Counting the Cost of NPM Reforms in Sweden's Local Government
New Public Management (NPM) is a neoliberal system of governance that has introduced the outsourcing and bidding of public services, performance measurement, and cost efficiency in the welfare state of Sweden. It has significantly altered public service delivery. The competition, flexibility, and individualism of NPM, though, are in stark contrast to the historic “Swedish model” of public control of services and equal access to social and economic opportunities. It also raises the possibility of declining the standards and procedures associated with public administrations (Maravic, 2007, p.126).
This article will discuss the adoption of NPM, a term developed by Christopher Hood in 1991 (Hood, 1991), by Sweden’s municipalities (Sveriges kommuner), the country’s lowest tier of government administration. It will discuss the theory’s expansion since the country implemented these reforms, thereby adopting private-sector ideas of competition and cost efficiency in response to its financial crisis during the early 1990s (Wollmann, 2004, p.649).
The existence of local government is guaranteed by Article 7 of the 1974 Swedish Constitution. Sweden is divided into 290 municipalities and 21 regions, each possessing different decentralised tasks and responsibilities for its citizens’ welfare, safety, and well-being (Lidström & Madell, 2021). These were specified by the Local Government Act of 1991. The Act also strengthened the autonomy and decision-making of municipalities, which gave them greater freedom to decide how services would be delivered (with outsourcing as an option) [Wollmann, 2004, p.649; Argento et al., 2010]. Swedish municipalities are now subjected to the laws of the market and, consequently, have become one of many local service providers.
New Public Management
NPM is a neoliberal economic strategy first pursued by the three consecutive Conservative administrations of UK Prime Minister Margaret Thatcher between 1979 and 1990. It is a system that has come to typify the modern, global trend of governance for “less government and more market” (Petersen & Hjelmar, 2014, p.5), and is characterised by its core tenets of outsourcing (marketisation) and the deregulation of the public sector to replicate “the pressure to improve which exists in the private sector” (Cowper & Samuels, 1996, p.2). Government procedures are replaced with the competition of the private sector, incorporating performance measurements, incentives, and cost savings (Ferlie, 2017; Lapuente & Walle, 2019), which its proponents believe will improve service delivery. Ultimately, NPM is deliberately designed to deregulate government and public bureaucracies in favour of private interests.
The role of NPM in all tiers of Sweden’s government has transformed the country since it adopted marketisation reforms during the 1990s (Hall, 2013, p.407). From the delivery of public services to housing construction, the political-ideological direction of Sweden is now greatly influenced by NPM as a function of government (Wollmann, 2004; Lowndes & Pratchett, 2011; Karlsson & Montin, 2013). The regulations to ensure healthy competition are contained in the Swedish Public Procurement Act (LOU) and the Act on Procurement in the Water, Energy, Transport and Postal Services Sectors (LUF) (Lundberg, 2005; Lennerfors, 2007).
Sweden's Municipalities
Local government is a form of public administration that is the lowest tier of a country’s administration. It is a hierarchically organised bureaucracy based on “a principle that embodies both the idea of local autonomy and the goal of popular responsiveness” (Heywood, 2002, p.166). Although restricted to a specific geographical area, national and global changes, as the Swedish economy experienced in the 1990s, can place significant pressure on the local government's ability to function and deliver services.
Sweden has a long history of local self-determination and participation guaranteed by the country’s constitution. The strong, decentralised position of its 290 municipalities makes it an area of interesting research on governance—how “state-society relations are structured and managed” (Hyden et al., 2004, p.99)—since their autonomy grants them powers to collect taxes and implement public policies in social services, planning and building issues, elderly care, and waste management (Linde & Erlingsson, 2012; Madell, 2012; Karlsson & Montin, 2013). This independence involves powerful groups such as trade unions (Kommunal, for example), federations (kommunalförbund) and cooperatives (such as housing) (Dahl & Lindbolm, 2000, p. 307; Argento et al., 2010; Bengtsson, 2024).
In 1970, the local government in Sweden was described as “a highly complex phenomenon, a maze of systems overlapping and interlocking at all levels” (Board, 1970, p.214). Four kinds of sub-divisions existed: cities (stad), rural communities (landskommun), market boroughs (köping), and municipalities (municipalsamhälle), with bureaucracies, in some areas, serving a population of mere hundreds. Municipal reform and amalgamations the following year not only sought to simplify this bureaucratic “maze” with the creation of large unitary municipalities but also to improve administrative efficiencies in response to the substantial post-war growth of the local public sector (Gustafsson, 1980; Jacobsson, 1996; Nelson, 1992, p.42). However, these enlarged municipalities, both in population and land area, have been criticised for creating a gulf between individuals and decision-makers (Ornäs, 2002), denoted by decreasing involvement in local direct democracy (Mors & Noppe, 2000; Guziana, 2021).
The drive for local individualism has been characterised by the scope of important policy areas that municipalities are responsible for implementing, albeit at the whim of central government (Jacobsson, 1996; Feltenius, 2007), notably in education, health and social care, and environmental protection (Bergh et al., 2012; Linde & Erlingsson, 2012).
Local Government and NPM
Financial austerity places huge pressure on public expenditures to the extent that private interests may take control of programmes (Pollitt, 2010). As a public choice theory, NPM is oriented towards efficiency and outcomes by managing public budgets based on private sector managerialism. This move reflects the apparent “superiority” of private sector management (Yamamoto, 2003, p.3) over the direct intervention role of the state, thereby demoting public bureaucracies to a supervisory role or an “arm’s length” distance (Hood, 1991, quoted in Bergh et al., 2020).
