Bureaucracies, Budgets and Decision-Making David Bell & Khurram Butt Bureaucracy as a polity & politicization of bureaucracy Development, Development Planning

Bureaucracies, Budgets and Decision-Making

David Bell & Khurram Butt

Bureaucracy as a polity & politicization of bureaucracy

Development, Development Planning & Policy

Budgeting

Privatization

By Michael Siciliano & Clayton Wukich

Rethinking Institutional Analysis and Development by Ostrom, Feeny, and Picht (1988)

Essence of Decision: Explaining the Cuban Missile Crisis by Graham Allison (1971)

Classic Readings in Organizational Behavior by J. Stephen Ott (1989)

The Complete Yes Minister by Lynn and Jay (1988)

Concerned with how economic forces interact with political and institutional arrangements to affect economic development.

Author sees the fundamental goal of development as expanding human choice through economic growth, human capital improvements (education, technology, health) and enhanced institutional structures.

Institutions affect human choice by influencing the availability of information and resources, by shaping incentives, and by establishing the basic rules of social transactions.

A major role of institutional analysis in economic development concerns the problem of “getting the prices right”. He sees this for three reasons:•First, institutional development and design are part of

the process of “getting the prices right” because the interaction of supply and demand is mediated through institutions.

•Second, bad policies will, over time, fundamentally corrupt and distort institutional performance.

•Third, policy reform and structural adjustment effects, by starting the process of “getting the prices right” are essential to the process of institutional change and economic development.

These interactions between prices, institutions, and economic development can be illustrated in three areas:•Policy and Institutions: Distributive policies

(social services, subsidies, infrastructure) are common source of price distortion in developing countries.

•The Character of Goods and Institutions: Distortions can also arise via pricing problems within the public sector in terms of pricing public goods.

•Institutional Innovation :The role of technology and especially technological innovation has been added to traditional models and discussions of economic growth.

Three models of decisionmaking:

•Model I: Rationale Actor

•Model II: Organizational Processes

•Model III: Government Politics

Model I: Rational Actor•Government is viewed as the primary actor,

akin to an individual with values, purposes, and cost-benefit calculating capacities.

•Decisions are made based on viewing all of the alternatives and selecting the one with the highest payoff

•Under this theory the Soviets withdrew the missiles due to the mutually assured destruction of nuclear war.

Model II: Organizational Processes•Based on the work of March and Simon - Allison

notes that existing government bureaucracy places limits on the range of government action and establishment of possible alternatives.

•Government’s cannot analyze all possible courses of action. Problems are broken down into manageable parts and organizations operate on historical trends, existing patterns of action, and standard operating procedures.

•Simon’s notion of satisficing

Model III: Government Politics•Actions are best understood through the

lens of politics and negotiation.•Leader’s power is mitigated by the need

for consensus; the final actions are in part determined by the men surrounding the leader (Yes Men).

•Issues of groupthink.

Janus is studying how the US gets ourselves into such blunders as the Bay of Pigs, Korean War stalemate, Vietnam, and being unprepared for the Pearl Harbor attacks.

He looks at fiascos from the standpoint of group dynamics

Each case study showed that (1) phenomena of social conformity and pressures of the cohesive group against a dissident’s objections and (2) the bolstering of morale at the expense of critical thinking; of staying loyal to the group by sticking with failed policies – policies that are even disturbing to the psyche.

Groupthink is defined as the deterioration in mental efficiency, reality testing, and moral judgments as a result of group pressures. The primary danger Janus says, is that a group will member will think a proposal is a good one without attempting to carry out a careful, critical scrutiny of the pros and cons of the alternatives.

Janus identifies 8 symptoms of groupthink:•Invulnerability•Rationale:•Morality•Stereotypes•Pressure•Self-censorship•Unanimity•Mindguards

A detailed study of groups which display these symptoms would likely reveal a number of immediate consequences which are products of poor decision making:• View only a few (usually 2) alternatives• Do not reexamine course of action• No discussion of non-obvious gains or losses they may

have overlooked• Little or no attempt to obtain info from experts even

within their own organization who might be able to supply better estimates of potential gains and losses

• Tenency to ignore facts and opinions that do not support their preferred policy

• Spend little time deliberating about how a chosen policy might be hindered by bureaucratic inertia, sabotaged by political opponents, or derailed by common accidents

Recommendations to prevent groupthink include the following.• Assign a role of critical evaluator – sets tone for

acceptance of criticism and encourages diverse opinions.• Key members must adapt an impartial stance at the

beginning stages of deliberation to allow for a wider range of alternatives to arise and be discussed.

