A Democratic Architecture for the Welfare State (Routledge Studies in the Management of Voluntary and Non-Profit Organizations)

A Democratic Architecture for the Welfare State

‘At a time of deficits of the democratic political system Victor Pestoff offers a critical and fundamental insight: the solution is to promote a greater role for the third sector and full-range citizen participation or even empowerment in public policy making and service provision.’ Gyorgy Jenei, Corvinus University, Budapest The welfare state faces various challenges in Scandinavia and many European countries today, including a poor work environment in the public sector, a growing democracy deficit and demographic obstacles. In this new book, Victor A. Pestoff argues that these challenges cannot be resolved either alone or together with the market and requires the active participation of citizens and the third sector in order to overcome them and become more sustainable and flexible in the future. This book addresses the need for a more democratic architecture for the European welfare state, opening new perspectives for developing alternative channels for direct citizen participation at the submunicipal level of governance. Pestoff finds that neither democratic theory nor welfare state theory devotes adequate attention to the contemporary role of the third sector as a service provider or to greater direct citizen participation in the provision of welfare services, so instead shifts the focus of analysis from the input to the output side of the political system and explores new ways to promote a greater role for the third sector and more citizen participation in the provision of universal, tax-financed welfare services. This book will be of great interest to researchers and students working in both the fields of third sector studies and the governance of welfare states in Europe, as well as in the disciplines of political science and sociology. Victor A. Pestoff is Guest Professor at the Institute for Civil Society Studies at Ersta Skondal University College, Stockholm, Sweden. He is the author of Co-production: The Third Sector and the Delivery of Public Services, also published by Routledge.

Routledge studies in the management of voluntary and non-profit organizations Edited by Stephen P. Osborne University of Edinburgh, UK

1 Voluntary Organizations and Innovation in Public Services Stephen P. Osborne

8 The Third Sector in Europe Prospects and challenges Edited by S. P. Osborne

2 Accountability and Effectiveness Evaluation in Non-Profit Organizations Problems and prospects J. Cutt and V. Murray

9 Managerial Economics of Non-Profit Organizations M. Jegers

3 Third Sector Policy at the Crossroads An international non-profit analysis H. K. Anheier and J. Kendall 4 The Emergence of Social Enterprise Edited by C. Borzaga and J. Defourny 5 Charity Shops Retailing, consumption and society S. Horne and A. Maddrell 6 The Governance of Public and Non-Profit Organisations What do boards do? Edited by C. Cornforth 7 Social Enterprise At the crossroads of market, public policies and civil society Edited by M. Nyssens

10 Employment Relations in the Voluntary Sector Struggling to care I. Cunningham 11 A Democratic Architecture for the Welfare State V. A. Pestoff Also available from Routledge: The Management of Non-Governmental Development Organizations An introduction D. Lewis Financial Management in the Voluntary Sector New challenges P. Palmer and A. Randall Strategic Management for Nonprofit Organizations R. Courtney

A Democratic Architecture for the Welfare State

Victor A. Pestoff

First published 2009 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Avenue, New York, NY 10016 This edition published in the Taylor & Francis e-Library, 2008. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” Routledge is an imprint of the Taylor & Francis Group, an informa business © 2009 Victor A. Pestoff All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Pestoff, Victor Alexis. A democratic architecture for the welfare state / Victor A. Pestoff. p. cm.—(Routledge studies in the management of voluntary and non-profit organizations ; 11) Includes bibliographical references and index. 1. Welfare state—Europe. 2. Public-private sector cooperation— Europe. 3. Europe—Economic policy. 4. Europe—Social policy. I. Title. HV238.P474 2008 361.6¢5094—dc22 2008018376 ISBN 0-203-88873-1 Master e-book ISBN

ISBN 10: 0–415–47595–2 (hbk) ISBN 10: 0–203–88873–1 (ebk) ISBN 13: 978–0–415–47595–2 (hbk) ISBN 13: 978–0–203–88873–5 (ebk)

To my wonderful wife, Kathleen and my charming daughter, Rebecka

Contents

List of figures and tables Acknowledgements 1 Making citizenship meaningful in the twenty-first century

ix x

1

PART I

Social economy actors in Scandinavia

21

2 The future of consumer cooperatives in postindustrial societies

23

3 The development and future of the social economy in Sweden

34

PART II

Major issues for the third sector and welfare state

51

4 Balancing profit and social goals in public/private partnerships

53

5 Work environment, service quality and the third sector

75

6 Consumer perspectives on the social economy and civil society

114

7 Democratizing medical and healthcare – the Japanese example

137

8 Co-production of welfare services: childcare in eight European countries

155

viii

Contents

PART III

Revisiting the third sector and state 9 Revisiting the third sector and state in democratic theory

177

179

10 Revisiting the third sector and state in welfare theory

220

11 Hurdles to the third sector and democratization of the welfare state

244

PART IV

The politics of participation in European welfare states

271

12 The politics of participation in European welfare states

273

Appendix References Index

295 305 323

List of figures and tables

Figures 1.1 The relation between functions and sectors providing welfare services 1.2 The third sector in the welfare triangle 2.1 The competing ‘logics’ of cooperative associative action 5.1 Client relations – a new dimension in the work environment model 6.1 Exit, voice and the type of goods or services 7.1 Relations with governmental authorities and patient groups 8.1 Participation in preschool services and the level of analysis 11.1 Politics at the submunicipal level in Sweden 11.2 Co-production and volunteering in welfare services 12.1 Development of the Swedish welfare state, ca. 1980–2030 12.2 Co-production and relations between public authorities and citizens

5 9 24 97 126 151 167 259 265 274 276

Figures in Appendix

4.1 Distribution of an organization’s surplus 10.1 Relations between the state and third sector in Sweden

298 302

Tables 5.3 Stress and sick leave among the workforce, 1997–2006

94

Tables in Appendix

1.1 2.1 5.1 5.2

Swedish Riksdag elections, 1982 to 2006, votes and seats Development of Swedish consumer cooperatives, 1910–2000 Proportion with ‘high-stress jobs’ for selected occupations Attitudes towards public social expenditures in Sweden, 1981–1997 7.1 Comparison of alternative medical care providers in Japan, 2004 9.1 Trends in the growth of Swedish municipalities, 1951–1995 9.2 Development of Swedish popular movements in the twentieth century

297 298 299 299 300 300 301

Acknowledgements

A number of people have helped me formulate the arguments in this book, both through their writings and in discussion with me, but unfortunately only a few can be mentioned here. First, I would like to extend special thanks to my friend and colleague Professor Sten Berglund, who is currently in Berlin. Second, I would like to thank my colleagues Docent Ingemar Wörlund and Docent Ingrid Zakrisson at Mid-Sweden University, for their support. Third, I would like to thank my two Ph.D. students who recently defended their Ph.D. dissertations in Stockholm and Östersund, Sophie Söderholm-Werkö and Johan Vamstad. Fourth, I would like to thank many of my European colleagues, especially those from the EMES network, the EGPA’s Third Sector Study Group and the IRSPM. They include, among others, Doctor Isabel Vidal in Barcelona, Professor Stephen Osborne in Edinburgh, Doctor Taco Brandsen in Nijmegen, Professor Wim van der Donk in Tilburg and Professor Carlo Borzaga in Trento. To all of you I say your friendship, encouragement and support over the years meant more than you realize. I was assisted in the revision of this work by my wife, Kathleen Pestoff. Without her help and support it would never have reached fruition. So, I want to thank her especially for her love and understanding. I look forward to working with my new colleagues at the Institute for Civil Society Studies, Ersta Sköndal University College in Stockholm, in particular Professor Lars Svedberg, who shows a true entrepreneurial spirit. I also want to acknowledge the right to reproduce some of my own figures that appeared previously in the following publications: Figure 2.1 is based on Figure 4.4, p. 80, V. Pestoff (1991) Between the Market and Politics, Frankfurt & Bolder: Campus Verlag & Westview Press. Figure 1.2, Figure 5.1, Figure 6.1 come from V. Pestoff (1998 & 2005) Beyond the Market and State, Aldershot, Brookfield, Singapore & Sydney: Ashgate. Figure 11.1 is based on Figure 10.1, p. 176, V. Pestoff (2008) in The Third Sector in Europe. Prospects and challenges, S. Osborne, ed., London & New York: Routledge. Stockholm, April 2008.

1

Making citizenship meaningful in the twenty-first century

Introduction The Swedish general elections of September 2006 ushered in some dramatic political changes. First, the Conservative (Nya Moderaterna) Party received record high support (26.1%) in the parliamentary election and the Social Democratic Party noted record low support (35.2%), while the five other parties that received between 7.9% and 5.2% of the votes were returned to the Riksdag. Second, the non-socialist parties, known as the Alliance for Sweden, could form a new coalition government with a majority of 178 seats of 349 in the Riksdag. Third, the populist, anti-immigrant party, Sverigedemokraterna (sd), received 2.94%, falling short of gaining representation in the Riksdag,1 but it did get 281 seats in the local elections2 in 144 municipalities, or nearly half of them. Table 1.1 in the appendix shows the results of the Riksdag elections between 1982 and 2006. Some foreign observers now claim that the Swedish electorate has turned its back on the welfare state. However, it is far too soon to claim that this election represents a sharp turn to the right in Swedish politics or that the results threaten the Swedish welfare state. Reasons for the change of government given by the experts on election night and shortly after reflect several common themes. They include arguments like: the voters wanted a change after 12 years of Social Democratic rule; the Social Democrats and their Prime Minister, Göran Persson, made a tired, weary impression in several of the early debates; the traditional leftist issue of unemployment and work for everyone was abandoned by the Social Democrats, but taken up successfully by the non-socialist parties during the campaign – otherwise, it was hard to see any major difference between the proposals of the right and left, in particular concerning welfare services; the parties forming the Alliance for Sweden developed common policies in many areas and spoke with one voice as a team, in contrast to the Prime Minister, Göran Persson’s solo stance on many questions, with little or no consultations with his government partners, the Leftist and Green Parties; the Social Democrats appeared like proud bureaucrats, but lacked a vision for the future and refused to listen to criticism of many acute problems, etc. The final results were slow coming in and were only available shortly before midnight

2

A Democratic Architecture for the Welfare State

on Election Day. Soon after the Prime Minister, Göran Persson, announced in a TV interview that he would resign as party chairman and turn over control of the Social Democratic Party to a new chairperson at an extra party congress in March, 2007. The political pundits, mostly professors of political science, were quick to provide their analysis and make proposals to the new majority on the debate page of the major daily newspaper, Dagens Nyheter. The first proposed that it would be logical for the non-socialist parties in the winning Alliance for Sweden to capitalize on their victory by forming a single party to insure success in the next election in 2010 (Möller, DN, 18/9-06). The second argued that the result put an end to minority governments and political compromise between parties belonging to different political blocks. Majority politics would provide voters with two clear alternatives and could possibly contribute to increasing confidence for politicians (Lewin, DN, 19/9-06). The third declared the election result a triumph for the Social Democrats, since their social model, based on a universal welfare state, gained support from the winning Alliance for Sweden (Rothstein, DN, 20/9-06). Differences between them and the leftist parties in terms of the welfare state were marginal and the non-socialists were forced to embrace it in order to win the election. Elsewhere, the fourth called for the leftists to form a single party to face the united Alliance for Sweden in the next parliamentary elections in 2010 in order to return to power (Blomgren, 20/9, svt.se). However, the chairwoman of the Swedish Federation of Labor (LO) quickly pointed out that the next round of collective bargaining in the Spring of 2007 could be threatened if the Alliance for Sweden pushed through some of its proposals for changing the balance between labour and the employers (Lundby-Wedin, DN, 22/9-06). In the days following the Riksdag election the final results for smaller parties and local municipal elections became available. Only then did the full scale of the gains for the populist, anti-immigrant party, Sverigedemokraterna become evident. Although they failed to gain seats in the Riksdag they did get representation in 144 municipalities, 45 where they could hold the balance of power between the Alliance for Sweden and the leftist parties. They did particularly well in the south and west of the country, with 22.9% of the votes in Landskrona and 12.6% in Trelleborg. Their support at the national level entitled them to 45 MSEK in public campaign funds starting in 2007. Leaders of the national parties on both sides of the political spectrum quickly stated that they intend to rule at the municipal level without the support of Sverigedemokraterna. However, this may not always prove possible. But, in at least a dozen municipalities where the Sverigedemokraterna gained one or more seats, they may remain unrepresented, as their ballots had no candidates’ names. Several of the write-in candidates appeared unwilling to bear the sd party label or represent it in the municipal council. Thus, some of these seats will remain vacant until the next election in 2010. Sweden and Swedish politics nevertheless changed dramatically after the 2006 elections. Sweden has now become an ordinary member of the European

Making citizenship meaningful in the twenty-first century 3 Union (EU), with an established populist, anti-immigrant party, similar to those found in many other European countries, including Austria, Belgium, Denmark, France, Germany and Norway. Many voices are now calling attention to the failure to cope with such a phenomenon by ignoring it. Isolation failed miserably in Belgium to minimize Vlaams Belang, which now has become the second largest party in some areas. Fredrik Reinfeldt, Chairman of the Nya Moderaterna or Conservative Party repeatedly claimed during the 2006 election debate, shortly after the election results became known, and again in his government’s declaration of intent at the opening session of the new Riksdag, that many voters felt a deep sense of frustration due to their exclusion (utanförskap) in Sweden today. There are, of course, several indicators of growing voter disenchantment with liberal representative democratic institutions and a growing feeling of powerlessness among the electorate. Long-term trends in declining voter turnout, sharply decreasing membership levels in political parties, growing distrust of politicians and support for populist, anti-immigrant parties are but a few ominous signs, found not only in Sweden, but in other established European democracies. Many voters in Sweden also experience a growing feeling of exclusion both as employees and users of public services, due to the lack of control over their work conditions and/or the quality of major welfare services. As employees they have little say about the what, when, where and how of their daily activities as providers of public welfare services. As users they have little say about the quality of the public services provided in their name. Standardization and equality of access to public welfare services are central values for the Social Democrats and often interpreted as the provision of homogeneous public welfare services everywhere in the country, with little room for alternatives. How will the Conservatives and their coalition partners that took over the reigns of government at the beginning of October, 2006 attempt to channel these feelings of frustration and exclusion? Whether they can harness them to develop and promote a new architecture for the welfare state, without launching major cutbacks and massive privatization of public welfare services, remains to be seen. A major reason for the growing feeling of exclusion, in politics, at work and/or as a user of public welfare services is the lack of control or influence in such matters. The growth of large bureaucracies, both in the public and private sectors, provide an important factor contributing to the growth of feelings of exclusion by citizens and their experience of powerlessness as voters, workers, users of public services and taxpayers. One main remedy for such feelings of exclusion and lack of control is, therefore, to promote greater citizen influence in important matters of daily life in politics, at work and in the provision of welfare services. One of the main arguments found in this book is that a possible solution to the growing feelings of exclusion by voters, workers, users of public services and taxpayers is found in small-scale provision of welfare services. Then each individual’s contribution is important and visible; it makes a notable difference and therefore gets recognition. Replacing

4

A Democratic Architecture for the Welfare State

big public organizations by big private firms, either national or multinational, will do little to alleviate the growing feelings of exclusion by ordinary citizens. Replacing public provision of welfare services with private for-profit providers in the name of greater ‘freedom of choice’ will, at best, provide a temporary illusion of greater influence for some citizens. Others are likely to reject it for ideological reasons. Choice between different providers of welfare services may be necessary, but it is not sufficient to give ordinary citizens greater influence. Only their direct participation in the provision of welfare services will give them substantial influence and resolve their growing feelings of exclusion as voters, workers, users of welfare services and taxpayers. This can be achieved by contracting out the provision of welfare services to third sector providers. Democratically controlled and run voluntary associations, cooperatives and social enterprises in the third sector received no attention in the 2006 Swedish election debate. Yet, many recognize their potential contribution to alleviating citizens’ feelings of exclusion and to reorganizing the welfare state. However, the importance of the dramatic political changes in the 2006 election for the third sector or the social economy remains highly uncertain. On the one hand, it could result in positive changes that imply greater pluralism and flexibility in the provision of welfare services, including greater third sector provision. On the other hand, it could prove mainly negative and merely result in replacing the state provision of welfare services by the market. In the latter case the domination of municipal providers would be replaced by the domination of multinational companies noted on the stock market in Stockholm and elsewhere. This would leave little room for third sector provision, or for voter, worker, user and/or taxpayer influence in determining the what, when, where and how of providing welfare services. The relation between different service functions and the sectors providing welfare services is hotly contested. By service function I am referring to a distinction between the financing, provision and supervision of welfare services. The sector providing a welfare service can either be the public sector, usually through a local or regional authority, a third sector organization or a private for-profit firm. For ideological reasons some maintain that the public sector should combine all three functions and provide all welfare services, since it alone can promote equality between citizens. Others claim that the market is best suited to provide most or all welfare services since it alone promotes the efficient use of public funds. A middle or third position argues that the third sector should provide many welfare services, since it alone can promote greater welfare pluralism, a rejuvenation of the welfare state and greater citizen participation in the provision of welfare services. Leaving these ideological positions aside, these three functions and sectors can be combined in the following fashion. The public sector can finance the provision of welfare services through taxes and user fees, the third sector through contracts, user fees and volunteers, and the private for-profit sector through contracts, user fees and even sales. All three sectors can provide

Making citizenship meaningful in the twenty-first century 5

Figure 1.1 The relation between functions and sectors providing welfare services. Source: Pestoff, 2007.

welfare services to citizens, but in a different fashion. The public sector provides welfare services directly to citizens, while both the third sector and the private for-profit sector provide them via public sector contracts. Turning to supervision of welfare services, at present only the public sector has the authority to undertake this function. Neither the third sector nor the private for-profit sector is currently entrusted with this responsibility. These relations can be summed up in Figure 1.1. The purpose of this book is to focus on the third sector as a provider of public financed welfare services. It argues that the third sector can promote a better work environment for the staff and therefore better quality services. It also facilitates greater citizen participation in the provision of welfare services and this, in turn, results in a more financially sustainable welfare state. The triple dilemma facing the universal welfare state in Sweden The universal welfare state in Sweden is currently facing three major dilemmas that challenge its future and sustainability. In brief, it suffers from low-quality public welfare services, low citizen participation in political life and high costs of producing universal welfare services. This is the result of: a

b c

the declining quality of public services due to the poor work environment in the public sector following major cutbacks in public financing during the 1990s; the growing democracy deficit, in spite of very high democracy scores and voter participation; and the permanent austerity of financing welfare services due in part to a rapidly ageing population and in part to the world’s highest taxes.

Sweden must therefore develop a strategy to move from the current situation to the opposite one of high-quality welfare service, greater citizen participation in the provision of welfare services, and lower costs for providing such services. In order to do so, Sweden must successfully resolve the three interrelated challenges of:

6

A Democratic Architecture for the Welfare State

a

improving the service quality by improving the work environment of the women providing welfare services; increasing possibilities for citizen participation in and control of the services they demand and pay for through their taxes; and given demographic changes, finding new ways to maintain tax-financed universal public welfare services without large increases in taxes or user fees.

b c

The common currency of the three democratic challenges facing the Swedish welfare state is power and influence. They reflect the lack of power and influence of ordinary citizens, as public employees, service users and taxpayers over some of the most important issues in their daily lives. This includes the power of employees to improve the quality of their work life and the welfare services they provide to the public. The service users also lack the power to actively contribute to improving the quality of welfare services that they depend on and that determine their well-being and that of their loved ones. Today most of them are passive consumers of public services, but many are willing to become co-producers of some kinds of public financed welfare services. They could thereby become active participants in the development and renewal of a welfare state that the vast majority of them strongly support and have done so for decades. Promoting greater citizen participation in the provision of welfare services has clear economic implications in the search for new ways to maintain a universal, service-intensive, tax-financed welfare state. Co-production allows citizens the power and influence to make a difference in the future of the welfare state. Moreover, both employees and users, as taxpayers, lack the power today to influence the development of the welfare state and contribute directly to its sustainability in ways other than paying higher taxes or more user fees. Unless all three of these challenges are faced and met in a coherent fashion the universal, tax-financed welfare state as we know it in Sweden faces a bleak future and it will most likely not survive the year 2020, according to economic experts (Långtidsutredningen, 2003/04). The three challenges of low quality, low participation and high costs taken together comprise the welfare state’s triple democratic dilemma. It is necessary to realize that they are interrelated before developing policies to resolve them. However, solutions calling for more state or more market provision of welfare services will not resolve this triple democratic dilemma. Rather, the big organizations on both sides of the public/private divide have augmented this triple democratic dilemma. They do so by constraining the power and influence of ordinary citizens over some of the most important issues of their daily lives, like the availability of high-quality welfare services that they can influence directly at the site of production at a reasonable cost to themselves and society. Only greater citizen participation, a greater role for the third sector in providing tax-financed welfare services and greater welfare pluralism can begin to resolve the democratic challenges facing the universal welfare state at the beginning of the twenty-first century. Unless we can successfully

Making citizenship meaningful in the twenty-first century 7 move beyond the black/white ideological blinders of either more state or more market provision of welfare services there will be little progress. Unless the government embraces and promotes greater welfare pluralism in the production of tax-financed welfare services there will be little progress in meeting the challenges of poor service quality and a dismal work environment of public services, of declining citizen participation in political life and the escalating cost for financing a universal welfare state. The Swedish constitution states that all power comes from the people. Perhaps it should be amended to include that some power should now be returned to them. This book focuses on the role of citizens and the third sector and/or social economy in redemocratizing the welfare state. I want to make three points briefly by way of introduction. Permanent austerity and the deterioration of the work environment Permanent austerity has become a central feature of the post-golden age of welfare states in Europe (Ferrera and Rhodes 1999, Esping-Andersen 2000, Pierson 2001). However, one aspect of austerity seldom dealt with in social science analysis of the crisis and future of the welfare state is what it means for the staff providing welfare service, nor the quality of the services provided. Swedish experience clearly shows that permanent austerity implies the rapid and dramatic deterioration of work environment for the staff providing welfare services. Swedish work life changed in several ways during the 1990s. High unemployment, major reorganizations both in the public and private sectors, outsourcing, downsized organizations, a sharp reduction in the number of civil servants, an increase in temporary workers and reduced job security were some of the features of these changes. In addition, the sick leave compensation system was reformed several times in the 1990s (Aronsson et al. 1999). The rapid transformation of working life has in many cases entailed negative stress as a result of ‘lean’ organizations, unemployment and unemployment notices, pressures of time and the acceleration of the pace of work, overtime, solitary work, risk of violence, and so forth. This is reflected by the number of reports of stress-induced occupational illness and also by the increase in long-term sick leave. The Welfare Audit (Välfärdsbokslut) noted that numerous work environment studies published during the 1990s show the same pattern when pointing to psychosocial factors as the decade’s worst work environment threat (Bäckman 2001). Exposure to this type of work environment problem increased in most groups on the labour market and differences between most groups on the labour market remain constant, with two notable exceptions: women and employees of the municipalities and counties. These public employees clearly had a worse development in terms of work environment than other groups on the labour market during the 1990s. In spite of privatization in some areas, municipalities and counties are still the major provider

8

A Democratic Architecture for the Welfare State

of welfare services in Sweden and women comprise the overwhelming majority of welfare service employees. Thus, the public sector in Sweden went from a model employer to becoming a very poor employer in the 1990s. Work environment is an important part of the picture painted here and it provides an important motive for a far-reaching reorganization of the welfare state in Sweden. However, the reorganization proposed herein is based on the third sector and social economy rather than the private market. Here the focus is on developing and renewing democracy and the welfare state, rather than merely cutting back the public sector, privatizing and turning welfare over to the market. The contribution of permanent austerity to the deterioration of work environment of the public sector and service quality of welfare services needs to be taken seriously. Work environment is discussed in greater detail in Chapter 5. The third sector: alternative provider of services, ‘school of democracy’ or both? In order to examine the role of citizens and the third sector or social economy we need to define, or at least attempt to delimit what we mean by the third sector and social economy. The third sector is part of civil society in most advanced societies. It is separate from both the state and market. This is illustrated by Figure 1.2. The social economy includes democratically run organizations and firms that produce socially necessary services not always provided by the state or the market. While the state and the market may provide certain services, they either will not be of the desired quality for some groups, as often is the case with public services, or they will not be affordably priced to satisfy total demand, as often is the case with market provision. Thus, third sector and social economy provide a necessary complement to both public and private for-profit provision of basic welfare services. However, the third sector has a much greater potential than simply becoming an alternative provider of welfare services. In particular, it can play a central role in renewing liberal representative democracy and the welfare state. Serious thought should be given to the relationship between the state and the third sector, in particular, by democratic theory and welfare theory. This is considered in greater detail in Chapters 9 and 10. The third sector is becoming a new ‘school of democracy’ in Sweden. Let us, therefore, briefly consider what democratic theory traditionally says about the third sector. In general it says two basic things. 1

Alexis de Toqueville (1945) regarded the third sector as ‘a school of democracy’ in the early 1800s. Other European scholars have followed suit, and the Swedish historian Ronny Ambjörnsson (1988, 1995) discussed the role of the third sector in pre-democratic mill towns in the north of the country, at the beginning of the twentieth century. His conclusions were similar to those of de Toqueville, that is, that the vitality

Making citizenship meaningful in the twenty-first century 9

Figure 1.2 The third sector in the welfare triangle. Source: Pestoff, 1998 & 2005.

of democracy owes a great deal to the third sector and popular movements. Undoubtedly, in the rural, agrarian towns and villages of America nearly 200 years ago and in the company mill towns of pre-democratic Sweden nearly 100 years ago, third sector organizations contributed considerably to the establishment of democracy. However, economic, political and social conditions were significantly different then for ordinary people than today. Then, most people were self-sufficient farmers and they lived in extended families that provided most goods and services at home. Thus, they were economically and socially independent of both the market and state. Today we live in highly urbanized, postindustrial or service societies with well-developed welfare states, where many basic welfare services are financed and/or provided by the public sector. The government has grown dramatically from a night-watchman state of 100 or 200 years ago. Today the government is a major producer of many important welfare services, either for the ‘deserving poor’ as in the US or for all citizens as in Scandinavia and other European countries. Citizens are no longer as independent of either

10

2

A Democratic Architecture for the Welfare State the state or market as they were 100 or 200 years earlier. This means that we need to reconsider, revise and modernize democratic theory. More recently Robert Putnam (1993) argued that the civil society and horizontal relationships between citizens provided by memberships in voluntary organizations have a positive impact on both economic development and the quality of government. He contrasted the development of the north and south of Italy in this respect. However, he was criticized for not distinguishing between bridging and bonding social capital. The latter could be illustrated by the Hells Angels, Hezbollah, Hamas, and so forth. They belong to the third sector and provide some social services both to members and non-members in order to gain/retain their support.

Associative democracy: focusing on the output side of the political system Political science and democratic theory normally focus on the input side of the political system (Easton 1965, 1996). We ask how non-governmental organizations (hereafter NGOs) influence decisions, but we say little or nothing about how they influence the outcomes or the output side of the equation, nor how they could if they tried. Yet, it is on the output side of the equation that the state has expanded and expanded dramatically during the past 50 years. This expansion is seen both in terms of the types and amount of services provided today that were unthinkable 50 years ago and the number of civil servants providing them. How and where do citizens, the third sector and democracy fit into this new equation? What new democratic rights have citizens gained in recent years to help them influence, and at times even protect themselves from, the expanding welfare state bureaucracy and growing number of civil servants? Thus it is on the output side that we must develop a new understanding of the role of citizens as co-producers of welfare services and the potential of the third sector and social economy in the democratization of the welfare state. These topics are discussed in greater detail in Chapters 8 and 9. It is difficult to discuss the relationship between the third sector and state, and the renewal of democratic theory from a traditional liberal representative democracy perspective. However, Hirst’s proposal for associative democracy (1994) explores such matters in greater detail. He attributes major importance to civil society and the third sector as providers of goods and services. Thus it is primarily on the output side of the political system that we must focus our attention and devote our efforts to develop and renew democracy theory. Hirst does not regard the third sector as a threat to liberal representative democracy, but rather as a necessary supplement to it, to help it function effectively again. If the third sector were an active partner of the universal welfare state, then together they could function as co-producers, co-managers and co-governors of tax financed welfare services. Such services would no longer be provided or produced mainly or exclusively by the state and/or market.

Making citizenship meaningful in the twenty-first century 11 In this book I explore the welfare state’s triple democratic dilemma and propose some solutions in greater detail. However, before continuing I want to consider the development of democracy and the need to redemocratize the welfare state in Scandinavia and elsewhere in Europe.

Three or four democratic revolutions? Democracy is more than just a question of voting, elections and representative government. It also concerns the rights and responsibilities of citizens. In Sweden it is possible to speak of three major extensions of the rights and responsibilities of citizens or three democratic revolutions in the twentieth century, while I argue that a fourth democratic revolution is now in the making at the beginning of the twenty-first century. These democratic revolutions can be depicted in terms of their prime objectives: political democracy, social or welfare democracy, industrial or economic democracy and, perhaps in the not too distant future, civil democracy. I will only mention the first three briefly and then present the new emerging democratic revolution in greater detail. Three democratic revolutions and the ‘Freedom of Choice’ revolution Political democracy was achieved 85 years ago with the introduction of universal suffrage that provided all citizens over a certain age with specific political rights and responsibilities. Then in the period from the mid-1930s to the mid-1960s, social or welfare rights and responsibilities were extended to most or all citizens, when the Social Democrats gained power together with the Agrarian or Center Party in the 1930s. One of the world’s most ambitious universal welfare states was established, in the name of the ‘Peoples’ Home’, or folkhemmet. From the 1970s to the beginning of 1990 the major political struggle in Sweden was over the extension of industrial and/or economic rights and responsibilities to all employees. This found expression in a package of reforms in the 1970s known as ‘the Democratization of Working Life’, including the Co-Determination Act and later the notorious ‘Wage Earner Funds’. However, the latter acted as a catalyst for opposition to extending these rights and responsibilities to the entire workforce, to permitting trade unions to gain influence on company investments, matters of business strategy, and to continued Social Democratic dominance of Swedish politics. This third democratic revolution was clearly a failure and it resulted in the defeat for the blue-collar trade unions: LO and the Social Democratic Party. After suffering defeat over the Wage Earner Funds the Social Democratic Party failed to develop a new vision for a ‘good life’, a ‘good society’ and for the future of Sweden. It lacked any new ideas on how to improve life for ordinary citizens and for society in Sweden and merely wanted to administer what it had already achieved during the first and second democratic revolutions. Rather,

12

A Democratic Architecture for the Welfare State

it was content to remain in power or regain it after suffering defeat in the 1991 general elections. Still, today, the Social Democratic Party lacks a clear vision of the good life and how to achieve it, as became evident in the 2006 elections. Following the victory of the parties in the Bildt minority government in the 1991 general election, a new era was issued into Swedish politics. The Wage Earner Funds were quickly dissolved and turned into several new research foundations. Moreover, the ‘Freedom of Choice Revolution’ was also initiated, in conjunction with a programme of privatization. It proposed to introduce competition and provide citizens with a free choice between public and private service providers. The public sector would thereby become more efficient and citizens would have more influence over the services they demanded. Accordingly, the public sector would be drastically reduced in size and most of the public services would be exposed to private competition via contracting out, service checks and the introduction of other market mechanisms. It was argued that ‘exit’, rather than ‘voice’, would provide citizens with real choice and influence, but first and foremost as customers, rather than citizens. If they were truly dissatisfied with their children’s childcare or schooling, with their own healthcare or handicap care or with the care provided for their elderly parents, they could vote with their feet and change to another provider, once several alternatives existed. Whether this again becomes the dominant theme of Swedish politics after the 2006 elections remains to be seen. Three ways to privatize public welfare services However, there is more than one way to privatize the provision of welfare services and they are expressed in different social orders. Polanyi (1944, 1957) refers to four basic social orders or types of governance in modern societies: the market, the state, autocracy or the household, and symmetry or associations. Similarly, Streeck and Schmitter (1985) spell out the basic social orders of the market, the state and community, while they explored the role of associations as an emerging potential fourth social order or type of governance. The welfare triangle helps to depict these social orders and provides a good starting point for our discussion, as seen in Figure 1.2. From a macro-perspective, the idea of the welfare mix, at an abstract level, expresses variations in the importance attributed to the institutions of community, market, state and associations in the governance of society (Evers 1993), and at the concrete level to the role played by various sectors in delivering social welfare. However, the separation between public and private, forprofit and nonprofit, and formal and informal is not the same everywhere nor fixed once and for all, rather it varies both in political, societal and temporal terms. What may seem as an appropriate role for the state in one country or period may not hold for another country or for another period. Much of the contemporary political struggle concerns the issues of what the state should do, what the market should do, what families can do and what

Making citizenship meaningful in the twenty-first century 13 might be left to the third sector. Universal welfare states attribute many more responsibilities to the public sector and fewer to the market than do residual welfare states. Some countries are well-known for their highly developed welfare states, such as the Nordic countries, while others are associated much more closely with commercial and/or voluntary provision of many basic social services, like the US. Yet, traditional patterns of governance change with time and political shifts. Thus, at the macro-level, we can note variations in the welfare mix both between countries and over time. Given the unique nature of these various social orders or institutional models, each of them has its strength and weakness. Privatization of the provision of welfare services can follow one of three distinct paths or trajectories, each with different values and implications for society and its citizens. These distinct social values require different social institutions for their fulfilment. First, a privatization that is based on greater community responsibility implies a refamilialization of the provision of social services, one based on a subsidiarization, feminization and deprofessionalization. Women are forced off or kept out of the labour market and they provide welfare services to family or relatives without pay. This was the main path for privatizing social services in Central and Eastern Europe (Pestoff 1995, 1996). Second, a privatization that results in a greater role for the market implies a recommodification and recommercialization of social services. This alternative depends on the ability of consumers or clients to pay for the service, thus excluding many groups in society from such services, unless mandatory social insurance systems are introduced. Third, a privatization that attributes a greater role for third sector can imply a democratization and cooperativization of the provision of social services under certain conditions. This type of privatization can also promote civil democracy and empower citizens as co-producers of the most important services that they demand. However, it may also imply a charitization of the provision of welfare services. The difference between the latter two depends largely on the national context. At the micro-level all three of these alternatives will often exist, side by side, in any given country. At the sectoral or meso-level one type of privatization may dominate one policy area, while another may dominate another in the same country. At the macro-level one country may primarily pursue one path to privatization, while another will emphasize a different one. The choice of path reflects the strategy of privatization and carries with it far-reaching consequences for society, for various social groups and for citizenship. Civil democracy – a fourth democratic revolution? Returning briefly to the ‘Freedom of Choice Revolution’ in Sweden in the early 1990s, it severely underestimated the transaction costs of exit for individual consumers, for the organizations or firms providing such services and for society as a whole. In addition, few citizens living at any distance from one provider, be it public or private, could afford to avail themselves of the

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A Democratic Architecture for the Welfare State

theoretical benefits of competition, especially if they must travel a great distance to arrive at the premises of another provider of similar services. Thus, market failure and information asymmetries make welfare services well-suited for provision by third sector and nonprofit organizations. The third sector can mitigate some kinds of market failure and can instill greater trust in the relations between the consumers and providers of such services. The enduring nature of some welfare services renders them better suited for seeking redress through voice than exit. Furthermore, given the growing differentiation of citizens demands for public services, third sector provision can also correct some aspects of government failure and insure not only the availability of more alternatives and greater welfare pluralism, but also greater flexibility. All these considerations argue for third sector alternatives to both markets and politics, which moreover involve citizens as co-producers. A typical example is parent cooperative childcare services, where the services are financed by public funds, but parents who choose this form of childcare must also be willing to work in the childcare centre, normally in the evenings or on weekends, with administration and maintenance. Their participation helps to give them a feeling of belonging and provides them with influence in the running of these childcare centres (Pestoff 1998 & 2005). See Chapter 6 for more details. The ‘Freedom of Choice Revolution’ also ignores the potential democratic benefits of voice, in particular of collective voice, in the provision of social services. Furthermore, it drastically reduces the scope for citizens’ rights and responsibilities, by transforming them into consumers. This in turn contributes to the already growing ‘democracy deficit’ in Sweden. This deficit is most acutely felt at the level of local government, where the number of municipalities was reduced from nearly 2,500 in 1950 to just over one-tenth, or 280 by the end of the municipal reforms in the 1970s. These reforms resulted in much larger local government units, but also eliminated many nonprofessional and part-time politicians, since the number of elected offices at the local level decreased from 200,000 to less than 50,000. More recently, the growing use of market models for providing local services accentuated this democracy deficit. During the past decade an additional 9,000 nonprofessional politicians have been relieved of their responsibilities, decisions have been delegated to local bureaucrats, purchaser-seller models have taken over a growing part of public services, and contracting-out to private for-profit suppliers has increased dramatically. Moreover, municipal limited companies have restricted both public accountability and their employees’ possibilities of informing the public about their operations. Criticism of this development gained new fuel in the early 1990s from the excessively generous ‘golden parachutes’ for directors of marketized public companies – the numerous scandals concerning financial licence and/or sex, which involved the directors of municipal limited companies, municipal politicians and some well-known national politicians. The democracy deficit is discussed in greater detail in Chapter 9.

Making citizenship meaningful in the twenty-first century

15

Under these circumstances a new social contract for democracy and welfare appears necessary today. Welfare should not only mean dispensing funds and services to citizens as passive objects of various social programmes. It should also aim at empowering both the workers and clients of these services, as citizens and co-producers. Moreover, it should pay greater attention to various social cleavages, like gender, age, work status, family status, ethnic origin, and so forth; and not only to class, as in the past (Giddens 1994, 1996). In particular, it should focus much more on the position of the young, women, unemployed, single parents, the elderly and various minority or excluded groups (Giddens 1998). It must find ways to provide them with a stake in the rapidly changing societies of Europe and to involve them actively in planning and improving their own future. All groups in Europe must be guaranteed a stake and active role in forming a welfare society in the twenty-first century, and not only those that were mobilized previously nor only those with the right party book. But in order to do so we must move beyond both the market and state as well as beyond the left and right. Citizens have several roles vis-à-vis the state and/or municipal authorities today, most of which are passive, including their roles as taxpayers, service users and/or clients. Their political activity and influence is limited to participating in general elections and perhaps also to becoming a member of a political party. The growing democracy deficit and the professionalization of the provision of welfare services in Sweden have resulted in an unintended and undesirable situation where many citizens are pacified and become objects of social programmes, rather than active subjects in meeting their own service needs. Stakeholder democracy promoted in Britain is seen as one way of giving all groups and individuals in society clear rights and responsibilities and, thus, a clear stake in society, in the way it is run and in the way it functions. The concept of civil democracy provides a clear alternative to the ‘Freedom of Choice Revolution’ in terms of giving ordinary citizens greater rights and responsibilities to directly influence the services that are both financed and provided by the public sector, however, here via voice rather than exit. Civil democracy provides the grounds for a fourth democratic revolution, or for a (re-)democratization of civil institutions and welfare services. In my book, Beyond the Market and State (1998), I maintain that the third sector and cooperatives could provide a durable base for creating institutions to facilitate greater citizen participation in the twenty-first century. Thus, the term civil democracy refers to citizen empowerment through cooperative self-management of personal social services, where the citizens become members in social enterprises, where they participate directly in the production of the local services they demand, as users and producers of such services, and where they therefore become co-producers of these services (ibid., 25). One of the main underpinnings of ‘civil democracy’ is a realization that democracy is interactive in its nature, that is, the relationship between the rulers and the ruled comes into focus. A democracy that merely encourages

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A Democratic Architecture for the Welfare State

its citizens to vote every second, third, fourth or fifth year, but expects little or nothing else of them will lead to an atrophy of the democratic spirit of its citizens. Moreover, a democracy that attempts to meet most or all of the needs of its citizens without also expecting them to actively participate in the provision of some social services, at least occasionally, turns its citizens into passive consumers of such services rather than active co-producers of the services they themselves demand. In Sweden many citizens have become the passive objects of a wellintended and well-organized universal welfare state, but one decided upon by politicians and run by professionals. However, democracy rests on a moral base, which grows when exercised, but dwindles when left fallow for too long. Unless Putnam’s (1993) concept of social capital clearly includes participation in local decision-making, it also faces the risk of becoming a passive resource, as his more recent book Bowling Alone (2000) clearly shows. If the provision of welfare services and other local services remains exclusively the domain of professional civil servants, and does not directly involve the concerned citizens in their daily life, then political democracy will also atrophy. Voting, paying taxes and obeying the law are not enough to maintain social capital and keep democracy alive. In order for social capital to be turned into a resource available to many citizens in the economic, political and social spheres it must be exercised more often than at general elections or annual general meetings. Civil democracy and the idea of enabling citizens to become co-producers of the welfare services they demand are part of a strategy for increasing the stake of the average citizen in the existence and effectiveness of the welfare state and public sector. Such a strategy attempts to turn passive citizens who pay their taxes, obey the law, receive social services from the public sector and vote regularly into active stakeholders in the society where they live. It proposes both to enable and empower them by providing them with opportunities to play an active role as co-producers of some of the most important welfare services they demand. It provides them with an individual stake in collective solutions to basic social needs and the collective provision of basic social services. It provides them with obligations and responsibilities, but also with rights and influence in the democratic decision-making structures set up to govern these services. Such services could include childcare, primary and secondary education, long-term healthcare, handicap care, housing and eldercare. Furthermore, in order for citizens to temper their demands and expectations they must actively participate in real world situations where they sometimes are forced to make hard choices. For example, they may have to choose between one hour more or less childcare service per day, higher parent fees or an unacceptable deficit that threatens to close their parent cooperative childcare centre. In other areas, they may have to decide whether to allocate more funds for trainers and sport activities for girls or invest in more football and ice-hockey rinks for boys. It is from these everyday, but sometimes tough

Making citizenship meaningful in the twenty-first century 17 choices that the moral resources are derived, which are so necessary to nourish a thriving civil democracy. Without regular exercise and without active participation neither the citizens nor civil democracy will become an active resource in rejuvenating the welfare state from within and eliminating the democratic deficit of Sweden and elsewhere. Civil democracy is clearly related to participatory democracy. It requires the involvement of most of the people some of the time in the provision of welfare services and of some of the people most of the time. This should facilitate the shifting involvement of citizens between public and private pursuits, with periods of activity followed by periods of inactivity. This allows a natural shift from private pursuits to public engagement for a certain period, followed later by a withdrawal to private interests once again (Hirschman 1982). It should also be noted that civil democracy does not require the participation of most of the people most of the time, nor only a few of the people all of the time. The former appears Utopian, while the latter appears to correspond with elite democracy or service democracy. In the twenty-first century the rights and responsibilities of citizens will, hopefully, not be limited to those spelled out by universal suffrage and political democracy. Greater citizen involvement in the provision of basic social services promises to extend and develop the concept of citizenship in a new direction. It can make citizenship meaningful once again and provide means for getting citizens back into the management of important matters for their personal lives, their future and the future of their loved ones. Civil democracy can provide all citizens with a stake in society and the running of welfare services and perhaps eventually even a local countervailing power to globalization of the market.

The plan of the book and terms employed This book focuses on ways to make citizenship more meaningful. In particular it focuses on the relationship between the state, market, third sector and welfare. It concentrates on developments in the transformation of the public sector in Sweden and the changing welfare mix between public, private and third sector provision of welfare services. Continued public provision of welfare services faces a serious challenge in the form of a rapidly ageing society together with the rapid deterioration of the work environment of the providers, in particular for public sector employees. These two challenges make recruitment to the public sector very difficult and uncertain and the quality of welfare services highly unreliable. Third sector provision can help to enrich the work life and improve the quality of human services by facilitating an enduring encounter between the producers and consumers of such services. It can also help to rejuvenate social capital and alleviate the growing democracy deficit in Sweden. This book explores ways to make both membership and citizenship meaningful in the twenty-first century. The chapters in this book make numerous comparisons between Sweden

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A Democratic Architecture for the Welfare State

and other highly developed countries with respect to various aspects of providing welfare services. These comparisons are either historical or geographical. Chapter 2 compares the democratic role of Swedish cooperative movements historically, as well as the contribution of the established cooperatives and new social service cooperatives in Japan and Sweden. Chapter 4 compares the concepts of nonprofit organizations in the US with third sector organizations in Europe. Chapter 5 compares the work environment of the staff providing welfare services in the Swedish public sector with the quality of work found in the third sector in the US and UK, Germany, Italy and Sweden. Chapter 7 compares alternative providers of healthcare in Japan in terms of their contribution to the democratization of such services. Chapter 8 compares parent participation in providing childcare services in eight European countries. These comparisons are mostly heuristic in nature, rather than the result of a systematically designed comparative study, except those found in Chapter 8 on childcare in eight European countries. By comparing various aspects of providing welfare services we can always learn something, even in the absence of systematic comparative materials. Comparing social phenomenon can shed new light on existing patterns of providing welfare services. Focusing on some of the major challenges facing one of the most developed welfare states and comparing it with other countries and models for providing welfare services allows us to explore a new architecture for the welfare state, one based on greater citizen participation, the third sector and co-production. It also permits us to make some recommendations for revitalizing democracy and redemocratizing the welfare state in Sweden. This can also encourage the development of greater participation in the delivery of welfare services in other countries. The pages that follow discuss several different topics related to civil democracy and the redemocratization of the welfare state. Part I considers the historical role of cooperatives in terms of providing the organizational base for a middle way in Scandinavian politics. It also sketches the historical relationship between popular movements and the third sector, on the one hand, and the state, on the other. It delimits five periods in their relations and asks if we have now arrived at a new period based on a partnership between them with the initiation in 2006 of the new Law on Nonprofit Firms. Part II explores several major issues facing Scandinavian society in order to develop new channels for greater citizen participation. It starts by examining the concept of profit and argues that the characteristics of European social enterprises and the third sector comprise a functional equivalent to American legal restrictions on distributing an organization’s profit, particularly when combined with a social audit and multi-stakeholding patterns of internal decision-making. An organization’s social goals, if monitored by a social audit, say more about an organization’s activities than whether it distributes a profit or not. Then it turns to work environment, service quality and third sector provision of welfare services. It moves on to consider consumer

Making citizenship meaningful in the twenty-first century 19 perspectives of the third sector and civil society. Then, it discusses some important issues related to democratizing healthcare, using the Japanese example. Finally, it introduces the concept of co-production of welfare services and explores its implication in childcare in eight European countries. Part III revisits both democratic theory and welfare theory in terms of the role attributed to the third sector. It calls for shifting theoretical attention and efforts to the output side of the political system and for greater associative democracy. It also emphasizes the importance of developing functional democracy at the submunicipal level. Then it considers the hurdles to the redemocratization of the welfare state and involving citizens as co-producers of welfare services in a Scandinavian context. Many of these hurdles need to be removed before civil democracy can thrive and in order for it to develop its full potential. Finally, Part IV discusses the politics of participation in light of earlier chapters and makes some suggestions for strengthening it. Several terms are employed by this study for organized groups of citizens in an interchangeable fashion. They include terms like cooperatives, voluntary organizations, the third sector and third sector organizations (TSOs), nonprofit organizations (NPOs) and the nonprofit sector and nongovernmental organizations (NGOs). While there are some differences between them, often these differences express nuances or different national contexts, rather than difference in substance or kind. These differences can be cultural or legal. Cooperatives and voluntary associations refer to separate legal forms for voluntary organizations in many European countries, including Sweden. The social economy refers to democratically managed organizations and/or firms that promote both social and economic goals. Third sector organizations (TSOs) denote a more generic term covering all types of nonprofit and NGOs, regardless of the national setting. The term nonprofit organization (NPO) is originally an American term for describing organizations that qualify for special tax benefits, if they guarantee not to distribute their surplus or profit. However, there is no requirement that they are democratically run or founded on the idea of one member one vote. Foundations, charities and many other NPOs in the US are not normally run democratically. The term NPO has gained widespread international usage. But, some scholars contend its relevance for comparative empirical studies, since it excludes most European social economy organizations (SEOs), like cooperatives, mutuals and social enterprises. While they may distribute a limited proportion of the organization’s annual surplus to their members or users, they are also normally democratically managed. The distribution of a surplus is often done in relation to their patronage. However, it is their democratic features that make them particularly interesting and relevant for this book. The term non-governmental organization (NGOs) refers to various interest groups, lobby groups and pressure groups that try to influence politics and political decisions. There is no requirement that they be democratically organized. The voluntary sector and independent sector are aggregate terms that are often reserved for NGOs, NPOs and foundations in the US and/or

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A Democratic Architecture for the Welfare State

UK. Finally, civil society is a widely used term and it is viewed here as broadly equivalent to the third sector. When a particular term employed in the text refers to a specific phenomenon in a given country, that usage is usually found herein. When the usage is more general the more generic term, the third sector or third sector organization (TSO) is more often used. The third sector therefore encompasses cooperatives, voluntary associations, social economy organizations, nonprofit organizations, nongovernmental organizations, lobby and pressure groups, the voluntary sector, and so forth. The social economy is part of the third sector and can itself be divided into established and new social economy organizations, regardless of their legal form. The former would include the established cooperative movements, mutual insurance companies, and so forth, found in Europe. The latter refers to new social service cooperatives, voluntary organizations and social enterprises filling new social needs. In addition to these terms, some researchers make a sharp distinction between pre-school and childcare services (Moss 2006). The former represents a holistic, pedagogical approach to early year services for children and is provided universally. The latter is more fragmented and seldom made available for more than a few parents who can afford it. The former phenomenon is primarily found in the Scandinavian countries and perhaps New Zealand, while the latter is available in many other countries. The strict distinction between pre-school and childcare is not maintained herein and both terms are frequently employed in an interchangeable fashion. Chapter 8 compares childcare in eight European countries and the term childcare is used to facilitate this comparison. One final constraint concerns the time frame for this book. The manuscript was prepared in 2006 and revised in 2007. Therefore, it does not contain any new materials after the Riksdag election in September 2006, except for the occasional footnote denoting a major change.

Notes 1 A political party must receive four per cent (4%) of the votes cast nationwide to gain seats in the Riksdag. Thus, Sverigedemokraterna were 60,000 votes short of gaining representation in the Riksdag in 2006. 2 Elections to the Riksdag, county and municipal councils take place at the same time in Sweden.

Part I

Social economy actors in Scandinavia

2

The future of consumer cooperatives in postindustrial societies

Introduction Childs’ influential book, Sweden: The Middle Way (1936, 1961), was set in the turbulent years of the 1930s, against a backdrop of massive economic, political and social unrest in most of Europe. This was illustrated by the Soviet Revolution, the aftermath of the Great Depression throughout Europe, the rise of Nazism in Germany and Fascism in Italy and elsewhere. Sweden and its Nordic neighbours appeared to be an idyllic isolated region of social tranquility and everyday pragmatism, dominated by the politics of compromise combined with economic and social progress. Childs attributed a major role to the Swedish cooperative movements in achieving this, in particular the consumer cooperatives and the building and tenant cooperatives. He devoted most of five chapters to the cooperative movements. They provided a pragmatic commercial alternative to the rampages of laissez-faire capitalism in the US and to communism in the Soviet Union. Nearly 50 years later he noted dramatic changes in many walks of Swedish society (Childs 1980). Once again he called attention to the importance of the Swedish consumer cooperatives, now in terms of promoting international development aid to the third world. However, the consumer cooperatives became more ‘business-like’ in many respects in the 1990s and their economic, political and social role has changed greatly in the new millennium. Given their historical importance, it therefore seems logical to begin our inquiry into the third sector and redemocratization of the welfare state by considering what could be the potential contribution of the cooperatives today in promoting the development and renewal of democracy and of the welfare state in Sweden? Many observers elsewhere wonder how the consumer cooperatives will survive in a globalized economy and if they will be able to maintain their cooperative identity. Several consumer cooperatives have gone bankrupt and closed their doors forever in some highly industrialized countries in recent decades, while others have changed completely beyond recognition, and would no longer be considered cooperatives by some observers. Therefore, I want to briefly compare two books on the cooperative movements in

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A Democratic Architecture for the Welfare State

Sweden that emphasize their social values – one on the established cooperatives and another on the new cooperatives.

The development of consumer cooperatives in Sweden In this section I want to present an interactive model of cooperative development and to discuss the historical development of the consumer movement in Sweden in the twentieth century. It summarizes my earlier work that compared the Swedish cooperative movements. Between Markets and Politics: Cooperatives in Sweden (Pestoff 1991, 1996) introduced an interactive model for analysing the organizational development of the established cooperatives in Sweden (see Figure 2.1). The interactive model underlined the importance of cooperatives adjusting and adapting to major changes in their environment. It also pointed to the need of balancing the claims of various stakeholders or strategic groups, and not allowing a single group to dominate for too long. If management continues to ignore the demands of some important

Figure 2.1 The competing ‘logics’ of cooperative associative action. Source: V. Pestoff, 1991 & 1996.

The future of consumer cooperatives in postindustrial societies

25

stakeholders and pursues only one goal, like maintaining its market shares or increasing its efficiency, then it risks changing the cooperative into another type of organization and losing the support of its original stakeholders. This is seen clearly in the Swedish consumer cooperatives, but is also evident in the agricultural cooperatives in Sweden as well. We need, therefore, to consider each environment or dimension more closely. The four most important environments for consumer cooperatives in industrial and postindustrial societies are: the market, their members, their employees and the (public) authorities. Together they comprise the most important limits on the actions and decisions of consumer cooperatives and their managers. Each of them acts as a powerful constraint on the freedom of cooperative leaders and their decisions. Each of them promotes their own particular values and represents their own particular goals, which at times come into conflict with other values and goals. Each of them is based on a separate logic that at times may come into conflict with the others. Thus, it is possible to speak of four competing logics or principles of organization: the logic of (efficient) competition, the logic of (democratic) membership, the logic of (political) influence and the logic of (personnel) management. At the same time both members and employees comprise the internal environment of consumer cooperatives, as they are part of the cooperative, while markets and authorities comprise the external environment of consumer cooperatives. They are neither members nor employed, but outside the organization itself. In addition, consumer cooperatives can also be analysed in terms of their commercial and social/political dimensions. Here markets and employees comprise the commercial dimension, while members and authorities comprise the social/political dimension of consumer cooperatives in industrial and postindustrial societies. The commercial dimension is something consumer cooperatives share with all firms in the market while competing with them. The social/political dimension of consumer cooperatives is something they hold in common with all other popular movements, NGOs, voluntary associations and TSOs, and so forth. This means that consumer cooperatives are complex, hybrid organizations that have multiple values and goals. The managers of consumer cooperatives cannot afford to let a single logic nor goal dominate the cooperative for too long, without the other logics and goals losing strength and withering. The managers of consumer cooperatives cannot afford to focus exclusively their market shares or efficiency, without the risk of transforming their cooperative into a pale copy of their competitors. Once this is done, however, it is very difficult, if not impossible, to revive the social values represented by the other logics and dimensions of consumer cooperatives. This research on Swedish cooperative movements clearly shows that their social dimension helps to set them apart and make them different from their competitors. On the one hand, the active promotion of social values provides cooperatives with a clear profile, helps to distinguish them from their competitors and gives them a competitive advantage. On the other hand, the

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A Democratic Architecture for the Welfare State

absence of social values denies cooperatives a natural profile, makes it harder for members and consumers to distinguish between them and their competitors, and therefore denies them their natural competitive advantage. Consumer cooperatives must, of course, adapt the goods and services they provide over time to the changing needs of their members. In today’s postindustrial societies citizens have a greater need for high-quality welfare services than reliable goods and groceries for daily consumption, since the latter are now readily available on the market. Thus, it is by promoting their social values and providing welfare services that consumer cooperatives could play an important economic, political and social role in a globalized economy. In this way they could contribute to the development and renewal of democracy and the welfare state in the twenty-first century. I would, therefore, like to make some points concerning the future of consumer cooperatives in postindustrial countries as I see it, a future that is clearly related to the social dimension of consumer cooperatives. Sweden changed radically and dramatically during the last century, from a rural agrarian society often with only one store per village to a highly industrialized, urbanized and competitive member of the EU. With sporadic markets, a single shop per village and several hours or perhaps even a day’s distance between villages, competition was at best a theoretical concept, and definitely not something most citizens encountered in their daily lives. Today, however, it is possible to drive an additional 20, 50 or 100 kilometers to the next town, or to a shopping centre outside town to find the best buy, although this was something unimaginable and physically impossible 100 years ago. Today, Sweden is light years from the situation when the Swedish consumer cooperatives started providing goods for their members over 100 years ago. In 1899 when Kooperativa Förbundet, the Cooperative Union & Wholesale Society, KF, was established the consumer cooperative movement had a clear social profile, which included cash-only sales, unadulterated products, breaking up production and/or sales monopolies, and democratic decision-making structures, almost two decades before Sweden adopted universal suffrage, and so forth. Table 2.1 in the appendix provides a brief overview of the organizational development of the consumer cooperative movement from 1910 to 2000. At the beginning of the twentieth century the Swedish consumer cooperative movement mainly comprised numerous semi-independent local cooperative societies. In 1910, only ten years after the establishment of Kooperativa Förbundet, or KF, there were nearly 75,000 members organized into nearly 400 local consumer cooperative societies that joined the national central organization, with an average size of less than 200 members each. Just ten years later these figures had increased dramatically: the number of members approached 250,000, the number of local societies was nearly 1,000, but the average size of the local societies was still only 250. By 1950 there were nearly 1,000,000 members in nearly 700 local societies, with an average size of nearly 1,500 members each. Forty years later the number of members had increased

The future of consumer cooperatives in postindustrial societies

27

to over 2.5 million, while the number of local societies had decreased to only 75. Thus, the average size of the local societies increased to 34,000 members. This represents a doubling in the average size in the past decade alone. Moreover, the number of retail outlets was halved during the same period, down from 1,687 in 1990 to 784 in 2000. Thus, in the past 100 years the number of members has increased by several hundred per cent, while the number of local cooperative societies was reduced to only a fraction of what it was at the beginning of the twentieth century. As a consequence of these two developments, the average size of local cooperative societies increased from about 200 to well over 34,000 members. In the process, the semi-independent small local cooperative societies that were the backbone of the movement at the start of the twentieth century were relegated to a marginal position compared with the megasocieties formed in major urban areas through a process of amalgamations starting in the 1960s. Reasons for this development are discussed in Chapter 9 (see ‘The democracy deficit: amalgamations in popular movements’ for details). These developments had a detrimental impact on the democratic side of the Swedish cooperative movement and the logic of membership. This is reflected in figures related to member participation at the annual general meetings of local cooperative societies, as well as the index of democratic control1 (Pestoff 1991). The growing size of local cooperative societies in major urban areas turned members into passive consumers, whose only expression of loyalty to the movement was reduced to purchasing all or most of their groceries at the local cooperative. However, passive members seldom show loyalty to a movement that has turned its back on them. Many members began to make their purchases at the closest grocery store rather than the closest cooperative store. This in turn deteriorated the competitive position of the Swedish cooperative movement. Both these developments can be seen as interrelated and the opposite side of the same coin, or part of a downward or negative spiral of development. The new wave of amalgamations in the 1990s completely lost sight of traditional cooperative goals and values. The new organization was a complicated conglomerate that owned the biggest local societies, and they in turn owned the central organization, KF. The business side of the Swedish consumer cooperatives was completely separated from its member organization, and members no longer have any influence, nor can they participate in the running of their local cooperative society. In the early 1990s the consumer cooperatives also changed their legal standing from economic associations to limited companies, and they developed such complex decision-making structures that not even knowledgeable and well-informed persons can understand decision-making in the new structures. Finally, in 2002 the consumer cooperative movements in the four Nordic countries amalgamated, creating a new multinational or Nordic level of decision-making and making membership influence even more obscure.

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A Democratic Architecture for the Welfare State

Given these changes, it is natural to wonder what became of the Swedish consumer cooperatives’ traditional social goals and values. What kind of social functions and values do the consumer cooperatives fill today by providing goods and services compared with providing for the new and growing needs for welfare services? Today it seems very unlikely that the consumer cooperatives can contribute significantly to the development and renewal of democracy and the welfare state. Rather, it could be argued that KF and Konsum at the turn of the century comprised a unique cooperative form, a ‘manager-owned’ cooperative, without the bothersome influence of either members or the staff. An important report delivered to the Centennial Meeting of the World Congress of the International Cooperative Alliance, ICA, held in Manchester in 1995 was given the title Making Membership Meaningful. All too often consumer cooperatives and other types of cooperative movements have done just the opposite, they have made membership meaningless, with the result that members eventually lose interest in them. Consumer cooperatives in postindustrial society need to reinvent membership and relate it to activities and services that are more meaningful to their members. They need to develop a unique profile, one based on human needs and social values. They need to rediscover their social dimension in order to emphasize and take advantage of their natural competitive advantage. Only then will they create trust and grow to meet the challenge of turning their members into active citizens, helping to develop and renew democracy and the welfare state, of helping to turn it into a participative welfare society, based on active citizens as co-producers. The time has perhaps come in many postindustrial countries to ask whether consumer cooperatives should sell off their stores, or at least part of them, and reinvest their collective resources into the development of welfare services, where cooperatives could and should have a natural competitive advantage.

Shifts in the welfare mix The welfare triangle introduced earlier helps to define major governance institutions in society, as well as to suggest the change in the welfare mix in postindustrial societies (see Figure 1.2 in Chapter 1). Along with the market, state and family, we find a third sector made up of NGOs and NPOs. In Europe we often refer to the latter as the third sector or the ‘social economy’. It is comprised of voluntary organizations, ideal associations, sports clubs, various societies, cooperatives, mutual societies, social enterprises, popular movements, and so forth. The role of the third sector and social economy in providing welfare services is considered in the next chapter. In postindustrial societies, where people live both better and longer, neither the market nor the state can fulfill all the needs of its citizens. The third sector plays an important and growing role in the production and delivery of goods

The future of consumer cooperatives in postindustrial societies

29

and services. There are a variety of reasons for this, including what is commonly known as market failure and government failure. Keep in mind however, there is also something known as voluntary failure. All sectors have both their strengths and weaknesses, and a welfare mix tries to take both the strengths and weaknesses of each sector into account and to combine them in ways that all sectors can make an optimal contribution to the overall welfare of citizens. Changing demographic patterns contribute to changing demands by citizens. Changing institutional configurations, like Sweden’s membership in the EU, also influence the institutional capacity of various sectors of society. Together they have a profound influence on the capacity of various sectors and organizations to provide the goods and services that citizens expect and demand. What is striking is that services comprise a greater proportion of total employment and production in many European countries than does the manufacture of goods. Rather than postindustrial society, we should perhaps speak of a service society, or maybe a welfare society. A growing number of citizens make increasing demands for welfare services, ranging from childcare, education and handicap care to eldercare and healthcare, and so forth. However, unlike goods, services can normally only be evaluated by consumers or clients once they have been consumed, or while they are being consumed. It is difficult to try them on first before deciding if you want to purchase and consume them. Thus, services imply a greater element of trust between the consumer and provider than do goods. This in turn opens interesting new possibilities for TSOs and cooperatives as providers of welfare services. They are uniquely positioned to provide such services, due to the greater trust they can generate, either because of the socalled ‘non-distribution constraint’, the social values they promote and/or the democratic structures that govern their internal decision-making. Thus, the third sector, social economy, cooperatives, social enterprises, and so forth should have unique opportunities in the twenty-first century, as providers of welfare services, since they have a unique capacity to promote trust, not available to for-profit organizations or state institutions. Cooperatives and social enterprises will help characterize shifts in the welfare mix and a few examples from Japan and Sweden help to illustrate this. During a sabbatical in Japan in 1998, I studied several important examples of social enterprises and cooperatives providing welfare services. Here I will focus on three: the Saitama and Sakura-so Consumer Co-op Hospitals; Co-op Kobe and the JA/Koseiren; the National Welfare Federation of the Japanese Agricultural Co-ops. Cooperative healthcare in Japan is explored in greater detail in Chapter 7. a

The Japanese Consumer Cooperative Union, JCCU, actively promotes many different types of social activities and services, including childcare, eldercare and healthcare. It runs nearly 76 hospitals and 240 clinics throughout the country. In Saitama Prefecture outside Tokyo there are

30 A Democratic Architecture for the Welfare State

b

c

four cooperative hospitals and a dozen clinics. The main hospital, the Saitama Co-op Hospital, has about 350 beds. In Hirosaki the Sakuraso hospital has 300 beds for ordinary patients and another 200 beds for mental patients. It also cares for 700 ordinary outpatients per day and an additional 200 mental patients as outpatients per day. Members are encouraged to participate actively in their own healthcare. Members regularly test their urine for the salt content and their blood for the sugar content, and they also record their own blood pressure when visiting the hospital or clinic, by using a digital blood pressure apparatus available to outpatients in the reception. The patients then report these basic facts to the medical staff at the beginning of their medical visit or checkup. These simple procedures fundamentally change the asymmetry of information between the medical staff and patients, and the balance of power between them, if only marginally, in favour of the member/patients. Members are also encouraged to participate in small groups, or hans, to discuss and evaluate these basic facts in relation to their diet and lifestyle. Very few cooperative healthcare facilities exist in Europe. Following the Great Haishin Awaji Earthquake in January 1995, with its epicentre near Kobe, Co-op Kobe faced a serious and fundamental dilemma. Not only had it suffered enormous material and financial losses, but its members had also suffered huge personal losses of homes, lives, family members, and so forth. Given the big losses both in terms of property and life, Co-op Kobe had to decide whether it should concentrate on rebuilding itself and develop as a highly rational wholesale and retail organization, or return to its cooperative values and renew its social dimension and commitment to its members. The leaders of the Co-op Kobe saw the opportunity for rejuvenating their cooperative movement in the rubble of the earthquake. They decided to develop important social services for members along with their efforts to rebuild their shops, warehouses, and so forth. For example, the previous cooperative headquarters building in the city centre collapsed during the earthquake and it was temporarily housed in the gymnastics hall of the Co-op College, more than an hour’s drive from the center of Kobe, although this meant a much longer commune for the staff to and from work every day. Rather than quickly rebuild their central office, Co-op Kobe decided to open a residential nursing home for 150 elderly persons in the centre of town in 1996. Conversations with two mobile women in their nineties, and with one over 100 years old, plus the staff, quickly revealed the benefits of engaged staff and the quality of service possible through cooperative solutions. The Japanese Agricultural Cooperatives (JA) run 122 hospitals and 47 clinics in various parts of Japan. Their hospitals have 309 beds on average. Most of these services, that is, 77 of their hospitals and almost all of their clinics, are located in small towns of less than 50,000 and rural

The future of consumer cooperatives in postindustrial societies

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villages. This stands in sharp contrast to other alternative providers of healthcare and JA clearly benefits the agrarian population by providing healthcare in rural areas, by bringing such services closer to where their members live and work. See Chapter 7 for more details. Ten years ago, on the initiative of the Ministry of Health and Welfare, the Agricultural Law was changed to permit JA to undertake ‘social welfare activities’. They subsequently developed homecare for the elderly in most prefectures. The local authorities could not meet the growing need for elderly care in rural areas. The Ministry of Health and Welfare also gave JA the right to educate ‘home helpers’. Already by the year 2000 nearly 30,000 women qualified to provide such services. They were normally farmers’ wives and became certified and could provide such services through the municipal authorities. JA also runs 28 Home Helper stations, four childcare centres and 15 nursing homes. Such activities not only help to maintain the local social network of the elderly in rural areas, they also provide the rural population with elderly care services in their own locality, rather than in remote urban areas. Moreover, it also provides farmers’ wives with extra income, a chance for self-realization, development and greater independence. By contrast, most of the established cooperative movements in Europe today devote little, if any, effort to developing and providing welfare services to members. However, Beyond the Market and State: Social Enterprises and Civil Democracy in a Welfare Society (Pestoff 1998 & 2005) focused on the new rather than the established cooperatives in Sweden. It analysed three different aspects of social enterprises. First, it explored the enrichment work life and the empowerment of workers. Second, it examined the empowerment of citizens as co-producers of welfare services. Third, it evaluated how these two aspects of social enterprises together contribute to democracy and to the renewal of the welfare state. Let us look briefly at each of these three aspects. We studied 57 cooperative childcare centres in six different parts of Sweden. We collected nearly 250 staff answers to our questionnaires about worker empowerment, codetermination and work environment as well as nearly 600 parents’ answers to our questions about consumer empowerment and citizens as co-producers. There were three different types of social enterprises represented in our study, parent cooperatives, voluntary organizations and worker cooperatives. The voluntary organizations often have a special educational philosophy or pedagogical approach, that is, Waldorf, Montessori, Reggio Emilia, and so forth, and their members normally included both parents and the staff. A brief summary of our study shows the following: a

A retrospective study of all three types of social services shows that they resulted in improved work environment compared with municipal childcare services. A large majority of the employees (from 68.3% to 85.5%) stated that they prefer working in cooperative childcare compared to the

32

b

c

A Democratic Architecture for the Welfare State municipal childcare services. When asked if they would do it over again, two-thirds of the staff of worker cooperatives said they would definitely choose to work for a cooperative childcare facility again, while one-third of the staff of the other two types said they would do likewise. Almost all the rest said they would probably go to work for a childcare cooperative centre again, if given the chance. However, compared with other types of social enterprises, worker cooperatives promote the best psychosocial work environment and ‘good jobs’. Small self-governing workplaces empower the workers, which in turn results in greater staff engagement and probably in better quality service as well. See Chapter 5 for a discussion of work environment. Consumer involvement empowers the citizens as co-producers of welfare services. The work obligation in these types of childcare services helps to integrate parents into the childcare facility and provides them with valuable insights, which in turn can be put to use in their internal democratic processes. However, parents’ motives for choosing one type of childcare centre are clearly reflected in the profiles of each of the three types included here. They also provide the basis of evaluating the performance of and satisfaction with the services provided. The overwhelming majority of parents with experience from both cooperative and municipal childcare services state that they prefer cooperative childcare services (77.4% to 85.5%). Asked if they would choose a cooperative again for their daughter or son, the overwhelming majority (72.1% to 89.5%) say yes! See Chapter 6 for more details. These two quite different aspects of providing welfare services, worker and client empowerment, together can contribute to the democratization and renewal of the welfare state. They facilitate the enrichment of work environment, the development of grass-roots economic democracy, the decentralization of the provision of welfare services, and they turn citizens into co-producers of services. See Chapter 8 for more details on co-production.

Conclusions: trust and welfare services In a European context, we need to consider the future of democracy and the welfare state, as well as the role of the third sector and social enterprises in renewing both of them. However, we also need to pay more attention to trust and understand how such organizations can create trust in the absence of a non-distribution constraint or of American tax laws. Trust could and should provide most organizations found in the third sector, like social enterprises and cooperatives, with a natural competitive advantage in the provision of welfare services, if correctly understood and put to use. Chapter 4 discusses the need to achieve a balance between profit and social goals, while Chapter 6 discusses trust and welfare services. Social enterprises take three different forms in Sweden, that is, consumer

The future of consumer cooperatives in postindustrial societies

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cooperatives, worker cooperatives and voluntary organizations. Consumer cooperatives can engage their members in the provision of welfare services, they can empower them as co-producers and can provide them with greater influence and control than many other alternatives. Consumer cooperatives can, therefore, create trust between the consumers and providers of social services. Worker cooperatives usually result in more engaged and enthusiastic staff, which is often reflected in the quality of the services provided. Better quality services and more engaged staff can also result in greater trust between the consumers and providers of social services. Voluntary organizations that combine both the staff and clients as members, function as multi-stakeholder organizations and can also contribute greater trust between the consumers and producers of welfare services. Trust is the key to the future in business, in particular when it comes to welfare services. Private commercial firms, on the one hand, recognize this, but they often lack natural ways of generating trust and must rely on advertising and other strategies to try to achieve what comes naturally to cooperatives. The recent growth of corporate social responsibility (CSR) and consumer relationship marketing (CRM) in business are two expressions of the need for private companies to create more trust. Cooperatives, on the other hand, have it naturally, but fail often to recognize trust as a natural competitive advantage of the cooperative form.

Note 1 This is the ratio of democratically elected leaders to professional staff.

3

The development and future of the social economy in Sweden

This chapter provides an historical overview of the relations between the third sector and state. The elections to the Riksdag in 2006 are a logical cutoff point. Sweden has a universal welfare state and a Social Democratic welfare regime. It therefore adds some unique features to the European social economy, including a large public sector, a strong étatist tradition and a weak but growing role for third sector providers of welfare services. This chapter begins by discussing the concepts of voluntary organizations popular movements and the social economy from a Swedish perspective. Then it sketches several different phases in the relationship between the third sector and state. Finally, it considers some of the major challenges facing the welfare state and its relations with the social economy. On the basis of this certain conclusions are reached about the future of the social economy in Sweden.

Voluntary associations, popular movements and the social economy Most American research projects on the nonprofit sector exclude cooperatives, trade unions and mutual aid societies, and so forth, on the basis that they distribute a limited part of the surplus to their members, and therefore do not conform to the non-distribution constraint. But, such organizations are more prevalent in Sweden and many of them played an historical roll in the development of democracy and the welfare state. Their exclusion produces a skewed sample of the Swedish organizational landscape and leads to biased comparisons. The point of making comparisons is not only to look for similarities or show that one country is better than others, but also to explain the differences between them. Regrettably, the Johns Hopkins Project excludes organizations that never distributed a surplus to their members during their 80-year history, like the Swedish building and tenant cooperatives, ‘for reasons of comparability’ (Wijkström and Lindström 1998). This excluded nearly a third of all multiple family dwellings in Sweden and all the members and resources associated with cooperative housing since 1925. Nevertheless, the voluntary sector in Sweden proves similar to that found in the other western industrialized countries in terms of membership, activity

The development and future of the social economy in Sweden

35

and economy (Salamon and Anheier 1996). However, the Swedish voluntary sector is less dependent on public support and more self-sufficient than in most other countries (ibid.). What really makes it different in Sweden is its distinctive structure, due to a combination of historical and political factors. The Swedish voluntary sector is weak in areas like healthcare, education and social aid, but strong in sports, leisure time, culture, adult education and on the labour market (Rothstein 2001), as well as housing in multiple family dwellings. In Sweden and the neighbouring Scandinavian countries, the concept of folkrörelse or popular movement is often used instead of nonprofit organization, since it refers to a different type of organization with quite different historical roots. The concept of popular movement is an historical category and it lacks legal status. However, it should be noted that the Swedish concept of ideell förening or voluntary association, refers to the legal status of organizations promoting nonlucrative goals, and perhaps comes closest to the US concept of nonprofit organization.1 Many popular movements register as ideell förening, a status that distinguishes them both from aktiebolag or incorporated firm and ekonomisk förening or economic association, which is the form normally chosen by cooperatives. Neither of the latter two legal forms carries any personal financial responsibilities for their board members for debts incurred by the organization, while board members in ideell förening have full responsibility for all such debts. Thus, many popular movements that produce goods and services prefer to take the legal status of ekonomisk förening, while those with limited commercial activities choose the legal status of ideell förening. Popular movements in Scandinavia differ from voluntary associations in most other countries, particularly those found in the US or UK, in several respects (Rothstein 2001). First, they were established and run as democratic organizations for ordinary citizens, rather than exclusive clubs of the well-todo. Second, although they had strong and active local branches for mass participation, they are also national movements that effectively coordinate the activity of their local branches. Third, popular movements considered themselves protest movements against the bureaucrats, clerics, aristocrats and capitalists that dominated Sweden at the beginning of the last century. The very concept of movement implies social change due to movement from below. Fourth, popular movements were not single organizations, but often, whole networks of organizations. So, the labour movement, was not only comprised of trade unions and the Social Democratic Party, but also of organizations for consumers, renters, condo-tenants, pensioners, scouts, adult education and even a burial society. A similar network of popular movements was found among the rural agricultural population. Fifth, popular movements that both protested existing conditions and promoted self-help were often opposed to middle- and upper-class organizations for charity. Sixth, a corporatist pattern of lay representation on the executive bodies of public administration boards, initiated at the beginning

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A Democratic Architecture for the Welfare State

of the last century, incorporated representatives for many major popular movements. This not only provided them with privileged access to policymaking as well as legitimacy in the eyes of the elite, but also promoted popular influence over the public policy prior to the breakthrough for universal suffrage. This pattern of corporatist lay representation persisted until the early 1990s. The privileged access, legitimacy and influence in turn helped to set the tone for the relationship between popular movements and the state in terms of cooperation and collaboration, rather than in terms of competition and conflict found in many other countries. Finally, popular movements in Swedish mythology were also important schools for democracy and organizational training, which helped the transition to democracy (Ambjörnsson 1988, 1995). The latter topic will be discussed in greater detail below. In addition, several unique political factors are also important for understanding the development of the welfare state in Sweden and its relations to popular movements and voluntary associations. First, the Social Democratic Party (SDP) ruled Sweden alone or in coalition with other parties during most of the formative period for the development of the universal welfare state. The SAP was in opposition three times in the post-Second World War period, that is, 1976–1982, 1991–1994 and again starting in 2006. This unusually long rule has provided them with unparalleled influence on the type of welfare state developed in Sweden and its relations with popular movements and voluntary associations. Second, Sweden lacked a strong independent church and religious movement, like the Catholic Church, which provided the backbone of many continental welfare states (Esping-Andersen 1996). Third, the Swedish Lutheran Church only separated from the state in 2001. Sweden also lacks the concept and institution of subsidiarity, which is so important in Germany and assigns a clear role to voluntary associations. Fourth, unlike most other European countries, Sweden also lacked a strong Christian Democratic movement and/or political party until quite recently. In fact, the Christian Democratic Party did not clear the minimal four per cent threshold necessary to enter the Riksdag until the 1991 General Election. Taken together, these unique historical and political factors meant that in Sweden there was no clear independent religious champion of individual charity, benevolent activities or subsidiarity found elsewhere in Europe. Thus, there was no effective opposition to the dominance of a more universal and collectivist approach promoted by the popular movements and Red/Green coalition, during and after the Second World War. Rather, private business, through the Confederation of Swedish Employers,2 SAF, served as one of the main forces challenging the extension of the universal, tax-based welfare state for economic reasons and even called for its privatization during the 1990s (Pestoff 1995, Pestoff 2001b). The concept of social economy, as generally used and understood in Europe, includes organizations that have open membership and are democratically run. The principle of one member:one vote applies to their internal decisionmaking. Normally, cooperatives, mutuals and associations are included in

The development and future of the social economy in Sweden

37

this category. Further distinctions exist between established and new types of organizations belonging to the social economy. Together, the consumer, building and tenant and agriculture cooperative movements comprise the established or old social economy in Sweden. They only provide sporadic or intermittent support for the new social service cooperative movement. These newer adherents often have highly visible and socially relevant motives or aims for providing services to their members or to special client groups. They often represent needs not presently catered to by the public sector, like parent cooperative daycare services, cooperative eldercare, and so forth. Social economy is a new concept that lacks a natural translation to Swedish. As a new member in the EU, the Swedish government initiated a parliamentary or official investigation of the concept in order to stand on firm ground when applying for EU funds or projects related to the social economy. The 95-page report of this parliamentary committee summarizes Swedish and international experience with the usage of this concept and concludes with an official Swedish definition of the term, social economy. Thus, Sweden is now the first country in the EU with an officially sanctioned definition of the social economy. This report weighed various aspects of the social economy and mentioned various segments of the social economy. However, the definition it proposed is more remnant of nongovernmental organizations than nonprofit organizations. Unfortunately, it fails to include the more specifically economic aspects of the activities of such organizations.

