Local Government Change in Finland –
Reflections on New Governance
School of Management
Arto Haveri
How the idea of local government has
changed in Finland?
1. The era of self-government ideal
- municipalities as civil society and counterforce
(1865 Local Government Act to 1930’s)
2. The era of welfare municipality
- municipalities as part of the welfare state service
machine (started already in 1930’s, the golden age from the end of 1960’s
to the beginning of 1980’s)
3. The era of transformation/turning point
- no grand narrative, search for new role (s) (from
the start of 1990’s →)
2
Typology of local government roles
View on autonomy
Municipalities have
intrinsic value as selfgoverning communities
Municipalities have
instrumental value as
service providers
Minimalistic
Municipalities as local
communities
-Governing model: changing
- Inhabitants of a municipality
select governing model and
service assortment according to
their local needs
-The difference between
municipalities is highlighted
- Localism (theory of public
choice vs. communitarianism)
Municipalities as service
purchasers
- Governing model: markets
- Municipalities role is narrow and
limited to specific services
- Inhabitant of a municipality =
customer/consumer
- New Public Management
Interventionist
Municipalities as arenas of
governing
- Governing model: networks,
meta-governance
- As a part of decentralized
system autonomous
municipalities have important
role in coordinating local
activities
- New Public Governance
Municipalities as service
producers
- Governing model: hierarchy
- Municipalities must produce
similar services to everybody
regardless of place and time
- The similarity of municipalities is
highlighted
- Bureaucracy, institutionalism,
View on the appropriate
role of public sector
Typology: from the era of self-government ideal to welfare
municipality
View on autonomy
Municipalities have
intrinsic value as selfgoverning bodies
Municipalities have
instrumental value as
service providers
Minimalistic
Municipalities as local
communities
-Governing model: changing
- Inhabitants of a municipality
select governing model and
service assortment according to
their local needs
-The difference between
municipalities is highlighted
- Localism (theory of public
choice vs. communitarism)
Municipalities as service
purchasers
- Governing model: markets
- Municipalities role is narrow and
limited to specific services
- Inhabitant of a municipality =
customer/consumer
- New Public Management
Interventionist
Municipalities as arenas of
governing
- Governing model: metagovernance, networks
- As a part of decentralized
system autonomous
municipalities have important
role in coordinating local
activities
- New Public Governance
Municipalities as service
producers
- Governing model: hierarchy
- Municipalities must produce
similar services to everybody
regardless of place and time
- The similarity of municipalities is
highlighted
- Bureaucracy, institutionalism,
View on the appropriate
role of public sector
Typology: The era of turning point
View on autonomy
Municipalities have
intrinsic value as selfgoverning bodies
Municipalities have
instrumental value as
service providers
Minimalistic
Municipalities as local
communities
-Governing model: changing
- Inhabitants of a municipality
select governing model and
service assortment according to
their local needs
-The difference between
municipalities is highlighted
- Localism (theory of public
choice vs. communitarianism)
Municipalities as service
purchasers
- Governing model: markets
- Municipalities role is narrow and
limited to specific services
- Inhabitant of a municipality =
customer/consumer
- New Public Management
Interventionist
Municipalities as arenas of
governing
- Governing model: metagovernance, networks
- As a part of decentralized
system autonomous
municipalities have important
role in coordinating local
activities
- New Public Governance
Municipalities as service
producers
- Governing model: hierarchy
- Municipalities must produce
similar services to everybody
regardless of place and time
- The similarity of municipalities is
highlighted
- Bureaucracy, institutionalism,
View on the appropriate
role of public sector
Change of municipal management in hybrids
H
Agency management
Own production, municipal agencies
Municipal companies, public utility
H= hierarchies
M = Markets
Corporate management
N= Networks
Inter-municipal
cooperatives
Joint ventures, public private
companies
Purchase of services/outsourcing
Privatization, vouchers
M
Management by contracts
Grants for third
sector organizations
Partnerships, self-supporting citizen
N
Network management
Community leadership
6
Expenditures in social and health care
(2000, 2004, 2008 and 2009, million EUR)
2000
2004
2008
2009
Change
2000-2009 %
(deflated)
Public
producers
9116
10969
15135
15494
28 %
Private
producers
2372
3458
5286
5684
80,4
Public and
private
together
11488
14427
20420
21178
38,8
Source: National Institute for Health and Welfare 2009
Personnel increase in social and health care
(1992, 2000, 2004, and 2008)
1992
2000
2004
2008
Change
1992-2008
%
Public
producers
226500
247700
255600
270300
19,3
Private
producers
34900
56800
71900
87800
151,6
Public and
private together
261400
304500
327500
358100
37
Source: National Institute for Health and Welfare 2009
How this is reflected in governance and
management practices of local authorities?
• Shift from hierarchy –based management to markets and
desired shift to network-based
• Use of (some sort of) purchaser-provider model has become
more common
• Municipalities can more often be regarded as corporate local
authorities
• Number of municipal owned companies (70-158 in 19972007, inter-municipal organizations and special districts has
increased
• “Managerial modernization” -increasing application of cost
accounting, internal contracting, performance measurement
• Citizens’ role as “consumer/customers” is highlighted
Proper role for local citizen from the point of view of
hierarchies, markets and networks
Inhabitant as (passive) stakeholder/owner
Own production, municipal agencies
Municipal companies, public utility
Inter-municipal
cooperatives
Joint ventures, public private
companies
Purchase of services/outsourcing
Grants for third
sector organizations
Privatization, vouchers
Inhabitant as customer/consumer
Inhabitant as (active) citizen
What is wanted:
Case Lantula as an example of third
sector activity
• In the town of Sastamala, Lantula village, third sector has
actively taken responsibility for welfare of village of 350
inhabitants
• Village association organizes events and activities to kids as
well as youngsters and elderly. As one example, the village
activist collect elderly people every Friday to weekly
recreational day.
• The village activists take care of all practical work and the
village association is also responsible for the economy of the
events and activities, the town of Sastamala supports
financially the village association.
Some research based experiences on the pros and cons
of different governance approaches
Cons
Pros
Markets
-The problem of quasimarkets
(markets don’t work properly)
-Development work, especially
in long service chains
-Monopolies, siloization
-Monitoring costs
-Increasing awareness of competition
and costs
-Efficiency when markets work truly
-Development of local business
competencies in services
Hierarchies
-Stiffness of the structure,
weak learning ability
-Weak ability to foster
commitment and social
cohesion
-Transparency, responsiveness
- Endurance, decision making ability
Networks
-Decision making in conflicted
situations
-Transaction costs
-Transparency,
responsiveness
-Flexibility, informality
Actors are able to create meanings
which is reflected in social cohesion
and commitment
12
The present situation and existing
challenges
• Some disappointments and plenty of doubtful talk about the
new governance, especially markets (outsourcing)
• The rising political discourse concerns the third sector and
big expectations are sot to it and active citizens
• Municipal organizations not clearly market not network based, models, but hybrids with complex and unfinished
structures
• Difficult to predict from the current situation whether it will
lead to any more paradigmatic and enduring model of
governance and management
• A lot will depend on the success/failure of current reform in
local government structures