEMENTATION OF NEW REGULATORY AGENCIES.
Jorge E. Culebro Moreno.
Profr. Metropolitan Autonomous University.
Cuajimalpa.
Department of Institutional Studies.
México.
Panel track:
Government at Arms’ Length: the Pendulum Shift
Twelfth Annual Conference of the International Research Society for Public Management - IRSPM
Brisbane, Australia
26-28 March 2008
*WORK IN PROGRESS*
This paper is part of a larger research-project financed by the National Council of Science and Technology.
ABSTRACT.
The introduction of the NPM reforms into the public sector has led to numerous transformations in the structure of the governmental apparatus, and one of these changes has been the creation of markets and quasi-markets, and in consequence the establishment and development of independent regulatory agencies to supervise them. Nevertheless, there have been some non-expected consequences in the evolution and performance of such agencies, these pitfalls are related to three paradox/dimensions: (1) the tension between autonomy and control, (2) the potential conflict between accountability and transparency versus efficiency and effectiveness, and (3) the divergence processes involving legitimacy versus knowledge and expertise. Accordingly, the contribution attempts to develop a general framework to study these paradoxes in certain regulatory agencies. We will use a structural/organisational perspective as well as an institutional approach to draw some hypotheses that help us to analyse the above dimensions.
PUBLIC MANAGEMENT REFORMS AND NEW FORMS OF ORGANIZING.
THE INSTITUTIONAL DESIGN AND IMPLEMENTATION OF NEW REGULATORY AGENCIES.
Since the 1980s decade many OECD countries have implemented a collection of reforms aimed at transforming not only the State apparatus but also, the institutionalizing new forms of relations between individuals and organizations. Under these transformations public sector has adopted different types of organizations, which in many cases, lead to a lack of coordination and synchronization in the public sector performance; besides, some governments are reluctant to adopt these new forms. These transformations has also been included in what has been labelled as New Public Management (Hood 1995) and one of its main elements has been the introduction of a collection of regulatory reforms that involves the creation of a set of semi-autonomous regulatory agencies. On the one hand, it is argued that through their regulations instruments and norms, markets would improve theirfunctioning; and on the other hand it is expected that the institutional design under which these agencies operate would provide agreater autonomy and formal authority without having effects in the democratic practices of a society. Thus, some of the effects of this reform have been the creation and transformation of regulatory independent agencies (RIA)in order to regulate the behaviour of the economic agents and citizens in specific sectors, but also other type of relations between individuals and organizations such as transparency and accountability.
Despite the fact that recently there has been an increase in the interest for conduct empirical studies to analyse the impacts of the regulatory reforms (Landy, Levin and Shapiro 2007), there is still a weak development on empirical studies in relation to the establishment and evolution of the regulatory agencies, as well as their performance;tough some investigations have emphasized the existence of a tension between the control and the autonomy (Culebro 2008).In addition, it is noted that the current behaviour of the regulatory agencies has not been deeply examined and research in this field has not been influenced by other investigationsdone by the same agencies nor their counterparts in the public sector; In this regard, there has been an insufficient ability to learn on behalf of such agencies. Thus, one of the most important challenges for the governments have consisted of discovering an appropriate balance between the necessary flexibility and autonomy in the regulatory agencies, and how to introduce new principles and values derived by NPM reforms without reducing the institutional capacity of the State.
The implementation of the so-called post-NPM reforms and more specifically the regulatory reform has brought a series of non-expected consequences. For example, it has produced a greater atomization of the public administration (Christensen and Laegreid 2004);and in the other hand, the introduction of new forms of control as well as an increasing fragmentation of the knowledge. Consequently,this fragmentation and atomization of the public administration might reduce the institutional capacity of the State (Christensen and Laegreid 2005),and to increase the coordination problems in both, horizontal and vertical manner. In addition, it has been noted that in Latin America as well as in other countries to delegate regulatory faculties to semi-autonomous agencies has not produced the desired effects in terms of depoliticisation and effectiveness (Mota Prado 2007).
However, one of the main concerns has been the lack of accountability (Flinders 2004, Flinders and Buller 2006, Aucoin 2006) and legitimacy in their decisions; in other words, the dilemma that arises as a result the institutional design and implementation of the new regulatory agencies is how to establish and design these agencies that need sufficient autonomy and flexibility to perform their functions, but at the same time to develop institutional mechanisms that promote accountability for the citizens and for the regulated sectors(Christensen and Laegreid 2006; Flinders and Buller 2006).
