First insertion on Heterodox Gazette Sam de Wolff: 22 november 2017

E.A. Bakkum is a blogger for the Sociaal Consultatiekantoor. He loves to reflect on the labour movement.

In several previous columns attention has been paid to the positive incentives, which derive from private property. Therefore it is logical to now study the effects of privatizations in the public sector. The new institutional economics offers useful insights, which are summarized here. Also, ways of market regulation are presented. Several experiences with free markets are described. Finally, the radical criticism of E. Tonkens and the PvdA commision Van Thijn are discussed.

Privatization is the transfer of a state enterprise to the private sector1. It can concern commercial activities, such as financial services (credits, insurances), or the construction of cars, airplanes, ships and houses. It can also concern public services, such as waste disposal or energy distribution (quasi-collective goods). Even in existential services such as education and health care, free markets and privatization are possible. The budget mechanism (state planning) is replaced by the price mechanism. Privatization is often a transition to profitable production, because the aim of profit is an incentive for effective actions2. However, when desired, the state can transfer the production to a non-profit organization. This happens indeed, for instance in nursing3.

The transition from public to private production is far-reaching to such an extent, that the supply of the product must generally be regulated in some form. Privatization and new regulation go together. The state chooses in fact a different form of organization for its services. The changed regulation makes it complicated to evaluate the effect of privatization in isolation. As an illustration this column will present several empirical evaluations further on. There the importance of the market form will indeed become apparent. For instance, the state will often be the only buyer on the market4. Then it is true that the production is privatized, but not the demand. This is called outsourcing. Sometimes the costs are completely covered by public funds (taxation), whereas in other cases the consumer must pay a personal contribution (principle of benefit).

So regulation implies formulating and imposing market rules by the state. This is studied by the new institutional economics (NIE). The state can impose the market targets by means of regulation, but can also dictate the market procedures. Sound procedures can reduce the transaction costs on the market. The formulation of market targets is only possible to a limited extent, because the state rarely disposes of all relevant information, which is needed for stating the targets. Besides, the economy is dynamic, so that the imposition of future targets is notoriously subjective and speculative. The advantage of free markets is, that consumers can make their own judgement about the targets of enterprises. Enterprises offer solutions on the market, and thus create a continuous innovation. The directions of private enterprises are exposed to market incentives to perform optimally.

Cooperation on the market

The privatization has also become popular, because the economists have developed a more positive opinion about economic cooperation. In the past it was believed, that cooperation between enterprises would be hurtful for the consumer, because it leads to price agreements between the producers. See the column about industrial concentrations. For instance, this fear was the reason, that at the time the public branch organizations (PBO) were given a tripartite structure, that is to say, with state interference besides the organizations of entrepreneurs and workers5. The state supervises the general interest. In the same way, during the twentieth century various anti-cartel laws have been introduced in order to prevent, that producers make mutual agreements6. See the column about the European market. However, nowadays it is realized, thanks to NIE, that cooperation between enterprises is sometimes desirable.

Caricature of Troelstra
Figure 1: Caricature
    Troelstra as minister
    (A. Hahn, 1913)

As an illustration, now the book The economics of business enterprise (in short EBE; see voetnoten) will be amply consulted. Suppose for instance, that two producers cooperate in research and development. This can be socially profitable, among others because a general standard is established. Or suppose, that a producer wants to profile by means of quality and reliability. Then he must be able to supply selectively merely the retail trade with a similar reputation (see for such examples paragraph 15.3.2 in EBE). The maintenance of a reputation is a legitimate manner to profile the concerned product, and sometimes the only means to prevent market failure. Agreements about exclusive selling rights are sometimes needed in order to avoid under-investments in the enterprises. Therefore one must actually weigh for each contract, whether trade agreements are hurtful (p.508 in EBE)7.

Since the economic cooperation is no longer a taboo, there are new opportunities to create free markets for public goods. The incentive to privatize is partly caused by the unsatisfactory experiences with state enterprises. It became clear, that state enterprises can hardly be stimulated to perform better. The insight, that the state is an ineffective owner, grew during the seventies of the last century, when the global competition intensified. Since 1980 many state enterprises have been privatized. The experience shows, that subsequently such enterprises indeed begin to produce more efficiently8. Obviously, the problem remains, that sometimes the state wants to or even must impose certain quality requirements. Then yet some supervision is required, which is accompanied by regulation. New institutions are established in a learning process, where the states imitate each other's innovations.

Points of concern during privatization

The regulation of markets is complicated, because the decisions are made in the chain electorat → political state → markets. In each of these two arrow the principal-agent problem occurs. In the electorat, interest groups are active, and lobby politics for their interests (p.506 in EBE). This is called rent seeking, because they demand subsidies from the state. Sometimes their demand does not coincide with the general interest. Deregulation can reduce this risk (p.514). Furthermore, when the state concludes regulations and contracts, they are usually incomplete, due to lacking information. Experiments have been done with various indicators in order to check the performances of the privatized enterprise. Note that the state itself sometimes also tries to seek rent. The public choice theory emphasizes, that here the state is sometimes tempted to exploit the enterprise (p.512).

