The objective of Liberalization, Privatization and Globalization and of New Public Management was to limit government functions and reduce public expenditure. However both functions and expenditure has increased. Account for the paradox.
Liberalization, Privatization, and Globalization (LPG), along with New Public Management (NPM), sought to reduce the size and scope of government. The aim was to cut costs, enhance efficiency, and restrict the State to regulatory functions while outsourcing or privatizing service delivery. In practice, however, government functions and expenditures have expanded, creating a paradox.
Several factors explain this. First, globalization created new responsibilities for states, including regulation of trade, environmental protection, and managing global crises. Far from shrinking, government functions diversified into new domains such as cyber security, digital governance, and climate action.
Second, privatization and outsourcing did not eliminate public expenditure; they restructured it. Governments continued to fund welfare schemes, subsidies, and public-private partnerships. Contract management and regulatory oversight often required new bureaucratic structures, increasing administrative costs.
Third, globalization widened inequalities, compelling governments to expand welfare interventions, safety nets, and targeted subsidies. Instead of reducing expenditure, social spending grew to maintain political legitimacy.
Fourth, crises such as financial meltdowns, pandemics, and natural disasters reinforced the indispensability of government as the ultimate guarantor of stability. Emergency expenditures often ballooned budgets despite a neoliberal framework.
Thus, the paradox reflects the tension between ideological goals and practical realities. While LPG and NPM reduced direct state ownership, they expanded the state’s indirect responsibilities in regulation, welfare, and risk management. In effect, governments shed certain roles but assumed newer, more complex ones, leading to functional and fiscal expansion rather than contraction.
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Sakshi Negi
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