NPM reflections 1: On privatization

READER and fellow blogger Cris Jugo asks: "In what way would NPM go against 'populist policies'? Couldn't you implement populist policies using NPM?"

Our seven-day seminar on NPM finally ended today, and by way of reflection, I will address the issue of its compatibility with populism beginning with this entry. Which came up again and again throughout the week, precisely because our Latin American participants -- who are not exactly fans of Hugo Chavez and the other left-wing leaders in the region -- assumed NPM is automatically incompatible with populist policies.

That was actually the bone of contention in an exchange I had over lunch with a Brazilian participant who came from Porto Alegre, the city that pioneered the "participative budgeting" best practice and host to several editions of the World Social Forum.

I asked Luis Leonardo, who is an unabashed free market advocate, what he thinks of his hometown's innovation. He vehemently opposes the idea, arguing that some decisions made by the budgeting committees benefited only a few -- like buying a ice-freezing facility for some fishermen within the community.

Why don't they work their butts out so that they will earn enough money to buy the freezer themselves? Leonardo asked.

But what's wrong with a decision arrived at by a community? I argued. Is that not what democracy and NPM is all about, respecting the decision of the majority and allocating government resource to address what customers need?

Our debate extended into our final task later in the afternoon, where our group (comprising Leonardo and five others) was asked to defend privatization of government services against common opposing arguments. One of these had to do with excluding the poor who do not have the money for private services.

While I argued that successful privatization, as in the case of telecommunications and air travel in the Philippines, can actually make these services more accessible to ordinary citizens, it should not be pursued for its own sake. Critical preconditions exist -- such as the existence of private providers who can actually do better than the state in delivering these services.

A good example would be education. While public and private schools exist in cities and leading urban centers, making it possible to offer and implement a voucher system that can operationalize choice and promote competition, the same is not true in the rural areas. This market failure provides a justification for the state to come in and provide the service itself -- through the public school system.

These examples, I think, demonstrate a number of things. One, it is unwise to put our faith wholly on market forces to provide all the goods and services required by society. Two, it is a disservice to NPM to assume that privatization is the only way achieve a lean state; there are other tools that can pretty much achieve the same objective, such as decentralization. Finally, the devil is in the details; there is no one-size-fits-all formula to pursue NPM, and the choice of the most appropriate tools depends on a given context.