Privatizations on a large scale are considered to be structural reforms. They are the consequence of fundamental (qualitative) changes in the social knowledge and morals. This is explained well in the book Political economy in macroeconomics (in short PEM)9. The reforms are radical to such an extent, that the policy measures must be attuned in a coherent package. An example of such a package is the Washington consensus, dating from the late eighties (see p.619 in PEM)10. On the one hand, there is the desire to swiftly realize the reform. On the other hand, the consequences are uncertain, which pleads in favour of a gradual (phased) transition. The dynamics of a reform are so large, that unavoidably some groups or circles fear to be hurt in their interests. They will resist the reform, and organizing sufficient support becomes a problem in itself (p.624 in PEM).

The NIE refers to such obstacles with the term path dependency. The success of the reform partly depends on political leadership. The political management becomes more difficult, according as the electorat is more heterogeneous (p.632). Often politics will do conflicting promises during the reform (time inconsistency), simply in order to keep the democratic majority. Or the state manipulates the reform agenda (p.641). It presents the first phase of the reform as an experiment, which can be reversed. This gives an extra guarantee to the electorat, that the outcome will not be damaging. In other situations the success can be furthered by a single shock-wise reform (p.628). Or the losers in the reform are compensated.

The reform must often be postponed, until a window of opportunity appears (p.636). The electorat must develop a sense of urgency about the reform (p.406). Sometimes this requires the previous emergence of a crisis. Incidentally, during the crisis the rent seeking will also be less profitable (p.440). In many cases the new morals must settle in the conscience (cognition) of the electorat. Incidentally, this also holds for the politics itself, which has a notoriously short-term horizon. A striking phenomenon is, that the necessity of reforms is sometimes most convincingly stated by a party, which previously always has combatted them! (p.431). Ideas and means must be collected in order to make the reform possible (p.408). During privatizations, indicators must be developed for supervising the performances of the private enterprises. This is explained in The economics of business enterprise.

For instance, the state can regulate the height of the capital efficiency (p.515 in EBE). However, this creates a moral hazard, such as the excessive use of capital goods. Moreover, this indicator does not really stimulate effectiveness. Therefore, in this situation the state must also regulate the production technique. On the other hand, the state is tempted to reduce the allowed capital efficiency after a while (hold-up). As an alternative the state can regulate the profit rate, so that the enterprise can be rewarded in the case of an increased effectiveness (p.516 in EBE). This approach commonly has the form of a price policy. But the profit rate is merely a useful indicator, as long as the state is informed about the production costs. The enterprise does not run much risk, as long as the state guarantees its existence. In practice, regulation is often simply a collusion between the enterprise and the state (p.516).

Poster for labour morals
Figure 2: Poster
    for labour morals

As an alternative, the profit rate can be regulated by means of a tax on profits (p.519). Or the concession for the supply of the public goods can be granted by means of an auction. The highest bidder apparently has the heighest expectations of profit. Obviously, this introduces the danger that the quality of the supplied good is undermined, because the contracts are never complete (p.523). A special situation occurs for the case of public goods, that are supplied by means of pipe networks. For, this pipe network remains the property of the state, because its privatization is not beneficial (p.525). Thus the network manager can remain inefficient. However, in other branches privatization is fairly simple, such as in various types of maintenance, the disposal of waste, cleaning, or renovation. Here good results have been obtained. Saving around 20% have been realized, the innovation increases, the product prices fall, and (therefore?) the supply increases (p.531-532).

In Europe the policy with regard to privatizations is different in each state. After the Second Worldwar the states invest in the reconstruction of their economy. The profits are huge. During this period France and Great Britain have nationalized many branches, including banking and the car- and aviation-industries. Therefore, later these states have again privatized a lot, and the (English) book The economics of business enterprise mainly refers to the British experiences. During the same period, Germany and the Netherlands have avoided the state ownership of enterprises. They have preferred other instruments of state intervention. Here the seventies are particularly interesting, because then the goal of the interventions changes. During this period the interventions aim to support failing enterprises and to conserve employment.

It is instructive to briefly discuss the then Dutch state interventions11. The capital flows of the state are controlled by the Nationale Investeringsbank (NIB), and later (after 1972) also by the Nederlandse Herstructureringsmaatschappij (Nehem). Incidentally, the Nehem never was a success. The NIB is a cooperation of the state and banking (a find of PvdA minister Lieftinck). During the post-war reconstruction it stimulates investments in promising projects. The stimulation of export is an important goal. Since the late sixties it also supports the restructuring of withering branches. This often happens by means of the granting of special credits, which reduce the risk of the participating banks. Furthermore, during the seventies the ministry of Economic Affairs gives wage subsidies (so-called employment funds) to individual enterprises, as well as tax deduction for investments.

