Public services 

Continuing privatization and outsourcing of service provision 

On the one hand, propelled by the EU’s persisting market liberalization drive, outsourcing and privatization has continued to further strengthen the market position and share of private sector providers. This holds true particularly for CEE countries in which further outsourcing and privatization of public service provision can be seen also as measures to cope with the in part still ‘unfinished business’ of their secular transformation (see the chapters on CEE countries in Wollmann, Kopric and Marcou, 2016). It also applies to southern European countries which, under budgetary (sovereign debt) pressure and prodded by the EU and the IMF, have initiated asset privatization in order to procure additional financial resources (see Tsekos and Triantafyllopoulou, 2016 on Greece). 

Comeback of the public/municipal sector in the provision of public services?

On the other hand, the public/municipal sector has seen a comeback in service provision for several reasons.

On a global scale the neo-liberal belief in the superiority of the market forces and of the private sector over the public sector has been profoundly shattered by the bankruptcy of Lehman Brothers in September 2008 and its worldwide financial and economic aftermath and politico-psychological shockwave, which has sparked off a widespread reappraisal of the state and of the public sector in its role and the merits of rectifying and remedying market and private sector failures.

While, well into the 1990s, it was all but taken for granted in the political and academic discourse that the privatization of service provision would entail ‘better quality at lower costs’ this assumption has been seriously called into question both by practical experience and in academic research. Recent internationally comparative studies plausibly suggest that with regard to provision of public utilities public enterprises are on a par with, if not superior to, private sector providers.

The positive reassessment of the role and merits of public/municipal sector provision is also mirrored in and supported by the politico-cultural ‘value change’ that is evidenced by representative surveys as well as national and local referendums in which the privatization of public/municipal assets and services has been rejected, often by broad majorities (see Kuhlmann and Wollmann, 2019, 250).

The comeback of the public/municipal sector has unfolded along two tracks. Municipal companies have been established anew or have expanded, also by merging and by forming intermunicipal companies. Moreover, municipalities have proceeded to remunicipalize facilities and services by re-purchasing shares previously sold to private companies or by re-insourcing previously outsourced (contracted out) services after the expiration of the respective concession contracts. 

Germany is an exemplar particularly in the energy sector. After the municipal companies (Stadtwerke) had lost ground to the Big Four private sector energy giants during the 1980s, they have now regained strength and market share in operating local energy grids and supplying as well as generating (renewable) energy themselves (see Kuhlmann and Wollmann, 2019, 253; Bönker et al., 2016, 91). 

Similarly, remunicipalization has progressed in the water sector in countries where during the 1980s private water companies, particularly the international big players, such as the French Veolia and Suez, expanded in local water markets. In the meantime, municipalities have proceeded to re-purchase or re-insource water provision (see Kuhlmann and Wollmann, 2019, 250; Lieberherr et al., 2016; Hall, 2012). 

However, in order to realistically and cautiously assess the potential of further remunicipalization, significant hurdles should be called to mind. 

(Re-) Emergence of the third sector?

Public utilities

In the provision of public utilities, energy cooperatives have recently made remarkable advances. Founded typically by local citizens, they join the cooperative movement which, historically dating back to the 19th century, is made up of a multitude of (economically often quite powerful) organizations that primarily focus on agricultural, housing, banking and consumer matters (for an overview and data see Cooperatives Europe, 2015). 

While the recent emergence of energy cooperatives is, no doubt, a remarkable example of a ‘societal’ initiative which, in view of the growing importance of local level renewable energy generation and supply, is likely to have further growth potential. However, such a forecast needs to be cautioned since until now the quantitative contribution of cooperatives to the overall energy generation is quite scanty.

Social services, care for the needy

Third sector organizations and actors have (re-)appeared also in the provision of personal social services and care for the needy. This development has emerged on two tracks.

For one, in the wake of the worldwide financial crisis that followed the Lehman Brothers collapse in September 2008, European governments have resorted to fiscal austerity and retrenchment policies. These have included policy initiatives designed to relieve the public sector of its direct financial and operational responsibility for the provision of social services and to ‘top-down’ activate and ‘tap’ the financial and operational potential of third sector organizations and actors. 

The top-down track is exemplified by the policy initiative inaugurated by the EU in 2011, targeted at the creation of social enterprises (European Commission, 2014).

Second, societal organizations and actors have come to life bottom-up in reaction to the neo-liberal policy-inspired financial cutbacks in personal social services and in response to the socio-economic needs engendered by these policies of shifting the financial and operational burden back to the needy and their families and peers. 

Cooperatives that focus on providing personal social services and care can historically be traced back to the self-help organizations of the 19th century. Italy is the prime example of this long and continuous development. While in Italy the total number of cooperatives currently amounts to some 40,000, with a broad scope of agricultural, housing and other cooperatives, as of now about 1,400 social cooperatives (cooperative sociali) exist, half of which are engaged in child, elderly and disabled care (Bauer and Markmann, 2016, 288).

Moreover, in reaction to fiscal austerity measures and the ensuing cutback of social services provision, ‘societal’ self-help initiatives have come to life which aim at providing services and care for themselves as well as for others. For instance in Greece voluntary groups have sprung up, at first in big cities, such as the ‘Atenistas’ in Athens, and subsequently “all over the country” (Tsekos and Trantafyllopoulou, 2016, 144).

Notwithstanding the remarkable (re-)emergence of societal (third sector) initiatives, organizations and actors, their further course and expansion should be assessed with caution. A major crux lies in their precarious financial potential. Although they have proved to be able to mobilize additional financial resources (donation money, membership fees, also user charges), personnel resources (volunteers) as well as entrepreneurial and organizational skills (particularly in the case of social enterprises), their durable and long-term engagement and growth depend crucially on the availability of sufficient public funding. The salience of this financial aspect has been highlighted in a recent major international study on the third sector (see Enjolras et al., 2016, 9). 

Concluding remarks: Pendulum swinging back?

In view of the comeback of the municipal sector in the delivery of public services and the (re-)emergence of third sector/societal organizations and actors in the provision of personal social services and care for the needy, the question arises whether, in a historical perspective, the ‘pendulum has swung back’.

The pendulum image stems from Polanyi’s seminal work on the Great Transformation (see Polanyi, 1944), in which long-term swings from state regulation to the markets and back were addressed. Adopted by Millward (see Millward, 2005), the pendulum image has subsequently been used in the international comparative debate on service provision as well (see Wollmann/Marcou, 2010; Hall, 2012; Wollmann, 2016, 331). 

While the pendulum metaphor certainly provides a useful heuristic lens apt to analytically identify developmental stages and shifts, two inherent limits and ‘traps’ should be borne in mind cautioning against rash conclusions. For one, it is essential to make careful note of and take into account the contextual conditions and specificities that exist between the stage and situation in question and the respective historical starting conditions and points of reference. Second, the image should not lead us to straightforwardly assume a kind of determinism or cyclic pattern as in the movement of a pendulum swinging back and forth (see also Bönker et al., 2016, 81).

Hellmut Wollmann is Emeritus Professor of Public Administration at Humboldt Universität, Berlin.

*The article is based on Wollmann, 2018, International Public Management Journal.

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