Alternatives to Privatization

David A. McDonald, Greg Ruiters, David A. McDonald, Greg Ruiters

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136509476
• Edition: 1
• Topic: Politique et relations internationales
• Subtopic: Politique sociale

There is a vast literature for and against privatizing public services. Those who are against privatization are often confronted with the objection that they present no alternative. This book takes up that challenge by establishing theoretical models for what does (and does not) constitute an alternative to privatization, and what might make them 'successful', backed up by a comprehensive set of empirical data on public services initiatives in over 40 countries. This is the first such global survey of its kind, providing a rigorous and robust platform for evaluating different alternatives and allowing for comparisons across regions and sectors. The book helps to conceptualize and evaluate what has become an important and widespread movement for better public services in the global South. The contributors explore historical, existing and proposed non-commercialized alternatives for primary health, water/sanitation and electricity. The objectives of the research have been to develop conceptual and methodological frameworks for identifying and analyzing alternatives to privatization, and testing these models against actually existing alternatives on the ground in Asia, Africa and Latin America. Information of this type is urgently required for practitioners and analysts, both of whom are seeking reliable knowledge on what kind of public models work, how transferable they are from one place to another and what their main strengths and weaknesses are.

1 Introduction

In Search of Alternatives to Privatization

David A. McDonald and Greg Ruiters

In the ongoing debates about privatization, it is often argued that those who oppose private sector involvement in service delivery do not present concrete alternatives. There is some truth to this claim, springing in part from the deep impoverishment of debate since the onset of neoliberalism, which pronounced that “there is no alternative” to privatization. This also needs to be seen in contrast to the 1930s, and the post-World War II period when there was a strong sense of the limits and dangers of excessive domination of society by unfettered markets and private sector service provision and much greater scope for understanding the limits of capitalism and the use of state powers to ensure social integration and secure basic needs and wants.

Yet in the recent past, with the limits to privatization and financialization becoming more apparent, a burgeoning field of enquiry around alternatives has emerged, albeit in a fragmented and inconsistent way. Social movements have developed powerful rhetoric—such as “another world is possible” and “there must be alternatives”—but with little detail on how alternatives are constructed, to what extent they are reproducible, and what normative values might guide them (if any). The literature and practices that do speak directly to “alternatives to privatization” tend to be highly localized and sector-specific and lacking in conceptual and methodological consistency, leading to interesting but somewhat variegated case studies.

This book is an attempt to help fill this analytical and empirical gap by synthesizing existing work and generating new conceptual frameworks, which directly address questions of what constitutes alternatives, what makes them successful (or not), what improvements have been achieved, and what lessons are to be learned for future service delivery debates. The analysis is backed up by a comprehensive examination of initiatives in over 50 countries in Africa, Asia, and Latin America. It covers three sectors—health care, water/sanitation, and electricity—and is the first global survey of its kind, providing a more rigorous and robust platform for evaluating alternatives than has existed to date and allowing for better (though still challenging) comparisons across regions and sectors.

Although our research focuses on particular sectors in particular regions, the findings are relevant to other services and to other parts of the world, at least in broad conceptual terms. Information of this type is urgently required by practitioners, unionists, social movements, and analysts alike, all of whom are seeking reliable knowledge on what kinds of public models work and their main strengths and weaknesses.

To this end, the book is intended as a first step in a multipronged research process. The findings presented here offer a preliminary review of the scope and character of “successful” alternatives in the different regions and sectors investigated, while at the same time providing a testing ground for conceptual frameworks and research methods. Subsequent research will provide more fine-tuned case studies in sectors and regions identified from this research to be of particular interest, with a focus on key themes that have emerged from the studies (such as the trend towards remunicipalizing water services and the tensions inherent in corporatized service delivery models). The book is therefore a starting point, not an endpoint, and is intended to act as a guide for our own future research as well as a catalyst for others.

The orientation of the research is academic but has involved activists, unionists, social movements, and non-governmental organizations (NGOs) from the outset. As with previous research by the Municipal Services Project,¹ the involvement of frontline workers, service users, policy makers, and others has been an essential part of the design and implementation of research, as well as of outputs and outreach. The perspectives and practices brought to the table by these various groups, based in various regions and sectors, complicate the traditional academic process, but the outcome is much richer for it. The book has thus been written to be academically rigorous but also to be accessible to policy makers, analysts, unionists, activists, and others familiar with the debates on privatization and its alternatives. Not all chapters will resonate with all readers, but the intention is that the book will help advance our understanding of alternatives to privatization in general and stimulate further research in this critically important area.