Development of the relations between voluntary associations and the state There are five main periods in the development of the Swedish voluntary associations and popular movements. They include: 1 2 3 4 5

the period prior to the emergence of voluntary associations (up to the beginning of the 1800s); the period of emergence of the voluntary sector (1810–1870); the period of industrialization and development of popular movements (1870–1930s); the period of the emerging welfare state (1940–1970) (Wijkström and Lundström 1998); and the period of new social movements and a growing welfare mix (1970–2000).

Perhaps we are now witnessing the beginning of a sixth period: 6

the introduction of a new nonprofit category of organizations for the production of healthcare and education (2001–).

We will return to this below in the section on privatization and nonprofit legislation.

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A Democratic Architecture for the Welfare State

In the first period prior to the Reformation, organized charity and poor relief were matters for the Church. Then, when the church became a matter of national concern, the responsibility for poor relief followed the ownership of church properties, and became a matter for the Swedish Crown. In the second period, the early ‘societies’ or associations were not open or democratic organizations, but an exclusive expression of the elite of the emerging capitalist society. Many of them were social clubs and were oriented to charitable activities, often working closely with local poor relief boards. Sweden experienced late, but rapid industrialization, and also late democratization, compared to many other European countries. Sweden dissolved the guild societies in the middle of the nineteenth century (1846). The freedom of association was introduced a few years later (1864). These two developments interacted and overlapped in such a fashion as to reinforce the collective efforts of many ordinary people with very few resources, privileges, rights or alternatives. Thus, in the third period we find the growth and development of ‘popular movements’ in the latter part of the nineteenth century, which often had an anti-establishment emphasis. The labour movement, which included both the trade unions and SDP, the temperance movement and the non-Conformist churches, were all against one or more aspects of the privileges of the establishment. Many popular movements and their Social Democratic allies rejected established ideas about poor relief as an expression of class oppression and also viewed charity as the poor being forced by circumstances to accept gifts from the rich. Such views still have strong support in certain segments of Swedish society today. Rather than relying on charity, the popular movements developed and put into practice ideas of self-help, which decades later became the nucleus of general welfare state programmes, like national sick-leave insurance and life insurance, unemployment insurance, and so forth. Popular movements were all mass organizations, based on ideas of open membership and democratic control. They actively challenged the existing society and helped to change it in a more democratic direction. They gained enormous legitimacy from their early years and are still considered by many today as synonymous with the democratization of Sweden. They are also considered by some as an expression of collectivism and perhaps also socialism. They became important as schools for organizational and democratic training for the growing working class, long before universal suffrage. They encouraged their members to learn to read and write and also taught them how to run meetings, write resolutions, argue for their proposals and promote their interests in a democratic fashion. The leaders of many popular movements became local, regional and national political leaders at the turn of the nineteenth century (Ambjörnsson 1988, 1995). Newer, popular movements grew in the wake of their predecessors, and often followed their example in terms of open membership and democratic decision-making. They included the consumer cooperatives, the building and tenant cooperatives, the farmer

The development and future of the social economy in Sweden

39

cooperatives, the women’s movement, trade unions for salaried employees and persons with academic credentials, the sports movement, the pensioners’ movement, the environmental movement, and so forth. The SDP and the trade unions, with support from the Liberal Party, were the major political forces promoting universal suffrage and breaking the power monopoly of the Conservatives and employers at the beginning of the twentieth century. Sweden adopted near universal suffrage as late as the 1921 Riksdag election. By 1932, the SDP was the largest party, and it formed a minority government for a brief time. Then, when it returned to power in 1936, it formed a coalition with the Agrarian Party (now Center Party), referred to as the Red/Green Coalition. Both of these parties were, and are, still known as the ‘popular movement parties’ (Pestoff 1977). Their most solid base for many decades were the rank-and-file members of the trade union movement and agricultural cooperatives, respectively. These two parties governed Sweden together from 1936 until 1957, but together with the other noncommunist parties in a Grand Coalition during the Second World War period. Thus, these two popular movement parties together helped to transform Swedish society in a fundamental way and to plan and develop the welfare state that makes Sweden one of the leading nations in providing universal social services and social insurance on the basis of citizenship or residence (Esping-Andersen 1996, Stephens 1996). In the fourth period the social policies adopted by the national government during this Red/Green Coalition were often based on the demands, activities and programmes promoted by popular movements like the trade unions, agricultural cooperatives, consumer cooperatives, the temperance movement, and so forth. They focused on improving the lot of ordinary people in Sweden at the time. These were years of great scarcity due to the Great Depression, the Second World War, and the postwar reconstruction. First and foremost, the basic needs of ordinary citizens and collective means for providing them with security were promoted by popular movements and the government. The ambition of the Social Democratic/Agrarian Party Coalition governments during the post-Second World War period was to provide all citizens with certain basic social services and to insure them against economic loss due to sickness, unemployment, old age, and so forth. This served to eclipse the purpose and activities of many voluntary associations based on charity or ideella föreningar from the period prior to the advent of the welfare state. However, the ideell sector actively contributed to the development of many public welfare services that are provided by the public sector today. In some cases they are financed by public funds, but still provided by nonprofit organizations (NPOs). Popular movements and NPOs promoted many social reforms and helped to elevate social problems to the national agenda, which then resulted in their being assumed by the state and provided by the public sector. In a few areas there are still some voluntary associations that provide

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A Democratic Architecture for the Welfare State

services today. They include limited parts of healthcare, education, recreation and leisure activities, in particular sports, and so forth. They are discussed more below. In addition there are various types of foundations in Sweden, but they are comprised solely of the autonomous property administered to accomplish specific objectives. They were seldom involved in financing or providing welfare services. In general, voluntary associations and foundations have not only become marginalized by the development of a universal welfare state, but they are also isolated from the major promoters of a universal welfare state and the popular movements associated with it. In the fifth period, we note that new social movements based on new or unmet social needs, identity, socializing or recreation, rather than class, provide the basis of growth for new social movements and for a growing welfare mix (Evers 1995). As previously noted, for historical and political reasons popular movements cooperated closely with the state in the development of universal welfare rights and services for all inhabitants. The corporative channel provided popular movements with influence and resulted in collaboration and cooperation between them and the state rather than conflict and competition about the delivery of social services. The space available for independent initiative in terms of providing social services or healthcare has been restricted by active state provision, and universal provision has marginalized the need for and role of charitable organizations. However, in some well-defined areas voluntary associations still play an important role in providing some services today, like education, healthcare and social services. In terms of education they are mostly found in adult education and adult residential colleges or folkhögskolor, and study circles. However, several of the national education organizations are part of popular movement networks, including the labour movement, agricultural movement, sport movement, and so forth. In healthcare they are usually found in small niches like epilepsy, tuberculosis, cancer (Wickström and Lundström 1998) and diabetes (Söderholm Werkö 2008). In the later years of the twentieth century client organizations also began to develop for newer healthcare needs, like those for persons afflicted with HIV/AIDS (Walden Laing and Pestoff 1997, Walden Laing 2001). In terms of meeting new social needs, like providing advice and shelter to battered women, services were initiated by a variety of women’s organizations in the 1980s. Such groups exist in most parts of Sweden and today nearly half of the municipalities have also established some kind of public help activities for such women. Shelter to the growing number of homeless is an activity taken on by various religious groups, including the Salvation Army. Even older needs like caring for alcoholics are met in a new way by the spread of Alcoholics Anonymous groups. Handicap organizations provide an example of a strong client organization, but they have negative attitudes towards charity, and prefer to emphasize the rights of handicapped persons to work, housing and even personal assistance. Their demands are met by a growing mix of public and third sector efforts, including the Independent

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Living movement. Several of these examples demonstrate the international spread of successful models from the US. Nonmunicipal childcare services also provide an illustration of new or unmet social needs. In the late 1970s and early 1980s, when demand for childcare services largely outstripped the public supply for many years running, the Social Democrats reluctantly conceded the right of parents to form their own pre-school childcare cooperatives and receive a public subsidy covering about 85 per cent of the expenses. This put them on a similar economic footing with the municipal childcare services. Then, in 1991 all restrictions were removed concerning the legal status of the provider of pre-school services, and private for-profit providers could also receive public subsidies for their daycare services. Today fifteen per cent of all pre-school children are enrolled in nonmunicipal daycare facilities (Pestoff and Strandbrink 2001). The major providers of such services are in fact the parent cooperatives, while worker cooperatives and voluntary associations are also big providers (Pestoff 1998 & 2005). However, the popular movements, established cooperative movements and trade union movements do not have much in common today with the new social movements nor with the old voluntary associations in terms of their stance toward the developing welfare state. The voluntary associations are not generally viewed as active defenders nor promoters of an expanded welfare state, while some of the popular movements still are, at least, occasionally. In particular, both the blue-collar trade unions, under the umbrella of Landsorganisationen (LO), and the white-collar trade unions, under the mantel of Tjänstemännens Centralorganization (TCO), actively support a universal welfare state, while calling for changes or reforms to make it more in tune with major social and demographic challenges in the 1990s. For example, TCO in its new social policy programme, The Welfare State 2.1, Developing Welfare, reiterated its support for a general tax-based welfare state (TCO 2001). But it also called attention to some of its shortcomings in terms of the amount and quality of welfare services. Among other things it points to the decrease in spending for health services during the 1990s and to the ceilings for public expenses that have become part of the budget process since 1997. Now any increase in one area must be matched by decreases in another and amplify the ups and downs of normal economic cycles. TCO also warns that it may deteriorate the high level of public support for general welfare programmes (ibid.). Some of the popular movements associated with the Social Democrats in the earlier period, like the consumer cooperatives, housing cooperatives and labour unions continue to play major economic and social roles for the well-being of their members, but their role also became overshadowed by the growing welfare state and large-scale social changes. For example, at the beginning of the last century, the consumer cooperatives played an important role in breaking the hold of local factory magnates on the sale of daily goods, and even in breaking the production monopoly on basic staples, like

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margarine. However, growing urbanization, industrialization and competition have diminished the importance of such activities for the well-being of ordinary citizens. Moreover, through a process of extensive amalgamations starting in the 1960s, the consumer cooperatives grew into large bureaucratic organizations, well beyond the reach of ordinary members (Pestoff 1991, 1996). See Chapter 2 above for more details. Fifteen years ago the Swedish consumer cooperative movement changed its legal status from that of economic association to a limited company and with it eliminated the last remnants of democratic control by ordinary members. The Swedish consumer cooperative movement has thereby become an ordinary commercial wholesale and retail chain (Pestoff 1999a). In 2001 the Danish, Norwegian and Swedish consumer cooperative movements amalgamated to create Co-op Norden, in order to protect their market shares in the respective Nordic countries against foreign competitors. The agricultural cooperative movement has also become ‘big business’ and is now involved in a series of amalgamations in neighbouring countries, thereby becoming an important actor in the EU. Thus, both these popular movements have been transformed into huge commercial conglomerates, operating successfully in several countries, but far removed from their origin as popular movements that promote social values, and that were democratically run. Today they belong to the old rather than new social economy. Similarly, the two major building and tenant cooperatives, HSB and Riksbyggen, established in 1924 and 1930, respectively, also played an important social role, by building low-priced, good quality housing for workingclass inhabitants (Pestoff 1991, 1996). They contributed to resolving problems brought on by the major demographic changes and urbanization of Sweden and to the urban renewal of major urban areas in the 1960s and 1970s. They are democratically run by their members and have continued to expand and to provide high standard housing, but not always as low-priced as many young persons would like today. HSB also supports a general tax-based welfare state. Moreover, it has engaged itself in the field of homecare for the elderly in recent years and has recently expressed concern about the future of public services and the welfare state, due to increasing marketization of services, and the threat this poses to third sector alternatives (DN, 1/9-01). Also the trade unions have traditionally played, and still play an important role when it comes to providing unemployment insurance. Unemployment insurance in Sweden is primarily organized and administered by the trade unions themselves, through separate organizations known as an Erkänd arbetslöshetskassa or ‘Recognized Unemployment Insurance Fund’. Employees may opt out of joining a trade union, but non-members cannot be excluded from Unemployment Insurance Fund. Many argue that union control of unemployment insurance provides them with strong arguments in recruiting new members. Trade union membership is indeed very high in Sweden; nearly 85 per cent of the labour force belongs to a trade union. When unemployment began to exceed five per cent in the early 1990s, employer

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organizations and some groups began to demand that unemployment insurance should be taken over by the state, to avoid any unnecessary association between the unions and their unemployment insurance. As a compromise, public unemployment insurance was initiated, but only for persons not covered by the union managed funds. The National Labor Market Board (AMS) was given responsibility for supervising the management of the trade unions unemployment insurance funds. Responsibility for supervising the operation of the unemployment insurance funds was transferred in 2004 from AMS to the newly created Swedish Unemployment Insurance Board (IAF). IAF studied how the unemployment insurance funds dealt with their members in 2005 (IAF 2006). The report is critical of 29 of the 36 unemployment insurance funds from the point of view of equal treatment and due process of law (ibid.). Its criticism concerns differentiated treatment of members depending whether they belong to a trade union, different ways of making payment, periods for payment, and serving notice before the insurance expires. It also had other critical comments concerning the organizational separation of the unemployment insurance funds from the trade unions and the existence of a formal agreement between them regulating their relationships. However, several of its criticisms appear to focus more on establishing uniform bureaucratic procedures for all 36 unemployment insurance funds than equal treatment of members.3

Privatization and nonprofit legislation A sixth period may soon be commencing with the introduction of new legislation paving the way for providing nonprofit status to some organizations, primarily those providing education or healthcare services. Sweden is also considering a proposal to introduce individual tax-deductions on gifts to voluntary associations in order to promote more insight into and control of organizational fraud in the third sector. Such proposals seem in part motivated by the lively discussion about the role of for-profit organizations in the provision of publicly financed welfare services, particularly in healthcare and education. However, in Sweden most welfare services are financed, provided and regulated by the state and/or local authorities. When the economic crunch of the 1990s hit Sweden, the neo-liberal Bildt Government (1991–1994) slashed public expenditure on social services. Later, the Social Democratic governments pursued a policy of continued austerity for nearly a decade. A debate on the vices and virtues of privatization and deregulation raged on during the 1990s. The heavy losses suffered by the Social Democrats in the 1998 General Election caused them to turn to the left for continued political support in the Riksdag. However, gains at the national level by its partners, the Leftist Party4 and the Green Party,5 were not always translated into similar gains at the local or municipal level. Thus, a coalition of nonsocialist parties took over the reigns of power at the local level between 1998 and 2002 in many municipalities, in particular in major urban and

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suburban areas. This led to a highly contended division of power, where the Social Democrats ruled at the national level and the nonsocialists ruled at the local level. Many nonsocialist municipalities appeared intent on privatizing as much as possible prior to the 2002 elections. The Social Democrats at the central level seemed equally as intent on limiting the privatization of welfare services, in particular healthcare and education. Thus, we found a Swedish variety of the French ‘cohabitation’ or power sharing, where each of two different political leanings occupied separate levels of power, and where they must coexist, but also show respect for each other’s jurisdiction and the limitations of their own. Needless to say, power sharing or cohabitation was a new phenomenon in Sweden, and did not run very smoothly, given the strong ideological differences about privatization in general and the role of private for-profit firms in providing healthcare and education. It also resulted in a sharp ideological confrontation between the central and local levels of government about the rate of privatization of municipal services, in particular welfare services and housing. Both in Stockholm County and Stockholm City the nonsocialist coalitions that ruled between 1998 and 2002, actively, if not aggressively, promoted the sale of as much of the publicly owned and operated welfare services as possible before the 2002 General Elections. A wide array of social services like municipal housing, elementary and secondary schools, homecare for the elderly, emergency services and maternity centres at public hospitals, primary healthcare services, library services, Swedish language training for foreigners, and so forth, were privatized in Stockholm and run as private for-profit firms. Nearly one-fifth of all municipal activities in the City of Stockholm were provided by a private entrepreneur through contracting-out in 2002. Municipal housing was also rapidly privatized either by selling it to the current occupants or to private landlords, in blocks of 1,000 apartments at a time in various parts of Stockholm and its suburbs before the 2002 election. The main reason given by the City of Stockholm and other towns pursuing such a policy was the belief that this would improve the administration of housing. The national government did its best to prevent this. The Social Democratic Government initiated special laws in 2001 to forbid private for-profit hospitals and schools, and the sale of public housing, to firms noted on the stock exchange. These became known as the ‘Stop Laws’. Swedish Prime Minister, Göran Persson, announced a major change of policy concerning the fight against privatization of welfare services in Sweden. On three separate occasions in May and June, 2001, he stated that the Social Democratic Government wanted to promote ‘nonprofit care’. First, at the Congress of the Social Democratic Women’s League, he announced that companies without a profit interest could be allowed to provide elementary education and healthcare. He also stated that Swedish taxation rules were being reviewed in order to facilitate such organizations. ‘We need to consider if we in Sweden should have a company form found in the USA and other

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parts of the world called nonprofit. It is a company that makes a profit, but it remains in the company and helps develop its activities’, he said. According to Persson, this type of company can provide the answer to many of the problems the Social Democrats see with privatization of the public sector’s social services (DN, 20/5-01). Then, one week later, at the Congress of the Swedish Municipal Workers Union (SKAF), where privatization was hotly debated, the Prime Minister reiterated this new stance. Finally, he took a similar position on privatization and nonprofit organizations in the Debate of the Party Leaders in the Riksdag, on 11 June 2001. The Swedish Department of Justice initiated a quick study of this proposal, and in October 2001 a legal brief was prepared on the matter. It rejected the introduction of a completely new legal status for nonprofit organizations in Sweden, but, went on to propose the inclusion of ‘nonprofit companies’ in the existing Swedish Company Act. The Social Democratic Party adopted a new party programme and social welfare programme at its Congress in November 2001 (SAP, 2001 Social Democratic Party Program). It reiterated their staunch and continued support for a universal, tax-based welfare state that provides services to all citizens on the basis of need rather than capacity to pay. However, it also stated that ‘one of the main responsibilities of the public sector is to develop alternatives within the frame of its own activities; but, cooperatives, voluntary associations and private alternatives can also play a role’ (DN, 7/11-01). The Minister of Education commented that ‘. . nonprofit companies can make a “reasonable” profit, similar to ordinary bank interest. That is the content of the Directive to the Official Investigation on Nonprofit Companies. It provides a new legal status to companies, which according to the government would be extended to firms providing education’ (DN, 7/11-01). The new Swedish Law on Limited Companies with Special Limits on Distributing Profit/Aktiebolag med särskild vinsutdelningsbegränsning, was passed by the Riksdag in 2005 and took effect at the beginning of 2006 (Prop. 2004/05: 178). It is discussed in greater detail in the next chapter. The concept of nonprofit organizations (NPOs) is, of course, also highly problematical, both from an analytical and comparative perspective. This is the main topic of Chapter 4. However, it is ironical that the government should see nonprofits as the solution to privatization of healthcare, given the wave of conversion of nonprofit to for-profit hospitals in the US during the 1990s (see Weisbrod 2000). Thus, its interest in a new nonprofit legal form appears both inconsistent and misplaced, however ideologically motivated or politically expedient it may be. Moreover, given widespread privatization in some areas of welfare services, but not others, begs the question, when is it acceptable for private agents to provide such services through public funding, and when is it not? No clear answer was apparent. Why did the Social Democrats accept private for-profit childcare, eldercare, libraries, maternity care and elementary schools, but not private for-profit hospitals nor high schools? The distinction between them remains unclear. Is it the size of the organization involved, the number of

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employees or users, the nature of the service provided or some other unspecified criteria that determines when privatization was acceptable to the central government and when it is not? And when are social enterprises, cooperatives and nonprofit organizations welcome as providers of welfare services? The answer to the latter question may only become apparent in the future once concrete legal proposals are made to improve the competitive conditions for these small-scale providers of welfare services.

Challenges to renewing the welfare state in Scandinavia One important element of the Swedish social model so far has been its public nature: the responsibility of ensuring social solidarity and cohesion lies with the government – public funds, public schemes and public bureaucracies are the main pillars of the welfare state edifice. However, mass unemployment during the 1990s has not only been a major economic, financial, political and social burden on continued public provision of major social services. It has also challenged the legitimacy of public provision of social services and opened the way for privatization and contracting-out of these services due to sharp cutbacks in public budgets and a notable deterioration in the quality of public services in many important areas. Thus, it is necessary to ask if public provision can be maintained or are there alternatives that might be more effective? Such crucial questions are often discussed in terms of a changing ‘welfare mix’ between the various spheres and actors involved in social policy: not only the state and the market, but also the third sector – regarded by many as a sphere that could play a more prominent role in the future of Swedish social protection. The third sector has often been welcomed in both public and scientific debates, since it is recognized that a greater pluralism of actors, levels and forms of protection can be advantageous in the new context of socioeconomic diversification and flexibility, which increasingly characterizes Swedish society, given the rapidly changing structure of needs. Third sector associations can perform valuable tasks: in the identification of emerging needs; in the provision of a wide array of services (for example, personal care, socioeconomic integration, and so forth); in helping to overcome the negative consequences of an excessive ‘etatisme’ of existing public services (such as bureaucratization and professionalization, rigidity, low efficiency, and so forth); in mobilizing new energies and resources and in improving the quality of welfare services. Both the political and financial constraints on the Swedish welfare state during the 1990s have fundamentally changed the relationship between the state and its citizens, and this change has important implications for the role of the third sector and social economy. Privatization, the ‘Freedom of Choice Revolution’, brought about by radical reorientation of politics during the Bildt Coalition Government (1991–1994) and the austerity policy pursued by the subsequent Social Democratic Governments (1994–2006) resulted in

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sweeping changes in the Swedish welfare state. The crisis of the welfare state also has its origins in far-reaching ideological, political, financial, economic and demographic changes in Sweden during the 1990s (Pestoff 1999b). In addition, the political struggle between the central government and the City of Stockholm and some other nonsocialist municipalities in Stockholm County illustrate the risk of ideological polarization drowning out pragmatic solutions to social problems. The third sector and social economy as an alternative both to the state and market easily gets lost in the mega-battle between those supporting a monopoly of public provision of welfare services and their opponents who want to privatize as much as possible and as quickly as possible. As a result of the changes in the 1990s, the Swedish welfare state faces at least three major challenges to the continued public provision of welfare services, introduced at the outset of this book. The first is a threat to the quality of public welfare services, due primarily to the rapid deterioration of the work environment of the frontline staff providing such services. The second is the growing democracy deficit, stemming in part from the municipal amalgamations of the 1950s and 1970s in Sweden and in part from the rapid economic and political internationalization or globalization in the 1990s, following Sweden’s membership in the EU. The third is the need to meet the financial challenges associated with demographic changes and an ageing society. Provision of welfare services must be guaranteed to all groups in society without major increases in taxes and/or user fees. Together, these three challenges may erode public support for a universal welfare state. The first two challenges are discussed in greater detail in Chapters 5 and 9. The third challenge is given less direct attention herein, but it is nevertheless discussed indirectly throughout the book. Finally, a fourth potential challenge to some of the proposals made herein is mentioned briefly. First, the Swedish welfare state now faces a serious challenge to the continued public provision of welfare services, namely the threat to the quality of public welfare services, due primarily to the rapid deterioration of the work environment of the frontline staff providing such services. This is mainly a result of sharp cutbacks in public funds and staffing in the 1990s, during the period of prolonged austerity. However, unless the work life and work environment of the staff providing welfare services is rapidly and dramatically enriched and improved, it will be hard to attract the qualified and motivated staff necessary to meet the growing need for such services. Without qualified and motivated staff to provide high-quality services, the most quality conscious clients will flee publicly provided services and choose private for-profit ones instead, where they can top up the minimum provided by service checks in order to obtain an acceptable standard. Under such circumstances, the public services face the risk of becoming more impoverished and such services will only be used by very needy clients, since they cannot afford private alternatives. This will accentuate the ghettoization of public services and the staff will be even less motivated to provide high-quality services, and so forth.

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One way proposed here to improve the quality of welfare services and to attract the qualified staff necessary to provide them in the future is to enrich the work life of the staff and to improve their work environment. Enriched work life and improved work environment will result in more engaged staff. An engaged and motivated staff provides better quality services than a stressed staff. Research shows that the staff employed in social enterprises in Sweden was more motivated by gaining control over their working conditions and improving them, than by instrumental rewards (Pestoff 1998 & 2005). Thus, contracting out to third sector social enterprises provides one strategy for attracting well-qualified and highly motivated staff. See Chapter 5 for a fuller discussion of this challenge and some possible solutions. Second, the growing democracy deficit in Sweden threatens to undermine democracy, support for major political projects and publicly financed welfare services. In the past two decades support for general welfare programmes remained strong and stable, but the public’s attitudes towards the public administration providing these same welfare services was surprisingly negative (Rothstein 2000). There was also more general support for contracting-out some types of welfare services than others. Contracting-out welfare services can be done in a way that promotes both continued democratic control and greater citizen participation in the delivery of welfare services. Empowering citizens as co-producers of some of the major welfare services they demand can help to offset the growing democracy deficit and can contribute to rejuvenating the dwindling stock of social capital. It will provide citizens with a clear stake in the collective provision of welfare services and an active role in ensuring the quality of such services. It can legitimate the continued provision of welfare services by collective and political channels, rather than individual market ones. Thus, enriching the work environment of the staff and facilitating more citizen participation in the provision of welfare services are two measures that could win broad public support and provide more alternatives for citizens to choose between in the production of welfare services. A greater welfare mix and greater role for the third sector would more easily gain public support, if public financing for such programmes continued at current levels, if universal coverage was maintained and if service quality was improved. Moreover, in the long-run the costs for providing welfare services would grow more slowly if citizens participated in providing them. However, we need to recognize that greater third sector participation could pose some problems, due to the changing role of the third sector. A greater welfare mix could promote third sector organizations and the social economy as advocates of various interests and/or as innovators of new services not currently provided by the public sector or the market. There are, however, some risks associated with giving the third sector and social economy a greater role in the provision of publicly financed welfare services. Today, the Swedish third sector has the lowest level of professionalization and more active members of any industrialized nation (Wijkström and Einarsson 2006).

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However, they argue that contracting-out the provision of welfare services to third sector organizations (TSOs) may, in fact, contribute to transforming them into routine service providers and result in their growing professionalization. This could, in turn, restrict their role as advocates and/or innovators of new services and also undermine their internal democratic decision-making. These risks need to be explored more closely and a better understanding of what social values various types of third sector providers actually promote by providing welfare services is necessary in order to evaluate their contribution more accurately. Social accounting provides a good tool for developing such an understanding. It is discussed in Chapter 4.

Conclusions Until very recently the social economy in Sweden was more closely associated with folkrörelser or popular movements than with voluntary associations, even if the latter were not negligible. Voluntary associations and popular movements have gone through several stages in their development and relationship with the state. The étatist nature of the Swedish welfare state has also helped eclipse the role and contribution of voluntary associations and popular movements in the production of welfare services. Several of the established organizations in the Swedish social economy still pay lip service to a general, tax-based welfare state, but few actively contribute to its development or renewal. This limited role of third sector providers of various welfare services in Sweden stands in sharp contrast to the more extensive role they play in providing various welfare services in other European countries; in particular, Germany, the Netherlands and the UK illustrate this contrast. Sweden differs from other European countries where there were two clear parallel lines of development, one of advocating for new or more welfare services and another of the TSOs as providers of such services. In Sweden, we note a merger of the two in an increasing collaborative relationship with the state in the postwar period, where the latter becomes the principal financier and provider of welfare services like, education, childcare, eldercare, health and medical care, and other social services. However, popular movements could still influence the developments of the public provision of welfare services through their close relations with the Social Democratic Party and by using existing corporatist channels of influence. It is first in the 1990s, as a reaction to the growing austerity and privatization of welfare services that new social movements grew to meet the challenge of this new situation. It is the new social movements and voluntary associations that are the most dynamic part of the Swedish social economy today. They actively help to develop and renew both democracy and the welfare state, in line with broad social and demographic changes in a postindustrial and highly urbanized society. They are able to renew and enrich working life in a stagnant public sector, to improve the quality of welfare services funded by public budgets, to engage citizens as co-producers of such services and to rejuvenate the social

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capital that is otherwise rapidly diminishing due to the growing democracy deficit in Sweden. Unfortunately, there is little room for the third sector or social economy in the highly polarized and ideological struggle between the Social Democrats and their nonsocialist opponents. So, the third sector and social economy risks being ignored, forgotten, or even worse, getting crushed in the struggle over power between the central and municipal governments in major urban areas like Stockholm. Uncertainty also reigns concerning the long-term intentions of the Social Democrats and their successors, the Alliance for Sweden, concerning new legislation to allow nonprofit status to certain organizations or companies in Sweden that provide welfare services. Will this result in yet another category that confuses matters for the public, business partners, civil servants social enterprises themselves, or will it strengthen the third sector and social economy? No certain prognosis is possible, but étatist traditions of the past and a lack of interest in alternative solutions to ailing public services, do not bed well for the third sector or social economy in the future.

Notes 1 In 2006 Sweden included a nonprofit category in its Company Law. See Prop. 2004/ 05:178; Aktiebolag med särskild vinstutdelning, for more details. 2 SAF changed its name in 2001, after amalgamating with the Federation of Swedish Industry, to Svenskt Näringsliv, the Confederation of Swedish Enterprise. 3 One of the first measures by the new non-socialist government, ‘Alliance for Sweden’, after winning the 2006 elections, was to drastically increase the monthly fee employees pay to the officially recognized unemployment insurance funds run by the trade unions. This has resulted in numerous employees leaving them, as they can no longer afford the fees. In addition, as most employees preferred to join the union providing such services, many of them have also quit the union. All the recognized unemployment agencies ran with a surplus in 2005, so financing was not at issue. In addition, the established Swedish tradition of an official parliamentary investigation and long deliberations prior to major reforms was also ignored. No effort was made to reach an agreement with the unions about these dramatic changes. Another measure by the new government was to disband the National Work Life Research Institute (Arbetslivsinstitutet, ALI) and all its regional sites. Work life research should be carried out by universities to insure good quality research, not by independent bodies, it was argued. Besides, many thought that ALI was too close to the trade union movement. So, Sweden is now one of the few countries in the EU without a national work life research centre. 4 Former Communist Party. 5 First gained representation at the national level in 1988.

Part II

Major issues for the third sector and welfare state

4

Balancing profit and social goals in public/private partnerships

Introduction Public/private partnerships have become a catchword in recent years in many OECD countries, especially when considering ways to reorganize the provision of public services. However, contracting-out welfare services can pose serious problems for public/private partnerships. Governments clearly need to balance considerations of efficiency and social goals in public/private partnerships for providing welfare services, but how? How can you encourage a long-term commitment to providing high-quality services, and not just making a profit? How can you measure the performance of private nonprofit service providers? How can you insure that the interests of the users/clients will be taken into account in the internal decision-making? The dilemma of balancing profit and social goals in public/private partnerships is conceived quite differently in the US and Europe and the traditional solutions to this dilemma also differ. For example, the Bush government wants to involve more ‘faith-based’ organizations in the provision of welfare services, while the Social Democrats in Sweden want to promote nonprofit organizations and to prohibit the provision of some welfare services by for-profit organizations. But, how can such different proposals contribute to resolving the difficult problem of balancing profit and social goals? United States’ tax laws provide nonprofit organizations with a special tax status, but at the same time it imposes a non-distribution constraint on the profit they make. This denies the owners or members a return on their share of an organization’s surplus. In Europe, social enterprises are organizations that permit a limited return of the surplus to members, but they rely more on goal-related incentive structures to motivate their staff and members, rather than merely material rewards. Moreover, many social enterprises not only have clear social goals, but their members run them democratically. Although the US and European approaches are far from identical, they are nevertheless a rough functional equivalent. They are both designed to control and discourage opportunism by owners, managers and/or the members. However, in spite of this similarity, they also show some significant differences concerning governance and incentive structures.

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Nonprofit organizations must produce a surplus to survive, and they are not prohibited from making a profit, but only from distributing it to their managers and/or members. However, most nonprofit organizations in the US have seen their donations, grants and subsidies fall over the past two decades, while at the same time they experienced a growing need for their services. This led to an increasing commercialization of nonprofit organizations. They have to rely more and more on revenues from sales to cross-subsidize their preferred public goods, as most kinds of donations and grants continue to fall. However, more dramatic examples of commercialization also include extensive partnerships between nonprofit organizations and private firms and even the conversion of nonprofits into private for-profit firms. One observer notes that ‘when faced with new opportunities for commercialism, many nonprofits seem quite willing to shed their altruistic cover and assume the values and behavior of for-profits’ (James 2000). The dilemma of balancing profit and social goals in public/private partnerships for providing welfare services is not made easier if an organization and its behaviour is judged solely on the basis of its institutional status, that is, whether it is a for-profit or nonprofit organization, rather than by its social goals and activities. For example, Nobel laureate Kenneth Arrow (1963) warned concerning the medical industry that ‘. . . the very word profit denies the trust relations’. While such judgements may appear reasonable and legitimate in the case of organizations that only try to achieve a single goal, such as a private firm that maximizes the return on invested capital or wants a larger market share, it is more questionable when it comes to organizations that strive to achieve multiple goals, some of which are clearly economic while others are social. In fact, many nonprofit providers of healthcare in the US have converted to for-profit status in recent decades in order to escape the constraints imposed on them by their nonprofit tax status, that is, not being able to distribute a profit to their owners. But, status conversions may impact on the stability of public/private partnerships and may require changing providers of certain welfare services. Developments in the US and Sweden make it both timely and important to examine public/private partnerships more closely and to explore efforts at balancing profit and social goals. In order to do so we will briefly introduce the current debate on this topic in the US and Sweden. Then we will examine the concept of ‘profit’ and explore whether and how it is related to the goals and behaviour of organizations producing welfare services. It is argued here that there is an inherent vagueness in the concept profit and that it lacks the necessary precision to guide strategic decisions about public/private partnerships for providing welfare services. Another point is, however, that the governance of and incentive structures in third sector organizations are perhaps more important considerations in public/private partnerships. Admittedly, we face serious problems of measurement when trying to evaluate the performance of such organizations, due to their mixed goals. However, I conclude by discussing social accounting and multi-stakeholder organizations as two

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specific methods of addressing issues related to opportunism, governance, incentive structures and measurement.

The current debate in the USA and Sweden The current debate, both in the US and Sweden, clearly illustrates the problematic nature of using general concepts and categories related to profit or similar terms for making strategic decisions about granting or denying public support to public/private partnerships for providing welfare services. In the US the newly coined term of ‘faith-based’ organization illustrates these difficulties, while the concept of ‘profit-making’ serves the same purpose in Sweden. During the first week in office, President G.W. Bush issued an Executive Order to set up a new ‘White House Office of Faith-Based & Community Initiatives’ (OFBCI). It actively promotes the inclusion of ‘faith-based’ organizations in the provision of government funded welfare services, in particular in programmes related to literacy, sexual abstinence and substanceabuse treatment. In spite of its clear ideological overtones, this concept has drawn strong criticism, not only from liberals or the left, but mainly from the Christian right in the South. Only a few months later, John Dilulio, its first Director, made a plea for Christian support at the National Association of Evangelicals’ convention in Dallas, in light of criticism by Revs Jerry Falwell and Pat Robertson, and some top leaders of the Southern Baptist Convention. Robertson, a staunch Bush supporter, warned that government funds would soon be flowing to such controversial groups as the Church of Scientology or the Rev Sun Myung Moon’s Unification Church. Dilulio appealed to conservative evangelicals to back the Bush Administration’s plan to increase government funding for ‘faith-based’ welfare programmes. However, Rev Jerry Falwell, the TV evangelist and Bush supporter, called on the President to exclude Muslim groups from getting government welfare service funds. ‘The Muslim faith teaches hate’, Falwell said, in an interview with an interfaith website (SFC, 8/3-01). The government would ‘increase competition and raise performance standards’ with ‘charitable choice’, Dilulio said. He continued that plans to expand the existing charitable choice programme ‘welcomes work from people of faith – whether Methodist, Muslim, Mormon, or good people of no faith at all’. However, Richard Land, President of the Southern Baptist Convention’s Ethics & Religious Liberties Commission said he would not touch Charitable Choice money ‘with the proverbial 10-foot pole’. Land and other evangelical leaders fear that any governmental money comes with too many strings attached (ibid.). The Washington Post’s feature article on ‘Faith and Federal Funds’ focused on two different approaches to providing welfare services, one with and another without government funds. The Central Christian Mission in NW Washington offers overnight shelter, free food and drug counselling – but only after participating in a compulsory prayer hour. It neither seeks nor

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wants any government funds, because of the strings attached to federal grants requiring a separation of church and state. The Gospel Rescue Ministry does not insist on mandatory religious activities, but people know they are going to talk about Jesus. Nearly half of its funds come from the government. One uses the Bible and repentance to convert drug addicts, while the other combines Bible study with personal counselling. Both claim success, but using different methods (WP, 18/3-01). The Bush Administration officials have said that their plan will be a form of ‘performance-based contracting’, meaning that funds will go to social service programmes that show results. However, the two organizations interviewed in the Washington Post article could only offer anecdotal evidence about their programmes’ effectiveness because they have no formal system of tracking former clients. Nor is there any consensus among researchers that spiritually based services are more successful than secular ones. The OFBCI claims that faith-based organizations ‘have not been evaluated (because) social scientists were not interested in doing that’ (ibid.), but that also is very true of secular programmes. In Sweden, after several years’ debate and discussion, the Social Democratic Government of Göran Persson proposed a new section in the Company Act for Limited Companies with Special Limits on Distributing Profits (Aktiebolag med särskild vinstutdelningsbegränsning, Prop. 2004/05: 178). It introduced rules for a new type of limited company, one with special limits on distributing its profit, and noted by the initials svb following the company name. Such companies should promote goals other than the owners’ profit. These rules were intended to guarantee that the profit remains in the company. It only allows for the distribution of a limited profit to its owners, set nominally at the prime interest rate plus one (1%) per cent during any given year. The government noted that growing privatization of health and medical care during the 1990s led to some problems. It was financed by public funds, but could nevertheless result in a profit for the owners of private companies. In 2001, a prohibition of profit in health and medical care was initiated. It was, however, lifted at the end of 2002. The government concluded that a special law was necessary for activities without a profit motive. However, there was only a limited number of nonprofit actors in health and medical care in Sweden, in contrast to many other countries. This Bill passed the Riksdag in 2005 and took effect at the beginning of 2006. Small cooperatives, social enterprises and voluntary organizations find it very difficult to compete for public tendering contracts. In the wave of privatization of welfare services, beginning in the early 1990s, they are only an important actor in providing pre-school services and elementary schooling. In other areas, like health and medical care, hospitals and eldercare, they remain a marginal phenomenon. However, in addition to providing health and medical care or eldercare, they often have a clear social profile, strong ideas how such services should be provided, with an emphasis on special

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services or other complementary aspects of their services. In many countries social economy organizations (SEOs) are important providers of such services. But in Sweden they have had difficulty starting and developing such activities, even if they have existed for a long time. When it comes to more complex activities, like managing hospitals, there are only a few cases of SEOs doing that in Sweden. Thus, the Social Democratic Government initiated a Public Investigation of the conditions for social economy organizations in health and medical care and eldercare in 2006 (Dir. 2006: 42). It noted that forms for competitive tendering, capital financing and networks for cooperation are factors that may influence chances for SEOs to establish themselves in health and medical care and eldercare. Moreover, traditions and historical factors also help to explain the difficulties facing SEOs (SOU 2003, p 23). The government stated that health and medical care and eldercare should remain publicly financed in the future. However, this should not exclude other caregivers with new ideas about how to provide health and medical care and eldercare. In particular, the government noted the following advantages with SEOs:

• • •

they can mobilize citizens for complementary voluntary activities; in an ethnically diverse society with growing cultural and religious differences, care needs to take into account the cultural and language needs of many groups. SEOs facilitate the direct participation of various groups; the relationship between rights and responsibilities had weakened. Care activities through SEOs help to recreate democratic participation and responsibility (ibid.).

The Committee’s time plan was to provide an overview and some (good) examples in its first report in April 2007 and a final report, with recommendations for promoting NPO and SEO welfare services one year later. However, shortly after the first report, the new non-socialist government gave the Committee less than three weeks to terminate the investigation and vacate its offices. It was also forbidden to produce a final report or make any recommendations.1

Vagueness of the ‘concept profit’ The intuitive definition of the concept profit is that of ‘net gain’ or what is left when all the costs or expenses of production have been deducted from income of the sale of goods or services produced by an organization in any given year. In private firms the surplus or profit is normally taxed and part of the after-tax profit is often distributed to the owners of the firm, in the form of a dividend. Nonprofit organizations are subject to special tax laws in some countries and given preferential treatment compared to for-profit firms. In the US, for example, nonprofits are exempt from taxes on all income related to their primary goals and on the property they own, but they do pay tax on

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income from unrelated sources or the sale of ancillary goods and services (Weisbrod 1988). This preferential treatment is justified in part since they promote certain social values and in part since such organizations are prohibited from distributing the profit to their members or board of directors, according to American tax laws – hence, the name nonprofit organizations, or NPOs, and the idea of a ‘non-distribution constraint’. However, this intuitive definition of profit is both too vague and insufficient for relating organizational behaviour to institutional form, be it for-profit or nonprofit. This is true since the initial pre-tax surplus an organization generates can be (re-)distributed in one or more of at least two dozen ways before the final year-end surplus is declared for tax and dividend purposes. Figure 4.1 in the appendix serves to illustrate some typical ways for an organization to distribute its surplus. They all involve discretionary choices that reflect the ownership, goals and governance structures of an organization. With the help of ‘creative accounting’, the number of ways can easily be multiplied. Beyond taxable profit and paying a dividend to the shareholders, an organization can distribute its surplus in various ways, some of which would appear socially acceptable, while others would not be condoned by most citizens. Most organizations will spend their potential surplus in several different ways, thereby reducing the taxable profit at the end of the year. In general, an organization can engage in ‘normal’ business practices and make ‘normal’ business investments, but, it can also invest in other types of activities. ‘Normal business practices’ would include: paying back a loan, investing in new assets and greater productive capacity; investing in product development and/or new products for new markets; increasing its marketing activities; buying or taking-over a competitor and perhaps expanding abroad. An organization can also invest in its existing human capital or it can attempt to attract new highly qualified employees to the organization. There are several methods for doing this, like increasing wages, salaries and fringe benefits for the staff. An organization can also choose to invest in increased education of the employees in order to promote their professional qualifications and/or it can provide more vocational training for them. It can provide employees with the chance to travel; it can improve their work environment, give them more time off or additional vacation, sick-leave, and so forth. It can also invest in ways to increase staff participation in corporate decisionmaking. An organization can also help to maintain local services; invest in community development; promote strict adherence to environmental rules and regulations; pay its taxes freely and willingly; and so forth. Less acceptable ways of distributing an organization’s surplus are based on different forms of management self-aggrandizement. They include various types of perks, mainly for the CEO, top management and/or board members. A daughter company can skim excess surplus out of a given market and transfer it to the mother company, like California Edison did during the 2000/01 energy crisis, just prior to impending bankruptcy proceedings. Finally, there are some ways of distributing an organization’s surplus that

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would appear dishonest, if not outright illegal to most people. They include Enron and some other energy companies’ ricochet schemes for artificially inflating the energy prices in the West US in 2000; buying goods and services from other companies, owned by friends or relatives, at higher than the market prices; or giving bribes and kickbacks of various kinds, and so forth. However, the important issue at stake here is not merely the great variety of ways to distribute an organization’s surplus, but also the social implications of various ways of doing so. Profit is merely the tip of the iceberg. It is what is left over for taxation and to distribute to the owners, after all other expenses have been paid and much of the surplus has already been distributed in various ways. Organizations that continually fail to report a profit for many years, that is, ‘permanently failing organizations’ (Meyer and Zucker 1989) are found in all sectors of the US economy, the private for-profit, nonprofit and public. An organization that continually fails to report a profit may in fact be very lucrative, but its owners and managers may prefer not to declare and distribute the profit in a normal fashion. Yet such organizations may be pursuing an important mission in the eyes of the owners and/or managers. In fact, repeatedly not declaring a taxable profit may be one way of fulfilling their objectives, as the surplus is used for things other than paying taxes. Moreover, legal constraints may punish an organization that reports a taxable profit. All or part of such a surplus may be confiscated, or requirements may stipulate that it be divided in a particular way. US tax law treats certain assets and activities of NPOs as preferential, by excluding some of them from income and property taxes, while others have a corporate tax imposed on them. Clear incentives exist to cross-subsidize the preferred activities or mission from the sale of goods and services in the ancillary activities. In fact, most NPOs declare a loss in their taxable income (Weisbrod 2000). In Sweden, for-profits were prohibited from providing certain types of goods or services, while cooperatives were given preferential treatment for providing others, but, normally on the assumption that their costs would equal their expenses and that they would not declare a surplus. However, in both countries this assumes that a profit in one organization is identical to a profit in another. The incentives for and the amount of managerial discretion in making decisions on how to distribute an organization’s surplus are typically ignored. The great variety of ways to distribute a surplus before it even becomes registered as a profit, and thereby ways to reduce an organization’s taxes are equally ignored. It is assumed that ‘a profit is a profit, is a profit’. In the world of fiction this may be the case for roses, but in the real world it is not for profit, as Enron, World Com., and others, clearly show. So, we find, on closer consideration, that there are numerous reasons for recognizing the vagueness of the concept of profit: first, it is merely the tip of the iceberg; second, an organization’s surplus may be used in numerous ways before showing up as a profit, some of which are more socially acceptable than others; third, the managers of an organization may be under heavy practical and/or legal constraints to use the surplus for purposes other than

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paying taxes and dividends. However, if the concept profit appears vague in this respect, then that of nonprofit also proves imprecise and unstable. Some scholars argue that the dichotomy for-profit/nonprofit conveys too little information to say anything certain about an organization’s values or behaviour, while others maintain that there are major differences between them. However, the recent trend in commercial transformation of the nonprofit sector in the US demonstrates the risks of classifying an organization as nonprofit. At one end of the commercialization spectrum are the museums and zoos that charge admission and have gift shops to help raise funds for their principal activities and objectives. But, where is the limit? Is it when half, three-fourths or nine-tenths of an organization’s income is derived from its taxable commercial activities? Can it still be considered a nonprofit organization? The very mix of for-profit and nonprofit activities in the same organization proves misleading. If being classified as a nonprofit organization is based solely on tax status, regardless of the extent of its commercial activities, the concept nonprofit appears to lose much of its logical content and meaning. At the other end of the commercialization spectrum in the US we find the conversions of community nonprofit healthcare organizations into for-profit medical firms. However, removing the non-distribution constraint resulted in enormous windfall profits for the current management and/or board members. So, the concept nonprofit also proves imprecise about what types of and to what extent an NPO should be involved in commercial activities. In addition, the conversion of nonprofit healthcare demonstrates the instability of the concept nonprofit. Thus, it might prove more appropriate to study and classify organizations according to some combination of relevant social criteria, rather than merely using a single legal one that is as vague as profit or nonprofit. Organizations should be studied and classified both according to their social values and goals, as well as how they distribute their surplus, rather than merely being classified as for-profit or nonprofit. This approach would shed light on their past and present values, goals and actions, and provide greater value for predicting their future performance, rather than merely noting their current institutional status.

Incentive structures in social enterprises A somewhat different perspective can be gained from Rothchild-Whitt’s (1979) examination of the value rational type of social action that is missing in Weber’s discussion of bureaucracy. She discusses the emergence of contrabureaucratic or collectivist organizations based on substantive rationality, rather than formal rationality. She notes the tension between substantive or value-rational social action on the one hand, and formal or instrumentally rational action on the other. The polar opposite of the formal bureaucracy would be fully collectivized democracy, she argues, one that was governed by the principles of substantive rationality. She explored numerous alternative

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institutions that were created in the 1970s, such as a free medical clinic, a food cooperative, a free school and an alternative newspaper in a mid-sized California city. She identified eight characteristics of collectivistic organizations that set them apart from typical bureaucratic organizations. They include: a) authority, which is collective rather than individual; b) rules that are constructed on an ad hoc basis; c) social control, which is achieved through personal and moralistic appeals that in turn depend on group homogeneity; d) social relations that strive toward an ideal community; e) recruitment and advancement, where staff are generally recruited on the basis of friendship and shared sociopolitical values and no career ladders exist; f) incentive structures, which differ from normal bureaucratic organizations, a point to which we will return in a moment; g) egalitarian social stratification; and h) differentiation, which is kept to a minimum in order to eliminate a division of labour. This is often reflected in the prevalence of self-selection, rotation and part-time work in such organizations (ibid., pp 511–519). Rothchild-Whitt maintains that value-rational organizations use different kinds of incentive structures to motivate people’s work. They primarily rely on purposive incentives, like value fulfillment, secondarily on solidarity incentives like friendship and only tertiarily on material incentives. They also reject bureaucratic incentives like career advancement, and so forth. She continues that work in collectives is construed as a labour of love and they pay themselves low salaries. First and foremost, people come to work in alternative organizations because it offers them substantial control over their work. Collective control means that members can structure both the product of their work and the work process in congruence with their values and ideals (ibid., pp 515–16). She argues that the democracy achieved by collectivist organizations is imperfect and may produce unanticipated social costs. However, these social costs reflect their values. What is perceived as a cost to one person may seem a benefit to another. Moreover, Hirschman (1982) argues that what may appear as a benefit of social involvement at any given time may later seem to be a cost, or vice versa. This helps to explain the shifting involvement of individuals and groups in US politics, like that of the 1968 generation, according to Hirschman. The social costs of collectivist organizations, according to Rothchild-Whitt include: a) time; b) require homogeneity; c) are based on emotional intensity; d) may attract non-democratic individuals; e) lack of a legal form; and f) mirror individual differences (ibid., p 524). She concludes that collectivist organizations should not be judged as failures to achieve the bureaucratic standards they do not share, but rather as efforts to achieve entirely different values (ibid., p 525). The third sector in Europe is made up of numerous organizations, not only those adhering strictly to the non-distribution constraint. In particular, Bacchiega and Borzaga (2001) argue that social enterprises reflect different institutional arrangements. The goals or objectives of an organization, such

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as serving the community or a specific group of people, or promoting social responsibility at the local level, give rise to unique incentives structures and different relational systems among the various stakeholders involved, that is, donors, consumers, public authorities, volunteers and employees. Moreover, they claim that relations of trust with the local community, the users, volunteers and workers are guaranteed by the involvement of different stakeholders in democratic management. From an economic perspective the rights of ownership in firms are primarily related to two things: the right of control or the right to appoint the agents or staff of an organization and the right to appropriate the residual income or profit of an organization, that is, governance and property rights. Both are important for the management of an organization. A definition of the third sector solely in terms of a non-distribution constraint is designed to prevent opportunistic behaviour by managers. However, Bacchiega and Borzaga (2001) argue ‘this assumes that the absence of agents [that are] formally entitled to the residual income effectively protects consumers against opportunistic behavior. In fact, it proves highly ineffective in preventing the onset of opportunistic behavior, or the exploitation of consumers/clients’ (ibid., p 11). Moreover, the non-distribution constraint proves particularly weak concerning social enterprises engaged in the production and sale of welfare services to governments or directly to the public. This is so, since ‘. . . in many of these services both consumers and government agencies are able to exert some control over quality . . . Indeed, the non-distribution constraint seems limited to donative or charitable nonprofits, but when firms produce private goods and services the nonprofit form provides a very crude consumer protection device’ (ibid., p 12). In a social enterprise the allocation of control rights are perhaps more important than the destination of residual income or profit, since control rights assigned to agents entitles them to determine the objectives of the organization. Here, the profit maximizing will be substituted by alternative goals, some of which are potentially conflicting. However, the coexistence of multiple goals is clearly more likely when control rights are shared among different categories of stakeholders. The divergent objectives of a social enterprise are often very difficult to quantify and codify, because they represent qualitative dimensions of the activity or general principles of an organization. However, Bacchiega and Borzaga argue that incentive structures in social enterprises give relatively little weight to the more easily measurable and verifiable dimensions of production in order not to jeopardize the pursuit of less verifiable objectives. But, it remains an empirical question whether this is an intended or unintended result of social enterprises. They note that ‘the organizational structure of social enterprises seems better suited to avert the danger of opportunistic behavior, not only when compared to for-profit enterprises and public agencies, but also with traditional nonprofits, like foundations. This is so because social enterprises can develop incentive systems which are consistent with organizational objectives, in particular to

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workers and managers’ (ibid., p 20). Moreover, the choice of a particular institutional form signals to the stakeholders the kind of objectives that the organization will pursue, and consequently the incentives that it will offer. The characteristics that appear crucial for defining the incentive structure of social enterprises are closely related to their social dimension. In particular: the existence of an explicit social aim to serve a community or part of it; the direct involvement of a group of people belonging to the community or sharing a common need; limited profit distribution; and democratic and open management. These characteristics are also closely related to each other and typical of social enterprises in Europe (ibid., p 20). The existence of an explicit social aim in an organization is an important signal of its nature to both the workers and other stakeholders, as well as to the outside world. Thus, both existing and potential workers and volunteers are able to measure their abilities and expectations against the organizational goals that they are asked to pursue. Moreover, while explicit social goals and maximizing monetary objectives by-and-large may appear mutually exclusive, a clear signal that monetary objectives are not the organization’s main or exclusive pursuit seems to be consistent with the production of services with non-measurable or non-verifiable dimensions (ibid., p 20). Thus, social enterprises are able to motivate workers by using non-wage incentives. But, the demand for labour expressed by social enterprises can only find a matching offer if there are workers willing to exchange extrinsic (wage-related) rewards for intrinsic motivations (ibid., p 21). Studies of social enterprises in the Italian welfare service sector show that ‘. . . for the large majority of workers in social enterprises the choice of organization and sector of activity was a consequence of their specific interest in the content of the job, and not dictated by the lack of alternatives or attractive monetary rewards. At the same time work satisfaction was higher for the workers who have joined the organization in the pursuit of intrinsic motives’ (ibid., p 21; see, also, Pestoff 1998 & 2005 for similar findings in Sweden). Clearly ‘to profit or not to profit’ should not be the main question, or at least not the only question, asked about organizations and their legal forms. Rather, the question asked by scholars, concerned politicians and practitioners should focus on the ends to which an organization’s resources are devoted, including its surplus. This however, touches on the problem of how to measure an organization’s output, especially when it has economic and social goals. This brings us to the topic of evaluating firms or organizations with multiple goals, including social ones. Social accounting and auditing provides a useful method for this. It will be discussed in greater detail below.

Social auditing and the performance of third sector organizations An important task for scholars and politicians, as well as practitioners and bureaucrats is the thorny question of how to measure an organization’s

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output, especially when it has multiple goals or products, as do most third sector organizations and social enterprises. Weisbrod (2000) notes the insurmountable difficulties facing the Internal Revenue Service in the US when it attempts to evaluate the performance of NPOs. He recommends that more scholars should concentrate on the development of common and systematic standards for judging the output of NPOs. The social auditing movement in Europe could provide some guidance and relevant alternatives to such efforts (Zadek and Evens 1993, Gray, Owen and Adams 1996). Social auditing provides a basis for evaluating the overall performance of NPOs, cooperatives and social enterprises (Quarter et al. 2003). A major part of the growing public/private partnership in both the US and Sweden is based on contracting out the provision of welfare services. President Bush stated that he was not as concerned by the faith of an organization receiving a government grant as by the results it produced. However, most organizations are judged by their economic performance, not by the achievement of their social goals. Contracting-out publicly financed welfare services to ‘faith-based groups’, social enterprises, cooperatives and nonprofit organizations, increases the need to develop systematic and comprehensive social auditing and reporting. Social accounting is still a young and underdeveloped field in business administration and the social sciences. Yet, it is very important, if not crucial for the development and future of the social enterprises, cooperatives and nonprofit organizations providing welfare services, as well as for many of those providing other types of goods and services. Social accounting can and should serve several different purposes. Four main ones are introduced briefly here. First, social accounting is a basic and essential means of guarding against goal deflection and voluntary failure. Second, social accounting provides a useful tool for evaluating the performance of an organization, in particular the non-monetary aspects of its activities. Third, social accounting is an important means of promoting and marketing an organization and its goals, and can contribute to increasing a firm’s or organization’s legitimacy, both in the market and in politics. Finally, social accounting also provides a new method for greater member and stakeholder influence and control, and thus promotes organizational democracy. Goal deflection is an important phenomenon in all types of organizations, for example, public, private and nonprofit. Organizations are started for one purpose or goal, but often fail to fulfill them, either because they are inefficient and unable to do so, or because they start pursuing other, and sometimes conflicting goals. ‘Permanently failing organizations’ fail to provide a surplus on their operations for long periods of time, and yet somehow continue to exist and maintain their operations at a constant loss (Meyer and Zucker 1989). The cause of their economic inefficiency is that they usually pursue some other goals in addition to the economic ones, for example, power for their owners or certain social or political aims. Permanent failure is not restricted to any single type of firm, and there are many in depth examples from the public, private and nonprofit sectors (ibid.).

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Michels’ (1911, 1962) classical work on oligarchic tendencies of modern democracies, Political Parties, focuses on the problem of goal deflection in the German labour movement shortly before the outbreak of the First World War. He decries the embourgeoisement of the German trade unions and socialist party of the time, and relates this to goal deflection in voluntary organizations. Due to the division of labour in complex organizations, an organization soon changes from a means for its members, to an end for its leaders. Thus, the special interests of organizational leaders come into conflict with those of the members. Michels concludes his work by formulating his famous Iron Law of Oligarchy: ‘he who says organization also says oligarchy’. A more recent and relevant example of goal displacement and workingclass failure is found in the Swedish consumer cooperatives, once the pride of the International Cooperative Alliance (ICA). The unsuccessful attempts during the 1970s to develop a multidimensional method for evaluating the performance of the Swedish consumer cooperatives illustrate the fallacy of merely focusing on commercial activities of a cooperative or social enterprise, and ignoring the members and the democratic aspects of such organizations (Pestoff 1991, 1996). While some authors clearly associate voluntary failure with goal deflection, few provide recommendations for avoiding these twin ills. Michels (op. cit.) discusses several techniques for attempting to restrict the influence of leaders of voluntary organizations, including the regular use of a membership referendum. Lipset (1963) argues that competitive leadership elections are the only way to maintain union democracy. Ben-Ner and Van Hooissem (1994) contend that a deficient body of law and policy in the US has fostered a situation characterized by a marked depreciation of the goodwill associated with the term ‘nonprofit’. This is due to increasingly frequent reports of fraud and unethical behaviour in the nonprofit sector, found in daily newspapers in the US and many parts of the world. As a remedy, they call for changes in the law in support of the governance of NPOs by enhancing the rights of their ‘owners’, and demand-side stakeholders, that is, the consumers, donors or sponsors who have an economic demand for the good or service provided by a NPO. In essence, their proposal calls for transforming NPOs into something more like membership organizations or consumer cooperatives. Although I agree with much of their analysis of the situation of NPOs in the US, it falls short of the mark in certain respects. First, neither membership organizations nor consumer cooperatives are immune from opportunism, selfaggrandizement by managers or from permanent failure. Second, although calling for greater transparency in NPOs, their suggestions for such legal changes fail to recognize the need for externally verified social accounting. Rather, they propose to establish a formal status for stakeholders, to grant them legal standing in courts of law and to provide them with the right to elect a board of trustees (ibid.). But stakeholders who lack a social account of an NPO’s activities will have insufficient information to prevent the very

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goal deflection that they are interested in preventing. While their proposals might seem appropriate in an American context, we suggest that they should be supplemented by legal requirements for mandatory social accounting, both of the monetary and non-monetary activities and goals of social enterprises, cooperatives and NPOs. Evaluating the performance of voluntary organizations, nonprofits and cooperatives is equally important in the growing public/private partnership. ‘What cannot be objectified and codified [sic by numbers] does not exist, in the sense of being capable of being perceived and handled by the perceptual and information-processing apparatus of the market’ (Kallinikos 1995, p 126). Numbers fail to convey organizational and network relationships into numerical messages. Focusing on numbers, efficiency and utility functions only captures part of the considerations, values and social preferences of social actors (ibid., p 134). ‘[C]onventional accountability attempts to reduce the social to the economic and the economic to the cash nexus. The importance of the social audit movement is its commitment to the restoration of social and political control of the economy’ (Geddes 1992, as quoted in Gray, Owen and Adams 1996, p 237). The traditional economic balance sheet provides social enterprises, cooperatives and nonprofit organizations with some feedback about their economic performance. However, the need to consider social, and often philosophical, objectives makes the overall assessment of their success more elusive (Bold 1991, pp 95–7). This ambiguity continually plagues researchers studying the behaviour of such organizations. Their members have different sets of expectations and any attempt to capture all of the expectations of their stakeholders demands the use of a model and method for evaluating performance that considers their multiple objectives. Such models and methods are rare, but social accounting and the social audit movement provides some encouragement and guidance. The social accounting model proposed by Gröjer and Stark (1978) provides a goal specific description, both in monetary and non-monetary terms, of the positive and negative impact that firms and organizations have on individuals and groups stemming from their activities. The social audit movement focuses both on the diverse interests of various stakeholders and the specific goals of an organization or a firm. Compared with for-profit organizations or private commercial firms, cooperatives and social enterprises have several goals rather than a single one, which they must attempt to maximize. The owners of a cooperative are its members and each member has an equal number of shares, usually just one. Thus, a cooperative’s internal decision-making is based on the democratic principle of ‘one member – one vote’. After investments, the surplus generated from a cooperative’s commercial transactions is returned to its members as a rebate or in some other form in accordance with their patronage or purchases, rather than resulting in profits dispensed in accordance with the number of stocks held. Cooperatives and nonprofit organizations have social

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as well as economic goals. Management is more complex in multiple goal organizations than in single goal organizations. Profit margin, sales or market share fail to provide adequate or sufficient guidance for such multiple goal organizations. This is both a challenge to and an opportunity for the managers and members of multiple goal organizations. Thus, financial accounting provides a much too narrow picture of the performance of voluntary organizations, cooperatives, other third sector bodies and social enterprises. It also provides most stakeholders with too little information on which to make important and intelligent decisions. External social accounting is a necessary complement to financial information systems, if we are to accurately and continually judge the goal fulfilment and performance of social cooperatives and other nonprofit organizations. This is a logical extension of the principal/agent relationship between the owners and managers of social enterprises and cooperatives. Various efforts to specify a model for social reporting by cooperatives have been discussed and developed. Two of the more noteworthy are the report of the Social Audit Task Force of the Co-operative Union of Canada, Social Auditing: a Manual for Co-operative Organizations (1985) and the processes of the Lega Cooperatives in Italy (Viviani 1995). More recently an ESF/EQUAL project in Stockholm developed a manual for social accounting and auditing for Swedish NPOs, cooperatives and social enterprises (www.slup.se). A final purpose of social accounting in social enterprises, cooperatives and NPOs/NGOs is not merely to report on their efficiency, but rather to promote the effectiveness and legitimacy of such organizations among all their important stakeholders, in particular among their clients and those providing private donations and/or government grants. The need for social accounting by voluntary organizations, cooperatives and NPOs/NGOs stems from the moral obligation of the agent or management to account systematically and continually for their actions to the principal, that is, the main stakeholders. Quite simply the transparency of the relation between the principal and agent, or the managers and members, must be improved dramatically. This means that neither ad hoc, unaudited nor nonuniform social accounting would be appropriate. Regular systematic information should be provided to all the principal stakeholders in cooperatives and NPOs/NGOs. However, in the US, this task of measuring an organization’s output is not facilitated by the fact that most NPOs have very vague goals (Weisbrod 2000), which leaves a lot of discretion to the management in setting organizational priorities and in deciding how to achieve them. This in turn suggests that governance is also an important issue at stake, but one not always readily recognized by economists. Weisbrod laments the conversion of healthcare NPOs into for-profit firms, and notes that: a nonprofit’s goals are determined by its managers and board, since it has no other stockholders or owners, and this set of key decision makers change over time, sometimes in response to changing constraints. . . .

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A Democratic Architecture for the Welfare State As the altered goals grow less compatible with traditional nonprofit constraints, conversion may become appealing. (ibid., p 135)

However, Bacchiega and Borzaga (2001) argue that ‘. . . democratic and open management is another major characteristic of social enterprises, and it is consistent . . . with the need for the constant representation and participation of other stakeholders, such as clients and customers’ (ibid., p 21).

Governance of third sector organizations: multi-stakeholding The concept of stakeholder usually refers to various parties interested in or directly or indirectly effected by an organization’s or a firm’s activities. Stakeholders are persons or groups that have a legitimate claim on the firm (Ackoff 1981, Hill and Jones 1992, Deetz 1994, Clarkson 1995, Donaldson and Preston 1995). This legitimacy is established through the existence of an exchange relationship, which permits them to claim rights or interests in the firm and its activities, past, present or future (Donaldson and Preston 1995). In addition to stockholders, stakeholders include creditors, managers, employees, customers, suppliers, local communities, the government and the general public (Gröjer and Stark 1978, Hill and Jones 1992, Deetz 1994, Breton and Côté 1995). Each of these groups supplies the firm with critical resources and in exchange each expects its interests to be satisfied (Hill and Jones 1992). Stakeholder theory can be seen as a more generalized theory of agency, but stakeholder theory goes beyond agency theory, in that it argues that all persons or groups with legitimate interests in participating in a firm do so to obtain benefits. Each group of stakeholders has its own expectations or stake in the activity of a firm. Therefore, the objective of a firm is not to serve any single stakeholder group, but rather ‘. . . to serve all of them by increasing their ability to pursue their objectives more efficiently and effectively’ (Ackoff 1981, p 33, emphasis in the original). Moreover, they all should participate in determining the future direction of the firm in which they have a primary stake (ibid.). The managers are, however, in a unique position, since they are the only stakeholders who are in contact with all other stakeholders and the only group that has direct control over the decision-making structures of the firm (Hill and Jones 1992). In agency theory, managers only serve the interests of the principal or the providers of capital, while in stakeholder theory they should serve all of them (ibid.). The interests of principals and agents diverge, mainly since they expect different returns from the firm. However, stakeholder theory claims that the rewards other groups of stakeholders expect from the firm are also effected by the decisions of managers and the use to which management put resources. Employees want higher wages, customers want lower prices, suppliers want higher prices and reliable buyers, local

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communities and the general public want lower pollution and enhanced quality of life. All of these things involve the use of resources that otherwise might be invested by managers in maximizing growth (ibid.), and/or stockholders in maximizing wealth. As insiders, managers are in a position to filter, interpret or distort the information they release. This complicates agency problems and makes it more difficult for other stakeholders to gather information about a firm’s activities. This is highly likely when stakeholders are diffuse, or when no group of individuals has command over a significant proportion of the group’s total resources, common in voluntary organizations, NPOs, and consumer cooperatives. Here, no one individual or group may be able to finance extensive information gathering and analysis necessary to reduce in a meaningful way the information asymmetry between managers and other stakeholders. This in turn gives managers greater discretionary control over the firm’s or organization’s resources (ibid.). Stakeholder theory implies that all primary stakeholder groups have a right to complete information about the firm’s activities. The traditional model of the firm has been severely criticized for merely being based on economic representation (Ackoff 1981, Deetz 1994, Breton and Côté 1995) and solely building on managerial control, since only the stockholders can sanction or remove the managers. Aside from investors, all other stakeholders lack a substantive voice in the firm. The only option available for most other stakeholders, like labour, consumers, suppliers, is either exit or loyalty, but exit can also be very costly to individual stakeholders. Their interests are usually perceived as external to the corporation and with this separation all other stakeholders are not seen as an asset, but merely as a cost to the corporation. Thus, there are labour and training costs, equipment costs, tax costs, supply costs, natural resource costs, the costs of compliance with environmental laws, and so on. Even consumers are perceived as costs in terms of the need to advertise goods and services. Given this perspective of other stakeholders, it is easy to understand why cost containment becomes the predominant pursuit of managers. A multi-stakeholder model (Deetz 1994) is based on the conception of firms as having many different types of ‘owners’, that is, persons or groups with an interest in or directly or indirectly effected by the activities of a firm. This drastically changes the relations among stakeholders and managers. Many additional groups must be considered as internal to the system of the firm. It should become accountable to many ‘investors’ or stakeholders, and they all must be consulted in a number of decisions, and not only the stockholders. Various stakeholders will have different interests and will want them represented in the firm’s decision-making. Thus, a fully developed multistakeholder model changes the function of management radically. The main role of managers in the multi-stakeholder model is to find ways to align divergent interests and to facilitate conflict resolution, not to control nor eliminate costs and conflicts among various stakeholders. Social accounting

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provides one such way. Management can no longer act as an interested party in the decision-making process (ibid.). This would put many stakeholders in a firm on an equal footing. Domination and control will be replaced by codetermination and coordination, by participation and involvement (ibid.). In Europe today many of the organizations belonging to the social economy (Defourney and Munzon 1992) do, in fact, have clear stakeholder groups that function as owners and such organizations are governed by democratic institutions of decision-making, which help prevent or at least slow down the displacement of their social goals. Clearly, identifying each stakeholder group and providing them with rights and responsibilities is, therefore, another method for enhancing internal democracy and staving off goal displacement (Pestoff 1995, Borzaga and Mittone 1997; see, also, Ch. 5 in Pestoff 1998 & 2005). Multi-stakeholder social enterprises in Europe have several distinguishing characteristics (Borzaga and Mittone 1997). Their members consist of diverse stakeholder groups, including volunteers, workers, consumers and the local authorities who finance them. They lack a non-distribution constraint and can therefore distribute a limited amount of the potential surplus from their operations to their members, but they produce welfare services without the motive of providing profit to any single category of members. They practice internal democracy that permits all stakeholders to participate in important decisions and they take different legal forms, for example, associations, cooperatives, public companies, and so forth, which vary according to the laws in different European countries. Two major advantages of multi-stakeholder social enterprises are that their multiple composition helps both to dispel the information asymmetry between producers and consumers as well as to curtail the incentive of various groups to distort information about the nature and quality of the services provided. In addition the formal inclusion of diverse interests of different groups of stakeholders will act as checks and balances on each other. Each stakeholder group has its own motives for participating in the organization. The interests of consumers and volunteers for participating in a multi-stakeholder social enterprise will differ from those of workers and the presence of the former provides a certain amount of control of the costs of a firm’s operations. Moreover, participation by consumers reduces certain production costs by directly engaging them as co-producers of the services. Various stakeholders have divergent interests that may come in conflict. Structures need to be developed for an alignment of the divergent interests of various stakeholder groups. Multi-stakeholder organizations illustrate one method for resolving some of these differences of interests. Significant stakeholder groups should be given representation on the board of such organizations. It is often argued that firms owned by heterogeneous groups will have significantly higher transaction costs for decision-making (see Hansman 1996). However, these potentially higher costs are offset by greater staff engagement, lower contracting costs, higher quality services, involving

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consumers as co-producers, and so forth, helping to eliminate information asymmetries typical of single stakeholder organizations. Multi-stakeholder organizations can provide both strong democratic and economic motives for reorganizing private firms, social enterprises, cooperatives and voluntary associations. They promote economic democracy since they recognize the rights of all groups. They give legitimacy and influence to all major contributors to the production of an organization’s goods or services. Thus, they are both more equitable and democratic in their internal decision-making structure than single stakeholder organizations. This in turn should contribute to a greater legitimacy in the eyes of many of the organization’s stakeholders, and, thus also result in greater loyalty from the many groups contributing to the production of goods and services, as they now all have a recognized stake in it. By representing all major groups in the internal decision-making structures, multi-stakeholder organizations internalize their interests in the organization, and can thus, potentially lower the costs of the transactions between and among these diverse groups. The transaction costs for decision-making in the multi-stakeholder organization may, however, increase, as the interests of many divergent groups will have to be taken into account (Hansman 1996, Borzaga and Mittone 1997). But the cost increases immediately associated with internal decision-making will be offset by the gains due to increased legitimacy and loyalty of all these groups to the organization or firm. As all of them are represented and can now influence decisions, opportunism can be reduced, if not eliminated. Everybody has a clear stake, with the accompanying rights and responsibilities of multi-stakeholding. Moreover, the necessity of negotiating separate contracts and then of enforcing them with each of these major groups will also be eliminated, as they are now all part of the organization, and partners in its success or failure. This too should help to lower the transaction costs, making for a more efficient and effective organization. Such cost reductions can be significant, in particular when an organization produces services, rather than manufactures goods, since labour costs are crucial. When labour costs account for 75–80 per cent of the total costs, then worker engagement is important, if not decisive for producing a surplus. Without both qualified and engaged workers there will be a much smaller profit, if any, to distribute to the stockholders. Thus, in areas like personal welfare services, it seems clear that a multi-stakeholder model promises greater rewards to all parties than is possible with single stakeholder organizations. Today, some workers in personal welfare services in Sweden choose their job primarily for reasons of job satisfaction, and not merely in terms of material rewards. They prefer to have meaningful jobs, ones that are both challenging and rewarding in non-material terms, jobs that permit personal development and influence on the job and how and when it is done, jobs that fulfil meaningful social functions and/or that contribute to the satisfaction of others, and so forth. Permitting their participation in the internal decisionmaking, providing for greater codetermination will increase their satisfaction

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and loyalty. Thus, it is not so much a question of controlling for the opportunistic behaviour of workers, as of achieving the greater engagement by employees and of getting the greatest quality of services. This will also benefit the clients in terms of better quality services and the local community where such services are provided, in terms of more satisfied citizens. Clients can make a significant contribution to turning bad jobs into good jobs. Engaged clients with both rights and responsibilities can become involved in the production of the very services they demand, and thus become co-producers. Their involvement can make a significant contribution to the well-being of an organization and can mean the difference between a surplus or loss in operations. Again, it is not a question of preventing opportunistic behaviour by clients, but rather of providing them with the means to become engaged in the activities of the organization providing services for them and/ or their family. Recognizing their legitimate stake in the service organization and turning them into co-producers can best promote the rights and responsibilities of clients. The involvement of clients in the production of such services is important for maintaining the interaction necessary for good jobs and also contributes to satisfied citizens in the local community. It can also help to curtail the cost of producing such services. We note that multi-stakeholder organizations offer various advantages compared with traditional nonprofit organizations and for-profit firms (Borzaga and Mittone 1997). In particular, this holds true when market or contract costs are notably greater than ownership costs, or the costs of collective decision-making (Hansman 1996, Borzaga 1998). In the presence of information asymmetries, they provide consumers with more reliable guarantees of the quality of the services provided than either traditional nonprofit organizations or for-profit firms. They prove equally as efficient as for-profit firms. They can also help to generate greater trust between the producers and consumers of personal welfare services than for-profit firms. The development of the multi-stakeholder organization model could help social enterprises to evolve into a unique institution of grass-root economic democracy and thereby help to change the provision of publicly financed welfare services.

Conclusions How should governments try to balance considerations of efficiency and social goals in public/private partnerships providing welfare services? How should they measure the performance of private nonprofit service providers? How should they insure that the interests of the users/clients will be taken into account in the internal decision-making? How should they insure that all providers maintain a commitment to providing high-quality services, and not just making profit? The dilemma of balancing profit and social goals in public/private partnerships is conceived differently in the US and Europe and the traditional solutions to this dilemma also differ. Tax laws in the US provide nonprofit organizations a special tax-free status on some of their income, but

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at the same time it imposes a non-distribution constraint on the profit they make. In Europe, greater emphasis is given to organizational goals. Organizations with clear social goals that are democratically controlled by their members are considered part of the social economy. These two approaches are not identical, but they provide a rough functional equivalent, in that they both are designed to discourage goal-displacement and opportunism by managers and the members of the board. In spite of their similarities, they also show some significant differences concerning governance. Developments in the US and Sweden make it both timely and important to examine public/private partnerships more closely and to explore efforts at balancing profit and social goals. We did this by examining the concept of ‘profit’ and exploring whether and how it is related to the goals and behaviour of organizations producing welfare services. One basic argument made here was that there is an inherent vagueness in the concept of profit. Profit is just the tip of the iceberg in an organization’s activities during the past year. Moreover, there are numerous ways to distribute an organization’s surplus other than to give part of it back to the owners and/or members. Some of them clearly are more socially preferable than others. Moreover, the rapidly growing commercialization of nonprofits in the US begs the question of their true nature. Do they exist merely to make a profit or not? Furthermore, it was argued here that an organization should not be judged solely by its institutional form, that is, for-profit or nonprofit, but rather by the social goals it directly promotes in its daily activities and in the various ways it invests its surplus. This also implies that there are limits to economic, financial and legal controls of third sector organizations for preventing opportunistic behaviour. Clearly, to profit or not should not be the main question, or at least not the only question, asked about organizations and their institutional forms. Rather, to what ends are the organization’s resources devoted, including its surplus and how are they governed, should also be questions asked by scholars, concerned politicians and practitioners. This however, touches on the thorny question of how to measure an organization’s output, especially when it has multiple goals or products, some of which are economic and others that are social. The social auditing movement in Europe could provide some guidance and relevant alternatives to the almost insurmountable difficulties facing the IRS when attempting to evaluate the performance of NPOs in the US. Social auditing provides a basis for evaluating the overall performance of NPOs, cooperatives and social enterprises. However, in the US, most NPOs have very vague goals, which in turn leaves a lot of discretion to the management in setting organizational priorities and in deciding how to achieve them. Social auditing also helps an organization to clarify its goals and to intensify its efforts in achieving them, thus helping to avoid goal-displacement. This, in turn, suggests that governance is also an important issue at stake. In the US, many nonprofits’ goals are determined by their managers and

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board, since they have no other stockholders or owners. The scandals of some big NPOs in the US in the 1980s led some scholars to argue for changing the governance of the nonprofit sector by providing various stakeholder groups with a clearer role and rights in the management of their NPOs. Goaldisplacement is, of course, neither a new problem nor only an American problem. However, many of the organizations belonging to the social economy in Europe today do, in fact, have clear stakeholder groups that function as owners and such organizations are governed by institutions of democratic decision-making, which help prevent or at least slow down the displacement of their social goals. Clearly, identifying all major stakeholder groups and providing each of them with rights and responsibilities, that is, multistakeholding, is another method for enhancing internal democracy and staving off goal-displacement. In sum, balancing profit and social goals in public/private partnerships for providing welfare services is no simple matter. This is so, in part, because the concept of profit is vague and the goals of many nonprofits are equally vague. A non-distribution constraint appears unstable under changing circumstances at the beginning of the twenty-first century. Requiring voluntary organizations, social cooperatives and other NPOs providing welfare services to systematically and regularly carry out a social audit is one way of reaching a more stable balance between profit and social goals. Another way to achieve such a balance is to facilitate the democratic participation of the user/ members of the services provided in the organization’s internal decisionmaking. Together, these features of the European social economy can provide long-term stability in reaching a balance between efficiency and other social goals, in goal maintenance and in maintaining high-quality services. This also suggests that one important topic for continued dialogue between American and European researchers on the third sector is the area of governance and the different implications for goal-displacement and opportunism of the non-distribution constraint in America and democratic decision-making in organizations belonging to the social economy in Europe.

