Public Expenditure and Administration Cost

by Giovanni Vetritto, Director General of the Presidency of the Council of Ministers

Spending Costs Budget Speedometer Measure Results 3d IllustratioWhen it comes to public spending, it is necessary to distinguish the two different concepts of “cost” and “expense”: what an Administration “costs”, a very rigid voice, which derives from the way in which the administration is organized and in which, consequently, resources are allocated; while what the administration “spends” ultimately represents the reality of public policies.

We generally intervene – above all in the agitated phases in which the public budget goes under stress, for example for international speculation – only on the “expense” factor, because the “cost” factor of the overall organization is always rigid and impossible to maneuver in the emergency. Here then is the true point of a program of review of public spending: the reorganization of the offices.

But how should the administration be reorganized? I grew up on the pages of a book that I continue to consider not only of extraordinary importance (in my opinion it should be an exam text for anyone who wants to become a bureaucrat, and perhaps even a parliamentarian), but also as beautiful as a novel. It is a book by Guido Melis, from 1988, on the “two models” of public administration between the Giolittian age and fascism. In that book Guido Melis tells us about the conflict between two different ideas of the organization of the Public Administration, shared by distinct groups of politicians and senior bureaucrats in a very precise phase of Italian history; two different ideas that were not politically neutral, but in turn depended on very specific ideas on the economy, on society, ultimately on the country. And it tells us how the model of those who were then the innovators (the “Taylorists of the desk”), aware that it was no longer the time of the administration organized like the Prussian army, but of an organized administration like the Fordist enterprise (which was the great qualitative leap in the efficiency of the great organizations of the second industrial revolution), won in a certain number of organizations, of administrations separated from the state; but lost in the ministerial administration.

We still have the ministerial central administration organized like the Prussian army; and we run the risk, if we don’t study enough, to fall in love with organizational ideas that have danced just one summer.

I am thinking of the rigid idea that everything can be controlled by breaking down the ministries into “single-product” agencies, which was the model of the new public management; it is a rough idea, which for a few years has triumphed in international literature; but that today in those same magazines of international literature is considered completely outdated. I quote only one article a couple of years ago, in which “new public management is dead” is supported, the new public management is dead; today is the time of multilevel public governance with a strong technological content, which is quite another thing, requires other flexibility, requires the adoption of post-Fordist flexible organizational models.

A new organizational paradigm for the public sector that, therefore, forces us to a challenge that is extremely difficult for an ontological reason: our Public Administrations do not have the minimum of organizational maturity and, if we do not make the leap in organizational quality, we will not succeed never to intervene on what the administration costs, so we should increasingly cut back on what we spend, sacrificing policies.

But on this we live years in which, once again, bureaucracy is not a monolith, but is articulated between innovators, who carry out a new idea of ​​administration, and conservatives.

How, then, do we intervene, push the administration to choose among the possible organizational models, solving the internal conflict between the innovators and the conservatives? Politics is needed.

The speaker has always been referring to a liberal-socialist and Gobettian cultural trend, whose main exponents knew how to exploit the ability and coherence of the best Italian political culture and of the best organizational science, around some representatives of the Italian political class and that, from the analysis phases of the bureaucratic problem on the pages of Salvemini’s “L’Unità”, to the effort of Francesco Saverio Nitti, up to the last great exponent of this culture that was probably Ugo La Malfa, has always had an attention particular to the presidium that, also through the Parliament, the policy must have with respect to the ability of the administration to respond organizationally in the implementation of the democratically decided design. Nothing that can be seen today.

We are going to re-read the discussion on the indictment of Minister Trabucchi in the 1960s, in relation to the Brazilian tobacco scandal; and in particular the intervention of Ugo La Malfa, who asked “with pain” (his words), the indictment of this Minister, of whom he was personally a friend. Go and look at the organizational observations that La Malfa makes about how the organizational model of the autonomous company was to have allowed a certain type of political commingling in technical decisions.

Today we are in a condition in which, in the year “one” of a decisive seven-year period of European programming, Parliament does not enter into the organizational issues of the Public Administration; considers it normal that, at 6 months and more from the approval of a law that has completely redefined the organization of the Italian cohesion structures (which must take care of the use of the only 100 billion that we will have available in the next 7 years to avoid the collapse of this country) the consequent organizational acts have not been adopted; so much so that in June of this year we do not yet know how the Presidency structure will be made, which must fulfill the “high” functions of the programming of European Funds, as will be the Agency that will have to implement the implementation projects; but on the other hand a call was made to choose the President of an Agency that nobody knows yet what it is, because to date there is no public formulation, not even the object of discussion, on the organizational regulation of this Agency.

It is not even clear what the Agency will do in comparison to the many public project companies that already exist. Invitalia, the Formez, Studying Development, Italia Lavoro, ISFOL, Promuovitalia, on European funds we have a number of public limited companies (as Massimo Severo Giannini called them), which is not further sustainable; it’s not just Invitalia, but she’s all the others, two, three, four, five. It is time for Parliament to verify how the General Managers have been chosen who “in house” give these resources to these very expensive structures. And what they know how to do: the design, European or national, must come from the Directorates-General, cannot come from in-house companies, but today the opposite happens, due to a bad choice of those responsible for ministerial clients.

These things Parliament cannot but control, because this is what the administration costs. Formez takes on average 40%, 50% of the resources of the Ministry of reference, because that 40% is what the Formez costs (and costs more than a Ministry, but it works worse); only that then with the other 40-50% he takes the three young graduates, who are sent to the Ministries of reference to really write the programs (and that the administration itself cannot choose for some brainy, seemingly draconian organizational norm but in effect wicked).

This is the reality of the Administration, one cannot expect a Government to operate on the matter without Parliament’s control.

[…]

the Public Administration is a social subsystem, not an executive gearing, it cannot function regardless of the political system, it is necessary to have an idea of ​​what is the political direction in which it goes in order to make it work, and every dialectic between Government and Parliament can help keep the system’s organizational bar.

I belong to the last generation that really studied Keynes, instead of hypostatizing it to make it the enemy and the origin of all ills, I say that the very point of the programming of financial resources shows that this cannot go on; because programming is not a dirty word, it is not crypto communism, it is the rule of European Funds that – coincidentally – we spend badly, but better than any other Fund that exists in this country. Because, when we say that we do not use European funds well, we forget how we spend national money (those of the CIPE resolutions, for example): or even worse (there are money from the resolutions of the 1990s still around).

We spend European money almost well, in the sense that we spend it very badly, but we spend much less on any other national resource.

This is the crucial point of the problem of public spending and the spending review, which must be above all an organizational review.

We are with the administration at the organizational bankruptcy, the politics must put the head on the administration and make it become a big question which is discussed in Parliament and with the Parliament.

[…]

These are the questions, outside of this we go into a pure rhetoric, with which we will continue with an administration that costs too much and for this reason is forced to spend less and less.

27 June 2014