The paper will attempt to propose a theoretical framework to analyse some of the main features that have occurred as a result of the implementation of the regulatory reform, more specifically the development and evolution of regulatory agencies. In this sense it is expected to draw some hypotheses to analyse the manner in which diverse theoretical approaches may help to explore three possible areas of tension and conflict related to the effects of these types of regulatory agencies: (1) control versus autonomy, (2) accountability and transparency versus efficiency and effectiveness, (3) legitimacy versus knowledge and expertise. In synthesis the questions that might arise through this paper are how democratic could be the new forms of control and governance of the regulatory agencies, and how their formal autonomy and design can be complementary with the democratic practices (accountability and transparency).Thus, one of the central aims of this article is to build a bridge to close the gap between research on regulatory agencies at the national level and its possible effects in terms of accountability and legitimacy, and other democratic procedures.
In spite of the literature that has been done on administrative reform, until now there are few empirical studies that investigate the evolution and performance of the regulatory agencies. In the international scope, the research has been characterized by a weak theoretical development (Christensen and Lagreid 2005). For that reason, the present paper attempts to contribute with the current literature on public management reforms by drawing some theoretical propositions to investigate the development of the new semi-autonomous agencies created to regulate different sectors such as the economic competition, energy, telecommunications and environment. The central argument is that the continuous interactions between the institutional context, the institutional design and the structural-organizational characteristics of these hybrid organizations could have an effect on the possible areas of tension when management reforms are implemented, and in consequence in the evolution of democratic practices. The article is order as follows, the first section is an introduction of the main theories that explain and justify the mechanisms of regulation; the second part is related to the development of NPM and regulatory reforms; afterwards, I discuss how diverse approaches may help to explain the areas of tension of the regulatory agencies. Finally, some considerations are presented related to the further research on regulatory agencies.
I. THEORETICAL PERSPECTIVES ON REGULATION.
It is widely recognised that regulation is not a new issue and it can be associated with any form of governmental intervention into the politic and economic areas of the society. In this sense, regulation and its different forms that have taken place have been analysed from many disciplines like economy, political science, institutional approaches, organisation theory. Though all of them depart from different epistemological roots, in a broad perspective they try to answer a set of common questions such as why regulation exists and whether or not it regulation through governmental or non-governmental instruments becomes necessary? Which could be the best institutional instruments and incentives in order to ensure an effective regulation? And which might be the reasons to implement regulation mechanisms?In this regard,what we note is that there exists diverse sources to give an account for the regulation mechanisms, however in broad terms they come from a combination of national and international case studies under the international movements like NPM and globalisation (see Figure 1).
Yet, though the term regulation has been characterised as ambiguous and vague (Christensen and Laegreid 2005) there are for instance three main approaches, the first one sees regulation as a collection of authority instruments through norms, rules and autonomous public agencies as well as other type of mechanisms to supervise and promote the accomplishment of such norms; the second one refers to any kind of governmental intervention into the economy and private sphere to achieve a common good by means of public property and tax. Finally, the third one relates to any form of state and non-state involvement as a form of social control (Christensen and Laegreid 2005)
From a normative point of view, regulation is seen as mechanism of control exercised by a public agency with legal and formal mandate in those activities that society considers to be regulated (Majone 2005). This form of regulation assumes that regulators have not only a close involvement with the regulated sector,but also a detailed knowledge regarding the activities that they want to intervene. According to Majone (2005) there are two main forms of regulation, the American and the European Style. The first one holds a good perception about the market and private companies, and suggests the existence of some kind of self-regulation; mean while the former style consists in achieve centralised regulation through public property in so far public interests are protected and government would increase its ability to regulate the economy. Between these two extremes regulation via the creation of independent agencies represents an intermediate position; the argument behind is that these agencies would be apart from politicians, as well as insulated from regulated actors and legislators, in such a way that the agencies could have the enough capacity to act in accordance with technical parameters an consequently increase their performance (Majone 2005), in other words, specialization and expertise could led to adopt better decisions and norms and reduce the uncertainty in the markets.
I general terms, traditional theories of regulation have emphasised the solution of some kind of market failures, since there are diverse malfunctions that is necessary to intervene, for example negative externalities, opportunistic behaviour, information failures, lack of innovation and competitiveness. Thus, regulation can be seen as the existence of governmental intervention to replace the competence of the private actors and in consequence to increase the production and well being of the society. The assumption is that actors outside the State do not possess the enough expertise and capacity to regulate themselves (Coiman 2003).On the other hand, the so-called political-economic theory of regulationhave introduced how the political behaviour of individuals, politicians tend to affect the development of the markets, in such a way that interest groups may capture the performance of the agencies and government. Therefore, is desirable to promote the self-regulation of the private actors, because the state interference could become a threat for the performance of the markets. However, under these perspectives, terms like independence, reputation, credibility and the role of knowledge that posses IRAs has not been widely recognised, nor the fact that they operate in complex institutional environments (Rivera 2003, Majone 2005).