Note 1 SOU (2007) Vård med omsorg – möjligheter och hinder, Stockholm: Socialdepartementet, SOU 2007, v. 37.

5

Work environment, service quality and the third sector

Introduction As a result of the economic and political changes in the 1990s, the Swedish welfare state now faces a serious challenge to the sustained public provision of welfare services, namely the threat to the declining quality of public services, due primarily to the rapid deterioration of the work environment of the frontline staff providing such services. They are the women working in the municipalities and counties that provide most of the welfare services that most citizens rely on, if not depend upon, in an advanced service society. This is partially a result of sharp cutbacks in public funds and staff during the 1990s, a period of prolonged austerity. It is also a result of numerous organizational changes, in part related to the introduction of greater market mechanisms, in order to improve efficiency in the public sector. However, the other side of the coin is a rapidly deteriorating work environment and rampant growth of high-stress jobs, dramatically increasing sick leave, disability and early retirement, all in the public sector, as well as declining quality in many welfare services. As a consequence, recruitment to the municipalities and counties as employers has become very problematic, particularly to welfare services. Moreover, the high levels of unemployment Sweden experienced in the 1990s are now being transformed into a shortage of qualified, skilled workers at the beginning of the twenty-first century. In the future, competition for workers may not only exist between public and private employers in Sweden, but between all types of employers in most countries throughout Europe. Improving the work environment of the staff providing welfare services may prove crucial in the future to attracting and retaining well-educated and well-qualified staff in Sweden and elsewhere. Qualified and engaged staff is the key to high quality in welfare services. At the beginning of the 1990s unemployment skyrocketed, and the combined costs of unemployment insurance and loss of taxable revenue dominated the Swedish debate for the remainder of the decade. However, Sweden and many other European countries may soon face a completely new scenario in the twenty-first century, one where unemployment problems will quickly

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fade and work will no longer be scarce in some sectors of the economy. Instead qualified workers will be scarce and there will be stiff competition for them, in the service sector in particular. It is estimated that by the year 2010 the Swedish public sector will need to replace 570,000 employees – many of whom have begun to retire – just to keep services at the present level. An expansion of services, due to the large number of baby-boomers of the 1940s, who will soon retire and eventually require and demand more personal social services, would add numerous tens of thousands more new employees to this figure (Kommunförbundet 2001). Thus, Sweden, as well as most European nations, will have to choose between one or more policy options, and some of them might have high political costs. They will have to choose between extending the pension age by five to ten years, increasing women’s participation in the labour market, mobilizing immigrants currently unable to find employment due to labour market discrimination, rehabilitating persons on disability leave or early retirement, promoting drastically higher nativity rates, and/or encouraging mass immigration of non-Europeans (UN 2000, as cited in DN, 14/10-00). But, there are obviously limits to each of these proposed policies. For example, in Sweden all three of the central labour union organizations – LO, TCO and SACO – have already reported the current Social Democratic government to the International Labor Organizations, for its proposal to extend the retirement age from 65 to 67 years old and to allow individual employees to decide themselves whether to continue working for one or two years more. Unions see this as an infringement on their right to reach collective bargains with employers, including public sector employers, about the age of retirement. Adding five to seven mandatory work years, bringing retirement age to 72 years, would not be politically expedient. In Scandinavia, where women already have a participation rate in the labour market on par with that of men, it would be of limited value to promote increased women’s participation, while more might be gained by mobilizing and integrating unemployed immigrants into the labour market. Nativity is often said to be related to the existence of maternity allowances and leave, combined with well-developed and publicly financed childcare services, but such features are already a part of the universal welfare state in the Scandinavian countries, so little can be gained by extending maternity leave (now 15 months) or extending nearly universal public childcare (Strandbrink and Pestoff 2006). Moreover, it is obvious in an age of renewed xenophobia, where political cartoons exacerbate cultural differences and result in demonstrations and boycotts around the world, or with populists like Heider in Austria and Kjärsgaard in Denmark, who thrive on racial prejudices, that there are serious political risks associated with promoting mass immigration of nonEuropeans. In addition, many of the future labour shortages will be in the service sectors, which build on close relations between producers and consumers, like welfare services. Language and communication skills are an important part of such services. Thus, there is also a significant language

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barrier, and perhaps too, a cultural barrier to overcome, before the new non-European immigrants could fill the most acute labour shortages facing several European nations in the near future. However, the brain drain of skilled service workers from the new members of the European Union may help to temporarily alleviate labour shortages in Sweden, Germany, England and elsewhere. Missing from these proposals for increasing recruitment to public services are calls for improving the work environment of the public sector itself. This is unusual and if it were a case of dismal work environment in the private sector during a decade there probably would be a much greater public outcry for changes and improvements. Perhaps it is nevertheless symptomatic, since persons and organizations normally calling for improvement in the work environment are the social democrats and trade unions. But, they are also the champions of the public sector and tend to consider any criticism of it as criticism of the welfare state itself and indirect calls for more privatization and market mechanisms. One important element of the European social model so far has been its public nature: the responsibility for insuring the welfare state, social solidarity and cohesion lies with the government – ultimately with the national government – where public funds, public schemes and public bureaucracies are the main pillars of the welfare state edifice. Moreover, the universal welfare states of the Scandinavian countries also put greater emphasis on public provision of welfare services, compared with other welfare regimes (Huber and Stephens 2001). Can these elements of the Scandinavian model be maintained, are there alternatives that might be more effective, in particular to meeting the challenge of a labour shortage in the coming years, and the problems facing the public sector in recruiting qualified and motivated staff to provide welfare services? Such crucial questions can be discussed in terms of a changing ‘welfare mix’ between the various spheres and actors involved in social policy: not only the state and the market, but also the third sector – regarded by many as a sphere that could play a more prominent role in the future of European social protection and in the provision of personal welfare services in Scandinavia (Hirst 2000, Jessop 2000, Sörensen 2000, Evers and LaVille 2004). Research on the welfare state has made considerable progress in recent years, both in comparative and quantitative terms. Comparative research divides advanced countries into three or four categories or alternative types of welfare regime, each with a number of features in common. EspingAndersen’s idea of three welfare regimes (1990) has been adopted by many other comparativists and serves as the basis of a discussion of Welfare States in Transition (Esping-Andersen 1996, Stephens 1996). Much of these efforts, however, focus on analysing and comparing the development of welfare states in quantitative terms in relation to how much is spent on various welfare policies, and how these expenses have developed in recent decades, and so forth. Thus, it is possible to speak of an institutional/universal welfare regime

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in the Scandinavian countries, normally governed by social democratic parties; a corporatist or guild welfare state in the conservative or catholic countries of continental Europe, often governed by the Christian democratic parties; and a residual welfare state in the Anglo-Saxon countries, sometimes governed by neoliberal parties. We now know that the three different welfare regimes spent different amounts on welfare, devoted different proportions of their gross domestic product (GDP) to the well-being of their citizens and their expenditure developed differently in the period between 1960 and 1995. Moreover, they distributed the benefits differently and relied on different family patterns. Some were very public-sector-intensive in providing welfare services, others relied more on transfer payments, while yet others left most citizens to fend for themselves, except for the impoverished. Some promoted two-income family patterns, others relied on a male bread-winner model of income distribution, one that often excluded youth, females, immigrants, and so forth, while yet others promoted job flexibility, but also resulted in extensive poverty (Esping-Andersen 1996). However, as sophisticated and systematic as this research is, it also has major shortcomings. In particular, it says very little about the nature and quality of welfare services, what types of services they provided for the citizens or how they are actually delivered. This comparative research also ignores what types of organizations are involved in providing the welfare services in various regimes. This is a serious shortcoming, since there are considerable differences between countries, not only in terms of the financing of welfare services, but also in terms of the quality of welfare services provided, how they are delivered, and by what organizations, public, private or third sector. Moreover, comparative welfare state regime research says little if anything about the details of service quality or how the providers and consumers of welfare services experience them. Changes in how they experience the quality of public services can become crucial during prolonged periods of public austerity. The role of the third sector in service delivery is also absent in much of the comparative quantitative research to date. This problem and its implications are discussed in greater detail in Chapter 10. Does it make a difference to citizens, both as employees and consumers, if welfare services are delivered by public, private for-profit or third sector providers? Can they exert greater influence on service provision in one form or another? The third sector has often been welcomed in both public and scientific debates, since it is recognized that a greater pluralism of actors, levels of service and forms of production can be advantageous in the new context of socioeconomic diversification and flexibility that increasingly characterizes European society, with its rapidly changing structure of needs. Third sector associations can perform valuable tasks: in the identification of emerging needs; in the provision of a wide array of services (for example, personal and domestic care, socioeconomic integration, and so forth); in helping to overcome the negative consequences

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of an excessive ‘étatisme’ of existing public services (such as bureaucratization and professionalization, rigidity, low efficiency, and so forth); in mobilizing new energies and resources and in improving the quality of welfare services. Both of these shortcomings are major blind spots in the current comparative research on welfare state regimes, since it focuses more on finances and form or regimes than on the content of welfare services and how they are delivered. It is these two weaknesses or blind spots that research on service quality and third sector welfare services can help to rectify. First, the work environment of the public sector and the challenge it poses to service quality is the focus of this chapter. It also considers the role of the third sector in enriching work environment and in helping to meet future labour shortage in the provision of welfare services by recruiting qualified and motivated staff to provide welfare services. Second, the absence of the third sector in comparative welfare state regime research is considered in greater detail in Chapter 10. There are, of course, some political risks associated with giving the third sector a greater role in the provision of welfare services. Contracting-out threatens to transform some third sector organizations from advocates and/ or innovators into professionalized and bureaucratized service providers, thereby reducing their internal democracy (SoS, Socialstyrelse, 2004). Ferrera and Rhodes (1999) point to the risk that development of third sector provision of welfare services has traditionally been regarded with great suspicion by the left as a possible source of social differentiation and erosion of welfare state legitimacy. They question whether it is possible to design a welfare mix between public and non-public spheres to help solve the ‘resource’ problem without at the same time diminishing both the quality and coverage of care and the legitimacy of provision? These are, of course, serious considerations. However, in this chapter we maintain that the third sector cannot only help alleviate one of the main problems currently facing the welfare state, but can also better prepare it for the new financial and demographic challenges of the future. It is argued below that third sector provision of welfare services can provide the key both to improving the quality of welfare services and to maintaining, if not increasing, the legitimacy of publicly financed services, while also helping to keep their costs at bay. Moreover, it can do so in a fashion that facilitates the recruitment of highly qualified and motivated staff to provide personal welfare services, in times of growing labour shortage. Considerations of how augmenting consumer voice can improve service quality are presented in Chapter 6.

Unhealthy work in the 1990s – a major challenge for welfare services and the public sector This chapter begins by exploring the development of an unhealthy work environment in the Swedish public sector during the 1990s. It also proposes to extend the Karasek and Theorell model of work environment to include

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staff–client relations. Then it considers sporadic research on employment in the third sector before discussing the significance of improved work environment noted for social enterprises in the childcare sector in Sweden. Our discussion of work environment in the public sector in Sweden and service quality will begin with developments in the 1970s and 1980s before turning to changes in the 1990s. Work life in the 1970s and 1980s and its deterioration in the 1990s Development of work during the period 1968–1991, shows that a major structural change took place, which meant that the total qualification level of the workforce increased notably (Szulkin and Tåhlin 1994). Work that was both diverse and psychologically demanding increased during this period, while the proportion with the lowest requirements remained constant (ibid., p 97). Nearly half of the population changed jobs, going from unqualified to qualified ones, during 1968–1991, leading to an overall improvement of qualifications among employees (ibid., pp 102–3). But, in terms of work environment this led to a polarized development, with both better and worse jobs increasing at the same time. Perhaps the most important result of developments during 1968–1991 was that stress-filled jobs increased significantly for women, but hardly at all for men (ibid., p 106). The development of decision latitude, or control, is decisive for psychosocial work environment. If control is permitted to increase along with growing demands, it can lead to more active work, but if not, more demands will lead to more high-stress jobs (Karasek and Thorell 1990). The increase of high-stress jobs can almost entirely be explained by changes in work dominated by women, where there is a clear increase of stressful or demanding jobs, while decision latitude hardly changed at all, according to Szulkin and Tåhlin (op. cit., p 110), that is, it did not increase parallel with increased work demands. At the beginning of the 1990s, negative stress was more frequent in the service sector than in industry and manufacturing (Tåhlin 1995, p 37). With the growth of the service sector and demands for a more ‘rational work organization’, terms like ‘lean production’ ‘outsourcing’ and ‘downsizing’ became rampant in the public sector by the beginning of the 1990s. Moreover, women had worse psychosocial work conditions than men in general. In 1992/93, 12 per cent of all women, compared with 8 per cent of men, had high-stress work. But occupation is very important, and it explains most of these gender differences (ibid., p 39), since welfare services were hardest hit by these changes. Furthermore, the negative side of such organizational changes was amplified by the dramatic cuts in municipal budgets for most welfare services during the 1990s, in the name of reducing the national deficit and bringing municipal budgets into balance and by numerous reorganizations. Swedish work life changed in several ways during the 1990s. High unemployment, organizational restructuring in both the public and private sectors,

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downsized organizations, a reduction in the number of civil servants, an increase in temporary workers and reduced job security were some of the features of these changes. In addition, the sick-leave compensation system was reformed several times in the 1990s1 (Aronsson, Gustafsson and Dallner 1999). The rapid transformation of working life has in many cases entailed negative stress as a result of ‘lean’ organizations, redundancies and redundancy notices, pressures of time and the acceleration of the pace of work, overtime, solitary work, risk of violence, and so forth. This is reflected by the number of reports of stress-induced occupational illness and also by the increase in sick leave. Between 1997 and 1998 alone, the National Insurance Board reported a 23 per cent year-to-year increase in sickness benefit days in Swedish working life (ASS, 2000/eng). In order to document the development of long-term sick leave the situation in 1989 was compared with that in 1999 (SOU 2000, v. 121). The development of sick leave in the 1990s was clearly related to work environment. The report noted that the proportion of women who were on sick leave was clearly greater among those who are subject to high demands in their work, and, concerning influence or control over work, the relationship was unequivocal. Persons of all ages and both genders on sick leave had less control at work. This comprises the classical category of high stress that combines high demands at work with low control over their work (Karasek and Thorell 1990). This combination resulted in the highest level of sick leave during the 1990s. This report documented the development of work environment during the 1990s for women and men by sectors between 1989 and 1999. In general, high stress increased from 22 per cent in 1989 to 36 per cent in 1999 for women, while the same figures for men were 15 per cent and 24 per cent in the respective years. There was only a small increase for women in the state sector, but a dramatic one in the municipal and county sectors, with the private sector coming inbetween. For men there was an increase in all sectors, but first, in 1999, men reached the level for women at the start of the comparison. The figures for high stress in the county sector doubled during this 10-year period, reaching 51 per cent for women and 42 per cent for men in 1999 (ibid., pp 63–64). For the area of welfare services the 1990s were a decade of decentralization, reorganization and cutbacks. Municipalities took over more responsibility for providing welfare services from the central government and from the counties. For example, in healthcare, there were over 112,000 hospital and healthcare places/beds in the county and privately run healthcare in 1988, while by 1996 there were less than 50,000 beds left. The Ädel Reform for eldercare in 1992 transferred 31,000 eldercare places from the counties to municipalities, while another 31,000 simply disappeared. A large part of the social care that previously took place within county healthcare is now taken care of by the municipalities. This resulted both in a lack of care places and new demands on the social and healthcare under the auspices of the municipalities. Shorter care times and greater patient turnover have also led to a

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greater burden on hospitalized care by the counties. Budget reductions and rationalizations in healthcare led to reorganizations and redundancies (Harder et al. 2000). Thus, nurses and other heathcare workers to a greater degree than average felt in 1999 that they had too much to do and that they had too little influence over when tasks should be done and how to plan their work. They also felt to a greater extent than the average that they seldom got support or encouragement from their bosses (ibid.). In addition, the way of governing welfare services changed when the central government went from earmarked funds for each specific kind of welfare service, to more general financing of municipal services in the early 1990s. Now each and every municipality can decide how to spend its money and how to organize the provision of municipal services. The latter can either be provided directly by the municipality, by a municipal owned company, by a purchaser–provider division, or by contracting out the provision of services to private or third sector providers, and so forth. An important part of these changes was the increased use of market mechanisms in the provision of welfare services (Bergmark 2001). Moreover, resources decreased dramatically in the 1990s, due in part to cutbacks and in part to growing unemployment, which in turn decreased the tax base for municipalities at the same time it increased the demand for social support. These financial constraints in turn led to staff reductions by the municipalities in order to bring their own budgets in balance (Bäckman 2001, p 191). Thus, we find, given correction for the change of responsibility for providing services (the Ädel Reform, privatizations, and so forth), that the number of full-time and part-time staff in the municipalities decreased by 56,000 (or 9 per cent) between 1990 and 1997 (ibid.). The biggest reduction concerned technical staff, but in welfare services, childcare has experienced the greatest staff reductions. This led to an increase in the average size of the groups from 13.8 children in 1990 to 16.5 in 1997. The number of children per ‘full-year worker’ has increased from 4.4 to 5.6 during the same period (SOU 2001, v. 52, p 191). Concerning schools, the National School Board notes that the costs per pupil in elementary schools decreased by 9 per cent between 1991 and 1998. In 1997 resources for teaching were only 80 per cent of what they were in 1991. Thus, the ratio of teachers per 100 pupils decreased from 9.1 in 1991 to only 7.5 in 1998 (ibid., p 191). The Teachers Union noted in 2001 that seven of ten teachers experienced greater workloads during the 1990s, primarily as a result of more and newer work responsibilities (Lärarnas Riksförbund 2001). Changes in work organization, growing conflicts and numerous meetings also contribute to a heavier work burden, alongside new tasks like pupil care and growing social problems, and so forth – they summarize the 1990s as a period of high professional ambitions, growing pupil needs, work tasks that cannot be fulfilled, too few resources, limited possibilities to recuperate, and so forth. Nine out of ten teachers are exhausted at the end of the day, eight out of ten work at night and on weekends, six out of ten have sleeping problems, and

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six out of ten feel these factors impinge on the quality of the teaching (ibid.). Even on the county side there have been staff reductions. The number of full-year workers employed by the county councils for healthcare went down from 20.4 to 18.0 per 1,000 inhabitants between 1992 and 1998. Taken together the staff in healthcare and eldercare has been reduced by 15 per cent in the same period. At the same time the general population has aged and needs more care. Thus, at the end of the decade, we find a smaller number of employees who give service to more clients than 10 years earlier. There is good reason to believe that the development of work environment and general health in the population shown in the Welfare Audit and other studies, at least in part, are caused by these rather extensive organizational changes in the welfare service area (SOU 2001, v. 52, p 192). Work environment studies show that the proportion of staff exposed to high stress in the municipal and county sectors increased by 50 per cent between 1990 and 1997. The comparable increase in high stress for the central government and private sectors was 20 per cent and 10 per cent, respectively. The MOA-study (Moderna Arbets- o. Livsvillkor för kvinnor o. män) shows, moreover, that many occupations in the public sector have been de-qualified, that is, qualified staff have to perform relatively unqualified tasks to a greater extent than previously. This has led to feelings that they have less time to perform the tasks they are trained for. In spite of their attempts not to let the reductions impact on clients, they feel insufficient. This is particularly evident for women providing welfare services (ibid., p 193). Work environment problems not only affect the staff directly, but are probably related to service quality, even if it may be difficult to prove this relationship statistically. However, a high level of sick leave in welfare services can be considered a quality problem in its own right. On the one hand, high staff turnover and temporary replacements for sick staff result in a loss of continuity in activities, but, on the other hand, not employing replacement staff results in an even greater infringement on service quality. Between 1997 and 2000 the average level of sick leave (the number of sick days per year and person registered in the national insurance system) nearly doubled, increasing from 8.7 to 15.3. The corresponding increase for women was from 13.6 to 27.0. The number of employees on long-term sick leave (60 days and over) increased between 1992 and 1999 for women by 25,000, but decreased by 4,000 for men. The proportion of women among those on long-term sick leave increased from 58 per cent to 63 per cent during the same period (ibid., p 194). A physically stressful work environment at the end of the 1990s is an important reason for long-term sick leave. The relation to the psychosocial work environment is even more interesting. Twice as many persons with high demands and low control of their jobs are on long-term sick leave than persons without such working conditions. The relation between sector and sick leave also changed during the 1990s. At the start of the decade long-term

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sick leave among the staff of the municipalities and county councils was on a par with that for other groups in the private sector. Sick leave decreased for all groups until 1996. Then it increased again, starting in 1997. Here we see women in the municipal sector bring the level up to new highs. The municipal sector had the highest levels of sick leave in 1999 (ibid., p 197). The SCB work environment studies, 1991–1997 and the Government Commission on Work Environment Work environment statistics from the Swedish Central Bureau of Statistics (SCB) provide more detailed information about the deterioration of work environment in the 1990s. SCB’s Work Life Investigations are based on large samples, for example, 10,500 persons in 1989 and approximately 14,000 in their studies every other year between 1991 and 1999. In addition, SCB also provides some retrospective data for persons with the same occupation during the past five years or more, allowing for comparisons of the staff in public sector services with that of the entire workforce. Table 5.1 in the appendix provides some recent results of SCB’s Work Environment Studies from 1991 to 1997. It shows that big changes in the work environment took place during this period. Major groups have experienced increased demands, but not an increase of influence to the same extent. Based on questions in these studies an index was created to describe high demand and low influence in work. A combination of these two implies a negative stressful situation, and is called ‘high stress jobs’ (Karasek and Thorell 1990). Women and men often have different work environments, primarily because they work in different fields of activity, at different levels in organizations and in different sectors of the labour market. The proportion of women who were employed in ‘high-stress jobs’, as measured by this index, were nearly onefourth in 1991. By 1997 the proportion had reached 37 per cent in the public sector and 30 per cent in the private sector, resulting in a significant increase for the public sector. The increase for men is also significant in both sectors, but not nearly so high as for women during the same period. Stress increases for all groups, regardless of sex or sector, during this period, but is greatest for women in the public sector (Eklund 1999). Examples of occupations in the public sector where the proportion of women with ‘high-stress jobs’ increased significantly are elementary teachers, childcare staff and healthcare occupations. The occupation with the greatest stress in 1997 is registered female nurses, with three-fifths falling in the high-stress category. SCB’s 1999 study of work environment confirms that the share of women and men exposed to heavy demand in their work remained at least as high as in 1997, which was higher than during the first half of the 1990s. Moreover, a greater proportion of women than men claimed that demanding tasks have increased in recent years. The demands women face tie them down to monotonous tasks to a greater extent than men, resulting in significant changes for the public sector while men work more overtime or take more work home.

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Concerning opportunities for taking part in the planning of their work a greater proportion of women than men report that they lack influence (SCB 2000 AM768 SM0001). Furthermore, in the second half of the 1990s there was a dramatic increase in the number of work-related disability leaves granted for illnesses related to social or organizational factors. They increased from just over 1,000 in 1996 to nearly 3,200 in 1999. Also, the number of long-term sick-leave cases (sjukskrivningar) increased dramatically in recent years. The ‘Sept 4th Investigation’, undertaken annually on that date by the Riksförsäkringsverket, showed that there were 153,400 cases of sick leave lasting more than 30 days in 1998, while in 1999 it increased by 20 per cent to 184,100 cases. Taking occupational branches into account, the largest number of sick-leave cases was found in certain areas of public service, like health and medical care (hälso- o- sjukvård) and social work (socialtjänst) in 1999. A quick summary of several other recent studies of work environment show that the public sector is hardest hit by sick leave and disability. The dramatic increase in 1998 and 1999 for the costs of sick leave and disability led the government to initiate a top level investigation into these highly negative developments. The first report came in the fall of 2000 (Regeringskansliet 2000). After a general overview of recent developments in work-life stress in the 1990s, it devotes a special chapter to Care and Education. It notes that stress-related ill health in the public sector is found at all levels of government, from the top to the bottom. This is explained, primarily, in terms both of far-reaching budget reductions and numerous reorganizations during the 1990s. The economy of the counties and municipalities was hard-pressed during the 1990s, due to extensive budget reductions. Since much of the activities in care and education are staff-intensive, such savings and reorganizations have direct effects on the staff and their work environment (ibid., p 61). In these areas of work, women are in the majority, so these negative changes in work environment have special implications for women’s work environment. The MOA-Study cited by this governmental investigation shows that for work in the public sector, in particular healthcare, schools, police, and so forth, there were numerous reorganizations, staff reductions and expanding work demands, which resulted in work becoming less stimulating. This governmental group asked how such reductions and changes during the 1990s have impinged upon the work conditions of the staff and on the quality of service. It maintained that the quality of services was closely connected to the staff ’s conditions of work, but also lamented that so little research to date had reflected on the nature of the relationship between the givers and takers of welfare services. They conclude that all these changes make it possible to speak of ‘stress from constant change’ (ibid., p 64). The Swedish government also points to growing difficulties for the public sector as an employer, in particular when it comes to recruitment. Citing the Welfare Audit of the Kommittén Välfärdsbokslut (SOU 2000, v. 3), it argues

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that the number of older persons will increase dramatically until the year 2030, the number of children will decrease sharply, due to low nativity during the 1990s, and the number of persons in active working ages, between 18 and 64, will decrease in absolute terms from the year 2010. This poses a serious threat of a scarcity of workers in many sectors and occupational categories, which in turn will have negative consequences for work life and work environment. It is clear that an employer’s capacity to retain and recruit highly qualified workers becomes crucial under such conditions, the study notes (Regeringskansli 2000). The Welfare Audit’s study of employment in welfare services The Welfare Audit (Välfärdsbokslut) attributed central importance to the work environment in welfare services and therefore studied it closer for persons providing most welfare services (Bäckman 2001). It notes that numerous work environment studies published during the 1990s tell the same tale when pointing to psychosocial factors as the decade’s worst work environment threat. Exposure to this type of work environment problem increased in most groups on the labour market and differences between most groups on the labour market remain constant, with two notable exceptions: women and employees of the municipalities and counties. These public employees clearly have a worse development in terms of work environment than other groups during the 1990s. Yet, in spite of privatization in some areas, municipalities and counties are still the major provider of welfare services in Sweden and women comprise the overwhelming majority of welfare service employees. It is typical of most service producing activities, and welfare services in particular, that work takes place in relation to someone who receives these services. Relations in such services are therefore often close or emotional in character, like those between staff and children in childcare. There are good grounds to assume that the quality of such services is dependent on the staff ’s work conditions. If working conditions are good, this will be reflected in better service quality, but if they are bad, service quality will suffer. If stress in these occupations increases, it is reasonable to assume that it will influence the quality of the services provided. If such stress leads to extensive sick leave, burnout and early retirement, the planning and production of such services will also be negatively affected, as well as the quality of the welfare services provided. Work environment in welfare services can therefore be explored from three different perspectives. First, it is a question of the well-being of persons employed in these sectors. Second, it is a question of the quality of the welfare services in such sectors. Third, high sick leave and early retirement in an area that employs so many persons also has ramifications for employers in the sector and for public financing of a higher level of sick leave and early retirement (ibid., p 190). The Welfare Audit undertook an independent analysis of SCB’s work

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environment data, included in the AMU or labour market studies, undertaken every other year since 1989, with a sample of about 14,000 persons each in 1991, 1993, 1995, 1997 and 1999. In particular, the Welfare Audit focused on employment conditions in the following welfare service categories: healthcare, education, elder and handicap care and childcare, compared with all other occupations (ibid., p 200). Beckman shows that the proportion with high stress (Karasek and Thorell 1990) develops in a negative fashion for all groups during the 1990s, but in particular for persons employed in health and sick care and teaching. In general there is a 50 per cent increase in the proportion claiming high stress during the 1990s, but healthcare staff experience a 60 per cent increase, while the unspecific category, all other occupations, only increased by 40 per cent (ibid., see Figure 1f., High stress, p 205). Thus, he notes a polarization between occupations, where the work environment of welfare providers deteriorated faster than for other occupations. This appears to be a continuation of developments noted already in the 1970s and 1980s (see, above, the section titled ‘Work life in the 1970s and 1980s and its deterioration in the 1990s’ for more details). The Welfare Audit summarizes its findings on work environment for welfare workers. Taken together the development of the work environment for persons employed in welfare service occupations, particularly in the psychosocial area, has been worse than for other occupations during the 1990s. But, there is a lot of variation. High stress increases in all the groups studied in detail. The smallest increase is found in the category ‘all other occupations’. The biggest increase is found in the healthcare staff. There is a tendency during the 1990s for increasing polarization between welfare service occupations and other types of jobs (ibid., p 222), as seen in sick leave statistics. Work environment and long-term sick leave Since 1997 there has been a dramatic increase in sick leave in Sweden. During 1997, 44.3 million days of sick leave were compensated by sick pay or rehabilitation pay. By 2001 this figure had increased to 92.1 million days (Lidwall 2003). And less than one year later, in October 2002, the figure had increased to 99 million days (RFV 45/2002). A study was undertaken in 2002 by the National Health Insurance Authority (RFV) known as RFV-HALS of persons on long-term sick leave, based on the Karasek/Theorell demand control model. The results show that both men and women on long-term sick leave to a larger extent than the normal population experience that they have work with high demands, low control and weaker social support. The greatest risk of having long-term sick leave is for persons who, according to the Karasek/Theorell model have high-stress jobs, characterized by high demands and low control. Among women there is also a greater risk of long-term sick leave among those with active work. Lidwall found that psychosocial work environment was important for long-term sick leave, even after consideration was given to other conditions that might be important, like age, physical work

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environment risks, family circumstances and life patterns. It was also worth noting that an individual’s family situation does not appear to have any importance for long-term sick leave. If an individual had problems combining home and work life, it was often someone who was single with or without children or other relatives, or had experienced difficult times in their life. These factors do not seem to have major importance for long-term sick leave (ibid.). Even if risks in the physical work environment have not been eliminated, psychosocial work environment factors have received greater attention during the 1990s as more and more workers experienced strong negative stress in their work. The number of workers on sick leave due to psychological sickness clearly increased during the 1990s. At the beginning of the 1990s, 14 per cent of those on sick leave of 60 days or longer were due to psychological sickness. By 1999 the proportion had reached 18 per cent, and in 2001 it was 25 per cent. This problem has increased in all sectors of the economy, but has increased most in the public sector. The deterioration has been greatest in the municipal and county sectors (ibid.). Thus, psychosocial work environment problems increased during the 1990s, especially for employees in the municipal and county sectors, and for women. It appeared primarily a question of both increasing demands and dramatically decreasing possibilities of influencing the pace of work. Even if developments are parallel for men and women, it is nevertheless women who experience the greatest deterioration of the psychosocial work environment in their daily work. In addition, attaining a high education is a risk factor for men, while a low education level is a risk factor for women. Even the type of employer bears with it certain risks, but municipal employers are the deviant category. Persons employed by municipalities bear a greater risk for longterm sick leave than those employed elsewhere. This result holds both for men and women. For women it pertains mostly to those working in municipal care and personal services, while for men it is true of most types of services, but particularly for male teachers (ibid.). The reason for this can be found in terms of the employment conditions for municipal employees. Cutbacks and reorganizations probably lead to deteriorating work environments in many municipalities. Note that there are no significant effects of family situation found when comparing those on long-term sick leave with the normal population. This is reflected in the fact that the work-related problems in the whole population have registered just where the most negative developments are found in the work environment, namely in the female dominated municipal provision of care, education and personal welfare services (ibid., p 39). SCB examined the exploding costs for sick leave between 1993 and 2001 and explored what influences the costs for it (SCB 2004). SCB notes at the outset that the proportion of persons on sick leave for any length or period has only increased marginally in most branches since 1993. The increase in the proportion out on sick leave is primarily concentrated to municipal

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activities and the branches of care, education, elder and childcare. One of the most important reasons why sick leave has increased more for women than men is that many women are employed in those branches of the economy that were subject to an increase in sick leave. For example, in education and care, four out of five employees are women. The SCB study covers all employees between 20 and 64 years of age. Concerning economic branches, the food processing industry is most problematic in terms of the proportion of sick leave, both among men and women, and it shows the greatest increase in both 1996 and 2001. Women employed in elder and handicap care, other care activities and childcare also have a very high proportion of sick leave. The municipal sector has a high proportion of sick leave for both men and women. It is also the sector that showed the greatest increase between 1996 and 2001. There are also regional differences that are not explained by normal social background factors. In particular, in regions classified as weak service dominated areas (that is, those with few industrial alternatives) problems with sick leave are more notable for women (ibid.). In its study of the register of workplaces, SCB notes that there is a general increase in sick leave at all types of workplaces, regardless of branch, sector, and so forth. Much of this is due to the increased length of sick leave. The other main change is that municipal activities have had much greater problems since 1996. In 2001 there were several branches among the most problematic where municipal employers dominated. If only four branches that are dominated by the municipalities are included, childcare, eldercare and handicap care, other social care activities and education, there are differences between private and public employment. The private sector has a lower level of sick leave. However, SCB finds difficulty in explaining these differences, due to a lack of information about these places of employment (ibid., pp 74 and 83).2 The costs for early retirement and sick leave in 2001 reached 428.8 BSEK for women and 338.4 BSEK for men, or a total of 767.2 BSEK in 2001 (SCB 2004, from tables on pp 34–35). Persons on sick leave, disability or unemployed at the beginning of the 1990s, were to a much greater extent than others in the same situation at the end of the decade. The National Insurance Board (RFV) reports that costs for sick leave and rehabilitation reached 27.9 BSEK in 1999, for an increase of 12 BSEK or 75 per cent since 1997 alone. This figure does not include costs to employers. Bergendorff, Nyman and Palmer (2002) argue that part of the reason for a higher level of sick leave in Sweden and Norway, compared to the five other EU countries3 in their study, can be found in a larger proportion of women 60 years and over, employed in these two countries. However, high sick leave does not necessarily imply a problem, they say, since it can reflect higher levels of employment, in particular among older women (ibid., p 104). The alternative would be early retirement. Moreover, Aronsson et al. (1999) argue that together with increased sick

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leave there is a growing number of employees who go to work when they are sick, but who should normally stay home to rest. Being present at work when one is sick is referred to as sjuknärvaro or ‘sick, but present’. Based on a questionnaire of nearly 4,000 Swedish adults, they find that sick presence is most common in two sectors – health and care services, and education. They note that of the six occupational categories with high sick presence, four of them also demonstrate high sick leave. They are nurses/medical staff, preschool teachers, special nurses plus medical assistants and pre-school assistants. They are on the lower end of the wage scale. Low wages, high levels of being sick, but present and high sick leave were common for nearly one-third of their sample. They conclude the occupational groups that in their daily work have responsibility for care, education, and so forth, have a much higher risk of sick presence. In such occupations the relationship with other people plays a big role for the result of the work. This corresponds particularly well for occupations that care for the sick, youth and small children, plus the elderly, for example, client groups that are highly dependent on their ‘careers’ and highly vulnerable. Healthcare, personal social services and education are low wage occupations. Many of these occupations are found in the public sector – in the county and municipal governments. Such activities were subject to sharp cutbacks in the 1990s. Here we find environments with high risks, stress and low wages. Women are greatly overrepresented in almost all occupations with high sick presence (ibid.). The Occupation Safety and Health Authority’s study of stress and fatigue in healthcare: some important aspects An encompassing project or total work environment study was undertaken by the National Occupational Safety and Health Authority (ASS) called ‘Control of negative stress and lifting ergonomics in healthcare and social care, regardless of employer’. All Occupational Inspectorate (YI) districts in Sweden were involved in it and nearly 2,000 inspections of such worksites took place during 1998 and 1999. The study noted that there are serious and extensive problems in the area of lifting ergonomics and negative stress. Organizational changes during the 1990s dramatically deteriorated the psychosocial work environment for employees in healthcare and social care, in terms of demands in work, the content of work and access to support and guidance (Harder et al. 2000). Each of these factors will be considered briefly below. All the Occupation Inspectorate (YI) districts reported big increases in the amount of work in the whole healthcare and social care sectors. The increase concerns all occupational categories, with foremen and nurses in municipal eldercare services a specially burdened group. The staff says that they have more and more to do due to staff reductions and more work responsibilities. They describe the consequences of this as a difficulty in fulfilling the

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organization’s goals and problems with tiredness, stress symptoms and nervousness for making mistakes. The large amount of work is a result of three general changes in the healthcare and social care sector. In part, the Ädel reform and the increasing number of elder persons needing care, means a bigger amount of work in both eldercare and homecare. In part, more administrative responsibilities have been delegated due to changing administrative rules. At the same time, budget austerity in both the municipalities and county councils has meant staff reductions and flatter organizations. In eldercare foremen have responsibility for bigger groups of staff. This led the Occupation Inspectorate to recommend that the employers investigate the staff ’s physical and psychological workload, evaluate the workload and work content, and decide if the workload and work content fit the existing staff. The work content has changed radically after the Ädel reform and the growing number of older persons in society. Persons moving to special living forms have become older and older and in need of more care. Eldercare has therefore become more concerned with healthcare; at the same time new groups with psychological sickness problems and dementia problems have been included in the responsibility area of the municipalities. Even homecare, which previously was service-oriented, now mainly provides social care and healthcare. This implies new work assignments, new demands for knowledge and increased responsibilities for unregistered nurses and health assistants. A new occupational category has also been created – personal assistants for handicapped persons who live independently. These changes have brought with them increased demands and expectations on the care staff by the elderly, their relatives and politicians. At the same time the staff ’s possibilities for influencing their own work situation have decreased due to the increased amount of work and increased size of the workgroups. Most investigations of the consequences of these changes have primarily focused on the interests of the clients, but rarely those of the staff. The increased workload in healthcare is related to a notable increase of workrelated sickness caused by organizational or social factors. Especially work illness, which results in longer than 14 days sick leave, has increased significantly according to the statistics of the Occupational Health and Safety Administration (ASS). Due to an increased size of groups in the municipal care, support from the work leaders is generally very poor. Some Occupation Inspectorate districts report that managers with full care, staff and budget responsibility manage a staff of between 50 and 90 persons, while others have as many as 150 persons under their supervision. Both staff support and work environment control suffer greatly in such a situation. In particular, middle managers and nurses are especially exposed to negative stress and homecare workers to lifting injuries. The increasing workload for all occupation categories, combined with new demands and expectations from both caretakers and patients, and from relatives and politicians during the 1990s for healthcare and social care

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staff has resulted in a considerably tougher/heavier work situation. Since neither the organization of work nor programmes for the development of competence have been adapted to these new demands, psychosocial work problems have increased both in numbers and intensity. The results were seen in a marked increase of stress-related occupational sickness with long-term sick leave in 1998 and 1999. According to work injury statistics, healthcare and social care are responsible for more than half of the serious lifting injuries among women. The lifting ergonomic problems in care are big. Occupation Inspectorate has noted a lack of routines in the ‘care chain’ and uncertainty concerning the responsibility for work environment when the care receivers are released from hospitals to municipal service and care. A very serious problem is that many of the persons with responsibility for production and work environment lack insight about their multiple responsibilities to fulfil not only the Law of Health Care, Law of Social Services and Law Supporting Handicapped, but also the Law on Work Environment. There is an excessive need for information and education in order to rectify these deficiencies. The growth in staff size is a serious hindrance in this respect (ibid.). The Health Care Commission has noted that a large number of healthcare and social care workers will be pensioned in the next 10 years, while the number of pensioners 80 years and older will increase from 429,664 to 524,538 between 1997 and 2020. Persons of 90 years and older are expected to increase from 58,658 to 99,074 during the same period. Thus, there will be an extensive need to recruit new staff during the next 10 years. At the same time there is a decrease in the number of youth applying to the healthcare specializations at all levels, in spite of favourable employment possibilities. The Health Care Commission notes that it is important to improve the work environment, to find new forms or organization and to improve the leadership/management of health and social care services in order to attract the younger workforce in competition with other activities. The Occupation Inspectorate concludes its report by making several recommendations concerning the work environment of health and social care. They include demands for new or changed routines, development of plans of action and development of internal control systems of the work environment. It also notes that it is important to follow up this study with closer observation in the future (ibid.). A survey of work environment conditions in 2005 The Survey on Work-Related Disorders in 2005 was the fifteenth annual study undertaken by the Central Bureau of Statistics (SCB) and the Work Environment Authority (Arbetsmiljöverket, AV) (SCB & AV, SOS: AM 43 SM 0501). It is based on interviews with 20,000 persons concerning work-related disorders experienced during the past 12 months. The 2005 Survey showed that nearly 25 per cent of the Swedish workforce suffered from some disorder

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that they related to their work over the past 12 months. Slightly over onethird of them also were on sick leave during the last 12 months, due to their disorder. One in 10 employees reported work-related disorders that led to sick leave during the past year. For nearly half of them it resulted in a total sick leave of five weeks or longer (ibid.). During the period 1996–2006, both the share with physical disorders and the share with other disorders due to work rose significantly for both men and women. The year 2003 was the peak for physical as well as other types of disorders for both men and women. Since then a decrease has occurred, now for the second year in a row (ibid.). Sick leave also showed signs of declining for both men and women in 2004, after many years of increase. However, it was still higher in 2006 than it was 10 years earlier. Unfortunately, the Work Environment Authority provided no explanation for this apparent trend break. Fewer men than women reported work-related disorders between 1996 and 2006. Among men the most common causes of disorder are strenuous working postures, followed by heavy manual labour and stress and mental strain. Stress-related disorders increased more than other disorders for men from 1996 to 2003, but for the last two years a decrease is reported. The most common types of disorders for women are those related to stress or other types of mental strains. This cause of disorder has also had the most dramatic development, and the number of women afflicted by these disorders has doubled since 1996. However, since 2004 a decrease has occurred. Strenuous working postures account for the second most common cause of disorder for women, and disorders with this cause remain on the same level since 1996. See Table 5.3 below for details. Reported work-related diseases were classified by probable reasons. Ergonomic factors were the most important category of suspected reasons for all work-related diseases in 2005, reaching 58 per cent for both men and women in 2005. Next in importance came organizational and social factors (stress), which had an average of 22 per cent, but where men and women differ greatly. Here, only 14 per cent of men, but 28 per cent of women reported workrelated diseases due to these factors in 2005 (AV/ISA, report 14, 2006). The main aspects of work attributed to organizational and social factors that resulted in work-related diseases are: a) too much work (30 per cent); b) too high tempo at work (23 per cent); c) problems with relations to third parties at work (clients) (21 per cent); d) reorganizations, liquidations, and so forth (20 per cent); e) problems with their boss (18 per cent); f ) unclear demands (17 per cent); and g) problems of relations with their colleagues (15 per cent) (ibid.). Once again we note differences for men and women. Men have a higher rate of complaints in the first two categories of problems, while women have a higher rate with the other four categories (ibid.). Regarding disorders due to stress and other mental strains, non-manual workers report more disorders than manual workers. Stress and mental strain are the most common causes of work-related disorders among women and

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Table 5.3 Stress and sick leave among the workforce, 1997–2006 Stress

97

98

99

00

01

02

03

04

05

06

Men with stress Women with stress M. on sick-leave W. on sick-leave M. with stress & on sick-leave W. with stress & on sick-leave

3.7 7.0

4.5 7.9

5.1 9.3

6.5 11.8

6.6 11.2

7.7 12.9

8.2 13.6

7.2 13.4

6.4 12.1

7.4 12.1

4.2 6.3 1.0

4.2 6.8 1.2

4.7 8.1 1.2

5.2 8.8 1.8

5.6 9.4 1.8

5.5 9.8 2.0

5.6 9.7 2.2

5.3 9.3 2.0

5.7 8.5 1.7

5.9 9.3 1.6

1.7

1.8

2.6

3.3

3.8

4.3

4.2

4.2

3.1

3.0

Source: SCB & AV, SOS, AM 43 SM 0501, tables found on pp 34 & 35. M = Men, W = women.

the third most common cause among men. In total, the percentage of women with stress-related disorders is 13.0 per cent, while the corresponding figure for men is 7.4 per cent. Concerning women, a larger proportion with stress-related disorders are found among the social worker professions (27.7 per cent), elementary school teachers (24.6 per cent) and high school teachers (21.8 per cent) than among other occupations. The corresponding occupations for men with the highest proportions of stress-related disorders are elementary school teachers (15.9 per cent) and high-school teachers (14.6 per cent) (ibid., p 36). Women experience both a much higher rate of work-related disorders than men and they take sick leave more frequently than men for such disorders. Between 2002 and 2005 the percentage of persons with work-related disorders other than occupational accidents reached 27.7 per cent for women and 20.3 per cent for men. Corresponding figures for those on sick leave as a result of disorders due to reasons other than occupational accidents was 11.0 per cent for women while it was only 6.5 per cent for men. The percentage of women who had taken at least five weeks sick leave was 6.4 per cent, while it corresponded to 2.9 per cent for men. A closer look at the figures for women reveal five of the seven occupational categories most heavily affected by work-related disorders and sick leave are found in the public sector. They are: a) home-based personal care and related workers; b) assistant nurses and hospital ward assistants, and so forth; c) pre-school teachers and recreation instructors; d) social work professionals; and e) high-school teaching professionals, and so forth (ibid., p 38). Workplace empowerment and disempowerment Work-related stress is defined as a pattern of emotional, cognitive, behavioural and physiological reactions at adverse and noxious aspects of work content, work organization and work environment. It is a state characterized by high levels of arousal and distress and often by feelings of not coping with

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demands (European Commission 1999). Johnson (1997) argues that a large number of epidemiological studies have demonstrated that health may be clearly related to power differentials – persons in the working classes and those who are marginally employed have worse health compared with those in the upper class who have the best health profile. Evidence is increasing that such differences in health status across social class groups may be explained with reference to the relative inequalities in access to social resources, such as power and control over critical aspects of daily life. Epidemiological and psychobiological research on the work environment has shown that low levels of empowerment in daily work life, measured in relation to limited possibilities to control work content and process, is strongly related to neurohormonal arousal, drug and alcohol use, mental distress, excess chronic disease, and even risk of early death. The strong and consistent findings across societies, using different designs and focusing on various outcomes, provides powerful evidence that powerlessness may indeed be causally related to chronic illness (ibid.). Empowerment has recently been used to refer to a change process that nominally increases the power of a local group to influence some aspect of their existence. ‘Empowerment is a social action process that promotes the participation of people, organizations, and communities in gaining control over their lives in their community and larger society’ (Johnson 1997). This can be contrasted with many organizational changes in both the public and private sectors in recent years. They often call for increased participation on the part of the rank and file employees in task level decision-making, supervision and job changes; yet it is often accompanied by downsizing and results in work intensification for the surviving workforce. This phenomenon has been referred to as ‘management by stress’. Lean production often results in power moving upward, but accountability being forced down to lower levels, as management reduces resources and staffing. Thus, lean production is replacing ‘scientific management’ as a new management ideology. In fact, lean production can have potentially hazardous impacts on two psychosocial work environment factors: control and social support (ibid.). In most work environment studies job demand is defined in terms of answers about the job being hectic and psychologically demanding. Work control on the other hand, combines influence over the planning of work, setting the work pace, how much time is used in work and planning of work breaks, vacations, shifts, and so forth (Johnson and Hall 1988). Workrelated social support is measured in terms of being able to talk to co-workers during breaks, being able to leave their job to talk to co-workers, being able to interact with their co-workers as part of their jobs, and so forth. It is in terms of work control that we noted a particularly negative development for women working with welfare services. The Swedish Municipal Workers Union, SMWU/SKAF, reported some significant changes in its members’ work environment, between 1988 and 2003 (Wondemeneh 2005). She noted that four per cent of its male and ten per cent of its female members were on sick

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leave between 100 and 365 days in 2003, which is more than the average of three per cent for the entire Swedish workforce. Concerning control and influence at work, this report observed that a growing proportion of workers in various categories have ‘little or no influence’ on various aspects of their work environment. This includes such items as the pace of work, planning of work, planning of their vacation and planning of their own hours. Between a half and four-fifths of women in general have no influence on one or more such aspects of their work. However, women in SMWU have, on the average, ten percentage points less influence than the rest of the workforce, and normally less than men in SMWU (ibid., her Table 2 on p 38). Internal or on-the-job training is a development tool to improve staff competence, but women got much less on-the-job training. The purpose and quality of it can, of course, vary. However, only 10 per cent of the women in SMWU received on-the-job training in 2003, compared to 19 per cent for men in SMWU and a national average of 20 per cent (ibid., see her Diagram 22 on p 39). In a report prepared for LO, the Swedish Confederation of Trade Unions and its Investigation of Democracy, Levi discusses the relation between public health, power and democracy (2000). He notes that one of the directives found in the Social Democratic Party’s report on ‘Sweden facing the 21st Century’ (SAP, Socialdemokratiska Arbetarpartiet 1996) was about ‘Ökad makt i vardagen’/Increased power in daily life. It states that many people experience a growing feeling of powerlessness in their daily life. This is due in part to the economic crisis and the increasing divisions in society. But it also is due to a difference between people’s desire to influence and their limited possibilities to do so. Powerlessness and a lack of context influence people’s health negatively (ibid., p 68). The report continues that workplaces are one of the most important areas where power in daily life should be sought. Employees’ power over their place of work should be strengthened. Work life must be organized so that the competence and creativity of employees will be released and taken advantage of. Development of possibilities for everyone in working life should also concern the promotion of basic democratic values in work life. This should benefit both employers and employees in the public and private sectors (ibid., p 69). Levi related the Social Democratic Party’s discussion of individual power and public health to the importance of empowerment and power in daily life, or what Giddens calls ‘life politics’. Having power is, therefore, to be able to influence your own life chances, to be able to decide your own future, or to influence the number of possible future alternatives available to you (ibid.). Where have all these social democratic and trade union ideas and visions about empowerment and democracy gone in all the social democratic controlled municipalities and counties, during unbroken Social Democratic rule in Sweden since 1994, Levi wonders.

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Relations with clients and work environment in welfare services The Karasek and Theorell analysis of work environment is multidimensional. The basic model includes both workplace demands and worker control as the two main dimensions. In addition, they also stipulate that social support from the workgroup, by one’s boss and co-workers, provide another important dimension of the psychosocial work environment. This was reflected in the analysis above of the deterioration of work life in the public sector in Sweden in the late 1990s. Furthermore, Karasek and Theorell (1990) argue that job security, risks in the physical work environment and social support by persons outside the workgroup, like consumers, family and friends, are also important aspects of work environment and they deserve close study. They provide some examples of job redesign leading to greater interaction between workers and customers, particularly in the welfare service sector and eldercare. They noted positive benefits both for the workers and customers in activating the clients (ibid.). I strongly agree that the three-dimensional demand, control, support model would benefit from the formal inclusion of interaction with clients. Such interaction can be divided into high and low categories, similar to the other three dimensions. Later, I discuss and analyse client reactions to welfare services in terms of whether such services are enduring or non-enduring from a consumer perspective (see Chapter 6). However, here I want to focus on work environment aspects of relations between the staff and clients of welfare services. I will therefore use the categories of sporadic and enduring to describe differences in the relationship between the staff and clients of such services. Figure 5.1 presents a proposal of how client relations could be included as an additional or fourth dimension in the Karasek and Theorell model. Since we are mainly interested in the implications of client relations for welfare services, where job demands are high, we will take the two high psychological demand categories – active work and high-stress work – as our starting point. Staff members with active jobs, but only sporadic contacts with their clients can be expected to behave sympathetically but professionally towards clients, that is, they will have a sympathetic professional relation with them. Staff with high-strain jobs, but only sporadic relations with numerous clients will

Figure 5.1 Client relations – a new dimension in the work environment model. Source: Pestoff, 1998 & 2005.

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probably display the typically bureaucratic distance to their clients, that is, remaining impersonal, if not short or at times even irritated due to stress. On the other hand, staff with active jobs and enduring relations with their clients will more likely involve them in the design and implementation of the services being provided, thereby turning them into co-producers. Finally, staff members with high-strain jobs, but enduring contacts with their clients will most likely develop a semi-personal relation to them, but may experience more stress from such interaction than their colleagues with active jobs. Thus, we are now able to introduce a valuable new dimension for understanding stress and the psychosocial work environment in welfare services, one that extends the basic demand, control, support model. This new dimension is particularly important to the development of the service sector in general and to the redesign of public service and the development of social enterprises in particular. Karasek and Theorell also underline the importance of two additional aspects of job redesign. The first is the necessity of getting support both from the service workers directly involved and from the upper levels of the administration of public services (ibid., pp 321–32) or from the top management and trade unions in the case of a private company. Then they ask, somewhat rhetorically, if change should start from the top and move downward or come from the bottom and move upward. It comes as no surprise that their answer is: ‘both are necessary’. Both a bottom-up and a top-down process are needed to support job redesign and to overcome the forces of inertia against change (ibid., p 245). We will return to the problem of redesigning welfare services in Sweden in Chapter 12. The second aspect they highlight is the need to develop ‘. . . altogether new methods of assessing industrial output, in which health and developmental capabilities of the employees appear as goals in their own right’ (ibid., p 164). They label this as ‘New Value’ measures of productivity. While their concrete proposal differs in detail from the type of social auditing proposed previously herein, I feel that they are calling attention to similar problems and proposing similar solutions. Some reflections Thus, several different studies document that the 1990s were a lost decade for women working in welfare services in terms of their work environment, stress, sick leave, disability, and so forth. Three aspects of work environment were taken up by the Welfare Audit’s study of work environment as posing problems for welfare service occupations. First is the individual problem for employees, second as a potential quality problem for the clients and third as a financial problem for the state and public employers. Concerning the first problem, there is clear evidence that poor work environment creates a welfare problem for employees in these occupations. In welfare service occupations there is a higher risk of exposure to poor work environment and work-related

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problems. To the extent that exposure and work-related problems lead to sick leave the persons affected experience a double welfare loss, not only in terms of poorer health, but also economically and socially, since long-term sick leave leads to poorer income development in the long run (Bäckman 2001, p 224). Many who take sick leave for two months or more never return to active participation in the labour market. The Work Environment Authority documented an increasing proportion of the workforce reporting workrelated disorders between 1997 and 2003. Starting in 2004 we noted a small decline. Unfortunately, no explanation or analysis is provided. Concerning service quality, it is harder to say anything definite. The National Board for Welfare (Socialstyrelsen) observed that the municipalities’ judgements about the quality of the services provided by private firms are often limited to noting how a provider fulfils the criteria found in their agreement and if they follow the law (2004). However, factors other than the legal status of a provider determine the users’ experience of service quality, such as continuity, contacts, possibilities to influence the content of service, and so forth. Yet, the lack of methods to study the quality of services provided by public and private organizations is a most notable weakness today (ibid.). The Work Safety Inspectorate (ASS), however, makes a connection between service quality and work environment problems in a report on employment in healthcare (Harder et al. 2000). Moreover, service quality cannot be divorced from work environment in the many areas of welfare services. Mirvis (1992) noted that employee dissatisfaction has implications for the quality of human services. ‘It is hard to imagine people who feel cold and alienated easily reaching out to educate and care for others’ (p 33). Consumers spend long periods of time in the same physical as well as psychosocial environment as the producers. Clients become, therefore, not only co-producers of the welfare services, but also co-consumers of the same good or bad physical and psychosocial work environment. Thus, from this perspective, service quality and work environment can be seen as two sides to the same coin. However, this dramatic deterioration of work environment for major segments of the public sector makes it urgent to find ways and means of improving the situation of the staff of agencies providing personal welfare services. The Occupation Safety and Health Administration makes several precise recommendations on how to improve the work environment in welfare services (see ‘The Occupation Safety and Health Authority’s study of stress and fatigue in healthcare: some important aspects’ above) and warns about serious and imminent recruitment problems facing Swedish municipalities and counties, as the major providers of welfare services. This also makes it more important to explore new models for organizing work, in particular ones that permit greater participation and engagement of the staff and/or clients in welfare services. Social enterprises provide one such alternative model for organizing work and the production of welfare services. Evers (2001) argues that by engaging civil society in providing welfare services their specific potential for

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improving service quality can be realized. Below we will first consider some of the advantages of social enterprises as service providers and employers and then consider the third sector as an employer, both in residual and universal welfare states.

Alternative models: social enterprises, the third sector and work environment in different welfare states SCB’s report on sick leave discussed earlier laments the lack of research on alternative providers of welfare services in Sweden. Most alternative providers are either for-profit firms or social enterprises organized as voluntary associations or cooperatives. Social enterprises have grown rapidly in some sectors of welfare services in Sweden in recent years, and will introduce the discussion on alternative models of work environment. Sporadic research on quality of work presented below draws on various sources. The substantive rationality found in collectivist organizations studied by Rothchild-Whitt (1979) provides a starting point for exploring alternative models to organize work and provide welfare services. Comparison of employment in the public, private and nonprofit sectors in two residual welfare states, the US and the UK, provides some empirical data on this. Then the quality of employment in the German third sector as well as worker motivation and job satisfaction in public and nonprofit social services in Italy provides two illustrations of conservative continental welfare regimes. Finally, in Sweden – a universal welfare state – third sector childcare proved an exception to the general deterioration of working conditions and the work environment of welfare services in the 1990s. Social enterprises in Sweden A variety of alternative models for providing welfare services are being tried in various parts of Sweden. Contracting-out to the third sector, purchaser– provider models, cooperative welfare services, volunteering and third-party provision are a few of the models now being tried in order to resolve the acute ideological and financial problems facing the Swedish welfare state. Among the changes in the universal welfare state in Sweden in recent decades has been the growth of social enterprises or alternative providers of welfare services. Taking alternative provision of childcare to illustrate this, we note that the number of ‘private’ or non-municipal childcare centres more than tripled between 1988 and 1994, going from 538 to 1,768 facilities, while the number of children attending them more than quadrupled during the same period, increasing from 8,500 to 39,100 (Stryjan 1995, Pestoff 1998). ‘Private’ childcare now accounts for more than 10 per cent of all children enrolled in childcare facilities, and includes nearly one-fifth of the children in the major urban areas of Sweden. However, nearly two-thirds of these ‘private’

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childcare centres are either parental or worker cooperatives, or voluntary organizations with special curriculum (Pestoff, op. cit.), while there is a small, but growing number of private for-profit providers. Social enterprises have also been established in other areas such as eldercare, healthcare, handicap care, homecare for the elderly, and so forth. Social enterprises are firms that try to fulfil several goals simultaneously, recognizing that no single goal can constantly be maximized, but rather that several of them will be satisfactorily fulfilled or satisficed, at the same time. Social enterprises do not exist to maximize the return on capital nor the revenues over expenses, but rather are willing to accept a lower, but nevertheless satisfactory economic return on their efforts in order to combine the necessary economic goal with other important social goals. This results in a more rewarding occupation for the employees, socially meaningful goals for the firm or organization and greater value creation for the consumers. This, in turn, leads to a positive selection of the staff, where employees are not onedimensional utility maximizers seeking the highest possible wages, but rather wish to satisfy several goals simultaneously, like achieving necessary financial rewards, a meaningful occupation, stimulating and flexible working conditions, care giving, and so forth. It may also lead to a positive selection by clients who want to play a more active role as co-producers of welfare services. Social enterprises can also facilitate and enhance the self-realization and professional development of their employees, the improvement of work environment, and also promote the influence and empowerment of their clients/consumers on the services produced. One of the main competitive advantages of social enterprises is that they generate trust between their staff and clients/consumers, since they clearly have more than one goal, including one or more readily identifiable social goals. By simultaneously fulfilling diverse and multiple goals, while accepting a satisfactory rather than a maximal return on their capital, they are clearly indicating a policy of not exploiting the information asymmetries related to their professional role and services/products for their own personal and private benefit, that is, they will not behave opportunistically vis-à-vis their clients. Thus, by operating on a policy that is clearly committed to a satisfactory return on revenue over expenses, while promoting social goals, they are thereby providing a minimal guarantee of trust to their clients/customers and to the local community in which they operate. Social enterprises can take several legal forms: a nonprofit or ideal organization, a cooperative or economic association and even a private firm. However, while the latter is normally the privileged and preferentially treated business form in national legislation in most European countries, it can nevertheless undermine one main competitive advantage of social enterprises in Sweden, that is, trust. One major contribution of social enterprises in Sweden concerns the renewal and enrichment of working life associated with changes in providing welfare services. Quite different work relations are, however, implied by each form of social enterprises. There are three basic forms or models for

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providing third sector welfare services. The first form is the worker cooperative model, where all or most of the providers of a social service are also members of the service cooperative, but where the clients have a formal customer relation with the providers. Here we can expect to find worker empowerment most clearly manifest. The second form is the consumer cooperative model, where the consumers own or run the cooperative and the staff members are their employees. Here, consumers become co-producers, which is primarily associated with consumer empowerment. The third form comprises voluntary organizations, where the employees and clients share common social or pedagogical values related to the purpose of the voluntary organization. Both groups participate in the management and running of the services, to a greater or lesser extent. The provision of cooperative and third sector welfare services is local and small-scale in nature. Third sector and cooperative alternatives can provide either the staff or producers of welfare services and the consumers or clients of such services with greater influence in their operation. This results in greater citizen control over the welfare services they demand and depend on and it also promotes local grass-root democracy. Moreover, greater employee influence and client empowerment not only result in greater involvement as producers and/or consumers of welfare services, but normally will also result in better service quality. Third sector employment in residual welfare states: the US and the UK Rothchild-Whitt (ibid.) examined the value rational type of social action missing in Weber’s discussion of bureaucracy. She discusses the emergence of contra-bureaucratic or collectivist organizations based on substantive rationality, rather than formal rationality. She notes the tension between substantive or value-rational social action on the one hand, and formal or instrumentally rational action on the other. The polar opposite of the formal bureaucracy would be fully collectivized democracy, she argues, one that was governed by the principles of substantive rationality. She explored numerous alternative institutions that were created in the 1970s in a mid-sized Californian city and identified eight characteristics of collectivistic organization that set them apart from typical bureaucratic organizations. They are presented in greater detail in Chapter 4. However, of particular importance for the current discussion of work environment and service quality, is her point on the incentive structures found in value-rational social action or collectivist organizations. She maintains that value-rational organizations use different kinds of incentive structures to motivate people’s work. They primarily rely on purposeful incentives, like value fulfilment, secondarily on solidarity incentives like friendship and only lastly on material incentives. They also reject bureaucratic incentives like career advancement, and so forth. She continues that work in collectives is construed as a labour of love and they pay themselves

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low salaries. First and foremost, people come to work in alternative organizations because it offers them substantial control over their work. Collective control means that members can structure both the product of their work and the work process in congruence with their values, ideals and life style (ibid., pp 515–16). Sporadic attempts to compare the public, private and third sector as employers in residual welfare states are found in two separate studies: an American study of the quality of employment in the US nonprofit sector and a British study of the quality of third sector employment in the UK. The former study compares workers’ attitudes in three sectors, based on US survey data both in 1977 and in 1990 (Mirvis 1992). People employed in the nonprofit sector on both occasions gained more satisfaction from their jobs than their counterparts in business or government. In the University of Michigan Survey Research Center’s 1977 study of a national sample of working adults, people employed in the private nonprofit sector reported having more meaningful work and higher involvement in their jobs than their counterparts in business and government. While facing more pressures and overload on their jobs, they were less constrained by work rules and controls and felt that they could exercise more influence in their organizations. These differences even held when matching for occupation (Mirvis 1992, p 23). However, two trends shaped the 1980s. First, many nonprofit organizations in the US experienced intense funding pressures and responded by adopting a more ‘businesslike’ approach to their management and operations, including a greater emphasis on efficiency and stronger reliance on management controls. Second, employees coming into the workforce in the 1980s had a much stronger materialistic orientation than earlier entrants (ibid., p 24). The 1990 study showed that employees in nonprofit organizations were still less materialistic and often willing to trade off lower wages against nonmaterial satisfactions they gained from work. They also had a stronger ‘nonmonetary’ orientation than employees in business or government, stating that their work was more important than the money they earned. Second, the staff of NPOs often believe that their work makes a significant impact on their recipients. This link between them is often an important motivator in human service work, whatever the sector, but is especially pronounced in the private nonprofit sector (ibid., p 26). However, during the 1980s many NPOs and government agencies adopted quality control policies, more hierarchy and rules, and so forth, and provided market-based incentives (ibid., p 27). Overall, this study confirms the earlier results of Rothchild-Whitt’s study of value-rational social action. The 1990 data confirms that work in the US nonprofit sector retained much of its appeal to job holders. Wages in NPOs were still lower than in government and business, and many more people since 1977 reported that they lack job security. Still, the work itself provided meaningful compensation, and more people in NPOs than elsewhere said that it ‘pays’ to work hard on their jobs (Mirvis 1992, p 39). Moreover, the nonprofit sector offered proportionally more opportunities for employment

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for women and minorities and more options for part-time work than private business, as did the nonprofit sector in Britain. And NPOs continued to attract (and retain) a highly educated workforce. However, there are indications that the work climate in the nonprofit sector was becoming ‘more like a business’ and that NPOs were reaping the seeds of growing cynicism in their workforce (ibid., p 39). Almond and Kendall discuss the quality of third sector employment in the UK (2000). They note three different perspectives or assumptions derived from the literature. The first states that the field of activity, rather than sector, is important for employment. The second argues that public/private differences override all others in terms of employment conditions. The third expects both economy-wide and sectoral differences for all three sectors, that is, public, private for-profit and third sector. The empirical data for their study comes from the Quarterly Labour Force Survey (QLFS), based on 260,000 persons aged 16–64 years old, with 5,000 respondents from the third sector. The third sector proves unique as an employer in the UK. Almond and Kendall find that unpaid work is rampant in the third sector; there is considerable workplace flexibility and nonstandard employment, in particular part-time employment (ibid., p 32). Third sector establishments are usually small in size and third sector employees are three times as likely to be employed in small workplaces than employees in the public or private sectors (ibid., p 35). They conclude that the third sector differs from both the public and private sector in terms of employment. The third sector emerges remarkably distinct in terms of greater wage equality, its socioeconomic composition and its capacity to mobilize unpaid overtime as well as negative aspects like some staff health problems and the ‘involuntariness’ of its nonstandard (part-time) workers. These findings support the third proposition stated at the outset of their study and confirm many of Rothchild-Whitt’s earlier findings. The third sector possesses some specific features that result in a unique combination of work attributes (ibid., p 37). Both these studies of third sector employment were set in residual welfare states, where the third sector plays a very different role than in a conservative continental welfare regime or in a universal welfare state. However, it is important to keep the institutional setting in mind when considering the quality of third sector employment in general and work environment in particular. In conservative continental welfare regimes the role of the third sector as a provider of welfare services historically is based on the principle of subsidiary. In Germany, the six established welfare associations, or wohlfahrtsverbände, employ more than one million persons and provide substantial welfare services. Here, employment conditions come much closer to those of civil servants than private employees. In Italy we can compare worker motivation and job satisfaction in public and third sector agencies providing social services. Universal welfare states not only have higher levels of membership in voluntary associations in general than residual welfare states, but

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they also have much higher levels of unionization. Stronger unions, together with dominant social democratic parties, will, of course, promote better working conditions, even among workers in the third sector. Workers in social enterprises in Scandinavia may also expect similar employment conditions to those found in the public sector, without all the stress, of course. Whether these findings from the US and the UK would hold true in Germany, Italy or Sweden is considered below. Third sector employment in conservative welfare states: Germany and Italy Bode discusses the quality of nonprofit employment and work organization in the German third sector (2004). He notes the historical role played by NPOs in providing welfare services in Germany and the importance of third sector provision still today. In Germany, the six established welfare associations, or wohlfahrtsverbände, employ more that one million persons and provide substantial welfare services to major social groups. Alongside them are, however, the newer small – often social movement-based – associations engaged in various areas, including sports, culture, leisure, but also social services. They provide services like childcare, women’s shelters, and so forth. The institutional setting of the established welfare associations and the new small associations providing welfare services is quite different and has a different impact on the quality of employment. The ‘corporatist’ culture in most public–private partnerships for providing welfare services has important consequences for the quality of employment. The established welfare associations have become highly professionalized (ibid., p 236) and their working conditions were very similar with those found in the public sector (ibid., p 237). However, volunteers were expected to fulfil administrative tasks or to engage in a range of community work. They were often concentrated in separate units and focused on special tasks, like visiting old people in hospitals or running leisure activities for children, and so forth. This resulted in considerable distance from the professional core. Moreover, in the newer small social movement organizations, flexibility in employment is the key word, with its freelance and project employment even among professionals, as well as much greater flexibility in terms of working hours, time worked and wages. Here we can note conditions that approach those found for employees in the third sector in residual welfare states. However, today, professionals in both types of NPOs are experiencing more competition and greater market demands than previously. In conclusion, Bode notes that employment in the third sector in Germany results in two different configurations. The traditional one provides working conditions that were and are still close to the public sector norms. Here, employees had considerable discretion in determining social needs; work was quite comfortable and often led to a regular professional career (ibid., p 240). Even the less qualified workforce experienced generalized social standards

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and job security. By contrast, the newer small associations produce a different pattern. They lack job security and their financing operations are more precarious. However, the formal patterns of employment in both the newer and established NPOs seem to be moving away from the logic of the public sector towards that of the private for-profit sector, although at a different rate (ibid., pp 242–43). An Italian study from 1999 compared 228 public and nonprofit organizations from 15 provinces operating in the social services sector, with 2,066 workers/respondents (Borzaga and Tortia 2006). Approximately one-third of the service providers were public bodies, one-third religious or non-religious nonprofit organizations and one-third were social cooperatives. The latter are a new phenomenon and run mostly like worker cooperatives. This study explored how workers’ satisfaction and loyalty to the organization was influenced by workers’ motivations and by the incentive mixes offered by the different organizational forms. It concluded that different organizational forms appear to be characterized by different incentive structures with diverse abilities to satisfy workers. Hence, internal labour relations emerge as a crucial variable in explaining the ability to match workers’ motivations and organizational objectives. On the other hand, wage differentials are only one of the elements in this complex picture, contrary to the assumptions found in other studies. Nonprofits are able to obtain the highest degree of worker satisfaction on most of the items considered, notwithstanding their disadvantage in the field of salaries. More important, they seem the best able to involve the workforce (ibid., p 243). An analysis of satisfaction and loyalty showed that intrinsic and relational attitudes are crucial factors for increasing worker satisfaction, whereas workers driven by economic attitudes appear less satisfied. The specific strength of NPOs resides in process-related aspects of the incentive mix, whereas they seem weaker at the economic level (ibid., p 244). Comparing employment in municipal and non-municipal childcare in Sweden Most of the women working for third sector providers of childcare services have previously worked for municipal services. Several studies show that the social-economic and education background of the staff of alternative providers of childcare services is quite similar to that found in municipal services. This differs considerably from circumstances in residual welfare states, where the staff often has quite different socioeconomic and education backgrounds. As mentioned above, cooperative childcare has grown dramatically in recent decades in Sweden. More than half of all children under the age of seven are enrolled in childcare services financed by public funds. More than one of eight of these children attends childcare services contracted out to nonmunicipal providers, mostly to different types of cooperatives and voluntary organizations. In the major urban areas like Stockholm, Gothenburg and

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Malmö, more than one out of five children attending childcare services is enrolled in a cooperative facility (Pestoff 1998 & 2005). Alternative childcare services were studied in the Work Environment and Cooperative Social Services Project (WECSS). Its data collection comprises data from three different sources. Fifty-seven cooperative childcare centres were chosen in a quasi-random sample from six different parts or counties of Sweden (Pestoff 1998) and the managers were interviewed in the Organization Study. Nearly 250 personnel questionnaires from the same childcare centres were returned and analysed in the Staff Study of psychosocial work environment. Almost 600 client questionnaires were collected and analysed in the Parent Study. The analysis of the WECSS Staff Study follows Karasek and Theorell’s (1990) model and provides extensive empirical material, based on nearly 250 respondents. It presents the profiles of these three different types of social enterprises: parent cooperatives, voluntary organizations and worker cooperatives. It came as no surprise that the worker cooperatives were consistently rated higher by the staff on most of the over 200 items employed in WECSS Staff Study of psychosocial work environment. This should, however, not be simply interpreted that worker cooperatives provide a superior model for worker empowerment. Rather the worker cooperative model is based on organizational structures that facilitate group processes that are positive for promoting the interest of workers/employees. Thus, they help bridge the gap between the instrumental and expressive values of employees (Hirschman 1982). This may, however, take place at the expense of parent involvement and engagement. Moreover, we saw one or two examples in the comments of a worker cooperative where the manager was repeatedly criticized by one or more staff members for treating the cooperative and her fellow workers as if they were her employees in a private firm. Voluntary organizations appear often to function like mixed or multi-stakeholder cooperatives, and they have a common ideology or pedagogical perspective that unites the interests of various stakeholders. Parent cooperatives often demonstrate several clear signs of less functional parent/staff relations, which detract from their psychosocial work environment. They were, however, better than the municipal services. We also wanted to compare the psychosocial work environment of these three types of social enterprises with that of municipal childcare services, in order to explore the possibility of creating good jobs, renewing and enriching work life and improving the psychosocial work environment, in publicly financed childcare services. We were able to employ a retrospective comparative method, since most of the staff had previously worked in municipal childcare services. Those with experience from both forms of childcare services were asked to make comparisons of nearly 30 aspects of their present jobs in cooperative childcare services with those found in municipal childcare facilities. A summary of this comparison shows that the overwhelming

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majority (80.8 per cent to 88.4 per cent) of the staff had no previous personal experience of cooperatives before starting to work in a childcare cooperative. They chose to work with cooperative childcare primarily because they found it meaningful, they wanted more influence over their work, and/or due to the cooperative’s specific curriculum profile. The overwhelming majority of those with experience of both forms of childcare services – between 68.3 per cent and 85.5 per cent – clearly preferred working for cooperative childcare compared with municipal services. In almost all respects of work life, cooperatives were rated better or clearly better than municipal childcare services by the staff of all three types of cooperative services. But the staff of worker cooperatives noted the clearest improvement of work life. The staff of all three types of cooperative childcare services showed a similar high level of engagement at the start of their employment in a cooperative. But, more of the staff of worker cooperatives (43.3 per cent) declared a higher degree of engagement today than the other two types of cooperative childcare services, while more of the staff of parent cooperatives (37.9 per cent) claims a lower degree today than at the start. Finally, given the chance to do it all over again, twice as many staff members in worker cooperatives (66.7 per cent) as in parent cooperatives and voluntary organizations (33.3 per cent) would definitely choose to work in a cooperative social enterprise. Only a tiny fraction of the staff in any of these three cooperative forms would, however, consider working in municipal childcare services again. Numerous comments to these questions illustrated both the positive as well as the negative side of work life in cooperative childcare services. Social enterprise childcare services permit the staff much greater influence on their own work, much greater responsibility for and participation in decisionmaking, greater contacts with parents, greater possibilities for improvements in their work environment, greater work satisfaction, and so forth, than municipal childcare services do. At the collective level we find more engaged staff and presumably, better quality service. Karasek and Theorell (1990) contrast their ideal of bad and good jobs. The latter sound very much like the cooperative social enterprises studied here, whereas the former sound like anything but. Thus, they characterize good jobs in the following way: skill discretion: the job offers possibilities to make the maximum use of one’s skills and provides opportunities to increase skills on the job; autonomy: freedom from rigid worker-as-child factory discipline, workers have influence over selection of work routines and work colleagues can participate in long-term planning; psychological demands: the job has routine demands mixed with a liberal element of new learning challenges in a predictable manner; social relations: social contacts are encouraged as a basis for new learning and new contacts multiply the possibilities for self-realization through collaboration; social rights: there are democratic procedures at the workplace; meaningfulness/customer/social feedback: workers gain direct feedback from customers, and workers and customers

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work together, customizing the product to meet the customers’ needs (ibid., pp 316–17). The WECSS Staff Study demonstrated that social enterprises in childcare could provide good jobs in the fullest meaning of Karasek and Theorell. In addition to being psychologically demanding, they provide high-decision latitude to the workers, high social support for the workers and enduring interaction with the clients. These work-life attributes, however, stand in sharp contrast with those found in the services provided by the large hierarchical bureaucratic organizations often associated with the public sector services in Sweden, including municipal childcare services. Thus, in this sense the social enterprise model can help to transform welfare services jobs into active, participative and interactive jobs. The social enterprise model can also help to enrich work life of the employees. Thus one of the quickest and most direct ways of enriching work life, redesigning work and promoting human resource management in the welfare service sector in Sweden is to decentralize the provision of welfare services and to let the women produce them in social enterprises. This brief comparison of the quality of employment and work environment in third sector providers of welfare services in three different types of welfare states or regimes underlines the importance of considering the institutional context. The quality of work and work environment in the third sector can, under certain circumstances provide substantial benefits for the staff when compared to the public sector, although this is far from the norm. The SCB had good reason to lament the lack of systematic research in this area. It is very important and worthy of a much more systematic comparative effort than this brief explorative overview could provide. The quality of employment and work environment depend on the national context. In Sweden, where the public sector’s work environment is rapidly and dramatically deteriorating, alternative models of organizing work must be explored.

