Privatization and the Twenty-First Century City

Political Rhetoric and Reality in the Indianapolis Experiment


Privatization and the Twenty-First Century City:

Political Rhetoric and Reality in the Indianapolis Experiment
by Sheila Suess Kennedy, J.D.

Assistant Professor of Law and Public Policy

School of Public and Environmental Affairs

Indiana University-Indianapolis

801 W. Michigan St.

Indianapolis, IN 46202-5152

Prepared for delivery at the 1999 Annual Meeting of the Political Science Association,

Atlanta Marriott Marquis and Atlanta Hilton and Towers, September 2-5, 1999.

Copyright by the American Political Science Association.


Calls to "reinvent government" and achieve efficiencies through "privatization" raise issues that have engrossed political scientists and public administrators for years. At the heart of the conversation is the question: how do we combine our concerns for economic efficiency and democratic control? How do we best govern? The answer to that question is almost entirely political, because the administrative methods we choose will reflect our most fundamental convictions about the nature of the democratic state and the role of government officials.

For the past seven years, the Mayor of Indianapolis has been a leading proponent of privatization, which he prefers to call "marketization." His efforts have been widely reported– in glowing terms by the national media, in somewhat less glowing terms by local commentators. Other public officials are being urged to emulate his programs. As he prepares to leave office, then, it seems particularly appropriate to evaluate the extensive changes he has instituted.

This paper focuses upon one aspect of the Indianapolis experiment only: the political implications of privatization. It examines the effect of Goldsmith’s approach upon political party viability, citizen participation, consistency with constitutional principles and general accountability.

The Indianapolis experiment under Goldsmith has been an attempt to remake government in the image of private business, where competitiveness and the ability to accommodate constant change are necessary to survival, technical expertise drives decision-making and management is decisively top-down. The lesson of the Indianapolis experiment appears to be that such a paradigm operates to diminish social capital, discourage political participation, and seriously undermine the community of trust necessary for effective governance.


Calls to "reinvent government" and achieve efficiencies through "privatization" raise issues that have engrossed political scientists and public administrators for years. At the heart of the conversation is the question, recently articulated by Elkin and Soltan (1993): how do we combine our concerns for economic efficiency and democratic control? How do we best govern? The answer to that question is almost entirely political, because the administrative methods we choose will reflect our most fundamental convictions about the nature of the democratic state and the role of government officials.

Michael Spicer (1995) provides a very useful characterization of the various answers that have been proposed. Spicer has surveyed the literature of public administration and has identified two contradictory visions: he characterizes them as "discretionist" and "instrumentalist." The discretionist sees public officials as akin to independent agents; we citizens elect or hire certain individuals, presumed to be qualified by training or experience, to decide for us what is in our interest and we expect them to use their best judgements to effectuate that interest. If they go too far astray, we can "fire" them at the next election, but while they occupy the position they exercise autonomy of action. We might call this the "father knows best" approach to public management. The instrumentalist, on the other hand, sees public administration as an exercise in effectuating the political will of the community. In this view, the elected official has an obligation to act almost entirely in accordance with the desires of his constituents. We might call this the "I didn’t elect you to think" approach.

Most public administrators and political scientists would agree that both of these visions are flawed, and that effective management requires a judicious blend of the two. But it seems fair to place advocates of privitazation well toward the discretionist end of the spectrum. As Montgomery and Nunn (1996, 43) have noted, "Current efforts to restructure local government service delivery through privatization and contracting-out potentially privilege the public management model over the participatory model." Privatization is thus one aspect of the so-called "scientific" or "rationalist" theory of public administration which views government primarily as a provider of services (Kirlin 1996) and constitutional checks and balances as impediments to efficiency rather than essential safeguards against overreaching and arrogance (Spicer 1995).

For the past seven years, the Mayor of Indianapolis has been a leading proponent of privatization, which he prefers to call "marketization." His efforts have been widely reported– in glowing terms by the national media, in somewhat less glowing terms by local commentators. Other public officials are being urged to emulate his programs. As he prepares to leave office, then, it seems particularly appropriate to evaluate the extensive changes he has instituted.

While it would be instructive to determine whether the savings and efficiencies which have been claimed have actually occurred (there is considerable debate around that issue) such an inquiry is beyond the scope of this paper. Instead, I propose to examine one aspect of the Indianapolis experiment only: the political implications of privatization.

