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”?
Mayor Ballard’s proposal to privatize the city’s parking continues to spark bipartisan concern. Last week, the Sunday Star ran a “point-counterpoint” between Deputy Mayor Michael Huber, the proposal’s architect, and Aaron Renn, a respected urban affairs expert who has criticized it. Star editor Dennis Ryerson noted that many open questions should be answered before the City-County Council makes a final decision.
What are those questions?
Why would any city turn over an important part of its infrastructure to any private company for fifty years? Even if the deal were less one-sided fiscally, decisions about where to place meters, how to price them, what lengths of time to allow and so on have an enormous impact on local businesses and residential neighborhoods. They are decisions requiring flexibility in the face of changing circumstances; they are most definitely not decisions that should be held hostage to contracting provisions aimed at protecting a vendor’s profits.
Why would we enter into a contract that will add significantly to the costs of downtown development? Indianapolis has worked hard to encourage construction of hotels, retail establishments and residential units in our urban core. Often, that construction interrupts adjacent parking. Now, the city can choose to ignore that loss of parking revenue, or to charge the developer, based upon the City’s best interests. This contract requires that ACS be paid whenever such interruptions occur. It has been estimated that such a provision would have added over two million dollars to the cost of the current legs of the Cultural Trail.
Why ACS? Much has been written about the problems with Chicago’s parking privatization, but far less about ACS’ track record in places like Washington, D.C., where an audit documented mismanagement, overcharging, over-counting of meters, and the issuance of bogus tickets (ACS gets all the revenue for tickets). Washington lost $8,823,447 in revenue and experienced a twenty-fold increase in complaints from the public. And it wasn’t just D.C. Police officers in Edmonton, Canada, were tried for accepting bribes from ACS, and a few years ago, the company’s CEO and CFO stepped down after admitting to $51 million in stock fraud. Why enter into such a disadvantageous deal for so long a term with a company having so troubling a track record?
One of the problems with privatization in general, as we learned during the Goldsmith administration, is that it leads to speculation about cronyism and political back-scratching. In this case, the Mayor’s personal advisor is a registered lobbyist for ACS through Barnes and Thornburg, the same law firm that employs the President of the City-County Council. Whatever the facts of the situation, those relationships raise an appearance of impropriety.
Finally, why not simply retain control of our infrastructure, and issue revenue bonds for the necessary improvements? Interest rates are at a historic low, making it an excellent time to do so. If this administration simply can’t manage parking, create a Municipal Parking Authority, as Councilor Jackie Nytes has suggested.
However we proceed, we should park this proposal. Permanently.
There is a lively debate currently raging over the apparent intent of the Ballard Administration to sell Indianapolis’ water and sewer utilities. Most of the criticism centers on allegations that the decision-making process has been less than transparent—that whatever the merits of an ultimate deal, the public has been largely shut out of the discussions.
In response to such criticisms, the Administration points out that its Request for Expression of Interest and all of the twenty-plus responses have been posted on the Mayor’s website. Fair enough (although that defense reminds me of the scene from A Hitchhiker’s Guide to the Galaxy, where the Vogon spaceship is preparing to destroy Earth to make way for an inter-galactic highway. When the hero protests that Earth has had no opportunity to appeal the decision, the Vogons respond that “The plans have been posted in the appropriate offices on Alpha Centuri for fifty of your Earth years.”). There have also been public hearings, although those have been focused more generally on the subject of Indianapolis’ decaying infrastructure.
Transparent process or not, it is now generally believed that the City is negotiating to sell the water and sewer utilities, probably to Citizens Gas and Coke Utility. Such a sale would consolidate management of the three utilities, and may well make sense, at least from the City’s point of view.
The Water Company is struggling to pay the bonds issued when the Peterson Administration bought it for what critics said then was an inflated price. Furthermore, substantial outlays will be required to bring both systems up to basic environmental and safety standards after decades of deferred maintenance, and the Environmental Protection Agency will insist that those repairs be done. The real question is, why would Citizens—or any other buyer—pay a billion-plus dollars for two utilities that—according to the City’s own reckoning—are somewhere between four and five billion in the hole?
The simple answer is that a buyer can “monetize the income stream.” In plain English, that means that a buyer isn’t buying a bunch of fixed, decaying capital assets. It is buying the right to charge—and increase—water and sewer rates.