Conclusions and discussion This chapter considered several important issues related to work environment for public welfare workers, the quality of public welfare services and the role of the third sector as a welfare service provider and employer in a universal welfare state. These phenomena all have clear economic, organizational and political aspects. The main economic issues discussed include the growing levels of stress experienced by the staff providing public welfare services and the escalating costs of long-term sick leave, disability leave and early retirement at the end of the 1990s and beginning of the twenty-first century. The organizational issues concerned repeated reorganizations of welfare services in the 1990s to introduce market mechanisms and budget and staff cutbacks. Taken together they resulted in much greater levels of stress among public sector workers providing welfare services, and as a result a deterioration of

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the quality of public welfare services. Organizational issues also concern alternative solutions provided by the third sector and social enterprises in the form of more engaged and motivated staff, and engaged citizens as coproducers of welfare services and more satisfied clients. These economic and organizational aspects also have a direct and indirect impact on the governance of such organizations. The political aspects of work environment, service quality and the third sector as a service provider concern the degradation of the public sector as an employer since the mid-1990s and the deterioration of the quality of public welfare services during the same period. Restricting or limiting the staff ’s decision latitude or control of the what, when, where and why of everyday decisions concerning the most efficient and effective way to provide enduring welfare services is hard to fathom, given the extraordinary long tenure of power by the Social Democratic Workers Party (SAP) in Swedish politics, both nationally and at the municipal and county levels. It also seems to contradict their long-term efforts to change power relations in Swedish society and their programme to promote increased power in daily life (SAP 1996; see, also, Levi 2000). Moreover, it is impossible to understand how the same party that for decades championed women’s rights to an occupation and income of their own, that developed family friendly policies to facilitate this through childcare and maternity leave, could turn its back in the 1990s on the very women who supported them so loyally, and leave them in such degrading working conditions, in the very sector they have the greatest control over, that is, the public sector. The Social Democratic Party, SAP, noted in its report of the future of Sweden (1996), that workplaces are one of the most important areas where power in daily life should be sought. Employees’ power over their place of work should be strengthened. Work life must be organized so the competence and creativity of employees will be released and taken advantage of. Development of possibilities for everyone in working life should also concern the promotion of basic democratic values in work life. This should benefit both employers and employees in the public and private sectors (ibid., p 69). However, talk is cheap. Why did SAP not promote greater workplace democracy in the public sector during the 1990s? Imagine if an effort by the SAP, similar to that of providing workers with greater control over the private sector – through the highly divisive and hotly contended Wage Earner Funds in the 1980s – had been devoted to improving working conditions in the public sector in the 1990s. Perhaps then much of the deterioration of working conditions in the public sector might have been avoided. If the top-down models of bureaucratic or managerial control of workers, which are largely irrelevant for welfare service production, had been replaced by more flexible small-scale decentralized models of democratic control at the local level, perhaps much of the degradation of the work environment in public sector services in Sweden might have also been avoided. Similarly, much of the costs for increased sick leave, disability leave and early retirement that followed

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might also have been avoided. Decision latitude or control at work is ultimately a political question, regardless of whether the employer is public or private. Equally, preference for one model of production – public rather than third sector or private – is also an issue of politics or ideology. Refusing to recognize the benefits associated with small-scale democratic models for producing welfare services and insisting that most, if not all, services be produced by the public sector is equally a question of political choice. How do such choices reconcile with policy pronouncements about increased power in daily life? Equally important, is the fact that welfare state research is often enmeshed with political or ideological choices. It focuses on the quantitative aspects of comparing the development of welfare regimes, but says little if anything at all about the quality of the welfare services provided, the working conditions of the women providing them or the satisfaction of citizens consuming them. This attitude seems untenable, given the dramatic degradation of the work environment of the public sector in Sweden in recent years and the deterioration of service quality. Most welfare state research seems very concerned about who provides services – the public or private sector – but it is rather indifferent to the fate of those actually producing welfare services and those consuming such services. It is time for a change. It is time for quantitativeoriented welfare state research to recognize the importance of more qualitative approaches that focus on the substantive content of welfare services paid for by taxes and provided by the public sector. It is no longer possible to assume that public welfare services are superior by definition to those provided by either the nonprofit sector or the private for-profit sector. It is time to systematically explore how welfare services are actually delivered, what types of organizations provide various types of welfare services and what is the role of the third sector in their production. Working conditions and service quality are empirical questions, as shown above, and also require systematic research. Improving the quality of welfare services will become much more important during the next 20–30 years for all the stakeholders: the staff who produce welfare services, the citizens who benefit from them, the municipalities who provide them, the taxpayers who finance them, and the state that has a responsibility for maintaining a minimum quality of the services provided. It is therefore important to move beyond simple black and white models of privatization, the freedom of choice revolution, the introduction of buyer– seller models and total quality management, and so forth, and look more closely at the work environment of the staff that provide such services, as well as the special character of these services themselves. They are based on repeated and enduring interaction between the providers and clients of major welfare services like childcare, elementary and higher education, handicap care, eldercare and healthcare. It is important to ask for whom these services are provided and how both providers and clients can actively contribute to improving the quality of the services. It is also important to understand how

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the repeated and enduring interactions between the providers and clients of such services can be organized to improve their quality, for mutual benefit of both groups and for society as a whole. Unless the work life and work environment of the staff providing personal welfare services is rapidly and dramatically enriched and improved, it will be hard to attract the qualified and motivated staff necessary to meet the growing need for welfare services. Without qualified and motivated staff to provide high-quality services, the most quality conscious clients will flee publicly provided services, choosing private for-profit ones instead, where they can top up the minimum provided by service checks in order to obtain an acceptable standard. Under such circumstances, the public welfare services face the risk of continued decline in quality, becoming more impoverished and they will only be used by the most needy clients, thus, further accentuating a ghettoization of public welfare services. Then the staff will be even less motivated to provide good quality services. However, one sure way to improve the quality of personal welfare services and to attract the qualified staff necessary to provide them in the future is to enrich the work life of the staff and to improve their work environment. Enriched work life and improved work environment will result in more engaged staff. An engaged and motivated staff provides better quality services than highly stressed staff. Research on Swedish social enterprises shows that the staff was more motivated to gain control over their working conditions and to improve them, than they were by instrumental rewards (Pestoff 1998 & 2005). Thus, contracting-out the provision of welfare services to social enterprises provides one strategy for attracting well-qualified and highly motivated staff. Research on alternative childcare services in Sweden shows that both the staff and clients in the three types of organizations studied here, that is, parent cooperatives, voluntary organizations and worker cooperatives, clearly preferred the services provided by social enterprises to municipal services. But, the women employed in worker cooperative childcare services were more positive about these organizational changes than were their colleagues in parent cooperatives. Parent cooperatives, however, promote other values, such as greater parental influence and more active parental participation in the daily life of their child(ren) (ibid.). Thus, there are clearly two sides to the coin of organizational change, depending on which model is employed. Greater worker participation does empower the workers, but not necessarily promote all the interests of the clients. Similarly, greater consumer participation does empower the clients, but not necessarily promote all the interests of the workers. Group interests and group conflicts are therefore not resolved by greater participation of a single group in the decision-making of social enterprises. However, multi-stakeholder organizations provide both recognition of and representation for the most important stakeholders responsible for achieving an organization’s social goals. Thus, research on social enterprises and the alternative provision of childcare services in Sweden demonstrated that organizational models can be

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found to promote greater worker control, influence and participation in the production of welfare services and/or to promote greater citizen participation in the production of the welfare services they demand. It shows that it may be possible both to improve the quality of service provided and to attract the qualified staff necessary to provide services to a growing number of elder citizens in the future.

Notes 1 In March 1991 compensation for sick leave was reduced during the first days. In 1992, employers took over the responsibility for sick-leave compensation during the first 14 days. In January 1997, this period was extended to 30 days. In April 1993 a ‘quarantine day’ was introduced into sick leave. In 1996, the level of compensation was reduced to 75 per cent of the loss of income (Arbetslivsfakta, nr. 1, 2/97). 2 See section headed ‘Unhealthy work in the 1990s – a major challenge for welfare services and the public sector’. 3 They were Denmark, Finland, France, Germany and Holland.

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Consumer perspectives on the social economy and civil society

Introduction Rothstein (2000a, 2000b, 2002) and Kumin and Rothstein (2005) discuss social dilemmas, trust and social capital. Rothstein (2000a) identifies an institutional mechanism, which implies that trust can be established ‘from above’ rather than exclusively from below, as argued by Putnam (1993, 1995) and many other scholars of social capital. The trustworthiness of ‘efficient’ institutions creates interpersonal trust, according to Rothstein (2000a), which in turn makes the ‘production’ of social capital in civil society possible. This institutional mechanism ‘from above’ provides the missing link in the theory of social capital and game-theoretical explanations of cooperation. He pursues this line of analysis (2000b, 2002) and argues that differences in general or universal entitlements in universal welfare states promote trust and social capital, while means-tested, or need-tested provision of social services fail to do so. Thus, Kumin and Rothstein (2005) maintain the impact of welfare state institutions can either make or break social capital. They present a fourth theoretical perspective to the debate about democratic citizenship and social capital, introduced by Mettler and Soss (2004). They note the dominance of three broad theoretical perspectives: 1 2 3

a ‘sociological’ tradition focusing on political orientation and behaviour in terms of communication and socialization; a ‘psychological’ perspective emphasizing individual values and identifications; and an ‘economic’ focus underscoring self-interest and individual rationality.

But, Kumin and Rothstein (ibid.) emphasize the importance of a political science perspective on citizenship and the formation of social capital, one that focuses on political institutions and ‘policy feedback’. They do provide an interesting institutional interpretation; however, it does not go far enough. They have had an interesting political analysis of developments in Sweden since the mid-1990s that follow up on themes earlier explored by Rothstein (2000a, 2000b, 2002) about the importance of political

Consumer perspectives on the social economy and civil society 115 institutions and the universality or targeted nature of various social policies in explaining social capital. They note that personal experience with universal or means-tested programmes either promotes or respectively reduces interpersonal trust. However, their analysis falls short of the mark, since it fails to take the politics of austerity into account. As noted in Chapter 5, Sweden experienced a sharp deterioration of work environment in the public sector during the last 10 years, in particular in the public bodies providing universal welfare services, and also a clear decline in service quality of many public sector welfare services due to the public funding cutbacks in recent years. Kumin and Rothstein say nothing about how such changes in the quality of the services could impact on the trust created ‘from above’ by ‘efficient’ institutions. What kind of ‘policy feedback’ results from a deteriorating work environment and poorer quality childcare, basic education, eldercare, and so forth, in a universal welfare state? How will it contribute to the creation or destruction of trust and social capital? The answer to these questions probably depends on the degree of exposure as a provider and/or consumer of welfare services. Turning to another important point they question continued societal support to voluntary organizations on several grounds. First, voluntary organizations can create both social and unsocial capital, or trust and distrust among citizens. Second, they argue that investing in ‘efficient’ government may be more important for creating trust and social capital than investing in voluntary organizations. While sharing their criticism against the romanticism about popular movements and voluntary organizations among certain scholars, once again they fail to go far enough. Fewer and fewer Swedes spend much time in face-to-face contacts in voluntary organizations in the twenty-first century, while most of them do have regular contacts with one or more public bodies implementing social welfare policies. Their contacts with public bodies may contribute more to creating trust and social capital or distrust and unsocial capital, depending on their experience and expectations, than membership in voluntary organizations. However, much more could be done to design policies and institutions at the local level that include the consumers of various social policies more actively in the implementation of such policies. Citizens could be actively engaged as co-producers of the very services they need and depend upon in their daily lives. This would promote greater face-to-face interaction between the staff and consumers of major welfare services. This would also allow for greater citizen influence over their own life-politics, as well as over the welfare services that are most important to them and thereby could contribute to creating trust and social capital, in the same way that Kumin and Rothstein argue that universal welfare state institutions do, as opposed to selective ones. Finally, Kumin and Rothstein fail to explain the embarrassing fact that in repeated empirical studies of citizens’ trust in various social policy institutions, the public bureaucrats rate extremely low. Rothstein (2000b) discusses the balance scores for various public programmes and shows that the universal

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ones get much higher public support than the selective or means-tested ones. However, the state and municipal administration consistently had very negative scores between 1981 and 1997 (ibid., p 227). Keep in mind that this is the same ‘efficient’ public administration that is supposed to create trust and social capital ‘from above’. How is this possible? No explanation is provided. Once again, greater citizen participation in the implementation of social welfare programmes would promote greater face-to-face interaction between the staff and consumers of major welfare services and could perhaps help to alleviate the very negative attitudes about the public administration of welfare services and generate greater trust and social capital. Providing citizens with greater voice and participation in the provision of major welfare services, and the creation of greater trust between the staff and consumers of such services is the focus of this chapter. Promoting greater citizen involvement in matters important for their daily life would be one way of reorganizing the public sector, rejuvenating civil society and making citizenship meaningful. For example, greater citizen participation in the production of local public services, in particular, personal social services, is one specific way to rejuvenate civil society and to generate trust between producers and consumers of such services in Sweden. Until recently the public debate focused mainly on introducing market mechanisms and new public management techniques. But, there are other emerging models for the future of the public sector, including a ‘participatory state’, where the groups excluded under more hierarchical models, are permitted greater organizational involvement. Such an approach empowers both the frontline workers and the clients of organizations (Peters 1994, p 11, Peters 1996). A participatory state is dependent upon both its citizens and frontline staff becoming involved in making some choices about policy and social services. Similar to the market model, a participatory model would also give citizens more choice and direct control over providers of various programmes. But the manner in which these choices would be exercised in the participatory state would be much more overtly political. Rather than voting in the market with their feet, euros, dollars, crowns or yen, citizens would vote through some sort of political process. They might participate in referenda on local policy or in local representative structures, like parent involvement in school committees (Peters 1994, p 15), in childcare services (Pestoff 1998; see, also, Chapter 8), or patient involvement in healthcare (North and Werkö 2002; see also Chapter 7). We will explore: how the social economy can contribute to greater citizen involvement and facilitate the development of a participatory state; how the social economy can promote the interests of civil society; and how the social economy and social enterprises can create trust between the producers and consumers of welfare services. We will also examine in what areas of production the social economy can potentially make a significant contribution to the creation of trust between consumers and producers. Should social enterprises concentrate on certain types of goods or services related to their competitive advantage? In

Consumer perspectives on the social economy and civil society 117 postindustrial societies the provision of high-quality welfare services has become a major concern for ordinary citizens (Pestoff 1999a, 2000). Can the social economy contribute to generating trust between the consumers and producers of such services? The approach employed here is to identify those services where trust can most likely play an important role to the consumers and citizens. Then we explore more closely the values associated with and facilitated by social enterprises for citizens, and demonstrate how they can generate trust between the providers and consumers of social services. In order to do so, we will first discuss problems of asymmetric information associated with personal social services. Then, alternative ways of distributing a firm’s or organization’s surplus and the non-distribution constraint are briefly considered and two different kinds of trust are discussed. We continue by introducing the concept of citizens as co-producers and follow the development of the Swedish social economy, before we summarize some of the main findings from the Parent Study of the project on Work Environment and Cooperative Social Services (WECSS) in Sweden. It focused on the empowerment of citizens as co-producers of welfare services. We will use the example of daycare services provided by three different types of social enterprises: parent cooperatives, voluntary organizations and worker cooperatives. We will explore the values promoted by these social enterprises and how they contribute to greater trust between the providers and clients of such services.

Welfare services, collective action, trust and citizenship From a transaction costs perspective, variations in ownership are related to the costs of market contracting. The costs of ownership, that is, monitoring the behaviour of managers, collective decision-making and risk-bearing, should be weighed against the costs of market contracting (Hansmann 1988, 1996). The latter costs are related to market power, being locked-in or having no alternatives and asymmetric information. Markets do not manage to achieve allocative efficiency nor Pareto optimal allocation when one or more of the five following characteristics is present: 1 2 3 4 5

the failure of competition particularly linked with increasing returns to economies of scale; the existence of public goods; the presence of externalities; of incomplete markets; or of imperfect information (Stiglitz 1988).

The presence of one or more of these characteristics results in ‘market failure’ (ibid.). Focusing on the problem of imperfect information, Enjolras (1993, 1995) identifies the asymmetry of information between the providers and consumers of personal services in terms of producers having more information

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than consumers. The former can take advantage of their superior knowledge to obtain excess profit from a market situation or relationship. Such an asymmetry is typical of personal domestic services that are strongly relational, such as care for the elder or childcare for children. An elderly person or their family finds it difficult to evaluate a priori the quality of services provided by a certain organization or by certain visits to the home. Similarly, parents find it difficult to evaluate the quality of childcare service prior to enrolling their child. Moreover, the quality of the service does not entirely depend on a certain number of material activities according to predetermined norms. The quality of human relations established between the producer and consumer of services plays a crucial role, but the quality of these relations cannot be determined beforehand. By contrast, if consumers demand similar services, public provision is simple, but if their demands are different, the public provision will satisfy some, but not others. There will always be certain persons who want more, others who want less service, and yet others who want different services all together, something that is difficult for the public sector to cope with (ibid.). The provision of rapidly expanding service or different kinds of service due to heterogeneous demand often results in ‘public failure’, that is, some citizens’ needs may go unmet. Economists argue that associations and nonprofit organizations tend to develop in areas or activities that are either subject to market or public failure. Associations, by their not-for-profit nature and the fact that they are often based upon voluntary activities, are particularly well-suited to develop responses and provide services where other forms of production fail (ibid.). This is so because associations can promote trust between the consumers and producers of services. It is commonly assumed that associations will not engage in opportunistic behaviour, given the absence of the motive to maximize profits. However, it should be kept in mind that the voluntary or third sector is not immune to failure (Salamon 1987), nor to breaching life sustaining trust relations (Michells 1911, 1962, Perrow and Guillen 1990). A consumer who is aware of the asymmetric information situation may, therefore, prefer to deal with a family member, an old friend or someone recommended by a church, a nonprofit organization or a cooperative on the assumption that such providers of service will not normally take advantage of the ignorance of the consumer. Producers who choose to provide services through nonprofit organizations provide a signal of quality and a potential guarantee that the asymmetry of information will not be exploited nor lead to excess profits. In addition, a nonprofit organization can satisfy minority needs not catered to by the public sector (Enjolras 1993, 1995). Thus, the social economy should have a potential competitive advantage in the production of personal welfare services. Smith notes that the social economy in Europe has always responded to social needs that are inadequately met by either the state or market (2005). Since the 1980s the reshaping and restructuring of state activity has involved

Consumer perspectives on the social economy and civil society 119 policies and programmes to extend the role of social economy organizations in the delivery of welfare services previously provided directly by the welfare state. This may be interpreted in terms of rolling-back the state, but also in terms of recasting the relationship between the state, the third sector and citizens. Fitzpatrick (1999) discusses ‘Green’ social policy, while Hirst (1994) focuses on the renewal of contemporary democracies through associationalism. See Chapters 9 and 12 for more details of Hirst’s proposals. The European perspective on the social economy places much greater emphasis on membership influence and control, and on the participation of the principal beneficiaries in the management of a firm or organization and their influence on the goods or services the organization provides. Thus, it is often the goals or aims of the firm or organization, how it is run, who runs it, for whose welfare or benefit and who participates in the decision-making that are the focus of research on social enterprises and the social economy in Europe. We now need to consider more closely how such concerns are related to trust and how they facilitate trust between a firm or organization and its principal beneficiaries, regardless of its legal form. For some the very word profit excludes the possibility of trust in certain industries or sectors. Arrow (1963) maintained this was particularly true for medical care. Other researchers studying the third sector, social enterprises or nonprofit organizations proclaim their competitive advantage in terms of their ability to create ‘trust’. The non-distribution constraint in the US (Weisbrod 1988) or democratic control by members in Europe (Enjolras 1995, Pestoff 1996, Borzaga and Mittone 1997) provide two different mechanisms for safeguarding against opportunistic behaviour on the part of the owners and/or staff of third sector organizations, which gives them a competitive advantage vis-à-vis for-profit organizations. Their social goals guarantee that information asymmetries will not be exploited by the management or staff of such organizations, thus, rendering them more trustworthy. Quite simply, they will not exploit their customers, as they lack the motive to do so, since they are not-profit maximizing organizations. Trust means different things to different people and it can be seen either as an individual (Arrow 1963) or a collective (Putnam 1993, 1995) phenomenon. Much of the economic discourse on trust has a micro-focus and concerns avoiding negative or opportunistic behaviour in exchange relations. This mainly involves generating trust between two individuals in a precarious situation, like a doctor and his/her patient (Arrow 1963, Meyer et al. 1995). Where trust is low or absent exit can often provide redress for opportunistic behaviour and allow an individual to avoid future risk. Research on collective action and social norms bear directly and indirectly on the social economy and social enterprises providing welfare services. One important finding of this research rejects the central assumption of neoclassical economics, namely that all individuals are norm-free maximizers of immediate gain. They can only be trusted to promote their own interests, if necessary at the expense of others. Nor will they contribute to collective

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solutions to common problems. M. Olson summarizes this in The Logic of Collective Action (1965, 1971), stating that ‘. . . rational self-interested individuals will not act to achieve their common group interest’. However, recent experimental laboratory and field research clearly demonstrate the existence of ‘. . . multiple types of individuals, some more willing than others to innovate reciprocity to achieve benefits of collective action’ (Ostrom 2000a, p 138). She maintains the necessity of revising the theory of collective action to include assumptions about other types of actors and the existence of social norms. The inclusion of at least two types of ‘norm-using’ players: ‘conditional cooperators’ and ‘willing punishers’, in addition to rational egoists, makes more sense out of laboratory experiments on contributions to public goods. Conditional cooperators are individuals who are willing to initiate and/or partake in cooperative action when they feel that others will do likewise and to repeat these actions as long as others also do so. In addition, there is yet another type of player who, given the opportunity, is willing to punish presumed free-riders through verbal rebukes or the use of material payoffs, when available. Together, conditional cooperators and willing punishers create more robust conditions for collective action and mechanisms for helping it to grow (ibid., p 142). Thus, an important question is how potential cooperators signal one another and how to design institutions that reinforce rather than destroy cooperation. Ostrom notes that both laboratory experiments and field studies confirm that a substantial number of collective action situations are resolved successfully, or at least in part. However, it is essential to develop public policies that enhance socially beneficial, cooperative behaviour, based in part on social norms. Merely changing the payoff structures for rational egoists is insufficient (ibid., p 154). Moreover, she is highly critical of intended or unintended actions by governments that crowd out citizen initiatives (2000b): The currently accepted theory of collective action presumes that individuals are helplessly trapped in social dilemmas. This has led to a form of policy analysis that presumes external authorities (read governments) must solve all collective action problems. The presumably universal need for externally implemented incentives is based, however, on a single model of rational behavior . . . that is, the rational egoist model. However, she continues that this model provides an inadequate foundation to explain empirical findings from the field and experimental laboratory related to non-market settings. In fact, she argues that such policies give citizens two devastating messages. First, public pronouncements stress that only short-term selfish actions are expected from ‘the common people’. But a policy ‘. . . designed for knaves tends to drive out civil virtue and their intrinsic motivations are crowded out’. Second, the literature stresses that citizens do not have the knowledge nor skills needed to design appropriate institutions to overcome collective action

Consumer perspectives on the social economy and civil society 121 problems. Here, citizens risk becoming passive observers in the process of design and implementation of effective public policy. The role of citizens is reduced to voting every few years between competing teams of leaders (ibid., p 15). Thus, much of contemporary policy analysis and the policies adopted in modern democracies tend to crowd out citizenship. They do this by crowding out norms of trust and reciprocity and by crowding out the knowledge of local circumstances and the experimentation needed to design effective institutions. Moreover, she notes that crowding out citizenship is a waste of human and material resources and challenges the sustainability of democratic institutions over time (Ostrom 2000b, p 15). Furthermore, she notes that the general preference for neat, orderly hierarchical systems needs to be replaced by a recognition that complex, polycentric systems are necessary to cope effectively with complex problems of modern life and to give all citizens a more effective role in the governance of democratic societies (ibid., p 1). Increasing the authority of citizens to devise their own rules may result in processes that allow social norms to evolve and thereby increase the probability of them better solving collective action problems together (Ostrom 2000a, p 154). In postindustrial societies active trust needs to be deliberately won from other persons, rather than coming from traditional or pre-established social positions or gender roles (Giddens 1994). It is a powerful source of social solidarity, since compliance is given freely rather than enforced by traditional constraints. It is based on a ‘positive spiral’ of difference. Getting to know the other, coming to rely on the other, presumes that differences can become a means for developing positive emotional communication. It generates solidarity across time and space: the other is someone on whom one can rely, and that reliance becomes a mutual obligation. When founded on active trust, obligation becomes reciprocal. Obligations are binding because they are mutual, and that is what gives them their authority (ibid.). In civil groups the members of an organization work together to achieve common aims or goals. However, repeated interactions between two individuals permit them to get to know each other better, to understand and perhaps to appreciate their respective strengths and weaknesses, to rely on each other and to develop mutual solidarity with each other. This results in an active, collective and positive spiral of trust. For example, in Sweden, parent cooperatives and voluntary organizations that provide childcare services are governed by the parents themselves and they normally have a work obligation. Many parents also hold an elective or honorary office and they must play an active role as long as they want to benefit from the services provided by such childcare centres. They get to know each other, come to rely on each other and develop mutual solidarity with each other, both individually and together in the group. Moreover, the parent’s active participation in the management of their daughter’s and/or son’s childcare centre permit them to get to know the staff in a way not possible with other forms for providing such services, either

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public or private. They get to know the strengths and weakness both of individual staff members and the staff as a team. Parents observe the staff when they occasionally substitute for them as temporary relief. They discuss the staff together when they hold their regular meetings, and they decide on changes in the running of the childcare centre and, when necessary, even changes in the staff. This too results in an active, collective and positive spiral of trust by the parents for the staff. Thus, trust is promoted by the social economy and involving citizens as co-producers. Thus, the political science and sociological perspective on trust is normally more collective and proactive in its approach. Trust and social capital are conceived of as a positive collective phenomenon. They stem from repeated face-to-face interactions between the members of various civil groups. The achievement of collective goals is a primary function of trust. It would usually not be possible to achieve such goals without the cooperation of most of the members of a group, that is, without extensive reciprocity. The repeated interaction in a group also permits its members to control for opportunism, but, this comes mainly as a by-product of their interactions. Thus, it is possible to speak about two distinct types of trust: an individual and a collective type. We are mainly interested in exploring the active, collective trust in relation to the social economy and social enterprises as expressions of civil society.

Institutionalizing consumer voice: citizens as co-producers Rifkin (2004) notes that the old centralized forms of governance – both in the Soviet Union and in the West – were modelled after F. Taylor’s Principals of Scientific Management. He introduced a rationalized, hierarchic commandcontrol mechanism into American industry in the first decade of the twentieth century. Governments also relied on this top-down bureaucratic model of governance. Here, civil servants perform like soldiers and the citizens are treated like passive recipients, which mirrors a machine mentality of the age. It left little room for discretion from those executing the tasks or those receiving the services (ibid., p 118). However, cybernetics contributes a different perspective. It is the theory of the way messages or pieces of information interact with one another to produce predictable outcomes. The steering mechanism that regulates all behaviour is feedback. It’s like adjusting the thermostat for maintaining the right temperature. It relies on both positive and negative feedback, and how machines self-regulate themselves. Rifkin claims that the old model did not make room for feedback and inclusion of all potential actors. In the new model government becomes only one player, among many diverse players, in a political game. The state is no longer sovereign, and loses its power as the exclusive agent responsible for disciplining its citizens. Thus, governance is reconceived as the management of communication flows, and players position themselves at strategic nodes, embedded in multiple interacting networks, where their every

Consumer perspectives on the social economy and civil society 123 decision and action has consequences that flow across the network and beyond (ibid., p 223). Beyond exit and voice: citizens as co-producers Nearly 40 years ago, A. Hirschman (1970) initiated a discussion of ‘exit’ and ‘voice’ as alternative consumer responses to decline in the performance of firms, organizations and states, and as alternatives for improving the quality of goods and services. Exit is a typical market response, where disappointed customers change their patronage to other suppliers of the goods or services they purchase. Voice is a typical political response, where customers verbally express their disappointment about poor quality, either individually or collectively (ibid.). Voice can either be expressed as complaints or as suggestions for improvement (Stryjan 1989, Pestoff 1994, Möller 1996). Elsewhere, Hirschman (1982) discusses consumer disappointment in relation to two major kinds of goods, for example durables and non-durables, and regularity with which they are used. His main focus is, however, on the relationship between the consumer and the goods or objects consumed, and he pays less attention to services (Pestoff 1994). One way to reorganize public services and promote greater citizen involvement in the public sector is to enhance their role as co-producers of social welfare services and to provide them with greater collective influence and bargaining power in the production process itself. Involving citizens as co-producers could result in a far-reaching form of consumer participation in the production of welfare services, one that goes beyond exit and voice, and facilitates active and creative consumer responses. Such responses will not always manifest themselves spontaneously among individual consumers, especially during periods of major reorganization or during reductions of the public services. The necessary structures or institutions must be created for facilitating citizen involvement; thus, political support will be necessary and essential. In relation to exit, it is worth keeping in mind that price elasticity and quality elasticity differ. When prices increase, it is often those customers with the smallest means, that is, the marginal customers, that exit first, since they are most price-sensitive. However, when quality decreases, it is often those customers with the greatest means who leave first, because they are also the most quality-conscious. Thus, if we want to avoid a situation where the most quality-conscious and articulate consumers, that is, the well-educated middleclass, are the first to exit, then some means must be found to facilitate voice and restrict exit (Hirschman 1970). In his reaction to the initial discussion of exit and voice, Hirschman (1981) also noted that consumer and producer ignorance about products and services, particularly new ones, motivated voice. Consumers often have clear preferences about their food tastes and readily use exit to express these preferences. By contrast, expressing preferences about services, like childcare,

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education, elder care, handicap care, healthcare, and so forth, which are of an uncertain quality, both for the consumers and producers, requires more voice, and an active and constructive dialogue between consumers and producers in order to improve the quality. Ignorance about quality is not necessarily limited to consumers or to new products. The demand for new services may arise more rapidly than the ability to meet them or the knowledge of how to satisfy them. Under such circumstances, it is not so much a question of consumer ignorance or even redress, but of educating producers and providing them with as much information as possible about their own performance in relation to consumer preferences. Voice provides much more information about performance and preferences and is also much richer in detail than exit (ibid.). Similarly, with products or services where there is asymmetric information or disproportionate knowledge between sellers and buyers, such as medical care, childcare, elder care, and so forth, voice has an important role to play. Exit and voice should, therefore, not be seen as mutually exclusive alternatives, but rather as complementary responses to consumer disappointment, depending on the type of goods or services. Voice is not a rival to exit, but rather a welcomed complement, that is, consumer sovereignty (exit) often needs to be complemented by consumer participation (voice). Hirschman’s discussion of the elusive optimal mix of exit and voice points out the difficulty of combining these two consumer responses. Too much input of the one diminishes the impact of the other (1970). So, exit and voice are not mutually exclusive, but they can in fact depend on or be predisposed towards each other, according to Möller (1996). The existence of one influences the other. Thus, exit may be necessary for augmenting consumer influence, but it is not sufficient for achieving it alone. Moreover, exit alone seldom promotes trust. Collective voice is also needed to achieve real consumer influence and trust. Fountain (2000) notes the growing levels of employment in the service sector in all advanced OECD countries. She specifies the structural features of service organizations, in terms of being labour-intensive, dealing directly with the customer, and producing intangible products. In addition, three characteristics of service enterprises help to focus attention on the service recipients. The first is that of the intangibility of many services – compared to manufactured products – which makes the customer’s highly subjective perceptions of quality vitally important, in particular, in the process of producing/providing services. This explains the importance attributed to the subjective perceptions of the customer in the service transaction or encounter (ibid., p 58). The second is that service production, delivery and consumption often occur simultaneously, making buffers, stockpiles, quality control and other control processes unnecessary. Finally, in services customers easily enter into the production and delivery of services as co-producers. They provide essential inputs in real-time through the verbal and written information they contribute. For many government agencies policy is formulated in detail,

Consumer perspectives on the social economy and civil society 125 but implemented and delivered during service transactions. It follows from the structural features of service production that service recipients or customers are the arbitrators of quality and that customer satisfaction – the logical objective of customer services – is highly subjective (ibid., p 58). This also calls for greater attention to the institutionalization of customer/ citizen voice. Social enterprises promote power-sharing and a closer partnership between consumers and producers of welfare services. We suggest that such organizational forms could contribute greatly to improving the quality of welfare services, since they promote both a collective institutionalized encounter and the continuous collective interaction between consumers and producers. The institutionalized encounter and continuous interaction between clients and producers of welfare services is closely related to the process of quality improvements stemming from such interaction. Perceiving consumers as co-producers carries with it three major potential benefits: better quality products and services, shorter time required to develop new products or services, and lower costs (Wikström 1993, pp 8–11). Interaction or personal relations between the consumer and provider constitute the major difference between goods and services. Hirshman’s distinction concerning the regularity of use of goods (1982) could be beneficial to the analysis of welfare services. Here we propose to distinguish between nonenduring and enduring services. Minor services that are used on a daily basis or services that are used irregularly and do not depend on repeated interaction, will not result in the same kind of long-term relationship between the consumers and providers of the services. Such services will be referred to as non-enduring services. Regularly used welfare services do, however, rely heavily on repeated, long-term interaction between the consumers and producers of the services. These services will be referred to as enduring services. Moreover, enduring services often include attributes of greater intimacy, stemming from more extensive contact between the consumer and producer than is the case with non-enduring services. Furthermore, enduring services are often collective in nature, that is, they are normally provided for a group of consumers or clients at the same time, rather than one at a time. Figure 6.1 illustrates these distinctions. One problem however remains, that is, how to distinguish between nonenduring and enduring services? Often repeated and relatively inexpensive services belong to the former category, while enduring and important physical or social needs belong to the latter. Personal services like haircutting or hairdressing, getting the clothes dry-cleaned or the car washed, occasional baby-sitting, sporadic meals out, short-distance transport, the telephone, fax, internet, and so forth can be considered non-enduring services, in most cases. Enduring services would include, regular, long-term welfare services, like childcare, education, chronic healthcare, handicap care, elder care, and so forth. Services found in the first category can readily be bought and sold in a market situation, subject to supply and demand. However, services in the

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Figure 6.1 Exit, voice and the type of goods or services. Source: Pestoff, 1998 & 2005.

latter category have different attributes that require more enduring relations between buyers and sellers than are normally found in a market. Here, it is necessary to establish stable long-term relations between buyers and sellers, to guarantee some minimum demand for the provision of such services on a continual basis. Day-to-day market fluctuations might make the minimal provision very difficult (Pestoff 1994). Thus, non-market institutions often provide such services. Since voice can be both a negative as well as a positive expression of consumer (dis-) satisfaction, it can either take the form of customer complaints or suggestions for improvements in the services. But, it stands to reason that greater interaction between consumers and producers will normally result in more positive voice. The greater the need for or the role attributed to the voice of consumers in the production of a service, the greater the likelihood that consumer–producer interaction will be positive. Thus, if we were to place services on a continuum from non-enduring to enduring, we could expect to find an increasing degree of positive voice and continuous interaction between the consumers and producers of the services at the enduring end. This also implies that customer voice is a more important component in defining the quality of services at the enduring end of the continuum. Thus we see that developing policies for promoting an active and constructive voice of consumers can be an important, if not an essential, aspect of improving service quality in enduring services. But, just as there are two types of voice – positive and negative – so too, there are two ways in which voice can be expressed: individually or collectively. Service management is normally concerned with negative and positive individual voice, but positive collective voice could also make an important contribution to certain services,

Consumer perspectives on the social economy and civil society 127 particularly enduring services, since they are often collective by nature, serving groups of clients, rather than one at a time. Collective voice can also be divided into two categories: direct or representative voice. In groups over a certain size, it is common to shift from direct to representative voice. In certain types of enduring services, representative voice could play a more important role, if the right institutions were encouraged. We suggest that social enterprises, cooperatives and voluntary associations are all institutions that could contribute greatly to improving the quality of welfare services, by promoting a collective institutionalized encounter and continuous collective interaction between consumers and producers. Here we are mainly interested in the encounter between the personnel and clients of enduring welfare services. If these encounters can be formally institutionalized to include collective and representative voice, then they can provide unique opportunities for continuous interaction between consumers and producers, and for improving the quality of welfare services. Cooperatives and other nonprofit organizations can, thus, make unique contributions by bringing clients and personnel together, providing the former with collective voice and representation, thus, promoting an institutional dialogue between them. Such dialogues can in turn promote the quality of the services provided. Thus, cooperatives provide a unique form for formally involving consumers as co-producers of enduring welfare services. Cooperative welfare services provide a good example of consumers as coproducers of important social services and of an institutionalized encounter between the consumers and producers of such services. Evers (1998) discusses co-production in terms of empowerment, while others see it as a way of improving service quality. Wikström (1996) notes how changing patterns of interaction between firms and their customers open new possibilities of doing business. Such changes are based on a much closer relationship between producers and consumers than traditionally found in industrial society, a relationship in which the consumer increasingly assumes the role of co-producer. This implies a clear shift in perspective (ibid., p 360). A firm’s interaction or social exchange with its customers is therefore central to her definition of co-production. Their social exchange is motivated in part by the perceived degree of uncertainty in their exchange relations and in part by the potential benefit accruing to the participants from eliminating such uncertainty (ibid., p 363). Co-production, therefore, implies greater consumer involvement in the production process. It is defined and discussed at greater length in Chapter 8. Here, parent participation in the delivery of childcare in eight EU countries is compared and contrasted. Neither municipal nor private for-profit providers of childcare encourage much parent participation in their services. Co-production is also found in some third sector providers of healthcare in Japan, and discussed in Chapter 7. In the Swedish context the motives of parents for choosing one type of childcare facility or another provide a good indication of the values they hope to promote by becoming co-producers of

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their own and their children’s childcare service. Moreover, the provision of welfare services through social enterprises that facilitate co-production changes the relationship between the state and its citizens in a fundamental way. Citizens are no longer merely voters who exercise a political choice every fourth year. Rather they become active participants in the production of the welfare services they themselves demand and for which they pay taxes and user fees. In fact, it is possible to speak of civil democracy, which was defined by (Pestoff 1998 & 2005) and presented earlier in Chapter 1. For our purposes, we need therefore to specify in greater detail the value or values associated with co-production of welfare services, in particular the specific value added for consumers of welfare services. Here we will use childcare to understand these values. Therefore, we turn to the development of parent cooperative childcare services in Sweden, to illustrate the point. 2. The Swedish social economy and cooperative welfare services Welfare associationalism, according to Smith (2005), provides a vision of ‘non-market decentralization and social participation, where individuals and groups either produce the welfare services which they consume, or where this is unrealistic, have the greatest practical control over the design and delivery’ (Fitzpatrick 1999, p 18). This bears striking similarity to Hirst’s arguments for associative democracy (1994). For Hirst, the production of services either by large-scale public bureaucracies or hierarchically managed business corporations, due to privatization, has led to a low level of accountability to citizens. There is little or no room for citizens to shape the services they receive, however good or bad they may be, since citizens are merely clients or objects of the public or private administration. The social economy can promote welfare governance that promises to open new avenues for citizens to engage themselves in collective action and social governance. Smith recognizes, however, that the state has generally shown little interest in associative reform; rather it has shown greater willingness to privatize welfare provision, extending the reach of the private for-profit-oriented economy. However, without sustained political action, the social economy will remain a small symbol of another kind of economy, one based on meeting social needs and enhancing social citizenship. Some of the so-called privatization of the public sector in Sweden has in effect led to a ‘cooperativization’ of some welfare services. Cooperatives have rapidly become one of the most important alternatives to the public provision of childcare services in the current transformation of the welfare state and privatization in Sweden. Non-municipal childcare services, usually known as alternativ drift/alternative provision/ or enskild/private services in the Swedish debate, expanded dramatically after 1985. In 1988 there were just over 500 non-municipal childcare centres that met public requirements for public financial support, but they reached nearly 1,900 at the end of 1995 – an increase of nearly four times. The number of children enrolled in these non-

Consumer perspectives on the social economy and civil society 129 municipal childcare services increased from 8,500 in 1988 to 47,000 at the end of 1999 – a nearly sixfold increase. On average in 1999, nearly 15 per cent of all childcare children enrolled in childcare facilities, attended non-municipal services. However, large variations can be noted for different parts of the country: in Uppsala County nearly one-quarter of the children attended nonmunicipal facilities, while in Västerbotten in the north, only about one out of twenty did so (SoS 1996). A closer look at non-municipal childcare services shows that a variety of forms are employed for organizing and running such activities, including parent cooperatives, voluntary organizations, worker cooperatives, organizations with special curriculum, a combination of these or ‘other’ forms, and so forth. Nearly two-thirds of the ‘private’ or non-municipal childcare facilities in 1995 were either provided by parent and worker cooperatives or voluntary organizations. More than half of the non-municipal childcare services were organized as parent cooperatives in 1995, or 1,016 of them. Worker cooperative childcare was a new form at the end of 1991, and between then and 1995 the number of worker cooperatives increased from 13 to 157. In 1995 there were 250 non-municipal childcare centres and after-school homes with a special curriculum, for example, Montessori, Regio-Emilia or Waldorf. They call themselves ‘parent co-ops’, but usually organize themselves as a voluntary organization or foundation. The parishes of the Swedish Church ran 47 childcare centres in 1992, and in addition there were several ‘parent co-ops’ affiliated with the Swedish Church, which took the legal form of a voluntary organization. Cooperative organizations offer a unique opportunity for creating a dialogue between the clients and personnel of welfare services and under certain circumstances can involve the consumers as co-producers of welfare services. The financing of these ‘privatized’ welfare services, however, remains primarily a public responsibility. A variety of vouchers has been developed or is under development to pay for welfare services, for example, childcare vouchers, school vouchers, patient vouchers, home-help vouchers, and so forth. These vouchers are financed by public funds and provide access to basic welfare services, that is, they constitute a quasi-market. Service vouchers are intended to give individual consumers greater freedom of choice and to stimulate efficiency through competition, according to their proponents. While service vouchers may facilitate ‘exit’ reactions by clients, and introduce more market signals, they ignore ‘voice’ reactions and, therefore, discourage a dialogue between the consumers and providers of personal welfare services. Parent cooperatives and other types of nonprofit organizations providing childcare in Sweden not only facilitate a dialogue between the producers and consumers of welfare services and enhance the meeting between them, they also encourage the direct participation of consumers in the production of such services. It is common for parental cooperatives and other nonprofit alternative forms of childcare to include a work obligation for members in their statutes. Parents are not normally charged with actively developing the

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curriculum of childcare, but they are obliged to participate in maintenance, repairs and administration of childcare centres. This work obligation provides greater insights into the running of individual childcare centres and promotes a dialogue between the personnel and parents. Parents also have a majority of the seats on the board of these childcare centres, which gives them greater influence. They are able to formulate and discuss their opinions about the quality of the service with the personnel. Personal welfare services are provided by the public sector in universal taxfinanced welfare states with the principle of equity in mind. All members of society have an equal right to get the same services wherever they live. Parents have the right to the same childcare services, children to the same basic education, the handicapped the same rehabilitation and activity support, the sick the same medical services, the elderly the same home-help or institutional care, and so forth. However, equity is often bought at the price of quality in services, or the idea that one-size-fits-all. This may prove adequate during the establishment and expansion period, when services are new. However, it is less suitable in a mature demand situation. Once basic services become available, then their quality and individual needs may become more important to some citizens. Some parents may demand new or different kinds of childcare services, offering special curriculum, like Montessori, Waldorf or Regio-Emilia. Others are more willing to participate in the management and maintenance of their child’s childcare centre, in order to be a part of the child’s daily life while they are still small, without the mother having to sacrifice her career. Special curriculum or parental participation in the management of the services are rarely possible in public childcare, so some parents will be attracted to, or even help to start alternative childcare services. Most alternative childcare services include a work obligation as a condition for membership. Parents who are unable or unwilling to do so can choose between municipal or private for-profit childcare services, where there is no work obligation. Both the existence of a work obligation and the requirement to serve on the board of these democratically run services provide parents with insights on the nature of the services and how their own services run, as well as institutions for democratic control of the same, or simply voice. However, this represents organized or collective voice, rather than sporadic individual, voice. Thus, a unique feature of parent cooperatives and voluntary organizations providing childcare services in Sweden is their democratic nature that embodies the organized voice of the parents and consumers of the services. Institutions for facilitating voice are rare, if not impossible, in public and private for-profit childcare services in Sweden. Thus, it appears that third sector providers of personal welfare services have unique features that are closely associated with voice, rather than exit. This makes them uniquely designed for providing personal welfare services. No other type of organization can promote the organized, collective voice of the consumers of enduring personal welfare services in the same way or to

Consumer perspectives on the social economy and civil society 131 the same extent as third sector organizations, especially when members are primarily recruited from the consumers or users of such services. It is their unique features, in particular their ability to promote consumer voice, which gives them a competitive advantage over other organizational forms for providing enduring personal welfare services. To the extent that service quality is dependent on a continuing dialogue between the providers and users of such services, those organizations that promote greater voice will provide services of better quality. The recent development of greater cooperative and nonprofit production of welfare services in Sweden can facilitate the development of citizenship and citizens as co-producers of welfare services in several ways. The institutional involvement of members/citizens as co-producers of welfare services can extend their right to participate in the governing process by facilitating their direct participation in the production of some relevant personal welfare services. It can clarify their duties as citizens and consumers of welfare service in terms of the obligation to contribute time and service. It can promote a decentralization of the public sector and maintain upward accountability of the producers of welfare services to politicians; it can also increase the downward accountability of these same producers to their consumers or users. Finally, it can strengthen the control of citizens over politicians and politicians control over the bureaucracy and the public service. The empirical materials summarized below stem from the Swedish Project on ‘Work Environment and Cooperative Social Services’ (WECSS), called ‘Arbetsmiljö och social service i kooperativ regi’ in Swedish. The WECSS Project comprises three different datasets from three different, but related, sources. Fifty-seven social enterprises providing non-municipal childcare services were chosen in a quasi-random sample from six counties in different parts of Sweden (Pestoff 1998 & 2005) and the managers were interviewed in the Organization Study. Nearly 250 personnel questionnaires from the same childcare centres were returned and analysed in the Staff Study in terms of the Karasek/Theorell (1990) model of psychosocial work environment (see Chapter 5 for details). Almost 600 client questionnaires were collected and analysed in the Parent Study. We will summarize the Parent Study below.

Empowering consumers: a summary of the WECSS Parent Study Here we are interested in exploring the value created for parents through the existence of possibilities for greater participation in some forms of welfare services providing childcare services, as opposed to the lack of possibilities for participation in municipal and private childcare facilities. Three types of social enterprises were included in our study: parent cooperatives, voluntary organizations and worker cooperatives. The WECSS Parent Study sheds light on the motives parents have for choosing one type of social enterprise rather than another and for becoming involved as a co-producer or not.

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Three clear client profiles of these social enterprises are derived from the parents’ perspective. Nearly one-third of the parents with children in parent cooperative childcare centres participated in the start of the cooperative childcare centre, while less than one out of ten parents with children in voluntary organizations or worker cooperatives did so. This is a reflection of the fact that parent cooperative childcare services often had their origin in a lack of municipal services in the 1980s and parents thus took these matters into their own hands by starting childcare services of their own preferences. A brief survey of the socioeconomic background of the parents of children in different types of social enterprises demonstrates that they do not comprise a homogeneous group of well-off parents. Parents with children in childcare services provided by voluntary organizations rate higher in most social respects, for example, education, occupation, type of housing and income, than parents with children in the two other types of cooperative childcare services, while parents with children in worker cooperative childcare services often come lower, except for type of housing, where parents with children in parent cooperatives come lowest. Both parent cooperatives and voluntary organizations have a work obligation associated with membership, while worker cooperatives lack this feature, as parents can’t become members. The parents of both the first two types of cooperatives express similar attitudes to the positive aspects of the work obligation. It facilitates their participation, gives a feeling of belonging and valuable insights, that is, it enables their integration into the organization and running of cooperative childcare services. These two groups attribute less weight to gaining influence through the work obligation. Turning to elected and honorary offices, many more parents held them in parent cooperatives than voluntary organizations, while few if any parents have such possibilities in worker cooperatives, and where they do, it is only on advisory bodies. In contrast to attitudes about the work obligation, parent attitudes about their work on the board emphasize the political aspect of holding an elective office in cooperative childcare services, that is, it increases parental influence. The integrative aspects, already noted for the work obligation, are also rated high by both groups of parents in terms of holding elective or honorary offices. The higher rate of holding elective and honorary offices in parent cooperatives than in voluntary organizations means that the parents have greater access to influence in the former type of childcare services. Parents presented their motives for choosing one form of social enterprise providing childcare service rather than another. A clear profile of each type of social enterprise can be seen in the alternatives preferred by each group of parents. Parents with children in parent cooperatives attributed most importance to possibilities for influence, but they were also highly motivated by wanting to participate in their child(ren)’s daily life, as well as by practical issues like closeness to home, a lack of other childcare alternatives and even certain economic advantages. Parents with children in voluntary organizations

Consumer perspectives on the social economy and civil society 133 gave greatest priority to special curriculum, while they gave second priority to possibilities for influence and third priority to wanting to participate in their child(ren)’s daily life. They also referred to instrumental motives, like closeness to home, dissatisfaction with municipal services and recommendations by friends or relatives. In both these two types of cooperative childcare, parents shared some values and they had value-based, as well as instrumental motives. Parents with children in worker cooperatives, however, had a very different pattern of priorities and gave greatest weight to practical issues like closeness to home, other unspecified motives or recommendations by friends. Parents with children in worker cooperatives were clearly motivated by instrumental attitudes in their choice of childcare service. In addition, an engaged staff and an enjoyable atmosphere were given as an important advantage by parents of all three types of cooperative childcare services. Moreover, this study showed a greater staff engagement among workers in all three types of cooperative childcare services than municipal facilities where they were previously employed (Pestoff 1998 & 2005; see also Chapter 5). The disadvantages associated with each type of childcare service are also typical for their organizational profile established earlier. Most parents in all three types of cooperative childcare services stated that there was no major disadvantage with their cooperative childcare service. However, while not minding about the work obligation per se, parents in both parent cooperatives and voluntary organizations were nevertheless critical of the additional time required by the cooperative form and they were also concerned with the difficulty of combining their roles as parent and employer. Parents with children in worker cooperatives named few specific disadvantages. Parents were also asked how satisfied they were with the running, administration and organization of their son’s or daughter’s childcare cooperative. More parents with children in worker cooperatives were ‘very satisfied’ than parents in the two other types of cooperative childcare, while fewer of the former were ‘somewhat satisfied’. By combining these two categories, we find that more than four-fifths of the parents in all three types of cooperative childcare services were satisfied with the running, administration and organization of their child(ren)’s childcare service. Parents attitudes about their collaboration with the staff and their satisfaction with the running, administration and organization of their child(ren)’s childcare service showed similar positive levels and they did not seem to reflect any major differences between these three types of cooperative childcare services, nor the possibilities they provided for parental participation. One conclusion might be that such possibilities make little difference to parents; however, we feel that it would be both hasty and wrong to conclude that. Parents judge the performance of their child’s childcare service on its own merits, not on some general or abstract merits of ‘good teaching’ or ‘good childcare’. If there is a relatively good match between their own motives for choosing a particular type of childcare service and if the childcare service can promote such values, then parents will be satisfied. This of course may be true

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even for parents with children in both municipal and private childcare services. Thus, differences in work obligation and holding an elective office don’t reflect these parents’ satisfaction or dissatisfaction with the way the childcare services are run. Rather, their attitudes towards the work obligation and holding an elective office may reflect more fundamental differences in the attitudes of different groups of parents. Some of them are more engaged in the early years of their child(ren)’s life than others, some both enjoy the work obligation and holding an elective office, while others do not or cannot afford to. Those who want to participate would, however, probably not be satisfied, or not as satisfied, if such possibilities didn’t exist. Thus, it isn’t a question of the best form of childcare services in a simple black/white choice, but rather that what is better for one group of parents may not be so for another. So, greater welfare pluralism could promote numerous different forms for providing the childcare services citizens want, including municipal and private childcare services, parent cooperatives, voluntary organizations and worker cooperatives. Some parents had personal experience from both alternative and municipal childcare services. They were asked to compare them. Nearly three-quarters of the parents with children in any of the three kinds of cooperative childcare services express an appreciation of the openness and concern of the cooperative’s staff compared with that of municipal childcare services. Half or more of the parents with children in parent cooperatives or voluntary organizations who were eligible also provided comments to their comparison of staff openness and concern, while three out of five with children in worker cooperatives did so. The overwhelming majority of their comments emphasize either their dissatisfaction with municipal childcare services or the good relations they have at their present cooperative childcare centre, while some say that the openness and concern of the staff was similar in both types of childcare. More than three out of four of the parents in all types of social enterprises (from 77.4 per cent to 85.5 per cent) expressed a clear preference for the social enterprise form compared to municipal childcare services. This was the question that received the most comments from parents, indicating its saliency for them. Parent comments could be divided into three main categories. The overwhelming majority stressed the advantages of their cooperative childcare, some mentioned the disadvantages of the municipal services and others commented on the importance of special curriculum, while a few said that there was little difference between cooperative and municipal services. Finally, parents were also asked to state, if they could choose freely, whether they would choose cooperative childcare services for their child(ren) again, given its possible disadvantages. Nearly three-quarters or more of the parents in all three types of alternative services expressed a clear preference for cooperative childcare over municipal childcare facilities. Note, however, that there was much more missing data in the answers of parents with children in worker cooperative childcare services. More than one out of four

Consumer perspectives on the social economy and civil society 135 parents with children in parent cooperatives or voluntary organizations provided comments to their preference for cooperative childcare, even in the future, while more than one out of five parents with children in worker cooperatives did so. Once again most of their comments emphasized the advantages of the cooperative form, mentioned the disadvantages of municipal services, referred to the benefits of special curriculum or occasionally some disadvantages of the cooperative form (‘it takes too much time’). Wikström (1996) argues that co-production is motivated by the degree of uncertainty in the exchange between the producer and consumer of goods and services and the potential benefit to the participants from eliminating such uncertainty. Social enterprises and cooperative welfare services with clear social goals and nonprofit motives help to generate trust between producers and consumers of such services by minimizing or eliminating opportunistic behaviour. In the case of childcare, some types of cooperative welfare services eliminate uncertainty by promoting parental participation as co-producers, that is, by the work obligation combined with their democratic procedures and parents holding honorary offices. The creation of benefits related to the values of the parents is made possible by some types of cooperative childcare centres. In particular, the values of parent influence, participation in their child(ren)’s daily life, special curriculum and feelings of belonging are important values to the parents of children in parent cooperative and voluntary organizations. Co-production eliminates the uncertainty related to interaction between producers and consumers of such services, since it involves parents in the production, and their participation is ‘the best guarantee of quality’, according to one parent. Co-production both enables the parents and empowers them in fulfilling their own values related to the institutional care of their children. It is not as easy, if at all possible, to promote the same values in worker cooperatives, nor in municipal or private childcare services, but worker cooperative childcare services nevertheless promote the instrumental values of the parents. In this respect it can be argued that parent cooperatives and voluntary organizations’ childcare services are unique in promoting the creation of the values related to co-production. Without the existence of this form of childcare for children and without the participation and involvement of parents in the production of the cooperative childcare services, such values would not be created for these parents. Thus, these special forms of childcare service have created value for the parents by engaging them as co-producers. Both the lives and values of the parents with children in such childcare services, and most likely of their children too, would not be enriched by the possibilities provided by co-production, if such alternatives were curtailed for political or financial reasons. None of these values associated with co-production are available in services provided by worker cooperatives, municipal or private childcare services, since parent participation and co-production are not promoted by them. Without such forms of childcare services, these parents would not be able to obtain such values. Thus,

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co-production promotes unique values for large groups of parents. It thereby enriches publicly financed personal welfare services and contributes to the renewal of the welfare state by turning it into a more participatory welfare society.

Summary and conclusions Market failure and information asymmetries make personal welfare services well-suited for provision by third sector and nonprofit organizations, since they instil more trust in the relations between the consumers and providers of such services. The enduring nature of some personal welfare services renders them better suited for voice than exit. Moreover, the transaction costs of providing such services via markets are prohibitive for the consumers, producers and society. All these considerations argue for third sector alternatives to both markets and politics. European concern with social enterprises that facilitate democratic control by members and customers or principal beneficiary representation could facilitate the development of trust between the providers and clients of personal or domestic welfare services. Two distinct types of trust can be contrasted, that is, the passive-individual type that is traditionally the focus of economists and the active-collective type that is more often studied by political scientists and sociologists. Social enterprises and cooperative welfare services turn members into co-producers of the services they demand. Such organizations provide a viable alternative to both markets and quasi-markets, as well to the state. They also contribute to the development of civil democracy and local cooperative self-management of welfare services. From the perspective of clients or parents, providing an opportunity for the realization of the expressive values of parents in social enterprises promotes civil democracy and facilitates the role of citizens as co-producers. In this fashion social enterprises not only help to eliminate uncertainty in the relations between parents and the staff of childcare services, but they also promote greater active-collective trust between the clients and their social enterprises. This chapter has considered several issues directly related to the future of the social economy and civil society in Europe, as seen from a Swedish perspective. Both economic and political aspects of these phenomena were considered. The main economic issues discussed above include asymmetric information and trust, co-production as a way of eliminating uncertainty and achieving more satisfied clients. These economic aspects, however, also have a direct and indirect impact on the governance of such organizations. Turning to the political side of the coin, the most important political topics examined above comprise: direct member control and collective trust; citizens as co-producers and civil democracy; counteracting the growing democracy deficit by providing citizens with a new channel of participation and influence in public decisionmaking; and ways of rejuvenating social capital. These political aspects also have a direct and indirect impact on the success of such organizations.

7

Democratizing medical and healthcare – the Japanese example

Introduction: markets or other social institutions Nobel laureate Kenneth Arrow maintained that when markets fail to achieve an optimal state, society will to some extent recognize the gap, and nonmarket social institutions will arise to bridge it (1963, p 947). Furthermore, he contended that the special structural characteristics of the medical-care market in the US were largely attempts to overcome the lack of optimality, due to the lack of a market for taking suitable risks and the imperfect marketability of information. As a result, there was an overwhelming predominance of nonprofit over proprietary hospitals in the US. In 1958, only 3 per cent of hospital beds were in proprietary hospitals, compared with 30 per cent in voluntary nonprofits, while the remaining two-thirds were in federal, state and local hospitals (ibid., p 920, fn no 20). Arrow argued that the special character of the medical industry in the US was a result of the necessity of trust in the relationship between the patient and physician, where the latter cannot appear as if he were maximizing his income at every moment. Thus, he avoids the stigma of appearing to profitmaximize in order to maintain trust. Arrow states, that ‘[t]he very word profit is a signal that denies the trust relations in the medical industry’ (ibid., p 965). Osborne and his colleagues recently analysed the challenge of change in the contemporary Japanese voluntary and nonprofit sector (2003), with particular reference given to developments after the Hanshin Awaji Earthquake in January, 1995 (Makoto 2003). Osborne emphasizes the importance of distinguishing between old and new style voluntary nonprofit organizations in Japan, where the former are institutionalized, but the latter remain non-institutionalized. Referring to Deguchi (2001), Osborne (2003) argues that institutionalization means voluntary nonprofit organizations are highly dependent on the state for their very existence, while non-institutionalized voluntary nonprofit organizations are very much a product of local communities and independent initiatives. But, the latter have problems securing stable funding and do not have a formal relationship with the government because of their lack of legal status. Based on Buddhist traditions of mutual aid, the Japanese voluntary sector nevertheless has been vertically integrated

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and interdependent with the state. Young argues that Japan to this day maintains a nonprofit sector that is mostly guided, controlled or closely coordinated by government, and therefore often seen as an extension of the public sector (2000). Thus, Japan appears most strongly oriented towards the complementary relationship between the government and nonprofit sector, and nonprofit organizations appear as agents in a principal–agent relationship (ibid., p 168). However, Osborne maintains that the Nonprofit Organization Law of 1998 and the Long Term Care Insurance Law of 2000 are helping to rectify this situation and provide the newer voluntary nonprofit organizations with greater legitimacy (Osborne, 2003: 8). Nearly 40 years ago, A. Hirschman (1970) initiated a discussion of ‘exit’ and ‘voice’ as alternative consumer responses to decline in the performance of firms, organizations and states, and as alternatives for improving the quality of goods and services. Exit is a typical market response, where disappointed customers change their patronage to other suppliers of the goods or services they purchase. Voice is a typical political response, where customers verbally express their disappointment about poor quality, either individually or collectively (ibid.). Voice can either be expressed as complaints or as suggestions for improvement (Stryjan 1989, Pestoff 1994). In his reflections on the reaction to the initial discussion of exit and voice, Hirschman (1981) notes that consumer and producer ignorance about products or services, particularly new or very complicated products or services, also motivate voice. Consumers often have clear preferences about their food tastes and readily use exit to express their preferences. However, expressing preferences about welfare services, like childcare, education, eldercare, healthcare, and so forth, which are of an uncertain quality, both for the consumers and producers, requires more voice. Here, an active and constructive dialogue between consumers and producers is necessary in order to improve the quality of the goods or services. Similarly, with products or services where there is highly disproportionate knowledge between sellers and buyers of such goods or services, such as medical care, voice has an important role to play in improving service quality. Furthermore, the demand for new services may arise more rapidly than the ability to meet it or the knowledge of how to satisfy it. Under such circumstances, it is not only a question of consumer redress, but also of educating both consumers and producers and providing them with as much information as possible about their expectations and performance. Voice provides much more information about performance and is much richer in detail than exit (ibid.). Voice, together with the repeated encounter and continuous interaction between consumers and producers, is central to the process of quality improvements. Recognizing consumers as co-producers shifts our focus from the traditional transactions and exchanges between producers and consumers to their interaction (Wikström 1993, pp 5–6). The focus on the interactions between producers and consumers also shifts attention to establishing long-term relations between them. This carries with it three major potential benefits, that is,

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better quality products and services, shorter time required to develop new products or services and at lower costs (ibid., pp 8–11). In complex societies there is a division of labour and most persons are engaged in full-time production of goods and services as regular producers. However, individual consumers or groups of consumers may also contribute to the production of goods and services, as consumer-producers. This mixing may occur directly or indirectly. If co-production occurs, it takes place as a result of technological, economic and institutional or political influences (Parks et al. 1981, 1999). Technology determines whether there are production functions for a service where both regular and consumer-producer activities contribute to the output. Economic considerations determine whether it is efficient to mix regular and consumer-producer activities to provide the service. Institutional considerations determine whether appropriate mixing is permitted in situations where co-production is technically feasible and economically efficient, and whether mixing is discouraged where it is inefficient (ibid., p 1002). According to Ostrom (1999b), all public goods and services are potentially produced by the regular producer and by those who are frequently referred to as the client. However, the term client is a passive term, indicating that they are acted upon. Co-production, by contrast, implies that citizens can play an active role in producing public goods and services of consequence to them (ibid., p 347). Co-production in childcare is the focus of Chapter 8. The classical public health model is based on the premise that ordinary people are passive, unknowledgeable and need help and guidance from above. Promotion of public health becomes an expert activity and is based on a top-down approach. In this model it is not the sick, the handicapped, the unemployed and the homeless who are a source of information. Rather, outside experts, like doctors, provide the answers instead. Once the experts say ‘what’s what’, then bureaucrats step in to administer the prescribed solutions. Fountain observes that the private sector makes considerable efforts to condition consumer expectations about the nature of the service encounter (2000). She quotes Heskett, Sasser and Hart (1990) to illustrate that ‘[t]he medical profession has done a masterful job of enhancing the value of service perception by conditioning prospective patients to expect to be treated like small children, [they are] told little and accept much of what happens to them in faith, and [should] not be disappointed with failures to correct medical problems’ (ibid., p 59). By contrast, a popular health model, according to Starrin (1997), starts with everyone being an expert, each in their own way. Here, increasing everyone’s own resources is most important and increasing everyone’s competence, which helps to deepen democracy and improve their health conditions. In the former model negative developments are supposed to be stopped or hindered; in the latter something positive is developed – resources, competence and equality (Levi 2000). However, Lundåsen (2005) notes that Sweden initiated a new National Public Health Policy in 2003. The opening paragraph of it is

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devoted to Participation and Influence in Society, which is now considered a basic precondition for public health. Therefore, it deserves to be included as a separate goal in its own right (ibid.). Whether this is the start of a new chapter in Swedish public health policy or merely rhetoric remains, of course, an empirical question. Healthcare is always problematical, especially for the very poor. A popular health model stresses the primacy of autonomous healthcare. Scientific medicine in very poor areas must be regarded as only one possible approach to health and sickness. David Werner’s book, Where There is No Doctor, a village health care handbook (1977, 2003) is perhaps the best-known manual for healthcare in very poor communities. His approach emphasizes the following:

• • • • • •

healthcare is not everyone’s right, but everyone’s responsibility; informal self-care should be the main goal of any health program or activity; ordinary people provided with clear, simple information can prevent and treat most common health problems in their own homes – earlier, cheaper and often better than can doctors; medical knowledge should not be the guarded secret of a select few, but should be freely shared by everyone, people with little formal education can be trusted as much as those with a lot; and they are just as clever; and basic healthcare should not be delivered, but encouraged (Werner 1997, 2003).

Werner’s approach is clearly one of involving all citizens in maintaining their own health to the greatest possible extent. It focuses on trying to rectify the asymmetry of information between doctors and their patients. Given the growing availability of health and medical information on the internet, this may change gradually in the future, at least in the developed world. Dr Andrew Weil’s manual on Natural Health, Natural Medicine (1995, 2004) is also a welcome effort to inform patients about existing healthcare alternatives. Japan introduced universal healthcare in 1961, when it established compulsory public medical insurance schemes. In 1973 the Ministry of Health and Welfare1 introduced major reforms to reduce patients’ co-payments. In effect, all patients have access to medical services and are insured to cover most of the costs for this, regardless of where they choose to go for medical services. This not only includes all public providers of medical services, but also the medical providers discussed below. What role does civil society play in filling the gap noted by Arrow? What role does it play in promoting cooperation and co-production between the professional staff of hospitals and their patients of public financed healthcare? What role does civil society play in attempting to change the information asymmetry noted by Arrow? In order to answer these questions this chapter

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compares five ‘alternative’ or third sector providers of health and medical care in Japan at the turn of the century. They will be compared in terms of their purpose, relations with the government and authorities, as well as their attempts to change the asymmetry of information between doctors and patients and promoting a more active role for patients in their own healthcare.

Methods and materials Several voluntary nonprofit organizations provide healthcare services, run hospitals and health clinics in Japan. Some are well-known from other countries, like the Japanese Red Cross Society, while others are unique, in particular the medical cooperatives associated with both the agricultural and consumer cooperative movements of Japan. Their reasons for providing such services to their members vary, but there are clear social motives behind their medical entities. Most of the materials presented herein were collected in a partial survey of the field of alternative medical and healthcare providers in the spring of 1998, during a sabbatical stay in Kanazawa as a research fellow. They comprised both written materials from the relevant organizations and other sources, and interviews. Semi-structured interviews were carried out with representatives of some alternative medical care providers in the cities of Kanazawa and Hirosaki, in the Prefectures of Ishikawa and Aomori, as well as Saitama Prefecture outside Tokyo. The interviews covered three main areas of interest: 1) a brief description of the organization and their resources, like beds and staff; 2) main goals and challenges currently facing their organizations; 3) and their relations with other providers of medical services and with public authorities. Most interviews were conducted face-to-face, some with the help of an interpreter, and lasted about two hours each. Recent figures for the number of hospitals, beds, staff, and so forth, from 2004, have been included to update this overview. The alternative providers of medical and healthcare services included in this survey are the following organizations: a b

c d

the Social Welfare Organization Saiseikai, or Imperial Gift Foundation, Inc.; the Japanese Red Cross Society, through its representatives at the Ishikawa Red Cross Society, the Kanazawa Red Cross Hospital and the Kanazawa Red Cross Blood Center; the Koseiren or National Welfare Federation of Japanese Agricultural Cooperatives, through their branch in Aomori; the health cooperatives of the Japanese Consumer Cooperative Union, through their representatives at the Saitama Medical Cooperative Hospital in the greater Tokyo area and the Sakura-so Cooperative Hospital in Hirosaki; and finally

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A Democratic Architecture for the Welfare State the Japanese Federation of Democratic (Proletarian) Medical Institutions or Min-iren, through its Honorary President at his office in the Min-iren nursing home in Kanazawa.

A short presentation of alternative medical care providers The five alternative providers of medical care included in this study together represented about 7 per cent of the national capacity of hospital beds, already in 1997. Taken together they ran more than 500 hospitals, with 144,000 beds in 2004, or 30,000 more beds than in 1997, with an average size ranging from 167 beds to 439 beds. They employed 220,000 staff members in 2004, or 50,000 more than in 1997. This included doctors, nurses, technical personnel and administrative staff. Table 7.1 in the appendix provides more information on these five ‘alternative’ providers of healthcare in Japan. Then each medical provider included in this overview is presented briefly. Saiseikai – the Imperial Gift Foundation Saiseikai was founded in 1911, at a time of great social unrest, on the initiative of the Emperor Meiji, to provide medical care to the needy. After the Second World War it became a ‘social welfare corporation’, with its headquarters in Tokyo and branch offices in each prefecture. Saiseikai has the explicit purpose of establishing and running medical institutions to provide free or low-cost medical care for people with lower income, babies and handicapped persons, aged persons, patients of mental disease and for training of nurses. It has a clear benevolent or charitable goal. In 2004 it ran 79 hospitals, which represents an increase of five hospitals and more than 2,000 beds since 1997, and a staff of 35,000, up by more than 7,000 persons since 1997. The average size of its hospitals is 285 beds today (2004). In 1996, its auxiliary medical facilities included: 13 health clinics, one maternity hospital, 17 health facilities for the elderly, 18 home nursing stations, 32 elderly persons’ nursing help centers, 19 home nursing help stations and Saiseikai boat clinics on 65 islands, and so forth. The Japanese Red Cross Society, JRCS The JRCS was first established in 1877, and re-established as a special medical corporation under the Japanese Red Cross Law of 1952. Both individual and corporate donations to it were and are tax-deductible, which provided it with a unique privilege, not available to other NPOs in Japan at the time. Health services and blood services are the two biggest parts of the JRCS, employing 83.2 and 12.2 per cent of the JRCS paid staff, respectively, in 1997. In 2004, the JRCS ran 90 hospitals, or six less than in 1997. It employed nearly 57,000 staff and had more than 39,000 beds, for an average of 439 beds

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per hospital. This represented a growth of more than 5,200 staff and 16,000 more beds since 1997. The large size of its medical services and blood facilities make the JRCS unique when compared with the RCS in other countries. The historical explanation for this was the close ties between the JRCS and the Japanese Army at the time of the Meiji Restoration. The JRCS’s activities in 1996 included disaster relief, medical services, nursing training, social assistance services for children, handicapped and the elderly, the junior Red Cross, various courses, blood services, international cooperation and fundraising. The JRCS had 18.7 million members in Japan in 1996, and 4.3 million volunteers. In 1974, the Diet created blood centers in each prefecture, and gave the JRCS a monopoly on organizing them. In Ishikawa it comes under the Prefecture Office of the Ministry of Health & Welfare. According to the director of the Kanazawa Blood Center (KBC), they have enough voluntary donations to meet the needs of Ishikawa Prefecture. The KBC pays a fee for blood. Red Cross Society hospitals are financed through their own efforts and donations. The blood facilities and hospitals are run on a for-profit basis, while the international and social welfare activities are run on a nonprofit basis. The JRCS gets 1.5 billion yen per year in donations, but they are decreasing now. This poses big problems in the Red Cross system of medical care, and half of the hospitals may go bankrupt in the future. Patients spend ‘much too long’ in hospital in Japan compared with Europe: 5–7 days for an appendix operation, compared with 1–2 days in Europe; five weeks for a bypass operation, compared with 5–7 days in Europe. ‘Hospital services in Japan need to be rationalized, we’re 20 years behind Europe’, according to the director of the Kanazawa Red Cross Hospital (KRCH). The KRCH is building a new section with 120 beds. Once finished, the KRCH will have a total of 300 beds. The old section is 30 years old. Red Cross hospitals were unique when first established 50 years ago, but have lost their principles now. The national health insurance covers everyone, and the fee individual patients pay is the same, no matter which hospital they go to. However, in the future each hospital must be unique, and they must provide rooms with individual beds, as in the new section of the KRCH. They must all become specialized in some specific areas, like diabetes, gynecology, and so forth. The Ishikawa Red Cross Society maintains few contacts with the Kanazawa Red Cross Hospital (KRCH). In fact, it sees little difference between it and ordinary hospitals. In their opinion, the KRCH works closely with the local and prefecture governments, where it gets most of its funds. According to the representative at the Ishikawa Red Cross, it faces no major problems itself today, but the flow of volunteers could become problematical. The new Nonprofit Organization Law is not a threat, since they are the only disaster relief organization in Japan, that is, they have their own niche with long experience and knowledge of it.

