America’s attention is focused on Iraq these days, so the Bush Administration’s recent announcement that it plans to privatize 800,000 federal jobs, beginning with air traffic controllers, got very little attention.
America’s attention is focused on Iraq these days, so the Bush Administration’s recent announcement that it plans to privatize 800,000 federal jobs, beginning with air traffic controllers, got very little attention.
Having lived through an eight-year love affair with privatization during the Goldsmith Administration, some of us in Indianapolis might have a lesson or two to offer the eager beavers in Washington. It isn’t just that we worry when air traffic control is in the hands of the lowest bidder. It’s that we learned—the hard way—that what politicians on this side of the Atlantic call “privatization,” isn’t.
Love her or hate her, Maggie Thatcher understood how to privatize. Thatcher decided that government was doing things it didn’t need to do—Britain was highly socialized when she took office—so she sold off several government-owned industries. The sales were real. The buyers had full ownership, including responsibility for running the businesses involved, competing with others, and paying taxes on any profits. They could succeed or fail as market forces dictated.
In the United States, privatization means something very different. If the Bush Administration “privatizes” air traffic control, it will fire the government employees who are currently performing that function, and it will then contract with a private firm for the needed services. Government will still be providing the services, will still be paying for them, will still have control over the manner in which they are provided, and will still be responsible for them. Government will not be smaller, and will not be doing less—this “privatization” will simply change the delivery mechanism.
Now, there is nothing new or sinister about contracting out for goods and services—government agencies probably bought muskets for soldiers during the Revolutionary War. No one expects government to manufacture its own computers. Sometimes contracting makes great sense; sometimes it doesn’t. If there is a lot of competition in the production of the goods or services involved, it can save taxpayers money; if there isn’t, a private monopoly isn’t inherently superior to a public one.
One lesson that Indianapolis learned the hard way is that managing contracts can be a lot harder than managing employees. Oversight is a critical—and expensive—element of contracting, and it is easy to forget to factor in the cost of that oversight when calculating costs (or running for office).
We learned other lessons, too. It’s easy for government contracts to become another form of patronage—a “quid pro quo” for campaign contributions. Poorly managed, privatization can mean upheaval, loss of accountability, and loss of government expertise. It can also cost more, rather than less. In Indianapolis, it cost a lot more—and we will still be paying off the resulting municipal debt for years to come.
There aren’t a lot of companies in the United States offering air traffic control services in the open market. But somehow, I imagine one of Mr. Bush’s cronies will emerge to bid for the contract. “Kenny Boy” Lay doesn’t have a lot to do these days.