One caveat to this inquiry should be noted. The character and personality of a government official is always pertinent to the success or failure of program. We do not elect robots and simply program them to manage our civic affairs in accordance with this or that political theory. Talented managers can make dubious programs work; conversely, public officials with poor people skills can create problems that are not fairly attributable to the theories involved. In Indianapolis, advocates for privatization insist that certain obvious failures of the Goldsmith administration have not been due to an inadequacy of the underlying theory, but are instead a product of this particular Mayor’s temperament and personality. The thesis of this paper is that many of the problems that have been blamed on Goldsmith’s character flaws or management style really are inherent in privatization as the term has been understood and applied in the Indianapolis experiment–and would have manifested themselves under any mayor who pursued "marketization" so single-mindedly. As Kettl has noted, there is a tendency by privatization advocates to see problems that emerge as isolated instances of mismanagement rather than as "a generic thread that winds its way through contracting relationships"(Kettl 1993, 207). It is thus important to examine the political implications of privatization in Indianapolis apart from criticisms that might be leveled at this particular privatizer, and that is what I have attempted to do.

This paper will consider: (1) the effect of "marketization" on citizen participation generally and within local party politics specifically; (2) potential conflicts between privatization and American constitutional principles; and (3) policy implications of the Indianapolis approach, most notably the effect upon public accountability.

Theoretical Framework

Contracting out for government services is neither new nor inherently ominous. As Kettl suggests, however, "The constellation of issues generated by growth of government contracting spill over onto the most basic questions of American governance" (1993, 211). The growth Kettl alludes to is largely due to current disenchantment with government and the belief of some theorists and politicians that privatization is the "magic bullet" that can produce efficient and responsive government (Goldsmith 1992; Boaz 1997; Epstein 1995). This more extreme reliance on the benefits of "marketization" might be called "privatization ideology" to distinguish it from the longstanding use of contracting as one tool available to the urban manager. That ideology rests largely on a view of government as primarily, if not exclusively, a provider of services for "customers" rather than a shared enterprise of citizens (Kirlin 1996, 161). If government is, in fact, more than a service provider, if it is an important generator of social capital (Romine 1997; Hudnut 1998) and an instrument of collective choice (Kirlin 1996) — if it is, as this paper assumes, a political organization in the expansive sense of that term — efforts at privatization will be measured against a different set of criteria.

Citizen Participation

Citizens participate in their government in a number of ways beyond campaigns and elections. They serve on Boards and Commissions and ad hoc committees. They attend public hearings. They call City Hall to complain about potholes, or to demand installation of a traffic signal. They obtain permits. They work for government, as employees or consultants or contractors. They are vendors to government agencies. In the process, they partake of a civic and political culture.

Culture has been defined in terms of shared meanings and expectations–patterns of belief, symbols, rituals and myths that evolve over time and function as the glue that holds associations of all kinds together (Hennessey 1998, 525). Any significant change in the way government does things upsets those expectations, and requires a corresponding change in the political culture if it is to be sustainable.

Available literature on "reinventing government" suggests that effecting such change is anything but easy, and the way change is managed has important public policy implications that will be explored in another section of this paper. What is pertinent to note here is that privatization minimizes the contacts that citizens have with their government. When functions that were previously handled by government are contracted out to private companies, fewer committees and boards are needed. Fewer public hearings are held, because "experts" rather than citizens are driving the decision-making processes (Montgomery and Nunn 1996;Yankelovich 1991). Government agencies are doing less and so buy fewer goods. In Indianapolis, private firms now even dispense many permits. Contracting substantially reduces the points of contact between citizen and city (Lipsky and Smith 1993, 118) and with that reduction comes an attenuation of civic ownership, the sense of shared enterprise that characterizes a workable and working polis.

As Robert Gregory (1999, 67) has recently noted, social trust arises out of networks of civic engagement and norms of reciprocity. At a time when so much national attention is focused on the fragmentation of the polity and the dominance of special interests, privatization has increased the perception that most important decisions are being made by technocrats and their allies (and potential contractors) in the business community. (Yankelovich 1991, 241) In Indianapolis, the civic leaders who used to play an important role in our public life, whose motives for participation were founded on a sense of duty rather than a potential for profit, have all but disappeared. There are many reasons for that phenomenon; but privatization has been identified as one culprit. A recent article in Nuvo Newsweekly, an Indianapolis weekly paper, noted:

…. the city has lost a class of leaders that built domes and plazas, brought in pro football and international sports. They don’t make ‘em like Tom Binford [a local business and civic leader] any more. Those days of community good work were replaced by Goldsmith’s revolutionary urban governance that was authoritarian, cynical and sneering, with significant doses of fear and blackballing.

