governance

Neoliberalism

Those who advocate neoliberalism argue that the state is inherently inefficient when compared with markets. Often, neoliberals also suggest that the postwar Keynesian welfare state is in crisis: it has become too large to be manageable, it is collapsing under the burden of excessive taxation, and it is generating ever-higher rates of cyclical inflation. Neoliberals believe that the postwar state cannot be sustained any longer, especially in a world that is now characterized by highly mobile capital and by vigorous economic competition between states. Hence, they attempt to roll back the state. They often suggest, in particular, that the state should concentrate on making policy decisions rather than on delivering services. They want the state to withdraw from direct delivery of services. They want to replace state provision of public services with an entrepreneurial system based on competition and markets. Some experts distinguish between the activity of making policy decisions, which they describe as “steering,” and that of delivering public services, which they describe as “rowing.” They argue that bureaucracy is bankrupt as a tool for rowing. And they propose replacing bureaucracy with an “entrepreneurial government,” based on competition, markets, customers, and measurement of outcomes.

Explore Britannica Premium!

The trusted destination for professionals, college students, and lifelong learners.

SUBSCRIBE

Because neoliberals deride government, many of them look for another term to describe the kind of entrepreneurial pattern of rule they favour. Governance offers them such a concept. It enables them to distinguish between “bad” government (or rowing) and necessary governance (or steering). The early association of governance with a minimal state and the spread of markets thus arose from neoliberal politicians and the policy wonks, journalists, economists, and management gurus who advised them.

Those advocating neoliberal policies often draw on rational choice theory. Rational choice theory extends a type of social explanation found in microeconomics. Typically, rational choice theorists attempt to explain social outcomes by reference to micro-level analyses of individual behaviour, and they model individual behaviour on the assumption that people choose the course of action that is most in accord with their preferences. Rational choice theorists influence neoliberal attitudes to governance in large part by way of a critique of the concept of public interest. Their insistence that individuals, including politicians and civil servants, act in their own interest undermines the idea that policy makers act benevolently to promote a public interest. Indeed, their reduction of social facts to the actions of individuals casts doubt on the idea of a public interest beyond the aggregate interests of individuals. More specifically, rational choice theorists provide neoliberals with a critique of bureaucratic government. Often they combine the claim that individuals act according to their preferences with an assumption that these preferences are typically to maximize one’s wealth or power. Hence, they argue that bureaucrats act to optimize their power and career prospects by increasing the size of their fiefdoms even when doing so is unnecessary. This argument implies that bureaucracies have an inbuilt tendency to grow even when there is no good reason for them so to do.

Because rational choice theory privileges micro-level analyses, it might appear to have peculiar difficulties explaining the rise of institutions and perhaps their persistent stability. Microeconomic analysis has long faced this issue in the guise of the existence of firms. Once rational choice theorists extend such microanalysis to government and social life generally, they face the same issue with respect to all kinds of institutions, including political parties, voting coalitions, and the market economy itself. The question is, If individuals act in accord with their preferences, why don’t they break agreements when these agreements no longer suit them? The obvious answer is that some authority would punish them if they broke the agreement, and they prefer not being punished. But this answer assumes the presence of a higher authority that can enforce the agreement. Some rational choice theorists thus began to explore how they might explain the rise and stability of norms, agreements, or institutions in the absence of any higher authority. They adopted the concept of governance to refer to norms and patterns of rule that arise and persist even in the absence of an enforcing agent.

Social science

The neoliberal concept of governance as a minimal state conveys a preference for less government. Arguably, it often does little else, being an example of empty political rhetoric. Indeed, when social scientists study neoliberal reforms of the public sector, they often conclude that these reforms have scarcely rolled back the state at all. They draw attention instead to the unintended consequences of the reforms. According to many social scientists, the neoliberal reforms fragmented service delivery and weakened central control without establishing proper markets. In their view, the reforms led to a proliferation of policy networks in both the formulation of public policy and the delivery of public services.

The 1990s saw a massive outpouring of work that conceived of governance as a proliferation of networks. Much of this literature explores the ways in which neoliberal reforms created new patterns of service delivery based on complex sets of organizations drawn from all of the public, private, and voluntary sectors. It suggests that a range of processes—including the functional differentiation of the state, the rise of regional blocs, globalization, and the neoliberal reforms themselves—left the state increasingly dependent on other organizations for the delivery and success of its policies. Although social scientists adopt various theories of policy networks, and so different analyses of the new pattern of rule, they generally agree that the state can no longer command others. In their view, the new governance is characterized by networks in which the state and other organizations depend on each other. Even when the state remains the dominant organization, it and the other members of the network are interdependent in that they have to exchange resources if they are to achieve their goals. Many social scientists argue that this interdependence means that the state has to steer other organizations instead of issuing commands to them. They also imply that steering involves a much greater use by the state of diplomacy and related techniques of management. Some social scientists also suggest that the proliferating networks often have a considerable degree of autonomy from the state. In this view, the key problem posed by the new governance is that it reduces the ability of the state not only to command but even to steer effectively.

Social scientists have developed a concept of governance as a complex and fragmented pattern of rule composed of multiplying networks. They have done so partly because of studies of the impact of neoliberal reforms on the public sector. But two other strands of social science also gave rise to this concept of governance. First, a concept of governance as networks arose among social scientists searching for a way to think about the role of transnational linkages within the EU. Second, a concept of governance as networks appeals to some social scientists interested in general issues about social coordination and interorganizational links. These latter social scientists argue that networks are a distinct governing structure through which to coordinate activities and allocate resources. They develop typologies of such governing structures—most commonly bureaucracies, markets, and networks—and they identify the characteristics associated with each structure. Their typologies often imply that networks are preferable, at least in some circumstances, to the bureaucratic structures of the post-World War II state and to the markets favoured by neoliberals. This positive valuation of networks sometimes led to what might be called a second wave of public-sector reform.