The book has been divided into three sections. The first looks at conceptual questions around the nature of the state in service provision, the role of labour and social movements, gendered outcomes of different service mechanisms, and the ways in which neoliberal practices and ideologies construct and constrict the push for alternative delivery systems. The second section is an empirical review of alternative models of service delivery broken down by region (Asia, Africa, and Latin America) and sector (health care, water/sanitation, and electricity). In this latter section, regionally based research teams were asked to identify as many “successful” alternatives as they could find in a given region and sector, categorize them according to predefined typologies, and evaluate their achievements based on a set of normative criteria. The book concludes with a chapter that summarizes the findings of the research and points to future directions for study, policy, and activism.

WHAT IS AN “ALTERNATIVE TO PRIVATIZATION”?

An extended discussion of the methods and typologies developed for the collaborative research in this book is provided in Chapter 2, but it is useful to first explain what we mean by an “alternative to privatization”. We have defined alternatives in this book as (i) “public” entities that are entirely state-owned and operated (such as a municipal water utility or a provincial electricity generator) and (ii) “non-state” organizations that operate independently of the state on a not-for-profit basis and are oriented to principles of equality and social citizenship (such as certain types of NGOs or community groups). These two broadly defined groups might operate independently from each other or in some form of partnership (with “partnerships” forming a third category of sorts).

Notably, this definition includes non-state actors in notions of “public”, helping to get beyond the “stale positions staked out in the public-versusprivate debate”, which has often limited the discussion to states versus the private sector (Bakker 2010, 218). More controversially, however, our definition excludes all forms of private, for-profit actors, be they large corporations or for-profit NGOs. In this regard our definition of privatization covers all forms of “private” ownership and/or management, including governmental, non-governmental, or community-based organizations operating on a for-profit basis.

There are fuzzy margins here, of course, many of which complicated our data collection and analysis. After all, the majority of public services operates within capitalist environments and procure goods and services from private firms and rely on certain private distribution and collection networks. There are also many highly regarded public services that have outsourced small aspects of their operations (e.g. meter reading) but otherwise operate on a non-commercial basis. Being “purist” in this regard was not logistically practical and might have unnecessarily eliminated some interesting examples of “alternatives” from our study. There are also NGOs that offer interesting alternative service delivery schemes on a not-for-profit basis in one location but have ties to profit-making ventures in other areas. To rule out these forms of service delivery could also have meant the loss of interesting case studies. Similar parameters apply to “community” service providers, many of which can be “private” (to the extent that they are not always accountable to political authorities or to the communities within which they operate) but could not necessarily be ruled out as “public” actors, particularly if they operated in non-marketized ways.

But the most vexing question of all was (and remains) what to make of “corporatized” services—i.e. state-owned and state-operated services run (to varying degrees) on commercial principles. Corporatized entities have become extremely popular over the past 20–30 years, and some have become more private than public in their orientation. They may not operate on a for-profit basis, but they function using market doctrines, valorizing the exchange rate of a service over its use value, prioritizing financial costbenefit analysis in decision making, and employing private sector management techniques such as performance-based salaries. These corporatized entities often see their service delivery mandates framed in market terms of maximizing efficiency, promoting free enterprise, and serving individual consumer sovereignty (Shirley 1999, Bollier 2003, Preker and Harding 2003, Whincop 2003).

It is here that we found the biggest divisions amongst ourselves over the publicness of these corporatized entities and whether they should be considered “alternatives to privatization”. In the end it was decided that being purist on this point would not have been helpful either, knowing that some corporatized public entities have performed well when relying on (some) private sector operating principles and that democratic political processes can be used to buffer against overly marketized processes and outcomes (on the latter point, see Warner and Hefetz 2008). Individual research groups were therefore asked to determine whether they thought a particular corporatized entity was sufficiently “non-private” in its operational practice and ideologies to be included in the study. The outcome was that some corporatized service providers were included as positive examples of “alternatives to privatization”, and some were not. Uruguay’s corporatized water entity, Obras Sanitarias del Estado (OSE), is an example of the former, having been instrumental in the transformation of water services in that country into fairer and more transparent service provision (see Chapter 15, this volume). Many others were left out, such as South Africa’s parastatal electricity producer, Eskom, which initially extended subsidized electricity to millions after the end of apartheid but now acts much like a private company, cutting off low-income households for non-payment of services and aggressively pursuing privatized contracts in other parts of Africa (Greenberg 2009). This diffusion is a reflection of the conceptual differences of opinion within our research group, as well as a product of different interpretations and measurements of the more objective empirical evaluations of service performance captured in our “criteria for success”, such as accountability, equity, and quality of services (on which more will be said in Chapter 2, this volume).

