- Email: [email protected]
Shrinking the state: the political underpinnings of privatization
Book Review / Review of Radical Political Economics 33 (2001) 351–373
363
courses. Although Ideas and Economic Policy in Latin America is an interesting work at times, notwithstanding the criticisms and suggestions above, the seminal works on the political economy of modern Chile remain Class Conflict and Economic Development in Chile, 1958-1973 by Barbara Stallings (1978), The Breakdown of Democratic Regimes: Chile by Arturo Valenzuela (1978), and Chile: The Legacy of Hispanic Capitalism by Brian Loveman (2nd edition 1988). Although Anil Hira has laid some initial groundwork in the study of economic ideas in modern Chile, we still await a definitive account of the political economy, especially for the post-Allende period. Lastly, the publisher has priced this slim volume at $59.95, an economic injustice and a barrier to a wider circulation of this text. Michael J. Pisani Texas A&M International University Department of Economics and Finance 5201 University Blvd. Laredo, TX 78041-1900, USA [email protected] PII: PII S0486-6134(01)00083-3
References Hunt, S. D. (1990). Truth in marketing theory and research. Journal of Marketing 54, July, 1-15.
Shrinking the State: The Political Underpinnings of Privatization Harvey Feigenbaum, Jeffrey Henig, and Chris Hamnett; Cambridge, UK: Cambridge University Press, 1999. 174 pp. ⫹ index, $54.95 hb.; $18.95 pb. In the last two decades, privatization has played a major role in the spread of free market ideas and in the global transformation of state-market relations. Conventional market wisdom interprets privatization largely in economic terms, as a way to improve efficiency and economic performance. Feigenbaum, Henig, and Hamnett (the first two political scientists at George Washington University and the third a human geographer at King’s College, London) disagree, and argue that privatization primarily is a political phenomenon. The privatization movement, they suggest, is “a . . . movement whose goal is to realign political institutions in order to privilege the interests of some groups over others” (41). In turn, the forms taken by privatization as well as its social consequences can vary, depending on the political agenda, power, resources, and ideas of those who put it into practice, and the history, culture, traditions, and political and ideological configuration of the society in which it occurs. Privatization is a “political battleground, where outcomes remain uncertain, where victories and losses depend on local terrain, and where ideas play an important role” (35). Chapters 1 and 2 discuss the theory and politics of privatization. Privatization, “the shifting of a function, either in whole or in part, from the public sector to the private sector”
364
Book Review / Review of Radical Political Economics 33 (2001) 351–373
(1), is more complex than much of the literature suggests. It incorporates a variety of techniques, including management reforms, asset sales, contracting out, user fees, vouchers, and a range of public-private partnerships. Moreover, the public and private spheres have to be reconceptualized, according to the authors, as different ends of a continuum that has several dimensions: finance, delivery, responsibility, and decision making. In any given country, privatization may combine techniques and involve movements along one or more of these dimensions. Logically, these movements can take different directions. Asset sales, for instance, may be accompanied by an increase in the regulatory power of the state. Hence privatization may not, at least in any simple way, reduce the level of state intervention. This political model of privatization challenges, and potentially enriches, a number of theories of the state and public policy. First, the authors argue that privatization has undermined a variety of modernization, functional, cultural, pluralist, and developmental theories of state growth that all, to one degree or another, operate on the assumption that big government is the norm in Western industrialized societies. In contrast to the universalism and determinism of these approaches, the authors suggest a “conditional” approach that sees shifts in the scale and scope of the state “as the result of prior and continuing battles, compromises, and concessions among competing interests.” Since this clash of interests is variable in time and space, linear, evolutionary, and functional theories of the state’s growth are inherently problematic. Second, privatization challenges much of the incremental imagery of public policy theory, which relies on notions of social differentiation, the constraints imposed by institutions, or the gradualism of a social learning process. For all its