• Routinely set up outside policy evaluation groups to work on the same question and operating under a different leader.

• Invite and seek outside expertise• Have at least one member play devil’s advocate during

group meetings.• After an initial decision has been reached – a meeting

should be held solely to discuss peoples doubts about that policy.

The running of a hospital without patients•Despite an increase in 40,000 health service

administrators, the number of hospital beds had gone down by 60,000 and the annual cost of the health service had gone up 1.5 billion pounds. Humphrey commended such growth and disagreed with Hacker’s comment that the money should actually be used to make sick people better. Humphrey stated “it makes everyone better – better for having shown the extent of their care and compassion. When money is allocated to Health and Social Services, Parliament and the country feel cleansed. Absolved. Purified. It’s a sacrifice” (page 189).

Hacker wanted to shut down the hospital and use the money to open closed wards in other departments. Humphrey said that it is not as if the staff has nothing to do simply because there are no patients there. He then hands him a list of 10 ridiculous duties being performed by the administrators with no patients.

This list included contingency planning for air raids, projecting accounts and balance for when they have patients, catering, as well as administrators to administrate other administrators. Humphrey claims that these are vital tasks that must be carried on with or without patients, when Hacker asks why; Humphrey responds by saying should we get rid of the army simply because there is no war?

‘‘Bureaucracy as Polity’ in The Bureaucratic Experience: A critique of Bureaucracy as Polity’ in The Bureaucratic Experience: A critique of Life in the Modern Organization by Ralph P. HummelLife in the Modern Organization by Ralph P. Hummel

In a world of bureaucracy, administration In a world of bureaucracy, administration replaces politicsreplaces politics

Bureaucratization of politics: having to Bureaucratization of politics: having to jump through many hoops before decision jump through many hoops before decision is madeis made

Bureaucracies with their centralized Bureaucracies with their centralized command structures are structurally command structures are structurally superior to fragmented political superior to fragmented political institutions that make a democracyinstitutions that make a democracy

Citizens view bureaucracies as more Citizens view bureaucracies as more stable than ‘emotionally upsetting’ politicsstable than ‘emotionally upsetting’ politics


Yet, bureaucracies have high politization Yet, bureaucracies have high politization internally: bureaucratic power arises from internally: bureaucratic power arises from inside unlike political power (external)inside unlike political power (external)

Max Weber’s sources of power within:Max Weber’s sources of power within:• Division of laborDivision of labor• Hierarchy as a source of powerHierarchy as a source of power

Bureaucracies create the illusion that all Bureaucracies create the illusion that all problems, including political ones, can be problems, including political ones, can be translated into administrative and technical translated into administrative and technical onesones

Bureaucracy produces its own truncated Bureaucracy produces its own truncated politics (encouraging different behaviors for politics (encouraging different behaviors for managers and rank and filemanagers and rank and file


Post-bureaucratic politics: emergence of Post-bureaucratic politics: emergence of process politicsprocess politics

Process politics emerges when a Process politics emerges when a ‘facilitator’ used to overcoming structural ‘facilitator’ used to overcoming structural hurdles (division of labor / hierarchy) and hurdles (division of labor / hierarchy) and overcoming petty personal politics enters overcoming petty personal politics enters the policy arenathe policy arena

Process politics = problem-Process politics = problem-shapingshaping mode mode• Gets participants away from a mode of Gets participants away from a mode of

assuming that choices are already brought assuming that choices are already brought ready made to the tableready made to the table

• Participants first define what the problem isParticipants first define what the problem is

Overview of Bureaucracies and Political systems by Ferrel Heady in Public Administration: A Comparative Perspective, 6th eds. Edited by

Ferrel Heady

There is common agreement that bureaucracy should be instrumental and serve as agent not master• Respond willingly and effectively to policy

leadership from outside its own ranks Much of the last 50 years reflects a

tendency for bureaucratic elite regimes to become more prevalent

Gives rise to concerns of usurpative behavior as power-wielders

Overview of Bureaucracies and Political systems by Ferrel Heady in Public Administration: A Comparative Perspective, 6th eds. Edited by

Ferrel Heady

1980s bureaucracy characterized as in danger of being out of control

The global shift of the 1990s to devolution from central authorities

Form governing to governance—new public management movement

Presents various divergent opinions at strategic approaches for achieving balanced political development• Focuses on the role of external intervening

approaches• Aid—grant strategy

‘‘Development and its Administration’ in Governance, Administration Development and its Administration’ in Governance, Administration and Development by Turner and Hulmeand Development by Turner and Hulme