Sometimes loss participation is preferred, where the state promises to cover possible losses. The state wants to avoid by means of this support, that it buys the enterprises, The hope is that the maintenance of private property will result in an efficient operation. This policy has been applied energetically, with support funds rising to 15 milliard guilders in 1980, for a total GDP of roughly 250 milliard (so more than 4%). Unfortunately, it turns out that this approach creates moral hazards for the direction, namely the shifting of the entrepreneurial risks to the state. Then the direction prefers an extremely risky policy. Some examples: in 1975 the state tries to reconstruct the enterprise Nederhorst with the help of Ogem. This fails. In 1983 Ogem itself fails. Dramatic is also the failure of the ship-yard Rijn Schelde Verolme in 1983. Such negative experiences make state support unpopular12.

Experiences with privatization

In the Netherlands Graaiers of redders? (in short GR) is an interesting evaluation of the privatization of public services13. Concretely, the markets for hospital care, public bus transport, and energy are analyzed. It turns out that the privatizations improve the operation, distribution of operational information, and client service (p.13 in GR). Investments are made in places, where the demand is highest (p.25). The choice options increase (p.21). But it also becomes clear, that the regulation of markets remains necessary. Many public supervisors are established, which must guard the general interest (p.16). Consider accessibility, reliability, durability, and quality. Incidentally, some politicians believe that solidarity and employment in the various branches are also a general interest (p.31)14. Research shows, that the electorat is divided about the idea of privatizations. Nevertheless, people get used to it.

It turns out, that thanks to privatization the innovation increases. In the studied branches the privatization leads to more production against lower product prices (p.166). The states loses its direct influence, when enterprises are sold. However, by means of contracting (individual choice, concession, regulation) the client and the state yet obtain more influence (p.167, 172). Moreover, the free markets stimulate a better supply of information (p.168). Often the state reduces the subsidies to the enterprise after a privatization (p.181). The enterprises must perform better, which obviously also increases the labour intensity of their personnel (p.174). According to the authors of GR, free markets are a learning process, which requires some time. Therefore their continuation is desirable.

Hospital care

Since hospitals are traditionally non-profit organizations, the production is not commercial. Furthermore, the patients already before had a free choice. The privatization concerns notably the financing. A supervisory body has been established, namely the Nederlandse Zorgautoriteit. The privatization of the insurance leads to shorter waiting-lists of the hospitals (p.47, 80), but not (yet) to a better quality (p.75). The client service and the supply of information improve. Various indicators have been developed (p.82). Incidentally, this requires an administrative accountability, which is not popular among the personnel.

Public bus transport

The privatized public bus transport is put out to tender, and concessions are granted15. The provinces and urban regions, which form the transport authority, can dictate in their concessions, what they want (p.124). Sometimes this is done in too much detail. The administration imposes the legal fares. There are experimental contracts. The experiences are mixed: the number of realized kilometers increases, but the number of lines decreases (p.115). The wages are under pressure (p.122)16.


The market for energy has been opened completely for the production and sales. The distribution by means of the network is owned by the state. It is unclear, what is the price effect of the free markets (p.154). The customers can choose, but this is accompanied by yearly returning search costs17.

Alternative views

Until now this column consults the common insights of the political and institutional economics. They are supported by other social sciences, such as the psychology and sociology. But especially within the latter discipline there are also groups, which advocate another approach. The present paragraph gives an illustration of this, namely the book Mondige burgers, getemde professionals (in short BP) by the Dutch sociologist E. Tonkens18. Notably her views about the privatization of public services will be analyzed. Although she focuses on the care sector (medicine, nursing, youth counseling), her theory has the pretence to be generally valid. Since the eighties of the last century the health care changes due to an increasing specialization, individualism, and scarcity of means. Reforms are unavoidable, and here the free markets and privatization must also be considered.

Evelien Tonkens

Activities are commonly interpreted as a mixture of markets, state, and civil society. Tonkens has a preference for a derived mix, namely markets, bureaucracy and professionals. Each of these circles has its own morals (p.148). The market reacts to scarcity, and wants to limit the costs. The bureaucracy aims at justice and precision. Professionals are motivated by their professional morals, which incidentally vary for each profession. Therefore professional jobs can not be subjected to universal morals19. For instance, care prospers thanks to the dedication and selflessness of the suppliers (p.148)20. And education requires trust (p.150). The universal morals of the market and the bureaucracy disrupt care (p.149). Moreover, Tonkens sees no problems in the rising costs of care (See p.18 and 233 in BP)21.

