Monday, December 12, 2011

Public Scrutiny When Privatizing the Public Sector

The Problem:
After we abolished the parliament and the government, the civil administration feels rather lonely and unsupervised. So why don't we abolish the administration too?
No Civil Service is considered a bastion of effectiveness and innovation. If efficiency could reach private sector level, it is said that income tax could be reduce to half. Google government inefficiency and you will find an endless series of cartoons. I could not resist to copy a few.

Inefficiency is inherent to the current system of public administration. Explanations abound: Politicians don't like cuts in the public sector as it is complicated, long term and against a strong constituency. Using the coercive power to raise taxes is always easier. Though these options are in no way mutually exclusive. The waves of privatization of public sector functions have reduced cost but too often at the expense of quality. In short, it is complicated.  

The Solution:
In the new democracy advocated by this blog, every law has its own budget. The logical next step is that every law has its own administration. How does it work:

  1. The public proposes a law using their like-button 
  2. The cost of implementation of the bill is an integral part of this public discussion (even the type of taxes to raise the funds are discussed.)
  3. A random sample of the electorate approves or rejects the bill.
  4. Using the cost proposal as a ceiling, private companies can bid to implement the law. 
  5. A good performance system ensures efficiency does not come at the cost of quality.
  6. Other private companies bid for supervision and audit of the implementation including complaint handling.
  7. At all times implementation should be fully transparent (with the usual exceptions) and any citizen can ask for clarifications. 
Sure, not every civil servant will disappear (think national defense), but this is the vision. This is what should lead us towards our goal. And yes, privatization is preferably local in line with the principles of agile reform.

The Transition:
Privatization has been the flavor of the week for several decades now. But administrations have been growing simultaneously certainly if contracting-in is taken into account. And it has gone at the expense of quality as far as the time I spent talking to a machine to get public services is a reliable indicator. 
Civil service reform is as complicated as it is unpopular. The current crisis might be a good opportunity to implement unpopular measures and to start a process of real privatization. 
Still, a better approach might be to cut the public administration into very small autonomous pieces that have distinct function with a performance target linked to a fixed budget. This has been tried in various sectors around the world with mixed results. 
No doubt, abolishing the the administration is fraud with difficulties. Funny enough, when I try to explain this to friends, they find it so much more plausible than abolishing elections.

Tuesday, December 6, 2011

Save the Rich!

It does not really matter how you contribute, as long as we all start doing and work in the same direction. I just wish each contribution could be as funny as the one made by Garfunkel and Oates.

Sunday, December 4, 2011

Don't Use the Budget to Pass the Budget!

The Problem:
Belgium has a government at last. 540 days after the elections a new government will be in office. The budget was the final step in the negotiations. But this final phase only started on day 517. 23 days were sufficient, not because the budget negotiations were unimportant but because the budget can always be used to pass the budget. This has been common practice for a while. As a result most European countries have built up astronomical debt which is the main cause of the current economic crisis. 
Citizens have eagerly supported politicians that mortgaged the economic future of our children. As if we were in a collective prisoners dilemma, we preferred to have our part of the welfare state rather than investing wisely in productive and sustainable growth.

The Solution:
I remember when we decided to increase our daughter's pocket money on the condition that she would buy her own cloths. Her need for designer brands suddenly evaporated. She carefully considered whether she really needed another pair of trousers. 
To avoid that the budget is used to pass the budget and that unproductive expenditure seeps into the budget, every law should have its own (multi-year) budget and when the law is passed citizens immediately also pass the tax bill attached to it. 
The law will also stipulate what type of tax is used to pay for a particular service: An import tax, a progressive income tax, a property tax, or levy. Citizens will be able to consider whether the proposed law is worth the cost (tax) and whether the polluter pays principle is applied (i.e. the groups in society that profit also contribute combined with a healthy solidarity from the rich and the strong towards the poor and the weak.) 
Finally, the tax payer can judge whether the law will result in an economic gain that is worth borrowing for (i.e. economic growth will outpace interest rates.)

The Transition:
Nothing stops the application of this idea starting today though the cold-turkey transition might be considered too radical. 
An intermediate step could be to make the budget more transparent and encourage public debate about it. It is surprising that the citizens are not interested in the figures. Politicians seem to know that so they don't try to gain political visibility through a strong position on the budget details. Maybe that is why the budget in Belgium got negotiated in only 23 days. Or maybe the government negotiations over the budget were short because the negotiators did not want citizens to have time to scrutinize the budget.