When technocrats hire "experts" and eschew public participation (Montgomery and Nunn 1996), the sense of connectedness, of "ownership" essential to the building of community, suffers. Political capital dwindles. (Gregory 1999, 65) Such sentiments are difficult to measure, but their political significance is very real. Goldsmith himself attributed his decisive loss of the 1996 Indiana governor’s race partly to backlash over privatization. (Hasse 1996)


Impact on Political Parties

Enthusiasm for privatization is one consequence of our current lack of enthusiasm for government. Proponents of contracting out base their arguments largely on the presumed incapacities of government. Recommendations to privatize are thus generally accompanied by a good deal of bureaucrat-bashing and antigovernment rhetoric; certainly that has been true in Indianapolis. The early days of the Goldsmith administration were marked by a procession of press releases reporting efforts to cut middle management (almost invariably referred to as "fat") and replace "bloated bureaucracy" with more efficient private providers of goods and services.

Such rhetoric tends to devalue government employment. What is less obvious, perhaps, is that the constant denigration of government also tends to dampen enthusiasm for politics. Once one’s party has elected someone to dismantle the bureaucracy, what is left to keep the political party worker engaged and interested? Political parties, after all, are about electing people to government. When government work has been demonized, it should not be surprising that participation in party politics declines as well.

Of course, privatization has more direct implications for party politics. The Howey Political Report, published by Brian Howey, is an Indiana political newsletter. In a piece published just after the November ’98 elections, Howey and contributor Schoeff wrote:

When Goldsmith sacked the mid-level bureaucracy that had accumulated during the Republican Lugar and Hudnut administrations, he essentially disemboweled one of the most prolific and successful political machines of modern Midwest history…. Since then, the beleaguered Marion County GOP has compiled an excruciating record of failure. (Howey and Schoeff 1998)

Howey and Schoeff go on to report on the effects of that party bloodletting: inability to get out the vote, lack of enthusiasm, lack of manpower. They then conclude:

Why? Because the Republican patronage is gone. The bureaucrats Goldsmith sacked don’t bother to get out the vote. Unions can reward their activists, so they turn out the vote. There are no rewards for Republican partisans in Indianapolis. (Howey and Schoeff 1998)

This lack of rewards for grass roots political activity has been a key element in the politics of Indianapolis during Goldsmith’s administration. While some people participate in the political process for the sheer love of it, most party workers of the past knew that victory would bring them something: maybe a city job, maybe a paved street, maybe just improved access to the powers that be. In the privatized city, political contributions are rewarded, not party activities like polling and registration and phone banks. With the award of significant contracts to manage operations previously handled by municipal employees have come persistent allegations that political contributors are being rewarded with lucrative city business, that privatization is simply a less desirable form of patronage. A July 1996 article in the Indianapolis Star reported:

Seventeen days after getting a lucrative city contract, executives of the [privately owned] Indianapolis Water Company and its development partner will throw a fundraiser for Mayor Stephen Goldsmith.

The $250-per-person dinner planned for Wednesday would not be the first fundraiser for Goldsmith, the Republican nominee for Governor, to come on the heels of a privatization contract.

Shortly after privatization of parts of Metro Bus and the municipal golf courses, contractors held similar events for Goldsmith. (Johnson 1996)

While the influence of money on American politics is a national and systemic problem, in Indianapolis privatization has exacerbated it, because there is now much more government business available to the right people. Yesterday, blue collar workers polled their neighborhoods hoping for a job; today, business owners contribute $5000 hoping for a contract. And nobody polls the neighborhood.

Constitutional Issues

As Spicer has pointed out, many public administrators see the Constitution as a problem rather than as a basis for legitimacy of government action. The Founders devised a system of checks and balances intended to impede the efficiency of the state in order to protect individual liberty. When public administrators are concentrating on making the trains run on time, those checks can seem onerous.