DevelopmentDevelopment• Contested definitions: modernization theory, Contested definitions: modernization theory,

dependency theory were early points of viewdependency theory were early points of view• Today it’s usually the neo-populist and neo-Today it’s usually the neo-populist and neo-

classicist views that dominateclassicist views that dominate• State, dominant social classes, world bank and State, dominant social classes, world bank and

their allies in the West seen as the villainstheir allies in the West seen as the villains

Defining development todayDefining development today• Economic componentEconomic component• Social ingredient (health, education, housing…)Social ingredient (health, education, housing…)• Political dimension (human rights, pol. freedom)Political dimension (human rights, pol. freedom)• Cultural dimension (self-identity and worth)Cultural dimension (self-identity and worth)• Full-life paradigm (meaning of life)Full-life paradigm (meaning of life)• Ecologically sound and sustainableEcologically sound and sustainable


Rise of development administration (1960s)Rise of development administration (1960s)• US-led movement; seen as an attack on colonialismUS-led movement; seen as an attack on colonialism• ‘‘Primary obstacles of development are Primary obstacles of development are

administrative rather than economic’, Donald Stone administrative rather than economic’, Donald Stone – 1965– 1965

• Practical application of modernization theoryPractical application of modernization theory

Development admin = Public Admin = BureaucracyDevelopment admin = Public Admin = Bureaucracy Elitist bias: modernization task of an elite minorityElitist bias: modernization task of an elite minority Addressing ‘lack of administrative capacity for Addressing ‘lack of administrative capacity for

implementing programs’implementing programs’ Foreign aid was seen as a way to transfer missing Foreign aid was seen as a way to transfer missing

tools of public administrationtools of public administration Culture seen as an obstacle to be overcomeCulture seen as an obstacle to be overcome


Challenges to development administration Challenges to development administration (1970s)(1970s)• Shift towards ‘more complex and more Shift towards ‘more complex and more

economically oriented problem perspectives’economically oriented problem perspectives’• The assumption that big govt was the route to The assumption that big govt was the route to

development was questioneddevelopment was questioned• Administrative technology transfer aimed more at Administrative technology transfer aimed more at

‘maintenance’ rather than ‘development’‘maintenance’ rather than ‘development’• Class-interests of bureaucrats in developing Class-interests of bureaucrats in developing

countries hinder innovationcountries hinder innovation• Neo-classical approach (less govt) rose to Neo-classical approach (less govt) rose to

prominenceprominence• NPM started being exported to developing countriesNPM started being exported to developing countries• From development admin. to development policy From development admin. to development policy

‘‘The Policy Process’ in Governance, Administration and Development The Policy Process’ in Governance, Administration and Development by Turner and Hulmeby Turner and Hulme

What is policyWhat is policy• Process; about decisions; purposive behavior of Process; about decisions; purposive behavior of

human agentshuman agents

Models of policy change (Grindle & Thomas)Models of policy change (Grindle & Thomas)

• Society-centered: explains policy process in terms Society-centered: explains policy process in terms of power relations b/w social groups (interplay of of power relations b/w social groups (interplay of social classes and interest groups)social classes and interest groups)

• State-centered: focuses on the mechanics of State-centered: focuses on the mechanics of decision making, decision-maker seen as having decision making, decision-maker seen as having considerably more capacity for choice considerably more capacity for choice

Politics and power permeate the entire policy Politics and power permeate the entire policy process; understand the political context!process; understand the political context!

‘‘Development Planning’ in Bureaucracy: Its Role in Third World Development Planning’ in Bureaucracy: Its Role in Third World Development by Malcolm WallisDevelopment by Malcolm Wallis

Development planningDevelopment planning• Involves actors other than just the stateInvolves actors other than just the state• Requires technical expertise to collect and interpret Requires technical expertise to collect and interpret

data and informationdata and information• Political factors make it further complexPolitical factors make it further complex• Varied experience across different countriesVaried experience across different countries

Problems of planningProblems of planning• Lack of political commitmentLack of political commitment• Isolation of planners (from other govt machinery)Isolation of planners (from other govt machinery)• Administrative (HR, financial) obstaclesAdministrative (HR, financial) obstacles• Over-centralized planning (disregard for local Over-centralized planning (disregard for local

conditions)conditions)

‘‘The State of the Art’ by Norman Nicholson in Rethinking Institutional The State of the Art’ by Norman Nicholson in Rethinking Institutional Analysis and Development, Ostrom et al. Analysis and Development, Ostrom et al.

