Competition and participation rights

The degree of competition which is existent in the provision of public goods is a very important characteristic of the institutional frame. Many public goods are provided in an environment where competition is more or less nonexistent. Nevertheless, especially in recent years the exposure of the public sector to competition has been considerably wi dened, parti-cularly due to some influential concepts of public sector reform like the New Public Management approach. De Spindler (1998) dis tinguishes between competition among public agencies and/or priv ate institutions and competition within public agencies. We will refer to the latter cate -gory as participation rights.

4.1.2.1 Participation rights

The existing range of participation rights in connection with the provi-sion of public goods is considerable. The most common form of influ-ence on the provision of public goods is indirect democracy, the election of candidates or parties responsible for the provision and/or production of public goods for discrete periods of time. Note that elected repre sen -ta tives are not only obliged to provide or produce public goods; they also decide on whether goods are provided publicly or privately and on the institutional frame of the provision process. Hence, politicians of the executive and legislative branches define provision arrangements and shape the precise amount of publicly provided goods on all federal levels.

Additionally, in terms of participation, there are a lot of other insti-tutional possibilities associated with the provision of public goods. Some consumers of public goods may not be allowed to participate in elections (citizens of foreign countries, prisoners, children). Some public goods may be provided by institutions, where representatives are appointed and not elected (EU, international organizations, district administration) and some public goods may originate from other (adjacent) countries.

In contrast, there are countries like Switzerland and the United States where direct democratic rights are widespread, and citizens who are entitled to vote can directly shape the public good provision process in many areas. Participation in direct democratic countries approaches

the extreme of continuous participation, where all publicly relevant is-sues would have to be voted on by the electorate.

We can conclude that the more citizens can influence decisions through direct democratic decision making procedures (elections, refe-renda, assemblies etc.), the more competition exists.

4.1.2.2 Inter-organizational competition

The existence and degree of inter-organizational competition is another very important feature of publicly provided goods. «Classic» public goods are generally non-competitive in this sense, since they are provided only by a single public agency, like, e.g., foreign policy. Inter na tion -alization, nevertheless, has been challenging this more or less territo rial monopoly through the creation of institutions which are, normally, de-signed to complement national institutions but sometimes go so far as to compete with national institutions. Institutions of the European Union are a treasure trove of examples of this kind of «competition»: Think, for example, of the recently established High Representative for the Common Foreign and Security Policy as a complement to the national foreign policy. There are other European institutions which resemble the competition analogy even more closely than the example of foreign policy, since they are enabled to overrule national institutions, like, e.g., the European Court of Human Rights.⁷⁰

It is obvious that the competition in the examples mentioned above seems – at best – weak, but when some other commonly consumed, pub -licly provided goods are at stake, like health care, social security and education, one may be astonished by the rapid increase of competition.

4.1.2.3 Competition and VSC

Generally, there is a relatively clear correspondence between the degree of publicness and the degree of competition. Given the definition of pub lic goods and the definition of publicness, competition and public

-70 One may also consider every public good not separately, but as a set of public goods and apply the concept of competition to jurisdictions.

ness should be negatively related. Specifically, a decreasing publicness should tend to increase competition and vice versa. Consequently, it is difficult to implement an environment of workable competition for glo-bal public goods. Competition, therefore, is often replaced by transpa-rency, political control or evaluation measures. The possible difference between VSC and larger countries diminishes in theory, when local pub -lic goods are under consideration. They, however, always exhibit a cer-tain degree of regional monopolistic characteristics.

A lack of workable competition for local public goods and public goods with a limited degree of economies of scale may nevertheless be possible in VSC, where often very few suppliers of one good are to be found. Note that not only publicly provided goods may be affected (there are, e.g., often only few institutions offering higher education), but also government procurement. Hence, the price of some private goods may also be higher in VSC. Think, for instance, of infrastructure and structural and civil engineering enterprises, which may gain a mono -polistic or, at least, oligo-polistic position, especially for huge public orders.⁷¹

Since we concentrate on public goods with a considerable degree of economies of scale, the competition concept laid out above will not reap-pear in the case studies in Section 4.3 directly. However, it has to be borne in mind that the extent of competition plays an important role in international outsourcing. Adverse effects may be associated with inter-national outsourcing if it rules out competition for the provision of a pub lic good completely. In any case a VSC, which decides to source out the production and/or provision of a public good, often has to accept a temporary monopoly. One should however not forget that the produc -ing and/or provid-ing agency itself might be exposed to considerable competition in its own country. Additionally, the VSC may have the possibility to choose between different public agencies in different ad -jacent countries, which is a substitute for competition. Liechtenstein, e.g., could decide to introduce the euro instead of the Swiss franc with-out major problems if it were convinced that a change would better suit its needs.

71 Since most VSC are members of the WTO, a certain degree of competition is gua-ranteed by WTO regulations for larger public orders.