Academic journal article Journal of Australian Political Economy

Contestability in Human Services Markets

Academic journal article Journal of Australian Political Economy

Contestability in Human Services Markets

Article excerpt

Over the last thirty years in Australia and elsewhere, there has been a substantial marketisation of human services (1) funded by government. A major justification used for this process has been the concept of contestability. Neo-liberal critics saw the traditional provision of government-funded human services as a series of either government monopolies or protected 'in-groups' of favoured non-profit organisations (NPOs) able to retain funding with little scrutiny of performance. Making government funding more contestable, it was argued, would not merely enable the entry of good new providers and lead to exit of poorer ones, but would also create incentives that would change the behaviour of all providers, increasing the quality, equity of access, efficiency, responsiveness, and diversity of services, while making providers more accountable to both users and government (Bartlett & Le Grand 1993, Le Grand 2007).

In more recent years, the goal of maximising consumer choice has also increasingly been used to justify and frame the use of market mechanisms in government-funded human services. This involves enabling users of services (or the user's personal agents (2)) to decide for themselves what services they get and who will provide those services, rather than having government officials make these decisions for them. The two concepts of contestability and consumer choice are closely linked, although it is important to note, as is illustrated later, that there can be contestability without consumer choice, but not vice versa.

The two concepts are cornerstones of the conventional theory of markets, but there is an obvious tension between them and the reality of human services. In particular, an important implication of the substantial 'market failure' intrinsic in human services is the need to limit contestability by closely regulating the entry and behaviour of service providers, both to protect vulnerable people and to ensure high quality services that make the best use of limited public resources. This article seeks to identify how this tension has been addressed in the ways that contestability and consumer choice have been applied in managed markets (3) for human services; that is, markets in which government is the source of much, if not all, of the purchasing power for services.

Of course, the idea of marketising human services is itself contestable. The growth of human services markets over recent decades has emerged in large part from the political dominance of neo-liberalism, but the theoretical and empirical validity of its core tenets are widely challenged and the reality of markets is far from the idealised version presented in neo-classical economics (Stilwell 2005). Human services present a number of examples of major limitations to neo-classical assumptions, especially the notion of a rational fully-informed 'sovereign' consumer. Moreover, there are clear alternatives to the market for organising the production and delivery of human services, and market failure need not be the only justification for government involvement (Donahue & Nye, 2002; Denhardt & Denhardt 2007).

The aim here, however, is not to present an alternative paradigm for delivering human services, but rather to examine marketisation on its own terms, to consider the implications of the approach in the context of the reality of products that are human services. This perspective does not imply acceptance, even implicitly, of a neo-classical world-view. Rather, the need for such analysis is especially important in light of the ever-increasing significance of marketisation in human services, and the widely-held concern that many of the arguments justifying these developments may be 'social philosophy masquerading as economic science' (Nevile 1998:169). (4) A key implication of the article is that, even on its own terms, there are substantial qualifications to claims about the efficacy of marketisation. …

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