What American politicians call privatization has been a focus of much my academic work.(If you go to the “Academic papers” section of this blog and search for privatization, you’ll find a lot of entries.)
I phrase it as “what American politicians call privatization” because–as Morton Marcus pointed out to me years ago– genuine privatization is what Margaret Thatcher did in England. She sold off government-owned assets like railroads and steel mills to the private sector, after which they were private. They paid taxes, and either prospered or failed, but government no longer had much to do with them.
What Americans call “privatization” is very different. The accurate term is “contracting out” –and it refers to the decision by government agencies to provide government services through for-profit or non-profit surrogates. That process should not be confused with procurement–no one expects city hall to manufacture its own computers or the myriad other items it requires in order to function. (Admittedly, the line can get blurry: contracting with a private paving company to fill potholes, for example. But few privatization critics are troubled by those long-standing practices.)
It is important to recognize that when a government agency contracts with a surrogate to provide services that the agency is legally required to provide, government remains legally responsible for the proper delivery of those services.
Robert Reich recently enumerated five rules that should govern these decisions. His rules are very similar to those on my class lecture on the subject. It should be obvious, for example, that government shouldn’t contract out when keeping a service in-house will be more efficient and cost-effective.
Other rules are less obvious, but no less important.
- Don’t privatize when the purpose of the service is to bring us together – reinforcing our communities, helping us connect with one another across class and race, linking up Americans who’d otherwise be isolated or marginalized.
This is why we have a public postal service that serves everyone, even small rural communities where for-profit private carriers often won’t go. This is why we value public education and need to be very careful that charter schools and other forms of so-called school choice don’t end up dividing our children and our communities rather than pulling them together.
- Don’t privatize when the people who are supposed to get the service have no power to complain when services are poor.
This is why for-profit prison corporations have proven again and again to violate the constitutional rights of prisoners, and why for-profit detention centers for refugee children at the border pose such grave risks.
- Don’t privatize when those who are getting the service have no way to know they’re receiving poor quality.
The marketers of for-profit colleges, for example, have every incentive to exploit young people and their parents because the value of the degrees they’re offering can’t easily be known. Which is why non-profit colleges and universities have proven far more trustworthy.
- Don’t privatize where for-profit corporations face insufficient competition to keep prices under control.
Giant for-profit defense contractors with power over how contracts are awarded generate notorious cost overruns because they’re accountable mainly to their shareholders, not to the public.
Perhaps the most troubling contracting practices involve the military; contract soldiers are uncomfortably similar to mercenaries, and the growing use of private companies in America’s various wars and military actions generates a number of very thorny issues, a topic I’ve explored elsewhere.
One of America’s many overdue conversations should address what services we expect our various levels of government to provide and the nature and extent of the evidence needed to support a decision to outsource service delivery.