6 January 1999
Source: http://www.usia.gov/current/news/latest/99010602.tlt.html?/products/washfile/newsitem.shtml

USIS Washington File

06 January 1999


By Donald F. Kettl  (3870)

(Mr. Kettl is a Non-Resident Senior Fellow for Governmental Studies at
The Brookings Institution and Director of the Robert M. La Follette
Institute of Public Affairs at the University of Wisconsin at Madison.
He wrote the following background paper in connection with the "Global
Forum on Reinventing Government" to be held January 14-15 in
Washington, DC. The forum will be moderated by Vice President Al

In the late 1970s and early 1980s, governments around the world found
themselves simultaneously confronted by remarkably similar pressures.
Citizens demanded smaller, more effective governments. They wanted
more responsive services, more efficiently delivered. Developed
nations struggled to reshape their social welfare and economic policy
apparatus, while developing nations sought to create social and
economic systems that could compete effectively in the globalizing
economy. While the chords of reform varied, the underlying theme was
remarkably common. Citizens demanded a reinvention of the way their
governments operated -- and of the relationships between government
and citizens.

Faced with huge challenges, governments everywhere launched major
innovations. In some countries there were fundamental structural
changes, like the privatization of railroads, airlines, and telephone
companies. In other countries, there were profound process changes,
like customer service and improvements in the public procurement
system. These changes took place against a backdrop of fundamental
social and political changes, from toppling the Berlin Wall to the end
of apartheid. European nations tackled the fundamental issues of the
new union, East Asian nations launched substantial state-supported
economic development strategies and in Eastern Europe countries
struggled to democratize. In the United States, a major tax-reduction
movement accompanied an assault on the federal budget deficit and
President Bill Clinton and Vice President Al Gore's major campaign to
"reinvent government."

Viewed up close, these changes certainly flowed from the special
problems each nation confronted. Viewed from a higher altitude,
however, it is impossible to miss the worldwide nature of these
changes. The scope, breadth, and pace of change proved stunning and
universal. It proved nothing less than a global revolution, spread by
the dawn of the information age and by the inescapable demands of
citizens. A careful look at this revolution helps show the fundamental
problems it was launched to solve; common themes nations used in
attacking these problems; important lessons they learned; and the
tough questions that lie ahead.

This paper will examine some of the issues to be discussed at the
January 1999 Global Forum on Reinventing Government. It cannot be
comprehensive. Indeed, the experiences and lessons of the world's
nations over the last twenty years are far too rich to capture in any
document, no matter how detailed. Neither can this paper provide clear
answers. But those who have looked carefully at global reinvention
invariably come away with something even more important: a sometimes
surprising realization of the universality of the basic questions.
This paper is intended as a way to shape those discussions; to provide
a foundation for thinking about the lessons the past generation of
innovations has taught; and to begin identifying the questions that
the next generation of reform must solve.

Basic Issues

Any careful look at this puzzle must begin with a basic question: Why
did so many governments around the world launch such fundamental
reforms in such a short period of time? It is impossible to miss
either the flood of new government strategies or the remarkable
resonance of the basic strategies. Governments virtually everywhere
downsized, privatized, reengineered, and sought improved customer
service. They worked to improve the performance of government and
reduce its costs. They tried to increase; the skills of government
workers, the flexibility government workers had to do their jobs and
the accountability of government workers to governmental policy. They
pared back government services while attempting to regain citizen
trust. They struggled to define their new relationships with an
increasingly global community, where neither economic nor social
policies could be pursued in isolation.

Why did the "size-of-government" issue burst so suddenly and
universally into the civic consciousness?

