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Reinventing Government.

In 1978, the city of Phoenix began contracting its garbage collection out in phases to private companies. This "privatization" policy--radical at the time but more and more common today--has been hailed by the right as an illustration of the superiority of the free market and as a way to shrink the one thing conservatives despise above all else: government bureaucracies.

But a funny thing happened in Phoenix: The bureaucracy didn't wither away, it got stronger. At first, the city's sleepy public works department tried to bid for the trash business but lost section after section of its territory to the lower-cost contractors. So the department went on a self-improvement binge. It created labor-management quality circles. It let drivers redesign their routes and work schedules and gave bonuses to employees who suggested other ways to improve efficiency. And it replaced trucks requiring two-man crews with new vehicles a single worker can operate. Soon the department's costs were lower than the private sector's. By 1988 it had won back in competitive bidding all the territory it had lost.

Phoenix's trash tale is one of hundreds of government success stories in this ambitious and long-awaited book. (*) Journalist David Osborne and former city manager Ted Gaebler argue that a revolutionary restructuring of the public sector is under way--an "American Perestroika." Like the Soviet version, they say, this one is being driven largely by politicians and bureaucrats who, under extreme fiscal pressure, are applying market forces to monopolistic government enterprises. The difference is that in the U.S., market forces are not destroying state power. They are enhancing it.

This message, with its promise of fulfilling the public's seemingly impossible demand for more government activism without more taxes, has proven enormously appealing to members of the policymaking class in both parties. Osborne has been a consultant to Democtratic Governor Lawton Chiles of Florida and to Republican Governor William Weld of Massachusetts. He is a charter member of the "New Paradigm Society" in Washington, a loose group of policy intellectuals that includes Bush aide James Pinkerton. And he is one of several liberal New Paradigmers advising Bill Clinton. (No surprise, then, that in his speeches on the campaign trail Clinton occasionally slips in a line about the need to "reinvent government.")

Like reformers everywhere, Osborne and Gaebler sometimes push their ideas past their natural limits. Too often, they portray policies that fit their theory but that are also open to serious criticism--school choice, tenant ownership of public housing--as if they were proven solutions. Their prose style tends to be promotional when it should be measured, which leaves even a sympathetic reader wondering what land mines lie hidden on the path the authors are suggesting. One that immediately strikes me, as I read about aggressive, creative civil servants transforming their organizations, is the authors' seeming innocence about the quality of most of today's government employees--which is marginal. While there are some bright, vital individuals in every agency, there are plenty who have no wish to be creative except when decorating their offices.

But on balance, Osborne and Gaebler have tried diligently to subject their ideas to the test of reality. They have read mounds of academic case studies, visited scores of agencies, and talked to countless bureaucrats. They have assured themselves a future place in the Wonk Hall of Fame. Reinventing Government is mostly convincing precisely because the authors have not let standard ideology cloud their view of how government works, at its worst and at its best.

Rethinking shrinking

The authors have distilled their ideas into 10 jargony principles that, taken together, amount to what they call a "New Paradigm" for the collective action of democracies. Actually, elements of the paradigm will be familiar to longtime Monthly readers. They include scrapping civil service rules to make bureaucracies more "mission-driven"; rewriting government accounting standards to force lawmakers to be more "anticipatory"; making government programs "results-oriented" by toughening evaluations; and tapping the spirit of volunteerism. But where this magazine has focused, naturally, on Washington, Osborne and Gaebler fanned out to state and local bureaucracies, where most of the policy action was in the eighties. Their book is richer for it.

The authors also build on the work of the handful of political scientist who have studied bureaucratic reform efforts, especially that of James Q. Wilson, whose 1989 book Bureaucracy laid out key elements of the paradigm. But where Wilson is a neoconservative skeptic--the concluding section of Bureaucracy is entitled "A Few Modest Suggestions that May Make a Small Difference"--Osborne and Gaebler are messianic. Readers who haven't lost their faith in government will find their optimism infectious.

The biggest influence on their thinking, however, comes not from government but from management gurus like Thomas Peters, Edward Deming, and especially Peter Drucker. These writers recognize that corporations suffer from bureaucractic rigidities just like governments, and that the structures of both are rooted in bygone eras. Too many corporations still bear the stamp of the Industrial Age, relying on strict work rules and centralized command to eliminate "human error" in the mass-production of uniform products. Likewise, most government agencies are bound by civil service rules and other Progressive era reforms designed to control costs, eliminate patronage, and ensure uniform (i.e., fair) service to the public.