complexity and conditionality, privatization nevertheless may represent a “paradigm shift”–significant and potentially radical change in the form of the state and the pattern and effects of public policy. Since privatization is a political phenomenon, the best way to understand it, according to the authors, is in terms of the goals of those who put it into practice. Pragmatic privatization is usually carried out in order to solve specific short-term administrative problems, such as the need to raise funds to cope with a financial shortfall. Although it may occur in the context of a crisis, it is usually not undertaken with politics or ideology in mind. Tactical privatization is, in contrast, political in the sense that it is carried out in order to solve the short-term political goals of particular actors–to cement a political alliance, to reward allies, or to create political space between otherwise similar political agendas. The goal of systemic privatization is to “reshape the entire society by fundamentally altering economic and political institutions and by transforming economic and political interests” (42-3). This too has several related dimensions. One is a “power shift”– a reduction in working class power by means of the transfer of public sector jobs to the private sector. Another is a “perceptual shift”–the delegitimization of the public sector and re-establishment of the hegemony of market relations. An “institutional shift” involves the attempt to privatize a society’s basic decision-making processes. Wide-ranging campaigns of systemic privatization most directly challenge conventional ideas about political rationality, since the risk of failure and of backlash are high and the information needed to reduce these risks is not always available. The bulk of the book (chapters 3 to 5) applies these considerations to the privatization experiences of the UK, France, and the United States. A number of significant findings
Book Review / Review of Radical Political Economics 33 (2001) 351–373
365
emerge from these chapters. First, all three cases demonstrate that the form taken by privatization can change over time. In the UK, pragmatic privatization to alleviate cash shortages in the early Thatcher years evolved into full-blown systemic privatization, whose aim was to eliminate the public sector, reduce the deficit, and move Britain towards an ideological image of a “property-owning democracy.” In France, privatization by the Socialists after 1983 was limited and pragmatic. After the conservative election victory of 1986, however, it was followed by a larger tactical campaign designed to differentiate the conservative forces from market socialism, as well as to reward allies by giving them access to underpriced public assets. In the United States, the home of pragmatic, “apolitical” privatization at the state and local levels, Reaganism at the national level transformed privatization into a campaign to reshape the political landscape by shrinking the public sector and de-funding the Left. Second, the French and British cases illustrate the limits of the efficiency argument. In France, nationalized industries were already efficient and profitable. Wealth was redistributed, but not created. In Britain, poor performance in the nationalized sector in the 1960s and 1970 might suggest that there were gains to be made. But the political decision to maintain the privatized companies as monopolies produced asset stripping, deteriorating service, excess profits, and bloated executive salaries rather than efficiency. Third, the British and U.S. cases suggest the way in which systemic and tactical privatizations can produce political backlash. In the UK, the ideological zealotry of the late Thatcher years resulted in a series of sell-offs— especially the rail and water systems—that could not be justified, and produced the most obvious cases of deteriorating services. The backlash against these played no small part in the decline of the Conservative Party and an increase in government regulatory activity in the 1990s. In the United States, ill-advised attempts to sell off federally owned land energized the environmental movement, and quickly muted the enthusiasm for privatization in all but the most committed. Moreover, all three cases show how tactical privatization is only a small step away from overt cronyism and an anticorruption backlash. The authors conclude that there is “clearly a limit to the public’s willingness to let a coterie of ideologues completely dismantle all the capacities of state intervention” (146). Pragmatic privatization may have the best chance of producing long-lasting effects precisely because it is selective, incremental, and often has low political visibility. Finally, the three case studies demonstrate that even