Constitutional checks on power …provide a system of multiple veto points in the political process. These veto points limit the ability of any particular group of political leaders to simply impose its will on others in the political process. As a result, constitutional checks on power force political leaders to take account of information and opinions held by others about the effects of public policies. (Spicer 1995, 51)

The most consistent public criticisms of Goldsmith’s re-invention efforts have focused upon the widespread perception that public decisions are being made without the benefit of this constitutionally-required deliberative process. This perception has created an atmosphere of political cynicism which was largely absent during prior Republican administrations, and which has made it more difficult for Goldsmith to achieve his policy objectives. In his book, he complains that efforts at redeveloping a portion of the riverfront were met with accusations of cronyism and hidden agendas (Goldsmith 1997). Such suspicions are an inevitable outgrowth of a "government by expert" privatization model, which gives high priority to product and short shrift to process. The problem is intimately connected to the issue of political accountability addressed below.

Legally, privatization raises troubling issues of state action (Lipsky and Smith 1993). Civil libertarians have questioned whether independent contractors, even those operating under government contracts, are exercising state action so as to be bound by the Bill of Rights. Only the government can violate one’s civil liberties. Can a City avoid compliance with due process, or infringe citizens’ First Amendment rights, by the simple expedient of contracting with a private company? Are records maintained by such private contractors subject to Freedom of Information inquiry? Emerging law in this area is unclear, and courts are just being asked to address the issues involved. If city governments can avoid compliance with the Bill of Rights by engaging private contractors to manage selected pieces of the civic enterprise, the constitutional and political implications will be profound.

In "The End of the Republican Era," Theodore Lowi (1995) reminds us that we are in danger of losing the constituency for the rule of law, preferring authority to rules. While privatization is almost always defended as a method for producing smaller government, in fact it simply empowers private interests to act under government’s imprimatur, shifting the locus but not the magnitude of the task at hand. It privileges authority over the rule of law. One example: when the private managers of the Indianapolis Wastewater Treatment Plant were charged with various improprieties, including evasion of Indiana bid laws, Goldsmith defended the noncompliance and criticized the laws as inadequate to the governance of a Twenty-First Century City (Indianapolis Star 1994).

Policy Implications

(a) Managing Change

It is a truism that change is a constant. One of the challenges public administrators face is the management of change so that citizens experience continuity rather than dislocation.

James Madison observed that "it poisons the blessings of liberty itself [if the laws] undergo such incessant changes that no man who knows what the law is today can guess what it will be tomorrow" (Spicer 1995, 47). Stability and predictability are widely supposed to be important elements of governmental legitimacy. By its very nature, privatization, with its emphasis on finding a better deal, a cheaper supplier, a different or more efficient way of delivering services, invites–indeed celebrates–constant change. Change becomes a positive goal, an end in itself, rather than a side effect of necessary improvements. William Blomquist, a political science professor at Indiana University Purdue University, Indianapolis, has noted:

What Indianapolis had evolved by 1991 was an "interest-group" culture of politics. With a 29-member City-County Council and nearly two hundred neighborhood organizations, a principal modus operandi of citizen participation was for neighborhood organizations to wrestle with the city bureaucracies over some desired service (parks, streets, drainage, etc.) and call in their City-County Councilor to intervene if the neighborhood wasn’t getting the response it wanted.

From January, 1992 on, Goldsmith’s ceaseless reorganizing, renaming, reshuffling and out-sourcing disrupted that organizational culture so completely that neither the neighborhood leaders (even long-serving, savvy, suburban ones) nor the City-County Councilors (even long-serving Republican ones) knew how to make the system work any more. (Blomquist 1999)

In a recent article in Public Administration Review, J. Thomas Hennessey, Jr. looked at the management of change in several agencies during "reinvention" initiatives (1998, 522). He reported the following comments by middle managers in agencies that were not successful in their reinvention efforts. "There are constant changes and no one tells us why." "One day we are doing this, the next day that. I am not sure anyone knows what is going on." Hennessey’s analysis suggests that when change is experienced in this way, the new methods–good or bad– are not sustainable.

The Indianapolis model is a case in point. From his first day in the Mayor’s office, Goldsmith kept his promise that it would not be business as usual. Department names were changed; the Department of Public Works became the Department of Capital Asset Management. Personnel changes were frequent–many employees were fired, many others reassigned. Functions were relocated or contracted out with virtually no prior notice to the agencies affected; in many courtrooms during the early days of the administration, court records piled up in boxes for months, awaiting the choice of a new, private microfilm company. Change was a mantra.

