The winners of marketisation: Welfare profit-makers legitimising private profits in publicly funded welfare services

Abstract

Recent decades have witnessed the expansion of market mechanisms and private service providers in publicly funded care sectors. In this article, we examine how elite actors benefitting economically in this transition in Finland rationalise and legitimise their role as profit-makers. Drawing on 22 in-depth interviews of such welfare profit-makers, who have gained significant wealth or income in the social and healthcare sectors, we investigate the changing moral economies concerning such welfare profit-making in a Nordic welfare state. Moreover, we analyse how the image of the public sector is constructed in these legitimisation narratives. We show how the interviewees not only legitimise their own profit-making in the increasingly centralised quasi-markets created by public funders and private service providers, but also simultaneously delegitimise public sector’s service production. While legitimising their publicly funded, but private, profit-making, the interviewees shift accountability for excessive profits and the pitfalls of marketisation and outsourcing to the public sector. This way we describe a phenomenon in which private sector symbolically delegitimises public sector while retaining it as the financier of private profit-making.

Introduction

The marketisation and privatisation of care has figured prominently in many countries in the past few decades (Agartan, 2012; Fine and Davidson, 2018; Freedland, 2001). Services previously produced by public authorities are increasingly produced by profit-seeking private companies. This has also happened in countries known for their strong welfare regimes, such as the Nordics (Hoppania et al., 2024; Karsio, 2024; Moberg, 2017; Svallfors and Tyllström, 2019). Common to all ‘accounts of marketisation is that the state “devolves” direct responsibility for service provision within some form of “managed” or “quasi” market and promotes competition between suppliers’, ensuring that supply meets demand (Fine and Davidson, 2018: 508). Notably, outsourcing, user choice models, tax credits and competitive tendering have created not only a new socio-cultural configuration with its quasi-markets, but also a new elite group that we call welfare profit-makers – whose wealth derives from the production of (largely) publicly funded services. In this article, we focus on such profit-makers and their legitimisation struggles concerning their profit-making in the Finnish welfare sector.

We define welfare profit-makers as people who have made their top fortunes and earnings in the care sector by owning or managing companies whose clients are mainly public procurers and sometimes individual customers. They come close to what Maron (2022) has called ‘private state workers’, meaning employees of for-profit providers who deliver publicly funded services. Our specific focus is on the welfare sector’s profit-making and the specificities this brings to questions of legitimacy, hence the more specific concept of welfare profit-makers. This is an emerging elite group that has benefitted significantly from the policy changes of the past few decades. In the Nordic countries, for example, before the marketisation reforms of the 1990s and early 2000s, no economic profit was available from the core functions of the welfare model, whereas social and health services now provide lucrative, publicly financed opportunities for business (Hoppania et al., 2024; Svallfors and Tyllström, 2019). Welfare profit-makers have entered sectors hitherto deemed outside of profit-making. With their practices, we claim, these profit-makers renegotiate the moral economy (Sachweh and Hilmar, 2020) of the welfare state and its ethic of care (Tronto, 1993), constituting financial profits as a legitimate by-product of publicly funded services.

In our empirical case, we focus on welfare profit-makers in Finland which, like other mature welfare states (Svallfors and Tyllström, 2019), has experienced a rapid expansion of for-profit providers of health and social services even though the public sector funds around 79% of total health expenditure (THL, 2023). For our research, we interviewed 22 individuals deriving significant wealth or income from the Finnish social and healthcare sectors in the last two decades, for example, in elderly care, child welfare or medical services. This group, we claim, faces challenges in legitimising their practices and profit-making in the increasingly oligopolistic quasi-markets resulting from the interaction of public procurers, legislators and the (decreasing number of) private producers. As we will show in the empirical part, welfare profit-makers often identify themselves as objects of stigmatisation, implying their visible role in reorganising the welfare state’s moral order. Yet, this group has been neither described nor investigated in research.

To bridge this gap, in what follows, we investigate how successful elite practitioners of an emerging, but morally contested business legitimise their practices against negative evaluations. We show how the practitioners legitimise their practice by distancing themselves from the public sector and from the malpractices and excesses exposed in the for-profit sector.

This legitimisation work calls to mind the boundary work of ‘private state workers’, who in Maron’s (2022) study embraced ‘their position as extra-bureaucratic workers while challenging state schemas attributing to them an inferior service ethos’ (p. 1073). The reasonings of our interviewees are also reminiscent of the narratives discussed by Kolbe (2024) in her research on private museums in Germany, where private actors sought legitimacy by criticising both public museums and their peers in the private sector, dissociating themselves from the ‘dirty money’. However, unlike Kolbe’s interviewees, the welfare profit-makers are not only critical of the public sector but also dependent on it. Hence, an ambiguous double bind characterises the relation of our interviewees to the public sector. The large public sector needs to exist as a financier of the services, while simultaneously requiring delegitimisation as a service producer to safeguard the for-profit providers’ position.