In other words, there are no hard and fast boundaries between a “privatized” service and an “alternative to privatization”. Rather than lying along a linear trajectory of state ownership at one extreme and private ownership at the other, there are multiple criteria across different forms of provision that are fractured in relation to one another and in terms of more or less progressive outcomes; state (i.e. public) ownership can serve elite and corporate needs and marginalize the poor, for example. The degree of state or non-state ownership and control is neither a singular nor exclusive marker of “alternatives”. It is a matter of who is served and how, with substantial contextual content. And while we can argue for a definition of alternatives that is as free of private sector influence as possible—and we certainly need a stricter definition than the rather flaccid and overly compromised notions of “public” services being promoted by many United Nations (UN) agencies and international financial institutions, which can even include multinational corporations (UN-Habitat 2007, World Bank 2009)—we felt it was conceptually and politically mistaken to impose too tight a definition at this early stage of our research agenda.

We have therefore used this initial “mapping exercise” as an opportunity for constructive debate within and across the different sectors and regions we are studying to understand better how “public” service provision can be progressively sustained, rather than establishing firm guidelines for how boundaries for “alternatives” should be drawn or where these boundary lines should lie. Both the nature and dynamic of alternative provision are of significance. It is important to advance and defend definitions and not simply to try and stay the right side of the border, as it were. The material presented in this book reflects some of these unresolved debates and will serve as the subject of further empirical and conceptual study.

Having said that, the overwhelming majority of “successful” alternatives to privatization identified in this book are those run on a non-commercial basis by the state and/or by non-governmental or civic associations. The details of these services differ from place to place and are often as dissimilar to the “old style” state-run services that preceded them as they are from their more contemporary privatized counterparts. These differences are due in part to the dramatic changes that have been imposed by decentralization and supranationalization (with everything from local authorities to international governing bodies now taking part in service delivery), as well as the direct involvement that NGOs, social movements, and communitybased groups have earned at various levels of decision making and service delivery. As a result, the divisions between governmental and non-governmental have also blurred, and this is particularly pronounced in the realm of alternatives.

Despite this fuzziness we have attempted to typologize state and nonstate service delivery systems in ways that give sharper definition to alternatives than simply the term “public” (or “public-public” in cases in which there is more than one entity working together). We do so by more clearly distinguishing between governmental and non-governmental actors than has been done in the past and by differentiating between single and multiple actors (see Chapter 2 for more details, this volume). Though rather inelegant in the names and acronyms this produces—e.g. SiNP (single non-profit sector), NPNPP (non-profit/non-profit partnership)—there is a need for more clarity around the institutional composition of alternatives if we are to comprehend better the nature and shifting differentiation of public sector alternatives.

IDENTIFYING ALTERNATIVES BY THEIR “OBJECTIVES”

We have also attempted to identify alternatives by their intended objectives and have broken them into five categories, based on how they emerged from the research. The first category refers to alternatives whose primary objective is “defending the status quo”. In the fight against privatization, we often forget that the vast majority of services that exist are still provided by the public sector (an estimated 90%–95% of the world’s water services, for example). There is much that can be improved (even rejected) about these public sector service delivery models, but some of it is done exceptionally well, and we should not fall victim to the negative rhetoric of public sector service bashing that has become part and parcel of today’s neoliberal political objective.

Our primary interest, however, lies with identifying and evaluating positive examples of alternatives to privatization that are aimed at “revising the status quo”. We acknowledge that many existing public services are poorly run—or non-existent—and do not meet many of our “criteria for success”. Defending these services is not an acceptable route to developing alternatives. It is important therefore to explore efforts that have gone into making public services more democratic, more participatory, more equitable, more transparent, more environmentally sound, more secure, and so on, and it is essential that we understand the scope and character of these reforms. Examples range from the well-known participatory budgeting models of Latin America to lesser known initiatives in cities, towns, and villages in Asia and Africa. In some cases the reforms leave institutional structures intact, while in others they dismantle old forms of the state with a much broader set of actors and innovative forms of governance, opening up new vistas for thinking about how the “public” can operate.

Our third category is that of “reclaiming public services”. After the privatization euphoria of the 1980s and 1990s, many national and municipal governments are finding themselves once again in control of essential services, either as a result of a political struggle to remove a private firm (such as the “Water War” of Cochabamba, Bolivia) or because the private sector service provider fled what they perceived to be an unprofitable situation, leaving the state/community to pick up the pieces (as with water services in Buenos Aires in the early 2000s). Whatever the cause (an understanding of which is essential to assessing the outcomes), there is a large and growing swathe of previously privatized services that are now back in public hands. We have attempted to identify as many positive examples of this as possible and ...