School of ManagementArto Haveri

Local Government Change in Finland – Reflections on New

Governance

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How the idea of local government has changed in

Finland?1. The era of self-government ideal

- municipalities as civil society and counterforce (1865 Local Government Act to 1930’s)

2. The era of welfare municipality- municipalities as part of the welfare state service machine (started already in 1930’s, the golden age from the end of 1960’s to the beginning of 1980’s)

3. The era of transformation/turning point- no grand narrative, search for new role (s) (from the start of 1990’s →)

2

Typology of local government roles

View on autonomy

View on the appropriaterole of public sector

Municipalities have intrinsic value as self-governing communities

Municipalities have instrumental value as service providers

Minimalistic Municipalities as local communities-Governing model: changing- Inhabitants of a municipality select governing model and service assortment according to their local needs -The difference between municipalities is highlighted- Localism (theory of public choice vs. communitarianism)

Municipalities as service purchasers- Governing model: markets- Municipalities role is narrow and limited to specific services- Inhabitant of a municipality = customer/consumer- New Public Management

Interventionist Municipalities as arenas of governing- Governing model: networks, meta-governance- As a part of decentralized system autonomous municipalities have important role in coordinating local activities- New Public Governance

Municipalities as service producers- Governing model: hierarchy- Municipalities must produce similar services to everybody regardless of place and time- The similarity of municipalities is highlighted- Bureaucracy, institutionalism,

Typology: from the era of self-government ideal to welfare municipality

View on autonomy

View on the appropriaterole of public sector

Municipalities have intrinsic value as self-governing bodies

Municipalities have instrumental value as service providers

Minimalistic Municipalities as local communities-Governing model: changing- Inhabitants of a municipality select governing model and service assortment according to their local needs -The difference between municipalities is highlighted- Localism (theory of public choice vs. communitarism)

Municipalities as service purchasers- Governing model: markets- Municipalities role is narrow and limited to specific services- Inhabitant of a municipality = customer/consumer- New Public Management

Interventionist Municipalities as arenas of governing- Governing model: meta-governance, networks- As a part of decentralized system autonomous municipalities have important role in coordinating local activities- New Public Governance

Municipalities as service producers- Governing model: hierarchy- Municipalities must produce similar services to everybody regardless of place and time- The similarity of municipalities is highlighted- Bureaucracy, institutionalism,

Typology: The era of turning point

View on autonomy

View on the appropriaterole of public sector

Municipalities have intrinsic value as self-governing bodies

Municipalities have instrumental value as service providers

Minimalistic Municipalities as local communities-Governing model: changing- Inhabitants of a municipality select governing model and service assortment according to their local needs -The difference between municipalities is highlighted- Localism (theory of public choice vs. communitarianism)

Municipalities as service purchasers- Governing model: markets- Municipalities role is narrow and limited to specific services- Inhabitant of a municipality = customer/consumer- New Public Management

Interventionist Municipalities as arenas of governing- Governing model: meta-governance, networks- As a part of decentralized system autonomous municipalities have important role in coordinating local activities- New Public Governance

Municipalities as service producers- Governing model: hierarchy- Municipalities must produce similar services to everybody regardless of place and time- The similarity of municipalities is highlighted- Bureaucracy, institutionalism,

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H

NM

Own production, municipal agenciesMunicipal companies, public utility

Privatization, vouchers

Partnerships, self-supporting citizen

Joint ventures, public private companies

Purchase of services/outsourcing

Inter-municipal cooperatives

Grants for third sector organizations

Change of municipal management in hybrids

Agency management

Network managementCommunity leadership

Corporate management

Management by contracts

H= hierarchies

M = Markets

N= Networks

Expenditures in social and health care

(2000, 2004, 2008 and 2009, million EUR) 2000 2004 2008 2009 Change

2000-2009 %(deflated)

Public producers

9116 10969 15135 15494 28 %

Privateproducers

2372 3458 5286 5684 80,4

Public and private together

11488 14427 20420 21178 38,8

Source: National Institute for Health and Welfare 2009

Personnel increase in social and health care

(1992, 2000, 2004, and 2008)

1992 2000 2004 2008 Change 1992-

2008 %

Public producers

226500 247700 255600

270300

19,3

Privateproducers

34900 56800 71900 87800 151,6

Public and private together

261400 304500 327500

358100

37

Source: National Institute for Health and Welfare 2009

How this is reflected in governance and management practices of local authorities?

• Shift from hierarchy –based management to markets and desired shift to network-based

• Use of (some sort of) purchaser-provider model has become more common

• Municipalities can more often be regarded as corporate local authorities

• Number of municipal owned companies (70-158 in 1997-2007, inter-municipal organizations and special districts has increased

• “Managerial modernization” -increasing application of cost accounting, internal contracting, performance measurement

• Citizens’ role as “consumer/customers” is highlighted

Proper role for local citizen from the point of view of hierarchies, markets

and networks

Inhabitant as (active) citizen

Inhabitant as (passive) stakeholder/owner

Inhabitant as customer/consumer

Own production, municipal agencies

Municipal companies, public utility

Privatization, vouchers

Joint ventures, public private companies

Purchase of services/outsourcing

Inter-municipal cooperatives

Grants for third sector organizations

What is wanted:Case Lantula as an example

of third sector activity

• In the town of Sastamala, Lantula village, third sector has actively taken responsibility for welfare of village of 350 inhabitants

• Village association organizes events and activities to kids as well as youngsters and elderly. As one example, the village activist collect elderly people every Friday to weekly recreational day.

• The village activists take care of all practical work and the village association is also responsible for the economy of the events and activities, the town of Sastamala supports financially the village association.

Cons Pros

Markets -The problem of quasi-markets(markets don’t work properly)-Development work, especially in long service chains-Monopolies, siloization-Monitoring costs

-Increasing awareness of competition and costs-Efficiency when markets work truly-Development of local business competencies in services

Hierarchies -Stiffness of the structure, weak learning ability-Weak ability to foster commitment and social cohesion

-Transparency, responsiveness- Endurance, decision making ability

Networks -Decision making in conflicted situations-Transaction costs-Transparency, responsiveness

-Flexibility, informalityActors are able to create meanings which is reflected in social cohesion and commitment

Some research based experiences on the pros and cons of different governance

approaches

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The present situation and existing challenges

• Some disappointments and plenty of doubtful talk about the new governance, especially markets (outsourcing)

• The rising political discourse concerns the third sector and big expectations are sot to it and active citizens

• Municipal organizations not clearly market not network -based, models, but hybrids with complex and unfinished structures

• Difficult to predict from the current situation whether it will lead to any more paradigmatic and enduring model of governance and management

• A lot will depend on the success/failure of current reform in local government structures