By analysing the legitimisation narratives of the welfare profit-makers, our study contributes to three scholarly discussions.

First, to the critical literature on the marketisation of public services with a focus on how the profit-makers attribute the various discontents of marketisation – like the expansion of auditing, transaction costs and market concentration (Petersen et al., 2018) – almost solely to the public sector and policy makers, instead of perceiving them as perhaps inevitable consequences of outsourcing.

Second, to debates concerning the legitimisation of contested professions (Roulet, 2015; Walsh et al., 2023), where we shift the focus from the legitimisation of tainted professions to the legitimisation of tainted practices inside appreciated professions.

Third, to the literature concerning the changing moral economy (Mau, 2004; Sachweh and Hilmar, 2020) of the welfare state and the Nordic model, by describing a phenomenon in which the private symbolically delegitimises the public while retaining it as the financier of private profit-making. As Sachweh and Hilmar (2020) note, insofar as the welfare state can be viewed as institutionalised ‘politics against markets’ (Esping-Andersen, 1985), its moral economy is an essential part of the larger moral infrastructure of capitalist societies. In this article, we assess the changing moral conceptualisations of the public and the private inside the Nordic model by showing how the moral economy concerning profit-making is described by those profiting most from marketisation.

Publicly funded profit-making: legitimising a contested practice

Like in many mature welfare states, in Finland welfare services are provided by three different types of organisations: public producers, non-profit organisations and private for-profit businesses. In this article, we focus on the for-profit actors, to which we refer as the private providers. These, for-profit service providers operate at the intersection of public and private, in many ways a conflictual and contested terrain (Svallfors and Tyllström, 2019). In general, the marketisation of social and health care reflects a change in policy orientation, drawing upon the New Public Management ideology, according to which contracting out increases productivity and quality of care by making it more consumer-driven (Maarse, 2006).

Both moral and economic arguments for private provision of services have been evinced. Typically, arguments concerning the benefits focus on for-profits’ incentives for efficiency, innovation and growth (Meagher and Cortis, 2009). In such a framework, profits are treated as rewards for efficient, customer-oriented production and innovation (Meagher and Cortis, 2009).

The main criticism of for-profit care concerns the conflict between ‘profitable care’ and ‘quality care’ (Meagher and Cortis, 2009: 22). Critics argue that social and health care are a quintessential function of government not to be delegated to for-profit contractors organised around maximising profit (Hasanen, 2013). Examples of private failures include the impossibility of effective macro cost control, cost shifting to the public sector, cream-skimming and restricted access (Maarse, 2006; Petersen et al., 2018). Many public services are also characterised by high entrance costs, which limit competition and make public markets function less perfectly (Gilmour and Jensen, 1998). Together these critical perspectives make profit-making in the welfare sector a contested topic, challenging its compatibility with the public good and ethic of care (Tronto, 1993).

In the context of the Nordic welfare states, such contestations and dissonances are particularly pertinent. In Sweden, Svallfors and Tyllström (2019) have shown how public support for private care providers remains low, leading to political opposition fuelled by public scandals. The Finnish environment is similar: for-profit actors have been involved in media scandals concerning, for example, the quality and cost of services as well as aggressive tax planning. Significant media scandals occurred especially in 2019–2020. These scandals have not been studied systematically, but they have clearly damaged the service providers’ public image.

In short, the context of the for-profit welfare services, is decidedly contradictory and in flux in mature welfare states. In using for-profit companies to deliver public services, states redraw the boundary between the public and private sectors (Maron, 2022: 1062), and if such boundary revisions violate conventional understanding of what the public sector is, conflicts easily arise. From the service providers’ perspective, the welfare state establishes the economic preconditions for marketisation (Fine and Davidson, 2018), offering large-scale opportunities and stable demand, but entail specific risks. Comprehensive welfare states with rapidly ageing demographics represent tempting business opportunities, as demand and financing for services are fairly secured (Hoppania et al., 2024; Svallfors and Tyllström, 2019). However, such states also constitute highly regulated and politically risk-prone quasi-markets: a shift in political power or regulation may entail drastically worsened conditions for private companies (Kovalainen and Österberg-Högstedt, 2013; Svallfors and Tyllström, 2019). According to Karsio (2024: 43), imperfect markets are an unavoidable outcome of such marketisation because it embeds the idea of the public sector interfering with the market by regulating it.