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Koseiren – the National Welfare Federation of the Agricultural Cooperatives The Japanese Agricultural Cooperative Movement (JA) can trace its origin to the beginning of the twentieth century. It was re-established in 1945. Today, getting the highest return on its capital is the main goal. It has grown into a multipurpose agricultural cooperative offering supply, marketing, credit, insurance and other services, including health and social services. JA set up the National Welfare Federation of Agricultural Co-ops in 1948, with a specialist organization in each prefecture, known as Koseiren. It developed at a time and in areas where public practices were inadequate and private practices beyond the financial means of most members. It aims to serve the rural community and its residents with medical services. Already in 1951, it was designated by the government as responsible for the implementation of public health programmes in rural areas, and as such entitled to public subsidies and tax concessions. It has the purpose of supporting members’ health and their financial and social standing by improving their medical welfare. It performs the important function of providing regular annual health examinations for the rural population. It provides health examinations (for TB) using travelling clinics, lectures and movies to promote members’ health, diet and housing conditions. More than 3 million farmers and their families receive medical checkups every year. Koseiren provides various kinds of long-term, low-interest funds to promote the modernization of agricultural institutions and equipment, and lobbies for the modernization and improvement of medical institutions, particularly in rural areas. In the beginning JA ran hospitals in all provinces of Japan, but now they cover only about half of them. Each regional JA organization decides what kind of social activities to undertake. According to its local representative in Hirosaki, it had a hospital in Aomori in the 1950s, but sold it some years later to the municipality. He notes that perhaps it isn’t JA’s main responsibility to provide healthcare to its members, but it has other social activities in most prefectures. If a region isn’t enthusiastic about providing healthcare, then its health business doesn’t always do well, and it must eventually sell it. In 1997, more than two-thirds of Koseiren hospitals and health clinics were found in rural towns of 50,000 or fewer inhabitants, while it only operated a single hospital in one of the 13 largest Japanese cities, the Saku Hospital in Nagano. This gives it a very clear agricultural and rural profile that it maintains today. In 2004, Koseiren ran 122 hospitals and 47 clinics with 46,400 beds, and 287 mobile facilities, which visited rural areas for checkups or remote areas for primary care. This represented an additional 7,400 staff and 100 more beds than in 2002. That year they employed 4,009 doctors, 23,456 nurses and 11,539 administrative staff (Kurimoto 2005b). On average, Koseiren hospitals have 309 beds today (2004). At the initiative of the Ministry of Health and Welfare, the Agricultural

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Cooperative Law was changed about five years ago, permitting JA to undertake social welfare activities. Now they are developing eldercare in most provinces. The local authorities couldn’t meet the growing demand for eldercare in rural areas, so the Minister of Health and Welfare gave JA the right to educate ‘Home Helpers’. Today about 60,000 women have qualified to provide such services, mostly farmers’ wives. They get certified by JA, but provide their services through the municipalities in rural areas. By the end of the 1990s, JA ran 28 Home Helper stations, four Day Care Centers for the elderly and 15 nursing homes in Aomori Prefecture. Becoming a Home Helper provides an education, professional status and income for rural women, who often lacked all such things previously. Health cooperatives of the Consumer Cooperative Union, JCCU Consumer cooperative health and medical care can trace its roots to the turbulent years of the 1930s and 1940s, when it was part of the opposition to the Japanese wars and imperialism in Asia. It was important during the deprivation of the immediate postwar period. It developed at a time and in areas where public medical services were inadequate and private practices beyond the financial means of most of its members. Its aim is to serve the community and its residents with medical and rehabilitative services, while emphasizing preventive services including comprehensive and life-long approaches to healthy living. Health cooperatives are independent legal persons, organized under the Consumers’ Livelihood Cooperative Society Law. The people in a community form their own health cooperative and run their facilities in order to meet their own health and medical needs. The Japanese Consumer Cooperative Union (JCCU) set up a Medical Co-op Committee in the 1980s to bring all the health cooperatives together in one organization. The Medical Co-op Committee established a Medical Co-op Charter of Patients Rights in 1991, which includes: the Right to Know about their own health and/or illness, the Right to Decide, Privacy Rights and the Right to Learn about their own health and/or illness, as well as the Right to Receive Medical Treatment. One distinctive feature of the Japanese health cooperatives is that members are expected to play an active role in their own healthcare. So, they normally take their own blood pressure when arriving at a clinic or hospital and then inform the nurse and/or doctor on duty what it was that day, rather than passively being informed about it by the professional providers. Most members probably know both what their blood pressure was on their last visit and what it normally should be, something not often known even by welleducated persons in most other OECD countries. At the grass-root level members are encouraged to learn about promoting their own health by joining a Han group, or a small neighborhood group of between nine and ten members. In 2004, nearly one-quarter of a million active health cooperative members belonged to one of 26,127 Han groups, representing one in ten

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members in health cooperatives. Han members attend lectures and courses arranged by local health cooperatives. Some go on to become health advisors, who then can lead Han groups. Today there are more than 40,000 medical advisors. Members in the Han groups, initially with the assistance of nurses and health advisors, learn to conduct self-checks in order to monitor their own health conditions. They keep records of their blood pressure, sugar and salt content in their urine, fat content, and so forth, using simple devices. If irregularities are found members will have a health checkup and meet a doctor at a health cooperative. These self-monitoring activities provide effective early detection and treatment of illness (Kurimoto 2005b). Han groups also discuss their members’ basic health conditions, determined by selfmonitoring, and their diet and nutrition, exercise habits and lifestyle, in order to bring them closer into balance with each other. Thus, Han group members are made aware of their health conditions, which enable them to lead a healthier life. Through their learning and acquired knowledge users can actively collaborate with healthcare providers to prevent or combat disease, rather than passively leaving their health in the hands of professional providers. The Saitama Cooperative Hospital opened in 1978 with 74 beds. Since then it has developed into one of the largest hospitals in southern Saitama Prefecture, with 350 beds and 1,000 outpatients daily in the mid-1990s. The total staff was 450 persons, including 50 doctors and 210 nurses. There were three other cooperative hospitals, nine medical clinics and four dental clinics in Saitama Prefecture in the late 1990s, with 156,000 members, making it the largest health cooperative organization in Japan. Members have a share capital of 5,000 yen, while that of staff members is five to ten times as much. Share capital is invested in medical buildings and equipment. The employees of the Saitama Cooperative consider themselves a community hospital serving all the residents of Saitama Prefecture. The board of the hospital is composed of nearly 40 persons, more than two-thirds of which must be chosen from among the resident members. In addition, Saitama Health Cooperative has 42 directors, nine of which are full-time and must have medical training, while 33 part-time directors are chosen from among members. The combination of different member categories, representation of members on the board and use of members as part-time directors qualify the Saitama Cooperative Hospital as a multi-stakeholder organization. The CEO of the Saitama Cooperative Hospital feels that breaking the paternalistic approach of traditional medical care is an important task. He notes that few members have direct contacts with the cooperative health services unless they are ill. Similarly, there are few opportunities of members to become directly involved in the management of the hospital. However, active and conscious members can participate in community health study groups or a Han. They are often women in their 50s to 60s. The staff receives

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the same wages as in public medical facilities. However, they are not only employees, but most are also members of the health cooperative and also have share capital. Volunteers are used by the Saitama hospital. They come one day a week between 9.00 am and 3.30 pm. They are usually either housewives or retired men. They perform mostly nonprofessional tasks, like washing patients’ clothes, taking them to the bathroom, and so forth. The Ministry of Health and Welfare wanted to greatly expand the number of doctors in Japan. It asked the Saitama Cooperative Hospital in the early 1990s to play a more important role in providing places to train interns and asked them to accept graduate students in its facility. In 1994, the Saitama Cooperative Hospital agreed to comply with this request. Long-term care insurance for the elderly started in April 2000 to provide social support for the elderly. It opened competition among care service providers, including private nonprofit operators. Many hospitals are now attempting to provide long-term care services, thus strengthening their grip on the so-called medicosocial care complex. Health cooperatives are among those providing such services, but they try to get community participation in forming healthcaremedical welfare networks, which also includes the local authorities. This may result in even wider multi-stakeholder approaches to health and medical care (Kurimoto 2005a), at the municipal level and thereby introduce co-management in the medical system. In 2004, the healthcare cooperatives had nearly 2.5 million members, compared with 1.8 million members in 1996. In 1996 it was established in 38 prefectures and ran 336 hospitals and clinics, most of which were affiliated with the Min-iren discussed below. By 2004, they ran 76 hospitals and 240 clinics in 40 prefectures, with 12,660 beds, or an average size of 167 beds. Today (2004) they have over 25,000 employees, including 1,779 doctors, 9,896 nurses and 13,897 administrative staff. Medical professionals, including doctors, nurses and administration officers, are also members of the health cooperatives. Health cooperatives seek to create synergy effects by involving different stakeholders in the same organization. Multiple membership categories in the health cooperatives lead to user-dominated boards of directors. In all health cooperatives taken together there are 2,133 lay members and 710 other members representing professional providers. For example, in the Saitama Medical Co-op in the Tokyo area, 27 board members represent users, while 10 full-time board members consist of three doctors, one nurse and six executive directors (ibid.). In Hirosaki, the board of Sakura-so Cooperative Hospital has 41 members. Twelve of them are chosen by the hospital and its staff, while 29 of them represent the 27 local membership districts. So, cooperative healthcare is managed on a multi-stakeholder basis. The Sakura-so Cooperative Hospital in Hirosaki expressed its economic, political and social goals in the following fashion in 1998. In economic terms, after the year 2000 the new law on elder care insurance will take effect, but there will not be enough facilities. So Sakura-so is active in building visiting nurses centers, beds, consultants, training care managers, nursing homes, a

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network of daycare centres for elder persons, as well as lunches, home helpers, and so forth. In September 1998, 20 of their care managers took the test to be certified. All this means considerable expansion and investments. Although they opposed many details of the new eldercare insurance, it is better than nothing. It will enlarge their sphere of activities, improve the medical system, and can help to democratize medical services. The 52,000 members in Hirosaki are divided into 27 geographic areas or districts, but they unsure how they will meet the new demands under the new law. In terms of politics they note that democracy should take into account the will of the people. At the local and regional levels of government, the representative functions are not sufficient. Sakura-so members are divided into 640 Hans in Hirosaki. They meet regularly, discuss medical problems, provide members daycare, have distance education about medicine and cooperatives, discuss patients’ rights, and so forth. Sakura-so thinks of the JCCU medical cooperatives as a tool of empowerment, not just a medical organization. In terms of their social issues, they noted that their goal is a socially healthy and sound society. They want to democratize medical services and promote citizen/member involvement in them. They want a healthy society in all areas, and want to improve the medical status of the whole population, that is, they want to promote a healthy nation. The Sakura-so Cooperative Hospital in Hirosaki notes that there are no Saiseikai, Red Cross or Koseiren hospitals in Hirosaki. The Sakura-so Cooperative Hospital is very active in Min-iren. After the war it was for the poor people and many tenant-farmers had no access to medical care, so they turned to Min-iren instead. They cooperate with other hospitals in the prefecture, of which there are six (one prefecture, one cooperative and four private hospitals) in practical ways. This includes such activities as rotating emergency jour services 24 hours a day or rotating emergency night services. The Sakura-so Cooperative Hospital also collaborates with prefecture authorities who provide medical education, control hospital services and provide subsidies for emergency services. They also provide trainee courses and hold annual meetings, and so forth. There is also an Association of Doctors at the local and prefecture level, where doctors from all types of hospitals meet regularly. The Min-iren – Federation of Democratic Medical Institutions The Min-iren can also trace its roots to the turbulent years of the 1930s and its opposition to the wars and Japanese imperialism in Asia. It was (re-)established in 1953. According to the Japanese Ministry of Health and Welfare’s Welfare White Paper in 1990, the Min-iren had 1.5 per cent of all sickbeds in the country, 1.3 per cent of the medical doctors, 2.3 per cent of all nurses and 2.2 per cent of all radiographers, making it an important provider of medical and healthcare in Japan. In 2005, it organized 151 hospitals, 592 clinics, including 45 dental clinics, 81 insurance pharmacies and 64 other

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affiliated organizations, such as nurse training schools, nursery schools, and so forth. This represents a decrease of three hospitals since 1993, but the number of clinics grew by more than 200 during the past ten years. Nearly half of their affiliates were health cooperatives, while the rest of them were public or private medical care providers. Today (2005), Min-iren organizes medical facilities employing more than 4,000 doctors, 22,000 nurses, 10,000 administrators, together with other specialists, for a total staff of 62,287 persons. By 2005, the number of beds reached nearly 27,000. The member hospitals and clinics can take a variety of legal forms, but most of them are either medical care corporations or consumer cooperative corporations. Patients of Min-iren are grouped according to their illness, like cancer, rheumatism, and so forth, into 147 groups. They are organized into users associations, called Kyodo soshiki, that comprise 3 million people, about 70 per cent of which come from the health cooperatives in the JCCU. Patients’ active participation is encouraged, and they are invited as observers to General Assemblies and district conferences of Min-iren. There are also 57,000 patients actively organized for ideological support of the Min-iren and its peace movement. The Min-iren faces four important problems in the future: 1

2

3 4

Of a total staff of 62,000 working in Min-iren hospitals, there are 2,000–3,000 new persons employed each year. How do you educate them into the Min-iren principles? Capitalism is unfavourable to Min-iren and its principles, but they must survive and must keep in good financial shape. How do they finance the investments needed to improve their service? – Min-iren borrows money from their patients. There is a shortage of doctors in Min-iren. Both doctors and patients must participate in medical care.

As its honorary President his motto was: ‘Medical activity should be common or joint activity, involving both the doctors and patients’. Min-iren has close relations with the HCA of the JCCU. Most health cooperatives belong to Min-iren (94 per cent). It has no established relations with the Japanese Workers’ Cooperative Union, but the JRCS gives Min-iren a contribution of 100,000 yen a year. They have no relations with Koseiren or Saiseikai, nor do they have systematic relations with prefecture or municipal medical hospitals or clinics, but they maintain ad hoc relations in case of emergency, like heart attacks. However, their personal relations with the medical corps and individual providers are cordial. Min-iren hastens to point out that they receive no official support from municipal or prefecture authorities, but they are an important provider of medical services, with more outpatients per day than either the Red Cross or Saiseikai. Nor do they maintain formal relations with any political party, although the medical policy of the Communist Party is close to that of

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Min-iren, especially on eldercare. In general elections the staff of Min-iren generally supported the Japanese Communist Party, and many Min-iren doctors run as candidates for the JCP at the municipal and county levels.

Different social profiles and relations with public authorities These five providers of alternative medical care in Japan all have distinct social profiles. The Emperor founded the Saiseikai at the beginning of the 1900s to provide medical care to poor citizens who could not afford it. Given both its origin and focus group, it maintains a clear social profile related to benevolent and charitable activities. The Japanese Red Cross Society demonstrates a clear managerial approach today to providing healthcare. It emphasizes strategic management and the need for medical providers to find their right niche. The Koseiren is a part of the Japanese Agricultural Cooperative Movement (JA), and, unlike other alternative providers herein, medical care does not comprise its main activity. Some of the JA’s regional branches provide medical services to members today, while others do not. However, eldercare insurance and services provide a new field of social welfare for JA. Its training courses for women as Home Helpers to elder persons in rural areas opens new possibilities for rural women to get an education, profession and income of their own. This new development could provide a major impetus to change in otherwise very conservative rural settings. The health cooperatives are unique in that they actively involve their user/ members in the healthcare process as agents of change. Users gain knowledge about their own and other’s health, which facilitates more effective collaboration between users and medical care providers towards the common goal of enhancing citizens’ health and their quality of life. Their user/members become co-producers of their own healthcare. Health cooperatives are also governed as multi-stakeholder organizations. Thus, they promote democracy in medical care in two different ways: first by bringing greater parity into the asymmetric relation between users and providers or staff and patients and second in the democratic governing of healthcare cooperatives. Finally, Min-iren actively promotes values of equality and democracy among its members, who are mainly the professional staff of health cooperatives and other hospitals. These five alternative providers of healthcare in Japan demonstrate different relations with public authorities and with healthcare clients or patients. Some of them have strong relations to the Ministry of Health and Welfare or other parts of the government, while others have weak ties to public authorities. Some of them are focused on providing healthcare to certain specific groups in society, while others serve the public-in-general. These factors reflect their goals and may impact on how they meet future challenges in healthcare, as seen in Figure 7.1. From the times of the Meiji Reformation the Japanese Red Cross Society enjoyed a special relation to public authorities. JRCS was re-created through

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a special law after the war, and it was given a public monopoly to manage blood centres, again through a special law. Moreover, only the JRCS had the right to receive tax-deductible donations until recently. Thus, it could be argued that society has recognized a gap where the market doesn’t achieve an optimal state in providing medical care, and it has taken steps to bridge the gap with other social institutions. However, turning to the other dimension in the figure, the JRCS no longer has a special focus on a particular group in society, as it previously did on the military. Today it provides medical care to all persons living in Japan. The Saiseikai, on the other hand, was started by the Emperor Meiji in 1911, with a focus on providing medical care to persons with low or meager income, and so forth. So, it was also started to fill a gap where healthcare was otherwise unavailable. They have a clear benevolent relation with their patients. Similarly, the Koseiren was enlisted by the Ministry of Health and Welfare to provide medical care in rural areas at the end of the war, and again more recently to help expand provisions for the new eldercare insurance in rural areas, as well as Home Helpers for elderly persons in such areas. It is given a monopoly-like situation in providing healthcare in rural areas of Japan, where the government cannot provide such services and where no market alternatives exist. Both of these organizations have special relations with the authorities and are an institutionalized part of the Japanese nonprofit sector. All three of these medical providers – the JRCS, Saiseikai and Koseiren – clearly provide examples of what Arrow referred to as social institutions arising to fill the gap where the market fails to provide an optimal situation. In all three cases the state, either through the Emperor, or more recently the Ministry of Health and Welfare, intervened to fill a gap or took initiative to create and encourage medical institutions to fill a perceived gap in existing medical services. Thus, Japanese society worked through the government, rather than civil society to fill the gap left by the market. Concerning the activities of both the health cooperatives and the Min-iren as healthcare providers, the gap was filled by civil society, rather than the government. Therefore, they are found in another part of the figure above. They have weak ties with public authorities, and both organizations focus on the same group of clients or patients, the urban working class. They also

Figure 7.1 Relations with governmental authorities and patient groups. Source: Pestoff, 2006.

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appear to overlap extensively with each other, at least in terms of their professional or medical members. However, Min-iren seems to have more of a macro- and ideological perspective on healthcare, while the health cooperatives have a more micro-perspective. So, Min-iren proposes to reform medical care in Japan at the macro-level, while the health cooperatives focus mainly on providing ordinary members with greater information about their own healthcare through relevant education, self-monitoring and discussion in small Han groups. Thus, the health cooperatives also function as democratic multi-stakeholder organizations that can bring together both patients and professionals in decision-making about the running of the healthcare entities and can facilitate their working together in providing better healthcare, thereby bridging the information asymmetry between them. Providing ordinary members, or patients, with voice in the governance of their own healthcare and the medical institutions they belong to and run jointly, also helps provide a check on any potential opportunistic behaviour by the professionals and the exploitation of existing information asymmetries. In the making, many members of the health cooperatives are turned into active co-producers of their own health, rather than retaining the status as passive consumers or patients of purely professional medical care. This helps place them closer to the popular healthcare model than the traditional public healthcare model. This is, by all accounts, no simple matter; rather, it is one that clearly facilitates the involvement of ordinary members in their own healthcare and the democratization of medical care.

Conclusion and discussion From this overview of alternative medical care in Japan, we can conclude that Arrow’s assumptions about the special structural characteristics of the medical industry in the US also appear to hold true in Japan, more than 40 years later. Arrow claims that society will recognize the gap in healthcare provision and non-market institutions will arise to fill the gap. However, we found that society could either act to fill this gap on the behest of government and public authorities, as seen with Saiseikai, the Red Cross Society and Koseiren, or through direct citizens’ initiatives by engaging civil society in medical care provision, seen in the health cooperatives of the JCCU and Min-iren. The distinction made by Osborne (2003) between the older or institutionalized voluntary nonprofit organizations and the newer or non-institutionalized ones in Japan was partly born out by alternative medical care providers. The three more institutional providers were clearly dependent on the state and appeared to be an extension of the public sector provision of medical care, while the two non-institutional ones were kept at arm’s-length by public authorities. The type and scope of services provided by the former providers were clearly dependent on the sanction and leadership of the government, and their services were vertically integrated into and interdependent with the

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Ministry of Health, Labor and Welfare. However, neither of the latter providers corresponds closely with the fragmented, local or spontaneous community developments after the Hanshin Awaji Earthquake. Rather than view healthcare users as passive consumers who must choose between various alternative service providers, the non-institutionalized providers of medical care promote values clearly related to citizenship and democracy. Moreover, they are dependent on the sanction and leadership of two relatively established and institutionalized popular movements, dating back to before the Second World War. However, both the Japanese Consumer Cooperative Union and the Japanese Communist Party belonged to the opposition to the ruling Liberal Party during most of the postwar period. Concerning the asymmetric information relation between users and professionals in the medical industry, noted by Arrow, we also found a unique case of an organization actively attempting to change this asymmetry by promoting greater member knowledge about their own health and thereby also promoting greater member influence and democracy in medical care. Thus, we found that many members of the health cooperatives were systematically educated about healthcare issues. This approach emphasizes that healthcare is not just everyone’s right, but also their responsibility. Health cooperatives attempt to involve all members actively in maintaining their own health to the greatest possible extent. Members are thereby turned into co-producers of their own healthcare, and also provided with organized voice in the management of cooperative medical services. This is based on a medical philosophy that is closer to the popular healthcare than public healthcare approach. This is not a simple matter; rather it could serve as an inspiration and model for democratizing medical care elsewhere in the world. In particular, the health cooperatives demonstrate that in a country where mutual aid is an essential component of society, the unitary state has lost the initiative in developing new services demanded by some citizens. The state is unable to respond to all the needs of an increasingly heterogeneous and divergent society. Healthcare cooperatives are able to give voice to a growing minority and to other disenfranchised people by expanding the range of services available to meet emerging social needs due to demographic changes. Some citizens want to play a more active role in their own healthcare today. This was also true in part for the agricultural cooperatives’ provision of training and services for eldercare under the new Long Term Care Insurance Law, even if it was initiated and supported and led by the Ministry of Health, Labor and Welfare. The voice of members in the health cooperatives is institutionalized through democratic channels and multi-stakeholder representation of both producers and consumers of healthcare services. This is central to providing members with influence and participation in the process of quality improvements. Such democratic institutions carry with them the major potential benefits of better quality healthcare services at a lower cost. However, the professional and patient/consumer members are highly interdependent on

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each other to achieve high-quality healthcare services. Neither the professional nor the consumer members can supply high-quality healthcare alone: inputs from both are necessary. However, without the institutional incentives to both groups of producers, co-production would not be possible.

Note 1 Became the Ministry of Health, Labor and Welfare in January 2001.

8

Co-production of welfare services: childcare in eight European countries

Introduction What role should the state and market play in the provision of welfare services? Should the state provide most welfare services, as today in universal or Social Democratic welfare states in Scandinavia, or should services be privatized and provided by the market, as proposed by neoliberals? This is a hotly debated issue in all European countries and one of the main, if not the main question posed to the voters in all European elections in the last 20–25 years. As hotly debated as it is, it fails to consider the potential role of civil society, or the third sector and citizens. What role should the third sector play in providing welfare services, and what role should citizens have in producing such services? Answers to the latter question reflect different perspectives on citizens and different views of citizenship. Are citizens merely passive consumers of welfare services that are provided either by the state or market, or can they play an active role in producing some kinds of welfare services? Is citizenship restricted to voting in general elections, consuming goods and services, paying taxes and abiding by the laws of the land, or does it imply both rights and responsibilities that go beyond this limited view of citizenship? Co-production or citizen involvement in the provision of public services generated a flurry of interest among public administration scholars in America in the 1970s and the 1980s (see Parks et al. for a good overview). The concept was originally developed by the Workshop in Political Theory and Policy Analysis at Indiana University. During the 1970s they struggled with the dominant theories of urban governance underlying policy recommendations of massive centralization. Scholars and public officials argued that citizens as clients would receive more effective and efficient services delivered by professional staff employed by a large bureaucratic agency. But, they found no empirical support for claims promoting centralization (Ostrom 1999b, p 358). However, they stumbled on several myths of public production. One was the notion of a single producer being responsible for urban services within each jurisdiction. In fact, they normally found several agencies, as well as private firms, producing services. More important, they also realized that the

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production of a service, as contrasted to a good, was difficult without the active participation of those receiving the service. They developed the term co-production to describe the potential relationship that could exist between the ‘regular’ producer (street-level police officers, schoolteachers, or health workers) and ‘clients’ who want to be transformed by the service into safer, better educated or healthier persons. Co-production is one way that synergy can occur between what a government does and what citizens do (ibid.). The concept of co-production could prove highly relevant to proposals for democratic and welfare state reforms. Co-production provides a missing piece of the puzzle for reforming democracy and the welfare state. It contributes a view and understanding of conditions at the micro-level or the site of production of welfare services. This perspective is often missing in many of the more macro-oriented perspectives that follow. More than 20 years ago Barber (1984) compared weak democracy to strong democracy and proposed a more active role for citizens. Walzer (1988) argued for ‘more participative and decentralized forms for service provision’ – that make room for self-help and local initiative. He contrasted earlier calls to nationalize the means of production of goods with today’s need to socialize the means of distribution of welfare services. This needed to be actively supported by a state-sponsored socialization, that is, the democratic transformation of state agencies at the local level or the transfer of authority and resources to voluntary organizations (ibid., p 21). Most important was to increase the number of distributors who are also recipients or potential recipients of welfare services. Only then would they have a greater say in welfare management. He argued that greater recipient involvement can be worked out within a democratized system of state supervision or through the activities of voluntary organizations (ibid., p 22). He proposed several ways of recruiting more distributors of welfare services, including paying a nominal wage to volunteers and instituting a new national service for providing welfare services (ibid., p 22). In postindustrial societies a growing number of civil servants work in welfare services. But, they do not have a natural monopoly on helping, even if they are professional helpers. The welfare state coexists with a welfare society, even if the latter is relatively weak today and requires the continued and sustained support of the former (ibid., p 25). Walzer noted that his suggestion requires a major reform of local democracy and also an effort to extend the reach of voluntary organizations. At the same time the state needs to be strong enough to superintend and subsidize the work of citizens and volunteers. A lively and supportive welfare society framed, but not controlled, by a strong welfare state would represent a fundamental transformation in the relations of distribution or service provision (ibid., p 26) and also a reform of the relations between ‘the rulers and the ruled’. Hirst (1994) argued that liberal representative democracy is overextended today. Democracy is stretched to its limits, due to the growth of the modern welfare state, and cannot function as intended – to control the public

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administration. Associative democracy calls for a much more active role for the third sector and citizens in providing goods and services, in order to return democracy to what it once was – the will of the people. He suggested that many major policy networks be extended to include all the governed. Associative democracy means devolving as many of the functions of the state as possible to civil society, while retaining public funding, and democratizing as many as possible of the organizations of civil society (ibid.). This should not simply be seen as nostalgia for returning to a lost ‘golden age’, but rather as a way of developing and renewing democracy, as well as a means for curbing the growth and dominance of big organizations, both in business and government. In a lucid analysis of power Galbraith (1984, 1986) spoke of the ‘Age of Organizations’. Conditional power gains its influence by persuasion and changing beliefs. It stems from organizations, mostly big organizations regardless of sector, that is, public or private. More recently in a discussion of ‘democracy and governance’, Hirst (2002) contrasts an ‘organizational society’, with its large public and private bureaucracies to the normally smaller organizations found in civil society. He called for large-scale institutional reform of both state and social institutions. The aim of these reforms is to restore limited government by involving civil society in the functions of the state and to transform the organizations of the latter from top-down bureaucracies into constitutionally ordered democratically self-governing associations (ibid., p 28). However, associative self-government would supplement and extend representative government, not replace it. Democracy at the national level would be strengthened and made more viable by democratizing civil society. Governments’ principal task would, therefore, be to raise and distribute revenue to associations and the provision of a constitutional ordering and supervision of the institutions of civil society (ibid., p 30). What does greater citizen participation in the provision of welfare services, or co-production, imply for the development and renewal of democracy today? In what ways can and do citizens participate in the provision of public services? How do differences in citizen participation relate to the development and renewal of democracy? Co-production will first be considered from a theoretical perspective below and then illustrated by the involvement of parents in childcare services in Europe. Materials for this study come from the TSFEPS Project, Changing Family Structures & Social Policy: Childcare Services as Sources of Social Cohesion, a comparative European study between 2002 and 2005 of childcare services in eight European nations.1 They are Belgium, Bulgaria, England, France, Germany, Italy, Spain and Sweden. Thus, this chapter merges two strands of thought or two types of questions concerning citizen participation. First it addresses the theoretical literature on co-production of public services. Second, it explores citizen participation in childcare services in eight European countries. Finally, it reaches some conclusions about the role of co-production in developing and renewing democracy and the welfare state.

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Co-production, both in the private and public sectors Co-production can be found in many walks of life and in different sectors of society. Here we will introduce co-production in the private sector before turning to our main focus – co-production of public services. In a traditional industrial setting the activities of production and consumption are two distinctly separate functions, clearly divided both spatially and temporally. Some authors distinguish between manufacturing and service production in terms of the degree of customer contact. Service production has a high degree of direct customer contact, while manufacturing has a low degree. In between pure service and pure manufacture we find mixed service and quasimanufacturing (Chase 1978). Chase maintains that efficiency of production is directly related to the extent of customer contact in the creation of service. The extent of customer contact is measured in terms of the percentage of time that a customer must be in the system relative to the total time it takes to serve him/her (ibid., p 138). Chase explores several aspects of system design in terms of customer contact and laments that in all respects, high-contact services make rationalization and technical control harder and efficiency more difficult to achieve. However, he also notes that worker attitudes, the environment of the facility and attitudes of the customer determine the ultimate quality of the service experience. His main recommendation is therefore the development of policies to limit high-contact relations with customers. Here we witness an awareness of major differences between manufacturing and service production, but nostalgia for possibilities of rationalization gains found primarily in low-contact services. The co-production perspective, however, shifts the focus and explores how and why the buyer or purchaser of a product or service becomes involved in various steps of the production process and thereby a co-producer. One explanatory model is that after repeated transactions between producers and buyers, the purchaser of a product or service has some clear ideas on how the product or service should function, and therefore how it could be changed or improved to better suit their needs. In much of the business literature this relationship is framed in terms of business-to-business or B2B relationships. For example, firm A repeatedly buys a product or service from firm B and wants therefore to influence the nature of the service or product. Coproduction requires time and effort on the part of buyers as well as insights and acceptance from the seller of the value added to the final product or service by involving the buyer in some steps of the production process. Wikström (1996) refers to co-production as an expression of the changing patterns of interaction between firms and their consumers that open new possibilities of doing business. Such changes are based on a much closer relationship between producers and consumers than those traditionally found in industrial society. In this new relationship the consumer increasingly plays an active role as a co-producer of the goods or services desired, rather than remaining a passive consumer. She defines co-production as

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‘. . . company-consumer interaction or social exchange and adaptation for the purpose of attaining added value’ (p. 362). Their interaction is motivated in part by the perceived degree of uncertainty in their exchange relations and the potential benefit accruing to them from eliminating such uncertainty (ibid., p 363). There are also a growing number of examples of business-to-consumer or B2C relations, where the consumer of products or services becomes a co-producer. Here, the relationship is not necessarily durable, but can rather be of a one-time nature. For example, consumers who first purchase and then assemble furniture bought from IKEA or a similar store must contribute their time to assemble the product in order to realize the full and final value of the items purchased. In this respect they become co-producers of their own furniture. Consumer satisfaction may of course insure repeated transactions if the need arises, as the satisfaction derived from the first experience can facilitate future purchases. A more obvious example from daily life is the changing nature of retail commerce and the growing degree of self-service in many types of retail stores. Clearly the value to commerce is seen in terms of reduced staff costs, while consumers find value in greater flexibility and choice among products and lower prices as well as the time saved. Some business experts argue that managing quality and competitive advantage means that firms must become more customer-oriented. However, many quality-management programmes and efforts to enhance competitiveness take a rather limited view of potential customer involvement in the production process (Langnick-Hall 1996). A general view of production, regardless of whether it is manufacture or service, distinguishes between four distinct roles for customers: 1) resource; 2) worker (co-producer); 3) buyer; and 4) beneficiary (or user). In terms of human services a fifth can be added, 5) a key outcome in transformation activities (ibid., p 796). Students acquiring new skills or patients regaining their health are examples of the latter. This perspective recognizes that customers not only receive what an organization produces and delivers, they can also directly and indirectly influence the operations and outcome of an enterprise. Two customer roles are found at the input or upstream side of organizational activity: the customer as a resource and a co-producer. Three roles cluster at the downstream or output side of the system: the customer as buyer, user and as the final product (ibid., p 797). Three factors are keys to effective co-production: the clarity of the task, the ability as well as the motivation to do the work (Steers and Porter 1975). The more customers skills are suitable for the task(s) the more they can contribute to production and the more they can replace some of the functions undertaken by the regular staff. Customer motivation is related to information, insights and influence. Schneider and Bowen (1995) identify several possible incentives for co-production: a) productivity increases that lower prices; b) increased self-esteem because of increased control; c) more discretion and opportunities to make choices; d) shorter waiting times; and e) greater customization (ibid., p 804).

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Citizen involvement in the production of public services implies government-to-citizen (G2C), or municipality-to-citizen (M2C) relations. There are numerous important issues for understanding citizen involvement in the production of public services. A review of the literature provides a good starting point for identifying some of the most relevant issues. Coproduction differs notably from the traditional model of public service production in which public officials are exclusively charged with responsibility for designing and providing services to citizens, who in turn only demand, consume and evaluate them. The dominant model of public service production, according to Sharp (1980), is based on two distinct spheres: one of regular (public) producers and a second sphere of goods and service consuming clients or citizens, interest groups, and so forth. Feedback between these spheres can be problematic. By contrast, the co-production model is based on the assumption of an active, participative populace of consumer producers. When the two spheres overlap to a greater or lesser degree the feedback between them becomes an internal process. Service delivery is a joint venture involving both citizens and government agents (Whitaker 1980). Thus, coproduction implies citizen participation in the execution or implementation of public policies. Co-production is, therefore, noted by the mix of activities that both public service agents and citizens contribute to the provision of public services. The former are involved as professionals or ‘regular producers’, while ‘citizen production’ is based on voluntary efforts of individuals or groups to enhance the quality and/or quantity of services they receive (Parks et al. 1981, 1999, Brudney and England 1983, Ostrom 1999b). In complex societies there is a division of labour and most persons are engaged in full-time production of goods and services as regular producers. However, individual consumers or groups of consumers may also contribute to the production of goods and services, as consumer–producers. This mixing may occur directly or indirectly. If co-production occurs, it takes place as a result of technological, economic and institutional or political influences (Parks et al. 1981, 1999). Technology determines whether there are production functions for a service where both regular and consumer–producer activities contribute to the output. Economic considerations determine whether it is efficient to mix regular and consumer producer activities to produce the service. Institutional considerations determine whether appropriate mixing is permitted in situations where co-production is technically feasible and economically efficient, and whether mixing is discouraged where it is inefficient (ibid., p 1002). Technical relationships among regular and consumer producers are crucial and can either result in a situation where their inputs are substitutes for each other, or they are interdependent of each other. An economic mix depends on the substitutability or interdependence of producing a particular service and the relative wages and opportunity costs for regular and consumer producers. If it is a case of interdependence there are likely to be both regular and

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consumer production inputs. Neither the regular nor consumer producers can supply the service alone: inputs from both are necessary. Still, institutional incentives are necessary for co-production to exist (ibid., pp 1002–06). Percy (1984) notes that co-production occurs when both consumers and regular producers undertake efforts to produce the same goods or services. There is no requirement that their efforts be taken through direct interactions, but only that they be undertaken more or less simultaneously. In addition, Rich (1981) identifies other vital dimensions of co-production. He distinguishes between positive and negative, cooperative and compliant, active and passive as well as individual and collective co-production. Co-production does not require the formal organization of citizens, but organizations are also a critical variable, since they can enhance the levels of co-production and may facilitate the coordination between citizens and public agencies (ibid.). However, Warren et al. (1982) and Rosentraub and Warren (1987) warned against too broad a definition. They argued that by narrowing the concept one also excludes civic activities normally associated with citizenship – termed ancillary or auxiliary production – and actions taken totally separately from regular service agents, known as parallel production. Ancillary actions are expected forms of behaviour for citizens, such as obeying the law and following regulations or reporting crime. Parallel production involves services similar to those provided by public agencies, but produced by individuals without contact or cooperation with public agencies. Co-production is often seen as an approach to the enhancement of municipal productivity. Warren et al. (1982) maintain that co-production can lead to cost reductions, higher service quality and expanded opportunities for citizens to participate in decisions concerning public services. The latter can result in greater satisfaction with and support for public services. Thus, co-production becomes an important means of enhancing both the quality and quantity of public services. However, savings to the public budget from co-production are constrained by the amount of substitution that can effectively be undertaken between citizens and service agents or public employees (Brudney 1984). Citizens normally lack the training and experience to perform services requiring specialized training. Moreover, substituting paid personnel with voluntary efforts means that some of the costs are transferred to the coproducers themselves. The costs are not eliminated, merely shifted to the citizens. Percy (1984) maintained that the scope of the benefits resulting from co-productive efforts might affect a citizen’s decision about the types and frequency of co-production undertaken. Where the benefits of the citizens’ efforts go primarily to the citizen-producers themselves, co-production is likely to be greatest. There is a direct correspondence between resources committed and benefits received. However, where the benefits are more broadly scattered among the population in general, citizens’ co-productive actions are less frequent (ibid.). Here there is a ‘free-rider’ problem that needs to be identified and analysed.

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Rich (1981) notes that citizens may consider the net benefits of their voluntary efforts in terms of fellowship, self-esteem or other intangible benefits stemming from them. He emphasized the interface between the government and voluntary sectors and noted the importance of recognizing that voluntary action always takes place in a political context. The individual cost/ benefit analysis and the decision to cooperate with voluntary efforts, as well as the effectiveness of these efforts, can be conditioned by the structure of political institutions. Centralized service delivery tends to make articulation of demands more costly for citizens and to inhibit governmental responsiveness, while citizen participation seems to fare better in decentralized service delivery (Ostrom 1975). Moreover, Percy (1984) also stated that organizational arrangements could facilitate or hinder co-production. In particular, resistance to co-production strategies may be encountered in public service agencies. Service workers and public administrators may see themselves as trained workers and therefore resent or resist the intrusion of untrained and inexperienced workers. Without the tacit support of public employees, the involvement of citizens in production activities might create more problems than it solves (Rosentraub and Warren 1987). Typical examples of co-production found in the early literature in the US include public safety and security, education, fire protection, recreation and even solid waste collection and disposal (Percy 1984). While co-production initially attracted a lot of attention in the US in the 1970s and 1980s, since then involving people and groups outside the government in producing public services has received more sporadic interest. Ostrom (1999b) analysed co-production in developing countries. She focused on suburban water supply in Brazil and primary education in Nigeria. According to her, all public goods and services are potentially produced by the regular producer and by those who are frequently referred to as the client. However, the term client is a passive term; indicating that they are acted upon. Co-production, by contrast, implies that citizens can play an active role in producing public goods and services of consequence to them (ibid., p 347). Co-production is not, of course, universally advantageous; nor is it a process that will occur spontaneously simply because substantial benefits could be achieved. Several conditions increase the probability that co-production is an improvement over regular government production or citizen production alone. To name only a few: the technologies in use must generate benefits from complementary production, rather than merely a substitutive one; and also, incentives can encourage crucial inputs from both public officials and citizens (ibid.). Moreover, she argued that in a polycentric system, rules at large can be written in a general form, which can then be tailored to local circumstances. Many more actions tailored to local arenas can be authorized in a polycentric system than in a centralized system that tries to establish uniform rules for all settings (ibid.). Ostrom points out that on the one hand, no market can survive without extensive public goods provided by governmental agencies, but, on the other

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hand, that no government can be efficient and equitable without considerable input from citizens. Synergy outcomes can be fostered to a much greater extent than existing academic barriers let us contemplate or comprehend (ibid., p 363), or public vs. private ideological barriers permit us to consider or discuss. ‘Co-production of many goods and services normally considered to be public goods by government agencies and [by] citizens organized into polycentric systems is crucial for achieving higher levels of welfare in developing countries, particularly those that are poor.’ (ibid.). Her perspective could be extended to cover welfare services in many developed countries. Coproduction is also essential for sustaining current levels of welfare service provision in European welfare systems facing sharp budget constraints, the crunch of globalization and losing jobs to low wage countries. Renewed academic interest in co-production recognizes that in many important areas of government activity it is impossible to deliver services without the contributions of time and effort by clients. Today, there is a growing interest in understanding co-production or greater citizen participation in the production of public services. Alford (2002) distinguished between three sources of motivation for citizen participation in public sector services: material, solidarity and expressive incentives. He examined four cases of participation in public-sector services in Australia ranging from simple to complex: the use of postcodes in postal services, participation by long-term unemployed in training programmes, maintenance activities by tenants in public high-rise housing complexes and taxpayer collaboration with income tax requirements (ibid.). He noted that government reformers often urge the adoption of a privatesector-style ‘customer focus’, but critics see it as inappropriate, in particular because it diminishes citizenship. He argued that interactions between most public sector organizations and their clients differ in several fundamental ways from the private-sector customer transactions. From a social exchange perspective government organizations need some things from service recipients – such as their cooperation and compliance – which are essential for effective organizational performance. Eliciting those things requires not only meeting the material needs of citizens, but also their symbolic or normative expectations. Thus, involving citizen co-production is consistent with an active model of citizenship (ibid.). In addition to the basic exchange where services are exchanged for money, there is also an exchange of the client’s time and efforts for heightening the value the client perceives in certain situations. He noted that material rewards and sanctions are ineffective in eliciting the requisite client contributions of time and effort in all but the most simple of tasks. Rather, many clients are motivated by more complex nonmaterial incentives, such as intrinsic rewards or social, solidarity and expressive values. These different motivators elicit co-production in different contextual circumstances. The more public the value consumed by clients, the more complex the motivations for them to co-produce. He concludes that ‘. . . eliciting co-production is a matter of

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heightening the value that clients receive from the services by making more explicit its nonmaterial aspects through intrinsic rewards, solidarity incentives or normative appeal’ (ibid.). In Scandinavia the idea of enhancing the role of citizens in providing welfare services seldom gains attention from scholars and politicians. However, citizens currently contribute much of their time and effort to the production of welfare services, both as parents in relation to childcare or youth sports activities and sports clubs, as well as relatives in terms of eldercare. Thus, they directly contribute to the realization of the final value of good quality childcare, healthful youth sports activities, and/or good quality eldercare, although such services are primarily financed by taxes. A recent report to the Swedish parliamentary committee, Ansvarskommittén, calls for a greater role for citizen participation and direct democracy in continued reforms of the Swedish welfare state (Häggroth 2005). In order to come to grips with the growing democracy deficit and to renew the legitimacy of the welfare state, citizens should play a greater role in the delivery of welfare services the report concludes. In a Scandinavian context important public services where co-production might be promoted include welfare services, like childcare, elementary and higher education, healthcare, eldercare, handicap care, leisure activities, and so forth. In a universal, tax-financed welfare state like that found in the Scandinavian countries, the consumer is a citizen, while the buyer or purchaser of services may be a public body, unless vouchers are used, and finally the provider of such services is often a municipal or private body. Although the services can be financed by taxes, fees or both, they may also require that the consumer of the services contribute some of his/her time to realize the full value of the service. Many welfare services also build on enduring relations between the consumer and providers of such services, rather than on one-time relations of an ad hoc nature. Pestoff (1998 & 2005) explores both parent and staff participation in parent cooperatives, worker cooperatives and voluntary organizations providing childcare services for pre-school children in Sweden and contrasts them with the services provided by the public sector (ibid.). He shows that the motives of parents for choosing one type of childcare facility or another express the values they hope to promote by becoming co-producers. Their motives can either be instrumental or expressive, but most parents combine both, similar to the pattern found by Alford (2002). Co-production and the work obligation associated with many alternative providers of childcare services in Sweden help to eliminate uncertainty in the relationship between producers and consumers of these services. It provides parents with greater insights into the quality of the services and gives them influence on decisions of how to run the childcare facility. Moreover, the provision of welfare services through social enterprises that facilitate coproduction alters the relationship between the state and citizens in a fundamental way. Citizens are no longer passive consumers of public services who

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are defined mainly by their roles as taxpayers and voters who exercise their political rights every second, third, fourth or fifth year. Rather they become active participants in the production of important welfare services they demand themselves (ibid.). Peters (1994, 1996) discussed four emerging models of public sector provision of goods and services. He regards the participatory model as an alternative to both the old bureaucratic one and to New Public Management. A participatory state depends upon both its citizens and frontline staff becoming involved in making some choices about policy and social services. Similar to the market model, a participatory model would also give citizens more choice and direct control over the providers of various goods and services. But the manner in which these choices would be exercised in a participatory state would be much more overtly political. Rather than voting with their feet, through vouchers or their euros, dollars, crowns or yen, citizens would vote through some sort of political process. They might participate in referenda of local policy or in local representative structures, like parent involvement in school committees (ibid., p 15). Alternatively, participation can take place in non-representative, but nevertheless democratic, structures for providing welfare services, like cooperative childcare in Sweden (Pestoff 1998). The important point however is that citizens become involved in the coproduction of the services that they both need and demand. Finally, greater citizen involvement is often implied in proposals for a greater role for voluntary organizations in providing public funded welfare services. The Bush Administration initiated the White House Office of FaithBased Organizations in January of 2001 in order to obtain greater participation by religious organizations in providing some public services. The British concept of Public–Private Partnerships in community services is an attempt to revive interest in sharing productive efforts between public and private bodies. Both seem inspired by New Public Management ideas of using the third sector to replace the public sector in order to cut costs and ‘big government’. While this is not the intention herein, contracting-out, nevertheless, opens a new perspective on co-production, not evident in the earlier literature when this concept was first introduced. Today, we find that public funded, but citizen managed and provided services, like parent associations, initiatives and cooperative childcare found in France, Germany and Sweden, can both substitute and complement the functions or tasks of regular and citizen-producers. So, professionals continue to play a key role in their core areas of competence, but citizens can now assume some or many roles not considered core functions. Thus, childcare staff continues to be responsible for the pedagogical content of services, while parents assume responsibility for the maintenance and management of childcare facilities. In parent cooperatives they are even responsible for some central questions like hiring the staff, deciding on the opening hours, and so forth. This combination of substituting and complementing was not noted in the earlier literature on co-production.

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Citizen participation and co-production can either be individual or collective, as noted earlier. We are mainly interested in its collective forms, that is, co-production by and through the third sector as a provider of public financed welfare services. The extent of citizen involvement in co-production and whether it remains an individual activity or becomes an expression of collective action depends to a large extent on government policy and the organization of service provision in a service sector and/or country. Coproduction will be illustrated here by parents’ participation in childcare services. Materials for this study come from the TSFEPS Project, Changing Family Structures & Social Policy: Childcare Services as Sources of Social Cohesion, a comparative European study between 2002 and 2005 of childcare services in eight European nations. They are Belgium, Bulgaria, England, France, Germany, Italy, Spain and Sweden. Case studies of different providers of childcare in two cities2 per country contributed the empirical materials for the discussion of parent participation in childcare.

Participation in childcare services in eight European countries Different forms of participation in different countries Participation in childcare services takes different forms in different countries in the TSFEPS project. It ranges from high to low and can be found at different levels of analysis, both at the aggregate or citywide level and at the individual childcare centre. Participation involves different dimensions or aspects, such as economic, political, pedagogical and social participation. It also involves different groups or stakeholders, like the parents, staff and public authorities responsible for providing and funding pre-school services, and in some cases third sector organizations, TSOs, and even a few for-profit firms that provide such services. In general, low political participation is often associated with a top-down policy style, while high participation is normally an expression of a bottom-up policy style. Different dimensions, different stakeholders and different policy styles are found to varying degrees in most TSFEPS countries. These differences are illustrated in Figure 8.1. The different dimensions of participation in childcare services overlap to some extent with each other. We will begin the discussion with economic participation, followed by political, pedagogic and, finally, social participation by parents. Economic participation in childcare services can either involve the contribution of money, in-kind donations or time by parents. Parent fees are found in most countries and they represent one kind of economic participation. However, they are normally limited by law to a certain proportion of the total costs for providing such services, and not set by market circumstances related to supply and demand. Parents normally do not gain additional benefits from greater economic participation. But, parents are also expected to make contributions in kind for the running of childcare services in some countries. This is

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Figure 8.1 Participation in preschool services and the level of analysis. Source: Pestoff, 2004b.

particularly striking in the former socialist countries where the state or local authorities often lack the funds necessary to maintain reasonable material standards in childcare facilities. Here, parents feel obliged to contribute both their time and various material things necessary for keeping the services running, in addition to regular parent fees. But some type of economic contribution in kind can also be found to a lesser degree in countries with less developed systems of childcare provision and in services arranged or initiated by parents themselves. By contrast, contributions of time in most EU countries are normally associated with parental participation in the running and management of childcare facilities, like those found in France, Germany and Sweden (Evers and Reidel 2003, Fraisse and Bucolo 2003, Strandbrink and Pestoff 2003). In parent cooperative or parent initiative services there is often a work obligation, which excludes many parents who do not have flexible working conditions that permit them to make such contributions in time. In particular, single parent families find it difficult to meet the extra time demands of such services in most facilities included here (ibid.). Political participation by parents can either take indirect, representative or corporatist forms in sector-wide municipal decision-making bodies or it can involve direct parental participation in decision-making bodies at the level of individual childcare centres or site of service production. Small parent-run and managed childcare services often depend on the efforts of all the parents, not only a few elected representatives. Participation can also take the form of elected parental representation in the consultative committees found in public services in many countries, often stipulated by law. However, they tend to be consultive in nature, rather than to involve binding decisions. Pedagogical participation by parents is both a natural and highly disputed phenomenon at the same time. Parents and the home are a natural part of children’s growth and development and this argues for involving parents more actively with childcare facilities. The English report in the TSPEFS Project emphasizes the pedagogical philosophy of early excellence centres

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(EECs) that try to involve parents in the daily activities of childcare facilities and the Belgium report refers to policies to mobilize parents. Such pedagogical efforts are related to special social goals of integrating and empowering resource-weak groups of parents in these two countries. Parent associations, initiatives and cooperatives in France, Germany and Sweden are both managed and maintained by the parents themselves. But very few examples exist of direct, systematic parent involvement in the pedagogical aspects of childcare in such facilities. Rather, parents provide a necessary complement to the professional staff. Parents can substitute for professional staff when the latter are absent, due to sickness or relieve them for other reasons, such as attending training courses, and so forth. The presence of parents at a childcare facility can also enrich the environment of childcare facilities. In particular, the presence of fathers, in an otherwise heavily female dominated occupation group is positive both for young boys and girls. However, parent involvement in parent-run facilities is normally confined to performing nonprofessional tasks related to running and managing the facility, the maintenance and repairs, keeping the books, contacts with the authorities, and cooking occasionally. Thus, there is little risk that nonprofessional parents will permanently substitute and finally replace professional staff in parent associations, initiatives and cooperatives. Rather, there is a clear division of labour between the staff and parents. Social participation can take several forms. Regular meetings of parents can facilitate the creation of parent networks. Parents can be charged with helping to organize or arranging various social events, like the Christmas party, the end of the year party in June, and so forth. Such events can either be limited to those directly associated with the childcare facility, that is, the staff, parents and children, or they can be open to residents of the neighbourhood where the childcare centre is located. In the latter case they also involve the childcare centre’s social relations in the neighbourhood. Some country reports stress that municipal childcare services prefer to limit parties and festivals to the children, staff and parents of the facility, while parent initiatives and cooperatives prefer to see childcare as a way of integrating families into the social life of the neighbourhood (Evers and Reidel 2003, Fraisse and Bucolo 2003, Lhuiller 2003). The case studies analysed here demonstrate a wide range of patterns of parent participation. At the aggregate level, participation can either be ad hoc or it can take more corporatist forms of representation of various stakeholders in citywide consultive bodies charged with developing childcare services. The latter is normally the case when a variety of different stakeholders exist in the same geographical context; the welfare mix is accepted by most actors and no single form of production dominates the provision of childcare services. Some cities included in our eight-country study demonstrated a form of corporatist representation in permanent consultive bodies for all major providers of childcare services, while others did not. Institutions for regular citywide consultation between various service providers may be seen as the

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co-management of a sector. Regular consultation with most or all of the providers may also be prescribed by law, as seen in some of the TSFEPS countries (Evers and Reidel 2003, Fraisse and Bucolo 2003, Lhuiller 2003). Ad hoc consultations may take place in a city where the municipal government normally dominates the provision of such services. Once the number of nonmunicipal providers grows beyond a certain level they may be consulted in an ad hoc fashion. This is illustrated in Sweden by the existence of such consultations in Stockholm and Gothenburg, but not Östersund. However, the law does not require such consultations (Strandbrink and Pestoff 2003). Turning to the level of the individual childcare services, participation took quite different forms. Most childcare services studied here fall into the topdown category in terms of style of service provision. There are few possibilities for parents to directly influence decision-making in such services. This normally includes both municipal childcare services and for-profit firms providing childcare services in the countries studied here. Perhaps this is logical from the perspective of municipal governments. They are, after all, representative institutions, chosen by the voters in elections. They might consider direct client or user participation in the running of public services for a particular group – like parents – a threat both to the representative democracy that they institutionalize and to their power. It could be argued that direct participation for a particular group would thereby provide them with a veto right or a second vote at the service level. There may also be professional considerations for resisting parent involvement and participation. The logic of direct participation is also foreign to private for-profit providers. Exit, rather than voice provide the medium of communication in markets, where parents are seen as consumers. This logic excludes any form of indirect or direct representation. Only the parent associations, initiatives and cooperatives noted in some country reports clearly fall into the bottomup category. Here we find the clearest examples of self-government and direct democracy. Parents are directly involved in the running of their daughter and/or son’s childcare centre in terms of being responsible for the maintenance, management, and so forth, of the childcare facility. They also participate in the decision-making of the facility, as members and owners of the facility. This lack of congruence between the policy styles found at different levels of analysis shows how complex the field of childcare services is in terms of its governance. And it shows how difficult it is to generalize about policy styles in different countries when it comes to participation in childcare services and therefore how difficult it is to make policy recommendations. However, the French report maintains that various aspects of parent participation are problematical (Fraisse and Bucolo 2003). These include: problems related to the representation of only a few parents in councils or committees of a childcare facility; participation in formal structures crowding out other forms of participation; the lack of decision-making powers of most councils or committees of parents; parent turnover due to the short three- or four-year period

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they have a child there; the exclusion of single parent families in participative structures due to the extra time demands; the fact that the active parents also tend to be the better-off ones; problems of increasing participation by fathers and grandparents, as well as mothers; the lack of training and understanding of the staff for demands for greater parental participation, and so forth (ibid.). These and related issues of staff participation need to be addressed in a more systematic way by authorities developing new childcare services. Different types of co-production in childcare services in Europe Citizen participation at the aggregate level in citywide corporate bodies for governing the whole sector of childcare, or education in general are only found in a few of the TSFEPS case studies, and only when required by law. A law requiring pluralist governance of the sector is only explicitly mentioned in Belgium (ONE), Germany (KJHG and KJHA) and Spain (the PAME in Terressa and PMEIG in Granada). However, the French report notes that many local institutions appear to oppose greater parent participation in the governing of the sector (Fraisse and Bucolo 2003). Moreover, it laments the lack of political support for greater parent mobilization and participation. Unless the state actively promotes multilevel and multi-stakeholder governance it will not occur by itself in this sector. Neither the market, nor municipalities or third sector alone can bring this about or on its own. With legal backing the diverse providers together can co-produce and implement a policy to promote a welfare mix in the provision of childcare services. This may be seen as co-management and co-governance of the sector. However, the representation of various providers of childcare services in citywide corporatist bodies to govern the sector only takes place when there is a diversity of providers and when the political will exists to accept and cope with the diversity of providers. Thus, Sweden, where there are numerous parent cooperatives, worker cooperatives and voluntary organizations that run childcare facilities and that have done so for decades, is notably absent from the European countries with laws governing the diversity of providers. At the level of individual childcare facilities, parents’ participation includes examples of economic, political and social co-production. Economic participation is most obvious in Bulgaria, where contributions in kind and time are necessary, given the rapid deterioration of public finances after the transformation of that country. Also, the parent associations, initiatives and cooperatives found in France, Germany and Sweden require contributions both in kind and time from parents. Such independent organizations are usually financed by public funds, but parents’ contributions in kind and time clearly qualify them as prime examples of economic co-production in the field of childcare. Parents organize and manage these childcare facilities; they usually perform the maintenance and cleaning of the facilities, sometimes they do the cooking, they keep the facilities in good repair and even make improvements in them. They may serve as a pool of substitutes when the

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staff is sick or absent for other reasons, and they occasionally have a regular obligation to participate in the daily provision of childcare services, although this is an exception (Evers and Reidel 2003, Fraisse and Bucolo 2003, Strandbrink and Pestoff 2003). Thus, parents clearly comprise economic co-producers in various respects in such organizations. Note however, that such parent-dominated organizations are an exception to the rule, since most childcare facilities in Europe are not managed as parent associations, initiatives or cooperatives. Elsewhere in Europe the municipal childcare facilities provide few examples of parents’ economic co-production. In political terms the opportunities for parent participation are also limited in most European countries. Childcare facilities in most countries in the TSFEPS project provided some limited space of informal and formal interactions with parents, but not of a nature that would qualify as political co-production. The creation of ‘discussion spaces’ is mentioned in some of the reports. This includes both formal and informal spaces for spontaneous meetings between the staff and/or among parents. Sometimes these meetings may be related to social events, dealt with in greater detail below, but often they are not. Management committees that represent parents are often found in public childcare facilities in Europe, and occasionally even in private facilities, although not in the for-profit ones. Such committees only have an advisory or consultive function, but parents’ representation can provide a window-dressing of democratic legitimacy. In Bulgaria, however, the parent committees collect funds from other parents, the community and business, and they seek sponsors to support the financing of a local childcare facility (Dandalova 2003). Other examples underline the informal nature of these ‘discussion spaces’. Many of these meetings between parents and staff appear to have clearer pedagogic than political motives. They include requiring children and parents to participate in an introductory programme or a ‘schooling-in’ period at the commencement of the service. Spontaneous questions and comments to the staff on leaving or getting the child at the facility provide parents with some limited insights and the opportunity to make suggestions (Mingione et al. 2003). Also included in this group is parent participation in special meetings by the children’s age groups to inform parents about the activities and development of services (ibid.), or regularly periodic discussions of the child’s development (Strandbrink and Pestoff 2003). Surveys to solicit parents’ views on various issues could also be included here (Evers and Riedel 2003). Some reports mention the necessity of addressing the needs of a child in the context of their family. The needs of parents and children cannot be separated; the whole family must be supported (Lhuiller 2003). Elsewhere we find expressions of more systematic efforts to get the active support of parents in the pedagogical activities of the childcare facility, at least occasionally. For example, parent participation is part of their pedagogical philosophy in the English early excellence centres, or EECs (Lewis et al. 2003). Once again, we find that the participation of parents is a key characteristic

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of the parent associations, initiatives and cooperatives found in France, Germany and Sweden (Evers and Reidel 2003, Fraisse and Bucolo 2003, Strandbrink and Pestoff 2003). Parents not only manage such facilities, they run them and make the decisions concerning most of their activities, both in terms of staff and financing, and so forth. Parent associations (in France) demonstrate the possibility and desirability for parents and staff to work together, but the parents are in charge (Fraisse and Bucolo 2003). Parent associations, initiatives and cooperatives are nevertheless financed by public funds. Among the hurdles facing greater parent participation in the management of public childcare services, the French teams notes professional culture and staff refusal to accept parental influence and lack of staff training for meeting and involving parents (Fraisse and Bucolo 2003). In addition, the short duration at a childcare facility, only three years in most countries, discourages many parents from becoming involved. Social class may also play a role, since working class and single parents are discouraged from participating in the internal life of many childcare facilities (ibid.). Turning to social participation we note that a variety of ad hoc projects involving parents are found in most facilities and in most countries, regardless of form. These include regular or recurring events, like the Christmas party and/or summer break party, special performances by the children, special ad hoc efforts like painting a mural in or nearby the facility’s play yard, inviting the neighbours of the facility to a party, and so forth. Parents in most countries, regardless of the type of facility, express a great interest to participate in and contribute to such activities.

Summary and conclusions about co-production of childcare I will now consider the implications of these findings for the development of the concept co-production and then discuss their implications for the contribution of co-production to the development and renewal of democracy and the welfare state. We find an attempt to identify various types of citizen participation in terms of co-production resulted in examples of direct contributions in economic, political, pedagogical and social terms by parents to the value created by childcare facilities throughout Europe. However, some forms of participation seem more germane than others in terms of co-production. Some of the activities mentioned above could perhaps better be classified as auxiliary or ancillary activities, rather than co-production. In particular, many of the pedagogical and social activities appear to be of this nature. They are normally part of collective childcare, no matter the country or provider. However, both the economic activities found in Bulgaria, as well as the management and decision-making activities by parents found in parent associations, initiatives and cooperatives in France, Germany and Sweden, qualify as co-production. However, we should consider whether they might possibly be classified as parallel production.

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The main reason for not classifying them as parallel production is that these childcare services are financed by public funds. Moreover, the parent associations, initiatives and cooperatives found in France, Germany and Sweden are contributing to the fulfilment of public goals of providing childcare services to as many parents as possible and in a form that parents not only approve, but are willing to contribute with their time and effort. In Sweden, childcare is now an entitlement for all children between the ages of one and six years old. If the parents did not make contributions of their time and effort to alternative providers or if the latter did not exist, then these same parents would demand public services. The public authorities would be obliged to provide them, but they might be hard pressed to do so. Thus, although alternative services are provided by separate organizations, they are both financed by public funds and they contribute to fulfilling public policy goals in this area. Ostrom’s discussion co-production in terms of production functions, notes that it may involve strictly substitutable or complementary processes. Substitution would imply parallel production and involve parent participation in all areas of childcare, including pedagogical activities, not just in some tasks. Parent participation, primarily in the maintenance and management of childcare facilities, comprises complementary activities that create synergies based on a clear division of labour between the professionals and parents. Here the parents take over the secondary activities, while the professionals can concentrate on their core ones, the pedagogy of childcare learning. An alternative provision of childcare for children comprises an interesting example of co-production in France, Germany and Sweden. Public financing is available to all types of childcare providers in Sweden, for example, public, private for-profit and third sector childcare. However, only the latter appear to facilitate extensive parent participation. Today, approximately 15 per cent of all pre-school-aged children are enrolled in third sector childcare in Sweden. Moreover, co-production appears to change its form with changed conditions. Initially, co-production referred to the degree of overlap between two sets of participants in the service production process – regular producers and consumers. The resulting overlap represents the joint effort of these two groups – both public professionals and citizens – in the provision of public services. It was not necessary that they be organized in the same organization. However, with today’s system of contracting-out and the growing welfare mix, we need to recognize that citizens can participate both on an individual and organized basis, like in the provision of neighbourhood public safety, and as permanent organized groups of users at third sector institutions providing welfare services, like parents in parent associations, initiatives and cooperative childcare services found in France, Germany and Sweden. In the former case, users are clearly a complement to professional public providers of neighborhood safety, that is, the police. In the latter case citizens have taken over the management of welfare services, but the public sector still

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finances and supervises their provision. This would suggest an extension of the concept of co-production to include collective efforts to provide public services produced by third sector providers. The main requirements for co-production are the continued public financing of such services and the participation of consumer-producers or citizens in their provision. Finally, the term co-production needs to be distinguished from similar, but different phenomena of co-management and co-governance. The growing welfare mix and diversity of providers not only implies greater citizen involvement in the provision of some public financed services, but it also becomes necessary to manage and govern this growing diversity. Comanagement refers to the growing diversity or hybridization of providers of welfare services, typically found in situations where NPOs and/or FPOs participate in the provision of public financed services (Brandsen 2004), with or without greater citizen involvement at the site of production. Co-governance refers to attempts to manage this growing diversity in a more democratic fashion through the creation of citywide, provincial and/or national bodies where various providers are represented and given a voice in governing the development of a sector. The appropriate site for co-governance structures will depend, of course, on constitutional differences between various welfare states. We found some examples of this in the childcare sector in France and Germany, but not Sweden, in spite of the growing diversity of providers of such services in all three countries. However, here we must also distinguish between consultations – no matter how frequent or structured – and decisionmaking. Organizational participation in consultations may or may not lead to mutual adjustment, but this differs greatly from participation in binding decisions. Co-governance requires real input and influence in the development of a sector or provision of welfare services. This may be difficult to achieve without the existence of necessary intermediate structures among various providers of welfare services. This is particularly important for small third sector providers, who may find it hard to organize themselves. In conclusion, I will turn my attention to the implications of co-production for the development and renewal of democracy and the welfare state. Coproduction provides a necessary conceptual tool for understanding citizen participation at the micro-level or site of production of welfare services. It gives us a missing piece of the puzzle of democratic reform. It also underlines the importance of motivating and involving both the citizens and professionals in the process of institutional change. At the same time the political process is very important. Without the necessary political support and proper institutional structures, little progress will be made. However, we found that some dimensions of co-production in childcare appear more germane to the development and renewal of democracy and the welfare state than others. In particular, the contribution of time by parents to the political dimension, noted earlier, promote these goals more clearly than the economic, pedagogical or social dimensions. New ways need to be developed to encourage the participation of several different stakeholders in

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the provision of childcare services, not just a single one, as today. The staff, parents and financers of childcare services need to form multi-stakeholder organizations at the site of service production. Also, institutions should be created by the authorities to promote greater participation by alternative or third sector providers in the citywide management of childcare services. This would, of course, require a change in the laws of most European countries. However, participation in childcare services should not be seen as a ‘zero-sum’ game or winner-take-all situation, but rather one where various stakeholders can make a contribution to better quality childcare through dialogue and cooperation with each other. Therefore, they all deserve recognition of their potential contribution to a common goal. This recognition needs to be accompanied by providing them with ways and means for gaining influence in the day-to-day decisions of a childcare facility and the overall running of such services and the management of such services, both at the site of production and citywide level. This corresponds with calls by Barber (1984), Walzer (1988) and Hirst (1994), along with many others for a developing and renewing democracy and the welfare state. In particular, they call for providing welfare services through greater citizen involvement and a greater role for the third sector. The state has grown rapidly in recent decades and become part of an organizational society, where large organizations dominate, both in the public and private sectors. However, they do not see this as contradictory with democracy or simply as calling for the withdrawal of the state. Rather, they see it as enhancing the role of the state, by concentrating on financing and regulation of the provision of welfare services. Walzer notes the need for a strong state that can superintend and subsidize the work of its citizens, volunteers and third sector organizations, which provide welfare services. Hirst’s Associative Democracy means devolving as many function of the state as possible to the organizations of civil society in order to develop and renew democracy and curb the growth and dominance of big organizations, both in business and government. However, without a clear idea of how to involve citizens in these sweeping reforms, little progress can be made. Co-production provides a focus on citizens’ participation at the level of local production of welfare services or the site of production. Co-production opens up possibilities for better understanding the importance of obtaining the consent and support of all three major stakeholders in such reforms, that is, the citizens, the professional providers of welfare services and the politicians. However, without a clear vision of a ‘good society’, or at least a better society than today, it will be very difficult to promote such sweeping reforms. Co-production provides a missing piece of the puzzle for developing and renewing democracy and the welfare state. Various aspects of co-production were explored and illustrated by childcare here, but it can also be found in other areas of welfare services. It exists today in different areas like education, eldercare, handicap care and health and

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medical care. Parent-run and managed elementary and high schools are found in many countries, sometimes in combination with a special pedagogical approach, like Waldorf or Montessori, and sometimes when public provision fails. Third sector eldercare and other support groups provide alternatives in a rapidly growing field. Here, children and relatives can become co-producers of some of the services provided to their parents and loved-ones (Dahlberg 2004). The Independent Living movement is spreading in many countries and provides much greater influence for families and handicapped persons than either public or private-for-profit services (Westin 2008). Self-help groups in areas like diabetes and HIV/AIDS are a good example of co-production in healthcare (Walden Laing 2001, Söderholm Werkö 2008). Healthcare cooperatives in Japan and elsewhere illustrate the possibility for informed and active members who want to maintain their health and avoid becoming passive patients in traditional public health systems (Pestoff 2006a). Thus, the concept of co-production provides us with a better understanding of fundamental relations at the site of production of welfare services and a clearer comprehension of the dynamics of developing and renewing democracy and the welfare state.

Notes 1 See www.emes.net for more details and the country reports. 2 Only one city was included in England.

Part III

Revisiting the third sector and state

9

Revisiting the third sector and state in democratic theory

This chapter addresses some major issues concerning the relationship between the third sector and the state in democratic theory. In the next chapter I consider the relationship between the third sector and the state in welfare theory and in a following chapter the hurdles to the third sector for the democratization of the welfare state in Sweden. Numerous political indicators suggest that we may be witnessing the gradual ‘withering away of the state’ in many western democracies, or at least several vital institutions of representative democracy. Other evidence indicates that the citizens are finding or perhaps even founding new channels of participation and influence alongside the more established ones. However, these new channels are not yet institutionalized and formalized, nor are they recognized as legitimate by democratic theory or by many scholars in political science. Do these mixed signals concerning citizens’ participation indicate a growing crisis for representative democracy and perhaps also for the welfare state, or a rejuvenation of both, based on greater direct citizen participation in new forms of democracy and in the provision of welfare services?

Introduction Numerous political indicators suggest a growing crisis of citizen participation in representative democratic institutions. Electoral participation is decreasing in many western democracies, membership in political parties is declining rapidly and trust in politicians has dropped dramatically. Member participation in voluntary associations and social movements is also on the wane in many countries. This holds true of western democracies as different as Sweden, England and the US. In Sweden, for example, electoral participation has decreased in recent decades, from a high of 91.4 per cent in the 1982 general election to a low of 80 per cent in 2002. However, in 2006 it increased slightly to 82 per cent. Participation in the referendum on Swedish membership in the European Monetary Union in 2003 was 82.6 per cent, and a small majority rejected it. However, Swedish participation in the European Parliament elections was only 38.8 per cent in 1999 and 37.8 in 2002. But research shows that Swedes today participate more actively in other ways in politics

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than they did previously. Younger Swedes participate more individually and they think more about their political activities than earlier generations (Sörbom 2002). Mair and Biezen provide a comprehensive overview of new data on the levels of individual membership of political parties in 20 contemporary European democracies (2000). They found a contrast between small and large, as well as new and older democracies. However, the most striking feature to be noted is the sheer extent and consistency of membership decline through to the end of the 1990s. Not only have levels of party membership continued to decline as a proportion of the electorate, a trend that was already apparent at the end of the 1980s. There is compelling evidence of an average decline of 35 per cent in the absolute numbers of party members across all the long-established European democracies (ibid., p 13). As these data clearly reveal, parties in contemporary Europe are rapidly losing their capacity to engage citizens across Western Europe. They conclude that not only do party organizations appear to be withering on the ground, but there may well be a related decline in other traditional forms of institutionalized mediation, whether they are churches, trade unions, or other voluntary organizations. ‘Political parties, together with other traditional and hierarchical organizations, appear to be suffering from the impact of the individualization of social and political preferences, as well as from a more general unwillingness to rely on existing institutional structures to represent and articulate what appear to be increasingly particularized demands.’ (ibid., p 14). In April 2004, the party secretary of the Swedish Social Democratic Workers’ Party (SAP) noted in a debate article in Dagens Nyheter that 100,000 members had left the party in 10 years (L. Stjernkvist, DN, 16 April 2004). Other Swedish parties experienced a similar loss of members, so it is possible to speak of a crisis of political parties in Sweden. Half a year later the SNS Democracy Council noted that Swedish political parties had lost nearly half of their members between 1991 and 2004 (Olof Pettersen in Dagens Nyheter, on 24 October 2004). These changes do not imply the disappearance of political parties in Sweden, but rather that they are changing character. Mass parties are being replaced by elite parties, with a minimum of members, but ample public support through public financing. However, declining membership can be a problem when it comes to recruiting candidates for municipal and county council elections. Mass media seems to gain influence at the expense of political parties in Sweden (ibid.). In addition, a few years into the new millennium Sweden witnessed a major and prolonged scandal involving several of the political youth movements of the established political parties. They had systematically inflated their membership figures for years in order to receive more public funds for their organizations and activities. Their motives ranged from simply milking the system to political infighting. Two factions of the Social Democratic Youth Movements (SSU) hoped to gain more votes at national congresses and more

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seats on the board. After the scandal broke most of the youth organizations had to radically revise their membership figures downward. For example, in 2003, SSU claimed 30,000 members, while by 2006, it only claimed 4,000 paying members. The Economist Intelligence Unit (EIU) gave Sweden the highest score and ranked it as the most democratic country of the 165 countries included in its index of democracy in 2006. This score is a composite measure inspired by the Freedom House’s studies of electoral democracy and political freedom. In addition to voter turnout, the measure of participation employed here includes women’s representation, membership in political parties and several variables about attitudes towards participation from the World Values Survey (Kekic, EUI 2007). Sweden traditionally has very high voter turnout, even if it has decreased in recent years. While I do not question the importance of the EUI’s index of democracy nor Sweden’s score and rank on it, I feel it is necessary to go beyond voter participation and political attitudes and focus on major structural changes and how they affect citizens’ possibilities to influence the important issues of their everyday lives. To an ever-increasing degree these issues are related to the output side of the political equation in postmodern societies, in particular in universal welfare states. We need to ask how much influence citizens have on the politics of daily life? How much influence do they have on the availability and quality of important welfare services? The provision of welfare services concerns most Swedes directly in one way or another. The annual long-term economic forecast (Långtidsutredning, 2002/03, LU) produced by an independent public body focused on the sustainability of the Swedish welfare state until and after 2020 (SOU 2004, p 19). Sweden faces rising demands and expectations, due to changing demographics. However, LU questions the viability of the universal and tax financed welfare state in Sweden and argues that it not only faces major challenges in terms of its economic sustainability, but also suggests that it will begin to collapse under its own weight after 2020. But, LU only takes paid work into account in its analysis. Alternatives like the greater use of the third sector for providing publicly financed welfare services are not considered, as they fall outside the national accounts system (nationalräkenskap). Thus, according to LU macroeconomics set the limit for both the services provided to citizens and the role they can play, without citizens being able to influence either of them. A parliamentary investigation known as the Ansvarsutredning/Responsibility Investigation posed a different set of questions and came up with different answers concerning the future of the universal welfare state in Sweden. It examines the overall balance of responsibilities between the central, regional and local levels of government in Sweden. In doing so, it also points to possibilities for citizens to take greater responsibility for their own welfare by becoming co-producers of the services they use. Such greater responsibility and participation in service provision can either be exercised individually or collectively (SOU 2003, p 123).1

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This chapter begins by considering the growing inadequacy of the traditional role attributed to voluntary associations and the third sector in democratic theory. It continues by exploring new perspectives on their role in democratic theory. It presents arguments for greater citizen participation, user democracy and functional representation. In particular it questions how citizens can contribute to the reorganization of the welfare state and the rejuvenation of democracy in Sweden.