when privatization is backed by powerful global interests and institutions, the form, trajectory, and effects of privatization will depend largely on conditions in specific places at specific points in political time. This is a useful antidote to often-inflated arguments about globalization and political convergence. In the final chapter the authors use this conclusion to urge caution with respect to the anticipated consequences of privatization in Eastern Europe. Shrinking the State is a valuable addition to literatures in a number of areas, especially state theory, public policy, and comparative political economy. The authors’ detailed analysis of privatization itself is not always matched in other areas–for instance in the relationship between national and international forces in the privatization movement, if this distinction still makes sense. They are also too quick to use the term “apolitical” to characterize the technocratic and nonpartisan ideology that dominates American local government. These
366
Book Reviews / Review of Radical Political Economics 33 (2001) 351–373
quibbles aside however, Shrinking the State will stand as a model of the way careful comparative theoretical and empirical work can shed new light on an important contemporary debate, and cut through the easy assumptions of conventional thinking. It will be of interest to students and scholars in politics, economics, and a number of other social sciences, and will be required reading in my graduate comparative politics seminar. Phillip J. Wood Political Studies Queen’s University Kingston, Ontario Canada, K7L 3N6 [email protected] PII: S0486-6134(01)00084-5
Rethinking Liberal Equality: From a “Utopian” Point of View Andrew Levine Ithaca and London: Cornell University Press, 1998. Pp. x ⫹ 129 ⫹ index. $32.50 hb. Egalitarians ultimately want more than liberal equality, with its “parochial” appeal to distributive justice; they want democratic equality, with its “utopian” stress on republican community, self-realization, and autonomy. This is the theme of the book, and, like Andrew Levine’s other work (1988, 1993), it enjoins Marx and Rousseau in their critiques of aspects of liberal theory and society. Here, Levine worries that some contemporary egalitarians, e.g. John Roemer (1994), do not press a sufficiently radical case– one that accords with the “supra-liberal vision of the historical left”–against liberal institutions such as the market mechanism, constitutionalism, and private property in the means of production. Levine’s “utopian” rethinking consists in resuscitating an ideal of social, political, and economic life that goes beyond liberal institutions, but at the same time keeps and enhances a staid component of liberal theory, that of equal respect and concern for the autonomous quality of moral personality. “Utopian” merits scare quotes, Levine argues, because even though his prospective alternative is tentatively, speculatively, and incompletely broached, it is nonetheless empirically plausible and historically feasible. And that alternative, or something like it, is indispensable lest we “remain stalled where the liberal egalitarian leaves off.” In the first part of the book, Levine explores the economic egalitarianism of contemporary liberal theory, focussing on the “equality of what?” debates inaugurated by Amartya Sen (1980) and Ronald Dworkin (1981a, 1981b). He sorts out concisely the issues that divide welfarist from resourcist theories. Swiftly put, the former theory is concerned with the distribution of welfare (preference satisfaction) and the latter with the distribution of the resources (e.g. wealth and income) required to attain welfare. Levine does not take sides
363
courses. Although Ideas and Economic Policy in Latin America is an interesting work at times, notwithstanding the criticisms and suggestions above, the seminal works on the political economy of modern Chile remain Class Conflict and Economic Development in Chile, 1958-1973 by Barbara Stallings (1978), The Breakdown of Democratic Regimes: Chile by Arturo Valenzuela (1978), and Chile: The Legacy of Hispanic Capitalism by Brian Loveman (2nd edition 1988). Although Anil Hira has laid some initial groundwork in the study of economic ideas in modern Chile, we still await a definitive account of the political economy, especially for the post-Allende period. Lastly, the publisher has priced this slim volume at $59.95, an economic injustice and a barrier to a wider circulation of this text. Michael J. Pisani Texas A&M International University Department of Economics and Finance 5201 University Blvd. Laredo, TX 78041-1900, USA [email protected] PII: PII S0486-6134(01)00083-3
References Hunt, S. D. (1990). Truth in marketing theory and research. Journal of Marketing 54, July, 1-15.