The New Institutional in Economics (NIE) adds the relevance of the role of institutions within the regulatory mechanisms, specifically those institutions and incentives to improve the resource allocation and market failures, since it is recognised that behaviour and decisions are shaped by institutions and actors are seen as rational agents. Under the lenses of NIE economy is more than markets and prices, but also contracts and formal norms that provide certainty to the markets and actors. Economic processes such as regulation occurs within an institutional framework (Ayala 1998). Accordingly, most of the policy and market failures in which regulatory agencies have to intervene are attributed to coordination problems and increasing in the transaction costs associated to the design of the contracts in terms of positive and negative incentives (Ayala 1998).
At international level there are two broad categories through which governments may able to change their regulatory environment and instruments, the internationalisation and the transnationalisation of regulatory reforms. Within the first one there is some kind of supranational enforcement of national regulation as well as a collective national regulation, while the second one is characterised by the existence of networks and standardization processes. Both the supranational and the collective regulation produce formal norms to stimulate regulatory transformations at domestic level, however, under the collective form of regulation there are more involvement from the States and reforms are adopted more as a result of mechanisms of socialisation rather than coercive procedures (Checkel 1999). Within the second category instruments of standardisation are performed not only by the governments, but also through non-state actors such as NGO´s, private actors and international organisations, and the main incentive to standardise rules and norms is the access to the markets. On the other hand, regulation by means or networks is carried out mainly through socialisation processes where actors and professionals tend to share similar discourses and the mechanism of compliance are social influences because there is a great knowledge exchange (Bull 2007).
Figure 1.Basic scheme of Regulation.
II. REGULATORY REFORMS AND INDEPENDENT REGULATORY AGENCIES.
Regulatory reforms around the globe mainly have taken palace as a result of the NPM and post-NPM international movement in which public sector device is transformed. According to the British experience (Minogue 2001) NPM includes three main elements: (1) the reduction of the size of the public sector and the search for efficiency, achieved mostly through two mechanisms; first by means of privatisations of public enterprises and second as contracting out where a private contractor assumes for providing a specified public service for a fee. (2) Reorganisation of the civil service systems to accomplish a more entrepreneurial and mission driven culture in the government through structural changes the development of a performance pay system; and (3) Performance management to increase the autonomy and accountability of the public agencies by means of the creation of indicators to measure performance and management by results.
Nevertheless, though NPM is considered an ideology and a collection of practical transformations in the public sector, countries that have launched some kind of administrative reform share some common characteristics, even though NPM could be considered a theoretical hybrid (Christensen and Lægreid 2001). Thus, NPM can be seen as a complex mixture of changes, which include: budget cuts, separation of provision and production (contracting out), the customer concept, external or internal competition as a mechanism to motivate public servants and organisation, flexibility for public managers, the separation of politics and administration, decentralisation, accountability for performance and performance measurement, financial management for budget reforms, strategic planning and changed management styles, the use of information technology, the role of policy analysis and evaluation, and enhanced citizen participation (Groenning 1998, Holmes and Shand 1995). As result, NPM has encouraged the creation of markets and quasi-markets in sectors that usually belonged to the public sector, in consequence such reforms have established a collection of semi-autonomous organizationsaimed at regulating the functioning on the created markets.
On the other hand, the adoption of the so-called post-NPM reforms allows to analyse other kind of contradictions of the regulatory reform such as the effects and consequences of the of the local and domestic institutions for example, the creation and evolution of organizational hybrids based on the idea of “single-purpose” organizations, and on the other hand, the transformation of diverse international institutions as a result of continuous interactions between the national governments and international organizations. (Bull 2007, Christensen and Laegreid 2007). In this regard, the regulatory reform has been characterized mainly by a new way of formulating norms and rules to regulate the markets and quasi-markets created as a result of NPM reforms, as well as the establishment of semi-independent organisms that regulate the behaviour of the actors in certain sectors of the economy. However, the design and development of these agencies has frequently created more dilemmas than a solution to improve service delivering and efficiency in the government, more specifically terms of the balance between the control exercised by politicians or Ministries and managerial autonomy necessary for street-level bureaucrats (Richards and Smith 2006, Culebro 2008).
In addition, the development of regulatory reforms and creation of autonomous organisations as a part of NPM movement, have created a set of paradoxes, for instance on the one hand it is largely acknowledge that NPM and post NPM reforms has been promoters of the setting up of markets and quasi-markets through privatisation and deregulation, however at the same time it has been that the growth of more rules, complexity in the institutional design of the regulators and number of agencies and levels of government (Gilardi et al 2006).