The changing role of the third sector in democratic theory The traditional role of the third sector in democratic theory Voluntary associations or nongovernmental organizations and local governments have traditionally been attributed an important place in democratic theory as organizations that were independent of the state and therefore they became a cornerstone in early liberal writings. De Tocqueville (1830, 1945) provides a fascinating explanation of American democracy in terms of an unlimited reservoir of engagement by ordinary citizens. Voluntary associations comprised the key to understanding the development of democracy in the New World. They were, among other things, a school for learning democratic rules, thinking and behaviour. Later, other scholars attributed similar functions to voluntary associations in Europe. Ambjörnsson (1988, 1995) notes the importance of unions, free churches and the temperance movement in Sweden in the late 1800s and early 1900s for the development of the labour movement and democracy. They taught the working class in many mill towns basic skills of self-respect and self-discipline, how to read and write and how to organize union and lodge meetings and the importance of following democratic rules and regulations. Many who graduated from this school of democracy later became prominent in local and even national politics after Sweden adopted universal suffrage in 1919/21. However, it should be kept in mind that the era of agrarian society composed of rural villages and small towns observed by de Tocqueville at the beginning of the 1800s in America has long since passed into history. Similarly, the early industrial and pre-democratic conditions that existed in Sweden at the end of the 1800s and early 1900s no longer existed. Most persons in de Tocqueville’s America or Ambjörnsson’s Sweden were economically selfsufficient and/or independent of the state for major welfare services, while citizens in most OECD countries today live in a very interdependent world. In the globalized, urbanized, postindustrial societies of America and Sweden in the beginning of the twenty-first century there may be a growing need to revise our view of voluntary associations and their relationship to the state. Later, in the early pluralist works of the postwar era, writers like Truman (1951, 1971), Kornhauser (1960), Dahl (1961), Lipset (1963), Coser (1956), Huntington (1968) and Almond and Verba (1963) all attributed great importance to the democratic functions of voluntary organizations in modern

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societies (see Pestoff 1977 for more details). By virtue of multiple memberships, voluntary organizations could guarantee cross-cutting loyalties that tied society together and insured the democratic stability of western democracies. However, research showed that such organizations functioned differently in Nordic multiparty systems than in Anglo-Saxon two-party democracies (ibid.). Voluntary organizations were also seen by pluralists as a buffer between the rulers and ruled that prevented direct access of either group by the other, something not found in the totalitarian societies of Eastern Europe, ruled by a single party. At times the list of their virtues seemed unending, and they were often referred to as the glue that held diverse democratic and pluralist societies together in spite of considerable economic, political and social cleavages. Thus, voluntary associations played an important role in early pluralism, providing a more coherent, competition-based and market-like alternative to the political philosophies of socialism or communism. However, after the end of the Cold War and the Fall of the Berlin Wall, we may again face the need to revise democratic theory and ideas about the functions of voluntary associations. According to functional-structural theory, voluntary associations were supposed to articulate the needs and demands of citizens, while political parties were supposed to aggregate these political demands. However, when reality deviates too far from theory, it is necessary to change one or the other. Nongovernmental organizations in many European countries pursued their political aims by other means, independent of the electoral channel of representation. Stein Rokkan (1966) suggested that they comprise a corporate channel of influence, and he maintained that ‘[v]otes count in the choice of the government, but other resources decide which policies they will pursue’ (ibid.). Schmitter (1974) and his colleagues pursued the study of neocorporatism by focusing on business interest organizations in the OECD countries during the 1970s and 1980s (Streeck and Schmitter 1985, Streeck, et al. 2005). More recently Putnam argued that civil society and social capital were positively related to both economic development and political effectiveness, in his study of the development of new regional democratic institutions in Italy and his comparison of northern and southern Italy (1993). In later works he laments the loss of civic virtues and social capital in the US (1995). He has undeniably contributed to reviving a more general interest in the role of voluntary organizations in democratic societies. However, while perspectives on the relationship between the third sector and state may shift between various authors and approaches, there appears to be little awareness of fundamental changes in society that posit rethinking this relationship in democratic theory. In brief, the transition from rural, agrarian societies to postindustrial cosmopolitan societies has been dramatic in recent generations. Previously, society was based mostly on self-sufficient farmers who catered to their own needs and had little formal education. They lived on isolated farms, and

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perhaps only congregated in villages or towns on Sundays and holidays. Joining together in voluntary organizations to promote their common interests didn’t infringe on their way of life, although it perhaps sometimes made it easier for them to pursue their own family interests. By contrast, today’s modern societies are composed mostly of urban and suburban dwellers, many of whom live in multiple story and multiple family dwellings. Many are highly educated, hold jobs in highly advanced industries or services, and they are very interdependent, economically, socially and in other ways. They may travel greater distances by car or mass transportation, to and from work every day, than their ancestors normally did in a month or even a year. They take for granted things like hot and cold running water, showers, toilets, and some even an automatic lawn sprinkler system and a gardener. They also have electricity, a refrigerator and freezer, a stove, radio, TV, microwave, dishwashers, washing machines, and so forth. They come home to read their email or chat on the internet, and perhaps even watch a DVD or download music from the net, and so forth. Not only has life and many of its artifacts changed dramatically during the past century and a half, but society and its social institutions have also changed radically since the time of de Tocqueville. In the rural communities of self-sufficient farmers in early eighteenth century America, compulsory education did not exist and few persons performed paid labour all day long for five or six days each week. Today, civic virtues are more likely to result from social bonds established through school, work, family and even the compulsory military service, than from membership in voluntary organizations or participating in local town meetings. This is so, quite simply, because today’s citizens are much more involved in and spend much more time in the former type of social institutions than the latter (Newton 1997, 1999). Moreover, today’s citizens are to a greater or lesser degree dependent on the state and the services it produces for them, including education, highways and freeways, collective traffic, airports, water, sewage and trash collection, healthcare, and so forth. Moreover, Wollbaek and Selle (2002) note that voluntary associations are often ascribed a fundamental role in the formation of social capital. They challenge the notion that active participation is necessary for the formation of social capital and suggest that more attention should be paid to the importance of passive and multiple affiliations within associations (ibid., p 32). But they say that if active participation contributes nothing beyond passive membership, then voluntary associations do not play the role attributed to them by Putnam in his social capital thesis. Associational involvement for most people, compared to other activities we take part in on a more frequent basis, is of rather low intensity measured both in time and emotional commitment (ibid.). Furthermore, citizens dependency on the state and local governments for goods and services implies that the input side of democratic systems has also lost importance in comparison with the output side of policy-making. A

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night-watchman state that only provided defence, courts and police for its inhabitants has been replaced by a welfare state providing multiple and complex services to many or most citizens. The cradle to grave services provided by many welfare states also requires a large public bureaucracy and extensive civil service. This implies that the output side of the political system now greatly overshadows the input side in size, number of employees, financing and importance for everyday matters for many, if not most citizens. However, political science and democratic theory mainly focus on influencing representative institutions and on their representativeness. Political science and democratic theory continues to ignore the growing importance of civil servants and their routine decisions that impinge directly on the daily life of citizens. It also pays little attention to possibilities for citizens to influence such decisions. Later I will explore how the third sector can facilitate active citizenship and the organization of consumers as co-producers. However, it is important to understand some of the reasons for the growing democracy deficit in Sweden. The main ones are found in post-Second World War developments in the public and voluntary sectors. The democracy deficit: growth in the size of Swedish towns and cities The possibility for citizen participation at the local level changed radically in Sweden in the past 50 years, and Swedish institutions for channelling and rewarding such participation were sharply curtailed in recent decades. Sweden experienced a dramatic growth in the size of its towns and cities after the Second World War and an equally dramatic decrease in the number of elective offices available for its citizens to fill. This was due to two centrally initiated waves of amalgamation of villages, towns and cities – one in the early 1950s and a second in the early 1970s. In the end, nearly nine out of ten villages and towns were amalgamated with a nearby city that became the centre of the new ‘block’ municipalities. Barber defined ‘strong’ or participatory democracy as a ‘. . . process of ongoing, proximate self-legislation and the creation of a political community capable of transforming dependent private individuals into free citizens and partial and private interests into public goods’ (1984, p 151). Strong democracy is seen as a compliment to representative democracy at the national level (Sundberg 2005). It is based on direct participation in local political decision-making and is clearly a reaction against ‘thin’ democracy. In the latter, citizens are viewed as uninterested and lacking knowledge, and, therefore, also the necessary qualifications to participate in decisions, other than through voting (ibid.). Premfors (2000) described the Swedish municipal amalgamations between 1962 and 1974 as among the most radical in Western Europe. He felt that these reforms could be seen as a mistake of historical proportions from the point of view of promoting participative democracy (ibid., p 187). Sundberg (2005) points out that ‘[o]ne can of course also include the

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municipal amalgamations of 1952, which put an end to direct democracy in Sweden at the local level.’ (ibid., p 4). In 1919, when universal suffrage was first introduced at the municipal level, 58 per cent of Swedish towns still practiced direct democracy for reaching local decisions. The law stipulated that all towns with fewer than 1,500 inhabitants could choose the direct democratic model if they wanted. Larger municipalities were required to have representative structures for reaching decisions. In 1938, the threshold for representative structures was lowered to 700 inhabitants. This resulted in more than two-thirds of Swedish municipalities organizing local elections to representative bodies between 1938 and 1946. The new 1953 Law on Municipalities completely eliminated the last vestiges of direct democracy. However, as recently as 1946, 26 per cent of Swedish municipalities still practiced direct democracy through town meetings that included all enfranchised citizens (ibid., p 4). Normally municipal councils were held three times per year, but perhaps as few as 9 per cent of the eligible inhabitants participated in such direct democratic town meetings (ibid., p 6). However, he also explored the connection between participation in direct democratic town meetings and representative elections, using ecological data. He concluded that the development and spread of local branches of the national political parties was delayed or retarded by direct democratic institutions. Town meetings were no longer considered ‘modern’ by the national political elite and were therefore in the way of national political parties that wanted to take charge of developing local politics in the direction they had chosen (ibid.). Sjöblom (2005) argues that during the ‘Golden Age’ of welfare state development in Sweden in the 1960s and 1970s, no conflict was perceived between democracy and effectiveness. The latter could be accommodated by a collective view of democracy. Popular sovereignty and political equality were often associated with democracy. Participative democracy sees participation as a value, not merely a technique. However, promoters of municipal amalgamations and larger municipalities heavily emphasized the functional capacity of local government. This became known as ‘reform theory’, which argued that large municipalities are preferable to small ones since: a) they have the capacity to take minorities into account; b) they provide inhabitants with better possibilities to participate in decision-making; and c) they produce services more effectively. Here, economies of scale are assumed to exist, which should result in more satisfied citizens. Supporters of small-scale local government argue, on the contrary, that: a) homogeneity is a guarantee for decisions reflecting the preferences of citizens; b) smaller municipalities facilitate participation; and c) service can be produced more effectively in small rather than large municipalities (ibid., pp 5–6). Seen historically, the municipal reform in 1862 more clearly divided church matters from other issues, but the number of municipalities remained constant at 2,500 for nearly 90 years. The aim of the municipal reforms of the 1950s and 1970s was to insure a minimal size for efficiently and effectively

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providing services to all inhabitants. The minimum of 3,000 was set for the reform in the 1950s, while 8,000 inhabitants was the minimum desired in the reforms of the 1970s (Wörlund 2005). In the early 1950s, several municipalities were skeptical to the amalgamations since large municipalities created increased bureaucracy and greater distance to the electorate. The first ‘voluntary’ amalgamations in the 1950s proceeded very slowly and resulted in another parliamentary committee based on commercial geography and school planning needs. This gave rise to the ‘theory of central locations’ (centralort), which argued that a strong (read: big) central location had positive spreading or spillover effect on surrounding locations. Now the norm was set at 7,500–8,500 inhabitants for municipal size. However, contrary to the first wave of amalgamations, when political divisions were small, the second only received support from a small majority of social democrats, liberals and communists, while both the conservatives and centre party opposed it (ibid.). Municipalities in Sweden fill two different, and sometimes conflicting, functions today: through municipal self-government they are independent political organs that reach their own decisions and they are also local service producers of welfare and other services (Wörlund 2005, Bergmark 2001). Social Democrats conceived of municipalities as part of the public sector. Their function was to implement welfare state policy. Central reforms should create similar chances of life for all citizens. Nationally decided goals of equality promoted macroeconomic equality. Too great municipal freedom could undermine the national governance capacity. The non-socialist parties promoted greater individual freedom and responsibility. They argued that greater political independence for the municipalities would result in better conditions for economic effectiveness and rationality. They promoted microeconomic effectiveness. However, both these perspectives are close to ideas of a service democracy, although the means differ. Freedom of choice, individualization and opening municipal services up to competition are the building blocks for the conservatives, liberals and centre party, while social democrats emphasize user influence to counteract commercialization of welfare services (Strandberg 1998). At the beginning of the municipal reforms democracy and effectiveness were considered as intertwined concepts. An efficient municipal organization was considered as a precondition for pursuing equality. However, after completion of the amalgamations in the 1970s, microeconomic effectiveness came into greater focus. Questions were raised about achieving better democracy and effectiveness without public involvement. However, once resources declined in the 1980s the dependency between efficiency and democracy became more notable and conflicts between them became apparent. The economic crisis of the 1990s brought developments to a head, and effectiveness in resource allocation became an increasingly dominant value for social development. Already, the Power Investigation (Maktutredningen) in the 1990s called for

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abandoning the Swedish model’s collectivistic approach and applying a more individualistic liberal democracy ideal, based on each citizen’s knowledge, their economic and social responsibility. The Power Investigation was critical of public intervention, social planning and corporative solutions. It perceived the basic democratic dilemma of combining individual freedom and collective order, as one that could be dealt with by numerous autonomous institutions, with emphasis on citizen’s integrity and the possibility to influence. This also underlines a shift from societal to individual planning. The shift towards a more individual oriented social ideal paved the way for a more liberal NPM inspired reform policy. The concept of efficiency has even been included, by some, as an integral part of democracy in the form of decisiveness (handlingskraft) (Rothstein, et al. 1995). The Swedish Democracy Council (Demokratirådet), organized by the Swedish Council for Enterprise and Society (SNS), underlines decisiveness in terms of decision-making and implementation. The political system should have an organization with enough economic and other resources to prepare and carry out its decisions. This viewpoint renders effectiveness as a component of democracy. Thus, popular sovereignty is now viewed as a necessary, but not sufficient, condition for democratic rule (Westerståhl 1970, Rothstein et al. 1995). In 1951, there were almost 2,500 self-governed villages, towns and cities in Sweden. More than half of them had less than 1,000 inhabitants and more than 95 per cent had less than 5,000 inhabitants. In 1952, the number was sharply reduced to 1,039. By the end of the 1960s the number of Swedish towns and cities had decreased further to 464. However, the central government considered progress in the voluntary amalgamation too slow. A second wave of amalgamations in the early 1970s resulted in a further reduction of the number of towns and cities to only 278. The number increased marginally to 290 by the year 2004, often as the result of a process of strong local opinion in favour of splitting away from larger municipalities. After the 1952 reform, 85 per cent of Swedish towns and cities had between 2,000 and 7,000 inhabitants, while in 1995, more than three-quarters of them had 10,000 or more inhabitants. Today, only nine towns in Sweden have less than 5,000 inhabitants, mainly due to local split-offs (see Table 9.1 a in the appendix for details). Thus, we see a dramatic change of the situation found immediately after the war, where many formerly small self-governing villages and towns have been absorbed by larger towns and nearby cities. According to the Swedish Law on Municipalities (Kommunallagen, KL 4.1), an elected officer refers to both members and alternates on municipal and county councils (that is, councillors) and to persons appointed to municipal boards (that is, commissioners), as well as accountants and alternate accountants on the councils. However, it excludes members of the board of municipal owned limited companies (ibid., p 121). Research shows that, on the average, the number of elective offices at the municipal level decreased between 60 to 70 per cent, while for smaller municipalities the decrease was as

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much as 80 to 90 per cent. Swedish research also points to the growing distance between elected representatives and the electorate. It was less likely in the new and larger municipalities that citizens were aware of the name of candidates in local elections. Contacts between citizens and elected representatives developed in a negative fashion. Moreover, elected representatives became less representative socially, in particular in terms of gender, age and social class (ibid., p 65). The sharp reduction from 2,500 to only 290 municipalities, greatly reduced the number of elective offices, both as councillors and commissioners. The number of town and city councillors was estimated at 40,000 in 1951 (Wallin, et al. 1981). By the 1960s it declined to 32,000 and 15 years later it was down to only 13,000, where it remains today. This represents a reduction by twothirds in just 25 years. It was not offset by the fact that the average size of municipal councils more than doubled in the same period (ibid.). In the 1970s the number of elected councillors increased temporarily due to reorganization and the possibility to appoint alternates, first voluntarily in 1971, but in 1977 it became required by law. In addition both the number of boards and number of positions on them increased in the same period. The creation of local bodies, like municipal boards, had the same purpose, that is, to increase the number of elective offices. By such measures the total number of elective offices increased from 75,000 in 1974 to 83,000 in 1980 (Gustafsson 1996, p 124). However, greater flexibility introduced in the 1980s led to the opposite effect. Efficiency and economic considerations became dominant, and already by the election of 1991 a clear decrease can be noted, back down to 75,000 in 1995 (ibid., p 126), and even further to 66,000 by 2003 (Regeringsskrivelse 2003/04:110: 33). These changes are summarized in Table 9.1 in the appendix. On average each elected officer holds 1.5 elective offices, which means that the total number of elected officers in 1995 only reached 48,000 (Gustafsson 1996, p 124). An immediate effect of the first round of municipal amalgamations in the 1950s and 1960s was seen in terms of municipal administration. The larger municipalities received increased economic and administrative resources. This led to increased possibilities to provide inhabitants with equal services, regardless of where they lived, something deemed impossible for most small villages and towns in the early 1950s. The municipalities have become more similar in terms of economy and service (ibid., p 64). But more effective social planning has also decreased the need for detailed planning of municipal activities by the national government (ibid.). However, in many villages and smaller towns direct democracy was practiced prior to the first wave of amalgamation. In addition, local administration was often entrusted to lay citizens or nonprofessionals. Both direct democracy and lay administration disappeared in the decades following the war. The City of Falköping serves to illustrate these changes. More than 40 villages surrounding it lost their right to direct democracy in 1952. In the smaller towns 219 councillors were elected to the municipal councils between

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1962 and 1974. Today, Falköping only has 51 elected councillors, that is, 77 per cent lost their elected position (Herlitz 1999). Moreover, only 26 of the 36 municipal commissioners in Falköping survived the second wave of amalgamations after 1974. In the surrounding small towns now making up Falköping, only 25 of 183 such positions remain, or 14 per cent (ibid.). From a democratic perspective, the decline in the total number of elective offices, as a councillor or commissioner, corresponds with ordinary citizens’ chances of gaining an elective office at the municipal level. Taking into account that this is probably the most likely channel of recruitment to local and then national politics, developments since the early 1950s clearly show a dramatic drop, on the average by more than two-thirds, of such possibilities for ordinary Swedish citizens. The number of elective offices dropped from 25 per 1,000 inhabitants in 1965 to 5.2 in 1974 and only 4.8 per 1,000 inhabitants in 1995 (Gustafsson 1996, p 127). In terms of persons of voting age the change is more dramatic. In 1951, there was one elective position for every 14 voters. By 1980, this was reduced to one per 75 voters, and in 1995 to one for every 93 voters (Aronsson 2001, p 49). By 2002, it had declined to under one per 100 voters. Normally local offices are the first step in a political career; so, this also eliminated many potential political activists and politicians. Such changes must also be seen against the background of a sharp increase in the number of public sector employees or civil servants. At the beginning of the 1950s there were very few full-time civil servants employed by towns and villages, with the exception of the three large cities. (Gustafsson 1996, p 127). However, their number grew dramatically, and between 1965 and 1979 alone the number of civil servants at the municipal level increased from 60,000 to 116,000. Today, there is a more specialized and professionalized administrative organization in Swedish municipalities than 50 or even 20 years ago. Many administrative responsibilities have been taken over by civil servants, while elected councillors have clearer roles as decision-makers. By 1995, over 1.1 million civil servants were employed by the municipalities and counties in Sweden (ibid., p 127). Moreover, the costs for primary municipal responsibilities represented about 5 per cent of GDP in 1880, and to 9 per cent in 1930 (Johansson et al. 2001). Between 1965 and 1980, when their responsibilities expanded rapidly, costs for their activities increased to 20 per cent of GDP (ibid., p 124). More recently, the growing use of market models for providing local services accentuated the democracy deficit. During the past decade an additional 9,000 nonprofessional or lay politicians have been relieved of their responsibilities, decisions have been delegated to local bureaucrats, purchaser-seller models have taken over a growing part of public services and contracting-out to private for-profit suppliers has increased dramatically. Moreover, municipal limited companies have restricted both public accountability and their employees’ possibilities to inform the public about their operations. Taken together, an overwhelming number of opportunities for citizen participation in elective offices have been eliminated in Sweden in the postwar

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decades. Also, possibilities of future political recruitment, of rewarding citizens who are engaged in politics and of encouraging promising political talents have nearly disappeared. A reduction of the number of municipalities, and by implication, in the number of elective offices, resulted in fewer, but larger local economic and administrative units. It was argued that this was necessary in order to improve their performance and make possible an extension of public services. This was referred to as the ‘rationalization movement’ in Sweden, often based on a belief that economies of scale found in manufacturing could easily be transferred to and exploited by the public sector. In postwar politics, the Social Democrats promoted larger, unified and rationally organized municipalities, rather than continuing with several small overlapping municipal areas of shifting responsibility. The socken or nearly 2,400 parishes, which were self-governing between 1862 and 1950, provided a local identity in terms of a feeling of belonging to local society (Aronsson 2001). However, today’s block municipalities have their origin in the härad, an old institution for justice, maintaining roads, choosing representatives to the Riksdag, and so forth. In 1860, there were 322 härads – nearly as many as the number of new block municipalities after the amalgamations of the 1950s and 1970s, that is, 290. Thus, more attention was given to organizing service production and the expansion of the welfare state than to maintaining local identity and democracy (ibid., p 22). While the expansion of the welfare state brought to light the financial and administrative limits of villages and small towns, less attention was given to democratic considerations (Gustafsson 1996, p 65). The sharp increase in the size of Swedish municipalities was deemed necessary to lay the groundwork for the development of a universal welfare state. This should, however, be recognized as a means to an end, and not seen as an end in itself. It had, however, a high price in terms of local democracy and it dramatically reduced the chance for citizens to actively participate in local politics in the twenty-first century. If it is shown that this was a major factor contributing to the growing democracy deficit, then steps should be taken to alleviate and amend the damage caused to the fabric of Swedish democracy. New channels for citizen participation should be developed that are on par with those lost through the process of municipal amalgamations in the 1950s, 1960s and 1970s. Moreover, these two waves of municipal amalgamations also made a direct impact on other democratic structures in Sweden, in particular for the political parties, especially their local branches, and on some popular movements. The parties had to adjust to far-reaching changes in the new local political structures created by fewer and larger municipalities. This led to centralization of most political parties, as illustrated by the Social Democrats, who systematically pursued the principle of ‘one municipality – one local labor organization’ (arbetarekommun). The Social Democratic Party, SAP, now has 288 local labour organizations, compared with 2,800 in 1955 (Gustafsson 1996, p 139). Moreover, the municipal amalgamations appear to have a

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spillover effect on some other popular movements that were closely associated with a political party. They appear to have followed suit in terms of starting their own process of amalgamation. The democracy deficit: amalgamations in popular movements The promotion of more ‘rational’ (read: big) structures in public life did not stop with the public sector. Some of the more important popular movements adopted the logic or argument that ‘big is beautiful’ in their own organizations. The 1960s and 1970s saw several popular movements follow in the footsteps of the public sector by promoting larger local units, more professional employees and with fewer elected offices (Pestoff 1979). This resulted in a further reduction of the chance for ordinary members to gain an elective office, increased membership alienation and led to a sharp decline in membership participation and engagement in such organizations. Some of these organizations were closely allied with a major political party, like the trade unions or consumer and agricultural cooperative movements (ibid. and Pestoff 1991). Yet these were the very social institutions that were supposed to provide a ‘school for democracy’, that is, voluntary organizations, according to liberal democratic theory (see de Tocqueville 1945 for America and Ambjörnsson 1988 for Sweden). But, they succeeded in rationalizing away most of their elective offices/officers and eliminating or pacifying their active members. Moreover, as many politicians were recruited from popular movements closely allied with a specific political party (Pestoff 1977), these parties cut themselves off from rejuvenation by one natural source in Sweden. Thus, the rationalization movement in the public sector and popular movements in Sweden proved highly detrimental to opportunities for political participation by ordinary Swedish citizens in the decades following the end of the Second World War. While comprehensive data are not available for most popular movements, information from some of them indicates the impact of amalgamations in terms of changing their democratic structures. Data are available on four prominent popular movements: the building and tenant cooperatives (HSB), the consumer cooperatives (Konsum and KF), the producer cooperatives (SLR), and the blue-collar trade unions (LO). See Table 9.2 in the appendix for details. It can be used to illustrate the extent of amalgamations in Swedish popular movements and voluntary associations. With the exception of the producer cooperatives, these organizations grew steadily in membership during the first seven or eight decades of the twentieth century. The building and tenant cooperatives grew from 10,303 members in 1930 to 595,426 in 1988; the consumer cooperatives grew from 74,000 members in 1910 to 2,100,000 in 1990, while the blue-collar trade unions increased from 43,575 members in 1900 to 1,961,227 in 1976. The supply and marketing association (SLR) of the Swedish producer cooperative movement (LRF) experienced more

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fluctuation in its membership, due in part to the economic difficulties experienced by agriculture in the Great Depression. SLR had 84,726 members in 1920, 54,249 in 1950, 145,019 in 1960 and 112,924 in 1977. Amalgamations made a different impact on these popular movements. In the building and tenant cooperatives (HSB) they primarily affected the municipal or regional level, not the small local building and tenant cooperatives, while the other three amalgamations mostly impacted the lower level, where rank-and-file members have most of their contacts and where they can first hope to gain an elected office or honorary post. However, local building and tenant cooperatives register their stock of apartment buildings as separate legal entities, which cannot be amalgamated; thus, amalgamations in HSB mostly impacted the municipal or regional level, but preserved the local democratic structures. In the consumer cooperatives (Konsum and KF) the number of local cooperatives began to decrease early in the organization’s history, as they moved from democratically controlled shop cooperatives to town or citywide, and later regional consumer cooperative societies. This resulted in a steady decrease in the number of democratic structures where members could become active and hope to gain an elective or honorary office. During the 1990s, the average size of the local consumer cooperative societies doubled in just one decade, while the number of retail outlets was halved during the same period. This development made a detrimental impact on the democratic side of the Swedish cooperative. The growing size of regional cooperative societies in urban areas turned members into passive consumers, whose only expression of loyalty to the movement was reduced to purchasing all or most of their groceries at the local cooperative. The new wave of amalgamations in the 1990s lost sight of traditional cooperative goals and values. In place of small democratic consumer cooperative societies throughout the country there was a complicated conglomerate that owned the biggest local societies, and they in turn owned the central organization, KF. This new conglomerate was run as a limited company or Aktiebolag, rather than as an economic association. The business side of the Swedish consumer cooperatives was completely separated from its membership organization, and members no longer had any influence, nor could they participate in the running of their local cooperative society. Finally, in 2002, the consumer cooperative movements in the four Nordic countries amalgamated, creating a new level of decision-making and making membership influence even more obscure. The farmers’ supply and cooperative marketing association (SLR) demonstrates a similar pattern of development of their democratic structures. By 1977, there were two paid staff for every elected officer in SLR. This reflects a change in the balance of power between these two groups of leaders. Finally, turning to the blue-collar trade unions (LO), we can note less radical changes in the democratic structures of such organizations. Comparing the development of the democratic structures in these four popular movements during the first three decades after the Second World

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War, we can note that all their local organizations grew in size, but some much more than others. Keep in mind that this is the same period of radical reorganization and growth in size of local governments in Sweden. Between 1950 and 1977 the size of the local democratic units grew: in HSB from an average size of 54 to 86 members; in Konsum and KF from 1,413 to 11,092 members; in SLR from 221 to more than 5,000 members; and LO from 144 to 1,329 members. This implies that a member’s chance of gaining an elective office or honorary post in any of these popular movements decreased in proportion to the growth in size of the local organization. By the end of this period, chances for members to gain an elective office were greatest in building and tenant cooperatives, with the trade unions in the middle range and both the agricultural and consumer cooperatives at the bottom. Thus, a member’s chance to gain an elective office or honorary post in a popular movement decreased dramatically during the 1960s and 1970s in Sweden. Many popular movements clearly lost their ability in the postwar period to perform their often-noted function as schools for developing democratic values and virtues among ordinary citizens and for providing them with training in democratic meeting techniques. In addition, most of these popular movements also experienced a rapid growth in the number of employees. The professionalization of such organizations is also related to questions of member influence and can be expressed in terms of a ratio of elected to paid leaders, or an index of democratic control. However, there is a clear difference between the importance of paid staff in the three commercially oriented cooperative movements and the trade union movement. The paid staff has a much more dominant position in the cooperatives than in the trade unions (Pestoff 1979). Furthermore, a separate study showed that both the ratio of elected officers and staff per 1,000 members decreased with increasing size for agricultural and consumer cooperatives, but not for the building and tenant cooperatives, due to the maintenance of local democratic structures by the latter (Dellenbrant and Pestoff 1980). The message seems to be that it is possible to achieve a better economy without having to sacrifice membership democracy, as demonstrated by the building and tenant cooperatives. Rothstein (2002) analysed the relationship between developments in some popular movements and social capital in Sweden. He argues that citizen-tocitizen trust is insufficient for explaining developments in a corporatist political culture. In order to make such a system work we need to look at vertical forms of trust. He distinguishes between three types of vertical trust when explaining the disappearance of trust between labour market organizations in Sweden. In a system based on organized social capital, trust can also exist between: 1) individuals in the same organization; 2) the leaders of various organizations; and 3) the leaders of organizations and the state (ibid., pp 324–25). While the first provides an example of horizontal and vertical trust between both leaders and members, the latter two express a form of horizontal elite trust that corresponds with Lijphart’s discussion of

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consociationalism (1968). Rothstein argues that ‘the Swedish model rested on a limited role for government. It left the parties in the labor market to sort out their problems themselves. This limited role for the political sphere in the labor market was abandoned during the 1970s’ (Rothstein 2002, p 330). However, we noted above a different pattern concerning the development of local democratic structures. Here the state played a central role in promoting far-reaching changes that eroded much of the vertical and horizontal trust found at the local level. Moreover, vertical trust must have been quickly expended by the popular movements that followed the ‘big is beautiful’ movement in the 1970s. Active members in many popular movements could no longer count on their leaders to listen to them, nor to provide them with an opportunity to gain an elective office. This too must have destroyed a lot of the stock of social capital generated by popular movements in Sweden, and made it impossible to regenerate it in the future. Turning to other types of voluntary organizations we can also note a decline in participation during the 1990s. The democracy deficit: decreasing membership and participation Amalgamations at the local level in the public sector and in some important popular movements imply a dramatic loss for ordinary citizens in terms of gaining an elective or honorary office. Further negative developments can be noted during the 1990s in terms of the loss of membership and lower participation by remaining members in voluntary associations in general, and in political parties, in particular. Recent evidence about membership in voluntary associations and third sector organizations is relevant for their continued development and potential role in democratic theory. The Swedish Bureau of Statistics (SCB) regularly undertakes Studies of Life Conditions or levnadsförhållanden. Occasionally these studies include information about membership and participation in voluntary associations. SCB’s sample was based on 5,980 respondents in 1992 and 5,677 in 2000. Given the panel design, it is possible to analyse developments in Sweden concerning membership and participation, during the turbulent 1990s. The SCB report on Associational Life in Sweden initially provides a discussion of the theories and methods of the principal authors (Vogel and Amnå 2003). They note that in recent years the special characteristics of Swedish democracy have weakened considerably, in particular, membership and activity in voluntary associations. The three main reasons identified for this are the role of the mass media, the expansion of the public sector, which takes over citizens’ responsibilities, and growing individualization. But there are also changes within associations themselves, which can help explain such developments. They include the professionalization of associations, where more and more activities are taken over by paid employees, and members become more like consumers (ibid., p 9). Vogel and Amnå (2003) provide three different theoretical perspectives on the third sector: 1) welfare production; 2) social capital; and 3) providing a

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school for democracy. Concerning welfare production, they refer to services and information provided by the third sector where collective solutions are advantageous. This can either make them a complement or alternative to the public sector. However, the functions listed for associations are more like facilitators or enablers of public services than actual producers of new or alternative services (ibid., p 10). They include such functions as: facilitating activities, providing social contacts, providing information, helping to create identity, promoting feelings of togetherness, and so forth. These functions are very similar to the motives they propose for membership and activity in Swedish associations, suggesting a conceptual confusion between means and ends (ibid., pp 14–15). However, contrasted to a book on comparing institutions producing welfare in Europe one year later (Vogel et al. 2004), they nevertheless maintain a traditional, but limited, view of the role of the third sector as a direct producer of welfare services. They also refer to the role of Swedish associations in popular governance in terms of being a fundamental resource or nursery for representative democracy (Vogel and Amnå 2003). However, this seems difficult to maintain in light of the development of the democratic structures of some popular movements noted above and the overall decline in membership and active participation in voluntary associations that they go on to document. Turning to developments in Sweden during the 1990s, they note that membership figures decreased in many associations, including trade unions and sports associations, two of the largest groups in Sweden. In the 1980s, twothirds of the population lacked an elective office or honorary post in associations, and by 1997, most Swedes were no longer active in an association (ibid.). Moreover, dramatic changes have taken place in Swedish associations in the past 50 years. The focus of membership has shifted from traditional popular movements to more individualistic lifestyle associations, represented by cultural and leisure activities. In addition, general grants from the public sector to associations have been replaced or supplemented by payment for services provided or for specific projects. This promotes professionalization, and many of them have moved from ‘voice to service’, or from functioning like broad popular movements to professional oligarchic bureaucracies that fight for their own special interests (ibid.). The SCB report demonstrates the weakening of associations in Sweden along several dimensions and the proportion of both non-members and passive members grew during the 1990s. Taken together: these developments mean that associations have aged, with significantly fewer younger members; they become pacified, with fewer active members; they show greater gender inequality, with women preferring caring, cultural, religious and solidarity activities and men dominating in lifestyle, motor, sport, hobby organizations, and political parties; they lost their political character, with a sharp decline of membership in political parties, especially among the young; and they became more market-oriented, through contracting out and professionalization (ibid.).

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In closing, Vogel and Amnå note that associations and the third sector change in relation to changes in the other sectors, the market, the state and the family. But, contracting out and providing services causes them to focus more on their financial activities, rather than on internal democracy, moving them closer to their commercial competitors. This undermines their role as training schools for democracy and diminishes their role of providing voice. They note that it is impossible to know whether older associations will be able to adapt to this challenge. But trends show that traditional associations are losing their attraction power, in particular for younger people. Perhaps new forms will be developed for producing welfare, trust and popular governance that replaces the older forms. This will be necessary in order to maintain the political role of associations and their democratic importance in the future (ibid.). Skocpol analyses long-term developments in American NGOs and NPOs (2002). She notes that civil society in America has been transformed into a shadow of itself, with shrunken networks and dwindling and ageing memberships. Very few large membership groups have been launched or revived since the 1950s – especially not multipurpose groups that span across class and partisan lines and that combine local and national activities. Rather, growing groups in the US have a narrower mission, and either no members or computer-based mailings to individual constituencies, who send a check back in the mail. Most professional advocacy groups are small – often amounting to little more than headquarters operations in Washington DC or New York City (ibid., p 131). Newer forms of association may have their advantages, and they express the shifting interests of younger people today. But older aspects of the civic world are not being reproduced nor reinvented. Moreover, the new professional advocacy groups are very oligarch and they gain support from the more affluent citizens. There are no longer any crosscutting memberships and associations no longer building bridges across classes and places. This can have a detrimental impact on democracy in America. Lindgren (1999) strongly questions the idealized pluralist view of organizational life. She provides another critical perspective, that of the state usurping too much independence from third sector organizations that help to implement public policy in Sweden. Here, public authorities use voluntary organizations to undertake responsibilities in a growing but diverse number of policy areas, including eldercare, welfare services, the labour market, adult education, leisure and culture, international development aid, just to name a few. But, there is always a risk that they will become integrated with the public sector and dependent on it. She notes that already today, three-quarters of the financing for the voluntary sector comes from public funds. In addition, such support is more and more taking on business like result-oriented governance forms. General support is being replaced by project support, compensation for a specific level of production and contracting-out (ibid.).

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Her study of public support to adult education associations, popular high schools and their branch organization (FBR) during the 1990s shows that both the freedom and voluntarism are promoted by the state, but that more specific political goals also determine state support. However, several decisions in recent years indicate a growing desire by the state to govern and determine in greater detail how the adult education associations and popular high schools should go about achieving their goals. In fact, the same methods as used with the central administration have been employed with adult education associations, namely the use of directives (förordningar) and letters of regulation (regleringsbrev) (ibid.). Thus, she is skeptical to the possibility of the voluntary sector maintaining its special character in relation to the state. In general, public support for voluntary organizations has changed its nature from general support to support for specific projects. The voluntary organizations that wish to continue to receive public support must adjust their activities to these changed demands. In particular, public support for adult education has assumed a character that makes it necessary to question the continued legitimacy of its central organization, FBR. There is a large and growing discrepancy between the general motives for giving state grants to adult education and the growth of detailed governance practiced during the 1990s. Goal governance, specific support replacing general support, detailed determination of which students could receive such benefits, and so forth, were part of the overall picture above (ibid.). Bang and Sörensen provide similar criticism from a Danish perspective (1999). They argue that Putnam fails to distinguish thoroughly between competitive and participative democracy. The first is rule by competing elite rule only, while the second is rule performed by enlightened, civic citizens. What Putnam calls actively participating citizens could, in many, if not most instances, more appropriately be described as political sub-elites. For instance, more and more of the voluntary organizations that Putnam praises for their ability to produce civic democratic engagement are in fact becoming increasingly professionalized organizations that seek to make themselves heard in negotiations with various experts from the government. However, many voluntary organizations have long since given up their oppositional attitudes to government and have now become players in the games that elites and experts play when negotiating problems of pollution, equality of sex, foreign aid programmes, integration of political refugees, and so forth. They become players in experts networks (ibid., p 328). In brief, we can summarize one of the main arguments so far by noting that liberal democratic theory provides a faulty understanding of the role and potential of voluntary associations and the third sector in democratic theory. Vastly changing economic, political and social conditions have resulted in a dramatically changed relationship between voluntary associations and the state today, but one that has not been thoroughly taken into account nor adequately analysed by many political scientists. In addition, fewer and

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fewer citizens are active in the type of organizations that support the liberal democratic ideals expressed by de Tocqueville or Ambjörnsson.

The output side: new perspectives on the third sector and democracy Below, I will sketch some reasons for expanding the scope of academic enquiries to include the output side of political activities and the political system more directly, as well as to explore the implications of recognizing a more active role for citizens. It is necessary to augment the role, influence and power of citizens as users of public services in order to rejuvenate democracy at the local level and to reorganize the provision of welfare services in order to preserve a universal, tax-financed welfare state of the Scandinavian type. Failing to do so, the democracy deficit will continue to grow and the legitimacy of the welfare state will continue to erode. Citizen participation and the political system Lundquist discusses a model for greater citizen participation (2001). In doing so, he notes that neither society’s political institutions nor social observers, including academics, are value-neutral. Rather they favour certain values over others (ibid., p 137). In order to analyse democracy, he argues one must combine both normative theory and empirical theory in a constructive fashion. ‘It is first when we know in part what democracy should look like (normatively) and what it in fact is (empirically) that we can judge what it could become and how to achieve that situation (constructively)’ (ibid., p 16). He argues that it is necessary to distinguish between studies of the input side and output side of the political process or system. The input side includes studies of initiation, preparation and decision-making, while the output side includes studies of implementation and control. The study of political democracy normally focuses on institutions related to the election of politicians, as well as for activities undertaken by the parliament and government. Nongovernmental organizations and pressure groups articulate the interests of their members and pressure the elected representatives to support their causes (Truman 1951, 1971). However, Lundquist considers this perspective too narrow. If democracy is equated with the power of the people, it must include the entire political process, and not just those aspects that lead to political decisions. We must therefore also study what happens after a political decision is made, namely what happens in the implementation process on the output side of the equation. It is still a question of democracy, even if under different conditions than those found on the input side (Lundquist 2001, p 142). In order to speak of popular power, he continues, the people also need to have control over implementation of public policy. This is a decisive point, since it is here that it is ultimately decided what an individual citizen actually receives. In order to decide and influence matters, an individual citizen needs

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information about what is happening in the administration and what possibilities exist for influencing things, at least those concerning her/himself. However, in democratic theory most control over the administration is exercised by politicians, after the fact (ibid., p 143), and greater transparency and accountability are normally prescribed to improve democratic performance. Existing democracy theory focuses almost exclusively on the input side and on the political institutions found there. According to Lundquist, this reflects an input fixation. Why does democratic theory stop there? Earlier, it might have been possible to get by without considering the need to democratize the administration, but once the welfare state began to develop, this stance was no longer reasonable. The current political science fixation on input side democracy is probably also explained by ideas/theories of bureaucracy from Max Weber. They assume that political decisions automatically are transformed into actions by the public administration, and therefore lack interest in policy analysis (ibid., p 143). However, this is far from reality and the administration has a great deal of discretion and influence on public policy. From a popular power perspective it is reasonable to conceive of the entire political process as comprised of several steps, according to the following: a) input activities – which should open possibilities for citizens to participate; b) decisions – should be made by a majority of all citizens or their representatives; and c) output activities – should result in decisions actually being implemented. From a democratic perspective this means that citizens need information about what happens in the administration, and should be able to use that for forming public opinion and to influence activities of politicians and civil servants. Citizens need control over implementation directly or indirectly through their elected representatives. Within the limits for governance, users should be able to influence the implementation of public policies in their respective areas of interest. Civil servants should be (made) aware of the democratic implications of their work (ibid., p 144). A narrow input-side focus in the study of politics and democracy is employed typically both by mass media and the social sciences, including political science. This makes it more difficult to pursue a serious discussion of the need for democratic reforms. For many observers politics stop with the Riksdag and government. Perhaps the most important part of politics – the implementation process – falls outside, and is not a self-evident part of our knowledge and the general political debate. Any meaningful debate about political democracy requires that consideration also be given to the administration (ibid., p 145). Moreover, as Ilmonen (2006, p 16) points out, the position of the state and governmental/municipal bodies has not been considered profoundly enough in most studies of social capital. It is possible that the state can both create and destroy social capital. Thus, the state needs to be divided into at least two parts: the representative side, which deals with politics and the executive, which implements political decisions. When it comes to the representative side of the state, there is evidence that democracy and trust correlate with

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each other. However, the executive bodies of the state play a different role. Here, their fairness in the factual implementation of policy is likely to influence citizens’ confidence in the public sector. If civil servants are conceived as unfair, then it will lower the trust of various groups of citizens. Among doctrines of democracy, Held (1987, 1996) distinguishes between three main types: legal or constitutionalism, pluralism and participative democracy. Schumpeter described elite democracy as one where elites are supposed to compete with each other every second, third, fourth or fifth year for the support of voters. The latter are supposed to be passive observers of politics in the meantime. This doctrine is based on a pessimistic view of voters and their capacity to follow and influence politics. Pluralism, by contrast, emphasizes that pressure groups compete with each other, and that they are found in-between the voters and politicians. This guarantees stability and fights against a power concentration (Truman 1951, 1971, Pestoff 1977, Lundquist 2001, p 150). Participative democracy gained new acceptance during the 1960s, and proposes to extend democracy to other areas like economic democracy, firm democracy and organization democracy, alongside more direct democracy (Dahl 1989, Lundquist 2001, p 151). Lundquist (2001) asks if it is possible to combine direct and indirect democracy, or liberal representative democracy with participative democracy. Existing channels of participation appear hollow for many, if not most citizens today. For practical reasons, all citizens cannot participate in all decisions in today’s society. It is a question of finding a division of labour between different types of decisions that seem natural for the participants. Representative bodies should make the major overarching decisions. But other possibilities exist for direct citizen participation that are of importance, both in voluntary associations and popular movements, and on the output side of public policy-making. Outside the political sphere, organizational democracy is important for direct participation of all citizens (ibid., p 183, Hirst 1994). Greater direct citizen participation is possible in the political sphere, mainly on the output side of the political process, where citizens are users of services. Here, it is most natural to explore their direct participation in the political process. Within the frame of political decisions, users, together with civil servants, should be permitted to ultimately shape the decisions that concern them personally. Normally, it is only civil servants who make such decisions within the frame of political control today (Lundquist 2001, p 183). Unfortunately, Lundquist fails to relate his vision of future models of citizen democracy that combines direct and indirect democracy with questions of individual and collective action, for example, participation by individual citizens or third sector organizations representing groups of citizens. There is a significant difference between spontaneous individual activities and organized group solidarity, both in terms of scope and focus. Citizens can participate actively in producing greater neighbourhood security, either individually by marking their belongings and cooperating directly with the police or

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installing an alarm system and/or collectively by organizing themselves for neighbourhood watches. Parents can obtain childcare either individually by engaging a neighbour teenager as a babysitter and/or collectively by joining parent cooperative pre-school services. There are major differences between such efforts, and the role played by third sector organizations. He criticizes the spread of market models to the public sector as a serious threat to democracy and makes ample reference to the importance of civil society and nongovernmental organizations for democracy. But he envisions no clear role for them on the output side of citizen democracy, that is, he fails to synthesize liberal representative and participatory democracy in practical terms. Thus, he fails to adequately integrate the third sector into his model of citizen democracy. Hirst, by contrast, provides a lucid alternative in his discussion of associative democracy (1994, 2002b) (see Hirst’s works considered in greater detail under the section headed ‘A new role for the third sector in democratic theory’, below). However, before turning to a new role for the third sector in democratizing the welfare state, we want to consider changing political attitudes and patterns of participation, in particular those of today’s youth. Sub-politics and life politics Citizens today, particularly the youth, prefer participating in non-hierarchical and informal networks, in addition to a variety of lifestyle-related sporadic mobilization efforts. This replaces bureaucratic ties with loose connections. Citizens may be less overtly party political, but can still mobilize for political action. This may be seen as sub-politics. Moreover, check-book activism does not rely on intensive or regular face-to-face contacts between members and many models of organization no longer stress volunteering in local chapters. However, many such activities can be done alone at home (Stolle and Hooge 2004). Bang and Sörensen are critical of Putnam’s acceptance of state domination of politics and democracy (1999). They question whether governmental effectiveness and responsiveness can in fact compensate for the lack of selfgovernance and co-governance, which is the price that citizens must pay when handing over their right to govern themselves, to governmental elites. Their study of democratic governance and civic engagement in Denmark draws the contours of a new political identity that they call ‘the Everyday Maker’. The Everyday Maker represents a new form of political engagement, which attempts to combine individuality and commonality in new relations of selfand co-governance. Seen from Putnam’s perspective there is a serious risk that researchers will ignore the political potential of the Everyday Makers and see them as nothing other than individuals ‘bowling alone’ (ibid.). Sörbom (2002) gets inspiration in explaining changing attitudes to political participation in Sweden from the works of Ulrich Beck (1995) and Anthony Giddens (1998). She introduces their concepts of sub-politics (Beck 1995) and life politics (Giddens 1998). The former refers to the area opening

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up to ordinary citizens, which is outside the reach of or beyond politics, suggesting a space in-between the market and politics. The latter denotes a shift in the political focus of ordinary citizens from grand design ideologies and party politics at the national level to more mundane, but nevertheless important, matters of everyday life, like pre-school, schooling, eldercare, handicap care, healthcare, and so forth. Both of them also refer to the growing individualization, as well as the increasing reflectivity of life and politics in the late modern époque at the end of the twentieth century. Individualization means a loss of importance of traditions and collective bodies and the increase in importance of each individual. Each citizen has both a right and responsibility to decide for her/himself. This is also equated with a different type of political engagement, one that is expressed in subpolitics or life politics. Here, party and elector politics are no longer the focus of ordinary citizens; they lose in importance compared with sub-politics or life politics. Citizens realize that political engagement can be expressed in forms other than electoral politics or membership in political parties and popular movements. They also recognize that the arsenal of political activity is much larger and broader than those provided by the electoral system, like voting, campaigning, canvassing, giving speeches, writing petitions, filing formal complaints, and so forth. It does not exclude membership in solidarity activities for various groups, numerous voluntary organizations, different self-help groups, participation in diverse consumer boycotts, demonstrations, and so forth. It is possible to argue that any activity is political if it aims at bringing about changes that are not individual or only for one’s family, but also affect others in society (Sörbom 2002). Thus, as long as the assumed impact of the activities is collective and actively chosen, they can be defined as political activities in terms of sub-politics and life politics. Many far-reaching political changes brought about by the development and extension of the welfare state after the war, have also contributed to bringing politics closer to everyday life for most citizens: the development of public pre-school; a basic general education for everyone and higher education for most young persons; general public healthcare, eldercare, handicap care; regulation of work life and even books and theatre, in addition to the development of numerous social insurance systems. All of them have served to bring politics closer to everyday life and have become matters of great importance for most citizens. This became particularly evident in the period of mass unemployment and sharp cutbacks in public welfare services in the 1990s in Sweden, when most families were impacted in a negative fashion by cutbacks in one or more social programmes. Reflectivity is also important for understanding late-modernity. It is a natural product of modernity and the Enlightenment. But its continued development requires that reflectivity also focus on the very institutions that make up modernity, including parliamentary politics, the nuclear family based on a male breadwinner, lifelong work for the same firm, voluntary associations, and so forth. Primarily in matters of importance for citizens’ daily life, such

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as pre-school, schooling, healthcare, pensions, but also food and leisure, citizens expect and are expected to become more active in making their own choices (Sörbom 2002, p 35). This can, however, create problems and generate distrust in the very political institutions that create, finance and administer numerous universal, tax-based social programmes, including the parliament and municipalities themselves. Reflectivity implies that politics is not something that exists in and of itself, nor something that is produced by others. It is based on the citizen’s own choices and actions (ibid.). Environmental issues illustrate this, where the coupling between national political goals of lower emissions or refuse sorting and individual actions are not always clear. Sörbom (2002) provides empirical evidence on the growth and spread of individualization and reflectivity in Sweden. Numerous areas of daily life became drawn into politics and politicized and politicians became responsible for them. Many services related to daily life thereby became public goods, not just individual problems and solutions. At the beginning of the twentieth century citizens were satisfied with becoming a member of a popular movement or political party, and leaving responsibility for developing and providing social welfare services to the leaders and politicians. Then, membership was the main expression of political activity. But, as noted above, the wave of structural rationalizations in the political sphere and among many popular movements curtailed possibilities for citizens to become more active, should they so desire. However, today they have rejected earlier ideas of politics belonging to a higher sphere and being something other than citizens’ daily life. In particular, younger persons view their own engagement as important for the creation of society and they are therefore usually active in politics. Thus, they see their own activities as more central. Politics is not the activities and actions of others – an elite or leaders – but rather their own activities count and can make a greater impact (ibid.). For example, the growth of the welfare state means that more and more citizens use public services, but what kind of services they come into contact with varies with their life cycle. Their role as user of services creates the need to influence the delivery and quality of these services. But this does not always correspond with their role as voters and their possibilities for influencing the direction of politics at election time and the ability to decide who will govern the country, county and municipality (Johansson et al. 2001, pp 209–210). Many citizens expressed support for the welfare state and criticized changes made in the early 1990s for economic or ideological reasons. But in the late 1990s, fewer citizens are satisfied with traditional public services and many now consider the welfare state in imbalance (ibid., p 209). Voters’ attitudes towards the political system express relatively high levels of approval with the service provided by the welfare state, but less support for politicians and civil servants providing them. This may appear paradoxical, but can be explained in terms of viewing local politics as more than just service production. It is also a question of political culture and possibilities for citizens to participate in local politics and the provision of the services

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they demand (Aronsson 2001, p 50). This view gains support from Rothstein (2000a), who argued that Swedish welfare programmes receive varying public support, depending on whether they are general or specific in purpose. His data show increased support for most universal programmes in the 1990s, but also consistent low support for the municipal and state administration providing those same services (ibid., p 227). Finland also witnessed the growth of new types of voluntary associations in the 1990s and the decline of older ones. Political and ideological associations lost their footing, while a number of leisure and lifestyle associations have grown very rapidly in the 1990s, as too have healthcare and social welfare associations, alongside home district associations and village committees. These changes are in part related to the narrowing of political opportunity structures, a relatively high unemployment rate, and some cuts in the Finnish social security system, as well as population concentration in growth centres (Ilmonen 2006). The development of membership in Finnish voluntary associations is not as negative as in the US or Sweden. The proportion of Finns claiming no memberships dropped from 25 per cent in 1986 to 17 per cent in the year 2000, but those outside associational life today are mostly the unemployed, youngsters and those over 65 years old, while the well educated are overrepresented. Thus, although Finnish associational life has not suffered from a recession, it has gone through a fundamental change, from political and ideological associations to lifestyle and hobby associations. Older, collectivist attitudes have been replaced by more individually oriented ones, even among younger blue-collar workers (ibid.). Both the Finnish social security and healthcare systems have experienced sharp cutbacks during the 1990s. This has forced citizens to mobilize themselves against these cutbacks. In addition, the rapid ageing of Finnish society has contributed to this mobilization. These two trends have given people a heavy impetus to look for new survival strategies to defend their local services and schools. This explains in part the growth of village committees and home area associations (ibid.). A new role for the third sector in democratic theory What can studies of civil society and social capital say about organized user influence on the services provided by the welfare state? Hyden (1998) distinguishes between four main proponents and approaches to studies of civil society and social capital. They include de Tocqueville, Locke, Paine and Hegel, while he labels their schools, the associational, regime, neoliberal and neo-Marxist schools. He notes that civil society means different things to different people. However, there is a tendency to define civil society as organized social life between the individual and state. Although civil society tends primarily to be analysed in the context of a single country, there are at least two other levels of analysis: the associational level and global level. He

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concludes that associations will only contribute to the development of social capital if they are democratically run. Historically that included cooperatives, trade unions and grass root movements in Europe (ibid., p 32), but not charities or foundations. Democratic theory is currently dominated by a model of representative democracy, where citizens’ roles are limited to consuming services, voting and paying taxes. This type of ‘service democracy’ gains its legitimacy mainly from its output or the services provided to citizens, according to Fritz Scharpf (1970). Sharp cutbacks in service provision in the 1980s and 1990s were often combined with market experiments for providing services in most European countries. The crisis of the welfare state, combined with the growing interest for a ‘third wave of democracy’ or participatory democracy, helped to undermine the legitimacy of service democracy and to shift focus from services provided mainly by the state to greater participation by citizens, or input legitimacy. Zimmer and Freise (2005) relate the concepts – civil society, social capital and the third sector – to democratic theory. None of these concepts provide a ‘grand theory’, but nevertheless they are important at the middle-range theory level, and together can help renew democracy theory. From a theoretical point of view, civil society provides the possibility of linking policy analysis with participatory democracy, thus bridging the gap between output and input legitimacy of democratic governance and thereby tackling the democracy deficit of governing Europe (2005, p 4). However, they note that civil society remains a theoretical term equated with voluntary associations and other organizations populating the space beyond the market and state. The third sector is used by some European scholars to describe similar societal space, yet despite vague references to civil society, most of its proponents do not claim any clear linkage to democratic theory (ibid., p 6). Voluntary associations and third sector organizations (TSOs) participate in at least three societal spheres simultaneously. As provider of services for their members and/or the general public they are part of the market economy, although the growing contracting-out can strengthen their ties to the state. As lobbyists for the interest of their members, the common good or a specific topic, they are participating in politics and trying to influence public policy. And finally, due to the fact that nonprofits are dependent on voluntary inputs – donations, membership dues and contributions of unpaid labour – they are also embedded in particular communities where they form an integral part of the life world, thus contributing to processes of empowerment and selfrealization (ibid., p 8). It is their very multifunctional nature and multitasking that makes them interesting for democratic theory and as partners for policy planning. However, each of the three key concepts explores only one aspect of these multifunctional organizations: civil society focuses on democratization and social justice, social capital on civil engagement and participatory behaviour, and the third sector on the organizational infrastructure for social service

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production. They also examine different empirical phenomena at different levels. Social capital concentrates on the micro-level of analysing the civic engagement of individuals and the importance of civic activity on the input side of government. Most third sector research in Europe today focuses on the output side of government or the meso-level of a growing welfare mix of service delivery in different countries (Evers and LaVille 2004). TSOs, as producers of welfare services, constitute an institutional alternative of welfare production to both the state and market (ibid., p 16). Thus, third sector research is closely linked to questions of output legitimacy, whereas the social capital approach is geared towards problems of input legitimacy. In addition, multilevel research is necessary for multilevel problems, like social welfare problems, which are implemented at different levels in different countries. This is due to systemic and constitutional differences between EU countries. Zimmer and Freise (2005) emphasize the benefits of combining the microand meso-level approaches of social capital and third sector research. EU documents discuss the importance of output legitimacy and the gains to efficiency and effectiveness by integrating civil society organizations into the policy process. By contrast, ideas of democratic theory and input legitimacy also need to be taken into account. ‘Indeed, due to their multi-functional character civil society organizations provide the opportunity to combine policy making with elements of participatory democracy that makes them very attractive for any approach trying to strengthen multi-level democratic governance’ (pp 20–1). Walzer (1988) also promotes more participative and decentralized forms for service provision that make room for self-help and local initiative. He contrasts earlier calls to nationalize the means of production in manufacturing with today’s greater need to socialize the means of distribution of welfare. He notes that both production and distribution can be either nationalized or socialized. Nationalization of industry relies on state ownership, financing, production and regulation, but socialization of distribution implies ‘power to the distributors and recipients or clients’. In nationalized industries the managers are often no different from those in private industry. The real contrast is found with self-management and worker control. Similarly, clients in nationalized services often have no more or less influence than in private commerce. Again, the real difference is found in client or citizen control of welfare services. State-sponsored socialization implies the democratic transformation of state agencies at the local level or the transfer of authority and resources to voluntary organizations (ibid., p 21). Accordingly, Walzer states that the US basic education system illustrates possibilities of combining the benefits of a nationalization and socialization of the distribution of services. Education is nationalized in that it is guaranteed by the state and regulated by the federal government. It is socialized in the sense that it is organized and run by locally elected school boards. However, whenever welfare is delivered socially rather than nationally, citizens will receive different and unequal kinds or amounts

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of welfare (ibid.). Therefore, it is most important to increase the number of distributors or providers of services who are also recipients or potential recipients of the same welfare services, that is, the final users. Only then will they have a greater say in welfare management. He argues that greater recipient involvement can be worked out within a democratized system of state supervision or through the activities of voluntary organizations (ibid., p 22). The purpose of socialization is to find new ways for citizens to help themselves and one another, to facilitate the development of new ways to provide welfare services in the form of a multitude of networks and institutions for mutual aid. This also requires experimentation in local democracy and efforts to extend the reach of third sector organizations. At the same time it requires a state strong enough to superintend and subsidize the work of citizens as volunteers (ibid., p 26). In postindustrial societies the growing numbers of civil servants working in welfare services do not have a natural monopoly on helping, even if they are professional helpers. The welfare state coexists with a welfare society, rooted in civil society, even if the latter is relatively weak today and requires the continued and sustained support of the former (ibid., p 25). Citizens have several roles vis-à-vis the state and/or municipal authorities today, most of which are passive, including their roles as taxpayers, service users and/or clients. Their political activity and influence is limited to participating in general elections at regular intervals, and perhaps also becoming a member of a political party. However, the growing democracy deficit and the professionalization of the provision of welfare services in Sweden have resulted in an unintended and undesirable situation where many citizens are pacified and they become objects of social programmes, rather than active subjects in meeting their own service needs (Pestoff 2003). Stakeholder democracy promoted by the New Labour Government in Britain is seen as another way of giving all groups in society clear rights and responsibilities, and thus a clear stake in society, in the way it is run and in the way it functions. Involving citizens as co-producers of the services they demand is another way of mobilizing them. This perspective gains support from Hirst’s discussion of ‘associative democracy’ (1994). He argues that many major policy networks should be extended to include all the governed. Associative democracy involves devolving as many of the functions of the state as possible to civil society, while retaining public funding, and democratizing as many as possible of the organizations of civil society (ibid.). The aim would be to try to separate service provision from supervision at all the main levels of government within the national state. This will both simplify the role of representative institutions and make them watchdogs of public interests. Service provision should be devolved to self-governing associations wherever possible. Citizens could elect to join such service providers and the associations would receive public funds proportionate to membership for providing a specific public service, like education and healthcare, and so forth. Members could enjoy both

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exit and voice options, and could thereby serve as a pressure for further democratization of society (ibid.). In his discussion of ‘democracy and governance’, Hirst (2002a) argued that the main threats to democracy come from ideas related to privatization, economic governance and New Public Management, rather than those of partnerships with civil society, based on deliberative forums embracing a diverse range of actors, like labour unions, trade associations, firms, NGOs, local authority representatives, social enterprises, and community groups (ibid., pp 18–19). He contrasted an ‘organizational society’, made up of large public and private bureaucracies with the normally smaller organizations found in civil society. Most citizens are confronted by large hierarchical organizations that exclude them from insight, influence and participation, yet claim to provide services on their behalf and often in their name. This might be called an uncivil society composed of big bureaucracies, both public and private, rather than small, democratically run and accountable civil society organizations (ibid., p 20–1). He, therefore, calls for large-scale institutional reform of both state and social institutions. The aim of these reforms is to restore limited government by involving civil society in the functions of the state and to transform the organizations of the state from top-down bureaucracies into constitutionally ordered and democratically self-governing associations (ibid., p 28). However, associative self-government would supplement and extend representative government, not replace it. National democracy would be strengthened and made viable by involving civil society. Government’s principal task would, therefore, be to raise and distribute revenue to associations, to provide a constitutional ordering and to supervise the institutions of civil society (ibid., p 30). Citizen participation, user democracy and governance Parallel with greater individualization and reflectivity among younger citizens and a growing importance of life politics, we can also note greater engagement among the clients or consumers of some public services. More citizens become actively and directly involved in the provision of the welfare services, or co-production. Evers (2006) maintains that there are at least five different approaches to user involvement in welfare services in Europe. They are partially overlapping and partially conflicting. They range from welfarism and professionalism, through consumerism and managerialism to what he calls participationalism. They are based on different values and promote different degrees of user involvement. He states that these approaches will vary among sectors and over time. Their mix will probably differ among countries. They regard service users either as: a) citizens with entitlements; b) consumers to be empowered or protected; or c) co-producers who have active civic roles in their communities, in cooperation with authorities, service managers and professionals. Welfarism and professionalism are closely associated with each

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other and neither leaves much room for user involvement. Rather clients are viewed as people with little competence of their own. Consumerism and managerialism call for giving users greater choice through more exit options and argue that the public sector needs to learn from the private sector (ibid.). However, they do not facilitate voice. Participationalism (ibid.) encourages on-site participation by users of welfare services, based on the belief that citizens should engage personally in shaping the welfare services they demand. It emphasizes multi-stakeholder organizations and demands that users become co-producers. This concept is close to the definition of civil democracy presented earlier. Evers warns that at the level of service provision a mix of these approaches may result in ‘hybrid’ organizations containing elements from many of them. However, some may work better together than others and they may, in fact, lead to ‘mixed up’ or disorganized systems where user involvement works badly (2006). Dahlberg and Vedung (2001) note a growing engagement among the clients or consumers of some public services in Sweden. They argue that representative democracy needs to be complemented, when possible, by other forms of democracy. First and foremost, direct democracy and deliberative democracy are suitable complements to representative democracy. The expansion of the welfare state also meant that the development of new channels of influence became necessary. Citizens are the users of public services like healthcare, education, social care, culture, and so forth. It is therefore noteworthy that individuals should have access to such services without being able to directly influence their own situation or the quality or composition of the service consumed. They give six main reasons for promoting greater consumer participation in public services: 1) it provides greater training in the role as citizens; 2) it permits them to express their feelings through discussion and interaction with others; 3) it increases legitimacy of public sector services; 4) it results in greater effectiveness of service; 5) it promotes an equalization of power by giving ordinary citizens a more active role; and 6) it facilitates the adaptation of services to the needs of the consumers (ibid., pp 43–72, italics in the original). Moreover, political science normally focuses on the input side of the political system (Easton, 1965, 1996). We ask how nongovernmental organizations (hereafter NGOs) influence decisions, but we say little or nothing about how NGOs influence the outcomes or the output side of the equation, nor how they could if they tried. Yet, it is on the output side of the equation that the state expanded dramatically during the past 50 years. This expansion is seen both in terms of the types and amount of services provided today that were unthinkable 50 years ago and the number of civil servants providing them. How and where do citizens and the third sector fit into this new equation? What new democratic rights have citizens gained in recent years to help them influence, and at times even protect themselves from, the expanding welfare state bureaucracy and growing number of civil servants? Thus, it is on the output side that we must develop a new understanding of the role of

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citizens as co-producers of welfare services and the potential of the third sector for democratizing the welfare state. The politics of user participation in the provision of social services helps to shift attention from the input to the output side of the political system. In the public sector in general and at the municipal level in particular, citizens became viewed as ‘users’ or consumers in the 1980s. This led to discussions about ‘user democracy’, where users participate in and exercise influence on the production of services. However, user democracy refers to ‘voice’ or consumer participation in the production of services, but ‘freedom of choice’ is more a matter of ‘exit’ or voting with your feet (Montin and Elander 1995). While the latter may be a necessary condition, it is not considered sufficient for insuring greater consumer influence. Montin (2000) notes that three competing perspectives in Sweden now challenge the local popular government model of representative democracy: communitarianism, functionalism and governance. Communitarianism refers to traditional ideas that local government is a territorial community with citizens as responsible members. Functionalism refers to an ideology that local government is mainly a service provider and emphasizes the use of more market models as seen in New Public Management. Citizens are first and foremost consumers or users of services and efficiency constitutes the basis of legitimacy. This is also referred to as ‘service democracy’ (ibid., p 7). Governance falls somewhere in-between the other two. It focuses on how to deal with a situation where politics are defined and implemented within different networks and partnerships, rather than hierarchies or markets. No single actor – public or private – has the knowledge, resources or authority necessary to tackle social problems unilaterally. Hence, several relevant actors are normally involved in governance. Today, local governments are facing a legitimacy crisis that opens up for various renewal programmes and projects, and experiments with developing models that complement liberal representative democracy (ibid., p 22). Critics of greater citizen participation in the production of municipal services refer to three ideal types or models of influence (Klasson 2000). They are the citizen participation model, the user influence model and the consumer adjustment model. Klasson assumes that citizens are unlikely to take the general interest into account in the citizen participation model; rather, he argues, they will primarily act in their own self-interest or group interest (ibid., pp 44–45). They are normally organized according to sectors for providing the public services, like childcare, eldercare, and so forth. While users may gain influence in a particular sector, this can come into conflict with the territorial principles on which citizens are organized, that is, residence. Also non-users are excluded from this model. Moreover, political authority is gained from competitive elections, while increased citizen participation, user influence and consumer adjustment can all be seen as a fragmentation of political authority and accountability (ibid., p 48). However, it should be kept in mind that when party politics first began to

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develop in the early 1900s at the local level in Sweden, the very word party was synonymous with particularism and considered an unnatural division within the local community. It was also argued that parties failed to take the common good into account or to see the whole picture (Aronsson 2001, p 41). This is, of course, a far cry from the general view of political parties today. Few could imagine holding election or convening representative institutions without political parties. Moreover, contrasting the interests of the users of public services with those of representative democracy ignores the disenfranchisement of some public service users, due to a growing representation gap in modern society, stemming in part from greater geographical mobility of daily life. This mobility results in some citizens residing in one territory or a ‘sleeping town’, where they can vote and influence political decisions, while they spend much of their daily life and time in adjacent territories, where they work and receive many services. However, they lack influence on political decisions and the services provided there. Nor do they necessarily contribute directly to financing of such services, as their taxes remain in their home municipality, although they commute on a daily basis and use the services where they spend most of the day. The main reasons for commuting are, of course, the lack of work and/or of local service, like schools, medical facilities, care services, and so forth, where they reside. Their daily commuting can take them across both municipal and county lines, two or more times almost every day (Wiklund 2004). Whether users take the general interest into account remains an empirical question, and few scholars have attempted to study it empirically. Some evidence on this question is, however, found in a study of municipal and county boards for user influence (Jarl 2001). Jarl’s questionnaire to all Swedish municipalities and counties had a response rate of 82 per cent. Ninety per cent of them employ some organized form(s) for user influence in one or more of the seven areas she surveyed for formal user influence (ibid.). Moreover, seven out of ten municipalities claim to promote user influence in four or more of the seven areas studied (ibid.; see Table 2, p 84 for details). They were: childcare services, elementary and high school education, cultural and leisure activities, eldercare, handicap care, and individual and family services. It was most common to find institutions for user influence in elementary education and childcare services, followed by eldercare and handicap care, then cultural and leisure activities and high school education (ibid., p 27). The area of individual and family care allowed for the least user influence. The municipalities employed various forms for user influence. User influence was most often promoted through institutional councils of local users at the site of service provision or through municipal wide councils of all users of a particular service, while self-administrative bodies were found occasionally. Although user cooperatives technically fell outside the scope of her study, they were mentioned occasionally. However, different types of user influence were found in different policy areas, and influence at the mesoor municipal-wide level was greatest for eldercare and handicap care, while

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self-administrative bodies at the micro-level or site of production were found in elementary education in 42 per cent of the municipalities and parent cooperative childcare services were found in 54 per cent of the municipalities (ibid., see Table 3, p 87 for more details). However, Jarl questions whether the most common forms of user influence permit any real influence. The dominant forms are user councils at the institutional level, followed by the same at the municipal level, which allow relatively little room for real user influence. Moreover, municipalities often took the initiative in starting such user councils and users were primarily invited to participate in discussions and consultations, without any decision-making powers or an independent budget (ibid., p 39). Only parent cooperative childcare services were based on user initiatives, allowed for user participation in decision-making and had independent budgets (ibid.). In summary, the Swedish municipalities and counties’ experience of organized user influence was generally positive. The most common form of user influence was some type of consultive council, where various issues were discussed, but no decisions were reached. Fears that increased user influence could pose problems for representative democracy found little support in this report. More than four-fifths of the municipalities did not see any serious consequences of user councils for equality between citizens (ibid., see Table 13, p 173 for more details). Nor did the municipalities’ experience show that there were any serious infringements or conflicts between promoting greater user influence and representative democracy. On the contrary, most municipalities felt that the creation of user councils had provided them with useful insights into their own activities (ibid., p 31). Jarl states that a dialogue between the politicians and users is of great importance to avoid conflicts. The report concludes that Swedish municipalities seem concerned about how to improve user influence in municipal services, and some wanted to expand such opportunities. But, most municipalities seemed content with initiating user councils at the site of production for different types of services. At the same time there was little interest to give user councils real influence (ibid., p 95). Jarl discusses the debate for developing new forms for users to influence municipal services. Two main reasons were usually given. First, the content of municipal services is becoming more important for citizens as the welfare state continues to grow. Here, increased user influence could help to improve the quality of services. Second, municipal services need greater citizenship legitimacy. User influence could provide a valuable complement to representative democracy. However, Jarl argues that user interests were special interests and should not be represented in decision-making bodies for deliberating or deciding the general interests. Rather, she states, user interests should develop through greater interaction between users and civil servants (Jarl 2001, p 12). In the contemporary debate, greater user influence is sometimes conceived as a ‘school of democracy’. One argument for greater user influence is that it can contribute to allowing more persons to engage themselves democratically.

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It also contributes to greater understanding for municipal activities and how politics work. Jarl’s study shows that user influence involves a learning process for users. Users state that participation on user councils gives them useful knowledge and increased insights. This learning process is however limited to their own institutions, not to the general political system (Jarl 2001, p 32). It is noteworthy that as many as 34 per cent of Swedish citizens state that they were interested in participating in user councils, while only half as many could conceive of assuming a honorary office in a municipality (Jarl 2001, p 29). Thus, user engagement is an important form for citizen involvement. Montin (2006) compared materials on political attitudes from a limited local study of 200-plus inhabitants in Västerås municipality and 860 inhabitants in Tillberga township. Social services were provided by service cooperatives in Tillberga. His study showed that active members in childcare cooperatives and eldercare cooperatives in Tillberga who experienced influence as users of welfare services also tended to be more ‘active citizens’ than others. This was particularly evident in terms of attitudes related to trust in local politicians, interest in local politics, interest in taking responsibility for local affairs, trying to influence municipal politics and political efficacy. This limited local study also shows that user participation in the provision of social services can promote a willingness to become involved in local politics and greater political efficacy among active users, rather than greater particularism and group egoism suggested by critics of user participation. This, in turn, suggests the existence of a cumulative effect of user participation. It can function as the door-opener for greater political participation or the first step on the ladder of participation and influence. Thus, use participation in the provision of welfare services can be equated to a school of democracy. In a service democracy citizens are the passive consumers of publicly financed social services that are either provided by municipal authorities or private companies, or perhaps both. They vote every fourth year and in the meantime they choose between various service providers – public or private. By contrast, in a participative democracy, citizens are active in the provision of their own social services, in the development of the welfare state and the renewal of democracy. By including citizens and the third sector in the provision of welfare services the dialogue between the rulers and ruled takes on a new dimension and citizens can choose between more than the two alternatives of more state or more market. User participation in Denmark Although Sweden and Denmark are both universal welfare states, a different pattern of citizen participation and user influence is noted in Denmark. Sörensen (1999) discusses users as political actors and underlines the importance of developing new institutions to involve users as political actors, yet complement representative democracy at the same time. She notes the development of three main models in Denmark during the 1990s. They

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involve: 1) greater freedom of choice; 2) user boards in public institutions; and 3) municipal user councils. Freedom of choice developed in health and education sectors where citizens could choose between family doctors and hospitals as well as between schools. User boards, on the other hand, permitted parents to elect a majority of members to a school board, together with representatives from the children and teachers. Municipal user councils were introduced in 1997, as a central body for governing services to elder persons. They have no formal decision-making rights, but the right to be heard on matters concerning living conditions for elderly persons. Missing in the Danish experience, however, is a model for citizens to co-produce their own services, as witnessed by the rapid development of alternative childcare services in Sweden in the 1980s and 1990s (Pestoff 1998). Sörensen refers to the Danish politics of today like a play, where the politicians are the actors and citizens are spectators (1999, p 17). Engaging users can help to make politics concrete again for citizens, rather than something remote and abstract. However, greater user influence poses some democratic problems. Sörensen (1998) notes that while there is general agreement that increasing user influence is an important means of empowering citizens in relation to public authorities, there is some doubt whether it is a democratic form of empowerment. For example, providing citizens with more freedom of choice does not always imply more democracy, but only more market power in the market-like reforms of the public sector in the 1990s. In Denmark, some authors stress the contribution of greater user influence in developing a more participatory democracy than is possible through traditional representative institutions. However, opponents argue that greater user influence both promotes a particularistic perspective on policy-making at the costs of a universalistic perspective and that it undermines the institutional borderline between collective rule and individuality so important to liberal democracy (ibid., p 129). Danish experience is therefore of special importance, since Denmark has undergone three waves of decentralization involving greater user control over the services produced. The first concerned decentralizing a number of tasks from the central government to the municipalities in the 1970s, known as Kommunereformen/Municipal Reform. This mainly involved some areas of social policy and the primary education system. The second wave of decentralization came in the 1980s and involved moving tasks from municipalities to a wide range of self-governing public institutions. This included pre-school, primary schools, housing for the elderly, libraries, and so forth. User boards that are elected by all users of the service or institution now run them. The third wave of decentralization, beginning in the late 1980s, involved increasing cooperation between the state/municipality and civil society organizations, mostly in the social service sector (Sörensen 1998, p 129). Both the second and third wave of decentralization in Denmark changed traditional institutions of liberal democracy in at least three ways: first, it added a new level of influence; second, it introduced a functional rather than

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territorial basis of representative democracy; and third, it introduced a new form of empowerment. This implies both more freedom of choice between service producers, or more exit and more voice for elected user representatives on the self-governing boards. Moreover, the third wave of decentralization introduces public spending by private or third sector organizations, which limits public control (ibid., p 130). The disagreement over the particular vs. the universal in terms of greater user influence is also related to the distinction between territorial and functional forms of democratic empowerment. The territorial form of democratic empowerment has clear strengths. Channels of influence are equally distributed to all citizens through principles of ‘one person/one vote’. This form of empowerment serves to ensure an equal distribution of influence and enhance a holistic perspective on territorial governance, but, it nevertheless faces at least two important problems. First, it institutionalizes a low level of participation by ordinary citizens, due to the central role of elections and representation as the main means of democratic empowerment. Second, it turns the political into something very abstract, remote and distant, having to do with principles and ideology, and so forth, but lacking immediate relevance for the everyday life problems of most citizens (ibid.). Sörensen also discussed the need to create the right balance between territorial and functional democracy in the Danish primary school system. She analysed this in terms of achieving an optimal balance between exit and voice. Providing parents with increased voice would facilitate the employment of their resources to improve the quality of schools. Yet, maintaining a limited exit option would provide them with a safety valve if the situation became intolerable (ibid., p 132). One way would be to institutionalize the balance between exit and voice as forms of democratic empowerment in all areas of social life. This would allow for both user exit and voice within the public sector itself. She concludes that if functional forms of empowerment were to become democratic, then all members of functional units and all functional units within a given territory should have access to the same channels of empowerment. It is also necessary that functional politics be institutionalized in such a way that tight bonds are created between functional and territorial units of societal governance, or between user boards and municipal councils (ibid., p 141). Danish primary schools comprise a two-level system of governance. At the school or institutional level, functional forms of empowerment dominate, while territorial forms of empowerment govern at the municipal level. It becomes a problem of achieving the right balance and institutional bonds between these two forms of democracy (ibid., p 142). Sörensen not only suggested that the territorial and functional channels of influence and empowerment could be brought into harmony with each other, but she also pointed to an additional challenge of functional democracy, based on user representation, that is, to strong workplace democracy found in the Scandinavian countries. She argues that it is also necessary to balance the

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roles of users against citizens as well as those of users against other potential stakeholders, like employees (ibid., p 142). While her analysis may complicate an understanding of participative democracy, it points to important issues of involving both users and workers in multi-stakeholder democracy, which remain to be resolved both theoretically and in practical terms (see Pestoff 1998). Work environment was previously discussed in Chapter 5 and the potential of third sector providers to improving the work environment was considered. Peters explores the unprecedented expansion of and experimentation with public administration in most parts of the world in recent decades (1994, 1996). He notes the development of four alternative models of governance of public services: a market model, the participatory state, flexible government and deregulated government. They have some similarities, but greater differences. The market model is familiar and closely associated with New Public Management, but the participatory state is less well known. The latter concentrates on empowering of both the lower echelons of public service or workers, as well as of the clients of public services. It recommends greater participation of these two groups in general, and the inclusion of such groups in managerial decisions in particular (1994, p 13). However, their participation becomes explicitly political and collective in this model, while it remains nonpolitical and individual in the market model. Ideas of functional representation of service users, as a complement to liberal representative democracy, are explored in greater detail in Chapter 11.

Conclusions This chapter addresses some major issues concerning the relationship between the third sector and the state in democratic theory. The following chapters will proceed to discuss the relationship between the third sector and state in welfare theory, as well as to consider the potential of and hurdles to the third sector in terms of democratizing the welfare state in greater detail. Numerous political indicators suggest that we may be witnessing the gradual ‘withering away of the state’ in many Western democracies, or at least several vital institutions of representative democracy. Not only do we see a notable decrease in voter participation and membership in political parties, but also a substantial decline in ordinary citizens’ chances of getting an elected or honorary office, either in local politics or in many popular movements. We also note a decrease in participation in voluntary associations that play a key role in liberal representative democracy and that are supposed to function as a school of democracy. Other indicators suggest that the citizens are finding or perhaps even founding new channels of participation and influence alongside the more established ones, as illustrated by the growth of sub-politics and life politics. However, these new channels are not yet institutionalized and formalized, nor even recognized as legitimate yet by democratic theory or political science. We note a growing interest for citizen participation on the

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output side of the political system. We discussed user democracy and functional representation as a complement to representative democracy. It is time to reconsider the role of voluntary associations and the third sector in democratic theory. An understanding based on their role in the rural towns and villages of America at the beginning of the nineteenth century, life and society in mill towns in pre-democratic Sweden, or even in the early pluralism of the post-Second World War period is inadequate today. Vastly changing economic, political and social conditions have resulted in dramatically changed conditions for ordinary citizens and for understanding the relationship between voluntary associations and the state today. These changes have not been fully appreciated, thoroughly analysed nor completely understood by many social scientists. In addition, fewer and fewer citizens are active in the type of organizations that support the liberal democratic ideals expressed by de Tocqueville or Ambjörnsson. They provide an insufficient understanding of the changing relations between the third sector and modern welfare states today and they ignore the potential contribution of voluntary associations and the third sector to rejuvenation of democracy and the welfare state in the twenty-first century. Thus, liberal democratic theory provides an insufficient understanding of the role and potential of voluntary associations and the third sector in democratic theory in the twenty-first century. There have been monumental, economic, political and social changes in the past 100–200 years, which have fundamentally changed the role of voluntary associations and the third sector as well as their possibilities for providing citizens with influence and power. The rise of the modern welfare state has long been a major social goal that has fascinated social scientists. But it brought along with it numerous unintended and undesirable changes in the situation of ordinary citizens and their chance to participate in everyday politics. Moreover, the expansion of the welfare state and public sector means that interest for politics and democracy has to shift from its earlier fixation on the input side to output side politics. Here, voluntary associations and the third sector has received little systematic attention, although sporadic writings suggest that they could play an important role in promoting greater citizen participation in the management of the welfare state than is attributed to them in liberal representative democracy. Several long-term developments underline the urgency of a shift in attention to greater citizen participation in life politics. They include three main developments. First, were the unintended and undesirable effects of the amalgamation of Swedish municipalities in the 1950s and 1970s. This eliminated nearly 90 per cent of all elective positions at the local level for ordinary citizens and thereby eliminated most recruitment channels for local and national politics. Second, some popular movements undertook similar amalgamations, with less clear motives, again eliminating up to 90 per cent of their elected and honorary positions. This severely undermined their position as a school of democracy, and further constrained recruitment channels into politics, as some of these popular movements were close to specific political

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parties. Third, is the decline in citizen participation in voluntary associations in general during the 1990s, along with their continued professionalization. This also undermines their role as a school of democracy. By contrast we noted several more positive developments that emphasize the changing role of voluntary associations and third sector organizations in Swedish politics. The three most important are: 1) the development of subpolitics and life politics; 2) growing citizen participation in the implementation of public policies and the delivery of welfare services; and 3) a greater awareness of the growing importance of user democracy and functional representation of citizens as co-producers of the same services. It is argued here that democratic theory needs to accommodate the new democratic expressions of citizen participation found in sub-politics and life politics, as well as in greater citizen participation in the production of welfare services. Refusing to do so would imply that citizens must follow in wellestablished paths or channels of participation in order to be considered legitimate by democratic theory, that is, reality will have to conform to the theory. Many new political entrepreneurs are calling for new welfare architecture for the welfare state and some are proposing major regime change. It is time to rethink political boundaries, in particular the public–private divide, according to Esping-Andersen (2002). It is also time to include the third sector in serious discussions and plans for rejuvenating democracy and redesigning the welfare state in the twenty-first century.

Note 1 The Ansvarsutredning, however, ignored this in its final report. Rather it concentrated on the size of counties in Sweden. It proposed to reduce the number of counties from 21 presently to between six to nine large counties. Thus, a discussion of principles turned into an exercise of ‘cutting and pasting’ the pieces of a new administrative map.

10 Revisiting the third sector and state in welfare theory

This chapter addresses some major issues concerning the relationship between the third sector and the state in welfare theory. Chapter 9 analysed the relationship between the third sector and the state in democratic theory, and the next chapter considers hurdles to the third sector and democratization of the welfare state in Sweden. An increasing number of Swedes participate actively as co-producers of welfare services that they consume themselves. There is also an increase both in volunteering and giving money to organizations with charitable or humanitarian goals. Do these mixed signals concerning citizens’ participation indicate a growing crisis for the welfare state, or its rejuvenation, based on greater direct participation in new democratic forms for providing welfare services? In light of those changes, what potential and challenges does the third sector face in democratizing the welfare state?

Introduction Anthony Giddens (1994, 1998) maintains that liberal democracy is representative, but does not allow for any form of direct participation by those who are governed. Moreover, representation is confined to the political domain and leaves no room for influence in the realm of production, either public or private. He therefore calls for democratizing liberal democracy itself. Neoliberals want to shrink the state, traditional socialists want to expand it, while others argue that it is necessary to reconstruct it. The current challenge to democracy, according to Giddens, comes not from other countries, but rather from within, from not being democratic enough. The issue for him is not more or less government, but recognizing that governance must adjust to new circumstances in a global age, and that authority and legitimacy must be renewed (ibid.). One way of adjusting to these new circumstances would be to involve citizens more actively in their own welfare. Moreover, he argues that today’s society is plagued by high-consequence risk that pose a threat to everyone across the globe and by manufactured uncertainty, that is, risks created by the very development of the economy, society and technology. Life politics is the emancipatory politics of promoting life chances, that is, about how we should live in a world where everything

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now has to be chosen or decided upon (1994). Globalization poses five dilemmas for life politics: 1) new reflective individualism; 2) the loss of traditional political orientation and meaning of right or left in politics; 3) new political agency found in ‘subpolitics’; 4) ecological problems of global warming, erosion of the ozone-layer and BSE or ‘Mad Cow’, and so forth; and 5) the development of a new relationship between individuals and the community (1998). Is a greater role for citizens in the production of their own welfare services compatible with observations about decreasing citizen participation in formal channels of political life? Could greater citizen participation be conceived as a threat to liberal representative democracy by academics, elected officials and civil servants? Does greater citizen participation in the provision of universal, tax financed welfare services also imply greater citizen influence in political life? If so, would it be welcomed by professional Swedish politicians and public administrators, who might see politics as a zero-sum game, where they would be the immediate losers, in spite of any long-term benefits for Swedish democracy and the sustainability of a universal tax-financed welfare state? In order to explore such questions more thoroughly we need to address some central aspects of the role of the third sector in welfare theory. This chapter explores the relationship between the third sector and the welfare state. It starts by noting the almost total absence of the third sector in the analysis of welfare regimes. It only merits an occasional footnote. Then it turns to the relationship between the state and third sector and whether it is primarily one of substitution, complementing each other, or competition. A mix of all three relationships can normally be found in any given country, depending on the sector, context and the needs of the state in terms of regulation. However, competition over the basic factors of production makes the third sector’s position very tenuous. Through decommodification, highquality services have been a hallmark of the universal welfare state. However, although privatization and alternative provision have grown in recent years, welfare services are still considered by many as an exclusive part of the public domain in Sweden. Through defamilializaton the position of women has changed, but again, recent developments are now challenging this. Finally, a greater role for engaged citizens and the third sector would promote demonopolization of the provision of welfare services.