Developed nations, in the late 1970s and early 1980s, found themselves
confronted by extraordinarily powerful demands for reducing the size
of government. These demands, furthermore, were largely unrelated to
how big government actually was. In 1980, government at all levels in
Australia amounted to 31.4 percent of gross domestic product. In
Canada, it was 39.6 percent; in New Zealand, it was over 50 percent,
in the United Kingdom, 43.0 percent; in the United States, 31.4
percent; and in Sweden, 60.1 percent. Government employees ranged from
16 percent of all workers in Australia and the US to 21 percent in the
United Kingdom to 30 percent in Sweden. Despite these huge differences
in the actual size of government, the government-reform,
government-cutting movement hit all of these nations at about the same

In part, this movement grew out of the profound economic crises of the
1970s. Economic orthodoxy had grown up to tackle either high inflation
or high unemployment. It was ill-equipped to deal with both --
"stagflation" -- as it plagued the global economy following the
decade's oil shocks. Slower economic growth and higher inflation ate
away at many citizens' standard of living. That, in turn, made taxes
all the more burdensome. Policy makers found themselves pressed for
new ideas to fuel the creation of jobs and stable incomes, but in
searching for solutions they found themselves hamstrung by a
generation of regulatory and protectionist schemes that bound up their
nations' economies. Some nations, like Canada, faced a crippling
deficit. Others, like New Zealand, faced tight budgets and stark
challenges to their industries. A plea to shrink government
accompanied demands to untie the constraints on private markets -- to
use more market-based competition to fuel growth and, in the process,
serve as a model to reform government as well.

To complicate the issue, these economic pressures eroded the standard
of living of many families. They found themselves working harder --
even putting both spouses to work -- to live as well. These family
strains created further pressures to cut government spending and the
tax burdens that supported it.

Reformers also sought to shrink -- or at least reinvent -- government
for another reason. In program after program, performance lagged
promise. Governments, and government officials, faced rising citizen
expectations and lower confidence in their ability to deliver. In
part, this was because citizens behaved as citizens have always
behaved. They wanted ever-higher levels of service in exchange for
ever-lower taxes, and elected officials often abetted this unbalanced
equation through their campaign rhetoric. In part, this was because
governments were trying to do very hard things, like eliminate poverty
and promote global competitiveness. And in part, this was clearly
because performance was, far too often, poor.

So in addition to shrinking the size of government, governments faced
the very real challenge of improving the performance of their
programs. Doing either --cutting programs or improving performance --
would have been challenging enough. Doing both simultaneously proved
far, far more difficult.

Add to that one further element. Governments, like private companies,
found themselves struggling with the demands of the transformation
from the industrial age to the information age. The delivery of public
services became far less a process of creating efficient but
straightforward processes and much more a matter of creating and
managing complex partnerships between government and civil society.
Governments everywhere relied much more on contracting out, and on
other indirect service processes. They confronted new management
challenges in using these new processes. And they did so in the midst
of an information revolution so vast that reform ideas sparked
copycats around the world before their originator had a chance to
determine whether they actually worked. In fact, the idea of
innovation itself became an important force promoting the global
government reform movement.

Developing nations faced these problems -- and more. Some countries,
like South Africa, strove to move from apartheid to a more integrated
social and economic structure. Korea and other nations in the region
worked to create, and then struggled to sustain, economic growth.
Brazil sought social reform in the midst of rapid economic change. The
developing nations, confronting the same ever-more-globalized economy,
encountered all the issues of the more-developed nations. But they
struggled as well to solve these problems in the midst of
often-stunning tensions and problems. For many of these countries the
big questions were not about governmental "reinvention" but about
government "invention."

In short, the 1980s and 1990s saw both big challenges and sweeping

Change is constant, of course, and anyone in the midst of it tends to
see its implications as global. Every small wave looks like a tsunami
to pilots of small sailboats. The waves of innovation at the end of
the twentieth century, however, were in fact far larger than most.
They swept across more nations more quickly. They responded to
problems as important for their breadth as for their universality.
They prompted government-based innovations remarkable for their scope
and for how broadly they were shared. Governments everywhere sought a
new equilibrium: a new balance in the expectations their citizens
placed on them; the tax resources they provided; the services they
expected; the administrative mechanisms they used; and perhaps most
important, the relationships between citizens and their governments.
Not since the dawn of the industrial age had such fundamental changes
swept so far so fast through so many governments.