Poster by M. Joseph
Figure 3: Poster
    by M. Joseph (1970)

Tonkens mentions the generally assumed advantages of free markets: effectiveness, transparency, freedom of choice, customer service, and quality (p.55 in BP). Next she argues, that these advantages do not hold for care. The effectiveness on the market is undermined by the costs of advertising, wages in conformity with the market, procedures for inviting tenders, and the collection of data in order to measure the performance (p.62-64, 86, 153). Tonkens notably criticizes the performance measurements (see the whole chapter 11 in BP). Her aversion concerns the costs, but most of all she believes that control is an expression of distrust. See the following. The term transparency expresses, that free markets are accompanied by the spread of product information. In care various performance indicators have been developed. However, Tonkens believes, that these indicators present a distorted picture of reality (p.61, 64, 88, 98, 144).

Tonkens believes that freedom of choice in care is undesirable, because the search costs for the best supplier are high. This is also elaborated further on in this paragraph. Advertising would confuse the consumer. The customer service is undermined, because competition leads to an increased scale and thus to anonimity (p.58). Besides, the suppliers will opportunisticly select the for them most profitable consumers (p.59). Since the consumer can hardly judge the supplied quality, the suppliers have little incentives for improving the quality (p.64). These are the arguments of Tonkens. For the moment, your columnist will draw up a provisional conclusion.

The statements of Tonkens are not new. Institutional economics (NIE) has been developed especially for a better understanding of the human behaviour on markets and within organizations. All these problems do not justify the conclusion, that free markets are by definition undesirable. It is necessary to judge on a case-by-case basis, what mixtures of markets and organization yield the most satisfying result. The popular public choice theory learns, that groups and circles primarily defend their own interests. This theory has been the basis, among others, for the well-known principal-agent model. Tonkens remains silent in her book about these insights, although they did become common in sociology22. Incidentally, the behavioural economics and the social psychology also emphasize the opportunism in human behaviour.

Thus the criticism by Tonkens of the privatizations and free markets is, that the supply of public services (notably in the "soft" sectors such as care and education) is a group process, which therefore is unfit for free markets. The ideology of the sector and the morals of markets are irreconcilable (p.237)23. She uses ideological ad philosophical arguments in order to support her criticism. Her starting point is, that the sector requires trust, harmony and solidarity (p.160,234). Investments must be done in social capital (p.97). The loyal reader of the Gazette knows, that a certain trust and a good reputation are indeed indispensable for keeping the transaction costs in markets low. Enterprises are always embedded in their own networks. The Dutch economist P. Frijters even calls the enterprises "contact makers".

Tonkens believes that this hallmark of markets is insufficient. For, the core of markets remains the freedom of choice, so that the consumer can change his supplier, when desired. This is called the exit option (p.118 in BP). Freedom of choice appeals to the personal interest, and affects solidarity and self-sacrifice. Free markets are a stimulus for egocentrism (p.45, 59). This hurts the relation between the supplier and his consumer (p.69). Relations and networks must be maintained (p.97, 146, 167). In care, based on free markets, there is insufficient investment in this, because the benefits of relations become only apparent in the long run (p.115, 122, 130). Besides, the consumers experience their own choice as an obligation and a burden. When the exit option is removed or strongly discouraged, then they no longer have search costs (p.129)24.

The consumers do need a way to express their preferences. Tonkens wants to realize this by means of the dialogue, so deliberations and planning. She calls this the voice (p.119-120, 231). The voice is necessarily collective, and is expressed by groups and circles. Here the problem is obviously, that such circles do not emerge spontaneoulsy. Tonkens finds the solution in a left-wing phenomenon from the sixties of the last century, namely politization. Politization is the stimulation of the political debate and of criticism of society in general (p.123, 235)25. Tonkens calls this voice the vivid disagreement (p.125). It leads to a group polarization, so that the collective morals (doctrine) is reinforced. Tonkens calls this an ethics of life (p.120, 140). This will guarantee the general (public) interest. The voice method is accompanied by various problems, which unfortunately Tonkens does not address. Therefore, see here.

The political debate is actually a rent seeking by the various interest groups. All these groups must make high costs in order to propagate their view and to defend their own interests. The decisions proceed slowly, also when reforms are urgently needed, and even a stalemate situation is conceivable26. On the other hand, as soon as consensus has been reached about a doctrine, then social innovation will be stifled. Tonkens understandably remains silent about these costs and dangers. She does stress, that the ethics of life (the group morals) must not be imposed by means of commands and sanctions, in a hierarchical manner (p.142). The individuals must be disciplined in an informal way, by means of the social dialogue. The collective morals naturally impose certain choices on the individual. Since the relation is based on trust, the supplier can feel less responsible. Possible contracts are qualitative (p.143)27.

