Management Paper

9546 Words May 7th, 2012 39 Pages


Paul Andrisani and Simon Hakim

Center for Competitive Government

Richard J. Fox School of Business and Management
Temple University

Privatization of public services to reduce cost and improve quality has a long history. Peter Drucker, the Austrian born management professor, was the first to suggest contracting out of local services to private companies. Indeed many municipal services were already contracted out by 1980 in Great Britain. But the most significant drive for privatization in Great Britain, which signaled the way to the rest of the world, came about with the election of Margaret Thatcher in 1979. In the following decade a host of state owned enterprises were
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The focus of privatization efforts on the state level has mainly involved the contracting out of services. According to a recent survey, approximately eighty percent of state level privatization efforts involved contracting out of services, six percent involved private sector grants and subsidies, and four percent involved public-private partnerships (Keon and Jasper, 1998). The leaders in these initiatives were Florida, Colorado, California, Michigan, Maryland, and Iowa.

Contracting out involves almost all services delivered by government. Grants and subsidies occur typically, however, in social services, health care, mental health and retardation, and transportation agencies, while public-private partnerships tend to be concentrated in corrections, health care, and social and mental health services.

In the sections to follow in this introductory chapter, we focus on a number of overview issues. First, we outline general criteria for the appropriate intervention of government in the marketplace. Second, we then discuss the forms such intervention may take. Government intervention does not mean, for example, that government necessarily needs to produce and or supply the service at issue. For instance, while national defense is clearly the responsibility of government, the production of weapons is typically delivered by private companies and not by

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