Strategies and Tactics

As the reform movement spread throughout the world, it developed
common characteristics.

-- The search for a "smaller" government-through efficiency gains
rather than cutting programs.

Citizens contended that government had gotten too big. They insisted
on lower taxes. To meet these imperatives, governments often responded
not by eliminating programs but by seeking increased efficiency in
existing ones. Nations with large state-owned businesses, from the
United Kingdom to Mexico and New Zealand to Portugal, sold many of
them off. The United States accomplished the largest downsizing of its
federal government workforce in history and balanced its budget for
the first time in decades.

But these actions could only reduce the size of government so far. In
the developed nations citizens had come to like many aspects of the
social welfare state and in developing nations it became clear that
some sort of social welfare state would be needed to protect citizens
from the vagaries of a market economy. That left governments little
choice but to seek more efficient ways of delivering services. If
citizens made anything clear, it is that they expected the same level
of services for less tax revenue -- and that they expected governments
to find some way of doing more with less. Citizens' insistence on a
smaller government was not matched by an appetite for cutting services

-- The development of new processes-like reengineering of service
systems, contracting out, performance management, and accrual
accounting-to promote those efficiency gains.

In the past, governments would have tackled such problems by
reorganizing. Faced with the size problem and the efficiency
imperative, however, restructuring proved only of limited help. The
United States for decades had tackled this challenge by contracting
out-relying on partnerships with private and non-governmental
organizations for service delivery. Other nations, like Canada, began
aggressively developing such partnerships. New Zealand pioneered
performance-based management, tied with accrual accounting and service
contracts. Australia pushed farther in developing outcome-based
measurement systems. The United States pursued perhaps the most
ambitious performance system, seeking to link strategic plans and
outcome measures with budget systems and legislative decisions. These
systems, are more tightly integrated with both management strategies
and political decisions than previous attempts.

-- A new focus on transparency of government operations.

Some nations, like the United States, have for years had tough
open-records and government-in-the-sunshine laws. The
government-reform movement picked up many of these themes and made
transparency -- clarity in government's goals, openness of information
on government processes, and straightforward language about results --
a central goal. New Zealand's contract-based system of management made
transparency its keystone. And as nations like Hungary, Albania,
Poland, and Estonia developed new administrative structures to meet
their pressing needs, transparency was a core value.

-- A strong emphasis on customer service.

Reformers shared the judgment that rigid top-down processes dominated
government programs. That, in the eyes of the reformers, limited
government's responsiveness. They took a page from private-sector
managers and focused heavily on government from the bottom-up. The
United Kingdom advanced a Citizens Charter with explicit promises
about customer service, such as rebates for late train service. Canada
worked to produce improved one-stop shopping for citizens, while all
federal agencies in the United States developed customer-service
plans. Flipping the focus of government-from top-down direction by
senior officials to bottom-up responsiveness to citizens -- aimed to
improve citizen satisfaction, reduce distrust, and improve efficiency.

These strategies and tactics varied significantly. More conservative
governments focused on cutting taxes and then using lowered revenue to
force spending cuts. Margaret Thatcher's government in the United
Kingdom, followed quickly by Ronald Reagan's government in the United
States, framed this strategy. More-liberal governments focused instead
on finding which programs to cut and concentrated on improving
government's efficiency and effectiveness (producing more high-quality
services for the same tax level) and citizen satisfaction (with a
special emphasis on customer service).

Indeed, in the United Kingdom (with Prime Minister Tony Blair) and the
United States (with President Bill Clinton), these more-liberal
governments replaced the more-conservative regimes. Their political
success, in turn, inspired other left-of-center governments in Europe,
most notably in Germany.