The third sector and state in welfare theory Three or four sectors of society and providers of welfare services? Social scientists often discuss and debate whether modern society comprises three or four sectors. Many recognize the importance of hierarchies and markets. Twenty years ago Streeck and Schmitter (1985) proposed that most social institutions can be divided into four rather than three sectors: state,

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market, community and associations. They discuss and compare the attributes of each sector. Scandinavian scholars have employed these analytical tools for delimiting and describing the role of the third sector in relation to the state, market and community (Klausen 1989, Pestoff 1998 & 2005), while others explore the growing welfare mix between these four sectors (Evers and LaVille 2004). The apparent lack of dialogue between such four sector approaches to major social institutions and the narrower three sector approach of most welfare state research is, therefore, all the more noteworthy. In a seminal book on the three worlds of welfare capitalism, Esping-Andersen (1990) introduced what became a classic concept of comparative welfare research, that is, ‘welfare regimes’. He refers to the three components or pillars of a welfare regime as labour markets, the family and the welfare state. However, he later laments that the state has received too much attention in the debate about the crisis of the welfare state (1999, 2000). ‘We should not forget that the sumtotal of societal welfare derives from how inputs from these institutions are combined’ (ibid., p 5). The welfare state, according to this perspective is, only one of three sources for managing social risks, the other two being the family and market. The state’s role varies, and it can be termed residual or minimalist in liberal regimes, or comprehensive and institutional in Scandinavian social democratic regimes. Esping-Andersen also notes that today’s welfare regimes are built around ideals and risks that predominated when our parents and grandparents were young. However, the risk structure has changed dramatically since then. Thus, contemporary welfare states and labour market regulations have their origin in and mirror a world that no longer exists, that is, mass industrial production based on low-skilled workers, a predominantly homogeneous male labour force, stable family patterns, high fertility rates and a female population that primarily ‘worked’ as housewives (ibid., p 5). So, regardless of level of ambition, the postwar welfare state was premised on assumptions about family structure and labour market behaviour that today no longer hold true. In addition to the state, family and labour market, Esping-Andersen recognizes, in some footnotes in later works, the importance of another institution for producing welfare, that is, the third sector (1999, 2000, 2002). He acknowledges that his triad should perhaps be extended by adding the third sector, since it plays ‘a meaningful, even significant, role in the administration and delivery of services’ (1999, 2000, p 35, fn 2). However, he notes that crossnational comparisons are rare, which hampers attempts at systematically examining the role and contribution of the third sector to welfare. Moreover, half of the employees are paid workers, most of their revenue comes from fees and public subsidies, and welfare services generally account for a small proportion of NGOs’/NPOs’ activities (an average of only 40 per cent) (ibid., p 35). Esping-Andersen (1999, 2000) continues his discourse on welfare regimes

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by stating that they must be identified more systematically in terms of the intercausal triad of state, market and family. He underlines the importance of recognizing that they represent three radically different principles of risk management. The family is associated with reciprocity,1 markets with distribution via the cash nexus, while the dominant principle of allocation for the state is authoritative redistribution (ibid., p 36). Again we find a footnote denoting the possibility of including a fourth producer of welfare, that is, the third sector. Esping-Andersen raises no objections to this in principle, but, in practice, he hastens to add that ‘. . . it may make little empirical difference, since they are subsidized by the state, and as such they are a semi-public delivery agency’ (ibid., p 36, fn 5). In a more recent work, Esping-Andersen focuses on the need for reorganizing existing welfare states to meet new risks and the development of a new European welfare architecture (2002). In another footnote he claims that ‘[t]he “third sector” is arguably a fourth pillar, but where its role is of decisive importance its functioning tends to resemble markets or governments, depending on its chief financial underpinnings’ (ibid., p 12, fn 8). Vogel et al. discuss the contribution of the voluntary sector to welfare production in a statistical report on the voluntary sector in Sweden (2003). Ironically, in a subsequent comparison of welfare in 15 EU countries (Vogel 2004), the third sector receives no acknowledgement as a provider of social welfare. Now he refers to the welfare production of ‘three welfare delivery institutions that represent a functional division of responsibility for welfare delivery between the labor market (employers), welfare state (politics) and family (social networks)’ (italics in the original, p 18). However, he notes that the existing welfare mix in any country is not an inevitable, technical matter, but an ideological choice between different values (ibid., p 7). Powell and Barrientos (2004) argue that much of the debate following Esping-Andersen’s seminal book, Three Worlds of Welfare Capitalism (1990) has focused on concepts like ‘decommodification’ and ‘defamilialization’ at the expense of the welfare mix as a central component of welfare regimes. Exploring Esping-Anderson’s lead (1999, 2000) they argue that welfare regimes must be identified much more systematically in terms of the intercausal triad of state, market and family. They conclude that the welfare mix of these three sectors constitute the centre of gravity of welfare regimes (Powell and Barrientos 2004, p 87). Vogel, Esping-Andersen and Powell and Barrientos concentrate exclusively on the traditional three welfare producing components: the market, state and family, but they ignore the contribution of civil society and the third sector in the production and delivery of welfare services. Lewis (2004) also notes that in Esping-Andersen’s welfare regime approach the third sector is conspicuous by its absence. She interprets this in terms of the focus of much comparative welfare state research on cash provision and social insurance systems, rather than on services like health and education. However, most important, according to her, is the lack of analytical

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importance attributed to the third sector, since a large proportion of its funding comes from the state. This is based on the assumption that if the third sector is not a clearly demarcated alternative to the market and state it does not warrant separate attention (ibid., p 170). As noted earlier, Esping-Andersen (2002) now questions the viability of welfare states throughout Europe. He notes that there are two main reasons for considering major overhauls of existing welfare states: first, the status quo will be difficult to sustain given demographic or financial conditions in most European countries; and second, the same status quo is increasingly out of date and inadequate to meet the major social challenges ahead (ibid., p 4). Existing systems of social protection may hinder rather than promote employment growth in knowledge-intensive economies. They may also prove inadequate in the face of evolving and possibly more intensive social risks and needs of today and tomorrow. Thus, he finds that many new political entrepreneurs and welfare architects are proposing major regime change. His recent book provides a method for evaluating proposals from the perspective of social justice and for considering welfare as a social investment, rather than just a cost. Here he reiterates well-known arguments on the interrelatedness of the three welfare pillars and continues to ignore the third sector as a producer of welfare, Yet he closes by emphasizing the need to reconceive the political boundaries, in particular the public–private welfare dichotomy. This appeal seems to open the door for more systematic consideration of the potential of the third sector as a producer of welfare or provider of welfare services and as a potential fourth welfare pillar in Europe. Thus, in spite of earlier arguments against extending the triad of welfare to include the third sector, the need for major regime change suggested by Esping-Andersen and his calling for a new architecture should not a priori exclude other alternative producers of welfare and welfare services not initially included in his welfare regime model from 1990. One of the main criticisms against most leading experts on the welfare state is their focus on the economic growth and development of the input side of the welfare state. However, they rarely examine the output side of the equation. One good example is Welfare States in Transition (EspingAndersen (1996). He and his colleagues examine and compare the growth of the financing of the welfare state in many parts of the globe, but say little about the production of social services. Thus, they can tell us, more or less, how much each country spends on welfare programmes in a given period and compare the expenditures of country A with those of country B for the same period, but they say little or nothing about the services they produce, how they are produced, nor the quality of these services. This fixation on the input side leaves a major void in our knowledge about the welfare state, one that is important to all the citizens who provide and/or use these services and to many researchers interested in extending our knowledge about the welfare state. Several scholars have analysed the changing

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role of the third sector in producing social welfare in various countries, often the same countries examined in terms of input studies (Gidron et al. 1992, Kunhle and Selle 1992, 6 & Vidal, 1994). The time now appears ripe for a merger of interest between researchers focusing on the welfare state and those dealing with the third sector as a provider of social service. This could benefit all concerned parties. By combining knowledge about changes in the financing and the production of social services we gain a more well-balanced picture of the transition of the welfare state and national adaptations to changes in the global economy. A dialogue between academics, or better yet their collaboration, is urgent as the divide between public and private becomes less rigid and sharp. More scholars are beginning to focus on shifts in the welfare mix (Evers and Wintersberger, 1990) and to analyse the growing partnership between public and third sector agencies in delivering social welfare services (Salamon and Anheier 1996). Taxes and the public sources continues to finance collective welfare services, while the third sector produces many of them, through contracting-out, as seen in England, France, Germany, Italy, the US, and more recently, Sweden. Researchers associated with the EMES2 network on social economy comprise one school that deals with the third sector as a provider of welfare services. Their historical and comparative analysis systematically explores the development of the third sector and its relationship with the state in many European countries (Evers and LaVille 2004). They note different stages in the relationship between the state and third sector, as well as the variety of roles it plays in providing welfare in Europe today. Crowding out, crowding in, or simply crowding the data? Sweden has one of the highest, if not the highest, levels of membership in voluntary organizations in the world. It also has the highest level of membership in trade unions. However, in spite of Sweden’s large voluntary sector, the degree of professionalization remains modest. In fact, Sweden has one of the least professionalized voluntary sectors in the industrialized world (Wijkström and Einarsson 2006). Less than one-quarter of the work in the voluntary sector is performed by paid professionals, while three-quarters of it stems from volunteers (ibid., see Table B on p 47). This gives Sweden an ‘ideal’ civil society or voluntary sector, with many active members and few paid professional leaders. By contrast, paid professionals in the Japanese voluntary sector do more than three-quarters of the work, while nearly twothirds is provided by professionals in the US. Thus in Japan, only one-quarter of human resources are provided by volunteers and just over one-third in the US (ibid.). This low level of professionalization makes it difficult for scholars from some countries to understand the limited role of the third sector in providing welfare services in Sweden. However, it does play a clear role in mobilizing and involving citizens as co-producers of welfare services.

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Some authors suggest that the size and funding structure of the third sector can be explained by the nature of a country’s ‘welfare regime’ (Anheier and Salamon 2001). Accordingly, in a liberal model (the US and the UK) there is a large nonprofit sector, while in the social democratic model (Sweden and Scandinavia) high government spending is associated with a relatively small nonprofit sector. Thus, they claim that a strong state ‘crowds out’ a weak nonprofit sector, and argue that in social democratic regimes, such as Sweden, ‘. . . the room left for service provided by nonprofit organizations is quite constrained’ (ibid., p 15). In this view public and nonprofit provision of welfare services are seen as two competing models or substitutes that have a zero-sum relationship, where more of one automatically results in less of the other. However, a closer look at the data behind this claim reveals some serious shortcomings, including unresolved methodological problems. They calculate the size of the nonprofit sector by combining both paid employment and volunteer labour in nonprofit organizations to derive an ‘overall size’ of the nonprofit sector for each nation. They proceed to rank the size of the nonprofit sector in their 23-nation comparison. The four countries3 with no information on volunteering are nevertheless included in the estimates of the ‘overall size’ of the nonprofit sector. The aim of the analysis is to explain differences in volunteering and the size of the nonprofit sector by the size of government welfare spending. Countries are divided into high and low categories in terms of both variables. Here Sweden and the US are contrasted to compare liberal and social democratic models that result in the crowding out hypothesis. They concede that ‘[i]n fact, the Swedish social democratic model results in a nonprofit sector that comes closest to the ideal of “civil society”, functioning to facilitate individual and group expression’ (ibid., p 15). They also relate size of government spending on welfare services to overall volunteering. In Sweden, they note again, that volunteering is much less related to welfare service provision and much more related to community-building, lifestyle and recreation (ibid., pp 17–18). They propose to modify Esping-Andersen’s ‘welfare regimes’ model, by incorporating the overall size of the nonprofit sector. This results in four distinct models of nonprofit development, or four ‘nonprofit regimes’, as they prefer to call them: a Liberal, corporatist, social democratic and statist nonprofit regime. ‘Each of these types is characterized not only by a particular state role, but also by a particular position for the nonprofit sector, including the role of volunteering. Most importantly, each regime type reflects a particular constellation of social forces that can help to account for crossnational differences in the basic concept and relevance of volunteering’ (ibid., p 14), we are informed. However, they choose to illustrate their discussion of the size of the nonprofit sector and volunteering by regime type with only a few selected examples, rather than a systematic presentation of all 23 cases included in the study. Thus, they say that:

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. . . according to the social origins theory, we found a relative correspondence in the nonprofit sector scale and volunteering for countries that fall within the same regime type. Indeed, this is suggested by Table 5: France and Germany, both corporatist regimes are similar on both the scale of the nonprofit sector overall, and in volunteering inputs, with 23 and 26 per cent of the adult population serving as volunteers. The UK and US are exemplars of the liberal nonprofit regime. In the UK and US government social welfare spending is relatively low and the size of the nonprofit sector is relatively large . . . (ibid., p 17). However, the data found in Table 3 includes a few noteworthy anomalies. The corporatist or conservative group includes not only France and Germany, but also Austria, Belgium and the Netherlands, while Spain should perhaps belong to a separate Mediterranean Rim group. The Netherlands, also a corporatist country in both schemes, notes a high of 12.5 per cent in paid nonprofit employment and 46 per cent in voluntary input, well above the figures for France and Germany. Moreover, the average for the countries in each regime type leads to different results than those noted earlier. The unweighted average for the corporatist/conservative group is 7.5 per cent in paid nonprofit employment, and 31.3 per cent in voluntary input, which is very close to the averages found in the Liberal group: 8.2 per cent in paid nonprofit employment and 34 per cent voluntary input. They are so close that it is very hard to distinguish them. Moreover, the average for the central variable, Voluntary Input, fails to distinguish the countries in a meaningful or relevant fashion. The average Voluntary Input for liberal regime countries included here is 34 per cent, for corporatist regime countries it is 31.3 per cent (as noted above) but for social democratic countries it reached 42 per cent, while Spain, as the only Mediterranean Rim country, reached a low of only 12 per cent. Thus, the discussion of volunteering and nonprofit regime type seems to be more of a preliminary hunch than a well-researched finding. Perhaps the authors should subject their data to more rigorous comparisons before reaching conclusions about the state crowding out the voluntary sector, especially with such a weak methodology and shaky data. Maybe they have crowded too much interpretation into seemingly questionable data and somewhat dubious methods. Norwegian scholars also dispute the crowding-out thesis. Kuhnle and Selle (1992) emphasized the contextual aspects of the relationship between the third sector and state in Scandinavia. Ringen (1989) suggests that social policies in an extensive welfare state, contrary to crowding out theory, can in fact stimulate an active life style, rather than pose a threat to it. In a somewhat different, but not irrelevant context, Künemund and Rein (1999) explore the crowding-out hypothesis with regard to family relations. They examine the type and intensity of the help that elderly people receive from their adult children and families in five developed countries: the US, Canada, the UK,

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Germany and Japan. They wanted to study whether a ‘crowding out’ process, in which more generous welfare systems displace family solidarity, shaped the amount of family help transferred to older people. Taking co-residence between generations into account, the international comparison does not support the crowding-out hypothesis. They go on to show that the giving of services by older people to their adult children increases the probability that they receive help from them later. Their findings indirectly support the reverse hypothesis, namely that the relationship between the state and family may be described as a process of ‘crowding in’: a generous welfare system that gives resources to elderly people helps to increase rather than undermine family solidarity (ibid.). This can be explained by ideas of reciprocity, where the more elderly have to give the more they also receive. The more resources available to them beyond a minimum for survival, the more scope they have for participation in reciprocal giving and receiving. This leads to crowding in, rather than crowding out with better developed welfare systems (ibid., p 94). Does the third sector substitute, complement or compete with the welfare state? The lack of attention paid to the third sector by traditional comparative welfare regime analysis is symptomatic, since it fails to acknowledge the third sector as an important and independent provider of welfare. Therefore, it pays little systematic attention to questions of whether the welfare state crowds out or substitutes the third sector, if they form a partnership and complement each other in terms of the services they provide citizens. Or, do they compete with each other to a growing extent in some areas of service provision, thereby increasing the overall supply of services and the welfare of citizens in terms of greater freedom of choice between alternative services, while they complement each other in other areas of service provision? Young argues that the relationship between the government and nonprofit sector can be conceptualized in economic theory either as supplementary, complementary or adversarial (2000). However, he continues, that none of these views is sufficient on its own for a complete understanding of such relationships in the US or elsewhere. Historically, he notes a shift in their relations in the US over time (ibid., p 150). Osborne and McLaughlin (2003, 2004) note similar shifts in attitude towards the third sector in recent years between the Thatcher and Blair governments. See also the Labour Party’s discussion of partnerships with the third sector (Labour Party 1997). Young differentiates the three relationships in the following fashion. In the supplementary model NPOs are seen as fulfilling the demand for public goods left unsatisfied by government. Here, private financing of public goods can be expected to have an inverse relationship with governmental expenditure. As government takes more responsibility for provision of public goods, less needs to be raised through voluntary collective means. In the complementary

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view, NPOs are seen as partners to government, helping to carry out the delivery of public goods largely financed by government. Here, NPO and government expenditures have a direct relationship with one another. As government expenditures increase, they help finance increasing levels of activities by nonprofits. In the adversarial view, NPOs prod the government to make changes in public policy and maintain accountability to the public. Reciprocally, the government attempts to influence the behaviour of NPOs by regulating their services and responding to its advocacy initiatives as well (ibid., p 151). However, he notes that these three perspectives are by no means mutually exclusive. NPOs may simultaneously finance and deliver services where government does not, deliver services that are financed or otherwise assisted by government, advocate for changes in government policies and practices and be affected by governmental pressure and oversight. The boundaries between these three categories are blurred. Moreover, these three analytical perspectives derive essentially from rational choice models in the economic tradition. Other schools of thought, like the behavioural or sociologic, may also apply (ibid., p 151). Relations between responsibilities assigned to the sectors are neither rigidly defined nor permanently fixed, but shift from time to time to meet changing circumstances and needs (ibid., p 158). Young claims that according to supplementary theory government provision of services is constrained by considerations of equity and bureaucratic procedure to tax and offer levels of public goods in a uniform way. Individual preferences may not always correspond to the public goods available, so citizens may finance and produce them themselves in a supplementary fashion via the nonprofit sector. Thus, there is great variation according to sector and the homogeneity of citizens’ preferences for public goods. Where the latter vary widely NPO production can be expected to be substantial, while in other areas where preferences are homogeneous, there will be little NPO production. Both the preferences of citizens and activities of governments can change over time and this may effect the NPO provision of public goods (ibid., pp 151–2). He points out that in complementary theory NPOs and governments are engaged in a partnership, in which government finances public services and NPOs deliver them. Government may choose to contract-out the delivery of services, not only because they are cheaper, but also because they are unable to differentiate its services in response to heterogeneous preferences among citizens, while NPOs may be more knowledgeable about certain groups or communities. Thus, NPOs may help resolve problems of knowledge, and better be able to customize services to their local constituents. Moreover, NPOs operate under different constraints and are less likely to skimp on quality or renege on promises than for-profits (ibid., p 154). Young’s comparison of the US, the UK, Israel and Japan illustrate how these countries appear to differ in their particular mixes of supplementary, complementary and adversarial relationships between government and

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nonprofits. Second, the character of their complementary relationship appears to vary substantially among the four countries (ibid., p 165). Japan appears most strongly oriented towards the complementary relationship mode, viewing NPOs very largely as extensions of the government (ibid., pp 166–7). See Chapter 7 for more details concerning healthcare in Japan. However, Young notes that these relationships were both dynamic and in flux. There appeared to be strong shifts in these relationships, in which one or another mode seemed to come forward or recede at any given time. Part of the ebb and flow can be explained by demographic shifts within countries that may influence the diversities of preferences for public services, while part can be explained by singular events such as war or natural disasters, such as the 1995 earthquake in Japan in 1995 (ibid., p 170). Dahlberg (2004) explored the relation between voluntary organizations and local authorities supporting relatives of elder persons in Sweden in terms of substitution, complementarity or welfare pluralism. She studied the relationship between more than 350 voluntary organizations and 80 local authorities in both 1999 and 2002. Her analysis of the surveys provided no evidence of substitution processes (ibid.). Although there was an overall increase in support for relatives during the period studied, no positive correlation was found within individual support activities. This means that voluntary and public activities tended to be of different kinds at a local level. In fact, only rarely could users choose between different service providers, so the situation was not characterized as welfare pluralism (ibid.). Nevertheless, there was some overlap in service provision. However, at a local level voluntary organizations and local authorities rarely carried out similar tasks. Thus, she found extensive complementarity at a local level in terms of support to relatives of elderly persons (ibid., Dahlberg 2005a). In a separate in-depth study she interviewed 55 politicians, civil servants and representatives of voluntary organizations drawn from four municipalities (Dahlberg 2005b). They were selected to ensure different combinations of high/low levels of voluntary and public services. Qualitative analysis of the interviews showed that local authorities were seen as primarily responsible for the support of relatives and voluntary organizations were expected to offer social support and activities regarded as less demanding or ‘the icing on the cake’. Overall, she found strong support for a norm of complementarity. She argues such a consensus will naturally influence how they arrange their activities and services and can influence the practical outcome in terms of service provision. Moreover, voluntary organizations expressed no desire to fill in where the state failed, nor take on new or more demanding tasks. They also believed that they would become increasingly complementary to local authorities in the future, limiting their activities to less demanding tasks and social support. This implied agreement between actors about the boundary between tasks performed by volunteers and work that required the special skills and knowledge of professionals. Dahlberg maintains that her interviews give strong

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support to the idea of an ideology of complementarity between local authorities and voluntary organizations. This understanding not only results in mutual acceptance, but also influences how they arrange services, and so forth at the local level. Municipal authorities will provide the core services in eldercare, while voluntary organizations perform marginal or peripheral activities. Shifting attention for a moment from the relation between voluntary organizations and municipalities to the political influence of pensioner organizations as service consumers, we note that they have limited influence, as seen in Feltenius’ study (2004) of pensioner councils at both the national and local levels. They were promoted by and cater to the two large general pensioner organizations, PRO and SPF, rather than by the small organizations for support to relatives. At the national level it was established in 1991, while at the local level they have existed since the 1970s. Both at the national and municipal levels they provided an arena for political discussions between representatives of pensioners’ organizations and the respective authorities. He explored the influence of pensioners’ organizations in these councils and tried to explain their influence from a power resources perspective. He hoped to understand whether their relationship could best be understood by corporatist or pluralist power structures. He found that pensioner organizations did in fact influence the decisions to establish the central Pensioners’ Council and the local Senior Citizens’ Councils. However, having said that, their influence at the local level was constrained by the fact that they lack important power resources, namely professional expertise. Feltenius’ study of local and national pensioner organizations did not suggest the existence of a corporatist power structure in social issues in Sweden. Rather his findings pointed to a pluralist power structure, where alongside producer organizations (that is, the municipalities and private firms) other organizations such as welfare consumers also have an important power position. However, the question of how representative support to relatives of elder persons is for other types of welfare services in Sweden needs to be considered carefully before generalizing on these findings. We will look closer at this question below. A general overview of the historical development of relations between popular movements, the third sector or social economy and state are found in Chapter 3. Comparing the role of the third sector in different policy contexts Analyzing and explaining participation in, and influence by, third sector providers of childcare services in the eight countries included in the TSFEPS Project4 underlined differences in the relationship between the state and third sector and the contribution of the latter to the governance of the sector. Third sector providers were represented in local policy boards for child and youth matters in some countries, but not others. Alternative provision of

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childcare in Stockholm and Frankfurt is similar in some ways, in particular their prominence as alternative providers of local services, beneficiaries of public funds for such services and the proportion of children/parents dependent on such services. But, alternative providers have a completely different situation in the governance of local childcare and youth service networks in these two cities. They are a natural part of it in Frankfurt, but are considered outsiders in Stockholm (Pestoff 2004b). This led to the further insight that the third sector plays a very different role in different policy arenas and governance networks in Sweden itself (Pestoff et al. 2004b). In some governance networks they are very important, even central, players, while in others they are outsiders who are kept at arm’s length (ibid.). Why this difference? Extending the comparison of the third sectors role to eight policy areas, Sweden helps to illustrate the diversity of relationships between the state and third sector. Figure 10.1 in the appendix provides more details of this diversity. We note great variation in the patterns of relationships, ranging from relying completely on the third sector to administering and regulating a given policy area, or relying completely on the social partners to regulate their own relations without state interference, to open competition between the state and third sector for the factors of production of some services and for political power and influence. In agricultural policy the import/export of agricultural products was controlled for decades by the agricultural cooperative movement, referred to in the academic literature as ‘private interest government’. In the labour market the state kept its distance for decades, preferring to leave it to the trade unions and employer organizations to reach bipartite agreements regulating wages and working conditions, reflecting a balance of power strategy. In consumer policy the state encouraged the leading trade union movements and to some extent the consumer cooperatives to assume the role of a countervailing power to the well-organized interests of the industrial, wholesale and retail sectors. Again, we find a balance of power strategy that actively involved the third sector. Also worth noting is the challenge posed by new and deadly social risks, like HIV and AIDS. In Sweden, unlike some other European countries, the state collaborated extensively with voluntary associations to get the message out to certain high-risk groups and to provide special services not available in public services. By contrast, the third sector is often perceived by the municipal authorities as a competitor rather than a collaborator in providing welfare services, particularly when it comes to satisfying the demand for new or previously unmet needs, partially catered to by existing municipal services. Given current budget limits and the scarce resources available for standardized service provision, competition over the factors of production seems to drive such relationships. Municipal and alternative providers may also compete over political influence and power, although this may not always be obvious to outsiders, as they lack the influence and insights of the insiders. Here, we find a conflict of interest between the municipalities and alternative providers of public funded

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welfare services. What may appear as a zero-sum game to the municipalities, where any change in the status quo is a clear loss for them and the values promoted by the Swedish welfare state, can, at the same time appear as a positive-sum game to alternative providers, where both they and the municipalities can grow and learn from each other in providing better quality services to the public. Thus, competition appears to be a significant, if not decisive, factor in determining the relationship between the state and third sector in terms of providing many welfare services. Where the state is highly dependent on the third sector for achieving its policy goals, it willingly cooperates and collaborates extensively with the third sector. Agricultural, labour market, consumer policy and attempting to cope with HIV and AIDS demonstrate this point clearly. Where the state is moderately dependent on the third sector for achieving its goals – as in support for relatives of elderly persons and handicap care – a pattern of complementarity can develop between them in achieving the policy goals. However, where the state or municipality has a long tradition of service provision and where the third sector is a relatively new provider of services, their relationships often take a more competitive outlook. Here the third sector is kept at arm’s length, and treated like something ‘the cat dragged in’. In addition to competition for scarce resources, the ideological polarization of Sweden to include only two alternatives, or two ways of providing services can perhaps also help to explain the third sector’s dilemma in many new areas of service provision. The public debate about the strengths and weaknesses of a universal, tax-based welfare state – what’s good about it and what’s wrong with it – are often framed in simple black/white terms. The debate often reads ‘public is good and private is bad’, or vice versa, depending on which side of the debate you ‘tune-in’ to. There is little room for a third way or third sector in such a polarized, simplified debate. It is difficult for the third sector to survive and get attention and even harder for it to gain recognition for its achievements. Such ideological attitudes can easily divert attention from the competition for scarce resources. Here we often find the established social democratic politicians questioning the legitimacy of alternative providers, suggesting that they are all the same, just interested in profiting on the social needs of the population. By contrast, when and where the non-socialists take power they are usually more willing to experiment with new and different ways of providing welfare services, including various types of alternative providers, both for-profit and nonprofit organizations, as long as they promise to reduce costs. Thus, the impression that the political colour of the majority governing a municipality is important for the third sector diverts attention from the competition for scarce factors of production and potential influence.

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Decommodification: high-quality standardized services provided by a public monopoly In their introductory chapter to Swedish welfare policy, Lindqvist and Borell (1998) characterize the Swedish welfare state as one comprised of: a) income security for the whole population in different risk situations; b) where support is constructed as social rights or entitlements; and c) with well-developed welfare services that are organized and financed mainly by the public sector. The Swedish welfare state has two purposes: it is designed to prevent inequality and social problems and also to stimulate paid work in production. However, during the 1990s it became evident that there was a partial deviation from a centrally controlled welfare state. Decentralization in the 1990s meant that more and more was left to the municipalities and counties. This was due in part to ‘frame-work laws’ and in part to a transition from specialized financing of individual programmes to general financing by the central state to municipalities in the 1990s. Moreover, the ‘Freedom of Choice Revolution’, promoted by the non-socialist parties in the early 1990s, emphasized a ‘customer’ orientation and cost affectivity. Thus, Lindqvist and Borell note two main tendencies during the 1990s: services became more heterogeneous and there was both a concentration and diversification of services. Yet, at the same time, a growing conflict between the individuals and welfare bureaucrats became clearly manifest. Some groups favoured a ‘democratization of the welfare state’, where, instead of large-scale state solutions proposed by distant, objective experts, they wanted greater engagement by citizens and more individual responsibility by local society or from civil society (ibid., p 17). Blomqvist (2003) summarizes some important changes in the Swedish welfare state during the 1990s in terms of greater privatization. She argues that both those claiming ‘the crisis of the welfare state’ and those noting that the system is ‘still basically intact’ miss an important point. She maintains that the welfare state in Sweden is undergoing a transformation process whereby it risks losing one of its main characteristics, namely the belief in and institutional support for social egalitarianism. During the 1990s, the welfare sector was opened to competition from private actors, and their share grew notably in several sectors, including healthcare, primary education and social service provision. This resulted in a socially segregated dynamic promoted by introducing consumer choice in welfare services. This development undermines previous ideas about ‘a ‘peoples’ home’ where uniform, high-quality services are provided by the state to all citizens regardless of income, social background or cultural orientation (ibid., p 139). She succinctly captures the spirit behind the public monopoly in providing welfare services and notes that the way in which the Swedish welfare state institutionalizes the values of universalism and egalitarianism make it distinct, according to many well-known protagonists (Esping-Andersen 1990, 1996, Stephens 1996, Huber and Stephens 2001). Sweden has often stood as

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the country with a large public sector, in particular for providing welfare services (Huber and Stephens 2001), but one that discouraged, or perhaps was even hostile to, private alternatives for schooling, healthcare, and welfare services (Blomqvist 2003, p 140). Previous to the 1990s the public sector provided high-quality standardized services, allocated through bureaucratic planning, but this has been profoundly transformed, due to private providers, particularly in the larger cities, and consumer choice now plays a larger role. This represents a significant break with the past according to Blomqvist. While I tend to agree with the criticism that many earlier studies overlooked the importance of privatization during the 1990s, she nevertheless fails to distinguish between different developments in various sectors and different types of ‘private’ providers in terms of promoting collective and democratic values as opposed to individualistic and market-oriented ones. Most third sector providers differ significantly from private for-profit ones in terms of their relationship to the basic values of the Swedish welfare state, namely universalism and egalitarianism, and perhaps even more so when it comes to democracy. She fails, therefore, to appreciate the potential of the third sector to the rejuvenation of Swedish democracy and the potential contribution to the alleviation of the democracy deficit, as well as to the renewal of the Swedish welfare state. Moreover, Blomqvist also fails to problematize the concept of service quality (see Chapter 5). Are high-quality standardized services something that is given once and for all, or do they develop over time and through interaction between the producers and consumers of such services, as suggested in Chapter 6? Hirschman (1970, 1982) argues that service quality develops through a dialogue between the producers and consumers, particularly in new social service areas, like pre-school, as providers and consumers develop a mutual understanding of what constitutes good quality. The Welfare Audit includes a timely and welcome overview of the growth of ‘private’ actors during the 1990s, which provide publicly financed welfare services. Trydegård (2001) notes the highly ideological discussion about the privatization of welfare services and ponders the lack of facts and figures. She notes that alternative provision is often equated with privatization, since ‘private’ actors of various types provide services that were previously provided by the municipalities, but with continued public financing and regulation. However, there are different kinds of ‘private’ providers, including private-for-profit and public firms, as well as cooperatives or voluntary organizations. There are also several different ways to privatize services, including: turning provision over to municipal firms; contracting-out, with a competitive tender; publicly supported private activities, without a competitive tender; municipal ‘customer choice’ models, usually with some sort of voucher or ‘check system’; procurement of places in private institutions; purchase of support systems, and so forth. She documents notable differences in the development of alternative provision in various areas of welfare service, as well as the role played by various

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alternative providers. In pre-school, for example, alternative providers produced 15 per cent of the services by the year 2000. The total number of employees working in pre-school decreased to only 110,000 persons, or by 20 per cent, during the 1990s. Public employees decreased by 30,000, while alternative provision increased by 6,000 persons. In pre-school, 75 per cent of ‘private’ services are run on a nonprofit basis, mostly as parent cooperatives (ibid., pp 92–3). In elementary education, by contrast, the number of employees remained stable at about 215,000. Alternative provision is much more limited here, representing only 4 per cent in the year 2000. But again, alternative provision is dominated by nonprofits and foundations with special pedagogy, which employ two-thirds of the staff of alternative providers (ibid., p 103). In healthcare the number of employees decreased by 65,000 between 1993 and 2000. Here there are few nonprofit providers. Finally, elder and handicap care grew considerably during the 1990s, by more than 50,000 persons. Private for-profit care increased by 18,000 employees, while nonprofit providers only grew by 4,000 employees. Alternative provision makes up nearly 15 per cent here, and is most prevalent in the big cities and their suburbs. Taking all social welfare sectors together, alternative provision has increased, and the number of persons they employ doubled between 1993 and 2000, reaching 80,000 persons in the year 2000. This is most notable in elder and handicap care. Taken as a whole, one-quarter of alternative providers are run as nonprofits and three-quarters are for-profits. Private limited firms dominate this development; however, both the provision of pre-school and primary education is dominated by nonprofit organizations and cooperatives (ibid., p 131). Concerning the politics of alternative provision, she notes that in half of Sweden’s municipalities in 1999, alternative providers employed less than five per cent of the staff in welfare service, while in 12 municipalities it reached between 20 and 30 per cent. Private for-profit firms dominate this development, in particular in the big cities and their suburbs. This is mainly the result of local politics, rather than national or central politics, and conservative voting strength is strongly related to it (ibid., p 131). Most likely, nonprofit providers are more prevalent in smaller cities, towns and rural areas. Perhaps the need for collective alternatives to stave off municipal service closures is greatest there and nonprofits have a clearer role. Childcare services help to illustrate the development of welfare services in Sweden. At first they were provided by charitable organizations to needy families in urban areas and carried a stigma with them. Then, after the Second World War, the state backed the amalgamation of municipalities, the expansion of a universal welfare state and the provision of professional and high-quality services in order to assist women’s access to the labour market, in particular in the public sector. Extending such services to middle-class parents meant changing the nature of the services provided. But welfare services cannot always be standardized and planned in detail by politicians or

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bureaucrats, no matter how well-meaning. More and more parents lacked access to nearby municipal pre-school services and a growing number of parents preferred services with a special curriculum. Other parents felt the need to be a part of their child’s daily life, without having to sacrifice the career of the mother. This resulted in two waves of parent cooperatives, in the 1970s and again in the late 1980s and early 1990s. Thus, from the 1970s onward parents began to demand alternative pre-school, something unthinkable at the end of the war, when the expansion of the universal welfare state was just beginning to take form. A report, in October 2003, by the National Board of Welfare (Socialstyrelsen), gives more recent data on privatization on competition in eldercare. It notes that knowledge about the consequences of competition in eldercare were still very limited. Municipal documents indicated that there were shortcomings in the follow-up, in part due to the lack of established systems to measure quality. Municipal quality judgements often were limited to noting how a provider fulfils the criteria found in their agreement and if they followed the law. Municipalities often had a problem deciding the quality of services, and thereby whether the services had improved or deteriorated in quality due to competition. Not surprisingly, their overview shows that it is difficult to find any categorical answer concerning difference between public and private eldercare. Most previous examinations of this topic were based on fragmentary studies, and they were not well-documented, nor very extensive. General conclusions about the impact of competition on the users are hard to draw, for the same reason. Socialstyrelsen notes that in 2003 there were nearly 400 eldercare contracts. The five dominant actors, with a third of the contracts (the number of contracts is in parenthesis) are: Attendo Care (37), Samhall (35), Care Partner (32), Sv. Äldreoms. (20) and Riksbyggen (20). One of them is a public agency for the disabled, while another is a building cooperative. Municipalities do not often change providers, once they have a contract with one. In addition to commercial, for-profit firms and organizations, there were also many nonprofit organizations – foundations, economic and voluntary associations – providing eldercare. Nonprofit organizations account for 10 per cent of contracting out and 14 per cent of the sale of individual places. However, Socialstyrelsen warns that contracting-out may accentuate problems of goal displacement in such organizations. Among the alternative forms found today, cooperatives have now made their entrance. A cooperative can be started for different reasons, run in different forms and represent different interest groups. Socialstyrelsen estimates that there about 40 cooperatives providing eldercare today, but they lack a profit motive. User cooperatives with residential and home services were most prominent in rural areas, while worker cooperatives were more common in urban areas. Voluntary activities existed in cooperatives, as a quality improving complement. Private provision of eldercare, called enskilt regi in Swedish social statistics, refers to various types of firms, including municipal firms, foundations, or

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cooperatives that receive compensation from the municipality to provide help, care or service. Today, there are three main types of services for pensioners: 1) home help; 2) special living; and 3) short-time ward. Of the 128,000 persons in the country with home help, about 8.8 per cent received it from private providers in October 2003. Most municipalities had no private providers, while 61 municipalities had some. Four municipalities had more than half of their home help provided by private firms: Nacka, Linköping, Vellinge and Solna. In the latter municipality, as much as 84 per cent of services were provided by private firms. Turning to special living, about 110,000 persons live permanently there. Private firms provide about 13.4 per cent of all such services. More than 60 municipalities only provided public services, while seven municipalities had more than half of their service provided by private firms. Finally, only 9,000 persons were provided with short-term ward. Here, public service was more common – 83 per cent of the municipalities had no private providers, and the average was only 7.6 per cent private provision (ibid., see T. 6, p 65 for details). Thus, we note that there is a strong concentration of private provision of eldercare in some municipalities. Clearly, local politics are very important in promoting or thwarting privatization of welfare services. Furthermore, the cutbacks in public funding in the 1990s for welfare services also directly affected the work environment of the civil servants providing these services. We saw already, in Chapter 5, that the work environment of most public sector services providers deteriorated dramatically during the second half of the 1990s. Today, sick leave among welfare workers is at a record high, as too are the public costs for it. Moreover, service quality has also suffered, although it is difficult to give an exact figure or put a price tag on the inefficiencies created by increasing stress in the public sector (see Table 5.1 in the appendix for more details). In addition, massive sick leave and early retirement among civil servants became a major problem at the beginning of the new century. This rapid deterioration in the work environment for many persons providing welfare services also had a negative impact in the quality of the services provided. Thus, many parents began to look for alternatives to municipal pre-school services, as service quality deteriorated. And many civil servants also took advantage of new political opportunities in the 1990s by starting small-scale social enterprises, either as worker cooperatives or private firms, in order to escape the dismal working conditions found in the public sector. To view this as lack of support for public ideals of universalism and egalitarianism seems to confuse the issue. Moreover, as noted in the discussion of democratic theory (see Chapter 9), the reaction to the growing democracy deficit suggests that parents would turn to areas and arenas outside the reach of electoral and party politics. They become engaged in some major issues of life politics in order to promote the belief that they matter and can influence events once thought beyond their control. Their children are, of course, very important to them, and engaging themselves in creating high-quality services in the form of a

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parent cooperative pre-school service is, therefore, not so very far-fetched. It also permits them to play a more active role in raising their children and influencing the daily activities of their cooperative pre-school than is possible in municipal pre-school. So, it is not a question of frivolous middle-class parents turning their backs on high-quality public services and the egalitarian ideals of universality for the latest whims of ideological politics or the market. Rather, it is a natural reaction to major cutbacks in public services and a clear drop in service quality in the 1990s. But, perhaps most important, it is a question of developing new channels for citizens’ influence through collective action by providing welfare services, that is, of developing collective voice. Thus, some of the privatization during the 1990s – lamented by certain analysts – can instead be seen as an expression of democratic and collective values, rather than individual and market ones. It is based on a sound reaction to cutbacks in public services and lower quality in the eyes of many citizens. Parents did not turn their backs on high-quality standardized municipal pre-school services, but rather rejected low-quality municipal pre-school, in favour of higher quality services provided by parent cooperatives for their children and themselves. In addition, while public support for many taxfinanced welfare services, including pre-school, has remained strong during the 1990s, support for the civil servants or public bureaucrats who provide such services is much lower among the public, as clearly seen in Table 5.2 in the appendix. Defamilialization: salaried work, gender and citizenship Boje notes (1999) the shift in values at the end of the century is often described as a transition from the modern social order to a postmodern one. The modern order was dominated by universal political ideologies, the nation state and rational planning. Today’s social order is primarily dominated by differentiation of interests, internationalization and individual freedom of choice. There are two important implications of these changes. First, how has the relationship between the welfare state and women’s salaried work changed during recent decades and what importance does this have for societal integration and differentiation? Second, how have changed gender relations on the labour market and in the family influenced conditions for social citizenship? Changing family patterns have not only resulted in increased costs for the welfare state, but also women’s greater participation in the labour market have contributed to the collective and organized provision of personal care activities into institutionalized forms by the welfare state, outside the family. The reorganization of the family work has had central importance for the increased demands for public social service and has also contributed to the welfare states internal contradictions. It has contributed on one hand, through public institutions for daycare, eldercare, handicap care, and so forth, to the growing number of women who can achieve the status of

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‘salaried employee’. But this means, on the other hand, that there are a growing number of people who are dependent on the welfare state, both for their wages and for wage compensation during periods of unemployment, sickness, and so forth (ibid.). Work remains central in providing access to social rights, as well as social responsibilities. Work means normal social compensation, but the unemployed, disabled or persons with an early retirement only receive minimal compensation. However, the relation to the labour market and stable work varies considerably with gender, ethnic background, education and age. Salaried employment has therefore become not only a social right, but also a responsibility in order to obtain such rights. This results in increasing social differentiation and sizeable social groups outside the regular labour market. However, it is not work in general, but only paid work that is associated with social rights. Unpaid work falls outside social rights and responsibilities. This has important implications, since unpaid work, like voluntary work in the local community and housework in the family, is not encompassed by social citizenship and the rights associated with it. In this context it is important to underline that access to work has decisive importance for an individual’s social integration. In general, the welfare state has very complex relations with women and the labour market. The welfare state has assumed a number of women’s traditional caring activities in relation to children, the elders and sick and has made it possible for a growing number of women to achieve a salary outside the home. Moreover, women often find work in the social sector. The state has therefore created the conditions for women to become independent individuals through salaried work, and, at the same time, through social transfers contributing to their social citizenship. This development has gone farthest in the ‘women friendly states’ of Scandinavia. However, during times of austerity the drastic budget reduction imposed on the welfare state in the 1990s in Scandinavia hit women doubly. A considerable number of them were fired; at the same time the welfare services and transfers that women are dependent upon to combine family responsibilities with participation in the labour market, were reduced, diminishing thereby their possibilities to survive as independent citizens. It is therefore important to include unpaid work, alongside salaried employment as a base for social rights and responsibilities in universal welfare states (ibid.). Demonopolization: making room for the third sector and engaged citizens in welfare services Esping-Andersen’s seminal research on welfare regimes discusses the decommodification and defamilialization of relations in modern welfare states. Missing, however, is the idea of a demonopolization of service provision. Today, the Scandinavian-type universal welfare state not only finances, but also produces and regulates most welfare services. Many scholars and

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practitioners seem to take this for granted. The state becomes a ‘holy-trinity’ in terms of welfare services, by financing, producing and regulating them. However, a demonopolization would recognize the possibility of separating these three functions. The state should continue to finance and regulate the provision of welfare services, but no longer have a monopoly of providing them. For some, the idea of demonpolization may appear unthinkable, like questioning the merits of the universal welfare state, or giving in to market forces calling for the roll-back of the state and the recommodification of welfare services. For others it will appear as the first step in the redemocratization of the welfare state. In his survey of the development of welfare states, Pierson (1998) notes that Green’s critique regards the welfare state as a form of capitalist control. They argue that if self-reliant citizens are controlled by a legalized monopoly of standardized state management of state-defined needs, it results in a subject and dependent clientele. Green wants a greater scope for self-production, voluntary and cooperative activity, and ‘social economy’ independent of the state and capitalism markets. Accordingly, today’s needs are best met by small-scale, cooperative, ‘bottom-up’ self-production and self-management (ibid., p 92). Pierson also asks if perhaps the welfare state is a victim of its own success. He argues that to maintain that greater affluence and greater consumer choice must necessarily lead to defection from welfare state provision is to concede too much the New Right position, before their claims have been properly tested empirically (ibid., p 183). Turning to the generative politics and positive welfare approach of Anthony Giddens in Beyond Left and Right (1994), Pierson notes that he referred to four major developments: 1) globalization; 2) a post-traditional social order; 3) social reflexivity; and 4) manufactured uncertainty and risk. Positive welfare is based on life politics, bottom-up, self-activity by citizens and their voluntary associations. Giddens maintained that what is needed is a welfare regime that is empowering, which provides opportunities (and even resources) that will enable individuals to take responsibility for their own well-being (1998, p 197). Pierson’s survey of the development of welfare states concludes that there are two alternatives for the future development of the welfare state. First, there is one based on a range of new social movements, which bypass the state by returning welfare to more localized, non-hierarchical and nonbureaucratized forms of communal self-administration. Second, is found in the neo-conservative strategy of limiting the state (ibid., p 202). In the first, self-administration and voluntary efforts are not seen as an alternative to the state, but rather as partners to the local state (ibid.).

Conclusions This chapter addresses some major issues concerning the relationship between the third sector and the state in welfare theory. In the previous chapter

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I considered the relationship between the third sector and the state in democratic theory and in the next chapter I discuss major hurdles for the third sector and the democratization of the welfare state in Sweden. We noted at the outset of this chapter that the third sector does not receive systematic consideration in welfare regime theory in terms of its contribution to the provision of welfare services. The state, market and family are all attributed a prominent role in providing welfare services in modern welfare states, but the third sector only receives an occasional footnote. We continued to compare the role of the third sector as a substitute, complement or competitor to the welfare state. While recent research may suggest that a complementary role is most appropriate, a contextual perspective is necessary. We found historically that the third sector cooperated closely with the state in providing certain welfare services. However, its relationship with the state varies greatly in different areas. While history and tradition are important to understand these differences, also competition over scarce resources and the factors of production, as well as political influence and power need to be taken into account. We also noted the unique position attributed to the public sector in providing high-quality standardized services in Scandinavia. Basic values of universalism and egalitarianism provide support for continued public provision, but new needs and growing dissatisfaction with declining quality in public services also help explain the growth of third sector services. Rather than regard the ‘privatization’ of welfare services in the 1990s solely as an expression of growing individualistic and market values that undermine solidarity, they can also be seen as the spread of collective and democratic values, with the growth of third sector alternatives. In conclusion, we argue that in spite of the comparative and theoretical challenges, the third sector should be included, both in more systematic analysis of welfare production and research on comparative welfare regimes. Current welfare theory is inadequate for understanding the emerging or new risk patterns facing many groups of citizens today and tomorrow. Many new political entrepreneurs are calling for new welfare architecture and proposing major regime change. It is time to rethink political boundaries, in particular the public–private divide. It is also time to include the third sector in serious discussions and plans for rejuvenating democracy and redesigning the welfare state in the twenty-first century. This research, therefore, recommends that the Swedish government should use existing channels for parliamentary investigations to carefully examine several important issues related to greater citizen involvement as co-producers of welfare services and the role of the third sector in democratizing the welfare state. Such involvement is readily illustrated by different types of not-for-profit provision of childcare services to pre-school children. What are the costs and benefits to the financial sustainability of the welfare state in Sweden? What are the costs and benefits in terms of the growing democracy deficit in Sweden? What are the costs and benefits in terms of the work

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environment of civil servants providing public services? What are the costs and benefits in terms of the professionalization and internal democracy of the popular movements and voluntary organizations providing such services? These and related issues need the careful consideration and systematic analysis provided by academic research. Finally, major public experiments are proposed, based on greater flexibility and less regulation of welfare services, both at the local and regional levels. This could be undertaken during a five- to seven-year period in a few municipalities and even one or two counties in Sweden. It should involve efforts to actively engage citizens as co-producers of such services and a greater role for the third sector, both as a facilitator and promoter of new channels of democracy at the submunicipal level. These experiments, in what the Swedes call ‘frikommun’ or unregulated municipal activities, should be carefully designed and followed by a team of academics, who would study the effects of unregulated municipal activities on citizen engagement and the role of the third sector in democratizing the welfare state.

Notes 1 Compare this, however with Polanyi (1944, 1957), who presented a four sector model, where families are responsible for domestic administration and housekeeping with scarce resources, while the third sector is associated with reciprocity. The functions of the other two sectors are similar in both models. 2 More information on this group of researchers is available at www.emes.be 3 They are Austria, Japan, Mexico and Slovakia. 4 The TSFEPS Project, Changing Family Structures & Social Policy: Childcare Services as Sources of Social Cohesion, took place in eight European countries between 2002 and 2004. See www.emes.net for the details and reports. The countries participating in this study were Belgium, Bulgaria, England, France, Germany, Italy, Spain and Sweden.

11 Hurdles to the third sector and democratization of the welfare state

This chapter addresses the potential of the third sector in democratizing the welfare state in Sweden and the hurdles it faces. Previously, I considered some major issues concerning the relationship between the third sector and the state in democratic as well as in welfare theory. This chapter explores the compatibility of a more active role for citizens in the production of their own welfare services with observations about decreasing citizen participation in the formal channels of politics. How could the growth in reflexive individualism and egoistic consumers be reconciled with greater citizen participation in the provision of their own welfare and welfare services? Moreover, would greater citizen participation be conceived as a threat to liberal representative democracy by elected officials, civil servants and social scientists? Or would it be welcomed by professional politicians and public administrators in Sweden? Would they favour the potential long-term benefits for the sustainability of a universal, tax-financed welfare state and Swedish democracy over their more narrow view of politics as a zero-sum game, where they might be the immediate losers?

Political hurdles to the democratization of the welfare state Rational fools, foolish cooperators or frivolous policies? Elinor Ostrom (2000a) summarizes decades of research on collective action and common pool resources (CPR). She notes that the currently accepted theory of collective action assumes that individuals are helplessly trapped in social dilemmas without external help from a benign government. This has led to a form of policy analysis that presumes external authorities must solve all collective-action problems. The presumed universal need for externally implemented incentives is based, however, on a single model of rational behaviour. Citizens, as resource users, are rational egoists, according to theories of the economic man, and as such they are norm-free maximizers of immediate gain, who will not cooperate to overcome the common dilemma they face. However, this model provides an inadequate foundation to explain empirical findings from the field and the experimental laboratory related to

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non-market settings. Thus, it is necessary to adopt a broader theory of human behaviour that posits multiple types of individuals, including conditional cooperators alongside rational egoists, and to examine how the contexts of collective action affect the mix of individuals involved. Three important lessons can be derived from recent theoretical and empirical research based on the assumption of multiple types of players, including rational egoists and conditional cooperators who have adopted norms of fairness, reciprocity and trust. First, many individuals are motivated by social norms that affect intrinsic motivation. Second, it is possible for individuals who adopt these norms to survive in repeated situations where they face rational egoists as well as others who share similar norms. And, as long as they can identify one another, trustworthy fair reciprocators achieve higher material rewards over time than do rational egoists. In other words they can flourish. Third, achieving some reliable information about the trustworthiness of others is crucial to this accomplishment. Thus, information rules are as important (or more so) in solving collective-action problems than are changing payoff rules, but the latter are typically the focus of public policy (ibid.). She expands on this, noting that growing evidence demonstrates that it is time to reconstruct our basic theories of collective action and to assume that at least some participants are not rational egoists. At least some individuals in social dilemma situations follow norms of behaviour – such as those of reciprocity, fairness and trustworthiness – that lead them to take actions that are directly contrary to those predicted by contemporary rational choice theory. Intrinsic preferences lead some individuals to be conditional cooperators – willing to contribute to collective action so long as others also contribute. Yet others will approximate the rational choice model. Thus, one needs to assume multiple types of actors rather than only rational egoists. But in situations where individuals have no information about each other’s type, rational egoists will continually do better than conditional cooperators (ibid.). Moreover, a substantial gap exists between the theoretical prediction that self-interested individuals will have extreme difficulty in coordinating collective action and the reality that such cooperative behaviour is widespread, although far from inevitable. Her studies explore recent research on collective action, drawing from both experimental and real-world empirical evidence. ‘A central finding is that the world contains multiple types of individuals, some more willing than others to initiate reciprocity to achieve the benefits of collective action. Thus, a core question is how potential cooperators signal one another and [how to] design institutions that reinforce rather than destroy cooperation’ (Ostrom 1999a, p 138). This brings her to the delicate problem of designing institutions that enhance citizenship rather than crowding it out. Instead of relying on the state as the central top-down substitute of all public problem-solving, it is necessary to design complex, polycentric orders that involve both public governance mechanisms and private market and community institutions that

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complement each other. Moreover, the preference for neat, orderly hierarchical systems needs to be replaced by a recognition that complex, polycentric systems are needed to cope effectively with complex problems of modern life and to give all citizens a more effective role in the governance of democratic societies (Ostrom 2000a). She explains that the policy literature stresses that citizens neither have the knowledge nor skills needed to design appropriate institutions to overcome collective action problems. Citizens should be passive observers in the process of design and implementation of effective public policy. The role of citizens is reduced to voting every few years between competing teams of leaders. The policy of giving all authority to a central agency to design rules is based on a false conception, that there are only a few rules that need to be considered and that only experts have the appropriate knowledge to design optimal policies. Instead of highly centralized governance systems, we need polycentric systems. Thus, much contemporary policy analysis and many of the policies adopted in modern democracies crowd out citizenship. They do this by assuming that all citizens are rational egoists. This also crowds out norms of trust and reciprocity as well as crowding out the knowledge of local circumstances and the experimentation needed to design effective institutions. Crowding out citizenship is a waste of human and material resources and challenges the sustainability of democratic institutions over time (ibid.). She concludes that the assumption that individuals are able to engage in problem-solving to increase long-term payoffs, to make promises, to build reputations for trustworthiness, to reciprocate trustworthiness with trust, and to punish those who are not trustworthy, leads to a different type of policy analysis than the assumption that individuals ultimately or merely seek their own short-term, narrow interests, even when everyone’s joint returns could be substantially increased. The experimental situations described in Ostrom’s studies result in a bounded rational and norm-using behaviour, which views all policies as experiments. Bounded rational, local users are potentially capable of changing their own rules, enforcing the rules they agree upon, and learning from experience to design better rules (ibid.). Moreover, relative autonomous, self-organized resource governance systems may do a better job of regulating small CPRs than a single central authority for several reasons. They include reliance on local knowledge, inclusion of trustworthy participants, reliance on partial or fragmentary knowledge, better-adapted rules, lower enforcement costs, and redundancy. But there are some limits, namely: some appropriators will not organize, some self-organizations efforts will fail, local tyrannies may prevail, stagnation may occur, and so forth (ibid.). However, the costs of such failures must be weighed against the price of central authority. Parent participation and local schools in rural areas of Sweden The village of Drevdagen, in the rural municipality of Älvdalen, illustrates the strength and weakness of parental participation in elementary schools.

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Parents initially opposed municipal proposals to close the local school in the mid-1970s. When the municipality, nevertheless, decided to close it the week before school started in August 1983 parents began a school boycott and provided home schooling to defend their local school, rather than send their children 25 kilometers by bus to the closest municipal school in the town of Idre. In 1989, the government finally accepted their demands to keep the local school, and the first ‘Free’ (read: nonmunicipal) school was a fact. In 1993, the Riksdag approved a law making public support for nonmunicipal or ‘free’ schools possible. These schools are referred to as charter schools in the text below because they are semiautonomous. They propose their own curriculum, but the national authority must approve it beforehand, and they are responsible for hiring their own administration and staff. Since then, several hundred charter schools have been started, approved and now provide basic education. Many smaller local charter schools in sparsely populated rural areas are organized as economic associations or cooperatives, as well as some with a special curriculum profile in urban areas. However, many of the larger and newer charter schools in urban areas are organized as for-profit firms, and some even have aspirations to be listed on the stock market. This adds a highly charged ideological dimension to the debate about charter schools. The for-profit charter schools usually receive greater attention in the national media than their smaller rural counterparts, in part due to their size and proximity. One exception is the school in Drevdagen, due to its symbolic value as the first one in the country. The National School Authority, Skolverket, made a special investigation and report on Drevdagen’s school in 2004, after a parent complaint about certain conditions at the school in December 2003 (Skolverket, Dnr 54–2003: 3178). The report emphasizes four issues that conflict with the law regulating ‘free’ schools, that is, the principles for admission, control of the register, tuition-free education and initiating a plan of action to deal with other problems. The National School Authority made it clear that the school’s permit to provide elementary education could be withdrawn if the school failed to make the required changes. By October 2004, Drevdagen’s school agreed to meet these criticisms in the following fashion: to revise the application form so that it was clear to the parents that the school was open to all children, to follow the law concerning the register control, to inform parents that the education was tuition-free and to separate the parent council from the school and to initiate a plan of action for dealing with other problems. On the basis of this, the National School Authority decided to give continued support to Drevdagen’s school as a charter school. We will look at each of these four issues briefly. First, concerning the issue of admission, the Parent Committee in Drevdagen required parents to state if their child had any special needs that would require organizational changes or increased resources. Parents were also required to guarantee that they had read the relevant information and provided the Parent Committee with important information concerning a child’s

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special needs. The school maintained that it needed such information for its planning and subsequent requests to the municipality for special resources. According to the rector, the school never refused to admit a child with special needs. However, the National School Authority considered it inappropriate to interpret the law in this fashion, since it could imply that children with special needs might be denied access to a ‘free’ or charter school. The only circumstance when this would be permissible is if a child’s needs imply considerable organizational or financial difficulties for the school (emphasis in the original, p 10). Since ‘free’ or charter schools are required to report such needs to the local municipality, they can only refer to ‘considerable organizational or financial difficulties for the school’ if the municipality refuses to cover the costs, and once the school, after a subsequent analysis reaches the conclusion that admission of the child in question implies considerable organizational or financial difficulties for the school (ibid.). This takes time and it can promote social divisions in the village. Second, the National School Authority required Drevdagen’s school to reformulate its information to parents in the application form for new pupils. Note, however, that the Law on Free/Charter Schools also states that a municipality can refuse to provide financial support for pupils with special needs, if it would cause organizational or economic difficulties for the municipality (Ch. 9, par. 6). This means that such pupils would be required to attend a municipal school where such support is available, rather than a charter school, if it cost too much. A second point of criticism charged that the Principal failed to check the National Police Authority’s Register of Criminal Offenders prior to hiring the staff. In a small village like Drevdagen, the teachers are, of course, well-known local residents who have lived there for many years. In its reply to this criticism the school promised to do so in the future. Third, concerning criticism about tuition-free education and parent participation the following can be noted. In Drevdagen parents receive written information about the obligation to participate in different types of voluntary activities to support the school. They include weekly cleaning, the autumn and spring cleaning, the sale of lottery tickets (Bingolotter) to raise funds, cleaning at the Idre Mountain site, and maintenance of the school building and premises. This information also underlines the importance of everyone’s participation in order to prevent the school from being closed. Parents are required to guarantee that they have read this information and accept the school’s values and requirements. It is the Parent Council, not the school that is responsible for organizing the parents’ voluntary work, but parents automatically become members of the Parent Council once their child is accepted. The money earned by the parents’ efforts is used for school trips and the purchase of pedagogical materials or other things required by the school (ibid., p 5). Many ‘free’ schools in sparsely populated rural areas require a work obligation, similar to that practised by most parent cooperative childcare services. Some parents apparently perceive this as an infringement on free access to the school.

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In its report, the National School Authority argues that distinction between the school and Parent Council is nonexistent in Drevdagen, since membership in the latter is automatic. When it demands that parents either participate in the work or make a contribution to the school account, this is tantamount to taking a tuition-fee, which breaks the law (ibid., p 11). The school later changed its statutes and membership in the Parent Council is now voluntary, rather than automatic. This served to make the Parent Council independent from the school. The National School Authority appeared to accept this, at least for the time being. The plan of action to deal with other problems included taking active steps to recruit qualified teachers, putting a qualified teacher in charge of all curriculum development at the school, establishment of a curriculum development plan for all students with special needs, using a quality accounting system, and so forth. The National School Administration appeared satisfied with Drevdagen’s proposal on these matters. Local schools are considered important for the survival of villages in sparsely populated rural areas. Without a school many villages would lose the younger generation who would move and such villages would then decline because of an ageing population. Parental participation is considered essential for maintaining a local school in many rural areas. However, the National School Authority considers that requiring all parents to join the Parent Council and to participate in the maintenance of the school is tantamount to requiring a tuition-fee. There is a high risk that this line of reasoning will open Drevdagen up to ‘free-riding’ and opportunistic behaviour, making it more difficult to maintain the school in the future. This also provides an example of Elinor Ostrom’s argument about central administrators crowding out active citizenship (2000a). Citizens are expected to be passive observers in the process of design and implementation of effective public policy. They should vote every fourth year and pay their taxes and obey the law in the meantime. But, this assumes both that there are only a few rules that need fixing to design optimal policies and that only experts have the knowledge necessary to obtain optimal results. Ostrom maintains that such attitudes turn citizens into knaves. In 2004, the National School Authority, Skolverket, received no fewer than 49 applications to start new charter schools from parents in sparsely populated rural areas, where the local school was threatened with closure (DN, 23/05–04). However, Drevdagen’s school illustrates one of the dilemmas of charter schools in sparsely populated rural areas, since they are very dependent on parent participation. A decrease in the number of children makes it difficult to sustain the local school, in particular when most municipalities are also faced with a declining number of pupils in municipal elementary schools, due to demographic changes. They must allocate their scarce funds according to their own priorities, often with heavy competition between various welfare services, like childcare, eldercare, sports, and so forth. The problem becomes acute when one or more new pupils has special pedagogical or social needs.

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Municipalities can refuse to finance these special services at a charter school, thereby denying the child the right to attend the local school and the school loses the revenue associated with those pupils. However, the National Association of Free Schools considers that general support to children with special needs, regardless of where they study would be the best way to resolve this problem (DN, 23/5–04). If the number of pupils drops below 20 it can also jeopardize the future of a charter school, as the financial base is considered too small. If a charter school falls below this level it can apply for an exemption from the rule. There were only 18 pupils enrolled in Drevdagen’s school in the autumn of 2004. In such circumstances every pupil is worth its weight in ‘gold’, both in terms of income and costs. If, for example, a pupil has asthma or is dyslexic, the special costs for dealing with that will outweigh the income provided for normal school costs. A local charter school may find itself having to turn down such students for lack of special funds from the municipality. This in turn may lead to screening, which is against the law. Thus, pupils with special needs can put a charter school in a dilemma. Either they must screen all potential pupils to avoid assuming an unusual financial burden that they lack the means to bear, and turn down pupils with various disabilities, or they must send all pupils with disabilities to municipal schools far from home and lose the revenue needed to keep the local school open. However, given the general school obligation, parents and pupils may find that the local school where all their neighbourhood friends go is closed to them, due to a disability or handicap, and parents will have to send their child(ren) to a municipal school at a distance. Here, we see that several principles come into conflict. Moreover, sending children with special needs to municipal schools would result in an elite school, according to the National School Authority, which is also against the intentions of the law. The problem of sharing costs between municipalities and charter schools is not unique to sparsely populated rural areas; there are also problems in Stockholm and other major urban areas. Municipal elementary schools in Stockholm lost 3,460 pupils in recent years, while charter schools gained 3,890 pupils (DN, 30/11–04). Tens of millions of crowns are spent for renting vacant school facilities. This money could be used for other purposes, like expanding facilities at the gymnasium level, motivated by demographic changes and changing nativity rates in recent years. Childcare, after school care and charter schools are now invited to take up some of the surplus space in elementary schools. But it can often prove difficult to lease this space for special purposes or to separate it from normal scholastic activities in order to return it to the municipal property managing company and thereby avoid paying rent on vacant premises. Moreover, parents will often discourage their children from continuing at a higher level in a problematic school, and the pupils will enrol in a charter school instead. The Baggarmossen Junior High is 50 years old and was recently refurbished, but it has a problem recruiting, due to its bad reputation.

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Well-educated parents are active in helping their children choose which junior high school to attend. Many charter schools have taken root nearby in Skarpnäck, causing problems for Bagarmossen and the ward authorities (ibid.). It is possible to ask whether such parents should be chastised for promoting the best education opportunity for their children or should their children be forced to attend an inferior school? However, their choice of a charter school means that public funds for school rent take resources that could be used for other purposes. This may cause municipal authorities to perceive charter schools as competitors for scarce resources and to lose sight of the benefits of greater parent participation in their children’s education. Another problem connected with financing charter schools is related to sponsoring, something strongly encouraged in principle by Långtidsutredningen, 2003/04 (SOU 2003/04, p 123), in order to guarantee the sustainability of a tax-financed welfare state. It recently became known that Islamic schools in Sweden could obtain generous sponsoring from wealthy donors in Saudi Arabia (Kaliber, a SR-program on 5/6–05 and DN 7/6–05). However, there were often strings attached. Sponsors demanded a strict conservative form of Islam, the Wahhabite or Salafis branch of Islam, with stringent clothing and behavioural codes. Sponsoring relieves some of the financial burden from municipalities for charter schools, but this is perhaps taking it too far. The Minister of Schools indicated that he would initiate an investigation into this phenomenon. Moreover, soft drink companies sponsor both public and charter schools in the US, often with detrimental consequences for the children’s health. The Swedish Bill on Quality in Pre-schools The Minister for Children’s and Youth Affairs presented a Bill on Quality in Pre-schools in 2005 (Proposition 2004/05, p 11). It covered three areas of central importance for the future development of pre-school in Sweden: 1) the establishment of ‘Councils of Influence’ (Inflytanderåd) in all preschools throughout Sweden; 2) annual quality accounting for all pre-schools; and 3) changing the law in order to authorize mandatory annual quality accounts by ‘private’ pre-school facilities. This bill is important both for what it includes and what it excludes. Beginning with the latter, especially in relation to the question of facilitating greater parent participation, it is difficult to understand why no mention is made at all of the existence of parent cooperatives or voluntary associations that provide childcare services, and that have done so for more than three decades. It also fails to mention that ‘private’ providers are responsible for nearly 20 per cent of childcare services today and nearly two-thirds of them are organized as democratic organizations, run and managed by their members. Parent cooperative and voluntary associations providing childcare services are often used in Sweden to explore and illustrate the possibilities for greater citizen engagement and involvement

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in life politics. Numerous research reports, books and doctoral dissertations on these forms of providing childcare services are available, and the contribution of alternative providers in this respect is no secret. How or why a serious public proposal about promoting democracy in public institutions and greater parent involvement in childcare can totally ignore 30 years of experience that comprise nearly 20 per cent of all childcare services provided today is best understood in terms of an étatist ideology (compare Blomkvist 2003). It considers public provision of all tax-financed services as natural, and considers all alternative providers as competitors, not worthy of mention. A less ideological view of promoting democracy and greater parent participation through ‘Councils of Influence’ would have attempted to provide an overview of the strengths and weaknesses of parent cooperatives, voluntary associations, worker cooperatives and even for-profit childcare services in these respects (compare Pestoff 1998 & 2005). Moreover, the powers of these proposed ‘Councils of Influence’ are limited to informing parents about important developments and getting their views. They have no funds to allocate or any independent decision-making power. Nevertheless, several prominent organizations representing public authorities, involved civil servants and the municipalities clearly oppose the creation of ‘Councils of Influence’ at all pre-school facilities throughout Sweden. Skolverket, Kommunförbundet, TCO, Myndighet för skolutveckling, Lärarnas Riksförbund, and Lärareförbundet all belong to the opponents of such a weak vestige of greater democracy and parent influence. Some municipalities also questioned whether parents would really want to participate in such bodies. Research on the development of democracy in some popular movements provides relevant examples of failed attempts to obtain greater member engagement through similar bodies. The shop councils (butiksråd ), introduced in the Swedish consumer cooperative movement in the 1980s, illustrate this point. Many members elected to such shop councils quit them mid-term or refused to serve a second term. They felt the shop councils lacked meaning and the members had no influence on the running of cooperative shops. Shop councils had no budget of their own and no right to decide on anything; they could only give advice to local shop managers (Pestoff 1991). Similar problems can be expected with the proposed ‘Councils of Influence’ for pre-school services in municipal services, since their powers are also limited. Moreover, parent cooperative and voluntary associations providing childcare services already have very engaged parents, and a new body like the one proposed by Bill 2004/05:11 may prove detrimental to existing democratic participation by parents. This remains an empirical question. Turning to the question of annual quality accounts by each pre-school facility, Bill 2004/05:11 argues that both municipal pre-school services and ‘private’ facilities should complete such annual reports. Some features of the proposed quality accounts are similar to social accounting and auditing, as practised by social enterprises today in Sweden (www.slup.se), in particular,

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the need to involve various stakeholders, the need to repeat quality accounts at regular intervals and the need to be flexible and adapt the quality report to the individual facility’s local needs. At the same time, such quality accounts, according to this proposal, should conform to Skolverket’s standards and be as unified as possible. This may pose a threat to plans by some parent and worker cooperatives and voluntary associations providing pre-school today to develop social accounts and audits, better suited to their own needs and activities. Moreover, the Minister argues that the government also needs to get relevant information from private facilities. ‘Children and their parents should be able to make the same demands on the quality and insights into activities regardless of the legal form’. However, parents in cooperative and voluntary pre-school facilities have both the quality and insights lacking in many municipal and almost all private for-profit pre-school services today, although the insinuation in the bill is just the opposite. Finally, the issue of authorizing a public authority to oblige ‘private’ facilities to prepare annual quality accounts and that municipalities should coordinate the latter, elicited some interesting comments. Neither Kommunförbundet, Skolverket, nor Kommunförbundet i Norrbottens län considered it reasonable to place responsibility for coordination of these annual quality accounts in the hands of the municipalities, since they to a certain extent also compete with ‘private’ providers. On the other hand, Konkurrensverket, Friskolornas riksförbund and Waldorfskolefederationen rejected all aspects of the proposal concerning annual quality accounts. They see it as an added burden on these small organizations, but they also argue that municipalities compete with the ‘private’ providers of such services, and this would give them the power of coordination, which is not good. Thus, we can note that Bill 2004/05:11 on Quality in Pre-schools ignores the existence of parent cooperatives, worker cooperatives and voluntary associations that provide extensive childcare services, except as private competitors to municipal services. It also ignores the difference between various providers in terms of promoting greater democracy and parent participation. It also fails to discuss or propose a forum for bringing various providers together at the local level for an exchange of information concerning quality in pre-schools and for the common development of the sector. It represents a highly centralized, top-down approach, one where Skolverket alone is responsible for developing pre-schools, and municipal and private providers of these services are mainly responsible for implementing central decisions, but the third sector clearly has no role in governing them in an interactive dialogue nor in partnership with municipal authorities. The relationship between providing and governing social services The concept of governance gained extensive attention recently, becoming a buzz word in the social sciences. It is used in a wide array of contexts with widely divergent meanings. Van Kersbergen and van Waarden (2004) identify

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nine different definitions of the concept, while Hirst (2002a) attributes it five different meanings or contexts. They include economic development, international institutions and regimes, corporate governance, privatized provision of public services in the wake of New Public Management and new practices of coordinating activities through networks, partnerships and deliberative forum (ibid., pp 18–19). This chapter focuses mainly on the latter context. He argued that the main reason for promoting greater governance is the growth of ‘organizational society’. Big organizations on either side of the public/ private divide in advanced postindustrial societies leave little room for democracy or citizen influence. This is due to the lack of local control and democratic processes for internal decision-making in most big organizations. The concept of governance points to the need to rethink democracy and find new methods of control and regulation, ones that do not rely on the state or public sector having a monopoly of such practices (ibid., p 21). Accordingly, he defines governance as ‘. . . a means by which an activity or ensemble of activities is controlled or directed, such that it delivers an acceptable range of outcomes according to some established social standards’ (ibid., p 24). In order to explore the relationship between greater citizen participation in the production of social services and in their governance we compared and contrasted the role of civil elements in childcare in Europe in Chapter 8. A comparative European project, the TSFEPS Project,1 in eight EU countries on family policy and childcare, permitted us to examine the relationship between parent participation in the provision and governance of childcare (Pestoff et al. 2004, Pestoff 2006b). We found different levels of parent participation in different forms of provision, that is, public, private for-profit and third sector childcare. The highest levels of parent participation were found in third sector providers like parent associations in France, parent initiatives in Germany, and parent cooperatives in Sweden. We also noted different kinds or dimensions of participation, that is, economic, political and social. All three kinds of participation were readily evident in third sector providers of childcare services, while economic and political participation were mostly absent in municipal and private for-profit services included in this study. Moreover, we observed differences in the patterns of participation between countries. Parents participated actively in the provision of third sector childcare services in France, Germany and Sweden, and in their governance in the first two countries, but not in the latter one. Thus, we concluded that neither the state nor the market allows for more than marginal or ad hoc participation by parents in the childcare services. For example, parents may be welcome to make spontaneous suggestions when leaving or picking up their child from a municipal or for-profit childcare facility. They may also be welcome to contribute time and effort to a social event like the annual Christmas party or Spring party at the end of the year. They could bake a cake, prepare a dish or even help in cleaning afterwards. Also, discussion groups or ‘Influence Councils’ can be found at some municipal childcare facilities in Sweden, but they provide parents with very limited

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influence. Parent representatives meet with the staff three or four times per year, exchange information, but make no decisions and have no budget. More substantial and institutional participation in economic or political terms of providing such services can only be achieved when parents organize themselves collectively to obtain better quality or different kinds of childcare services than either the state or market can provide. Thus, only through collective action and the third sector can citizen participation and coproduction take on an economic and/or political dimension at the site of service production. Although there was a high degree of co-production in Sweden, we found no evidence of parent participation in the governance of local childcare services. We wanted to understand why the new entrants to the field failed to gain any influence on or access to the local governance of childcare. The period from the 1970s to 1990s saw the entry of many new interests in this quickly changing and rapidly expanding field of service provision. How was it possible to maintain a monopoly of political influence shared exclusively by the municipalities and trade unions? Is this perhaps a classical example of collusion between the welfarist and professionalist approaches to user influence discussed by Evers (2006)? It would seem logical for the new entrants like parent or worker cooperatives and other types of third sector providers to attempt to gain influence on the development and expansion of this new field. However, their mere presence, without any representation in policy circles was certainly not enough to provide them with influence. So, Sweden presents a dilemma in terms of citizen participation in governing the field of publicly financed childcare for pre-school children. Sweden is the only country in the TSFEPS Project with extensive parent managed childcare services that completely lacks institutional structures at the municipal level for the representation of third sector providers in the local governance of the field. A consultive body did exist in Stockholm for a few years in order to promote discussions between third sector providers and municipal administrators. But it provided no opportunity for the third sector providers to meet other types of providers on a regular basis or for them to develop common viewpoints on important issues of common interest. By contrast, citywide structures open to third sector providers of local childcare services were found in both France and Germany, where many third sector providers of childcare services also exist, alongside municipal providers. Given the long tradition of administrative corporatism in Sweden, in particular during long periods of Social Democratic dominance, it is difficult to understand why the new providers of important welfare services like childcare, which affect the interests of so many economic, political and social groups, were not able to gain access to important political arenas at the municipal or national level(s), where childcare policies were developed and implemented. It was a cornerstone of Swedish corporatism, until the mid-1990s, to include both the unions and employers in governing labour market policy. Representatives from both the trade unions for blue- and

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white-collar workers and academicians, like LO, TCO and SACO, as well as employer organizations, like SAF, sat for decades on the governing bodies of various labour market agencies, both at the national and regional levels (Pestoff 2003). A similar pattern of corporatist representation developed in the area of consumer policy, but there were no natural representatives for consumers, as consumers are notoriously difficult to organize. So the consumer cooperatives and trade unions were actively co-opted by the Social Democratic government to assume the role of consumer representatives on various public consumer bodies, thereby becoming a countervailing power to well-organized business and commercial interests. This was achieved in part by recruiting high-ranking trade union leaders to serve as the General Director of various national consumer agencies in the 1950s and 1960s and in part by having balanced governing boards in the 1970s and 1980s with an equal number of consumer and industry representatives (Pestoff 1984, 1989a). Why then did a similar pattern of corporatist representation not develop in childcare, one that could help integrate the newcomers providing third sector childcare services? No simple or clear answer is available, but a few might be suggested. First, perhaps in the social and family policy spheres, introducing ideas of corporatist representation and countervailing forces appeared farfetched. The need for promoting the representation of the weaker party was not seen as crucial for achieving the policy goals, as these very individuals were already the subjects or focus of such policies. Second, childcare is provided at the municipal level, not directly by the state. Administrative corporatism was not as prevalent at the municipal level as the central level (Nyhlén 2007). Third, since the municipalities were the principal providers of publicly funded childcare services, there was no need to encourage the inclusion of third sector providers in policy-making at the municipal level. The municipalities, after all, represent all citizens or inhabitants in a given geographical area, not just a single group or class of citizens, as was the case with labour market or consumer policy, where two opposing groups or classes were readily identified. Fourth, existing municipal actors may perceive new actors as a threat, both in economic and political terms. The staff of municipal childcare providers may feel threatened in terms of their jobs and financial security, while the politicians and administrators responsible for governing and supervising the municipal childcare service systems may fear the loss of political influence if new actors were recognized and included in local forums of policy deliberation. This corresponds to the welfarist and professionalist approaches to user influence. Fifth, some municipal and even national actors fail to see any difference between the small social enterprises made up of staff or parents and the large private for-profit corporations operating in several different municipalities. ‘If you accept one of them then you must accept them all’, seems to be their reasoning. Thus, including or legitimizing parent and staff cooperative

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childcare may serve to breach the outer walls of opposition to private forprofit services. Sixth, Swedish competition law lends some credence to such an interpretation. An organization’s social values cannot provide the basis for choosing between providers; only the lowest bid counts. So, political and ideological reasons may weigh heavily in opposing the inclusion of third sector providers. Finally, Sweden’s tradition of a unitary rather than a federal pattern of government also leave less room for variation with institutions of local representation in new areas, where new actors emerge, as witnessed by the exclusion of third sector providers of childcare (Vamstad 2004a, 2004b). One final reason for the lack of representation and influence by third sector childcare service providers at either meso- or macro-levels in Sweden is the lack of an infrastructure to promote coordination among third sector service providers themselves or between them and public providers of such services. Childcare delivery is provided by small, independent, third sector organizations, parent and worker cooperatives or voluntary organizations, which do not belong to an intermediary organization designed to promote their common interests within the public system for service provision, nor in any given service sector. Not only is the public system of childcare delivery closed to them, but also their own intermediary organizations are very specific, to the extent that they belong to any. Some third sector childcare providers do belong to the regional cooperative development agencies, now called Koompanion. However, the latter focus mainly on promoting the establishment of new cooperatives in their respective regions, not on promoting the interest of third sector providers in any given service sector. So, they lack the necessary infrastructure both for articulating and coordinating their interests as a specific group of service providers. Moreover, there are no public institutions for involving third sector providers in policy development or system governance, particularly not at the sectoral level. However, the mere existence of such public institutions would promote greater collective action by third sector providers of childcare. Prentice (2006) discusses the negative impact of the lack of formal mechanisms to integrate third sector providers into policy development or service coordination for the overall development, or lack there of, of childcare policy in Canada. Despite profound reliance on the third sector to provide childcare services it remains a system of mainly individual, stand-alone facilities, governed directly by the users (ibid., p 19). By contrast, Japan, in recent years has witnessed the development of local third sector intermediary organizations, often with the help of local governments, in order to promote a more active role for the third sector in the co-governance of important social services (Tuskamoto and Nishimura 2006). It would, therefore, appear logical to recommend that new ways be explored to include third sector providers of childcare services in order to accommodate them in the management and governance of childcare services in Sweden. In addition to public support for establishing intermediary organizations to promote the third sector, the

258 A Democratic Architecture for the Welfare State development of models of functional representation might provide one way forward (Pestoff 2008). Submunicipal politics and functional representation In modern parliamentary democracies in Scandinavia, with a unitary system, there are usually three levels of decision-making and administration, that is, the central, county and municipal levels. Each level has its own sources of income and taxation powers in Scandinavia. Sweden is a large, sparsely populated country, about the size of California, but with a population only the size of Los Angeles. Its 9 million inhabitants participate in elections every fourth year. In general elections representatives are chosen at the same time to the Riksdag or parliament, to the county councils and to municipal councils. All three of these elections take place on the same day and at the same election polling places. This promotes a high level of participation in elections at all three levels. However, participation in Riksdag election has decreased from 91.4 per cent of the electorate in 1982 to only 80.1 per cent in 2002, while it increased marginally in 2006 to 81.9 per cent. Participation rates are only slightly lower in county and municipal council elections and follow the general declining trend. Approximately 80 per cent of the population resides in the urban areas. Swedish cities are often subdivided into administrative wards to promote a feeling of nearness between inhabitants and the city administration. However, few if any Swedish cities allow for direct elections of representatives at the ward level. This means that at the submunicipal level there are no direct means of electoral representation. This gap in Swedish representative democracy leaves the citizens with no direct influence at the submunicipal or ward level. There are also numerous other political and democratic activities found below the municipal level, but nevertheless within their territorial confines. They can be referred to as submunicipal politics. Here we find various local development groups, municipal wards in urban areas, various user groups, in particular those related to welfare services, and so forth. There are 4,168 local development groups in Sweden today (Herlitz 1999). Many urban areas are subdivided into a number of wards to facilitate their administration and to decrease the distance between them and their voters and the users of their services. However, they lack direct elections to ward councils. Their boards are appointed politically by the municipality. In addition, there are a number of user controlled service providers, like parent cooperatives or third sector childcare, schools, eldercare, handicap care, and so forth. Here, the users are responsible for the management of the service. When they become members, users often have a work obligation and they are represented on the governing bodies of the service. In addition, there are numerous local branches of voluntary associations, popular movements, foundations and other nonprofit organizations found within the territorial confines of all municipalities. Thus, several different types of political actors are found at the submunicipal level

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in Sweden. Just as at the global, European or regional levels, these submunicipal actors do not always have clear political institutions, a forum nor can they easily find channels of representation. Figure 11.1 illustrates this. In order to empower citizens as co-producers of welfare services, greater use of functional representation at the municipal level could be promoted, especially in the sectoral boards responsible for providing and supervising various kinds of welfare services at the local level. They would function as a supplement to existing representative channels of democracy. So, the voters would continue to vote for their preferred political party in municipal elections and the political majority would continue to form the municipal government, just as today. Also, just as today, the municipal governments would appoint the members of boards to supervise the provision of various municipal welfare services. This top-down selection procedure allows no direct representation of the users of such services. However, functional representation could supplement political representation in the following fashion. Public, private and third sector providers of welfare services would be invited to sit on relevant municipal sector boards. This type of functional representation could be on a proportional basis in relation to their importance as providers of welfare services in a given territory. If there were numerous providers of a given welfare service in a municipality, like childcare, then a system of lottery could insure the rotation among all the providers in any given category – public, private and third

Figure 11.1 Politics at the submunicipal level in Sweden. Source: Pestoff, 2006.