The city would have to increase rates too, of course, but doing so would incur the wrath of citizens who have made it quite clear that they resent paying for even essential city services. The current Mayor owes his job to the anti-tax fervor that demands more for less, and who can blame him for learning that lesson?
Governor Daniels showed the way with the sale of the toll road. By selling an asset rather than paying to maintain it, a Mayor or Governor achieves two goals: an immediate infusion of cash, and deniability when rates or tolls go up.
There is a copious literature about the pitfalls of privatization. What is curiously lacking in that literature is a recognition that in too many situations, what we are really outsourcing is that quintessentially governmental power—the taxing power.
There really is no constitutional problem with government contracting with religious organizations for purely secular services. The state can purchase medical care or babysitting or welfare services from any organization, religious or secular, having the capacity to deliver those services in a constitutionally appropriate way–i.e., without proselytizing vulnerable populations, etc.
A problem that is rarely discussed, however, has become painfully obvious in Washington, D.C.
The Catholic Archdiocese of Washington has announced that it will be “unable” to continue the social service programs it runs for the District if the city passes a proposed same-sex marriage law, a threat that could affect tens of thousands of people the church helps with adoption, homelessness and health care.
So–do we allow religious organizations to make their continued participation in these programs contingent upon the District’s denial of fundamental rights to gays and lesbians? Or to put it another way, can the government give in to demands that its public policies be consistent with the religious beliefs of a contractor?
One of the problems with privatization in general is that too often, it is accompanied by a “hollowing out” of governmental capacity to provide essential services. In such cases, the contractor–secular or religious–has officials by the proverbial “short hairs.”
[The other night, I spoke to the Washington Township Democratic Club, and thought I’d post those remarks here.]
When I labeled this talk “The Current Mess” it was because I hadn’t decided what to talk about, and I figured “mess” covered pretty much anything I might choose—locally, I might be talking about our Mayor. (People tell me we do have one, although I’m dubious…). Or I could be talking about the state’s budget crisis, Mitch’s privatization fixation, or the multiple failures of what Harrison Ullmann used to call the World’s Worst Legislature. Nationally, there’s our economic meltdown, the fact that we are mired down in two ill-conceived and mismanaged wars, the damage that has been done to civil liberties and the justice system…well, you all know the drill.
But when I thought about it, I decided that there is a deeper problem—one that is really at the root of all the others. That problem is Americans’ loss of confidence and trust in government. I don’t mean our longstanding political debates about what government ought to do; those are both inevitable and in my opinion, productive. I’m talking about the de-legitimization of the whole enterprise of government. It is one thing to say that government should or should not do X; it’s another to say, as Ronald Reagan did, that government is the problem, not the solution.
I think our multiple current messes all begin with that attitude, with that scorn for using government to address even the most challenging of our collective civic problems. In my most recent book, Distrust, American Style (now available at a bookstore near you!!), I spend a lot of time discussing why Americans lost trust in our governing institutions. I actually wrote the book to address a different issue: the country’s growing diversity.
Because America is—and has always been—a remarkably heterogeneous country, we have long been consumed by the question “what is it that holds us together?” The proper answer to that question, in my own opinion, is what one writer has called “our American covenant” and what I have called “The American Idea”—allegiance to the ideals that gave rise to the Declaration of Independence, the Constitution and the Bill of Rights.
Many of you are familiar with Robert Putnam’s book “Bowling Alone.” Putnam was worried about what the decline of civic clubs and bowling leagues meant for civic engagement. Well, more recently, Putnam has published research that led him to an even more troubling conclusion: he found that people who live in more ethnically diverse communities are less trusting of their neighbors than are people living in more homogeneous neighborhoods. And he found that they are less trusting of everyone, not just of those who belong to other ethnic groups.
Putnam’s original findings were controversial, but this current research has set off an academic firestorm. Opponents of immigration, multiculturalism, and interfaith dialogue have seized upon Putnam’s research as evidence for their most paranoid fears. The article has especially been cited by opponents of immigration as proof that a continued influx of “others” will corrode the social fabric and doom the civic enterprise. You can almost hear Pat Buchanan urging “real” Americans to dig that moat.