In official rhetoric, co-operation between private providers and public procurers is often described as partnership, but as our research – and that of others (Tynkkynen, 2013) – shows such partnership is often based on dependency and mistrust as much as on collaboration, and public purchasers and for-profit providers may have vastly different perceptions of the nature and level of trust. Also, for these reasons, the welfare profit-makers have a specific need to legitimate their position and profit extraction, something our interview data exemplifies.

Our study describes the changing moral economy of the mature welfare state by drawing on scholarly literature concerning legitimisation (Schoon, 2022). Moral economy as a concept ‘implies that social transactions are grounded upon a socially constituted and subjectively validated set of social norms and shared moral assumptions’ (Mau, 2004: 58). From this perspective, morality – alongside institutions and networks – is a key social macro-structure in which economic action is embedded (Sachweh and Hilmar, 2020). One way to approach the moral basis of a particular society is to scrutinise how those benefitting most from the economic conjuncture legitimate their position. Hence, questions of justification and legitimisation have gained increasing scholarly attention in recent years, also in the context of elites (Ho, 2009; Maclean et al., 2012). For example, according to Sherman (2018), ‘the fact of justification is itself interesting, because it indicates a moral ambivalence about the legitimacy of economic privilege’ (p. 412). Elites often perceive a need to justify their position, and in research such narratives repeatedly arise from the interviewees’ own discourses without the interviewers’ prompting. This was also the case with our interviewees: the interview schedule included no questions about the legitimacy of the interviewees’ wealth, position or profit-making, nor did we challenge it in any way. Nevertheless, our respondents provided ample discussion indicative of moral legitimation.

Our interviews show how welfare profit-makers seek legitimacy by distancing themselves from their peers and the scandals permeating the industry, trying to subscribe to the traditional notions concerning ethic of care (Tronto, 1993). This means they draw boundaries not only against the public sector (Maron, 2022) but also against other private actors (cf. Kolbe, 2024). This is a typical strategy found in research on contested professions. Professions suffering from negative social evaluations or scandals often need to engage in intensive communicative work (Walsh et al., 2023). Redressing negative evaluations is particularly crucial to professionals, whose ability to perform depends on being perceived as credible by outsiders. In our case, these outsiders can be identified as taxpayers, politicians and public procurers, whose trust the welfare profit-makers need.

Prior scholarship has tended to characterise professions as being either contested or legitimate depending on the societal acceptance of their products (Roulet, 2015; Walsh et al., 2023), and the legitimisation of contested professions has been studied mainly in the context of so-called dirty work. What differentiates the welfare profit-makers from many other contested professionals is that their work in principle is highly appreciated: doctors, nurses and caregivers top the indices of most valued professions (for Finland, see Suomen Kuvalehti, 2024), and funds spent on health and care enjoy public support even in times of austerity (Muuri et al., 2019). In other words, in the case of the welfare profit-makers, what is called into question is not their profession, but their ability to profit from it. As Peda and Vinnari (2020) argue, affordable prices and high performance do not suffice to create legitimacy for an organisation that makes excessive gains from something regarded as a public good. The traditional Nordic ethos or moral economy, with its founding principles of equality, solidarity and public responsibility (Hänninen et al., 2019), creates additional legitimation challenges for the welfare profit-makers. Previous research on the Nordics has asked: how to be elite in ‘an environment that critically opposes privilege and hierarchy’ (Törnqvist, 2019) and how to justify one’s position at the top in a society of equals (Hjellbrekke et al., 2015). We take these questions further by asking how to legitimise private profit-making in a publicly funded system and its moral economy.

Marketisation and financialisation of care in Finland

Like its neighbours (Moberg, 2017; Svallfors and Tyllström, 2019), Finland has experienced a rapid marketisation of its welfare services in the past three decades. Legislative reforms in the 1990s and 2000s profoundly changed the terrain and local decisions have advanced marketisation when municipalities have outsourced services and introduced customer choice policies (Karsio, 2024). Consequently, in 2020, 24.5% of people working in health care and 43.8% of those working in social services worked in the private sector (THL, 2023).

The growth of the private sector has been fast: its share in social care services, for example, increased tenfold between 1990 and 2015 (Toikko and Rantanen, 2019). From 1994 to 2015, the estimated annual growth rate of the private sector was 12.14%, whereas the public sector grew only 0.85% (Toikko and Rantanen, 2019). In 1990, only 0.5% of the personnel working in social care were employed by private companies, but in 2018, the figure was 20.4% (Hoppania et al., 2024; Karsio and Anttonen, 2013; TEM, 2020, 2021). Health care has a diverse clientele, from private individuals to municipalities and employers, whereas the public sector is practically the only purchaser of services in the care of the elderly, the disabled, children and home help (Kovalainen and Österberg-Högstedt, 2011). In 2021, of total health expenditure in Finland, 78.7% was publicly funded, compared with 73.2% in 2000 (THL, 2023). One could say that the government has created ‘conditions in which the market logic dominates, so that care as a commodity can be competitively exchanged, and surplus of it extracted’ (Hoppania and Vaittinen, 2015: 80).

