Public Management and Administration - Owen E.hughes

Public Enterprise 111
in practice and have led to governments reducing their reliance on public enterprise
as an instrument of policy. There are really two options for the future. The
first is to improve the sector, aiming for greater efficiency and better public
control, hopefully permitting enterprises some independence, while retaining
the benefits of public ownership. Improvements can be made, particularly in
accountability, and public enterprise can continue.
The second perspective is that whatever is done, public enterprise is still just
that, public and enterprise and from this inherent conflict between government
and market stems inefficiency and the endemic problems of accountability. The
option then is to dispose of assets. There were some public enterprises that
could be privatized with little adverse effect. There seems little point in hindsight
for governments owning banks, insurance companies or airlines. On the
other hand, the privatization of public utilities has not reduced demands on
government to regulate them. In many countries there were political consequences
long after the relevant utilities were taken from the public sector.
Indeed, there was little public support or political pressure in favour of privatization,
but governments saw the opportunity to raise some discretionary
income. This was probably a more important motivation than ideology. The
response of most governments to the question of public enterprise has been to
privatize in those circumstances where it could be done, so to a great extent,
the experiment with government ownership of enterprises is finishing. There
may even be benefits for consumers in the long run, although they have been
slow in arriving.
The public enterprise sector is interesting for public management as a topic
in its own right, and also as the area of government to change the most dramatically
over the 1980s and 1990s. Economic theorists carried out studies
which purported to show that public enterprises were inherently less efficient
than private enterprise. Although the evidence was mixed and far from conclusive,
this change in theory led to the adoption of policies by governments to
reduce or even eliminate enterprises from the public sector. The full effects of
this are not yet apparent, although when privatization has been carried out
hastily and with insufficient thought as to the regulatory and competitive environment,
outcomes for consumers have not been markedly better. Perhaps there
is a lesson in this for public management in general. The privatization of public
enterprise may be a general test case for the whole public sector, but it is
one which shows that care needs to be taken in developing clear objectives, and
implementation is crucial for desirable outcomes.
In the final analysis it seems difficult to see any long-term future for the public
enterprise sector in any advanced or developing country, especially for those
enterprises supplying goods or services on a large scale. There may be a continued
existence for smaller enterprises or ones set up in cooperation with the
private sector, but that will be all. The reduction of the public enterprise sector
in the 1980s and 1990s says something about the public sector in general. The
fact that government entities may have lasted a long time is no guarantee of