The Nordic Model - Embracing globalization and sharing risks

With this kind of productivity growth in the private sector, the
prospects for similar gains in the public sector would seem good.
However, investments in IT alone are far from enough. IT is merely
a technological enabler. To improve productivity, firms have to
make complementary investments in human capital and changed
work practices of the order of three to five times the investments
in IT. 12 What is especially troublesome from the public sector’s
perspective is that the changes in work practices that are essential
include higher work autonomy and more powerful financial
incentives (usually for teams of workers). Given the problems of
accountability in the public sector and the bureaucracy built to deal
with them, it is going to be hard to change the whole system. Yet,
if these complementary investments are not made, the evidence
from the private sector shows that returns from IT investments
are often minimal, even negative. 13
8.5 THE FUTURE OF PUBLIC SERVICES –
LEVERAGING THE PRIVATE SECTOR
Increase the reliance
on privately supplied
services, but keep
control of the “core”
activities of the public
sector
The private sector
is already providing
a significant part of
the services financed
by the public sector,
and the private sector
could do more
Because of the inevitable burdens of public bureaucracy, the best
way to raise public sector productivity is often to look for ways to
“leverage” the private sector without compromising the government’s
broader social objectives. This means increasing the reliance
on privately supplied services, while keeping “core activities”
under government control. The strategy is similar to outsourcing
within the private sector and some of the lessons learned there
can be useful. But as always, one should be careful about imitating
private business models without checking how well their logic
fits the public context. The core activities of the public sector are
obviously very different from those in the private sector.
Many OECD countries, including the Nordic countries, are
already relying heavily on the private sector for part of government
financed services. Figure 8.1 shows the central governments’
purchases of all goods and services from outside vendors as a
proportion of total expenditures, excluding transfers and interest
payments. The Nordic countries, with their large government
The proper scope of the public sector · 145