According to the Washington Post, Elon Musk and the Trump Administration are hauling out an “oldie but goodie” and promising that once they’ve hollowed out the federal government’s capacity to govern, they’ll turn any functions they deem necessary over to the private sector. They’ll privatize for “efficiency.” What could possibly go wrong?
Let me count the ways.
I spent a fair amount of my academic career researching what folks on the Right misleadingly call “privatization.” The first thing you need to know is that calling what Trump and Musk want to do “privatizing” is a misnomer. When Margaret Thatcher sold off government-owned industries to the private sector–where they made or lost money, paid taxes, and were left to sink or swim–that was privatization. In the U.S., the term is used to mean contracts between a government agency and a business or nonprofit organization to provide a government benefit or service. Government continues to pay for that service or benefit with tax dollars, and government remains responsible for its proper delivery.
Sometimes, contracting out makes sense. Sometimes it doesn’t. (It also shouldn’t be confused with procurement— government’s purchase of goods and services from the private market.)
Contracts with units of government are qualitatively different from contracts between private actors, and those differences make it far more likely that the “privatization” contracts ultimately negotiated will be unfavorable to taxpayers. Contracting out first became a fad at the state and local level some twenty-plus years ago, and the results weren’t pretty.
As I wrote back in 2013, mayors and governors who are considering privatization are operating under a different set of incentives than the corporate CEO who is charged with long-term profitability of his business. Long term to a politician means “until the next election.” Typically, the elected official is looking for immediate cash to relieve fiscal stress (and improve his immediate political prospects) and is much less concerned with the extended consequences of the transaction.
Furthermore–although it really pains me as a former Corporation Counsel to admit this–the lawyers who reviewed these deals for local governments tended to be far less sophisticated than lawyers acting on behalf of the contractors. That’s not because they aren’t good lawyers–most are. But the skills required to advise a municipality or state agency aren’t generally the same skills as those needed by practitioners of business transaction law.
In addition to the existence of unequal bargaining capacities, there is also—unfortunately—the very high potential for “crony capitalism,” the temptation to reward a campaign donor or political patron with a lucrative contract at taxpayer expense. Back in the bad old days, patronage meant that you volunteered for the party and if your party won, you–or maybe your brother-in-law–got a job with the city or state. With “privatization,” patronage meant that you made a meaningful contribution to the party and if it won, you got a cushy contract.
Ideally, the media would act as a watchdog in these negotiations, alerting the public when a proposed contract is lopsided or otherwise unfavorable. But media has never been very good at providing this sort of scrutiny, because news organizations rarely employ business reporters able to analyze complex transactions. (In today’s media environment, of course, we’re lucky if we even know a deal is in the works.)
In that 2013 post, I warned that we shouldn’t be surprised when these transactions turn out to be unfavorable to the taxpayer–and in the years that followed, a great many of them proved to be very unfavorable indeed. (For one thing, it turned out that too many government agencies lacked the capacity to effectively monitor contractors.)
Worse, from an accountability standpoint, when services are delivered by an intermediary, citizens often fail to realize that those services are really being provided by government. That failure has constitutional as well as political implications. Only government can violate an individual’s civil liberties–that’s what lawyers call “state action”–so it’s important that we be able to distinguish actions taken by private actors from those that can be attributed to government. Privatization has significantly muddied that distinction.
Also, when contracting is extensive, it masks the true size of government. Today, there are approximately 3.7 million contract employees in addition to 2.1 million civil servants. Only the latter are being targeted by Musk.
Will the public fall for this replay of an expensive and discredited “reform”? Hopefully, our earlier, extensive negative experience with privatization will prevent folks from falling for this again, but as we know, simple prescriptions sell.
The plutocrats are undoubtedly salivating….
Not 100% convinced many CEOs see their responsibility as ensuring long-term profit. That doesn’t seem like the modus operandi for the past few decades (at least).
“Also, when contracting is extensive, it masks the true size of government.”
When Goldsmith published his savings of our tax dollars from the “waste” of Hudnut, he didn’t include his privatizing when publishing the City budget, only that of actual City employees and expenditures. He also had a form in “internal privatizing” by placing Mayor’s Office employees in other Departments, paying them out of that budget to prove his lowering his office staff numbers from that of Mayor Bill Hudnut and the financial savings.
Trump and Musk aren’t even hiding what they are doing to fully unAmericanize this entire country and its citizenry. Now blatantly saying he WILL deport American citizens he believes should be removed and sent to foreign prisons.
“Only government can violate an individual’s civil liberties…” And he and Muxk have only just begun; but there are the beginnings of some open in-fighting among the sitting Republicans in the Senate. But will those in the House join the fight?
Of course the people employed to monitor the newly “privatized” government functions are (or will be) defined as “non productive government employees” and be first in line to be RIFed. Then services will deteriorate, which will be attributed to waste, fraud, & abuse – requiring further austerity.
Yes, Dirk, the CEO of a publicly traded company, manages quarterly profits to gain approval from Wall Street analysts. Their vision is shorter than politicians’.
P3, or public-private partnerships, is part of the neoliberalism revolution started by the corrupt Reagan and Thatcher, which based their programs on Milton Friedman’s Chicago School of Economics. Musk is a federal contractor with the government. Only the Inspector General knows if the taxpayers are getting screwed, and the first people fired by Trump/Musk were the IGs. #shocking
Amazingly, Musk’s mentor came from the CIA joint ventures group and moved to NASA, where he provided Musk with a mysterious multi-billion taxpayer-funded capital infusion when he faced bankruptcy. Did the taxpayers get an ownership interest in the companies for our capital infusion? LOL
The corruption weaved into these revolving door P3 relationships is astonishing, but as Sheila mentioned, the “press” will not touch these relationships because of the oligarchy connection. Most of the press consists of publicly traded companies where profit is the motive – NOT truth.
