Privatization … What Is It?
By Staff News & Analysis - July 12, 2013

Edward Snowden and the disaster of privatization … In May, computer analyst Edward Snowden flew to China, handed over volumes of National Security Agency surveillance data to a reporter, and launched a heated national conversation about our nation's surveillance state. Underscoring that conversation was the fact that Snowden was a private contractor, given access to a vast store of information despite having virtually no track record with the NSA or the private firm with which he was employed. Snowden's leaks exposed a widespread lack of oversight of the contractors working at every level of our government; outsourcing can be nearly as damaging at the state and local levels as it is for federal contracts. – Reuters

Dominant Social Theme: Privatization is necessary, as regulatory democracies cannot do everything.

Free-Market Analysis: This article makes the point that privatizing the monopoly services of regulatory democracies is actually dangerous and unworkable.

We've made the same point. The article doesn't go far enough, however, in terms of nomenclature. The article calls what is going on, especially in the US, "privatization." We would call it something else.

But whatever you call it, taking a monopoly held in place by force – and that's what state monopolies are – and then transferring that privileged circumstance to the private sector does nothing to address the initial significant problem, which is that there is no competition allowed.

Because there is no competition, there is no consideration within the provision of the service for alternative ways of doing things. All that privatization does, therefore, is enhance the efficiency of whatever is being implemented.

If a public school is dysfunctional, that dysfunction will surely be rendered more pernicious and invasive by privatization. The same goes for surveillance or incarceration. The provision of services will be enhanced and costs likely will go down. When it comes to prisons, for instance, what this means is that food rations will be lessened, exercise reduced and work hours expanded.

Monopoly privatization does nothing to address the fundamental problem of most government – which is that it is increasingly irrational and invasive – while increasing the competence with which irrational policies and procedures are applied.

Here's more:

The same lack of transparency, accountability and oversight threatening our national security threatens public services provided each day across the country. Cash-strapped mayors and governors are handing over control of critical public services and assets to for-profit corporations and Wall Street investment banks that promise to handle them better, faster and cheaper.


Too often, such deals entirely undermine transparency, accountability, shared prosperity and competition — the very underpinnings of democracy. In fact, the fine print in these outsourcing deals often gives corporations the power to make public decisions for decades to come. It also often guarantees profits even when getting them conflicts with what was a bedrock value of America: public service provided for the public good.

In Chicago, a Morgan Stanley-backed consortium took control of 36,000 public parking meters in a 75-year lease. Taxpayers must reimburse the private company when spaces are closed for street fairs or emergency weather conditions.

The contract also prohibits the city from operating or permitting operation of a competing public parking facility. Even more outrageous, the city cannot make improvements to streets that contain parking meters, such as adding bicycle lanes or expanding the sidewalk.

In Denver, the private, foreign consortium that operates the Northwest Parkway can prevent any public road improvements near their toll road because they "might hurt the parkway financially" by providing an alternative route for drivers. Taxpayers are stuck with that contract for 99 years.

In 2012, Corrections Corporation of America (CCA), the largest private prison company in the country, sent a letter to 48 states offering to buy public prisons in exchange for a promise to keep the prisons 90 percent filled for 20 years. While the letter was a public relations fiasco for CCA, it turns out that many existing private prison contracts actually include "occupancy guarantees" of 90 percent and even 100 percent.

The article goes on to mention an initiative called the Taxpayer Empowerment Agenda – "a series of state and local proposals to restore transparency, accountability, shared prosperity and competition."

But even though this sounds well meaning, one wonders if re-empowering government is really the answer. The article ends by stating that it is time "taxpayers took control" but in regulatory democracies it is not taxpayers that are in control but bureaucracies.

We would argue that the way to reduce governmental abuses – especially those enshrined by privatization – has to do not with making government policies more transparent and controllable but with shrinking the public sector's reach and ambition.

Somehow, the idea has taken hold of late – in the context of mainstream media boosterism at any rate – that governments can provide effective and necessary services, either by themselves or in concert with private enterprise. This is simply not true and is probably at the root of what's gone wrong.

Governments are lousy providers of services and offering monopoly administration of these dubious services to the private sector doesn't address the real problem, which is the absence of free-market competition. Transparency doesn't help … nor does "taxpayer empowerment." And certainly marrying private efficiencies to public monopolies only aggravates what is bad and industrializes what is worse.

After Thoughts

The name for this is not privatization, by the way, but "fascism."

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