Poster by W. de Ridder
Figure 4: Poster
    by W. de Ridder (1968)

Tonkens has a second ideological objection against free markets, in addition to the exit option. For, markets require some transparency for each supplier of care. Since its direction wants to excel in her performance, the workers in care must register their efforts. This creates discontent among the workers. Tonkens even sees a class conflict between the supervisor (in casu the direction) and the workers in care! (p.108) Moreover, the registrations result in standards, so that the workers can no longer offer work done to measure (p.92). In personalized work the knowledge of the specific case is mobilized (called metis) (p.93, 107). Tonkens wants to minimize the reports, and therefore the accountability (p.238). Contracts must be based on confidence, and be free of manipulative performance-incentives (p.143, 146) and of supervision by means of performance measurements (p.143).

This completes the résumé of Tonkens' criticism on free markets and privatization. She addresses many practical problems, which are also mentioned by institutional economics. This is right and useful. However, your columnist believes that the ideological part of her argument is not satisfactory, because it is rather doctrinal. She states, that branches such as care and education are fundamentally different from other activities. This ignores, that any conceivable activity is human. Existential virtues such as cost control and transparency do have a universal value, also in care. The market does not at all block a mutual trust. On the other hand, functional distrust is a virtue as well, because it encourages learning processes28. In care this is perhaps especially true, because the patient (consumer) has so much to lose.

And the professional honour of a worker in care is not of another order than those of, say a car mechanic. Empirical studies show again and again, that free markets (and privatization) can result in positive effects, which are absent in other ways of control. Thus the free markets do contribute to the improvement of the public services. Here it must be noted, that the market regime can have many forms. The introduction of the market mechanism is a learning process, and moreover path-dependent.

The PvdA commission Van Thijn

In 2002 the PvdA commission Van Thijn presents the report Grenzen aan de markt about agency and privatization. The traditional reason for the existence of the social-democracy is the nationalization of activities. During the past century it has been ideologically integrated in capitalism, but this was never done with enthusiasm. The most recent attempt to modernize the social-democracy was the radical centre, twenty years ago. The radical centre is fairly positive about privatizations. The commission Van Thijn is clearly not yet convinced29. It dislikes the learning process of trial and error in the development of the institutions of markets. Negative experiences with privatized markets (so-called quasi-markets) are seen as an inducement to abandon the reform, and to nationalize the activity again30.

The view of the commission is expressed om p.128 of its report: "The social-democracy aims at a type of society, where other motives and values than economic ones help to determine the social dynamics; where the idea of profits is bounded". It questions the social scarcity, just like Tonkens. The consequences are accepted: "[In the mixed public sector] there is room for liberalization, free markets with significant state regulation, various forms of internal and external autonomy of state agencies, public service by social organizations with a public task, which compete without the aim of profit, and services by state agencies" (p.127). In short: the commission holds on to the status quo of the seventies.

Note that nevertheless here the social-democracy differs from the christian-democracy. The christian-democracy propagates the social enterprise, without the aim of profit, based on private law. The PvdA report advocates a public enterprise, based on public law. Her trust in the state control is unshaken. It is true that the poor experiences with such organizations is acknowledged, as well as the ideas of the public choice theory (p.41, 47), and the rise of new public management (p.41, 53). But the commission decides to do nothing with them31.

