Excellent topic. While avoiding econosemantics on whether a particular good is rivalous, excludable, prone to free riderism, etc., it is interesting to look back at how the notion of what could or should be provided by the public and private sectors has changed over the years and the underlying assumptions.
In the 1950s through the early 1960s, governments pretty much conformed to the principled view where armies, lighthouses and a few other things should be run by government and not much else. Private sector companies did not need Government Relations Departments, other than those companies which were partaking in the fabled military-industrial complex.
Beginning in the mid 1960s through the 1970s – yes, I’m that old and still vaguely sentient – there was an emerging belief that government could and should solve societal problems. In the US, the War on Poverty was launched and civil rights legislation enacted. In Canada and Europe, we were rapidly constructing the social safety net and welfare state, as well as setting up all sorts of state-owned enterprises. At this point in time, the rationale for government intervention was both expansive (asserting human rights; reducing inequality) and competitive (doing something more cheaply and efficiently than the private sector). In fact, Canada established its own national oil company (since privatized) simply because we didn’t trust the intentions of the US multinationals (mistrust Exxon; say it ain’t so). By this time, private sector companies were scrambling to establish Government Relations Departments.
In the 1980s through the 1990s, first with Reagan and Thatcher and then with, shudder, the NPM onslaught, the all-out assault on government revenue, aka waste and red tape and job-killing taxes on high-income earners, began in earnest. We needed to reform ourselves, ideologically and structurally. Hello Washington consensus. Now, the principles of what was appropriate for government to do began to produce a much narrower list of core governmental functions. So we privatized, divested, contracted out and found many, many ways to reclassify what was formerly a government function into something that could be delivered by the private sector alone, under contract, or in partnership. Schools, military operations, jails, hospitals, highways were all fair game. The rationale flipped from the proactive 60s/70s: Given the inherent efficiency of the private sector, government functions should be transferred outright or deconstructed and parcelled out to the private sector whenever a business case could be made for such an action. Functional reviews were ascendant. Many business cases were made. Meanwhile, a new government industry based on contract oversight and PPP coordination was born.
In many ways, similar beliefs, trends and organizing principles continued throughout the 2000s and 2010s. We still certainly intuitively believe that government intervention should be restricted to things the private sector cannot or will not do. Which is a highly circuitous route back to Shanta’s opening statement concerning what governments should not do (e.g., university education). But it is interesting to flip the question and ask if there are things that the private sector should not do. In Canada, airport security is clearly a private sector activity, whereas in post-9/11 USA it is definitely something that, although the private sector can do (they were doing it up until then), it has now been deemed something that they should not do. Back in Ontario, Canada, we have been debating for ages whether to privatize the massive state-run monopoly on selling liquor. But successive governments, right and left wing, keep hemming and hawing because it makes a ton of money and has phenomenal buying power. In fact, I attended the Cabinet discussion where the Premier who had promised to privatize the liquor board, on being presented with the cost-benefit analysis, said “We really should sell it, but we can’t afford to.” So, I think the word “should,” with respect to public policy, should be understood as a malleable, ever-mutating, context and era-sensitive construct.
Sorry for the long-winded tour down governance memory lane, but let’s close with that poor troglodytic PFM analyst who is analyzing potentially useless program expenditures somewhere in the bowels of the Ministry of Finance. They may be tracking a structurally unsound activity, but at least they periodically surface with some evidence to be considered by those who decide what governments should or should not do, at least for now. Cheers.