Not surprisingly, city workers took this as a repudiation of everything they had done up to that point; political party workers loyal to prior administrations were similarly offended. At the first Republican county convention held after Goldsmith’s election, the political reaction was marked. Goldsmith spoke first, focusing on his commitment to change and enumerating why his approach to privatization was superior to prior methods of administration.. The county chairman spoke next, and during his remarks tactfully reminded the Mayor that change simply for the sake of change was not the goal, and that upheaval also imposes costs. Following the County Chairman to the rostrum was a longtime local political figure, Tom Schneider, Mayor of one of the four "excluded cities" within the Indianapolis Unigov system. He began his remarks by saying "Frankly, if I hear the word change one more time, I’m going to puke." He got a standing ovation.

Not surprisingly, morale among city workers has been a persistent problem during the Goldsmith administration, as has employee turnover. Both problems have contributed significantly to the political party difficulties described above. While it is easy to blame this state of affairs on the Mayor–and certainly his management style is responsible for part of it–privatization ideology requires that change be a goal. How else do we understand the concept of "reinvention"?


(b) Minority Employment

Government has often been the employer of "first resort" for women and minorities, easing their transition into the workforce and offering an avenue to gain management experience. Under Goldsmith, the city workforce has been trimmed by 629 employees, whose functions have largely been contracted out (Morgan 1993). The impression in the Indianapolis African-American community is that this process has significantly diminished opportunity for blacks. Employment figures do show a substantial decline in the number of African-Americans employed by the civil city (i.e. employment exclusive of police and fire uniformed personnel). At the beginning of 1992, there were 690 African-Americans employed by the city of Indianapolis; at the end of 1998, there were 460, a reduction of 230 jobs, or 33%. During that same period, total city employment decreased by 27%.

While the City has given major contracts to at least one black-owned business, Oscar Robertson Smoot, based in Ohio, the local black community has viewed privatization as a method of rewarding mostly white political contributors at the expense of blacks who had been well represented in city hall during the Hudnut administration. This perception, coupled with persistent community-relations problems in the Indianapolis Police Department, has had a significant negative effect on race relations in Indianapolis. Rozelle Boyd, minority leader of the City-County Council, recently observed:

To its own detriment, the administration was very slow to respond to the broadly publicized "Meridian Street Brawl." The Brawl was a downtown police-initiated confrontation with citizens, characterized by racial slurs, that has come to be viewed as a kind of index to the administration’s general responsiveness to the minority community. This obtains in both civil and economic arenas, especially the so-called ‘privatization’ process.

There is a fairly widely held perception that response to the need for minority involvement and participation is minimal and that even then it comes only after determining that there are broader implications that need to be considered. (Boyd 1999)

(c) Accountability

Government’s increasing reliance on private contractors raises accountability issues different from those involved when government is providing services directly. (Kettl 1993, 174; Lipsky and Smith 1993) As noted above, much of what passes for bureaucratic and governmental inefficiency is really what Russell Hardin (1998, 12) has called "institutional design that encapsulates the self-interest of government officials." If, as many social scientists assert, trust in government requires accountability, lack of accountability contributes to distrust and even cynicism about government and those who are engaged in it.

In the private sector, the market provides very effective checks and balances, as anyone who has ever gone out of business can attest. The checks and balances applied to government, however, address fundamentally different concerns. The political system requires structural safeguards that recognize the differences between government and private enterprise, that compensate for deficiencies in leadership and protect against abuse. One of the problems with the political rhetoric accompanying privatization is its failure to acknowledge that government is fundamentally different from the private sector. As Gregory has noted:

[W]hen core public services are increasingly enjoined by government to operate as if they were businesses (as distinct from being required to work in a business-like manner), [political] commitment is weakly signaled. Genuine and forceful commitment to standards of ethical probity in public service rests on political recognition of those factors that make public administration essentially different from corporate management and that demand an appreciation of the idea of the public interest. (Gregory 1999, 66)

The differences are so fundamental that Jane Jacobs has identified different "moral syndromes" applicable to government and commerce (Jacobs1992). The checks and balances built into our system were intended to address that insight, and to require accountability of offficials to those they serve.

In Indianapolis, privatization has undercut accountability in several important ways.

