Privatization of Welfare Services: A Review of the Literature. The Political/Legal Perspective


A body of literature explores the broad political and legal ramifications of privatizing certain services (Diller 2000; Moe 1987; Milward and Provan 1993). It generally argues that contracting and greater use of competition and market forces risk altering the systems that provide certain public services in ways that decrease fairness and due process and limit public accountability. The shift from public structures that emphasize adherence to rules and procedures (means-based systems) to structures based more exclusively on specific performance results (ends-based systems) contributes to greater provider discretion, which might be misused, and to less emphasis on protecting client or employee rights.

A number of these scholars argue that contracting out moves public accountability for service provision back a step. The provider no longer must answer directly to an elected government official, and government officials exercise less direct control over services that are paid for with public funds. They contend that privatization further decreases citizen involvement in the governance of public services because contractors typically need not be as responsive to citizen demands as public agencies must be (Milward and Provan 1993).

Finally, some of this literature also argues that contracting out might inappropriately place "inherently governmental" functions with private organizations. These functions can include those that involve coercion--usually considered a prerogative only of the state--such as incarceration or decisions to sanction welfare families and remove them from the welfare rolls.


1.  Despite this ideological preference for smaller government, the number of state and local employees has increased more than the number of workers in the federal government has declined, leading to an overall increase in government employees at all levels of about 7 million over 30 years (Cohen and Eimicke 2000).

2.  Equity of distribution--providing equal access to everyone--is also an issue when considering whether to privatize some social services, such as health care or child care. This is less relevant for the provision of welfare services, where the aim is to provide additional services to a particular group.

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