When I began my research, I wanted to investigate whether this decline in what scholars call “generalized social trust,” assuming it had occurred, was really an outcome of increased diversity, or whether other aspects of contemporary civic life might be equally—or more—responsible. I also wanted to research whether the kind of trust America requires at this particular juncture in our national evolution is different from the kind needed in simpler, more rural communities, and if so, why and how. In simpler societies, for example, we could depend on reputation to decide who was trustworthy. Gossip actually used to be valuable because it gave people information about who they could trust—and who they couldn’t. The prospect of a bad reputation that would become the source of gossip often was all it took to discourage untrustworthy behaviors. In more complicated societies, however, trust itself becomes more complicated.
Think about it. We deposit our paychecks and take for granted that the funds will appear on our next bank statement. We make a deposit with the gas company without worrying whether they’ll turn on our heat. We mail checks to payees on the assumption that the envelopes will reach their destination, intact and unopened (if not always on time). We call the fire department and expect their prompt response. We even engage in internet transactions with merchants who may be located halfway around the world, merchants we’ve never dealt with before, because we trust their representations that their sites are secure and their merchandise will be shipped—the volume of business done in cyberspace multiplies exponentially month after month.
That kind of trust not only allows necessary social mechanisms to function, it makes our lives immeasurably more convenient and comfortable. But that isn’t trust in our neighbors; that’s trust in our common social institutions. And that’s where government comes in. Government is the largest and most important—not to mention the most pervasive—of our collective social mechanisms.
As America has grown larger and more complicated, the government has had to assume added responsibilities. Especially after the Depression, we recognized that citizens needed an “umpire,” a trustworthy institution to police and regulate a variety of business practices. Even the most ardent contemporary advocate of limited government is likely to concede the need for FDA regulations of food quality, for example. (I’m pretty libertarian, but I personally do not want so much “freedom” that I have to test the chicken I buy at my local Kroger for e coli. I prefer to trust the FDA.) Americans today rely on government agencies to ensure that our water is drinkable, our aircraft flyable, our roads passable, and much more.
It would be difficult to overstate the importance of our being able to trust government agencies to discharge these and similar functions properly. When America goes through a time where government is inept or corrupt, or both, as we have these past eight years, that confidence is shaken, and our skepticism and distrust affect more than just the political system. That is because trust in government institutions sets the tone for our confidence in all institutions. When we perceive that our government is not trustworthy, that perception infects the entire society. There was a reason the United States experienced so much upheaval and social discord in the wake of the Watergate scandal.
In urban communities and complex societies, we will never know most of our neighbors, even by sight. The informal mechanisms people employed in simpler social settings—reputation, gossip, identity—can no longer carry the information we require, cannot give us the guidance we need. We don’t have many places like the bar in Cheers, places where everyone knows your name. We have no alternative but to put our trust in the complex web of institutions we have created—the police and other government agencies, Better Business Bureaus, watchdog industry groups and the like—to discharge their responsibility for maintaining the trustworthiness of our economic and social systems.
In my book, I identified two culprits responsible for our loss of trust: one unwitting, and one just witless. The unwitting culprit is privatization, and I spend a whole chapter on the Goldsmith administration. (You’ll need to read the book to see the connection between institutional trust and privatization, but it’s only $14 at Amazon.com) Now, advocates of government contracting aren’t intentionally trying to make government less trustworthy—that’s just an unintended consequence. That’s why I say the outcome is unwitting.
The witless culprit, of course, was the Bush Administration. Let me just read the introductory pages of the chapter I devote to Bush, titled “Betrayal of Trust.”
The past decade has produced an unremitting—and seemingly escalating—litany of unsettling news, emanating from virtually all the major sectors of American society. It sometimes seems as if each day brings a new challenge or scandal. We sustained a stunning attack on American soil, reminding us that the oceans no longer safeguard us from the hostility of others. We invaded another nation because we were told that it had weapons of mass destruction that made it an imminent threat, only to discover that no such weapons existed. News reports have brought daily warnings that our governing institutions are “off the track.” There has been visible, worrying erosion of our constitutional safeguards. Meanwhile, the imperatives of population growth and commerce, technology and transportation, as well as politics, have eroded local control and hollowed out “states rights,” leaving people powerless to change or even affect many aspects of their legal and political environments.