1) Internally, as Spicer (1995) has documented, good government administrators and middle managers provide a check on the excesses of elected officials. Privatization has been an "end run" around that safeguard. Hired contractors do as they are told or risk losing the contract. Private companies do not have a history or ethic of public service, nor can they provide the institutional memory that citizens have a right to expect, and that frequently keeps newly elected officials from costly or embarrassing errors. As Gregory has written, "There is no clear evidence that corporate business has any unequivocal commitment to [the concept of public interest] and considerable room for valid debate as to whether it should have."(Gregory 1999, 66)

2) Externally, at least in the Indianapolis experiment, privatization has had a marked and troubling effect on public criticism of the administration. Reporters investigating allegations of misfeasance tell similar stories of sources unwilling to be quoted or even to talk to the media (Krull 1999; Ullmann 1999). When a contract is important to a company, its owners and employees will take great pains to keep it. The implicit (and sometimes explicit) threat of losing business quiets the companies involved, and exerts a discernable "chilling effect" on relatives, business associates, and those who may want to do business with the city in the future. Furthermore, when criticism does arise, it is often imputed to "sour grapes." This was the case with a lawsuit brought by a city worker, George Tomonovich, alleging improprieties by the Oscar Robertson Smoot company. Tomonovich had been a city engineer displaced by the contract to ORS. When he charged that the company was receiving payments far in excess of the market, and performing negligently, the administration dismissed the charges as the complaints of a disgruntled bureaucrat. It eventually settled the case for $300,000 after local media were able to confirm Tomonovich’s allegations; however, it remains unclear whether ORS ever made restitution, and it continues to do business with the City. That episode, along with a prolonged expose by the Indianapolis Star called "golfgate," involving privatization of the city golf courses, and reports over irregularities involving the wastewater treatment plant, has left many citizens uneasy and has raised questions about the adequacy of the city’s capacity to monitor contractors’ performance (Howey 1998; Howey 1999).

3) Open books and records, regular audits, and other proofs of financial regularity are an essential element of accountability. Privatization can make it difficult to get a complete picture of city expenditures. As Kettl (1993) points out, a company doing business with the city does not thereby bargain to open its books to the world. If onerous reporting restrictions are imposed, the costs of complying with those restrictions will become part of the overhead charged against the contract–reducing the very cost benefits privatization is supposed to provide. On the other hand, when public money is being spent, the public has a right to ensure that it is being spent in accordance with the contract and the law.

The issue of auditing those doing business with the city has been raised in several contexts. Midway through the Goldsmith administration, the city took legislation to the Indiana General Assembly that was intended to expedite the contracting out process. One of the changes proposed to existing law would have removed from the definition of "public money" sums paid to a private contractor pursuant to a legally binding and enforceable contract. Had the measure passed, no public audit of the contract could occur once payment to the private contractor had been made.

There has been no comprehensive public audit, and few performance audits, during the Goldsmith administration, either by the State Board of Accounts or by a private auditor. Nuvo Newsweekly, a persistent critic of the administration, recently editorialized:

One problem is that the State Board of Accounts has not been auditing the books of Unigov, leaving it to Unigov’s mayors to hire their own auditors. While the State’s watchdog slept, the foxes in city government have been shuffling funds without regard for law on the management of public funds and without regard to budgets passed by the Unigov council and appropriations passed by the General Assembly. Federal grants for specific purposes have been mixed with the money from state and local taxes in the city’s general fund. Costs have been deferred, checks have been kited, floats have been lengthened and funds have been juggled…

Similar points have been raised by City-County Councilors Rozelle Boyd, Jeff Golc, Monroe Gray, and Susan Williams (Boyd et al.1996). It is difficult to believe these allegations. Indianapolis has been extremely active in the bond markets, and underwriters require audits and assurances. But financial reporting available to rebut these charges suffers from the same problems identified above: a so-called "popular budget" was produced by a large CPA firm that had made generous contributions to the Mayor’s political campaigns. Furthermore, auditors with the firm acknowledged that they had relied upon city administration representations for significant elements of their report. The City no longer retains the internal audit capacity developed by the prior Controller–many of those functions have been "contracted out," leaving the city without the management depth it needs to mount an effective defense.