These government reform problems led governments everywhere to the
productivity challenge: avoiding tax increases, delivering tax cuts
where possible, and finding new tactics to avoid reducing
fundamentally the level of government services. Governments tried to
reinvent themselves through a constant stream of innovations. Locked
into the tough challenge of avoiding both tax increases or service
cuts, governments struggled to find an alternative. Reinvention was
the answer.

Less-developed nations faced all these pressures-finding greater
productivity in government services and dealing with the squeeze
between taxpayer resistance and service demands. In addition, many
nations struggled with traditions and deep-rooted problems that made
it difficult to mount the same efforts as more-developed nations.
Korea, for example, explored customer service while struggling with
the age-old tradition of gratuities to front line bureaucrats. Many
Southeast Asian and Latin American nations worked to strengthen their
economies and redress large disparities between the rich and poor --
without increasing government regulation. Indeed, these nations shared
the problems of the more-developed world, added special problems of
their own, and faced the imperative for quickly making their societies
and economies competitive on the world stage.

Questions Ahead

With the turn of the century, the global reinvention movement will
mark two decades of experience. The experience has been remarkable for
its breadth, depth, and energy. But what questions lie ahead?

-- What are the limits to government's reliance on private markets,
for both ideas and management partnerships?

Drawing on a fundamental belief on the superiority of private-sector
management, conservative reformers have proposed turning many of
government's services back to the private sector. Even liberal
reformers have relied heavily on non-governmental organizations for
delivering services. These partnerships unquestionably added great
flexibility to public service systems, especially in providing new and
innovative ways of delivering government services without the
government having to do the job itself. The competition they brought
made service delivery more efficient and provided powerful incentives
to government workers to improve their own work. They did not,
however, demonstrate that governments could close shop on the services
most important to citizens. Governments exist because private markets
cannot -- or will not -- provide services as the public wants.

After the initial sales of state owned assets, from telephone
companies to airlines, governments tended to build partnerships for
service delivery. Nonetheless, governments decided what ought to be
done and provided the funds for doing it; non-governmental
organizations worked increasingly as contractors to do public work.
The Netherlands, for example, built new strategies for public-private
partnerships. In developed countries the real challenge of global
reinvention thus has become determining how to manage the new and
often very complex partnerships that increasingly dominated service
delivery. In developing countries the challenge is the creation of a
vibrant, open civil society that can form some of these new
partnerships with the public sector.

What are the limits to privatization and public-private partnerships?
What does it take to manage them effectively?

-- How can performance measurement systems strengthen these

The bedrock of global reinvention has been performance-based
management: giving government workers and their partners more
flexibility in devising service strategies while holding them more
accountable for the results they produce. New Zealand took this notion
farther than any nation, with contracts that specified what outputs
managers were responsible for producing and measures that assessed how
good a job they did. Australia tended to rely more on program
evaluation and a broader assessment of outcomes. The United States
took perhaps the boldest step of any nation with its legislative
mandate for each government agency to develop strategic plans and
measures for assessing their outcomes. Developing and implementing
these measurement plans, however, has proven daunting.

Measuring outputs is hard enough. Moving to the next step of assessing
outcomes -- what broader results the outcomes produce -- is harder
yet. Creating effective measures for activities managed through
partnerships --service delivery systems that governments manage only
indirectly -- is harder yet. But as the job gets harder, measuring
results become even more important in systems of indirect

What potential does performance measurement have for managing
twenty-first century government? And what problems must governments
solve to develop effective performance measurement systems?

-- How can governments mesh these new performance-based measures with
their existing processes and structures?

Governments not only launched major new reinventions, innovations, and
partnerships. In the process, they ventured into turf far beyond their
existing procedures. It is one thing to develop tactics for managing
traditional government services through hierarchically structured,
authority-based systems. It is quite another to devise techniques for
measuring performance and to hold contracted agents and
nongovernmental partners accountable. Some nations -- notably New
Zealand, Canada, Australia, and the United Kingdom -- invested
substantial effort in improving their capacity.

