Rethinking Public/Private Partnerships
Although public/private partnerships have a long history in this country (actually dating back to Colonial days relative to science and technology) the current financial crisis has thrown a spotlight on attempts by Government to enter into partnerships with various private sector organizations (i.e. banks and financial institutions, insurance companies, auto manufacturers, etc.) as a means of solving economic problems. It is always assumed that the public/private partnership is the best mechanism for finding a solution because neither party alone has the resources or knowledge to solve the problem. In light of the fact that some executives of the very institutions that caused the problems, continue to receive bonuses despite the fact that the businesses have not reach full recovery and public outrage is high gives us reason to pause and to rethink the foundation of these proposed partnerships.
Modern emphasis on public/private partnerships evolved during the Eisenhower administration in 1953 when government and the agriculture sector sought to develop new markets. Further efforts to involve the two sectors led to attempts to train workers who were unemployed because of automation (i.e. Manpower Development Act of 1962; Comprehensive Employment Training Act of 1973 and Job Training Partnership Act of 1982, etc.), each seeking to blend a partnership of two sectors divided by strong cultural norms that exist even today. The latter act was a major departure from earlier attempts because it sought to create a partnership between local elected and appointed officials and private industry, thus setting a stage for two conflicting cultures—civic and business—to work cooperatively on a task that neither had been able to accomplish separately.
The Root of the Conflict
The root of the conflict between these two cultures lies in the separate responsibilities that are accorded to each; the civic (public) sector is responsible for government and politics and the business (private) sector is responsible for entrepreneurship and economics. Robert Reich, a former Secretary of Labor in the Clinton Administration, pointed this out in a 1983 book (The Next American Frontier) as did the visionary thinker John Diebold in book published a year later (Making the Future Work). The inherent conflict centers around each sector’s perception of reality: the public sector’s concern for citizen rights, health, education and welfare sees the common good being achieved primarily through community and citizen participation; the private sector with its concern for economic growth, productivity and inflation sees achievement of common good primarily through a free market, individual freedom and responsibility. It is these differences that create a culture clash between the traditionally community-oriented public sector and the traditionally individually-oriented private sector.
Inevitably this division leads to claims by many in the public sector that business, with its concern for profit, undermines civic values by polluting the environment with its concern for profit over the ecology, and endangers the livelihood of workers. Many in the private sector (and supply-side economists too) counter that intrusion into the free market system by government constrains business development and subverts the market, resulting in inefficient government operations, lost profits and compromises the economic health of the community. Like Reich and Diebold argued decades ago, these distinctions are no longer functional as we see the Obama Administration creating markets and setting boundaries for businesses. At the same time we also see businesses assuming a greater responsibility for the common good. Yet the cultural differences remain and therefore cooperation by both sectors on issues where they both can contribute to the common good is a formidable task, for it demands that each must transcend their respective cultures to create a new culture based on collaboration. The current debates between the Administration and Congress over health care reform, and the unwillingness or inability of Congress to arrive at consensus or at compromise, make this possibility one of serious doubt. What remains then, is an increase in partisanship and business as usual in Washington, DC.
Another Twist in the Public/Private Partnership
Another twist in the public/private partnership involves the voluntary (non-profit) sector, whose organizations are mission-driven toward the provision of some kind of human services that have a public benefit. As a result many of the publicly funded services are carried out by non-profit organizations that have the professional staff to deliver them. The contracts between these two sectors are less contentious but are not free of conflicts, largely due to the fact that many of the professional staff feels bound to a code of ethics by the various professional associations to which they belong. Public officials, for the most part, are bureaucrats who even if governed by a professional code are restricted in their behavior by bureaucratic constraints. Nonetheless many of the conflicts have been avoided through the use of a “memorandum of understanding” (MOU) that details the expectations and responsibilities of each party in the partnership, and how those responsibilities and expectations will be met. Because this MOU is a public document and subject to the Freedom of Information Act, it is transparent and subject to public scrutiny. It is toward this model of public/private partnerships that the private sector needs to move for as is presently constructed, conflict is endemic in current public/private partnerships because of the strong differences in the culture of each.
In the current economic crisis, it was only after public outcry and pressure on Congress, to complain of the “no strings attached” approach to lending to financial institutions by the Bush Administration, that led the Obama Administration to place conditions and constraints on further lending. This subjected the automotive industry and the “banksters” to a new set of guidelines, that while falling short of an MOU, increased their level of accountability for borrowing taxpayer dollars. Should this process be expanded so that in future the private sector will not be able to “privatize profits and socialize costs”, as seemingly happened in the recent situation? While I have no solutions to the financial problems we might face, one thing is sure, there must be reform of the guidelines and oversight by which financial institutions operate, and to which they must be held accountable.