As Kettl (1993) has noted, the choice is not between government and market, it is how to strike the best balance between them. Prior administrations in Indianapolis contracted with private companies for certain services for many years, and found the practice generally beneficial. It is when privatization or "marketization" becomes more than simply another tool in the manager’s arsenal, when it becomes an ideology, an end in itself, that it subverts the political and organizational cultures that sustain and legitimate governmental activity.

Government is an essentially political enterprise. The Indianapolis experiment under Goldsmith has been an attempt to remake government in the image of private business, where competitiveness and the ability to accommodate constant change are necessary to survival, technical expertise drives decision-making and management is decisively top-down. The Indianapolis experiment suggests that such a paradigm diminishes social capital, discourages political participation, and undermines the community of trust necessary for effective governance.

Blomquist, William. 1999. Personal interview, January.

Boaz, David. 1997. Libertarianism. New York, NY: The Free Press.

Boyd, Rozelle. 1999. Personal interview, February.

Boyd, Rozelle, Jeff Golc, Monroe Gray, and Susan Williams. 1996. "Bad News on City’s Privatized Services." Indianapolis Star letter to the editor, 25 August, D04.

Elkin, Stephen L., and Karol Edward Soltan. 1993. A New Constitutionalism. Chicago, IL: University of Chicago Press.

Epstein, Richard A. 1995. Simple Rules for a Complex World. Cambridge, MA: Harvard University Press.

Goldsmith, Stephen. 1997. The Twenty-First Century City. Washington, D.C.: Regency Publishing, Inc.

Gregory, Robert J. 1999. "Social Capital Theory and Administrative Reform: Maintaining Ethical Probity in Public Service." Public Administration Review 59: 63-75.

Haase, David L. 1996. "Goldsmith Says City Innovation Has Its Price." Indianapolis Star, 4 December, C01.

Hardin, Russell. 1998. "Trust in Government." In Trust and Governance, ed. Valerie Braithwaite and Margaret Levi. New York: Russell Sage Foundation.

Hennessey, J. Thomas. 1998. "’Reinventing’ Government: Does Leadership Make the Difference?" Public Administration Review 58: 522-532.

Howey, Brian. 1998. "Peeling the Goldsmith Onion: The Mayor Brought Dramatic Changes to City Government, But What it Cost and What We Got is a Mystery." Nuvo Newsweekly, 3 December.

Howey, Brian. 1999. "Are Goldsmith’s Books Crooked?" Nuvo Newsweekly, 14 January.

Howey, Brian A., and Mark Schoeff Jr. 1998. "Inside the Stunning ’98 Indiana Election." The Howey Political Report, November.

Hudnut, William H. III. 1998. Cities on the Rebound. Washington, D.C.: The Urban Land Institute.

Jacobs, Jane. 1992. Systems of Survival. New York: Random House.

Johnston, Kathleen. 1996. "Critics Question the Propriety of Fundraiser for Goldsmith." Indianapolis Star, 14 July, A01.

Kettl, Donald F. 1993. Sharing Power: Public Governance and Private Markets. Washington, D.C.: The Brookings Institution.

Kirlin, John J. 1996. "What Government Must Do Well: Creating Value for Society." Journal of Public Administration Research and Theory 1: 161-185.

Krull, John. 1999. Interview, January.

Lowi, Theodore. 1995. The End of the Republican Era. Norman, OK: University of Oklahoma Press.

Lipsky, Michael, and Steven Rathgeb Smith. 1993. Nonprofits for Hire. Cambridge, MA: Harvard University Press.

Montgomery, William, and Sam Nunn. 1996. "Privatization, Participation, and the Planning Process: A Case Study of Wastewater Treatment Infrastructure." Public Works Management and Policy, 1: 43-59.

Morgan, Kevin. 1993. "Family Feud: Hudnut Raps Goldsmith." Indianapolis Star, 25 November, D08.

"Privatization Run Amuck." Indianapolis Star, August 30, 1994: A06.

Romine, Van. 1998. "Civic Participation, Social Capital and Leadership." LaJolla Institute.

Spicer, Michael W. 1995. The Founders, the Constitution, and Public Administration: A Conflict in World Views. Washington, D.C.: Georgetown University Press.

Ullmann, Harrison. 1999. Interview, January.

Yankelovich, Daniel. 1991. Coming to Public Judgement: Making Democracy Work in a Complex World. Syracuse, NY: Syracuse University Press.