The marketisation of the sector in Finland has been followed by market concentration and the financialisation of care (Hoppania et al., 2024). Elderly care, for example, has become highly concentrated, with a nearly oligopolistic situation, as financialised chains have entered the field (Karsio and Anttonen, 2013; Lith, 2019). Three largest companies, Attendo, Esperi Care and Mehiläinen, dominate the markets and employ over half the private workforce in social and health care (Hoppania et al., 2024; TEM, 2020, 2021). All these companies have engineered their growth by financial means and buying out smaller competitors. ¹ The three largest companies have grown rapidly: from 2017 to 2020, Mehiläinen’s turnover increased by 89%, Attendo’s by 102% and Esperi Care’s by 280% (Hoppania et al., 2024). This has created short-term opportunities for profit-making for those selling their companies, but also led to a situation where the marginal effects of contracting-out most likely decrease because of decreasing competition (Petersen et al., 2018). Occupational health care and the growing popularity of private health insurances are further modifying the terrain and image of public services. In 2016, as many as 21% of Finns had a voluntary private health insurance (Tynkkynen et al., 2018), but the share that these companies pay of the total health expenditures is modest, as in 2021, private insurances covered only 2.2% of the overall health expenditures (THL, 2023). As John Lapidus (2022) has argued, the rise of private health insurance is an example of a gradual movement towards a divided welfare state where parts of the population choose private solutions, while the rest remain in the public system. Above all, their popularity can, however, be read as a sign of citizens’ mistrust against public healthcare, rather than as a sign of its replacement, as the public sector continues to fund a lion share of the services.

Data and analysis

Our data consist of 22 interviews with Finnish welfare profit-makers. We identified our interviewees through public records, starting with annual lists – published by the business magazine Talouselämä – where major acquisitions of private companies are reported. We studied these lists between 2013 and 2023 (except for 2014, when no list was published) and identified individuals whose main sector was healthcare or social care and who had sold their companies. In addition to these (ex-)entrepreneurs, we also identified the largest companies of the sector (in terms of revenue) based on annual Talouselämä listings of the largest companies in Finland and contacted these companies’ CEOs. We also contacted people identified in a previous research project on the top 0.1% of earners in Finland (Kantola and Kuusela, 2023) as individuals having prospered in the social or health sector. We contacted 99 individuals, and thus, the response rate was relatively low, but still acceptable for a hard-to-access elite group. The rate is, for example, significantly lower than in earlier studies among the Finnish wealth elites (see, for example, Kuusela and Kantola, 2023), which further reflects the contested nature of the business. The relatively low rate may mean that our data are biased towards particularly outspoken interviewees, but overall, we detected no systemic biases concerning who accepted our invitation.

The interviewees constitute a multifaceted group, including six working or having worked in top positions as waged workers (e.g. CEOs) and 16 (ex-)entrepreneurs. Half of the interviewees worked in health or dental care and the other half in social care, producing services such as child welfare and elderly care. Fifteen interviewees had medicine, nursing or social sciences as educational background, while seven held degrees in business or technology. The vast majority had at some point worked in the public sector. Three interviewees were women and 19 men. Some had gained their wealth by providing services for private customers, but the majority provided services for the public sector, benefitting from marketisation.

Twelve interviews were conducted online, three face-to-face and seven by telephone. Interview duration ranged from 52 minutes to 2 hours and 51 minutes. The interview schedule included open-ended questions on interviewee’s personal history, networks, work, media relations, wealth and philanthropy, also eliciting their views on the Nordic welfare state. After the interviews, the interviewees received a background questionnaire by email. This also included questions regarding their wealth and earnings. Participants often chose not to answer these questions, and only nine interviewees reported their wealth. The average reported wealth of these respondents was six million euros, but public tax records show that this is an underestimation; some of our interviewees had earned tens of millions of euros in the past decade. According to public tax records, the top management of the largest businesses in the sector had annual incomes between 250,000 and 700,000 euros.

Our data yield significant new knowledge, as previous research on Finnish for-profit care providers dates back to the 1990s and 2010s, focusing on the experiences of small entrepreneurs before the expansion of large companies. These neo-entrepreneurs had branch-specific motivations, and described their businesses as enabling personal development, enthusiasm and a voice in working conditions (Hasanen, 2013; Kovalainen and Österberg-Högstedt, 2013). Our data were produced in a much different situation, after market concentration and significant profiting.