Despite the historical reputation of Sweden as the “most ambitious welfare state in the Western World” (Karlsson & Montin, 2013, p.125) and “the epitome of the welfare state” (Pierre, 1995, p.140), the privatisation of public utilities has been adopted by the left-of-centre Social Democratic Party (Sveriges socialdemokratiska arbetareparti) since the country’s financial crisis during the early 1990s (Hall, 2013). The autonomy of Swedish municipalities, enshrined by the Swedish Local Government Act 1991, has meant that local public services can easily be converted into private companies or autonomous municipally-owned corporations (MOCs) (Bergh et al., 2020). Noticeable welfare services contracted out have included child and elderly care and education (Sundell & Lapuente, 2011; Broms et al., 2018).
Consequently, NPM has transformed the delivery of traditional public services into a customer-driven approach offering the “best value” (Cram & Woodward, 2014), with the public now consumers (Osborne & Gaebler, 1992).
Privatisation has fragmented the local democratic system of control of public services (Karlsson & Montin, 2013; Grossi & Thomasson, 2023), with concern over the weakness of Sweden’s local government procedures (Copus & Erlingsson, 2013) and their lack of resources, skills, and expertise (Bergh et al., 2018; Erlingsson, 2022). Furthermore, even though municipalities play a significant role in maintaining Sweden’s democratic system, public engagement and trust have been severely tested in recent years by dissatisfaction with service delivery (Erlingsson et al., 2022). The privatisation of local elderly care, for example, promoted by municipalities as “freedom of choice” in the early 2000s (Jordahl et al., 2020), has created a fragmented system of quality and cost (Rostgaard et al., 2022) in paradox to equal access historically associated with the Swedish welfare state.
Municipally-Owned Corporations
The dominance of municipally-owned corporations (MOCs), also known as municipally-owned enterprises (MOEs), is another aspect of the “quasi-privatisation” transforming Sweden’s local government (Bergh et al., 2019). As of 2021, Swedish MOCs employ roughly 62,000 (Bergh & Erlingsson, 2023)—an increase of 7,000 employees in just three years (Erlingsson et al., 2020)—highlighting their growing responsibility as municipality public service providers. Furthermore, in 2023, 91 of the 290 Swedish municipalities had created MOCs (Grossi & Thomasson, 2023), with the city of Gothenburg possessing the most with 71 (Bergh et al., 2022).
As a corporatist response to financial constraints and cost-saving measures (Citroni et al., 2013; Bergh et al., 2020), MOCs are closely associated with NPM reforms (Grossi & Thomasson, 2023). They are autonomous entities, established by one or more municipalities to deliver public services (Voorn et al., 2017) and generate revenue for the local authority from fees rather than taxation. The lack of literature available on MOCs means there is no clear definition of what they are (Green, 2023; Andrews & Ferry, 2023), but Voorn et al. (2017, p.823), using the earlier Portuguese research of Tavares & Camões (2007), identify three characteristics: being legally autonomous, possessing managerial autonomy, and being publicly owned with multiple stakeholders. Although the municipality appoints MOC management (Thomasson, 2020), there is usually a supervisory arm’s length approach—an “operational flexibility” (Bergh & Erlingsson, 2023)—which may limit or hinder their monitoring and auditing (Erlingsson et al., 2020).
The growth in MOCs reflects their “societal significance” (Daiser & Wirtz, 2021) in public service delivery and as an alternative source of increasing municipality revenue. While the managerial autonomy of MOCs is claimed to introduce the competition and flexibility of the private sector (United Nations Development Program & Istanbul International Center for Private Sector in Development, 2019), issues of transparency, trust, and accountability have raised the possibility of corruption (Voorn et al., 2017; Bergh & Erlingsson, 2023). In Gothenburg, corruption had turned MOCs into “semi-private corporate structures—without the public sector accountability mechanisms” (Amnå et al., 2013, quoted in Bergh & Erlingsson, 2023, p.5). The presence of Swedish politicians on MOC boards also risks transparency (Erlingsson et al., 2020)—shifting “the boundaries between the public and the private spheres” (Bergh et al., 2020)—and contradicts the arm’s length distance of NPM reform (Bergh et al., 2019).
Conclusion
“You know there are times, perhaps once every 30 years, when there is a sea-change in politics. It then does not matter what you say or do. There is a shift in what the public wants and what it approves of." — The UK Labour Prime Minister James Callaghan (1976-79) during the 1979 General Election, which brought Margaret Thatcher to power.
The adoption of NPM during the economic and social turbulence of the 1980s typified the pressures democratic administrations felt to reform “than during their entire previous existence” (Pierre, 1995, p.1).
The 1990s financial crisis hastened the adoption of NPM policies by Sweden’s decentralised local governments, with society’s poorest and most vulnerable sections, such as the elderly, experiencing unequal consequences. It also created lucrative opportunities for individuals to acquire new sources of wealth through what were considered non-profit activities.
Consequently, a reduced bureaucracy, the growing operational role of private businesses, and greater autonomy from state control have significantly altered the role of Sweden’s public administrations and continue to raise questions about the country’s principle of public accountability in decision-making. The outsourcing of public services and the increased drive for competition reflect the changing values of the country’s society in what was a welfare state serving the collective needs rather than those of the individual.
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While NPM reforms aim to enhance efficiency and accountability in Sweden's local government, they come with substantial costs Fun Games. A thorough analysis of these costs is essential for determining the overall effectiveness of such reforms. Local governments must balance the potential benefits of NPM with the financial implications to ensure sustainable and quality public services.