As I’ve mentioned, I stay on X to follow Musk and Trump’s crew. Their blatant dishonesty is incredible. Musk added community notes to X for fact-checking purposes, but they are turned off on him and Trump’s administration. What’s worse is their social media posts get implanted in articles circulated by the media, so their propaganda gets spread around the country.
Almost everything they are doing right now is in preparation to justify permanent tax cuts for the 1% oligarchs and their corporations, expected to cost around $4.5 trillion. Taxpayers will get the bill, and the social safety net will suffer. It’s called theft!
Scott Bessent bragged yesterday that 70+ countries have called Trump to negotiate their tariffs. “Trump is winning!” I responded, “Why did Trump wipe out trillions of value in the market only to receive phone calls? Why didn’t he ‘propose tariffs’ and then call leaders to negotiate?” #ignorance
p.s. Trump’s Executive Order signed yesterday for Charles Koch breathes new life into the dying coal industry. This will benefit Charles and Duke Energy, and Hoosiers will get to choke on all the CO2 and mercury-belching coal plants in Southern Indiana. #AsthmaAlley
When I was still working and we would outsource some particular job, almost always management failed to account for the management overhead needed to supervise the outsourcing. The thinking was that if something‘s outsourced, we don’t need to worry about it. The truth is it takes just as much management oversight to outsource something as it does to do it in house. Management almost never takes this into account thinking that once something‘s outsourced everybody involved should have all kinds of free time to do something else. I think in this case the thinking is that once a function is outsourced a department of government can be eliminated and that’s just not true.
“Will the public fall for this replay of an expensive and discredited “reform”?” There is so much more to Trump’s “replay” than privatization; he has taken us back to 1965 and “The Eve of Destruction”
“Don’t you understand what I’m tryin’ to say
Can’t you feel the fear I’m feeling’ today?
If the button is pushed, there’s no runnin’ away
There’ll be no one to save with the world in a grave.
Take a look around you boy, its’ bound to scare you boy.
And you tell me over and over again my friend.
Ah, don’t you believe we’re on the eve of destruction?”
We haven’t been this close to “the war to end all wars” before; and we need to fear another Civil War with our neighbor’s “boots on the ground” resulting in no following “Reconstruction” to be reconstructed. I’m again thinking about Rhett Butler’s words in “Gone With The Wind”: “There’s as much money to be made from the destruction of a civilization as there is in building one.” Trump is now talking about selling the government buildings he is having Musk empty of government workers. Are his own real estate development cronies and billionaires waiting in line to make use of them for their private businesses? Does he have MAGAs armed with assault weapons aimed at members of Congress to keep them mute and idle? What is it going to take in addition to the current global tariff wars ordered and directed by Trump to get them off their asses?
“Will the public fall for this replay of an expensive and discredited “reform”?” Is Trump’s global tariff war this century’s AI version of privatization?
“Will the public fall for this replay…?” Could happen, but Trump’s lowering numbers might get in the way.
To me this “privatization” has the smell of simply the next scam/grift for Trump.
First they came for the Post Office, then…..
The first thing that I was taught in the first class of my MBA program was “The business of business is to MAKE MONEY!” That is the key difference between the public and private sectors. It’s not the only difference, but it is the most important one.
Once upon a time there was a concept that was called inherently governmental duties. These duties were never supposed to contracted out. I’m pretty sure that it’s not the case today. It looks like everything from Cashier to Intelligence Analyst is open for bidding.
The distortion of government that is currently underway can’t continue unabated, if we’re to have any government at all. I know that’s the wet dream of every member of the Koch Consortium, but the rest of us really don’t want a pay to play trash hauling, road building, safety, fire suppression, or weather forecasting, etc.
Here I go again with another aside! If we bring back manufacturing, wouldn’t we also bring back strong labor unions?
The notion that privatization is a financial benefit rests entirely on the assumption that government is inefficient. But what if it’s not?
What if the corporate model that optimizes return on shareholders’ investment is inefficient?
Those assumptions are untested except for a single type of market: numerous corporations serving a commodity market in which none are favored by any factor except price to the buyer. Capitalists hate markets like that.
Every capitalist would prefer the early innovative days of Microsoft, Apple, Facebook, or Google.
What if currency flow, everything economic, is not even the point? What if the point of life is to achieve a safe, comfortable life in which everyone is free to live according to their own makeup and has access to the maximum degree of educational services to learn from past generations to be the best they can be?
That is finally, after 10,000 generations of homo sapiens, close at hand with the combination of AI and robotics and renewable energy and high rise farming.
Sustainable life is all about maximizing use of all of earth’s resources, including the minds of homo sapiens and our focused attention on long term sustainability.
Pete, someone already thought of a measurement for what you’re describing – the Happiness Index:
“In the 2025 World Happiness Report, the United States ranks 24th, its lowest position ever, marking a decline from previous years.”
Here are the Top 10 (surprise):
1) Finland
2) Denmark
3) Iceland
4) Sweden
5) Netherlands
6) Costa Rica
7) Norway
8) Israel
9) Luxembourg
10) Mexico
The Reagan administration allowed the medical insurance companies to make medical decisions that were dependent of profit margin. THAT is what will happen with everything else the Republican monster machine wants to privatize. Oh, and if Social Security, say, isn’t profitable enough, well the “privates” will just liquidate it and take the money to Switzerland.
When governments contract out they often don’t worry about those employees not having benefits other public employees have.