Public Management: The New Zealand Model
The state-sector redesign other governments copied; contracts, outputs, accountability.
Summary
Jonathan Boston, John Martin, June Pallot and Pat Walsh wrote the standard academic account of New Zealand's public sector reforms, which between 1984 and the mid-1990s went further than any other country's attempt to apply private sector management methods to government.
The reforms they describe were built on explicit theoretical foundations: agency theory, transaction cost economics and public choice. The specific measures included corporatising and then privatising state trading activities; separating policy advice from service delivery into different agencies; employing departmental chief executives on fixed-term performance contracts rather than as permanent civil servants; distinguishing the government's role as purchaser of outputs from its role as owner of assets; requiring departments to specify outputs and ministers to specify desired outcomes; and moving the whole government to accrual accounting with departmental balance sheets, which New Zealand did before any comparable country.
The authors are academics rather than advocates and they assess the reforms critically. Their concerns include the difficulty of specifying outputs for policy advice, the loss of institutional memory and of a unified public service ethos, the fragmentation produced by many single-purpose agencies, and the weak connection between outputs purchased and outcomes achieved. The book was written in 1996 and New Zealand subsequently reversed parts of the model, particularly the fragmentation, through later reorganisations. It remains the reference account of the most thorough new public management experiment conducted anywhere.
Key takeaways 7
- New Zealand's reforms applied agency theory and transaction cost economics to government explicitly rather than by analogy.
- Separating policy advice from service delivery was intended to prevent providers from writing the policy that funds them.
- Departmental chief executives on fixed-term performance contracts replaced permanent appointments, which changed accountability and removed institutional memory.
- Distinguishing the state's purchaser role from its owner role forced explicit pricing of what government buys from its own agencies.
- Accrual accounting across government revealed asset and liability positions that cash accounting had concealed.
- Outputs can be specified and purchased, but outcomes cannot, and the connection between them was the model's weakest point.
- Fragmentation into single-purpose agencies raised coordination costs enough that New Zealand later reversed part of it.
Who should read it
Policy analysts and public sector executives who want a rigorous assessment of the most thorough application of private-sector management theory to government.
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