Such tight hierarchical control made some sense 50 or 75 years ago, when only upper-level managers had access to enough information to coordinate an agency's activities. But the spread of computers and information technologies, say the authors, has given today's better-educated line employees the ability to coordinate themselves. Organizations run under the command model, they say, are too inflexible to meet the fast-changing demands of contemporary voters and customers, who tolerate neither drab, sluggish cars nor long waits in line at the department of motor vehicles.

Suffering the same rigidities, government and business must transform themselves in essentially the same way: by flattening hierarchies, decentralizing decisionmaking, pursuing productivity-enhancing technologies, and stressing quality and customer satisfaction. This is a very different message from that of corporate dilettantes like Peter Grace who are forever admonishing government to act "more like a business." Such advice normally leads to "cost controls" that bind bureaucracies with even more red tape.

Occasionally a government agency can be transformed with a few savvy adjustments of the organizational structure. When General W.L. Creech took over the Air Force Tactical Air Command (TAC) in 1978, only 58 percent of its fighter jets were mission capable at any one time. Over the next six years Creech boosted that readiness figure to 85 percent, at no additional cost. He did it largely by assigning mechanics--who had previously worked out of centralized pools--to individual squadrons in order to cut paperwork and build team cohesion. He even had the names of lead mechanics stenciled next to those of the pilots on the nose of each aircraft.

But because governments aren't like businesses, simple management changes are seldom enough. You have to alter the incentives within government that make bureaucrats behave as they do. For example, government managers seldom seek out ways of doing their jobs more efficiently because the traditional budget process punishes them for their trouble. If they don't spend what they've been allocated this year, they open themselves to big cuts next year, when appropriations committee members say, "Well, you didn't even need what we gave you last time, so...." (The internal pressure to "use it or lose it" leads to one of the Monthly's favorite bureaucratic perversions: The End-of-the-Year Spending Spree.)

To reverse this incentive, a few municipalities allow agencies to keep all or part of any money they save--money that can be used for anything from boosting salaries for high-performers to increasing other services. Towns such as Fairfield, California, adopted this policy in 1978, in the wake of Proposition 13. A decade later, Fairfield was running budget surpluses while other California towns were crying poverty. Fairfield bureaucrats now see money-saving opportunities they might not have noticed. For instance, an architect gave the Fairfield police department a $13,000 plan to build a rain cover over the pump where department vehicles are gassed up. "We thought that was outrageous," says the police chief. "So somebody said, 'What about these bus stop covers--the glass-enclosed ones?" We checked, and they cost $2,500. We put one of those up, and it works fine."

When governments let agencies keep at least part of what they save, bureaucrats can learn to "earn rather than spend." They boost user fees on public golf courses and marinas so that the golfers and yacht owners cover the costs of those services. They bill motorists who knock down city-owned trees. The idea of governments making money puts some people off. Not Osborne and Gaebler. Only by seeking new sources of revenue, they say, can governments fulfill their new public mandate of increased services without increased taxes.

Indeed, for all their admiration of privatization, the authors happily applaud the opposite: governments that take over profit-making enterprises to accomplish public goals. My favorite example is Visalia, California, which bought an about - to - be - moved minor league baseball franchise, made money running the team for six years, then sold it at a profit to new local owners.

Of course, one can imagine all kinds of mischief that bureaucracies with this much autonomy might cause. The way for the public, through its elected officials, to keep a grip on bureaucratic action without stifling agency creativity is to substitute "performance measures" for most rules and regulations, they say. Traditional governments focus on "inputs" (how many cops should we hire?) rather than "outcomes" (are additional cops lowering the crime rates?). Outcome or performance measures help bureaucrats and elected officials get a handle on their goals and effectiveness.

Ideally, politicians would base budgeting decisions on performance, the better to create incentives to perform. But the mere act of measuring results is sometimes enough to change behavior. After Massachuetts' welfare department began publishing the paperwork error rates of each office, the statewide rate dropped by half. Then it started publishing error rates of individual supervisors. Mistakes dropped another 25 percent. Government can also do a great service by measuring the performance of the private sector. Airlines became far more punctual after Washington started publishing comparative on-time records.