DevelopmentDevelopment• Expanding human choice through economic Expanding human choice through economic

growth, human capital investments and enhanced growth, human capital investments and enhanced institutional structuresinstitutional structures

Two schools of thoughtTwo schools of thought• Localized control vs. State controlLocalized control vs. State control

Problematic institutional contextProblematic institutional context• Lacks broad-based participation of the populationLacks broad-based participation of the population• Lacks resource allocation in socially efficient ways Lacks resource allocation in socially efficient ways

that facilitate developmentthat facilitate development

Economic forces interact with political and Economic forces interact with political and institutional arrangements to affect economic institutional arrangements to affect economic developmentdevelopment

Organizational Aspects of a Development Model in The World Bank and Non-Governmental Organizations by Paul Nelson

An organizational analysis of the World Bank’s (WB) role in the global economy

WB promotes a capital-driven development model (mandate) and investment strategy

Reflects internal organizational factors• Also, interests of powerful actors in the WB

political economy Mandate is resulted in a pattern staffing,

operations, and performance measurement that contradict social and poverty-related objectives

‘Organizational Culture and Participation in Development’ in The World Bank and Non-Governmental Organizations by Paul Nelson

WB’s organizational culture sharply limited popular participation and NGO involvement in operations• Constrains WB’s ability to learn from

experience Hierarchical and technocratic culture

• Dominates attitudes and procedures• Renders WB policies almost impervious

to critique that does not begin accepted premises

‘‘Groupthink: The Desperate Drive for Consensus at Any Cost’ by Irving Groupthink: The Desperate Drive for Consensus at Any Cost’ by Irving Janus in Ott’s Classic Readings in Org. BehaviorJanus in Ott’s Classic Readings in Org. Behavior

GroupthinkGroupthink• Deterioration in mental efficiency, reality testing Deterioration in mental efficiency, reality testing

and moral judgments as a result of group pressureand moral judgments as a result of group pressure

Groups that commit fiascos fall victim to:Groups that commit fiascos fall victim to:• Social conformity and pressures for cohesion Social conformity and pressures for cohesion

against dissident objectionsagainst dissident objections• Bolstering of morale at the expense of critical Bolstering of morale at the expense of critical

thinkingthinking

Precautions: encourage diversity in opinion; Precautions: encourage diversity in opinion; seek outsider expertise; play devil’s advocate seek outsider expertise; play devil’s advocate and invite doubtsand invite doubts

‘‘Financial Management’ in Bureaucracy: Its Role in Third World Financial Management’ in Bureaucracy: Its Role in Third World Development by Malcolm WallisDevelopment by Malcolm Wallis

Financial mgmt is an important, but not Financial mgmt is an important, but not necessarily an effective, tool for govts to necessarily an effective, tool for govts to direct their economiesdirect their economies

Financial mgmtFinancial mgmt• Pre-expenditure: BudgetingPre-expenditure: Budgeting• Post-expenditure: AuditingPost-expenditure: Auditing• Need for dev. planning & financial mgmt to gelNeed for dev. planning & financial mgmt to gel• Donor finance: ‘leverage’ for donors; ‘blueprint’ Donor finance: ‘leverage’ for donors; ‘blueprint’

approachapproach

‘Paying for Government: The Budgetary Process’ inThe Politics of Bureaucracy by B. Guy Peters

Public Budget—both plan and expression of political power

Money—means of bureaucratic demonstration to remainder of political system: • political clout• Importance


• What is included in the budget?• What is a deficit?• Lack of control of government expenses

Entitlements Private citizens and organizations

• Constant political pressure to spend more


• Spending agencies interested in monetary extraction

• Agencies coalesce to oppose control of expenditures

• Incrementalism—descriptive of all countries

Even in environments when decrementalism seems appropriate


Mechanisms have been devised to break the grip of incremental approaches to resource allocation

The common evaluations:• Institutions and procedures are important• Still need determination and competence by

those in the structure of government

The Management of Public Budgeting by Naomi Caiden in Comparative Public Management ed. By Randall Baker

Reviews the 1980’s efforts of• Canada, Britain, Australia, New Zealand,

Sweden• Explain the public management movement in

budgeting Identifiable pattern of budgetary

management• Works to combine accountability with efficient

resource mobilization and allocation• Also, dissolving traditional bureaucratic control

systems


Pre-budgeting system: dominant for hundreds of years • Continuity• Decentralization• Privatization • flexibility


