Introduce corporate thinking to the public sectorDetroit, the city known in Korea as the kingdom of automobiles, went bankrupt during the summer. In the 1950s, the city was the growth engine of the U.S. economy and an example of American pride. But the declining auto industry and the excessive spending of the city government ultimately forced Detroit into bankruptcy as it failed to pay its $18.5 billion debt. The city used to have a population of approximately 1.85 million 60 years ago, but it now numbers about 700,000. Due to the budget shortage, more than 40 percent of the street lights have been turned off and the city’s homicide rate has continued to grow. It takes an hour to reach a police responder over the phone, and the city is experiencing a public security paralysis.
Let’s think about Korea’s fiscal condition. The state-run institutes are 49.3 trillion won ($46.48 billion) in debt, while enterprises run by regional governments are in 72.5 trillion won of debt. By adding household debts, the nation has a debt of over 2,000 trillion won. The possibility of fiscal crisis is looming fast. Many argue that the country needs a tax hike or a social consensus to lower the expenditure, to find a fiscal balance. Detroit’s nightmare is not someone else’s business.
Even if the public sector is less controlled by the analysis of cost and effectiveness, the example of Detroit shows the need to introduce the corporate thinking of business management in the public sector. In order to effectively manage facilities, 24 out of 25 districts in Seoul have facility management corporations. Apart from their original purpose of managing with responsibility, professionalism and economic efficiency, the profitability of corporations is not much different from cases where facilities are managed directly by district governments.
Corporation heads are often political appointees with no professional fitness. There is no economical reason to hire up to 200 people in a corporation, only to manage facilities. The idea of introducing the corporate business mind to the public sector has actually brought about budget waste in this case, which is why Seocho District decided not to create such a corporation.
When you become responsible for running a public office, the people do not expect you to show pride in keeping the key to the coffers. What you need is to face the responsibility of managing the happiness of the people.
* Jin Ik-chul Head of the Seocho District Office