Q. What is New Public Management? Explain the concept and application in relation to health sector reforms across developed and developing countries.

1. Introduction

In the contemporary era, neo-liberal policies are given weightage attributing to their stance of limiting the work of government in the economy and its ability to introduce efficiency and effectiveness. We now witness an emerging trend of adopting neoliberal policies. The New Public Management is, therefore based on the neo-liberal views and attempts to introduce private sector efficiency in the public sector of a particular country. The use of New Public Management (NPM) has led to use of tools like decentralization, privatization, contractualism, total quality management, performance related pay etc. While adoption of NPM seems an attractive option for various economies, its applicability and success in developing and developed nations is highly debated upon. Popular examples reveal that the NPM techniques are likely to fail in developing nations because they do not have the preconditions required to harbor NPM. However, the success of NPM techniques purely depends upon the environment within which it is implemented and on the compatibility of the techniques with the country’s norms and values. This essay therefore aims to assess the applicability and success of NPM approaches in the case of developing and developed countries. The essay will begin with literature review that will emphasize on what paved the way towards NPM, definitional aspects of NPM and implementation of NPM as a steady reform process. The essay will then illustrate the case studies of Norway and Chile and analyze the degree to which NPM was successful in the two countries.

2. Literature Review

2.1 Road to New Public Management

For long now, the public sector setup has been under pressure to bring about efficiency by adopting more market oriented and private sector practices (Dunleavy & Hood, 1994). This has been argued to be due to multiple factors such as economic and fiscal dilemmas that brought about the need for state’s increased role in the economy (Ferlie, et al., 1996). The public sector crisis in the developed economies led to the search for new ways of organizing the public services and hence, redefining the role of the state to encourage competition and market oriented approaches. State’s indulgence in market type approaches in order to treat the problematic public sector led to the promotion of marketization, that was ought to be more efficient and effective as it tend to keep in mind needs of the individuals and consumers.

The shift towards New Public Management (NPM) started in 1970s and 1980s in UK, under Margaret Thatcher’s regime when she called for the readjustment of the iron industry, and in US municipal government who were agonized at the hands of economic recession and tax revolts. NPM practices were next adopted by Australia and New Zealand, which brought NPM into limelight and brought them on the agenda of OECD countries. It was not until then, theorists started to identify the common characteristics of what is known as “New Public Management” today (Dunsire, 1995).