In our data analysis, we focused on interviewees’ legitimation strategies, analysing how they made sense of their role in for-profit care. The coding and analysis of the data corresponded to the method of flexible coding (Deterding and Waters, 2021). In the first round of coding, the interviews were indexed identifying passages according to themes derived from the interview questions and from the interviewees’ responses. These broad themes included, for example, welfare state, public sector life course. In the second round, after seeing the variety of views in the data, the transcripts were systematically recoded into categories covering different views. The coded segments were analysed paying attention to how the interviewees legitimised their role as welfare profit-makers. By legitimation, we refer to claims and discursive practices intended to justify the activities, purposes and credibility of the for-profit sector and its elite actors (see Thumala et al., 2011).

Legitimating a contested business amid reputational problems

The contested environment of the welfare profit-makers emerged repeatedly in the interviews both obliquely and explicitly. As the top performers in their fields, our interviewees seemed to have a need to legitimise their practice against the negative media image. The for-profit sector’s stigmatised image was associated with media representations and political agenda-setting of the political green-left. For example, two interviewees portrayed the Finnish care scandals of 2019 as being part of the Social Democrats’ and the trade unions’ election campaign (Interview 7 – from here on I7; I10). The interviewees noted how the for-profit sector in Finland was ideologically ‘demonised’ (I18), considered ‘evil’ (I14), ‘exploitative’ (I14) and ‘criminal’ (I15). Some challenged these negative ‘money-grabbing’ media images by portraying them as exaggerated and unjust, as in this extract:

There are tens of thousands of companies . . . And those individual errors get too much air space. (. . .) It took me a long time to accept the fact that, from my point of view, really small things become big in the media, and then I feel that people are not interested in those bigger things. (. . .) If a mistake has been made, it will be addressed, but there will always be a follow-up story, and that’s what annoyed me about this media and publicity. (I5)

While talking about these morally tainting media representations, a few interviewees, like the one above, admitted blame for mistakes, noting that ‘whilst growing, some things went wrong’ (I7), or that ‘things should have been done differently’ (I4), and ‘no one wants to do shit anymore’ (I7). Portraying the unethical acts as products of ‘a shared past mindset’ and describing ‘the prudence of their more recent work processes’ (cf. Walsh et al., 2023), the interviewees drew temporal boundaries to the scandals. Past experiences were used to legitimise current practices.

However, most interviewees used the media representations to differentiate themselves from the moral taint, by making clear that ‘we avoided crises’ (I11), ‘we were never in the spotlight’ (I16), ‘we took care of adequate staffing’ (I10), or we were the ‘Robin Hood’ (I18) of the business. Thus, the interviewees evaluated their competitors while legitimising their own practices. For example, in the extract below, the interviewee constructs himself as moral by comparing his business with a ‘dishonest’ international company:

We have known all the time we have been in the business that the bigger ones compete, so to say, unfairly. They have calculated that they can take the risks, whereas we always had the idea to stick to everything [that has been promised], that no one would ever be able to say that we hadn’t done what we had agreed. (I10)

The interviewees, thus, deployed two competing strategies to legitimise themselves vis-à-vis the moral taint: they either contested or further contributed to the stigma while elevating their own current practice above accusations. The latter was mostly achieved by constructing hierarchies among the service providers and by blaming money-driven private actors (see also Kolbe, 2024). These are strategies widely described in research on tainted professions (Walsh et al., 2023) with which our interviewees also sought to legitimise their practice.

Defending the innovative and ethical private sector

Our interviewees did, however, draw boundaries not only against their (allegedly) tainted competitors, but also against the public sector, that was often their largest client. When public services are contracted out, this creates a specific relationship between contractor and service provider, one that cannot be equated with simple market transactions. In most cases, the result is better described as quasi-markets or a hybrid form of governance: instead of private customers, these markets are mostly funded and strictly regulated by the public sector (Johansson et al., 2016).

While legitimising their profit-making the interviewees actively constructed images of the public sector, participating ambivalently in both its delegitimisation and legitimisation. The interviewees often described how their services stood out in comparison with the public sector. They represented themselves as creative innovators (I8; I14) and employers who offered client-centred, high-quality services (I12; I13; I14; I17; I18; I19) and better access to care (I10), also saving taxpayers’ money (I6; I8; I20). As Maron (2022: 1063) has noted, in the context of changing conceptions of public service, boundary work emerges as a practice by which private actors create institutionalised differences to secure their status. Similarly, our interviewees described how for-profit practitioners work in an ambitious and ethically sustainable manner. Thus, some interviewees replaced (their assumed) profit-making motives with the ethic of care (Tronto, 1993):

Even if it is thought that the private sector prioritises euros, I would say that I have been able to accomplish [my work] more freely. It has been easier to develop the practice because there have been clear visions of what needs to be done, as I have been able to make investment decisions on my own, not needing to budget them as in the public sector. (. . .) I have also been able to implement what I would call ethically sound activities that have felt good. In my opinion, the money has followed from that. (I1)