There are plenty of dangers of performance measurements, however. When teachers are forced to give standardized tests, they often "teach to the test." When J. Edgar Hoover pressured his FBI to catch more fugitives, agents began pursuing easy-to-locate military deserters rather than dangerous, hard-to-find criminals. But that's no excuse to give up on performance measures, say the authors. Better to develop more and better measures, a task made infinitely easier by the computer revolution.

A case in point is Sunnyvale, California, a computer-happy municipality located in the heart of Silicon Valley. Sunnyvale bureaucrats measure everything from "the percentage of participants in a recreation program who rank it as 'good' or above" to "the percentage of trees needing replacement that are replaced within two months." Armed with thousands of such performance statistics, members of the Sunnyvale city council no longer debate operational details such as what kind of tree-trimming trucks to buy or how many park employees to hire. "Our council does not know how many people work for the city, nor do they really care," says Sunnyvale City Manager Tom Lewcock:

The essential thing the council does is set policy: what level of service, how many units are going to be produced, and at what unit cost. What they have done is given us the freedom over the management of city affairs, in return for them getting true policy control.

The results-oriented approach can help break another legacy of the Progressive era: the belief that all public functions must be carried out by civil servants. Again, the authors argue, this notion made sense 80 years ago, when local bosses, routinely funelled contracts to their patrons and friends, indifferent to whether those cronies would actually deliver any public goods. The need for more control over how government money was being spent led reformers to place more and more public tasks inside government bureaucracies.

Osborne and Gaebler are well aware that plenty of bad contracting is still going on. But they argue that better technologies and techniques for monitoring contract performance are now available. With good performance measures and enough bidders (including, as in Phoenix, the government's own agencies) to keep prices competitive, government managers can more safely farm work out.

Not all work, of course. It makes no sense to privatize, say, diplomacy--as Oliver North demonstrated. But routine tasks like street sweeping and check processing, where efficiency and effectiveness can be readily quantified, are good candidates for privatization. So too are human services (drug rehab, low-income housing construction) at which the nonprofit sector excels.

Bum steer

The authors see privatization not as a way to reduce government influence, but to "leverage" it. By doing less "rowing" (delivering services), government managers can do a better job of "steering" (setting policy goals, picking service providers, monitoring their performance). Steering also means creatively restructuring the marketplace, using everything from tax codes and regulations to public-private partnerships. Scottsdale, Arizona, saves money through "incentive zoning": Developers who build their own infrastructure are given permission to erect taller buildings.

Try to apply these state and local reforms to the federal government and you run into a curious difficulty: Washington is already structured to a great extent on New Paradigm lines. Most federal agencies don't supply services directly to citizens. They use taxes, regulations, and grants to "steer" third parties--individuals, state and local governments, private and nonprofit organizations. The authors admit this, but they fail to mention that such "steering" operations have produced some of government's greatest disasters.

Consider the savings and loan system. Private sector institutions (S&Ls) provide the service (processing mortgage loans), while government limits its role to structuring the marketplace (with deposit insurance) and monitoring contractor performance (with S&L examiners). That this definitively Osbornean system eventually collapsed is not necessarily an argument against governments that steer rather than row--having civil servants running S&Ls would hardly be an improvement. The point is that the authors' reforms are not quite as revolutionary or trouble-free as they sometimes present them to be.

For men who put such stock in measuring performance, Osborne and Gaebler are quick to explain away troublesome aspects of programs that happen to fit their paradigm. They zealously embrace public school choice, for instance, characterizing skeptics as unimaginative nostalgics. Choice, they say, breaks the monopoly of public education by letting parents send their kids, and their tax dollars, to any existing public school--or to any experimental school teachers wish to start. By making schools "consumer-driven," the authors assert, choice produces better-educated students.

In fact, there is no solid proof that choice programs improve student achievement. For "proof" the authors rely heavily on the theory - and statistics-driven work of John E. Chubb and Terry M. Moe, who never studied the kind of public school choice programs Osborne and Gaebler have in mind. The few programs that come closest to their ideal are either too new to judge or were put in place by the kind of autocratic administrators from whom, under choice, schools are supposed to be set free.

