Patterns and Causes of Marketization in Public Services

Lilla Sparbanksfoajén Session 2: The Neoliberal Shift organized by Jonas Ljungberg and Erik Bengtsson


Dominic Mealy, Jonas Ljungberg


Privatization has resulted in the changed ownership of important sectors of developed economies, including telecommunications, aviation, railways and utilities. While outright privatization has been less commonplace and extensive in public services (education, health care and social care) different forms of marketization have, nevertheless, been implemented. Broadly defined, marketisation refers to an increase in the private-sector production of goods and services previously undertaken by the state and the allocation of these resources through market arrangements, where non-market forms of administration previously prevailed. Most importantly, this has resulted in services in the public sector being provided by actors other than governments yet still being financed by revenue generated from taxation.While there is a huge literature on privatization of state-owned enterprises, and a growing literature on marketization of welfare services, there is still no quantitative mapping of the process of marketization showing when and to what extent this has taken place in different countries across time. According to the stylized facts presented in the literature on the European welfare states – social democratic (Nordic), conservative (Continental) and liberal (Anglo-Saxon) – a corresponding pattern in the structure and dynamics marketization could be expected. However, the present paper highlights that marketization only follows these stylized facts to a limited extent and in crucial aspects has been most rapid and radical in “social democratic” Sweden. These findings are based on OECD data that in very broad terms allows the tracking of marketization in education and health care back to the mid-1990s, and in the case of education partially back to the 1970s. To make this broad picture of marketization patterns more comprehensive, this paper aims to track the process of marketization in more detail and further back in time (to at least 1980) for a handful of countries. In so doing this paper will answer, firstly, when the levels of marketization began to rise and, secondly, map the various forms marketization that have taken place in education and health care systems. The most promising countries with regards the availability of data are Austria, Germany, France, and Sweden. In the political economy literature privatization and marketization have both been subject to a significant amount of analysis and theorization, however the focus has primarily been placed on the role of politics and ideology, leaving out the extent and character of the actual processes. This situation has been compounded by a lack of precise quantitative data arising from the conventions of national accounting, with the recommendation that countries measure both the industrial and institutional distribution of production at a disaggregated level only appearing in the SNA 2008. This paper therefore aims to open up new avenues of research by examining both these aspects for education and health care over past decades. It will further contribute to the literature by critically assessing the conventional ideational explanations of the driving causes of marketization. An alternative explanation is that marketization has been pushed by the contemporaneous and increasing process of financialization. A test is provided by analyzing how the extent of financialization across countries corresponds with the extent of marketization in the public services.


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