Shrinking the State: The Political Underpinnings of Privatization Harvey Feigenbaum, Jeffrey Henig, and Chris Hamnett; Cambridge, UK: Cambridge University Press, 1999. 174 pp. ⫹ index, $54.95 hb.; $18.95 pb. In the last two decades, privatization has played a major role in the spread of free market ideas and in the global transformation of state-market relations. Conventional market wisdom interprets privatization largely in economic terms, as a way to improve efficiency and economic performance. Feigenbaum, Henig, and Hamnett (the first two political scientists at George Washington University and the third a human geographer at King’s College, London) disagree, and argue that privatization primarily is a political phenomenon. The privatization movement, they suggest, is “a . . . movement whose goal is to realign political institutions in order to privilege the interests of some groups over others” (41). In turn, the forms taken by privatization as well as its social consequences can vary, depending on the political agenda, power, resources, and ideas of those who put it into practice, and the history, culture, traditions, and political and ideological configuration of the society in which it occurs. Privatization is a “political battleground, where outcomes remain uncertain, where victories and losses depend on local terrain, and where ideas play an important role” (35). Chapters 1 and 2 discuss the theory and politics of privatization. Privatization, “the shifting of a function, either in whole or in part, from the public sector to the private sector”
364
Book Review / Review of Radical Political Economics 33 (2001) 351–373
(1), is more complex than much of the literature suggests. It incorporates a variety of techniques, including management reforms, asset sales, contracting out, user fees, vouchers, and a range of public-private partnerships. Moreover, the public and private spheres have to be reconceptualized, according to the authors, as different ends of a continuum that has several dimensions: finance, delivery, responsibility, and decision making. In any given country, privatization may combine techniques and involve movements along one or more of these dimensions. Logically, these movements can take different directions. Asset sales, for instance, may be accompanied by an increase in the regulatory power of the state. Hence privatization may not, at least in any simple way, reduce the level of state intervention. This political model of privatization challenges, and potentially enriches, a number of theories of the state and public policy. First, the authors argue that privatization has undermined a variety of modernization, functional, cultural, pluralist, and developmental theories of state growth that all, to one degree or another, operate on the assumption that big government is the norm in Western industrialized societies. In contrast to the universalism and determinism of these approaches, the authors suggest a “conditional” approach that sees shifts in the scale and scope of the state “as the result of prior and continuing battles, compromises, and concessions among competing interests.” Since this clash of interests is variable in time and space, linear, evolutionary, and functional theories of the state’s growth are inherently problematic. Second, privatization challenges much of the incremental imagery of public policy theory, which relies on notions of social differentiation, the constraints imposed by institutions, or the gradualism of a social learning process. For all its complexity and conditionality, privatization nevertheless may represent a “paradigm shift”–significant and potentially radical change in the form of the state and the pattern and effects of public policy. Since privatization is a political phenomenon, the best way to understand it, according to the authors, is in terms of the goals of those who put it into practice. Pragmatic privatization is usually carried out in order to solve specific short-term administrative problems, such as the need to raise funds to cope with a financial shortfall. Although it may occur in the context of a crisis, it is usually not undertaken with politics or ideology in mind. Tactical privatization is, in contrast, political in the sense that it is carried out in order to solve the short-term political goals of particular actors–to cement a political alliance, to reward allies, or to create political space between otherwise similar political agendas. The goal of systemic privatization is to “reshape the entire society by fundamentally altering economic and political institutions and by transforming economic and political interests” (42-3). This too has several related dimensions. One is a “power shift”– a reduction in working class power by means of the transfer of public sector jobs to the private sector. Another is a “perceptual shift”–the delegitimization of the public sector and re-establishment of the hegemony of market relations. An “institutional shift” involves the attempt to privatize a society’s basic decision-making processes. Wide-ranging campaigns of systemic privatization most directly challenge conventional ideas about political rationality, since the risk of failure and of backlash are high and the information needed to reduce these risks is not always available. The bulk of the book (chapters 3 to 5) applies these considerations to the privatization experiences of the UK, France, and the United States. A number of significant findings
Book Review / Review of Radical Political Economics 33 (2001) 351–373
365