But how different is this capacity from the processes that have
traditionally guided government management? How do governments need to
alter the incentives for government workers to make this process work

-- How does "reinventing government" redefine the relationship between
governments and their citizens?

Some of the new strategies, such as "make the managers manage"
strategies like in New Zealand's contract-management system, were
top-down: policy makers specified goals and held managers responsible
for results through written statements of goals and performance
management. But other strategies, like "let the managers manage"
strategies like the American "reinventing government" process, were
bottom-up: policy makers sought to sweep away the regulations and
processes that prevented managers from doing their job.

Both strategies changed the relationship between government and its
citizens. Both asked government managers to pay far more attention to
the interests and needs of citizens, and both asked citizens to
connect far more closely with government. Analysts debated how well
these strategies worked in practice, but they brought governments and
their citizens into new relationships with each other. How should
government manage these new relationships?

Since the early 1980s, governments around the world have struggled to
reinvent themselves-to match their strategies and tactics to new
citizen demands, to reduce their size while maintaining services, and
to improve their capacity to meet the challenges of twenty-first
century government.

Amidst such rapid change, governments likewise struggled to redefine
their role. Economic analysts, after all, seem to suggest that, with a
globalized economy, governments matter less. At the same time,
reformers are pushing national governmental power down to the local
level and social power from government out to private markets and
market-like processes.

In an era of devolution and globalization, what is the role of
national governments?

In part, of course, the answer is that nation states must provide for
national defense,shape national economic and social policy, steer the
nation's governance, and define the civic culture. The government,
moreover, is responsible for defining the national interest, as its
people see it, and for ensuring that its governmental system
(including its network of nongovernmental partners) works to further
that interest. This challenge is far larger than most nations have yet

Thus, the global reform movement has not only reshaped the processes,
structures, and functions of government, in both developed and
developing nations. It has also raised a fundamental -- and largely
unanswered -- challenge about the role of the state in the information

Along with this new challenge to government's role is the question
about how government needs to equip itself for its job. While
governments have spun out a dizzying array of innovations, they have
faced problems building the capacity to implement those reforms.
Indeed, reform of the government service -- the people who do
government's work, the training they need, and the values they convey
-- has been one of the most difficult parts of government reform.

Because the rate of innovation has been so rapid there has been to
date little systematic efforts to determine how well these reforms
actually work -- in identifying success, in avoiding failure, and in
detecting the difference. With innovations spreading, quite literally,
at the speed of light it is time to consider both how to build the
capacity of civil servants and how to assess the results of

Liberals and conservatives continue to battle over the
size-of-government issue. Conservatives have, in many nations,
cleverly pressed to lower taxes as a strategy to force cuts in
government programs. But so long as citizens continue to want most of
the services they are receiving, the conservative government-reducing
strategy faces limits. Liberals, including "Third Way" advocates like
Britain's Tony Blair and Germany's Gerhard Schroeder, confront a
different problem. They pledge to sustain the level of services by
improving government's productivity through market -- like mechanisms.
But can they improve productivity enough to satisfy citizens and to
avoid a new wave of public demands for lower taxes and smaller

The tradeoffs are stark, and the political implications are huge. It
is one thing to suggest -- correctly, as it turns out -- that
government is in the midst of a major transformation from the
industrial to the information age. It is quite another to confront the
harsh and unforgiving political realities of the government-reform
movement. Governments around the world have launched major reforms
because they have had no alternative. They now need to think through
issue of capacity and how to engage their citizens in the new systems
they are creating.

The global reform movement thus is the foundation for new approaches
to governance. The answers produced by the reform movement are
anything but clear. But the global scope and innovative sweep of the
innovations clearly chart the questions that the next steps in the
global reform movement must answer.