  1. A clear explanation of regulation and privatization can be found here and there in The economics of business enterprise (2002, Edward Elgar Publishing, Inc.) by M. Ricketts. (back)
  2. Private enterprises must be profitable. And they must always fear competition. That is to say, the customer is free to choose his own supplier. And the private enterprises are not tied to a certain region, like state agencies. Therefore they can select the most profitable size of production (scaling effect). And privatization furthers the freedom, at least of the direction. See p.28-44 in Privatisering (1983, Stichting Maatschappij en Onderneming) by P.B. Boorsma and N.P. Mol. Your columnist bought this book a decade ago at the municipal library of Utrecht, which at the time cleared its stocks. The lending of antiquarian books is no longer a part of its tasks. The function of libraries changes, and in Utrecht they have indeed been made autonomous. Incidentally, this anecdote fits well with the theme of the present column. (back)
  3. Christian groups want to restrict the domain of the state, and therefore prefer nonprofit organizations. They aim at subsidiarity and sovereignty within the personal circle. In such social organizations there is a mutual trust, and this would reduce the transaction costs. There is a feeling of mutual responsibility, and moral obligations are accepted. These organizations are a part of the civil society. In Europe, they often resemble corporatism, where yet they become interwoven with the state, They exhibit a rent seeking behaviour, which regularly leads to public scandals. In the Netherlands, since 2005 the CDA has tried to further the social enterprises. These enterprises must have a special legal status, which among others regulates its management and ownership. Thus a sound supervision and accountability must be guaranteed. The CDA did not succeed in finding political support for this initiative. Apparently, yet the parliamentary majority has more confidence in the state (socialists) or the market (liberals). Besides, there is a preference for targeted regulation in each branch. (back)
  4. See for such discussions paragraph 2.5 in Privatisering. On p.22 it is pointed out, that sometimes a customer pays a personal contribution, and yet has the obligation to buy (compulsory education, connection to the sewer system). This is obviously not a free matket. And the transition to autonomy is not yet a privatization (p.24). According to p.71 in the PvdA report Grenzen aan de markt (2002, Wiardi Beckman Stichting) (edited by F. Becker) a quarter of the civil servants works at an agency. Autonomous administrative organizations (in short AAO, in Dutch ZBO) are among others the universities, Chambers of Commerce, and the Central Bank. AAO's sometimes engage in public-private partnerships (in short PPP). For instance, universities are active in contract research (p.78). On p.69 a strongly regulated market is called a quasi-market. Consider for instance care and the social security, where the general (public) interest is essential. (back)
  5. An anecdote is that around 1920 the legendary socialist leader Piter Jelles Troelstra still believed, that the workers in the branch organizations would defend the interests of their customers. He had an utopian expectation about the fairness of the working class. (back)
  6. At the start of the twentieth century the formation of cartels and trusts was a new phenomenon, which attracted much attention. There is the fear, that the economic power will become too concentrated. The liberals want to protect the competition on the markets by means of legislation, which prohibits the "collusion" among producers. The socialists believe that the formation of cartels and trusts is necessary and socially desirable. It is a step towards socialism. See the column about this theme. (back)
  7. Cooperation is a social process. Its analysis requires an input from psychology, sociology, anthropology, political science, and the policy and management sciences. It is not a coincidence, that the Gazette again and again refers to Foundations of social theory (1990, Harvard University Press) by the sociologist J.S. Coleman. In chapter 15 of Traité de sociologie économique (2013, Presses Universitaires de France), edited by P. Steiner and F. Vatin, ethical banking is mentioned as an example. This branch must develop criteria in order to define "socially responsible undertaking". The large banks define the norms. (back)
  8. Paragraph 14.7 in The economics of business enterprise gives a succinct survey of the international experiences with privatization. The privatization commonly improves the productivity and the profit rate. (back)
  9. See Political economy in macroeconomics (2000, Princeton paperbacks) by A. Drazen. In a previous column about planning it is explained, that Tinbergen implies by reforms, that the policy makers introduce truly innovative instruments. This distinguishes them from quantitative instruments, such as increased taxes, and qualitative instruments, such as a new tax. It is curious that nowadays this distinction is attributed to the English sociologist P. Hall, althoug he proposed it only during the nineties. Incidentally, Tinbergen strongly relies on planning. He attaches insufficient value to the policy problems, which are emphasized by the new institutional economics. (back)
  10. The privatizations are merely a part of the Washington consensus package. Other measures are a stable state budget, investments in human capital, free trade, deregulation of markets, and sound property rights. Another example of reforms after a social revolution is the policy of the Dutch cabinets Lubbers, since 1982. It is generally acknowledged, that at the time the state was overloaded by the demanded supply of welfare arrangements. See chapter 4 in the PvdA report Grenzen aan de markt, a credible source, which incidentally fits well with this column. Nevertheless, on p.62 the cabinet Lubbers I is provided with the unfriendly qualification of neoliberal. (back)
  11. Here Interventie en vrije markt (1982, Uitgeverij SUA), edited by H. Vrolijk and R. Hengeveld, is consulted, notably chapter 3. The publisher is famous for its radical left-wing orientation (say, related to the Pacifistisch Socialistische Partij). Since the state interventions in weak enterprises have been desastrous, the left-wing ideologists become convinced, that the entrepreneurs have "grabbled" in the public treasury. They have an almost palpable hate against entrepreneurs. An example of such a critical mind is P. Lakeman, who at the time publishes among others Het gaat uitstekend (1984, De Haan). It is filled with complot theories. Your columnist, who read this book 18 years ago, was utterly confused. The banker J.R.M. van den Brink is somewhat more reasonable, and states on p.384 in Zoeken naar een heilstaat (1984, Elsevier): "The failures, which occur during the seventies and after 1980, are almost always caused by an inextricable ball of unfavourable market developments and other negative cyclical and structural influences from outside, and true mismanagement within the enterprise. The latter occurs mostly for a long time, and is reinforced by external factors (...). Many reactions of enterprises suffer from inertness and the compromises in decisions of political bodies". In Interventie en vrije markt it is remarked, that during the fifties and sixties the Netherlands competed on the international markets, mainly with low wage costs. However, during the late sixties there is a wage explosion, so that this advantage is eliminated. (back)
  12. The preceding text illustrates the need for collective learning in the formulation of policies. This is partly done by means of the European liberalization, which strongly regulates state subsidies. This learning process never ends. Certainly when the individual identity is at stake, separate circles can subbornly stick to their doctrine. An example: at the initiative of the PvdA, in 2015 the state has formed the State cleaning organization (RSO), which brings the cleaning of offices back under state control. This was promised in the party program of 2012. The PvdA is notably irritated by the supposed high work load in the private cleaning and care branches. Your columnist, himself at the time still a PvdA member, believes that the nationalization is not a good solution. Besides, this measure illustrates the relation between politics and interest groups. After the establishment of the PvdA in 1946, some wanted to change it into a popular party, but this fits poorly with its inclination to criticize and polarize. In the left-wing Spekman executive the propagation of particular interests was even rather popular. (back)

