Creating Markets: The Recommodification of Welfare Services

The Dimensions of Marketization

The share of services—as opposed to agriculture and industry—in European economies has been continuously increasing over the past decades and stands for about 50 % of the labour force today. The rise of services in advanced capitalist economies reflects the main transformation since the industrial revolution. Understood in the broad sense, welfare services involve the provision of public utilities and services, including various social services, healthcare, education and culture. Whether stemming from public or private providers, these services today represent a substantial part of the economic activity in Europe, generating about 26 % of GDP, occupying 30 % of the workforce and attracting about 6 % of all investments (CEEP 2010). Over the past two decades, welfare services have undergone a strong process of mar- ketization, that is, the recommodification of services which were considered as rights and basic needs which the State had to care for regardless of market functioning. Marketization can be defined as ‘a change in transactions, through the introduction or intensification of price-based competition’ (Greer and Krachler 2015, p. 216). In the realm of welfare services, marketization relies on a triangular model whereby the provision of welfare services is mediated by an intermediate welfare services provider distinct from the State; by doing so, marketization turns the citizen into a consumer, marginalizes the relationship between the citizen and the State and economizes the relationship between the State and the public service provider (or producers), as the former becomes the purchaser (through tendering) of services from several providers or producers which compete for market shares (Freedland 2001). A case in point illustrating this process is the reform of the British NHS in the early 1990s which created an internal market in which the government is purchasing services from various providers. There have been significant differences in the scope, pace and form of marketization across countries and sectors. However, a number of common trends shed light on the fundamental changes which have occurred. Everywhere in Europe, the marketization of welfare services has occurred through liberalization, privatization and deregulation. Liberalization means that markets are open to competition among several providers beyond national boundaries. In the post-war era of the twentieth century, public transport, telecommunications, energy and water distribution, education, healthcare and so on were provided either directly by public authorities and administration or by large national companies integrated in the state apparatus which enjoyed a monopoly. Liberalization has put an end to public monopolies and introduced competition, hence creating markets in areas where the State used to provide services to users. Liberalization has been partly accompanied by privatization, that is, the transfer of services provision from public to private companies. In the specialized literature, this is referred to as ownership structure. Today, most sectors nevertheless exhibit coexistence between public and private providers. This raises problems related to market regulation and the conditions in which several providers can offer different products on competitive markets, while still addressing the public interest at stake and offering quality services to differently endowed categories of users. The role of the State has shifted from that of provider to that of regulator or market organizer. The end of national monopolies has meant deregulation in the sense that the regulations ruling provision by public companies (notably over prices) had to be adapted within the framework of competitive markets. As we will see below, a degree of re-regulation has occurred at the supranational level (through EU directives). One example is the so-called universal service obligation in the Postal Directive which has to be endorsed by one provider, usually the former national company enjoying monopoly, in order to ensure that the post continues to be delivered on a regular basis to all parts of the territory. As explained by Hermann and Verhoest, ‘the focus of regulation has shifted from governing the whole process of service provision to regulating particular aspects of the service supply chain or to partially controlling outcome’ (Hermann and Verhoest 2012, p. 20). In fact, new forms of regulation concentrate on organizing competitive markets through, for example, unbundling the management of network infrastructure and the provision of services so that new private competitors can be granted the right to use a network and provide services. Designing effective regulation is often problematic and control on outcome has proved to be limited (Petretto 1998). Obligations related to the public interest dimension of services are not defined and enforced in a systematic way across the various sectors, and they are not imposed upon all providers. The creation of independent regulatory agencies has created complex networks for horizontal and vertical coordination between national, European and international regulators. The maturation of this new governance has often been followed—after an initial phase characterized by the assertiveness of the newly set up agencies—by the coming of age, at a later stage, of regulatory capture, that is, of collusion between regulatory authorities and business reflected notably in the frequency of revolving doors practices (Coen 2005). All this explains that liberalization is often critically seen as a type of policy change bound to bring about deregulation in the sense of decrease in the capacity of public authorities to effectively protect the public interest once markets have been created.

Welfare services in Europe have therefore witnessed a multi-faceted process of marketization (illustrated in Fig. 2.1 below) where the monopoly of the public sector has been put to an end at the benefit of the private sector, hence featuring a shift from the realm of public law to that of private law.

The marketization of public services

Fig. 2.1 The marketization of public services

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