Here the common image of the for-profit sector as unethical is inverted with private actors described as the ethical alternative. This way, the interviewees constructed their own positive image by blaming the public sector for lacking exactly those qualities that the private sector has:

If we could open up this health and (social) sector, so that there would be competition, it would also enable different innovative solutions, because if there is a motivation to prosper, it would allow you to grow your own business, there would be a lot of different innovative solutions. (. . .) I have still not come across any innovative solutions to these issues in the municipal or public organisations. (I14)

Here profit itself is presented as proof of good performance, rather than of greed, and the innovativeness of the profit-makers is used to disassociate their actions from the public sector, regularly criticised for not having the qualities of the private sector. Such views reflect well the dissonances generated by the relatively new quasi-markets caused by marketisation. As Maron writes in her research on ‘private state workers’, historically, ‘state work is characterised as indifferent, arbitrary, mechanical and inefficient’, whereas ‘market work is celebrated as generating prosperity, growth and innovation’. Similarly, in our research the public sector is described as ‘lazy’ (I16; I19), ‘slow’ (I4; I8; I12) and ‘stiff’ (I21), whereas the for-profit sector was claimed to differ from it in its style of government (I3), staff (I3; I4; I16; I19), quality of services (I12; I13; I14; I17; I18; I19), resources (I16), leadership (I2), cost efficiency (I4; I4; I5; I6; I7; I8; I12; I13; I14; I15), budgeting (I1; I4; I8), decision-making processes, political guidance and use of power (I6; I7; I8; I12; I14 I18; I19). Similar to private health insurance companies (Lapidus, 2022), these for-profit service providers create ‘a culture of anxiety around healthcare, reducing trust in its public form by portraying it in a bad light’.

The discontents of outsourcing and the public sector’s mistakes

Finally, many interviewees also held the public sector and policy makers accountable for the problems encountered in the relationship between public and private sectors. Consequently, also the excessive profits of the private actors and the concentration of the market were attributed to mistakes in the public sector.

Many interviewees who had sold their companies to big conglomerates argued that the intensified regulation after the care scandals had (paradoxically) benefitted the largest companies (who were also the targets of the scandals), as it helped them to drive competitors out of the market. These ex-entrepreneurs of middle-sized companies complained about a ‘widely concentrated market’ (I10) which they claimed the public sector and policy makers had created. They attributed the situation to the legislative changes favouring large international companies who could respond to ‘heavy’ regulation. In the healthcare sector, market concentration was also attributed to insurance companies prioritising contracts with nationwide coverage, leaving small and middle-sized companies on the sidelines (I12; I18; 120).

Overall, in our data market concentration was described by ex-entrepreneurs in both neutral terms – ‘the world changed’ (I15) – and in a negative tone: ‘big companies bought and small whined’ (I21), ‘the big guys decided to conquer Finland and that’s what they did’ (I20) and ‘the large companies became the master and the public sector a servant’ (I16).

After describing the oligopolistic market, one interviewee further explains how the large companies began to resemble the public sector in their inefficiency:

It is starting to resemble the activities of the public sector. There are all kinds of managers and planners and office holders who have no productive job description. (- -) And now the big ones fall into the trap of having a heavy administration, that means they [customers] have to pay pretty big administrative fees at the moment. (I20)

In this extract, the interviewee refers to institutional ‘isomorphism’ between large chains and the public sector; arguing that they mimic each other, thereby losing the benefits of the private sector.

In the interviews, the public sector is, thus, described as incapable of providing good service efficiently, while criticised for creating an oligopolistic quasi-market that has pushed small service providers out of business. Such accounts also included outright denial of the public sector’s ‘altruistic’ motives:

Especially in Finland there is an old narrative according to which wisdom lives in the public sector, in public service production, that it is the only right thing to do and it is altruistic and it works for the common good, and then the private sector just seeks profit. It is not about that. (. . .) There is an astonishing difference in the way people view, for example, growth entrepreneurs or entrepreneurs. If you’re in the technology sector or gaming industry, or whatever, you’re like a saviour and a financier of society and everyone is on your side (. . .). But if you’re in the private health and social sector, the question is how to ban it. (I8)

Many also criticised the public sector for failures in procurement processes and for expanding auditing, in other words, for managing the hybrid form of governance (Johansson et al., 2016):

Those public tenders should be smarter. They are ridiculous at the moment. There’s a procurement manager, who organises a tender for a social sector, to which some road construction tender forms are applied, where the price is decided, or silly questions are asked. And there’s no point in such a tender. (I19)

The interviewee further complains about how changes in procurement processes may worsen conditions for private companies – referring to the political risk (Svallfors and Tyllström, 2019) as characteristic of the otherwise lucrative welfare markets:

The problem with these tenders is that (. . .) when tenders are made for a certain period of time, then, oh God, if you have got through the tender twice and [locally] built up an organisation, a company and services, then some stupid tender comes along and the service you have produced, which the municipality thinks has been good and what it wants, does not go through the tender because the tender is bad [in quality]. So all this work has to be thrown in the bin. The municipality cannot buy from this service provider, the employees will be unemployed, and this service will be lost from the area. (I19)

Here, the public sector is argued to create risks for entrepreneurs, when companies lose contracts after public tenders.