Budgeting was introduced with incredible persistency for over 150 years• Accountability against secrecy• Democratic decision making against autocracy• Regularity and control against opportunism

and improvisation• Public norms against institutional corruption• Also useful for planning, policy-making and

management


The 1970s: persistent deficits, taxpayer revolts, sluggish and volatile economies, increase of claims on budgeting• Resulted in reform of the 1980s• New and improved version of pre-

budgeting system

‘‘Challenging Financial Paradigms’ in Breaking Through Bureaucracy by Challenging Financial Paradigms’ in Breaking Through Bureaucracy by Michael BarzelayMichael Barzelay

Two examples where existing financial Two examples where existing financial paradigms were challenged as part of the paradigms were challenged as part of the ‘reform’ process related to Depts. Of ‘reform’ process related to Depts. Of Admin and FinanceAdmin and Finance• Bonding authority and the biennial budgetBonding authority and the biennial budget

Use financial systems to hold line agencies Use financial systems to hold line agencies more accountable for serving their more accountable for serving their customers, managing resources and customers, managing resources and complying with statewide normscomplying with statewide norms

Bonding authorityBonding authority• State agencies had few disincentives to seek State agencies had few disincentives to seek

as much bonding authority as they could for as much bonding authority as they could for capital spending authority; they did not bear capital spending authority; they did not bear the debt servicing chargesthe debt servicing charges

‘‘Challenging Financial Paradigms’ in Breaking Through Bureaucracy by Challenging Financial Paradigms’ in Breaking Through Bureaucracy by Michael BarzelayMichael Barzelay

Bonding authorityBonding authority• Target the sector of state govt making the Target the sector of state govt making the

largest request: higher education systemslargest request: higher education systems• Recommendation to make them responsible for Recommendation to make them responsible for

its entirety; negotiated to bear 1/3its entirety; negotiated to bear 1/3rdrd of the of the chargecharge

Biennial BudgetBiennial Budget• Changing existing budget instructions to Changing existing budget instructions to

eliminate room for incremental budgetingeliminate room for incremental budgeting• Countered arguments against this: political Countered arguments against this: political

fallout and perceived underfundingfallout and perceived underfunding• Purchase results rather than fund costs!Purchase results rather than fund costs!• Budget allocation based on what the public Budget allocation based on what the public

was willing to pay (tax and other revenue)was willing to pay (tax and other revenue)

‘‘Toward Successful Privatization’ in Privatization: The Key to Better Toward Successful Privatization’ in Privatization: The Key to Better Government by E. S. SavasGovernment by E. S. Savas

Strategies for privatization:Strategies for privatization:

Load sheddingLoad shedding• Partial or complete withdrawal of govt from an Partial or complete withdrawal of govt from an

activity; divestiture, denationalizationactivity; divestiture, denationalization

DevolutionDevolution• Making greater use of the private sector; Making greater use of the private sector;

vouchers, franchises and contractsvouchers, franchises and contracts

Levying user chargesLevying user charges• Charging full cost of service; identifies true costCharging full cost of service; identifies true cost

Introduce competitionIntroduce competition• Break up govt monopolies; deregulationBreak up govt monopolies; deregulation

‘‘Toward Successful Privatization’ in Privatization: The Key to Better Toward Successful Privatization’ in Privatization: The Key to Better Government by E. S. SavasGovernment by E. S. Savas

Problems with privatization:Problems with privatization:

Privatization as a means can be employed Privatization as a means can be employed by a welfare state, but as an end it is by a welfare state, but as an end it is inimical to the welfare stateinimical to the welfare state• Decision about what goods to supply at Decision about what goods to supply at

collective expense is quite separate from the collective expense is quite separate from the decision about what arrangement to use to decision about what arrangement to use to deliver the goodsdeliver the goods

Implementation problemsImplementation problems• Political, bureaucratic and employee resistancePolitical, bureaucratic and employee resistance• Sale, pricing and distribution of shares when Sale, pricing and distribution of shares when

denationalizing SOEs; legal impedimentsdenationalizing SOEs; legal impediments• Cream skimming: private sector only handles Cream skimming: private sector only handles

easy low-cost workeasy low-cost work

Documents

Bureaucracies, Budgets and Decision-Making David Bell & Khurram Butt Bureaucracy as a polity & politicization of bureaucracy Development, Development Planning