Old-fashioned corruption and greed have combined with political and regulatory dysfunction to undermine business ethics. Enron, WorldCom, Halliburton, the sub-prime housing market meltdown—these and so many others are the stuff of daily news reports. Newspapers report on the stratospheric salaries of corporate CEOs, often in articles running alongside stories about the latest layoffs, reductions in employer-funded health care and loss of pensions for thousands of retired workers. Throughout most of this time, business forecasters have insisted that the economy was in great shape—a pronouncement that met with disbelief from wage earners who hadn’t participated in any of the reported economic gains, and whose take-home pay in real terms had often declined. By 2007, the gap between rich and poor Americans was as wide as it had been in the 1920s.[1] Many of the business scandals were tied to failures by—or incompetence of—federal regulatory agencies; others were traced back to K Street influence-peddlers of whom Jack Abramoff is only the most prominent example.[2]
Meanwhile, American religious institutions have not exactly covered themselves with glory, heavenly or otherwise.Doctrinal battles over ordination of women and gays have split congregations. Revelations ranging from misappropriation of funds to protection of pedophiles to the “outing” of stridently anti-gay clergy have discouraged believers and increased skepticism of organized religion. In that other American religion, major league sports, the news has been no better. High profile investigations confirmed widespread use of steroids by baseball players. At least one NBA referee was found guilty of taking bribes to “shade” close calls, and others have been accused of betting on games at which they officiate. Football players seem habitually prone to wind up on the front pages; Atlanta Falcon Michael Vick’s federalindictment and guilty plea on charges related to dog fighting was tabloid fodder for several weeks. Even charitable organizations have come under fire; a few years ago, United Way of America had to fire an Executive Director accused of using contributions to finance a lavish lifestyle. Other charities have been accused of spending far more on overhead than on good works.
The constant drumbeat of scandal has played out against a background of gridlock and hyper-partisanship in Washington. And—more significantly, for purposes of the public mood—all of it has been endlessly recycled and debated by a newly pervasive media: all-news channels that operate twenty-four hours a day, talk radio, satellite radio, “alternative” newspapers, and literally millions of blogs (weblogs), in addition to the more traditional media outlets.[3] Political gaffes and irreverent commentaries find their way to YouTube, where they are viewed by millions; wildly popular political satirists like Jon Stewart, Bill Maher and Stephen Colbert have used cable television to engage a generational cohort that had not traditionally focused on political news. Everyone who leaves government service seems to write at least one book pointing an accusing finger or otherwise raising an alarm; their exposes join literally hundreds of other books (most of them alarmist) cranked out by pundits, political scientists and scolds playing to partisan passions. The political maneuvering, cozy cronyism and policy tradeoffs that used to be the stuff of “inside baseball,” of interest only to political players and policy wonks, are increasingly the stuff of everyday conversation at the local Starbucks. In this hyper-heated media environment, if you don’t like the news, you can run—but you really can’t hide. Even partisans who limit their news sources to those likely to validate their opinions hear about the latest controversies, if only from their chosen perspective.
When you add to this constant din of revelations, charges and counter-charges the highly visible and widely reported ineptitude of the current administration’s handling of Hurricane Katrina, the drawn-out, inconclusive war in Iraq, the even more nebulous and worrisome conduct of the so-called “War on Terror,” and mounting questions about the nature and extent of government surveillance, is it any wonder American citizens have grown cynical?Furthermore, all these miscues and misdeeds—and many more—are taking place in an environment characterized by economic uncertainty and polarization, as well as accelerating social, technological and cultural change (including but certainly not limited to the growth of diversity). Add in the so-called “culture wars,” and it’s not hard to understand why generalized trust has eroded.
We are not the only country to have gone through periods of turmoil, corruption or worse. I know of none that have escaped episodes of poor—sometimes disastrous—leadership. And as anyone who follows the news knows, democracy is no guarantee that you won’t get leaders who are ill-equipped to govern. All governments are human enterprises, and like all human enterprises, they will have their ups and downs. In the United States, however, the consequences of the “down” periods are potentially more serious than in more homogeneous nations, precisely because this is a country based not upon identity but upon covenant. Americans do not share a single ethnicity, religion or race. We never have. We don’t share a worldview. We don’t even fully share a culture. What we do share is a set of values, and when the people we elect betray those values, we don’t just lose trust. We lose a critical part of what it is that makes us Americans.