Auditing – one of the basic characteristics of the hybrid governance model – was also criticised and reported by some interviewees to create excess work:

Fortunately, we were no longer in business under the previous [prime minister Marin’s] government, when it introduced the new ratios and who knows what came out of it. So, I wonder if there are any private operators left in the sector because the administrative bureaucracy and supervision and self-supervision are so heavy. The organisation of a smaller company simply cannot bear it. That’s why all the agility has been removed quite effectively. Somehow, I would hope that this would go in the other direction, this regulatory tsunami, which came perhaps during the last government. [It’s] been pretty drastic. (I15)

Conversely, the small providers criticised the public sector for not auditing the private sector enough:

It seemed very strange that if you buy something, why don’t you make sure it happens. (. . .) With a small resource the customer could control that everything is implemented as agreed. But that was not done. (I10)

Finally, some interviewees described the relationship with the public sector as hostile for ideological reasons, thus shifting accountability to the public sector:

I remember in the mid-90s [anonymised] in a discussion said that ‘the confrontation between the private and public sectors has never been as bad as it is now’, and you could have said the same thing almost every year since. It’s never been so horrifying. On all occasions, you don’t even want to say where you work. Somehow our demonisation and the decision to make the private sector the culprit (. . .), the use of subcontractors has never been done wisely. First, they say in politics, ‘let’s not use it at all’, ‘we don’t need the private sector’, ‘we don’t want it to come here’ and then, when you’ve s***ed your pants, at the eleventh hour, in dire straits, you start . . . It’s like when your house is burning, and you start negotiating fire insurance for yourself, [at that moment] the rates aren’t very good. (. . .) And okay, there are certainly situations where the private sector has used this situation a bit unreasonably to their advantage. If money is being pushed, you take it, even if it would have been worthwhile to say, ‘hey, no, no, no . . .’, ‘hey, let’s discuss this matter, so that you don’t buy like this, so that we tell you how you should buy, so you would get it much cheaper’. But since there is no dialogue and it has never been proactive in the past, here we are. We are angry, we shoot over the fence in one direction or another, and when we need something, it’s no wonder that the other party is not willing to relieve the distressed situation very cheaply. (. . .) But some people in the political parties find the use of the private sector in healthcare so ideologically repugnant that I don’t know how terrible the economic situation must be for us to be able to put ideology aside for a moment and think about how we can solve this, let’s say, half-assed system together. (I18)

Overall, our interviewees criticised the public sector for a lack of long-term strategic thinking, for organising public procurements badly (I16; I17; I19), for failures in auditing (I5; I6; I10; I15; I19) and for not listening to market actors (I12; I18). As critics of outsourcing have noted, economic benefits from private contracting are more likely to be realised if the quantity and quality of the service can be unambiguously described and measured; otherwise, the administrative costs of preparing tenders, evaluating bids, signing the contract and monitoring (and possibly sanctioning) service delivery are likely to be high (Petersen et al., 2018). The interviewees seem to subscribe to such criticism, but instead of seeing these as characteristics of outsourcing practice as such, they present them as failures of the Finnish public sector.

These accounts are reminiscent of the legitimisation narratives discussed by Kolbe (2024) in her research on private museums. Her interviewees stressed the importance of private museums compared with public museums which were criticised as slow-moving and excessively bureaucratic. However, while Kolbe’s (2024) informants could dissociate themselves entirely from the public sector, our interviewees found a further challenge in their need to delegitimise the public sector as a producer of services, but also to keep intact its role as a funder also accountable for all the ills of marketisation, such as market failures, monopolisation tendencies and excessive profit-making.

To highlight the need for the public funder, the interviewees called for a relationship that would be symbiotic (I12), collaborative (I1; I9), consensual, co-operative, balanced (I6), seamless and based on (true) partnership (I4; I5). One interviewee made it explicit that without partnership-based models the company would have nothing to sell (I4).

