The question posed in the ‘Introduction’ to this book is whether allowing the private sector to provide public services in developing countries might accelerate economic development there. ‘Public services’ are described as any services available to the public, whether provided publicly or privately. The term ‘developing countries’ is loosely used to denote those countries at an early stage of economic development. Most of the examples are taken from countries at current low levels of economic development, but some are taken from countries that are now considered to be ‘developed’. ‘Private provision’ is taken to mean the production, provision, or delivery of public services by the private sector in one or more ways.
The author’s starting point is that private providers are generally more likely than governments to meet public needs, but he discusses five situations described in the economic literature in which market failure is said to justify government intervention:
- Where ‘natural monopolies’ exist
- Where increased production is associated with ‘decreasing costs’
- Where there are substantial externalities
- Where it is difficult to charge for a service or to exclude non-payers
- Where ‘merit goods’ are involved.
The author’s intention is not to tell policymakers or researchers what should be done, but to provide examples of what is being done already, so that officials in developing countries will know of additional options that may be available to them to make the best use of their countries’ resources. However, the author does identify the following policy implications:
- In a situation where private markets cannot provide the range, quality or quantity of services considered desirable, governments may have to intervene
- In deciding whether a service should be privately or publicly provided, governments have to choose between alternatives as they would actually work in practice. In some cases, the government ‘remedy’ may be worse than the ‘market failure’ disease
- To enable officials to concentrate on activities that only government can provide, private provision may be preferable even in situations where a government could provide better services than the private sector
- Decisions concerning the allocation of government resources must constantly be reviewed. Adaptation to change is an essential part of the development process.