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sector. This would promote a bottom-up representation of the providers in a given welfare sector. If the sectoral representatives were guaranteed a majority of seats on a municipal board, then they would have real influence and a greater interest in participating in its deliberations and decisions. However, it is unlikely that the views of all the functional representatives would be identical in all questions, especially given the prevalence of municipal providers. So there is little chance that they would vote as a block against the positions of the politically appointed representatives of the municipality. However, their dialogue would promote greater understanding and tolerance for their differences. Functional representation should occur whenever there is a sufficient pluralism of providers of a given welfare service in a given municipality. Functional representation might encourage the spread of co-production to municipal services, since their ideas and organizational models would be shared in the forum provided by sectoral boards. The existence of a sectoral municipal forum for discussion and decision-making would also facilitate the comanagement of the sector in a municipality and eventually could also promote the co-governance of the sector nationally, based on the growing collaboration between public, private and third sector providers of welfare services. This type of functional representation in the management of publicly financed welfare services need not be seen as an alternative to representative territorial democracy. Rather than viewing it as an either/or situation or a zero-sum game, functional democracy should be conceived as a supplement to representative democracy, as Danish experience shows, and it can help to develop and strengthen representative democracy. Sörensen (1998) also discussed the need to create the right balance between territorial and functional democracy, as well as the right bonds between them. However, if functional forms of empowerment are to become democratic, then, she argues, all members of functional units and all functional units within a given territory should have access to the same channels of empowerment. This recommendation is reflected in the proposal made above for representing third sector providers of social services in relevant municipal boards in Sweden. She also states that it is necessary for functional politics to be institutionalized in such a way that tight bonds are created between functional and territorial units of societal governance, or between user boards and municipal councils (ibid., p 141). Once again, the proposal above for functional representation made here also takes this into consideration.

Economic hurdles to the democratization of the welfare state An economic or civic perspective of the sustainability of the welfare state As noted earlier, the long-term economic forecast of the sustainability of a universal, tax-financed welfare state in Sweden questions its viability, given

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the shortage of funding and limited new ways of financing it in the future (Långtidsutredning, LU 2003). Given rising demands and expectations, due to changing demographics of the Swedish population, LU sees four main possible sources of increased funding or ways to finance a universal tax-financed welfare state. They are: 1) increasing productivity in general and thereby increasing tax revenue; 2) increasing productivity in the public sector in particular, since it produces most welfare services; 3) increasing taxation to finance an expansion of service and quality of public welfare services; and 4) increasing alternative ways to finance public services, including greater user fees and more private sponsoring of public services. The Swedish central organization for trade unions, Landsorganisationen, LO, criticized Långtidsrutedningen in its remiss answer. LO noted the limited number of alternatives presented by LU for financing universal, tax-financed welfare after the year 2020. LO provided six additional ways to strengthen public finances. They included: 1) increasing municipal taxes by 10 per cent over the next 20 years; 2) increasing municipal user fees; 3) increasing VAT taxes; 4) transfer of social insurances to the labour market partners (that is, LO, TCO, SACO and SN); 5) privatization of eldercare; and 6) mandatory elder care insurance, as found in Germany and Japan. Finally, LO also considers the impact of improving the productivity and employment of the Swedish economy. This could be achieved by: 1) increasing the compulsory retirement age; 2) increasing women’s employment; 3) decreasing involuntary part-time employment (mostly women in the public sector); 4) increasing the employment rate of the elderly; 5) increasing the employment of persons with less than average employment capacity; and 6) increasing employment of immigrants (Andersson et al. 2004). However, it should be noted that both LU and LO only take paid work into account in their analysis, which excludes consideration of alternatives like greater use of the third sector and more engaged citizens for providing publicly financed welfare services. Such alternatives are excluded since they fall outside the national accounts system (nationalräkningsskap). But unpaid labour, which is very prevalent in most types of caring activities, like childcare, eldercare, handicap care, and so forth, through informal activities of relatives and others is not considered by either LU or LO. Thus, neither LU’s or LO’s economists take into account unpaid labour or volunteering, for whatever reason and with whatever impact on the provision of welfare services. What is not paid simply does not exist in a national accounts system. A recent parliamentary investigation, known as the Ansvarsutredning/ Responsibility Investigation,2 poses a different set of questions and come up with different answers concerning the development potential and sustainability of the universal welfare state in Sweden. It examines the overall balance of responsibilities between the central, regional and local levels of government in Sweden. In doing so, it also points to two possibilities for developing sustainable welfare: 1) increasing the potential for developing the public sector by increasing the adaptability of public services to continuously changing

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circumstances regarding costs, values and patterns of living among Swedish inhabitants; and 2) increased levels of co-production by citizens, meaning greater individual and collective participation and responsibility by citizens for their own welfare. The latter perspective comes close to some of the ideas expressed here. The trade-off between quality and equity in welfare services Lindbeck (2005) argues that no time should be lost in initiating a public discussion about finding an acceptable political solution to the social dilemma or trade-off between quality and equity in terms of welfare services in Sweden. He states that if we wish to avoid a hasty, and perhaps uninformed, solution to this dilemma in one or more decades, we must act now. We must start a debate that can tear down the ideological and political barriers of today that prevent reforming the organization and financing of welfare services. He maintains that the social democratic government’s model of primarily or exclusively financing welfare services, like education, healthcare and social care, through taxes is insufficient to meet the challenge. The total availability of such services will not match the demands of citizens if we rely exclusively on new taxes. With such a model we obtain a high degree of equity, but at a low level of production/consumption of such services. With other forms of financing as a complement we can get greater total production/consumption, but at the price of greater inequity. However, striving for both high quality and equity will prove impossible and is futile (DN, 1/3–05). Today, he notes, there are big differences of opinion about how to finance high-quality welfare services. Some adhere to increasing taxes only, while others promote the greater use of alternative financing. The latter are already employed in the form of patient fees for doctor visits or fees for medical prescriptions, parent fees for childcare services, and so forth. They could also include mandatory or voluntary insurance fees for various welfare services, like homecare for the elderly, as in Germany and Japan, as well as mandatory or voluntary savings in special accounts, like the new pension system in Sweden. His main argument, however, is that if you rule out financing welfare services by alternative methods in principle, then you will end up with a situation where it will be impossible to finance citizens’ growing demand for more and better services. Increasing taxes will not be acceptable in the long run economically, politically nor socially. The total availability of welfare services in society will not meet growing citizens’ needs. Thus, we will probably be forced in the near future to choose between more total production with complementary funding methods and less production, but with more equitably distributed consumption of such services (ibid.). His narrow focus on financing welfare services ignores the contribution of the third sector to improving both service quality for citizens and work environment for civil servants. Previous research on alternative provision of childcare in Sweden showed that the parents and staff who had experience from both forms of

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provision, and could therefore compare them, strongly preferred alternative services to municipal childcare, for a variety of reasons (Pestoff 1998 & 2005). More satisfied parents and more engaged staff are a sign of better service quality and a better work environment. However, Lindbeck is not alone in recognizing the centrality of this social dilemma or trade-off for the financial sustainability of the welfare state. Esping-Andersen (2000) also discusses this trade-off in relation to the problem of saving today’s welfare state edifice, whether or not it is economically sustainable, but at the expense of ignoring new kinds of social risks, related to new lifestyles, changing family patterns, and so forth. Pointing to the political side of this dilemma he states that ‘[I]f the alliance against reforms represents the traditional, rather than the emerging risk structure, a successful defense of the status quo becomes problematic. The welfare state may be servicing the insiders . . . and the more it is upheld, the less its capacity to address the risks of the outsiders’. He adds that ‘. . . [i]f post-industrial society is altering the structure of social risks, the real crisis of the welfare state may be its popularity’ (ibid., p 148). He refers to the ‘Trojan horse of the welfare state’, where risks have shifted towards the younger, due to the failure of the labour market and family, and solutions to these risks in a large measure are found in providing more welfare services (ibid., p 150). How contemporary welfare states deal with this depend on their response to both the employment problem and the new demographics of ageing and family behaviour. For Esping-Andersen the answer to this dilemma is found in the responses of the market, state and family. However, once again the third sector is absent in this analysis. Equally, Lindbeck also ignores the possibilities of greater citizen engagement in the production of welfare services, or citizens as co-producers of the services they demand on long term and a daily basis. Co-production and volunteering in welfare services It is also important to consider the relationship between co-production and volunteering in the production of welfare services, as well as the organizational and value basis for such activities, in order to explore similarities and differences between them. Co-production in public services is the degree of overlap between two sets of participants in the service production process – regular producers or staff and citizens or consumer producers. Co-production is related by most analysts to cost reductions, higher quality services and expanded democratic opportunities for citizen participation. It resulted in a flurry of interest in the early 1980s by analysts of public administration in America and was discussed in detail in Chapter 8. However, it faces severe hurdles before it could become accepted in political and professional circles. The production of welfare services by the third sector can take different organizational forms, and it requires different contributions of both time and money. When considering these different forms, it is important to distinguish between the organizational basis for producing welfare services and the

264 A Democratic Architecture for the Welfare State individual value basis that motivates such activities or production. Starting with an organizational form of production, we need to distinguish between services produced solely by personal contributions of time and money, on the one hand, and those services produced mainly through collective efforts, on the other. Turning to the value basis of activities, we also need to distinguish between contributions of time and money mainly on the basis of altruism, and/or other social values, on one hand, and those mostly motivated by self-interest, on the other. Ilmonen (2005) argues that it is important to pay attention to motives other than self-interest, which can provide the basis for gift giving and that are related to the maintenance of social bonds. Only in the modern world are self-interests and other motives seen as opposed to each other. In sum, generosity is often not so ‘pure’ or altruistic as it may appear in Christian thinking. Thus, both ‘pure’ and ‘calculative’ gifts are merely ideal types. In everyday activities, generosity and the promotion of self-interest are intertwined. However, whether gift giving aims at promoting self-interest or not, it differs in one respect from a market economy. In the end, gift giving always aims at the creation and maintenance of social bonds. In a market economy the opposite is true. In terms of the organizational basis for providing welfare services, the alternatives can range from mostly individual to mostly collective provision. The personal value basis for engaging in the provision of welfare services ranges from mostly altruistic and/or other social values to mostly selfinterest. In both cases we will find a mixed category that includes a combination of both individual and collective production and a combination of both altruism and self-interest. The actual degree of individual vs. collective production or altruism and/or other social values vs. self-interest values will of course vary from one case to another. However, for the sake of simplicity, a middle range is included in the figure that combines both individual and collective production as well as a mix of both altruism and self-interest values. The size of any single category is not possible to determine a priori, but remains an empirical question to be determined by systematic studies. Figure 11.2 summarizes these differences. Concerning the organizational basis for such activities, individual donations to the homeless or victims of a catastrophe are normally channelled through organized groups and therefore usually combine both individual and group efforts. By contrast, eating a meal at a pot-luck dinner is normally a collective effort, in spite of the individual dishes that compose it. Few persons would prefer to eat their pot-luck dinner alone at home, unless the weather forces them to do so. The purpose of a pot-luck dinner is not only to eat a meal, but also to share your favourite dish with someone else and to taste theirs together with other people. Here the social dimension is not absent, and eating with others may contribute to creating social capital. In terms of value motives for individual activities of giving time or money to help feed the homeless or to help the victims of a catastrophe, this can be interpreted as an expression

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Figure 11.2 Co-production and volunteering in welfare services. Source: Pestoff 2005a.

of altruism and/or other social values, although a certain feeling of selfrealization may be present. By contrast, preparing a meal for a pot-luck dinner can normally be seen as an expression of self-interest, since the cook gets to taste not only his/her own dish, but also to try the favourite dish of other persons. Similarly, the situation for the staff and volunteers is different in organizations like the Red Cross, Charatis, Oxfam, political parties, and so forth. The value basis for the staff includes altruism and/or other social motives as well as self-interest, since they earn their living by their work. Volunteers, on the other hand, normally contribute their own time and/or money without direct material rewards, so the basis for their activities is more clearly altruism and/ or other social values, than self-interest. However, self-esteem, gaining job skills, maintaining a life structure or following daily routines may not be completely absent from the motives of certain volunteers. Citizens’ participation or co-production in providing many welfare services appears to fall in the middle category on both these dimensions. It involves a mix of both altruism and/or promoting other social values, as well as the realization of self-interest, and it also requires both individual and collective efforts to be realized or achieved. This implies that co-production of the type depicted here may, in practice, not be all that different from activities classified as voluntary in other perspectives, approaches or institutional contexts. The factual differences often discussed in the literature may be more a question of degree than kind. The ideas about collective action and common pool resources discussed by Ostrom are important to keep in mind when considering the ramifications of co-production. Challenges for co-production, co-governance and the third sector A policy of greater citizen participation and more active involvement by the third sector in producing and managing welfare services bears certain risks. First, there is the risk associated with such policies being perceived as a threat

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to liberal democracy. If functional democracy is promoted at the expense of representative democracy, then many people might oppose it in general. Second, many civil servants, public administrators and politicians in particular might perceive greater citizen participation and more active involvement by the third sector in producing and managing welfare services as a zero-sum game, one where they are the clear losers. Opposition by civil servants and trade unions is a common problem where co-production has been promoted. The third sector can then easily be presented as ‘a wolf in lambs’ clothes’, opening the doors for full-scale privatization of welfare services in Sweden, and the democratic benefits of such activities could be lost due to vigorous opposition. Third, a policy of greater citizen participation and more active involvement by the third sector in producing and managing welfare services needs to carefully consider the relationship between the state/municipalities and the third sector in the context of the needs of the staff, users and financiers in various areas of service provision. Competition over the factors of production as well as for political influence and power need to be recognized as real problems that are best worked out beforehand, rather than after competition leads to outright opposition, or even open confrontation. Fourth, as Osborne and McLaughlin (2003) warn, co-production and co-governance can, under certain conditions, lead to the third sector becoming incapacitated to act independently, to becoming incorporated in a local corporatist state and finally to the risk of isomorphic pressures from governments that promote professionalization and standardization of services. This would promote a reduction of membership influence and democracy inside participating organizations. Such a development would only reinforce their role as service providers, without contributing to either the democratization or the sustainability of the welfare state. A role as service provider, without the power to influence either local services or the policies pursued would merely serve to emphasize the third sector as a powerless outsider. This is the case of parent cooperatives as alternative providers of childcare in Sweden. What appears primarily to motivate continued parent engagement and co-production of childcare services is the better quality of the service, as perceived by the principal users, the children and their parents. However, their involvement during five or more years made no notable contribution to rejuvenating democracy at the local level, alleviating the democracy deficit, nor developing functional channels of influence and democracy at the submunicipal level in Sweden. Thus, better service quality for the children and richer and more rewarding social contacts for the parents and children appear to be the main contributions of alternative childcare in Sweden today, given the narrow political confines of its influence at the municipal level. The main benefits of this new form of user democracy are thus limited to the micro-level, or the stakeholders in the separate childcare facilities.

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Conclusions This chapter considers the potential of the third sector for the democratization of the welfare state in Sweden, and the hurdles in its way. Numerous political indicators suggest that we may be witnessing the gradual ‘withering away’ of several vital institutions of representative democracy. Other indicators suggest that the citizens are finding or perhaps even founding new channels of participation and influence alongside the more established ones. The growth of sub-politics and life politics provides support for this. However, these new channels are not yet institutionalized and formalized, nor are they fully recognized as legitimate by democratic theory and political science. This presentation first considered political hurdles to democratizing the welfare state, and then economic hurdles. It added cautious cooperators alongside the traditional rational maximizers for modelling our understanding of human behaviour and for judging the impact of government policies designed to resolve social dilemmas. But, some policies actually crowd out active citizen participation. They usually assume there are only a few rules that need to be considered and that only experts have the appropriate knowledge to design optimal policies. In many important areas of governmental activity it is impossible to deliver services without the contribution of time and effort by clients or citizens, a phenomenon known as co-production. However, material rewards prove insufficient for eliciting the requisite contributions by citizens in all but the most simple of tasks. Rather, complex non-material incentives elicit co-production in different circumstances. Local public goods are consumed both individually and collectively. This gives the community as a whole a stake in the quality of services. Public authorities should encourage cooperation in providing them. The rural village of Drevdagen illustrates the problems associated with parent participation in elementary schools in Sweden. Fifteen years later, the National School Authority’s report in 2004 made several critical remarks. It seemed to confirm Ostrom’s observations about treating citizens like knaves and Fennell’s comment on support for mechanisms to encourage users to cooperate. A comparative European project on alternative provision of childcare services shows that in spite of their importance as providers of high-quality services, parent cooperatives in Sweden have a limited impact on the overall delivery system. Unlike France or Germany, where parent initiatives are also numerous, no channels exist here for incorporating these new providers in local policy networks and they remain powerless outsiders. The recent bill on quality in childcare services emphasizes the lack of interest by central authorities to acknowledge or learn anything from citizens’ initiatives, or to provide parents with more influence in public services, except in a discussion forum. Several important authorities, like the Association of Swedish Municipalities and Counties and the concerned trade unions also clearly rejected proposals to give parents more of a say in public childcare facilities. Finally, this section explored the need for greater functional representation of citizens alongside

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the representative channels of influence, in particular in terms of renewing the welfare state, rejuvenating democracy and alleviating the growing democracy deficit. Turning to economic hurdles to democratizing the welfare state, we noted the following. Macroeconomic analysis of the sustainability of the welfare state (Långtidsutredningen, 2003/04) allowed little room for citizen participation in the provision of welfare services, except as the purchasers of services or payers of service fees. Only monetary transactions and paid work are taken into account by the national accounting system, which precludes engaging citizens as co-producers. The Swedish Confederation of Trade Unions (LO) proposed increasing both the size of the workforce and taxes, but ignored the potential of active citizens in promoting the sustainability of the welfare state. The economic debate underlined the trade-offs between quality and equity in welfare services, and noted the quality improvements found in third sector services. Then, volunteering and co-production were compared in terms of the value base motivating them and the organizational form such efforts can take. Finally, it also considered some drawbacks of greater citizen involvement in the provision of welfare services. One was opposition by bureaucrats, civil servants and trade unions. Another was that greater participation by the third sector can imply a risk of becoming incorporated by the state, and/or transformed into just another professional provider of publicly financed services, at the expense of membership influence and internal democracy. Experience from both England and Germany suggest that the relationship between the third sector and municipalities may be problematical in this respect. The provision of welfare services can be conceived of as local public goods, that is, something that both is consumed individually and has a composite quality impacting on the whole community. The same can be argued for active citizens as co-producers of welfare services. Users may be among the most important factors of production. They help establish a baseline level of good quality. Their daily participation comprises an endogenous component of good quality, which cannot easily be replaced or augmented by additional exogenous variables like better management or more financial resources. Among the more important composite local public goods that citizens’ participation in the provision of welfare services can result in is a renewal of the welfare state and a rejuvenation of local democracy. Citizen participation and cooperation in providing welfare services should be encouraged by public authorities, or at least not discouraged. The relationship between the third sector and both the state and market in Sweden is structured by power relations that give the latter two institutions important veto-points or gatekeeping functions over the former. In relation to the state, broadly accepted concepts of a universal tax-financed welfare state that provides similar, if not identical services to all inhabitants in all parts of Sweden, regardless of where they live, comprises one such vetopoint. Third sector alternatives are discouraged in the name of equality of

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services for all citizens/inhabitants. Any deviation from this norm of universality, equality, homogeneity and standardization of welfare services is discouraged in the name of class and equality. Small-scale provision of welfare services, which by definition means diversity of services provided, is thereby strongly condemned in the name of the basic values of the Swedish welfare state – universalism and equality of services provided. Furthermore, the state discourages citizen involvement in the provision of basic welfare services through selective incentives. For example, attempts in a major slum area in the suburbs of Malmö to encourage citizens/inhabitants to engage themselves in the maintenance of public housing by providing a symbolic reduction in their rent resulted in the national Tax Authority condemning it as an attempt to cheat on income taxes. Moreover, local trade unions also condemned it as an attempt to circumvent local collective agreements and to hide an employer/employee relationship subject to collective agreements. These efforts to engage citizens/inhabitants in the maintenance of public housing therefore failed. The Drevdagen’s school in rural Sweden provides another example of public authorities creating hurdles for collective action and active citizens in the provision of welfare services. The market, on the other hand, normally argues for a variety of providers and diversity of producers in the name of competition. This should normally benefit third sector providers; however, the market also uses its veto-powers, effectively eliminating third sector competition from major welfare services. Here, the Lag om offentlig upphandling (LOU), the Law on Public Procurement, plays an important role. It eliminates most types of competition in terms of quality of services, as practised in Sweden. It focuses most competitive tendering on the lowest possible price in the name of efficiency. Any consideration of other social values, in particular those values that are difficult to measure in monetary terms, like good quality services or secure and stable social relations between the providers and consumers of basic welfare services, are prohibited by LOU from being included in public procurements. Defenders of LOU will, of course, hasten to point out that LOU does not actually make social considerations illegal, but rather subjects public bodies to legal recourse by the companies losing a tender, should the authorities not choose the lowest bid. However, in effect in Sweden today, 99.5 per cent of all procurements concentrate on the lowest bid, even when bids are not financially realistic or socially tenable. However, Bruun (2000) noted that EU-law gives clear possibilities for taking social considerations and other noneconomic conditions into account with public procurements. The qualifying criteria allow for the inclusion of national requirements. Even the procurement or evaluation criteria permit national criteria. Furthermore, concerning contract criteria or additional contract conditions, EU Directives and the EU Court clearly point towards possibilities for taking social factors into consideration (ibid., p 452). However, social criteria must be clearly stated, their importance must be determined beforehand and applied in a transparent fashion. This first and foremost

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allows for national consideration and promotion of employment, equality and environment. When applying EU laws, the Swedish Law on Public Procurements, LOU, corresponds in general with EU law. If a public procurement deviates from business-like conditions of the lowest price, the central government can decide and rule in favour of social conditions. Thus, it is primarily an internal Swedish matter if social considerations are made during a public procurement or not (ibid., p 455). In 1999, the municipality of Värmdö, a sparsely populated suburb southeast of Stockholm, became the first municipality in Sweden to base its development on promoting the social economy and greater citizen participation. All the political parties represented on the Municipal Council of Värmdö declared their support for this policy. However, when it came to implementing these ideas, both the Conservatives and Liberals turned to the courts to stop certain developments. In particular, they opposed that the local Council of Associations should be given responsibility for providing daytime activities for pensioners at a local activity centre. They argue that it is first necessary to have open competition to decide which provider should get the tender. Thus, LOU was used against collective action and greater citizenship participation. The rainbow coalition that governed Värmdö until 2006, was replaced after the election by the Conservatives and Liberals, together with the two other parties belonging to the Alliance for Sweden. They decided to return to more a traditional model of governing and to abandon the social economy as a means for promoting local development. With this, an extensive, popular and successful local experiment in designing a new architecture for the welfare state at the local level also came to an end.

Notes 1 The TSFEPS Project, Changing Family Structures & Social Policy: Childcare Services as Sources of Social Cohesion took place in eight European countries between 2002 and 2004. See www.emes.net for details and reports. The eight countries participating in it were: Belgium, Bulgaria, England, France, Germany, Italy, Spain and Sweden. 2 The Ansvarsutredning, however, ignored this in its final report. Rather it concentrated on the size of counties in Sweden. It proposed to reduce the number of counties from 21 presently to between six to nine large counties. Thus, a discussion of principles turned into an exercise of ‘cutting and pasting’ the pieces of a new administrative map.

Part IV

The politics of participation in European welfare states

12 The politics of participation in European welfare states

Introduction Starting in the early 1980s the Swedish welfare state experienced several major changes in terms of providing welfare services and it is facing even greater changes in the next 20–25 years. There is a growing division between financing and delivering welfare services, which is becoming more apparent. Ideological clashes over the future of the welfare state began in the 1980s with the appearance of neoliberalism and the renewed political activism of the Confederation of Swedish Employers (Pestoff 1999b, 2005a). Initially, alternative provision of welfare services was marginal, usually found only in small specialized niches. By the year 2000, it had grown (Blomqvist and Rothstein 2000, Blomqvist 2003), with a varying mix of for-profit firms and third sector providers in different social service areas. The Långtidsutredning (2004) stated that the future of the universal tax-financed welfare state was highly tenuous and it predicted that it would be difficult to sustain in the future. So it would be necessary to develop alternative means for producing and financing welfare services by the year 2020. The Social Democrats attempted to stave off privatization of welfare services by adopting so-called ‘stop laws’ in various service areas. They prohibited the conversion of municipal housing into private condos and the provision of basic education and healthcare services by for-profit firms. The new non-socialist government immediately removed these restrictions when it assumed power in 2006. Thus, a continued state monopoly of the provision of welfare services was ruled out. Two alternative scenarios appear therefore relevant for the future of the welfare state in Sweden, either rampant privatization or greater welfare pluralism. The latter would include a major role for the third sector, as an alternative to both public and private for-profit provision of welfare services. These two alternatives are sketched in Figure 12.1. It was noted earlier in Chapter 8 that co-production is the mix of activities that both public service agents and citizens contribute to the provision of public services. The former are involved as professionals or ‘regular producers’, while ‘citizen production’ is based on voluntary efforts by individuals or groups to enhance the quality and/or quantity of services they use. In

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Figure 12.1 Development of the Swedish welfare state, ca. 1980–2030. Source: Pestoff, 2007.

complex societies there is a division of labour and most persons are engaged in full-time production of goods and services as regular producers. However, individual consumers or groups of consumers may also contribute to the production of goods and services, as consumer-producers. Evers’ (2006) distinguishes between five different approaches to user involvement in the production of social services. They have clear implications for citizens’ possibilities to participate in the provision and governance of such services. Two of his categories for user influence are closely associated with public production of social services, while two others are more closely related to market provision. All four of these approaches flourish in the European debate. However, the fifth approach to user influence is largely missing, that is, greater citizen participation in the provision of social services, or co-production. The Swedish and European debate about the future of the welfare state is often highly polarized and ideologically divided between continued public provision and rapid privatization of social services, where the only options discussed are either more state or more market solutions. It is difficult, if not impossible, to promote a third alternative, for example, greater welfare pluralism, more citizen participation and greater third sector provision of social services in such a highly ideological context (Vamstad 2007). Thus, citizens are normally faced with simple black/white choices between more state or more market solutions to most problems facing them.

The politics of participation in European welfare states 275 Yet, we found that neither the state nor market allows for more than marginal or ad hoc participation by citizens in the provision of welfare services. For example, parents may be welcome to make spontaneous suggestions when leaving or picking up their child from a municipal or for-profit childcare facility. They may also be welcome to contribute time and effort to a social event like the annual Christmas party or Spring party at the end of the year. Also, discussion groups or ‘Influence Councils’ can be found at some municipal childcare facilities in Sweden, but they provide parents with very limited influence. More substantial participation in economic or political terms can only be achieved when parents organize themselves collectively to obtain better quality or different kinds of childcare services than either the state or market can provide. In addition, worker cooperative services provide parents with greater influence than either municipal childcare or small private forprofit firms do, and the staff at worker cooperatives obtains greater influence, resulting in more democratic workplaces. Thus, co-production implies different relations between public authorities and citizens as well as different levels of citizen participation in the provision of public services. To simplify matters, only three categories or levels will be employed herein, but there can in fact be greater differences between them. The intensity of relations between public authorities and citizens can either be sporadic and distant, intermittent and/or short-term or it can involve intensive and/or enduring service relations. Similarly, the level of citizen participation in the provision of public services can either be low, medium or high. By combining these two dimensions we derive a three by three table with nine cells. Not all of them are readily evident in the real world or the literature on co-production. Figure 12.2 presents some variations on the combination of these two dimensions. It also includes an additional dimension on the degree of civil society involvement in the provision of public services that reflects the form of citizen participation, that is, organized collective action, individual or group participation and individual or group compliance. Overall, there appears to be a general trend towards increased citizen participation with increasing intensity of relations between public authorities and citizens in the provision of public services. However, when it comes to providing intensive and/or enduring welfare services, two distinct patterns can be noted. First, a high level of citizen participation is noted for third sector provision, since it is based on collective action or social economy organizations. Second, more limited citizen participation is noted for public provision of enduring welfare services. It focuses on public interactions with individual citizen and/or user councils, either on-site or at the citywide level. Citizens are allowed to participate sporadically or in a limited fashion, but seldom given the opportunity to take charge of the service provision or decision-making rights and responsibilities for the economy of the service provision. This creates a ‘glass ceiling’ for citizen participation in public provision and limits them to playing a passive role as service users who can make demands on the public sector, but make no decisions nor take any responsibility in

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Figure 12.2 Co-production and relations between public authorities and citizens. Source: Pestoff, 2007.

implementing public policy. The space allotted to citizens in public provision of such services is too restricted to make participation either meaningful or democratic. Thus, it is only when citizens are engaged in organized collective groups that they can achieve any semblance of democratic control over the provision of public financed services. Only through independent collective action and third sector providers will it be possible to achieve a value added in the form of democratic governance of public services. At the level of the individual welfare services, participation takes quite different forms. Most welfare services studied here fall into the top-down category in terms of style of service provision. There are few possibilities for citizens to directly influence decision-making in such services. This normally includes both municipal childcare or eldercare services and for-profit firms providing similar services. Perhaps this is logical from the perspective of municipal governments. They are, after all, representative institutions, chosen by the voters in elections every fourth or fifth year. They might consider direct client or user participation in the running of public services for a particular group, like parents in childcare or relatives in eldercare, as a threat both to the representative democracy that they institutionalize and to their own power. It could be argued that direct participation for a particular group would thereby provide the latter with a veto right or a second vote at the service level. There

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may also be professional considerations for resisting citizen involvement and participation. The logic of direct participation is also foreign to private for-profit providers. Exit, rather than voice, provides the medium of communication in markets, where citizens are seen as consumers. This logic also excludes any form of indirect or direct representation. Only the user cooperatives clearly fall into the bottom-up category. Here we find the clearest examples of self-government and direct democracy. Citizens are directly involved in the running of their daughter and/or son’s childcare centre or school or their mother, father or relative’s eldercare centre in terms of being responsible for the maintenance, management and so forth, of the facility. They also participate in the decision-making of the facility, as members and owners of the facility. However, this book also emphasized the importance of the interface between the government, citizens and the third sector and it noted that co-production normally takes place in a political context. An individual’s cost/benefit analysis and the decision to cooperate with voluntary efforts are conditioned by the structure of political institutions and the encouragement provided by politicians. Centralized service delivery tends to make articulation of demands more costly for citizens and to inhibit governmental responsiveness, while citizen participation seems to fare better in decentralized service delivery. However, one-sided emphasis by many European governments, either on the state maintaining most responsibility for providing welfare services or turning most of them over to the market, will hamper the development of co-production and democratic governance. The state can ‘crowd-out’ certain behaviours and ‘crowd-in’ others in the population. A favourable regime and favourable legislation are necessary for promoting greater co-production and third sector provision of welfare services. Only co-production and greater welfare pluralism can promote democratic governance. The Swedish General Elections of September 2006 ushered in three dramatic political changes. First, the Social Democrats got the lowest level of popular support since universal suffrage was introduced and the Conservative Party received the highest level since then. Second, the four non-socialist parties behind the Alliance for Sweden could form a new majority government. Third, although a populist, anti-immigrant party fell short of gaining representation in Riksdag, it did get seats in half of the municipal councils that were elected at the same time. On all three counts this represents a historical change in Swedish politics. As the strongest bastion of social democracy in Europe during the twentieth century, where they were victorious in all but three elections in the past 70 years, there is good reason to ask whether this reflects a definite break in Swedish politics. Has the Swedish electorate finally turned its back on the welfare state and the party that championed it for so long? Fredrik Reinfeldt, Chairman of the Conservative Party and the leader of the new non-socialist government, argued during the election

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that many people feel excluded in Sweden today. Perhaps they also felt abandoned by the Social Democratic Party and thought that the public administration was indifferent to their wishes, so they felt it was time for a change. Only, what kind of change is in store for the welfare state after the 2006 election? It is too soon to speculate about what these dramatic political changes mean for the future of the welfare state. Ideologically, it is reasonable to expect more market solutions. The sale of important national assets has already been announced in companies like SAS; the state monopoly of wine and spirit shops; the state housing loan bureau, SBAB; the crown jewel, Absolute Vodka; the state monopoly pharmacy shops, and so forth. However, if the Social Democrats have run out of steam, and lack a vision of the good life and for a good society, replacing public ownership and provision by a market model will not address the three main problems addressed in this book. Replacing the state by the market will not resolve the problems of the deteriorating work environment in the public sector nor the poor service quality. The market is unlikely to promote greater worker influence or to allow them more control of their work tasks. Replacing the state by the market will not encourage or facilitate greater citizen participation in the provision of welfare services, although it may promote greater reliance on the exit option related to the ‘freedom of choice’ revolution. Replacing the state by the market will not lower the overall costs of providing universal welfare services, although it may shift some of the burden to the citizens who demand such services and thereby eliminate some of the demand for them. Moreover, political considerations suggest that another alternative could take many welfare services off the market by encouraging families to produce them at home. The new non-socialist coalition has promised a new childcare allowance for families providing their own childcare at home. Moreover, it was maintained at the outset of this book that the welfare state faced a triple democratic dilemma in Scandinavia, and to a greater or lesser degree in other European countries, and that they must be resolved in a coherent fashion. This was a reflection of the three challenges facing the welfare state in Sweden: the inferior work environment in the public sector and the related declining quality of public services; the decreasing citizen participation in and support for the liberal democratic representative institutions; and, the permanent austerity facing public welfare services. The latter is, of course, fuelled by far reaching demographic changes facing all European societies. A growing number of pensioners combined with a decreasing number of persons between the ages of 18 and 65 years old, implies a reduction in the workforce and heavy new financial burdens for strapped European public sectors. There are several reasons for having a pessimistic view about the triple democratic challenges facing Sweden. Neither state nor market solutions seem adequate for meeting these challenges nor resolving these dilemmas. Something else, something new is required, a third alternative or way of tackling these three dilemmas together. The main solution proposed

The politics of participation in European welfare states 279 by this book calls for greater direct citizen participation in the continued provision of universal, tax-financed welfare services and a greater role for the third sector in producing such services. The solution is not found in more state or more market. Moreover, only greater citizen participation and a greater role for the third sector can provide a comprehensive solution to all three of these challenges or the triple democratic dilemma of the welfare state at the same time. Many observers call for developing a new architecture of the welfare state. However, proposing a new architecture for the welfare state that is based on greater citizen participation and a greater role for the third sector will not be an easy match. It will provoke a lot of criticism both on the right and left of the political spectrum and opposition from a variety of vested interests. The forces promoting either one-sided state or market solutions will find no solace in greater citizen participation and civil democracy. There are good reasons for this. For ideological and practical reasons both the étatist and market models favour the big bureaucracies of the public sector and multinational corporations. They feel threatened by small-scale organizations based on the participation of citizens as workers and consumers of welfare services. Involving citizens as co-producers implies sharing the power and/or profits derived from the transactions for providing welfare services. According to the étatist model, citizens are supposed to pay their taxes, consume welfare services and vote every fourth year. If they are dissatisfied with the current state of welfare services they can vote for another political party. Accordingly, the market model consumers are supposed to make their service purchase from a variety of competing providers and choose another supplier if they are dissatisfied. Exit is the main institution of restitution for the dissatisfied citizens and consumers. However, neither model leaves much room for citizen participation, particularly not in the provision of welfare services. Moreover, most models of democracy focus on the input side of the political system, and treat the output side as an unknown quantity or a black box, with few, if any possibilities for influence or direct citizen participation in the provision of welfare services. In addition, functional representation is poorly understood and seen by many as a threat to representative democracy, rather than as a complement to help rejuvenate democracy and redemocratize the welfare state.

Towards a democratic architecture for the welfare state? Some of the voices promoting an alternative to both the state and market have a common emphasis on greater citizen participation and a greater role for the third sector in providing welfare services. Rifkin (2004) compares and contrasts the American and European dreams. He states that politics in America operates with only two poles – market and government. Politics in Europe, by contrast, involve three nodes – commerce, government and civil society. He envisions civil society as a forgotten sector located between the

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market and government. Despite its importance, this realm has been increasingly marginalized in the modern era by the forces of the market and nationstate. The materialists view the marketplace as the critical social institution and primary arbitrator of human relations. However, civil society empowers people to champion their own interests in a world where corporations and governments are less likely to do so. Many civil society actors argue that the unregulated capitalist greed of globalization has led to the diminishing role of government as a redistributive agent and provider of essential social services. Rifkins notes that the European Union (EU) has somewhat hesitantly become the first government to recognize civil society as a potential third component or sector of governance. He attributes it an intermediary function between the state, market and citizens. Accordingly, civil society can bring ‘participatory democracy’ to the governing process, making organized citizens critical players in the new European political experiment. Recognition of a three-sector partnership has historical significance. However, many nation-states and provincial and local governments in the EU are still ambivalent about the implications of this and how much formal participation by civil society organizations should be sanctioned. In most European countries civil society organizations are more favourably regarded by the public and enjoy greater levels of trust than either the commercial or government sectors. So, given the democracy deficit in the EU, it is not hard to understand that European politicians embrace civil society organizations (ibid.). He notes that most governments in Europe would probably like to limit the role of civil society involvement to monitoring and feedback functions, to mobilizing support behind government initiatives, and perhaps to partnerships in delivering services. The civil society organizations want understandably also to be included in decision-making, with an equal voice. Here we find the acceptance of civil society organizations both as co-producers and co-managers, but not as co-governors of the provision of welfare services. However, in times of globalization and in light of the growing influence of global corporations, governments may have to enlist the support of civil society if they are to construct an effective counterbalance to commercial interests. Giddens (1998) argues that having abandoned collectivism, politics in Europe must look for a new relationship between citizens and the community. Among the steps necessary to achieve Third Way Politics, he calls attention to the need for developing a new relationship between the state and civil society and for democratizing democracy itself. He maintained that reforming the state and government implies a deepening and widening of democracy. Here the government can act in partnership with civil society to foster community renewal and development. While neoliberals want to shrink the state and traditional social democrats are keen to expand it, the third way, by contrast, argues that it is necessary to reconstruct it (ibid.). The current crisis of democracy in Europe comes from not being

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democratic enough. The issue is not more government or less, but recognizing that governance must adjust to the new circumstances in a global age, and that the authority to govern must be renewed. Accordingly, several things must be done. First is the need for recognizing that the democratizing of democracy not only implies decentralization, but, in fact, it involves both a downward devolution of power, and an upward devolution, as seen in the EU. This results in a double democratization process. Second, the state should expand the role of the public sphere through constitutional reform for promoting greater transparency and openness. Third, in order to retain their legitimacy, states must improve their administrative efficiency, but neither through the introduction of market mechanisms nor quasi-markets. Fourth, the downward pressure of globalization introduces the necessity of new forms of democracy other than the orthodox voting process – in other words greater direct democracy. And finally, the management of manufactured risk becomes important, but it cannot be left to experts. Deliberative processes for involving citizens are needed in risk decisions (ibid.). Jessop (2000) states that alongside political arguments for widening participation in economic and social policy decision-making, there are also important economic reasons. Noneconomic factors are becoming more central for economic performance, and a wider range of ‘stakeholders’ should, therefore, be involved than was deemed necessary in the Keynesian era. National welfare states in Europe were largely the result of a postwar capital– labour compromise expressed in different types of national agreements, pacts or settlements between employers and trade unions (Katzenstein 1985). Today’s Schumpeterian workfare state, according to Jessep, should ideally extend involvement to a variety of new ‘stakeholders’ in those institutional and functional systems now believed to have a significant impact on competitiveness as well as those most affected by the social repercussions of the process of uneven economic development. This clearly involves extending the political rights of citizenship to associations recognized as having a significant relation to the ‘public interest’. Jessop sees the Nordic ‘negotiated economy’ (Nielsen and Pedersen 1989) as an example of this logic, and states that it could significantly extend democratic governance (2000, p 74). The Ostroms (1999) argue that if the citizen has no place to go and if s/he is one in a million, the probability of getting his/her interest taken into account is negligible. Moreover, if they are organized in a way that does not reflect the diversity of interests among different groups of citizens, then producers of public goods and services will be making decisions without accurate information about the changing preferences of the persons they serve. Investments in and expenditures on welfare services will be made with little reference to consumer preferences. The interests of the users of public goods and services will only be taken into account if the producers of public goods and services are exposed to the potential demands of users. Thus, most political economists in the public choice traditions would anticipate that no single form of organization is good for all social circumstances (ibid., p 46).

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They maintain, therefore, that a public choice perspective is beneficial for analysing public administration. This reflects the growing diversity of preferences related to the provision of public goods and services that renders the traditional principles of public administration inapplicable. They propose to develop a new theory of public administration that is appropriate for citizens living in a democratic society. Solutions can be devised by references to overlapping jurisdictions so that the larger jurisdictions are able to control for externalities while allowing substantial autonomy for the same people organized as small collectivities to make provision for their own public welfare (ibid., p 47). Peters (1994, 1996) discusses the emergence of four alternatives to the traditional model of public bureaucracy: the market model, the participatory state, flexible government and deregulated government. In a participatory, state groups normally excluded under more hierarchical models are permitted greater involvement. This approach concentrates power in the lower echelons of the administration, the workers as well as the clients of the organization. It recognizes that the workers and clients found closest to the actual production of goods and services in the public sector have the greatest amount of information about the programmes. If those talents and ideas are harnessed, government will work better. It calls for greater empowerment and self-government, and has clear implications for management of the public sector. Workers and clients become more directly involved in managerial decisions and governance of the service (ibid., p 13). Governance can be broadly defined ‘as the means by which an activity or ensemble of activities is controlled or directed such that it delivers an acceptable range of outcomes according to some established social standard’ (Hirst 2000, p 133). There are three basic governance mechanisms and models of social organization corresponding to them, which have dominated modern industrial societies. They are hierarchy and imperative control, exchange or coordination through contracts and market transactions, and negotiated control or bargaining between the affected interests. He notes that one aspect of liberal democracy is the sharp divide between public and private. However, he claims that this is less relevant today, since modern societies are dominated by similar large organizations on both sides of the formal public–private divide: business corporations, big public bureaucracies, and many intermediate kinds of organizations. They are mainly weakly accountable to those to whom they provide services. Thus, he calls attention to a situation where there are service providers and clients, not public and private spheres operating on different rules of accountability. The cause of democratic reform will continue to stall until it is recognized that the old liberal architecture is obsolete and that we need to develop democratic practices across the whole of society (ibid.). Associative democracy provides a new and clear model of governance that is applicable in the political system, in economic life and in welfare services. However, associationalism does not achieve this by attempting to replace the

The politics of participation in European welfare states 283 existing social order with an entirely new one. Rather, it proposes to supplement existing institutions with ones that have a capacity to transform their workings rather than to supplant the existing ones. Associative democracy attempts neither to abolish representative government nor to replace market exchange with some other allocative mechanisms. Rather, it proposes to free the former from the encumbrance of an overextended and centralized publicservices state and to anchor the later in a complex of social institutions that enables it to attain socially desirable outcomes. (ibid., pp 148–9). Hirst argues that associationalism responds directly to the problems of how to democratize a postliberal organizational society, where the aim is to promote governance through democratically legitimated voluntary associations. The conversion of public and private corporate hierarchies into selfgoverning bodies answerable to those they serve and who participate in them could provide an answer to the greatest democratic deficit of our times – organizational government without consent and corporate control without representation. The effect of such reforms would be both to strengthen representative institutions and to enable them to more effectively carry out their traditional three main functions of providing society with a framework of basic laws to guide social actors, of overseeing forms of public service provision and holding public officials accountable for them, and of protecting the rights and interests of citizens. Currently, he maintains, the core democratic institutions do these basic jobs badly because government throughout the advanced world is too centralized and dominant; democratic bodies are thus enmeshed in the direct responsibility for the provision and delivery of services in an overextended public service state (ibid., p 149). He hastens to point out that the aim is not to convert big government into small government, nor to govern less, or to provide less through the commonwealth. Rather, the aim is to change the methods of governing, that is, public funding combined with decentralized provision is the essence of associative democracy. Representative institutions will continue to provide the basic rules and set the fiscal framework, but associations will become responsible for the provision of services to their members (ibid., p 150). Elsewhere, Hirst (2002b) argued that associative democracy has returned into prominence as a doctrine of political reform in Europe. Its main claims are that: a) as many social activities as possible should be turned over to selfgoverning associations; b) this will reduce the complexity of the state and enable classical mechanisms of democratic representative government to work better; c) self-governing voluntary associations should, wherever possible, replace forms of hierarchical corporate power – thus giving the affected interests voice and promoting government by consent throughout society, and not merely formally in the state; and d) for many essential public functions, such as health provision, education and welfare, voluntary associations should provide the service and receive public funds for doing so. The reason for associationalism’s growing importance as a social doctrine is

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that it addresses the double crisis of the declining effectiveness of representative democracy and the increasing dissatisfaction among citizens with centralized, standardized state welfare. It also addresses the issue of democratic accountability in extensive public service states by separating funding from provision of welfare services, making the state responsible for the core decisions about the scope and costs of services, but not attempting to perform the conflicting roles of provider and source of accountability for provision (Hirst 2002a, p 409). Democracy, according to Hirst, can be renewed on two conditions. First, the burden placed on representative institutions by complex public service states must be reduced, but without also reducing public services. Associationalism provides for governance that is public, but non-state. Second, the role of nonstate institutions in encouraging the habits of association and participation must be promoted. This may not be easy, says Hirst, but the alternative is the continued sclerosis of representative institutions and the continued erosion of democracy (ibid., p 421). Sörensen (2000) considers Hirst’s model a refreshing attempt to challenge traditional institutions of democratic government. It points to the necessity of developing institutions capable of dealing with today’s needs, not just yesterday’s. Such institutions give more room to diversity, autonomy and change than current representative institutions do in most European countries. It does so in two ways. First, it brings civil society back in as a resource in the production of public governance, as well as of welfare services. Bringing it back in might in the long run transform it into a responsible and capable partaker in finding solutions to societal problems. Second, associative democracy challenges the claim that only territorially based institutions of public governance can play a legitimate part in the processes of democratic governance. Hence, associative democracy grants functionally defined units of collective action a central role in the governing structure (ibid., p 165). However, she points to some serious problems related to associative democracy. The first concerns problems of democracy within associations themselves. How can political equality be insured by a sector based on voluntarism? Then there is the problem of fragmentation, due to a diversity of small disparate organizations and the lack of intermediate structures for articulating their interests. Third, Hirst focuses on exit rather than voice for empowering ordinary citizens/members (ibid., p 166). However, she concludes that efforts to develop new models can learn a lot from, and gain inspiration from, Hirst’s associative democracy. Sörensen (1999) also documented municipal reforms in the 1990s in Denmark that promoted new institutions to involve users as political actors, but that complemented representative democracy. The three main models included greater freedom of choice between providers, the development of user boards in public institutions and the creation of municipal user councils. Engaged users can help to make politics concrete again for citizens, rather than something abstract and remote. However, the Danish model ignores

The politics of participation in European welfare states 285 direct citizen participation in the provision of their own services, like the parent cooperative childcare that developed in Sweden in the 1990s. The Social Democratic Party’s policy document (SAP, 1996) also focused attention on the growing democracy deficit in Sweden and the growing feeling of powerlessness experienced by many Swedes. While they called for improving representative democracy, most discussion was devoted to increasing citizens’ power in their daily life. Feelings of powerlessness in daily life were due in part to the economic crisis (of the 1990s) and the increasing divisions in society. But it also was due to a difference between people’s desire for influence and their limited possibilities to influence today. Powerlessness and a lack of context influence people’s health negatively. Politics must contribute to giving all people a context and recognition. Today, many people feel disoriented; society has become increasingly more complex and changes all the time. Many people feel that the decisions concerning them are made over their heads. At the same time, more and more of them want to be part of decisions, but many do not find the channels to influence. One of politics’ most important responsibilities must therefore be to make possible such an engagement. In addition, working life, schools, housing and childcare are particularly important areas for increased daily power. They are basic social activities that concern everyone on a daily basis (ibid., p 68). The starting point for increasing daily power, it continues, should be that those persons closest to an activity often know best what should be done to develop it. It wants therefore to try many different ways for developing daily power: through local boards, self-governing groups, institutional boards and other forms of user influence. Similarly, they want to stimulate groups and associations that are willing to take responsibility for the management, through cooperatives or other forms, of important parts of our common welfare. Such a policy is based on the belief that people are active and creative and want to take responsibility for their and others lives (ibid., p 68). Workplaces are one of the most important areas where power in daily life should be sought. Employees’ power over their place of work should be strengthened. Work life must be organized so the competence and creativity of employees will be released and taken advantage of. Development of possibilities for everyone in working life should also concern the promotion of basic democratic values in work life. This should benefit both employers and employees in the public and private sectors (ibid., p 69). The document concludes that the Social Democrats are aware that the tension and creativity that can be produced by the meeting of different interests – politicians, civil servants and citizens, owners and employees – won’t be free from conflict. But when people gain influence and control of their situation, they also take responsibility – not the least for the general benefit/interest and solidarity (ibid., p 69). A potential balance between representation and participation is suggested about the same time by a report from the Swedish Committee on Developing Democracy (SOU 1996, p 162). Matters closer to citizens’ daily life provide

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greater room for their participation, while matters at greater distance from their daily life, like those found at the national, European and global level should be reserved for the representative system. More recently, Häggroth (2005) argued, in a special report to the Ansvarskommittén, for a further reduction in the number of municipalities, from today’s 290 to only 100. However, he maintains that democratic influence can also be organized in other forms than through the representative system. Citizens’ interest for municipalities is often related to their own role as users of service, such as pupils, parents or patients. Development of consumer participation is therefore important in order to develop democracy. If the elected representatives decided about the quality levels and act as the purchasers of services from various producing units and citizens participated actively in the running of childcare services, schools, eldercare and leisure and recreation facilities, then municipal democracy could (still) work even if municipalities were amalgamated into fewer units (ibid., p 86). Walzer (1988) conceives of the modern welfare state as a system of nationalized distribution. Accordingly, certain key social goods have been taken out of private control or out of exclusive private control and are now provided by law to all citizens or residents. The distribution is paid for by public funds and organized by public officials. Social Security in the US is a good example. This distribution is controlled by some kind of ‘rational/legal’ ideal. But, he notes, that the welfare state is first of all a state. The recipients of welfare stand in a necessary bureaucratic relationship to the state, a relationship mediated by state bureaucracy. Provision of welfare services is made into a national project, managed by public officials, with invested capital provided, if necessary, from taxes. But whatever the extent and degree of nationalization, its characteristic features regularly reappear: centralized control, bureaucracy and uniform regulation. From the perspective of workers he notes that it makes little difference whether their boss is a civil servant or a corporate official. The real difference to private management is self-management or workers’ control. Earlier critique of nationalized production is equally relevant to nationalized distribution. Old patterns of dependency have been reconstructed as new patterns of civil clientage. Private distributors have been replaced by state officials, but what might be called the welfare relationship has not disappeared. The poorest clients, and so forth, are not significantly more independent, responsible nor capable of shaping their lives and joining in the common work of citizenship. Hence, there is a growing disappointment with the welfare state (ibid.). The distribution of welfare can, however, be socialized or democratized. A democratization of the welfare state, as opposed to its nationalization, would imply ‘more power to the distributors and recipients or clients’. For example, in the US, education is a distributive sector that is both nationalized and democratized. Education is nationalized in the sense that it is guaranteed by the state and regulated by federal government, although local authorities

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provide it. It is democratized in the sense that it is organized and run on a daily basis by local and elected school boards. However, whenever welfare is delivered locally rather than nationally, citizens receive different and unequal kinds or amounts of welfare. However, state bureaucrats, acting in the name of efficiency and universality, will often seek to remove such inequalities (ibid.). Moreover, it is possible to argue for a more participative and decentralized form of provision, based on greater self-help and local initiative. Walzer states that the democratization process has two aspects. The first is expanding citizens’ participation in decision-making and the second, is expanding their role in the actual delivery of welfare services. In particular, it is imperative to increase the number of welfare service recipients who are also distributors. One way to achieve this, he states, is to borrow Gunnar Myrdal’s suggestion of creating a national service for all youth, and perhaps, even elderly and retired citizens. Myrdal (1968) argued that the vitality of the institutions of the welfare state depend upon popular participation in their management and direction. The purpose of democratization is to find new ways for citizens to help themselves and one another, to provide new ways in the form of a multitude of networks and institutions for mutual aid. This requires experimentation in local democracy and efforts to extend the reach of voluntary organizations. At the same time it requires a state strong enough to superintend and subsidize the work of citizens and volunteers (ibid.). Smith (2005) discusses the European Green parties growing interest in welfare associationalism, which according to him provides a vision of ‘nonmarket decentralization and social participation, where individuals and groups either produce the welfare services which they consume, or where this is unrealistic, have the greatest practical control over the design and delivery’ (Fitzpatrick 1999: 18). This bears striking similarity to Hirst’s arguments for associative democracy (1994). For Hirst, the production of services either by large-scale public bureaucracies or hierarchically managed business corporations, due to privatization, has led to a low level of accountability to citizens. There is little or no room for citizens to shape the services they receive, however good or bad they may be, since they are merely clients or objects of the public or private administration. The social economy can promote welfare governance that promises to open new avenues for citizens to engage themselves in collective action and social governance (ibid.). Smith recognizes however, that most European states have thus far shown little interest in associative reform – rather most have been more willing to privatize welfare provision, extending the reach of the private for-profitoriented economy. He concludes that without sustained political action, the social economy will remain a small symbol of another kind of economy, one based on meeting social needs and enhancing social citizenship (ibid.). McGinnis (2000) argues that public laws and policies shape transaction costs facing elements of civil society. In this way governments can play an essential role in laying the foundation for successful group management of

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common pool resources and the efficient operation of markets. Unfortunately, he laments, in many countries, governments actively undermine the ability of many groups to organize their own activities and they introduce market distortions that further the interests of other, more influential groups, like business (ibid., p 13). Self-governance at the local level is sustainable only in the context of a supportive political and cultural environment at the constitutional level. Market exchange can only be efficient when the proper political and legal institutions guarantee secure property rights and provide general access to low-cost and effective means of conflict resolution. Markets, states and user groups should be seen as complementary institutions. Each has a proper role to play in polycentric governance, its own unique configuration of strengths and weaknesses. In combination, they constitute diverse institutional arrangements, such as those modelled and analysed by the Workshop on Public Theory and Policy Analysis at the University of Indiana (ibid.). Pierson’s extensive survey of the development of welfare states concludes that there are two alternatives for the future development of the welfare state (1998). The first one based on a range of new social movements, which bypass the state and propose to return welfare to more localized, non-hierarchical and non-bureaucratized forms of communal self-administration. The second is found in the neo-conservative strategy of limiting the state (ibid., p 202). In the first, self-administration and voluntary efforts are not seen as an alternative to the state, but rather as a complement to it, working in partnership with the local authorities (ibid.). Furthermore, it was stated at the outset of this book that the triple democratic dilemma of the welfare state must be analysed and dealt with in a systematic and coherent fashion if the welfare state is to survive and thrive in the generations to come. The remedy for this triple dilemma is greater citizen participation in the provision of welfare services. However, this requires a new type of politics, that is, the politics of greater citizen participation. Civil democracy is based on several unique features of participatory democracy. First, it is important to facilitate the role of citizens as co-producers of the welfare services that are most important to them. As parents, this may be childcare, education or youth sports activities. As parents or relatives, it may be handicap care or eldercare. As citizens at any stage of life, it may also be healthcare or culture and leisure activities. Second, it is the collective forms of citizen participation that are most important to promote civil democracy. Here, the social economy and third sector can play an important role in the redemocratization of the welfare state. Third, it is important to shift our focus from the input to the output side of the political system, in order to develop a better understanding of, and new models for, facilitating greater citizen influence and participatory democracy in the implementation phases of the political system. Here, extensive theoretical analysis and empirical work is necessary for developing

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new models to better understand the nature and types of hurdles to citizen participation. These hurdles need to be analysed in order to neutralize or remove them and to engage and empower citizens in the provision of the most important welfare services for them. Fourth, new democratic institutions at the submunicipal level need to be developed and experimented with, in order to facilitate the engagement of citizens as co-producers of welfare services and the development of the social economy and third sector as providers of welfare services.

Conclusions and recommendations Conclusions This book deals with several different topics related to revitalizing democracy and redemocratizing the welfare state. Part I considered the historical role of cooperatives in terms of providing the organizational base for a middle way in Scandinavian politics. Increased commercial domination of the established cooperative movements neutralized their previous political role. It also sketched the historical relationship between popular movements and the third sector, on the one hand, and the state, on the other. It delimited five previous periods in their relations and asked if we have now arrived at a new period based on a partnership between them with the initiation in 2006 of the new Law on Nonprofit Firms. Part II explored several major issues facing Scandinavian society in order to develop new channels for greater citizen participation. It started by examining the balance between profit and social goals in third sector organizations. It argued that the requirements of social enterprises and the social economy comprise a functional equivalent to American legal restrictions on distributing an organization’s profit. An organization’s social goals, if monitored by a social audit, say more about an organization’s activities than whether it distributes its profit or not. Then it turned to work environment, service quality and third sector provision of welfare services. Both the work environment and service quality of public welfare services have developed very negatively during the past 10 years in Sweden. Third sector providers offer some solutions to both these aspects of public welfare services. It moved on to consider consumer perspectives of the social economy and civil society. Then, it discussed some important issues related to democratizing healthcare, using the Japanese example. Finally, it introduced the concept of co-production of welfare services and explored its implication in childcare in eight European countries. Part III revisited both democratic theory and welfare theory in terms of the role attributed to the third sector. It called for shifting theoretical attention and efforts to the output side of the political system and for greater recognition of third sector contributions to rejuvenating democracy and redemocratizing the welfare state. It also emphasized the importance of developing functional democracy at the submunicipal

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level. Then it considered the hurdles to the redemocratization of the welfare state and involving citizens as co-producers of welfare services in a Scandinavian context. Many of these hurdles need to be diminished or removed before civil democracy can thrive and in order for it develop its full potential. Finally, Part IV discussed the politics of participation in light of earlier chapters. This book focused on ways to make citizenship more meaningful. In particular it focused on the relationship between state, market, third sector and welfare. It concentrated on the development and transformation of the public sector in Sweden and the changing welfare mix between public, private and third sector provision of welfare services. Continued public provision of welfare services faces a serious challenge in the form of a rapidly ageing society together with the rapid deterioration of the work environment of the providers, in particular for public sector employees. These two challenges make recruitment to the public sector very difficult and uncertain and the quality of welfare services highly unreliable. It was argued herein that third sector provision could help to enrich the work-life and improve the quality of human services by facilitating an enduring encounter between the producers and consumers of such services. It can also help to rejuvenate social capital and alleviate the growing democracy deficit in Sweden. Thus, this book explores ways to make both membership and citizenship more meaningful in the twenty-first century. This book develops and expands the concept of civil democracy found in the introductory chapter. This concept helps to shift our attention from the input side to the output side of the political system. It also helps to emphasize the growing need to develop and renew democratic theory in that part or that side of the political system. This is a serious challenge since most democratic theory today deals only with the input side of the political system. Civil democracy underlines the need to democratize the means of provision of welfare services in particular, rather than the means of producing goods and services in general. The development of more and greater exit alternatives may be necessary, but it is not sufficient for the development of civil democracy. It is essential to develop more voice mechanisms. This can be promoted by the development of new channels for providing citizens with more influence on the most important welfare services for them, their families and their loved ones. The method proposed here is the development of functional channels of democratic representation of the users of welfare services at the submunicipal level. These new functional channels are proposed as a complement to existing, but now withering, channels of territorial representative democracy. They are proposed as a means for rejuvenating democracy and for redemocratizing the welfare state in Europe. Proposals for the further development of civil democracy are encouraged by several theoretical sources. They are based on a common understanding of the necessity for developing more participatory models to meet the democratic challenges of today and tomorrow. In particular, inspiration comes

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from theories of strong democracy (Barber), socializing/democratizing the distribution of services (Walzer), common pool resources (Ostrom), a participatory state (Peters), associative democracy (Hirst) and the third way (Giddens). However, unlike associative democracy, civil democracy does not call for the democratization of the means of production of all or most goods and services produced in society. Rather, it is more limited in scope. It calls for democratizing the provision of welfare services that are financed by taxes and user fees and produced universally by the public sector, or contractedout, either to nonprofit, third sector providers or to for-profit firms. It is based on the active involvement of citizens as co-producers of welfare services they pay for today through their taxes and user fees. It proposes to provide citizens with greater direct control and influence in the provision of such welfare services, as a complement to representative channels of democracy. Democratic controlled and managed third sector organizations and social enterprises throughout Europe provide good illustrations of this. Unfortunately, they are often treated as a marginal phenomenon by many academics, politicians and bureaucrats, as though unrelated to the development of the political system and democratic theory. Moreover, the proposals made at the end of this book call for a prolonged experiment with civil democracy in some parts of one northern European country where the welfare state is highly developed and universal services are readily available, that is, in Sweden. However, here the welfare state faces three serious challenges that unless resolved in a comprehensive fashion, will probably lead to its demise in the near future. The limited scope of the envisioned experiments reflects the pragmatism of these proposals. Rather than calling for the replacement of the existing, but faltering representative system of democracy by a more participative one, it calls for experiments with and the study of the impact of civil democracy on the provision of welfare services during a given period and the evaluation of their results before proceeding to deliberate about full-scale implementation of the politics of participation. Whether the recent historical change of government in the bastion of social democracy facilitates the promotion of civil democracy and the politics of participation remains to be seen. Recommendations This book concludes by making several recommendations concerning the initiation of parliamentary investigations and academic research, as well as some more practical steps to promote greater involvement of citizens and third sector provision of welfare services. First, it recommends that Swedish government should initiate a parliamentary investigation to carefully examine several important issues related to greater involvement of citizens as co-producers of welfare services and the third sector as a provider of the same. Such involvement is readily seen today in numerous examples found in this book of third sector provision of childcare, education, handicap care,

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eldercare, youth sport activities, and so forth. What are the costs and benefits of greater citizen and third sector involvement in providing welfare services to the work environment of the civil servants now providing public services? What are the costs and benefits of it in terms of the growing democracy deficit? What are the costs and benefits of it to the financial sustainability and flexibility of the welfare state? What are the costs and benefits in terms of the professionalization and internal democracy of the cooperatives, social enterprises, popular movements and voluntary organizations providing such services? These and related issues need to be carefully considered and systematically analysed by the government. Second, a major public experiment is proposed based on insuring greater flexibility in, and less regulation of, the provision of welfare services, both at the local and regional levels. This could be undertaken during a period of seven to ten years in five to seven municipalities and two or three counties in various parts of the country. It should involve efforts to actively engage citizens as co-producers of such services and a greater role for the third sector, both as a facilitator of this and promoter of new channels of representation at the submunicipal level. Renewed experiments in what was known as ‘frikommun’ or deregulated municipalities at both the local and county or regional levels, should be carefully designed and followed by a team of politicians and academics. They would be able to follow and study the effects of deregulated municipal activities on citizen engagement and the role of the third sector in developing submunicipal functional channels of influence and in redemocratizing the welfare state. Experiments with balanced territorial and functional representation, of the type discussed in Chapter 11, should be promoted by these unregulated municipalities and counties. This should involve both the development of functional channels of interest representation on the municipal boards governing various welfare services and support for broad development of intermediate organizations for the third sector at the local and regional levels. Such intermediary organizations would help to articulate and promote the interests of third sector providers of welfare services, as well as citizen participation as co-producers of tax financed welfare services. Turning to academic research, several new research programmes are proposed. First, a longitudinal research programme, similar to that previously conducted on municipal amalgamations in the 1950s and 1970s, should focus on the democratic and political aspects of greater citizen and third sector involvement on the provision of welfare services. One of the most striking findings of Robert Putnam’s empirical study of Making Democracy Work (1993) underlines the importance of the third sector and social capital for a country’s or region’s development. In short, he discovered, much to his surprise, that the level of development of the third sector determines both a country or region’s economic development and its political effectiveness. If we acknowledge the importance of this finding then we must abandon economic determinism and accept more multidisciplinary research on the role of

The politics of participation in European welfare states 293 citizens and the third sector in rejuvenating representative democracy and redemocratizing the welfare state. Second, research on a new architecture of the welfare state needs to put much greater emphasis on the micro- and meso-levels of welfare provision. It can no longer focus exclusively or primarily on the traditional macroeconomic aspects of comparative welfare regime analysis. Work environment, worker motivation, staff recruitment, the encounter between providers and consumers of welfare services and service quality are equally important for the sustainability and flexibility of a welfare state or regime as an increase or decrease in the proportion of gross domestic product (GDP), or the changes in the conditions for, or the replacement rates of, various social insurance programmes. This multidisciplinary research should systematically compare how and how well different welfare regimes are able to cope with permanent austerity. Such comparisons should also include alternative models and sources for financing welfare, including greater participation by citizens and third sector organizations and involving citizens as co-producers of welfare services. Furthermore, some practical, but nevertheless far-reaching economic, political and social proposals also need to be considered in order to promote greater citizen involvement and third sector participation in the provision of welfare services. They are also designed to strengthen the financing of welfare and the redemocratization of the welfare state. First, Myrdal (1968), Barber (1984) and Walzer (1988) suggested the initiation of a national service for all young citizens, both men and women, in order to promote greater citizen involvement in social matters and to democratize the means of distribution of welfare services. This could help to stave off the inevitable financial collapse of the universal, tax-financed welfare state by 2020, foreseen by the Swedish Långtidsutredning, 2003/04. All young citizens between the ages of 18 to 20 years old would (voluntarily) serve in providing welfare services in public and third sector facilities for 18–24 months. This proposal would provide work experience and help create meaningful job-related social networks for many of today’s unemployed youth. This would provide major new economic resources to help shore up the growing demand for welfare services due to demographic changes. The participants in such programmes should, of course, earn pension credit, just as they do in the military service today. It could also have the additional benefit of exposing young men to work in the service sector. This may later have positive ramifications for their choice of occupation. This, in turn, could also help break the extreme gender segregation of the labour market in welfare services. Moreover, both Myrdal and Walzer proposed that many younger pensioners might also be willing to contribute to some sort of national service for the welfare state. Today, a variety of local schemes for exchanging neighbourhood services exist throughout Europe. They often attract younger pensioners. Such schemes could be extended and tied together into a national system, but still under local control.

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Second, a work guarantee system associated with welfare service should also be initiated in order to involve a variety of excluded groups in society: immigrants, long-term unemployed, persons on long-term sick leave and persons with a disability pension. They would also serve in providing welfare services in public and third sector facilities for 18–24 months. This could help to provide such persons with important work experience, relevant social skills and meaningful job-related social networks. It could also help provide immigrants with extensive language submersion in real-life situations. Third, greater citizen participation, in the fashion discussed by Ansvarskommitteen (2003), could be promoted by initiating personal time accounts that function similarly to the national pension system today. Here, citizens unpaid contributions of time and labour at one stage in life could be recorded, and then deducted from their account at some later stage in life, when their needs may be greater. Both voluntary activities and time spent in co-producing publicly financed personal social services could be recorded and redistributed at a later time in life. Many relatives provide unpaid labour for caring services today, but get little or nothing in return later when they may need it, nor any credit towards their pensions. This could also help the national account system to face up to the hidden value of voluntary or unpaid labour, and macroeconomists to include a bit more realism in their abstract models.

Appendix

45.6/166 5.6/20 5.9/21 15.5/56 23.6/86 1.7/0 1.9/0 0.2/0 – 91.4

Social Democrats Communists/Leftists Liberals Center Party Conservatives Environmentalists Christian Democrats Others New Democracy*** Voter turnout

44.7/159 5.4/19 14.2/51 12.2/44 21.3/76 1.5/0 2.2/(1)** 0.5/0 – 89.9

1985 43.2/157 5.8/21 12.2/44 11.3/42 18.3/66 5.5/20 2.9/0 0.7/0 – 86.0

1988 37.6/138 4.5/16 9.1/33 8.5/31 21.9/80 3.4/0 7.1/26 1.2/0 6.7/25 86.7

1991 45.3/161 6.2/22 7.2/26 7.6/27 22.4/80 5.0/18 4.0/15 1.0/0 1.2/0 86.8

1994 36.4/131 12.0/43 4.7/17 5.1/18 22.9/82 4.5/16 11.8/42 2.6/0 – 81.4

1998

39.8/144 8.3/30 13.3/48 6.1/22 15.2/55 4.6/17 9.1/33 3.0/0 – 80.1

2002

35.0/130 5.9/22 7.5/28 7.9/29 26.2/97 5.2/19 6.6/24 5.7/0**** – 82.0

2006

Source: Val 2002, 2006, Resultatredovisning, www.val.se; Allmänna valet 1988, del. 1, pp 13–14 and Riksdag & Departement, 27.09.91, ‘Val 1991’: 4 and 6; R &D, 1994: 10., 1998: 13. * A minimum of four (4%) per cent of the votes cast is required for representation in the Riksdag. ** The Chairman of the Christian Party, Alf Svensson, was the sole representative of the party in 1985–88. This was made possible by a temporary electoral alliance with the Center Party. *** New Democracy was a new party in 1991 and received 6.7% of the vote in 1991 and held 25 seats in the Riksdag between 1991 and 1994, but did not clear the 4% threshold afterwards. **** The anti-immigrant party, Sverige demokraterna received 2.94% of the vote in 2006 or just 60,000 votes short of gaining representation in the riksdag.

1982

Party:

Table 1.1 Swedish Riksdag elections, 1982 to 2006, votes and seats*

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Table 2.1 Development of Swedish consumer cooperatives, 1910–2000 Year

Membs in 1000s

No. co-op. societies

Membs / Total No. local co-op. employees

No. sales outlets

Membs / sales outlet

1910 1920 1930 1940 1950 1960 1965 1970 1975 1980 1985 1990 1995 2000

74 236 450 700 926 1,172 1,323 1,605 1,801 1,882 1,971 2,100 2,213 2,563

391 941 837 687 681 592 338 232 188 152 142 120 93 75

188 250 539 1,019 1,413 1,988 3,913 6,920 9,580 12,380 13,879 17,500 23,796 34,173

448 1,592 3,302 5,301 8,017 6,651 3,901 2,786 2,358 2,068 1,897 1,687 1,399 784

165 148 136 132 116 139 339 576 764 910 1,039 1,245 1,582 3,269

na na 13,700 29,300 50,200 57,900 58,100 65,500 68,000 71,751 61,032 33,760 31,233 26,996

Source: Pestoff, 2005c; na = not available.

Figure 4.1 Distribution of an organization’s surplus. a) b) c) d) e) f) g) h) i) j) k) l) m) n) o) p) q) r) s) t) u) v) w) x) y) z)

a dividend to its investors or the shareholders (as a ‘profit’); other perks or benefits for shareholders; interest on a loan; investments in fixed assets; investments in increased productive assets and capacity; investments in new activities or products; building up reserves or a buffer for the future; buying up or taking over a competitor; increased wages and salaries for the staff; increased fringe benefits for the staff; increased perks of various kinds for the staff; increased professional education and vocational training for the staff; excursions, travel, etc. for the staff; improving the work environment; projects for augmenting staff participation in corporate decision-making; increased free-time, added vacation, holidays, etc. for the staff; maintaining local services; investment in community development; achieving agreed upon social goals; taxes; investments in non-productive properties, i.e. a house for the CEO and/or board members, a new car, pool, club membership for the CEO and/or board members, etc.; excursions, travel, etc. for the top management and/or board; increased perks to managers, i.e. shares, convertibles, etc. management self-aggrandizement in various other ways; outside products and services bought at above market prices; bribes, kick-backs, etc.

Source: Pestoff, 2001.

Appendix

299

Table 5.1 Proportion with ‘high-stress jobs’ for selected occupations Women

Men

branch/occupation*

1991

1997

1991

1997

Pedagogical work**: teachers: – elementary teachers – higher levels daycare staff

33 28 43 26

46 49 43 37

24 24 25 –

29 35 24 –

32 26 39 19

48 41 59 29

35 – – –

40 – – –

37 23

42 26

16 16

25 19

19 –

29 –

15 13

23 23

Health and medicine**: health and medical work: – nurses – registered nurses elderly care and handicapped care Commercial work: sales personnel other commercial work Manufacturing work: Manufacture/constr., metalwork

Source: SCB and Eklund, I., VälfärdsBulletinen, No. 4, 1999: 4; * figures in bold indicate a statistically significant increase between 1991 and 1997; – = to few men in the SCB studies to motivate their inclusion; ** mainly public sector employees in Sweden.

Table 5.2 Attitudes towards public social expenditures in Sweden, 1981–1997* Program Area:/Year:

1981

1986

1992

1997

– healthcare – support for the elderly – support to families with children – housing allowances – social assistance – primary and secondary education – employment policy – state and municipal administration

+42 +29 +19 −23 −5 +20 +63 −54

+44 +33 +35 −23 −5 +30 +46 −53

+48 +58 +17 −25 −13 +49 +55 −68

+75 +68 +30 −20 +/−0 +69 +27 −65

Source: Rothstein, 2000, p 227, as modified from Hadenius (1986) and Svallfors (1996, 1998). *Answers to the following questions: ‘Taxes are used for various purposes. Do you think the revenues spent on the purposes mentioned below should be increased, held the same or reduced?’ The figures above only report the net support or percentage of those wishing to increase expenditures minus those wishing to reduce them.

300

A Democratic Architecture for the Welfare State

Table 7.1 Comparison of alternative medical care providers in Japan, 2004 Organization/Item:

Saiseikai* Red Cross*

(re-)establ. Prefectures Hospitals Clinics Home visiting nursing station Doctors Nurses Admin. staff Total staff Beds x-beds Members Volunteers

Koseiren* Health co-ops*

Min-iren**

1911 all 79 10 42

1877*** all 90 2 50

1945 Na. 122 47 102

1990 40 76 240 Na.

1953 all 151 592 379

Na. Na. Na. 35,218 22,546 285 none Na.

Na. Na. Na. 56,751 39,511 439 18.7 mil. 4.3 mil.

4,009 23,456 11,539 46,400 37,734 309 Na. Na.

1,779 9,896 13,897 25,572 12,660 167 2.5 mil. 40,000+

4,059 22,072 10,471 62,287 26,793 177 3.0 mil. Na.

Source: Modified from Pestoff, 1998b and e-mail correspondence with Alvar Hugosson, Hideo Ishizuka and Akira Kurimoto in 2006; * figures for 2004; ** figures for 2005; *** reestablished after the war in 1952; Na. = not available.

Table 9.1 Trends in the growth of Swedish municipalities, 1951–1995 a) Proportion of small, medium and large Swedish towns and cities, 1951–1995. year

no. mun.*