Such views can be elaborated from a transaction cost economics perspective, where it has been argued that contracts are incomplete and suppliers cannot automatically be trusted, but there is rather legitimate mistrust between parties (Lindenberg, 2000). Such analysis was largely absent from the interviews. Instead of acknowledging the conflict of interest between procurer and service providers, competition between service providers – presented as a means to lower costs and greater efficiency (I4; I5; I6; I7; I8; I12; I13; I14; I15) – is replaced with partnership talk. Such opinions hint to the structural dependencies between the private providers and the public contractors discussed above.

A few interviewees were, however, critical of such partnerships, emphasising that large scale use of for-profit actors would lead to useless operations and ‘unhealthy practices’:

Buying these public services privately on a large scale is not a sensible policy because it creates a kind of money-making phenomenon. (I20)

Here, the interviewee makes clear that profit-making should operate within politically established limits to avoid a honeypot phenomenon (Thumala et al., 2011). One interviewee also participated in such reasoning by arguing that given healthy competition, profit-makers would be unable to profit unreasonably, and that profit-makers should be humble servants of the public sector (I16).

Conclusion

Recent decades have witnessed the expansion of market mechanisms in the publicly funded care sector. In reality, these markets are, however, better described as quasi-markets: instead of serving private customers they are mostly funded and strictly regulated by the public sector.

In this article, we examined how those private elite actors who have made large profits in this transition legitimise their practices and profit-making. Moreover, to understand the changing moral economies concerning such welfare profit-making, we investigated the role of the public sector in these narratives.

According to Kolbe (2024), ‘today’s privileged are able to treat the public and the private spheres as contingent, interlinked sites which can be effectively pitted against or blurred with one another’ (p. 1121). We took this argument further by showing how those actors whose profits depend on the public sector define the relationship between public and private, creating an image of a public sector without moral legitimacy, but nevertheless amenable to private profit-making.

The results show signs of a changing moral economy (Sachweh and Hilmar, 2020) of a mature welfare state where it has become possible to extract profit from the core functions of the state but when this is still not seen as entirely legitimate.

The moral anxieties around publicly funded private profit-making manifested in the interviewees’ tendency to produce discourses that could be interpreted as legitimation narratives. The interviewees not only drew moral boundaries against their competitors, but also passed accountability onto policies and legislators.

They regularly used moral and economic arguments to justify their own role. If in public opinion profit-making is perceived as an element that turns otherwise appreciated work ‘dirty’, in the discourses of the welfare profit-makers, the profits were treated as rewards for innovative, customer-oriented and ethically sustainable service production that the public sector lacks. By framing profits as a means for improved quality, the welfare profit-makers delegitimised the public sector as a producer of care. Our analysis reveals a paradox in which the actors of a field heavily dependent on public funding end up undermining the very legitimacy of the public sector.

In so doing, they sought to construct something that could be called a new moral economy in the Nordics, in which private profit-making is legitimised inside the public, and (consequently), the public sector hollowed out. As researchers of moral economy have suggested, to understand the role of morality in the economy, one should take account of the institutions as well as the moral, historical and cultural framings of the economy (Sachweh and Hilmar, 2020). Our interviewees participated actively in such work.

The interviewees often criticised the public sector for challenges typical of quasi-markets created by outsourcing. They criticised the public sector for the expansion of auditing, the complexity of procurement procedures, the centralisation of the market and the political risks imposed on the service providers. These are, however, all common features discussed in the critical literature on marketisation (Johansson et al., 2016; Petersen et al., 2018). Procurement processes are complex and laborious, and public organisations need to implement control mechanisms to ensure that vendors align with the buyer’s purposes. Future research could read the narratives of the private service providers next to those of the procurers to better understand the diverging views on outsourcing processes.

Instead of identifying these shortcomings as typical by-products of the new system, the interviewees perceived them as further evidence of the ineptness of the public sector. Consequently, our analysis shows how the for-profit actors constitute the relationship between public and private sectors as one in which the problems of privatisation, are imposed on the public procurer and on the structural changes (such as legislative changes), or in some cases on the competitors. The well-known discontents of privatisation are attributed to the failures of the public sector and partly to public scandals and wrongdoings by others. Consequently, our interviewees constructed a peculiar new moral economy in which private profit-making has become an essential part of public services. In the future, researcher might want to investigate to what extent such views impact policy makers’ assessments and decisions concerning privatisation.

Finally, our analysis also revealed diversity among for-profit providers. As Svallfors and Tyllström (2019) summarise the Swedish context, the private welfare industry is heterogeneous: ‘many are quite small, others very large; firms with large outside owners have higher demands for profitability than self-owned companies (p. 757)’. In our data, the small service providers, for example, criticised not only the public sector, but also the big conglomerates, using market idioms to frame themselves as the embodiments of a true market spirit. For such reasons, the various for-profit actors often disagreed in their analyses, but the resulting moral economy was in most cases the same: a public sector devoid of any positive qualities and a private sector deserving of its profits.