  13. See Graaiers of redders? (2011, Uitgeverij Atlas) by W. Dicke, B. Steenhuisen and W. Veeneman. On p.52-61 in Privatisering the effect of privatization on the waste disposal is extensively evaluated. The evaluation includes roughly ten studies in Europe and North-America. The privatization usually leads to cost reduction. It is curious, that a bundling of the waste disposal by municipalities brings no improvement. On the contrary, the collaboration increases the costs. In all these cases the state (usually the municipality) commissions the task and remains the only customer. As soon as the separate households become the customer, the private enterprises have high costs. For, the customer density in the covered area decreases, and the invoicing becomes more complex. (back)
  14. On p.60 and p.65 in Privatisering it is pointed out, that usually municipalities have high social insurance contributions for their personnel. Apparently the municipal human resources management is rather indifferent, so that it accepts, among others, that workers remain on sick-pay for a long time. Reversely, private enterprises will sometimes fire their sick employees. The solution is obviously a direction, which is able to motivate its personnel. (back)
  15. Here your columnist has experience in practice, as so often. In 2006 he protested against the privatization of the Municipal Bus Transporter in Utrecht (in short GVU), albeit without success. This action was mainly ideologically motivated. For, on p.69 in Kommentar zu den kommunalpolitischen Richtlinien der Sozialdemokratischen Partei Deutschlands (1929, Verlag J.H.W. Dietz Nachf., GmbH) by P. Hirsch it says: "Heute dürfte der Kampf zugunsten der munizipalsozialistischen Auffassung entschieden sein. Der Regiegedanke hat sich Bahn gebrochen, ein Zurück gibt es nicht mehr. (...) Die Erfahrung lehrt, daß keiner der früher gegen die städtische Regie ins Feld geführten Gründe sich als stichhaltig erwiesen hat. Die Gemeinden können nicht nur ebenso vorteilhaft, sondern noch weit vorteilhafter wirtschaften als Private, und sie haben es ebenso leicht wie diese verstanden, sich die Errungenschaften der Technik nutzbar zu machen". It is questionable, whether at the time this was indeed true. Anyway, nowadays it no longer holds. Hirsch was an expert, but also a convinced socialist, which makes him ideologically biased. (back)
  16. On p.79-93 in Grenzen aan de markt the transition to autonomy (and partly privatization) of the Dutch Railway Company (in short NS) is analyzed. It turns out that the construction of the quasi-market on the railway transport is a process of trial and error. Apparently the Dutch state did not want to imitate the examples of privatization in the Anglosaxon states. The PvdA commission Van Thijn, which is responsible for this report, has a clear ideological aversion against privatization of public services. This leads to dramatic flowers of speech (p.93): "The commerce undermined the classic labour ethics within the railways. Whereas the transition to autonomy was supposed to lead to a possibly small public burden, the NS became a millstone for the political and administrative capital". (back)
  17. The privatization of the electricity supply is also described on p.93-105 in Grenzen aan de markt, at least until 2002. It is interesting that according to the PvdA commission the reform was done too fast (p.105). This analysis adds little to the one in Graaiers of redders?. On p.105-119 in Grenzen aan de markt the commission analyzes the privatization of the health and safety services. For the reform of the social security your columnist refers to the column about the Purple cabinets. (back)
  18. See Mondige burgers, getemde professionals (2008, Van Gennep) by E. Tonkens. It is difficult to analyze this book, because Tonkens mixes science with journalism and left-wing satire. On p.186 she even states: "It is desirable to laugh more [EB: about policy analysis]". For several years, Tonkens was a member of parliament for the party Groen Links. In her scientific work she often cooperates with the Groen Links ideologist J.W. Duyvendak. Besides, she has close ties with M. Trappenburg and M. Hurenkamp, both editors of the PvdA magazine S&D. Hurenkamp has recently completed a thesis under her supervision. The arguments of Tonkens can only be judged in an objective manner, when first the ideological bias is filtered out. For, ideology is subjective. This filtering is always a hell of a job. For instance, your columnist needed many years for "interpreting" the Leninist arguments. Apparently such utopian dogma's yet generate a bizarre fascination! (back)
  19. See p.149-150 in Mondige burgers, getemde professionals. Your columnist believes that the assumption of various incommensurable morals is a problem, but it is not new. For instance, in France sociologists have invented the economics of the conventions. It assumes that different morals are present in the media, the commerce, industrial production, the civil society etcetera. See p.94 in L'économie institutionnelle (2012, Éditions La Découverte) by B. Chavance. And communitarianism gives the highest priority to the collective morals. It advocates the value rationality. Here certain values can be incommensurable. Your columnist believes that this is not fruitful, and limits his collective morals to constitutional patriotism. (back)
