Theoretical foundations of new public management

To better understand the contribution of NPM to public administration, one must become familiar with several fundamental concepts. The first and probably the most basic premise of NPM emerges from the distinction between two proximate terms or fields of research— administration and management. Since the late 1880s, the monopoly on the term ‘‘administration’’ has been in the hands of political scientists. Scholars like Goodnow and Wilson perceived public administration as a separate and unique discipline that should consist of independent theory, practical skills, and methods. Yet, the term ‘‘management’’ referred to a more general arena, used by all social scientists and mainly by those who practice and advance theories in organizational psychology and business studies. Consequently, conservative administration science tends to analyze the operation of large bureaucratic systems, as well as other governmental processes aimed at policy implementation [18].

Management, on the other hand, refers to the general practice of empowering people and groups in various social environments and the handling of manifold organizational resources to maximize efficiency and effectiveness in the process of producing goods or services. A second premise of NPM derives from the nature and values of democratic nations. Citizens of modern democracies act as voters and delegate power to politicians and administrators to do what is best for people and societies. However, representative democracy leaves its fingerprints on the actions and operation of bureaucracies. For many years, bureaucracies worked in a manner far removed from citizens and with a lack of sensitivity to the growing needs and demands of heterogeneous populations. As suggested by Rainey [13], the 1960s and the 1970s were characterized by the initiation of unsuccessful public policies in Europe and in America. At least some of these unsuccessful experiences were due to lack of reliable analyses of the needs and demands of the public, while other failures were caused by incorrect assessments regarding the power of bureaucracies. Over the years, efforts by governments to create extensive changes in education, welfare systems, health programs, internal security, and crime control were widely criticized for being ineffective and unproductive and for misusing public funds. Responsiveness to the real needs and demands of citizens waspaltry. The crisis in practical public policy implementation, together with the increased cynicism of citizens toward government and public administration systems, generated rich scholarly activity aimed at creating useful alternatives for improved policy in various social fields, as well as in the administrative processes in general. Voters expressed their dissatisfaction with elected officials and, hand in hand with the academic community, called for extensive reforms in government. This call produced a large number of working papers, articles, and books that proposed extensive administrative changes. One of the most inspiring works, Osborne and Geabler’s Reinventing Government, [11] is frequently mentioned as the unofficial starting point of such reforms, later known as NPM. As time went on, a growing number of political scientists perceived public administration as an old and declining discipline. It was unable to provide the public with adequate practical answers to its demands and moreover, left the theoreticians with epidemic social dilemmas awaiting study. Evidence for this shift in attitude appears in the transformation of many schools of public administration into schools of public management that took place during the 1980s and 1990s. Looking for alternative ideas, management theory was proposed as a source for a new and refreshing perspective. It was suggested that public management instead of public administration could contribute to a new understanding of how to run the government more efficiently and thereby overcome some of its pandemic problems [18].

New Public Management has many components. But what are the theoretical bases for these components?

Budget cuts need no explanation. All types of scholars (except perhaps those with an emancipatory worldview) would recommend budget cuts in times of money shortages. Privatization comes from public-choice theory, the neo-Austrian school, and property-rights theory. But proposals to privatize also come from rationally oriented management scholars [5]. The separation of provision and production can be derived from the Ostroms’ model of a polycentrical administrative system, but this recommendation comes from Drucker as well. Contracting out reflects both rational and humanistically oriented management. It was influenced by transaction-costs economics, but public-choice scholars, like Niskanen, also recommended it. And if contracting out can be designed to strengthen community organizations, emancipators will advocate it too. User charges are mainly proposed by public-choice adherents, but they can also be derived from consumerists’ views and marketing (rational management). The same can be said about vouchers. The customer concept can be traced back directly to marketing approaches. Certain applications of the concept—like one-stop shops or case management— are the outcome of organic management conceptions and even of NPA. Competition in the public sector comes mainly from public-choice theory. When competition is designed to motivate departments within an organization (internal competition, revolving funds), it can emerge from organic management models. To give managers the freedom to manage—to give them flexibility—is merely a matter of managerial indoctrination and the design of incentives. The separation of politics and administration can obviously be traced back to the Progressives and classical public administration, to the influence of policy analysis for politics, and even to certain branches of public management. Decentralization is also a concept that comes from neoclassic thought, from public choice, from transaction-cost economics, and from NPA and its followers. Accountability for performance can be traced back to classical thinkers and their idea to benchmark public organizations. It reappeared in neoclassical public administration, in policy analysis, and in rational, public-management circles. The same is true for the techniques of performance measurement and improved accounting. Nevertheless, public choice scholars, like Tullock, recommended them too (though with some reservations). The reform ideas for financial management and performance auditing can be traced back to this approach, with a particular stress on rational public management that used transplants from the private sector. Interestingly, the whole branch of output-oriented steering and evaluation shows heavy influences of PPBS. The whole language now used in this area—inputs, outputs, outcomes, products, programs, alternatives—was invented in the wake of the PPBS. But one can also identify ideas of principal-agent theory in this cluster of reform concepts. Strategic planning and changed management styles reflect the influence of the two branches of public management. One must distinguish between transitions from bureaucratic to rational management styles and from rational or bureaucratic to humanistic management styles. The same is true of improved personnel management systems and incentives. But these latter can also be traced to the influence of principal-agent theory. However, the use of information technology seems to be a characteristic of NPM that has no special theoretical roots. It is strictly a pragmatic idea, used where it is useful. For the debatable attributes of NPM, the center of gravity of the theoretical origins seems to move a little bit away from management: legal budget constraints are surely a creation of the constitutional deliberations of public-choice scholars (especially Buchanan) [2; 3; 4]. Improved regulation can be traced back to property rights theory and the theory of regulation of public choice approach to regulation [15] and his colleagues of the Chicago school). The rationalization of jurisdictions and the streamlining of administrative structures can again be traced back to classical administrative theory and the Progressives; later they were taken up by neoclassics, policy analysis, and rational public management scholars. The role of policy analysis for the use of policy analysis and evaluation in the reforms is selfexplanatory. Democratization and enhanced citizen participation can mainly be traced back to NPA and its three subsequent approaches, although consumerist views and public choice have also played a role [6].