SP-SP - Public-Private Sector Research Center
Research to improve communication between businesses and public administration

The role of government has undergone significant changes in the Western world. This transformation has impacted society in several ways. First, the line dividing the public and the private sector is less defined; at the same time, it is unclear whether the public sector should continue holding responsibility for certain functions it has traditionally held, and some experts have begun to question the State's efficiency in achieving its objectives. Furthermore, the public sector has started turning to the private sector more frequently in order to carry out its responsibilities.

Secondly, the concept of public sector has changed. Instead of a single all-encompassing unit, it is considered today a complex hybrid of entities, some supranational - the European Union - as well as within the same nation - central, regional and municipal governments - that share competencies and negotiate resources.

Finally, with the advent of non-governmental organizations (NGOs), which have taken on and efficiently managed a high number of activities once carried out by the State, the concept of public has become separated from one of its traditionally exclusive characteristics, its condition of being non-profit. Throughout this century, the functions of the State have expanded considerable, assuming different functions in respect to correcting faults in the market. This is the case with the regulation of monopolies and the financial system; the establishment of certain environmental standards, or increasing consumer protection. In some cases, under the pretext of implementing market policies, the State has has an active function in the creation of markets and the promotion of businesses.

Table 1. Functions of the State

New functions
However, the growth of the State - and in particular, public spending - is due largely to one of its specific functions, which may be defined as improving equality, that is, redistribution. On one hand, the component of social public spending - redistributive pensions, unemployment subsidies - has increased at a pace faster than public consumption (Table 2). On the other hand, many spending components that are not "social" in theory, have, in fact a redistributive component: this is the case with education, health care and public pension systems.

Thus, it is useless to think of the future of the State considering only its efficiency as compared to that of the private sector: redistribution, in many cases, has to be imposed in order to be effective.

Tables 2. Distribution and Evolution of Public Spending

Source: World Bank, World Development Report, 2001, Table 4.12

This fact must be taken into consideration when referring to another frequently cited inefficiency: excessive bureaucracy. It is an error to think that any initiative could be led like a private enterprise, for two reasons: the first is that there is no ideal model for managing businesses; secondly, and most importantly, because there are concrete reasons why a public activity should not be carried out like a private company:
 
"There is a role in our society for different kinds of organizations and for the different contributions they make (…) Business can learn from government no less than government can learn from business; and both have a great deal to learn from cooperate and non-owned organizations." (Mintzberg, "Managing Government, " HBR, May-June 1996, p. 75).

The public sector must, therefore, be understood not only in terms of efficiency ratios, and account losses and profits, but also as an organization which has its own characteristics and a mission that remains separate from markets.

Public administrations are instruments for collective action, and as such, exercise influence over the private sector, and on the competitive position of companies in different sectors and countries. Consequently, administrators and business executives should contribute to the processes of redefining the role of Public Administration and governmental reform.

It's necessary therefore to open up dialogue between society and its institutions. The SP-SP Center was created with this goal in mind.