Osborne and Gaebler do try to address some of the criticisms that have been heaped on choice, but they fail to blunt the toughest ones. Choice won't create incentives for schools to improve their academics, for instance, if parents choose schools because they are conveniently located or have fine sports programs. Yet "all the evidence from existing choice programs suggests that academic excellence is seldom what parents chiefly value in a school," writes education analyst Abigail Thernstrom in The Public Interest. The idea that parents might not insist on the best possible education for their children strikes most people--especially choice advocates--as patronizing. But the same assumption is behind compulsory education statutes, which only crank libertarians would abolish. One of the virtues of public education is that it forces kids whose families don't stress education, or who are simply not bright, into classes with the smart kids from academic-minded homes. I'm not sure which kind of kid learns more from the other, but the lessons stick with you the rest of your life. How much of this intellect-mixing would survive under choice is hard to say.

The authors worry about diversity, too. They oppose voucher programs for private schools, fearing vouchers would lead to further income and race segregation. Yet it's entirely possible that public school choice will decrease diversity if, as would be natural, parents put their children in schools with other children of their own class and race. Try to restrict such "wrong" choices, as the Cambridge, Massachusetts school district does, and you weaken the very instrument that is supposed to discipline the system. All this is not to say that school choice can't work or shouldn't be experimented with, only that it is far from the sure bet Osborne and Gaebler tout it as.

The same can be said for another of their favorite reforms: tenant ownership of public housing. Here again, the idea fits a key paradigm principle--the need to "empower" communities rather than "serving" them into dependence. To the now-common charge that the few tenant-management/ownership success stories have behind them women of rare energy and intelligence--women such as Kimi Gray in Washington, D.C., and Bertha Gilkey in St. Louis--the authors respond: "Why not create more opportunities in poor communities and see how many leaders emerge?"

Well, fine, let's try. But that's a long way from saying, as the authors do, that "empowerment" programs are the best way to help the poor. It's worth pointing out that the tenants most capable of leading such efforts are also the most likely to leave public housing for greener pastures. And it's worth considering the possibility that the billions required to "sell" public housing to tenants might be better spent creating more low-income housing, or making existing buildings secure, as Vince Lane has done at the Chicago Housing Authority.

That said, Washington would do well to adopt some New Paradigm ideas, especially those aimed at making bureaucracies function better--as opposed to eliminating bureaucracies entirely. Some of the book's best examples, like General Creech's restructuring of TAC, come from the Defense Department. Not coincidentally, DOD is the one arm of federal government that has received a steady flow of resources and support from the White House over the last 12 years. It makes you wonder what might be accomplished by an administration that cared as much about the rest of government.

Government at all levels could probably do more with less--and do it better--by privatizing aggressively and carefully as the book suggests. But the authors soft-pedal the pain this will cause, especially to the black middle class, which depends heavily on government jobs. Perhaps the pain can be minimized by letting attrition reduce employment and requiring contractors to hire ex-civil servants. But government agencies today are generally so overstaffed that some permanent layoffs will probably be inevitable. And then there is the dilemma of civil servant quality. Osborne and Gaebler could argue that jobs in a reinvented government will be so interesting that ambitious people will once again flock to the public sector. I'm just not sure it's possible to transform the public sector without having more dynamic people to start with.

There's currently a push on Capitol Hill and in OMB to subject all federal agencies to tighter performance measures, in return for less "micromanagement" from Congress. This strikes me as a great idea. But some congressional meddling can be a good thing. Congress did more than any recent administration to reform the Pentagon with the Goldwater-Nichols Act, which eliminated the high command's crippling interservice rivalries.

Osborne and Gaebler are certainly right that governance need not always involve civil servants. Then again, there is no great virtue in overreliance on the private sector, a fact that the book and Osborne's own experience make clear. As a consultant to Lawton Chiles, Osborne agreed to be paid by specially raised private funds. Unfortunately, the governor ran into trouble getting the money together. So he turned not to the small donors who funded his campaign but to several wealthy Florida executives. The Orlando Sentinel picked up on this--"Study Attracts Big Bucks, Big Interests" ran the headline--giving the impression that Osborne's work was somehow compromised. Things would have worked better had Chiles paid Osborne the old fashioned way, by appropriating tax dollars. That is, after all, what the money is there for.

(*) Reinventing Government. David Osborne, Ted Gaebler. Addison-Wesley, $22.95.

Paul Glastris is the Midwest correspondent for U.S. News and World Report and a contributing editor of The Washington Monthly.
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Author:Glastris, Paul
Publication:Washington Monthly
Article Type:Book Review
Date:Apr 1, 1992
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