Policy prescriptions and ten-point plans are all well and good, but at the end of the day, our country won’t work unless our public policies are aligned with and supportive of our most fundamental values. The people we elect absolutely have to demonstrate that they understand, respect and live up to those values.
As we in this room know, the word “values” means different things to different people. In the wake of the 2004 election, I remember pundits telling us that Bush voters had come out on November 4th to vote for “values.” What they meant by values—opposition to reproductive choice and equal rights for gays and lesbians, and nationalistic jingoism masquerading as patriotism—was the antithesis of the American ideals most of us really do value.
Let me be quite explicit about what I believe to be genuine American values—values that have been shaped by our constitutional culture, values that are shared by the millions of Americans who have been dismayed, enraged and dispirited by the revelations of the past eight years. Real American values are the values that infuse the Declaration of Independence, the Constitution and the Bill of Rights, the values that are absolutely central to the American Idea.
Americans value justice and civil liberties—understood as equal treatment and fair play for all citizens, whether or not they look like us, and whether or not we agree with them or like them or approve of their reading materials, religious beliefs or other life choices.
Americans value the rule of law. And we believe that noone is above the law— most emphatically including those who run our government. We believe the same rules should apply to everyone who is in the same circumstances, that allowing interest groups to “buy” more favorable rules or other special treatment with campaign contributions, political horse-trading or outright bribery is un-American.
Americans value our inalienable right to speak our minds, even when—perhaps especially when—we disagree with our government. We understand that dissent can be the highest form of patriotism, just as mindless affirmation of the decisions made by those in power can create untold damage. Those of us who care about America enough to speak out against policies that we believe to be wrong or corrupt are not only exercising our rights as citizens, we are discharging our most sacred civic responsibilities.
Americans believe that when politicians play to the worst of our fears and prejudices, using “wedge issues” to marginalize immigrants, or gays, or blacks, or “east coast liberals” (a time-honored code word for Jews) in the pursuit of political advantage, they are betraying American values.
Americans value reason and respect for evidence, including scientific evidence. We may go “off the reservation” from time to time, especially when the weight of the evidence points to results we don’t like, but eventually, Americans will place reason and compromise above denial and hysteria in the conduct of our collective affairs.
To use the language of the nation’s Founders, Americans value “a decent respect for the opinions of mankind” (even European mankind).
Finally, Americans value the true heartland of this country, which is not to be found on a map. The real heartland is made up of all the Americans who struggle every day to provide for their families, dig deep into their pockets to help the less fortunate, and understand their religions to require goodwill and loving kindness. The men and women who make up that heartland understand that self-righteousness is the enemy of righteousness. They know that the way you play the game is more important, in the end, than whether you win or lose. And they know that, in America, the ends don’t justify the means.
Americans’ ability to trust one another depends to a very great extent on our ability to keep faith with those values.
Life in a liberal democratic system is never going to be harmonious. Harmony, after all, wasn’t the American Idea. Despite the dreams of the communitarians, we aren’t all going to share the same telos; at most, we will have what the philosopher John Rawls called an “overlapping consensus.” In a country that celebrates individual rights and respects individual liberty, there will always be dissent, differences of opinion, and struggles for power. But there are different kinds of discord, and they aren’t all equal. When we argue from within our constitutional culture—when we argue about the proper application of the American Idea to new situations or to previously marginalized populations—we strengthen our bonds and learn how to bridge our differences. When our divisions and debates pit powerful forces wanting to rewrite our most basic rules against citizens who don’t have the wherewithal to enforce those rules, we undermine the American Idea and erode social trust.
At the end of the day, diversity (however we want to define it) is not the problem. And that’s a good thing, because the fact is that increasing diversity is inescapable. The real issue is whether it is too late to restore our institutional infrastructure and make our government competent and trustworthy again—whether it is too late to reinvigorate the American Idea and make it work in a brave new world characterized by nearly instantaneous communications, unprecedented human mobility, and the twin challenges of climate change and international terrorism.
The election of Barack Obama was a very hopeful sign, but the damage done during the past eight years to our most important national values and institutions is going to be very hard to reverse. As we lawyer-types like to say, the jury is still out.
