What Drives Me Crazy

A couple of days ago, I got my ever-thinner print version of Newsweek, and began leafing through it. I came to an article by one Niall Ferguson (“Niall Ferguson Solves the Debt Crisis”) I don’t know who Ferguson is, although I’ve seen his name here and there, but obviously, if he has a solution to the “debt crisis,” (the precise nature of which was conveniently undefined), I wanted to know what it was.

And what was it? Privatization, which–he blandly assured readers–“has been a huge success nearly everywhere it’s been tried.”

When I came to that sentence, my husband called from another room to ask me why I was making that strange noise.

Let me explain why Mr. Ferguson’s article made my head explode. I have spent a reasonable percent of my time in academia studying privatization, and have written a number of (peer reviewed) articles on the subject, and it is clear that Ferguson is, shall we say, confused. The first clue is his reference to Margaret Thatcher’s successes. I agree that much of Thatcher’s privatization effort was successful and sound, but what Thatcher called privatization was very different from what Americans mean when we use the term. Thatcher sold off assets (steel mills, for example) that most economists would agree should never have been owned by government in the first place. And she sold them, to private owners who were left to own and operate them, pay taxes on any profits, and go under if they failed. These assets were no longer on the British government’s balance sheets, for good or ill.

This is significantly different from the situation in the United States, for two reasons. First of all, we were never socialized to the extent that England and many European countries were, so our governmental units–with very few exceptions–do not own property that is extraneous to the mission of government. We don’t have publicly owned steel mills or coal mines or other assets more appropriate to private ownership to sell off. Ferguson cites Mitch Daniels’ “lease” of Indiana’s public highways with approval; I think many of us would argue that public roads are hardly in the same category as steel mills.

That allusion to Indiana’s Toll Road brings us to the second difference between British and American practices: what we call privatization in the U.S. isn’t really privatization. We use the term to mean “contracting out.” If we have potholes to fill (and right now, boy do we!) we ask private asphalt companies to bid on filling them–we don’t expect government to manufacture its own asphalt and use its own employees to do the job–but we don’t expect government to sell the streets and allow the market to determine which ones get paved, either.

I didn’t intend to turn this post into an academic lecture/rant, but I get so tired of pompous pundits who don’t bother to do any homework, who don’t bother to define their terms, blandly prescribing simple fixes for complicated issues they clearly do not understand.  If Ferguson is advocating that we sell off government assets, he needs to distinguish such outright sales from the “leases” and “contracts” that Americans are familiar with, and he needs to identify the assets that he believes should be privately rather than publicly owned. (I’d be quite willing to sell off sports stadiums, but I’d fight a proposed sale of libraries.) If we ever have that discussion, I think it is highly unlikely that we’d find enough stuff to sell to retire the national debt.

And just for Mr. Ferguson’s information, privatization (defined as contracting out) has not been a “success nearly everywhere.” I’d be happy to supply him with citations to multiple studies demonstrating quite the contrary–but somehow I doubt he’d be interested.

Who said “It ain’t what you don’t know that hurts you, it’s what you know that just ain’t so”?