The Shadow Government

A fair amount of my academic research has addressed issues of government privatization–or more accurately, contracting out. (Privatization, as Morton Marcus frequently notes, is what Margaret Thatcher did in England: selling off government enterprises to private sector owners. In the US, privatization means providing government services through for-profit or nonprofit contractors–a very different thing.)

My research has convinced me of three things: 1) while contracting may be appropriate under some circumstances, it is not the panacea that so many politicians seem to think. Sometimes it makes sense, often not. 2) the cost savings that are touted by privatization advocates are largely mythical, the result of omitting the cost to government of contract management–or the even greater costs of failing to manage those contracts. And 3) far from shrinking the size of government, as proponents contend, contracting actually expands both the size and scope of government, while at the same time making that expansion less visible and government less accountable.

Two recent studies confirm those latter conclusions.

A few weeks ago, the Government Accounting Office released the results of its investigation of contracting costs. It found that contracting was often more costly than providing the same services in-house. And just a few days ago, during a debate over a proposed federal contracting rule, the number of of federal contract workers–people working full-time for the federal government who are contract workers rather than federal employees–was estimated at approximately 7.1 million. That’s in contrast to the full-time civilian federal workforce of 2.1 million. ┬áThe Economic Policy Institute estimates that 43% of all employees who do the government’s work are employed by contractors. (It further estimates that 20% of that 43% are paid “poverty wages.”)

It isn’t only the federal government, of course. When you add the “shadow” employees working under contract for state and local governments, estimates of the number of contracted government employees run as high as 17 million. It’s impossible to know for certain, because there is very little data available that would allow governments to monitor these workers, and considerable resistance from the business community to the Obama administration’s recent efforts to collect and analyze such information.

It’s very difficult to hold government accountable when you can’t see government at work. Contract workers need to come out of the shadows.


  1. To your points in the second paragraph.

    1) I would ask, panacea for whom? I think you mean “taxpayers”, while proponents likely mean “their friends and contributors”. So, I imagine it is a panacea, just not for who it should be.

    2) Surely, you don’t mean to imply that proponents don’t realize this? Rather, I would imagine that they just ignore it because there is rarely a negative connection between themselves and the added costs.

    3) Ah, but for many politicians and bureacrats, less visible and/or accountable is a benefit, not a liability.

  2. Despite a lot of disagreement in this forum over government or the private sector (or something in-between) as “the solution”, I would argue that’s not as important as vigilance against corruption from any and all of them.

    The sad common factor in all of this is the behavior of human beings. Whether off-shore oil drilling that doesn’t get inspected, or overseas government contractors getting over, school boards and adminstration permitted years of lousy graduation rates, or an SEC that can’t find bad guys- if we don’t participate, vote, speak-up, inspect, write, call, picket, question, or belly-ache on the local blog (nod to our moderator)- then we get the government we deserve- whatever flavor it may be.

    Why would we fund any program with our hard-earned dollars without factoring in inspection, quality control, auditing, follow-up, or verification of what’s being done with the people’s money?

  3. I would like to see someone write a history of the civil service. I have a suspicion that there is a strong correlation between the demands to privatize government work and reduce use of direct government employees, and the implementation of exams and anti-discrimination measures that made the civil service one of the biggest employers of women and minorities. Moving well-paid jobs with good benefits out of direct government purview and into the private sector not only took profits from those jobs into private pockets, but also has made it harder to document and prosecute race and gender discrimination, while layoffs from the public sector have disproportionately affected women and minorities. The fact that the stereotype of the “lazy government employee” bears a striking resemblance, in its content and target, to the “welfare queen” shibboleth, suggests to me that there is a relationship here.

    In plain language: I think some of the umbrage at government employees which strangely doesn’t come up when functions are privatized has to do with how much of the well-paid positions in the civil service are occupied by black and female employees compared to the private sector.

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