  20. The theme of professional ethics is elaborated in the remainder of this paragraph. Here it is already mentioned, that the Dutch medical specialists demand and get an excessive income. Apparently they are yet motivated by the income motive. The grappling existed already, long before the introduction of free markets in care. This is evidently in conflict with the image of man according to Tonkens.
    On p.16, 22 and 32 in Graaiers of redders? it is stated, that free markets are a universal process, which fits in many branches, including care. However, the institutional frame is different in each case. (back)
  21. This nonchalance concerning the affordability of care has been mentioned before, in the column about the Purple cabinets. There the scientist F. van Waarden is cited, who believes that care is more sensible and valuable than brewing beer or coordinating projects. (back)
  22. Coleman has in Foundations of social theory elaborated on various public choice models for sociology. Some sociologists are not pleased by it, and call this approach an "economic imperialism". Your columnist can only speculate about the reasons, why Tonkens fails to mention this. On p.144 in Mondige burgers, getemde professionals just one sentence addresses the subject: "According to Bauman, this postmodern ethics [EB the ethics of Tonkens], which assumes an inherent uncertainty, pluralism and ambivalence of the present society, does not fit with the goal-means arguments and the theories which are based on them, such as the rational choice theory, and can be called irrational in this sense". Your columnist believes that this is a very poor basis for rejecting the fruitful knowledge, which has been accumulated during the last half of a century. (back)
  23. On p.68 and 151 in Mondige burgers, getemde professionals it is indeed argued, that the supply of care has been fragmented due to the division of labour and specialization. Each therapy or medical method is offered as a separate product. Tonkens argues that care is a process. At the moment the coordination of the process (the combination of the separate partial products) is unsatisfactory. (back)
  24. On p.128 in Mondige burgers, getemde professionals Tonkens assumes, that the state forces the freedom of choice on unwilling citizens. Here the state would have a hidden agenda, namely to save and shift the responsibility to others. Your columnist supposes that this accusation is left-wing satire. (back)
  25. Perhaps the preference of Tonkens is not surprising, because the political predecessors of Groen Links have been founded in and thanks to the sixties (PPR, EVP), or prospered then (CPN, PSP). Tonkens sympathizes with these parties, and with anti-authoritarian rebellions such as at the time in the psychiatric institute Dennendal. See chapter 2 in Mondige burgers, getemde professionals. On p.182 she states: "Do not belittle [tensions], but get angry!" The idea of social criticism has been propagated by, among others, the School of Francfort (Marcuse, Fromm) (p.38 in this book). The experiences with this movement are poor, so that nowadays not many adhere to this school. Note that Tonkens' party companion D. Pels also advocates social management by means of the political debate. Your columnist read 14 years ago Politiserende hulpverlening (1983, Link) by B. de Turck. He believes, that help consists of a mix: personal therapy, social consciousness, and social action. A patient must not only adapt himself, but also his environment and the society! Why is a confused person helped by making hin angry with others? (back)
  26. The reader can find an example of stagnation in the column about the economic slump in the Netherlands during the seventies and early eighties of the last century. (back)
  27. On p.239 in Mondige burgers, getemde professionals one reads: "Stimulate competition for being the best, for honour, instead of competing for who is biggest, for profit". Tonkens advocates activities in the form of a tournament, just like her party companion D. Pels. (back)
  28. See p.192 and further in Graaiers of redders?. (back)
  29. On p.44 in Grenzen aan de markt one reads: "Against the supporters (...) there are the no-sayers, who reject the neoliberal ideas, the market ideology in the public sector and more generally the development of the present capitalism and the commerce and economization of the world-view". (back)
  30. On p.118-119 in Grenzen aan de markt there is the complaint, that the reforms progress too fast. This illustrates, that not just the privatization is politically questioned, but also the path to it. On p.125 it is stated: "There is insufficient attention for the question (...) how, in the case of a durable disappointment, de-collectivization can again be undone". A phased reform can increase the support. However, in some situations phases can also block desirable reforms. See chapter 13 in Political economy in macroeconomics. (back)
  31. On p.53 in Grenzen aan de markt it is mentioned: "The new public management is more a loose approach than a consistent theory, with four main points: [1] increasing efficiency, where the industries provide an example; [2] the shrinking of the state; [3] the ambition to have excellent state organizations; and [4] stimulating an entrepreneurial spirit within the state bureaucracies. Your columnist hopes to once devote a separate text to this theme. (back)