Week of 08/05/2013

The Dangerous Push To Privatize
– by David Matthews 2

As a libertarian it is assumed that I am in favor of putting every facet of government activity in the hands of private industry.  Privatize the police, privatize ambulances, privatize fire fighters, privatize the mail, privatize the roads… oh, wait; I forgot that there would be no road according to the critics of libertarianism.

Anyway the general idea… not to mention the continual talking point of conservatives and neo-conservatives… is that private industry would care more about a service than if it is left in the hands of the government.  And once upon a time I used to agree with that statement wholeheartedly. 

But then reality happened, and through my observations and experiences, my sense of libertarianism evolved into what I like to call “Practical Libertarianism”.  And I began to realize that the script that has been strongly promoted by conservatives and neo-conservatives and by my fellow libertarians on this matter is, at best, only a half-truth.

There are some things that are essential for a community to function.  Yes, critics, that does include roads.  (Seriously, critics, what is with this perverse fetish you have about roads?)  And also emergency services… and law enforcement… and the courts.  You don’t have to hate everything about government to be a libertarian.  There are hundreds of elected local officials all across the United States that wouldn’t even consider running for those offices if their sense of libertarianism automatically meant that they couldn’t be involved with government.

So back to the idea of the privatization of local government services.  A few years back the City of Atlanta thought they had a wonderful idea of privatizing the water and sewer services.  They had lined up a sweetheart deal with a provider and then they turned things over to them.

What a mistake that turned out to be!

People were being billed for water they didn’t use.  Some were suddenly getting huge bills in the tens of thousands.  The costs were going up and up without any reason.  An audit in 2012 showed that about seventy percent of the water meters were faulty.  Seventy percent!  And yet it was all being blamed on the masses!  “Oh, you got a $10,000 bill for last month?  Well it’s your fault.  You must have a leak somewhere.  You better take care of it… and also pay our bill.”

That’s privatization for you.

And that’s not the only example that I can turn to either.

How about Cable Television?  Back in the 80’s and 90’s, when Cable TV was all the thing, cable providers basically had cart blanche to put lines in, set people up, and charge them whatever they wanted to charge.  They would offer fifty channels and say “Well the first fourteen are basic, but the rest are a new service tier that you have to pay extra for.”  And then they’d take the most popular of those and come up with a new “service tier” and so on and so forth.

This was why there were efforts to put government-imposed limits on those kinds of pricing games.

Understand that for most parts of the country, there was only one cable provider for your area, and that was it.  It was literally a government-sanctioned monopoly, and you either chose to accept their terms or go back to the monster antenna on your roof.  Even with the debut of digital satellite services like DirecTV and Dish, not all places could use those as alternatives, so they really had almost no choice aside from not watching television at all.

Then there’s your local electrical provider.  You really have no choice there, do you?  No electricity means no refrigeration, no lights, no alarm service for your house, no power for phones or computers, no heat or air conditioning… you’re really in a fix, especially if you have pets, children, and/or the elderly with you.  Well that’s privatized too, isn’t it?

Remember what Enron did a decade ago to California?  Rolling brownouts and blackouts… and all to generate profits to support a corrupt corporation that was self-destructing due to gross incompetence and mismanagement.  It even forced a recall vote of the Governor of California!

Again, that’s privatization for you.  You can’t come up with a bigger example of the dangers of it than with what Enron did to the public.

Sure, privatization works in theory, but let’s get brutally honest here… simply turning services over to private entities does not guarantee you’ll get better service or that you’ll cut down on costs.  All you’re really doing in that case is simply changing monopolies. 

Let’s start with the half-truth being promoted by conservatives and neo-conservatives about privatization.  Yes, the private sector can be competitive, providing better services at low costs.  But that only exists if there are actual alternatives for the customers (a.k.a. the public) to choose from.

If you have three or more providers of a service in any given area for the customers to choose from, they are all going to work to provide the best service possible for the most affordable rate possible; because they know that if they don’t, then the customers will cancel and sign up with their competition.  That’s how the whole competition thing really works.  The power in that situation is really with the customers.

But if you only have one or even two providers for the masses to “choose” from, then the customers don’t have the power anymore, especially when the providers agree to really not compete against each other.  They have no incentive to provide the best service for the cheaper price because there’s no real alternative for the customers.  Then it’s not a race to be “the best”; it’s just a struggle to be “not the worst”.  That’s how they are able to game the system. 

Now let’s suppose that you have a government service like animal control that you want to privatize.  You’re starting with an inherent monopoly, which is what the government is, and you want to give that same control to a private entity (a company or a corporation).  They will handle the Animal Control division, handle the licensing, deal with the stray pets, dispose of the dead ones, and oversee the adoption services of the strays they’ve picked up.  The deal is made and everyone talks about how a wonderful deal this is because it will put animal control in “capable hands” and do so cheaper than under government control.

Six months down the line, you find that the company is doing an abysmal job.  Strays are everywhere, dead animals litter the roads and ditches, there are more animals euthanized than ever could be adopted, it’s next to impossible to adopt one of those strays, the shelter staff treat the pets worse than pet hoarders, and the licensing fees have skyrocketed, so now it’s twice or three times the amount before privatization for citizens to own pets.  The masses are complaining because they believe they are getting screwed over on this deal.

So what can you do about that?  Well, nothing.  Previously you could get the local government to fire the people responsible. Granted, it’s not always an easy process, but it can be done.  But now the local government doesn’t have that power.  The private entity does.  The private entity has an iron-clad contract that gives them the authority to handle the quality of their service and the prices they charge.  The only power the local government would have would be when the contract comes up for renewal… and that only works if the local government would be willing to go back to managing the service themselves or to seek out any competition, if such competition even exists.

What happened to all of that talk about lower costs and better quality service?  It doesn’t exist, because there is still no competition in that department.  You’re merely handing control of that service to a private entity without any of the incentives that a private entity would normally have to provide that better quality and lower cost.

In theory, government operates to provide a service.  That is their purpose.  A job needs to be done and it will get done.  A private entity, especially a corporate one, operates to make a profit.  Everything else is secondary to them.  This is what separates the public and private sectors.  It’s not that the private sector is “better” at what they do; it’s just that they are motivated by something different than what drives the public sector.

I can understand the desire for local governments to want to cut costs, especially in the really tough times when people are hurting and tax revenues are harder to collect.  But turning essential services over to private entities is not the panacea that conservatives and neo-conservatives and even my fellow libertarians promote it to be.  All they’re really doing is handing off responsibility to yet another monopoly power; one that is more interested in making money than in providing a needed service.