emerge from these chapters. First, all three cases demonstrate that the form taken by privatization can change over time. In the UK, pragmatic privatization to alleviate cash shortages in the early Thatcher years evolved into full-blown systemic privatization, whose aim was to eliminate the public sector, reduce the deficit, and move Britain towards an ideological image of a “property-owning democracy.” In France, privatization by the Socialists after 1983 was limited and pragmatic. After the conservative election victory of 1986, however, it was followed by a larger tactical campaign designed to differentiate the conservative forces from market socialism, as well as to reward allies by giving them access to underpriced public assets. In the United States, the home of pragmatic, “apolitical” privatization at the state and local levels, Reaganism at the national level transformed privatization into a campaign to reshape the political landscape by shrinking the public sector and de-funding the Left. Second, the French and British cases illustrate the limits of the efficiency argument. In France, nationalized industries were already efficient and profitable. Wealth was redistributed, but not created. In Britain, poor performance in the nationalized sector in the 1960s and 1970 might suggest that there were gains to be made. But the political decision to maintain the privatized companies as monopolies produced asset stripping, deteriorating service, excess profits, and bloated executive salaries rather than efficiency. Third, the British and U.S. cases suggest the way in which systemic and tactical privatizations can produce political backlash. In the UK, the ideological zealotry of the late Thatcher years resulted in a series of sell-offs— especially the rail and water systems—that could not be justified, and produced the most obvious cases of deteriorating services. The backlash against these played no small part in the decline of the Conservative Party and an increase in government regulatory activity in the 1990s. In the United States, ill-advised attempts to sell off federally owned land energized the environmental movement, and quickly muted the enthusiasm for privatization in all but the most committed. Moreover, all three cases show how tactical privatization is only a small step away from overt cronyism and an anticorruption backlash. The authors conclude that there is “clearly a limit to the public’s willingness to let a coterie of ideologues completely dismantle all the capacities of state intervention” (146). Pragmatic privatization may have the best chance of producing long-lasting effects precisely because it is selective, incremental, and often has low political visibility. Finally, the three case studies demonstrate that even when privatization is backed by powerful global interests and institutions, the form, trajectory, and effects of privatization will depend largely on conditions in specific places at specific points in political time. This is a useful antidote to often-inflated arguments about globalization and political convergence. In the final chapter the authors use this conclusion to urge caution with respect to the anticipated consequences of privatization in Eastern Europe. Shrinking the State is a valuable addition to literatures in a number of areas, especially state theory, public policy, and comparative political economy. The authors’ detailed analysis of privatization itself is not always matched in other areas–for instance in the relationship between national and international forces in the privatization movement, if this distinction still makes sense. They are also too quick to use the term “apolitical” to characterize the technocratic and nonpartisan ideology that dominates American local government. These
366
Book Reviews / Review of Radical Political Economics 33 (2001) 351–373
quibbles aside however, Shrinking the State will stand as a model of the way careful comparative theoretical and empirical work can shed new light on an important contemporary debate, and cut through the easy assumptions of conventional thinking. It will be of interest to students and scholars in politics, economics, and a number of other social sciences, and will be required reading in my graduate comparative politics seminar. Phillip J. Wood Political Studies Queen’s University Kingston, Ontario Canada, K7L 3N6 [email protected] PII: S0486-6134(01)00084-5
Rethinking Liberal Equality: From a “Utopian” Point of View Andrew Levine Ithaca and London: Cornell University Press, 1998. Pp. x ⫹ 129 ⫹ index. $32.50 hb. Egalitarians ultimately want more than liberal equality, with its “parochial” appeal to distributive justice; they want democratic equality, with its “utopian” stress on republican community, self-realization, and autonomy. This is the theme of the book, and, like Andrew Levine’s other work (1988, 1993), it enjoins Marx and Rousseau in their critiques of aspects of liberal theory and society. Here, Levine worries that some contemporary egalitarians, e.g. John Roemer (1994), do not press a sufficiently radical case– one that accords with the “supra-liberal vision of the historical left”–against liberal institutions such as the market mechanism, constitutionalism, and private property in the means of production. Levine’s “utopian” rethinking consists in resuscitating an ideal of social, political, and economic life that goes beyond liberal institutions, but at the same time keeps and enhances a staid component of liberal theory, that of equal respect and concern for the autonomous quality of moral personality. “Utopian” merits scare quotes, Levine argues, because even though his prospective alternative is tentatively, speculatively, and incompletely broached, it is nonetheless empirically plausible and historically feasible. And that alternative, or something like it, is indispensable lest we “remain stalled where the liberal egalitarian leaves off.” In the first part of the book, Levine explores the economic egalitarianism of contemporary liberal theory, focussing on the “equality of what?” debates inaugurated by Amartya Sen (1980) and Ronald Dworkin (1981a, 1981b). He sorts out concisely the issues that divide welfarist from resourcist theories. Swiftly put, the former theory is concerned with the distribution of welfare (preference satisfaction) and the latter with the distribution of the resources (e.g. wealth and income) required to attain welfare. Levine does not take sides