traced to the rise of distinctive ideas; or it could be seen as the response to
structural changes, notably to the great wave of Wnancial globalization
originating in the 1970 s that made democratic governments anxious to conciliate
new footlooseWnancial institutions.
How we think of the connection between ‘‘economic’’ and ‘‘political’’ institutions is
a function of the paradigmatic world we inhabit—a point that is reinforced by the third
aspect of the connection between democratic institutions and economic institutions
examined here, a connection shaped by the rise of the New Public Management:
the modelling of public institutions on business institutions. These eVects can be
summed up under three headings: The rise of contractualism in the public
sector; the rise of executive agencies; and the spread of a consultancy culture.
‘‘Contractualism’’ summarizes a wide range of developments—contracting out
of functions and services, the development of managed ‘‘internal’’ markets which
mimic market exchange, the full-scale privatization of services—but all have a
common thread: The attempt to replace the routines and cultures of public service
bureaucracy with the routines and cultures—or at least the perceived routines and
cultures—of the characteristic institutions of the market place (Pollitt and Talbot
2004 ).
Agency creation is associated with some of these changes, but has taken a more
exactly institutional form. In the case of central banking we saw that it consisted in
part in a growth in the degree of control exercised by central banks over key
instruments of economic policy. This growth in autonomy can be viewed as a
special case of the more general process of ‘‘hiving oV’’ agencies in a variety of
forms, establishing a range of relationships again based on contract. Institutionally,
this development has had a number of consequences: It has blurred the tradition-
ally constructed separation between ‘‘state’’ and ‘‘market,’’ thus overturning
traditional ‘‘constructions’’ of the political and the economic; and, more
concretely, it has been an important means of introducing ‘‘business’’ cultures
into the public sector (Self 2000 ; Sahlin-Andersson 2002 ).
In this sense agency creation has also been a mechanism by which the cultures of
business institutions are diVused to public sector bodies, a process reinforced by
the more formal reliance on management consultancies. ‘‘Consultocracy’’ (Saint-
Martin 1998 ) is a key political feature of New Public Management. Two forces are
fashioning this, one supply led and one demand led. The supply is created by
aggressive competition in the service sector, especially in theWnancial services
sector, which has led, notably among the multinational accounting Wrms and
merchant banks, to the development of consultancy arms, hunting for business
across both the public and private sectors. One of the most important areas of
institutional change under the New Public Management lies in the international
privatization movement of the last couple of decades, where the marketing of
expertise in the privatization process has been an important means by which the
phenomenon of privatization itself has been diVused. On the demand side, the
economic institutions 157