The idea of privatization is not a new idea. Governments at all levels have long turned to the private sector—large corporations, small businesses, and individual entrepreneurs or consultants—to provide supplemental goods or services which, for reasons of efficiency, they do not provide for themselves.
For three decades, the idea of privatization has expanded. Initially, starting thirty years ago, privatization has sought to reduce government costs by transferring some routine operations to the private sector. Lately, in the past few years, it has sought to reduce government size by transferring comprehensive functions to the private sector.
Rationalizations of privatization involve one or more of several overlapping factors: waste-fraud-and-abuse, size, power, roles, and responsibilities. But the rationalizations have changed emphases. Initially, advocates claimed that government is so bloated that the private sector can do the same jobs as well for less money—to achieve greater efficiency. Lately, they have also claimed that government is so bloated that the private sector should take over traditional functions—to promote limited government and preserve freedom.
Both of these fundamental ideas of privatization are agenda-driven, advocated invariably by Republicans but advanced in practice by some Democrats as well. With the shift in emphasis and focus—most controversy targets much of the federal government—, privatization has become a political issue, increasingly implicated, not only in questions about government efficiency, but also by challenges to government authority and functions.
The basic issues, underlying the inevitably interwoven motives of profit and politics, are questions about the philosophy and foundations of the federal government, its purposes, functions, scope of operations, and relationships with other levels of government and the private sector. Thus, issues of privatization morph into a critical issue of Constitutional interpretation. The major challenge arises from those who ignore the Preamble and insist on the Tenth Amendment. They seek radical change, with privatization serving as the instrument to strip the federal government of its ability to serve, in addition to national defense, the many diverse national interests and societal concerns of the country’s citizens.
Positions on regulation indicate these contrasting interests. The private sector resists many regulations because they not only provide few, small, or no benefits to individual companies or entire industries, but also raise costs and lower profits. Government requires many regulations because they protect other companies or industries, or promote collective interests benefiting the nation or society, like clear air and water. Privatization would reduce regulation, with benefits to part or all of the private sector, but with baleful effects on the public and its citizens.
In this political context, privatization of functions serving these interests and concerns is inherently antithetical to democratic government. Private-sector entities are accountable to limited, largely powerless numbers of equity holders united by their interests in growth or returns. Government is accountable to all citizens, who have interests other than wealth alone. Because the relative power of the private sector and government is inversely related, expanding privatization diminishes the consent of the governed and reduces the freedom of citizens to control their lives. Two areas of contention between government and the private sector are public health and public education.
Arguments for privatizing health care, long provided by a mixture of public and private institutions, are specious. The first truth is that privatization has had its chance, has failed, and would fail again. If it had worked, millions of people would have had access to affordable health care and health care insurance, and health care reform would have been unnecessary. The second truth is that privatization often leads to poorer health care as providers work harder to cut costs and increase profits than provide good care. Case in point: facilities for the elderly have long been sources of recurrent scandals. The third truth is that government programs like Medicare and Medicaid, far from causing deterioration in health care or a decline in medical compensation, have had opposite effects. Overall, the health of program participants has improved, though, in trying to mediate between effectiveness and economy—that is, trying to prevent private-sector waste, fraud, and abuse by doctors and hospitals providing unnecessary services or overcharging for services—the programs have some perverse effects on quality of care. Moreover, private-sector compensation has not suffered; indeed, the rapid, steady increase in the nation’s health care and health insurance costs suggests that business is good.
Arguments for privatizing education are more insidious. Like health care, education has been a mixture of public and private institutions. Earlier, public funds went only to public schools. Lately, some go to private ones on the ground that they are performing a public function. The thrust is to privatize education by discrediting and debilitating public education, establishing charter schools, and transferring funds (vouchers) to privately operated schools. Research using long-term data discredits claims that they do better than public schools. Worse, private, for-profit, higher-education schools largely funded by government loans to students are providing poor education and strapping students with large debts. Privatized education is becoming a government-funded fraud.
Weakening public education is bad enough; weakening education itself in a privatized system is worse. The future of privatized education is a narrowing of education and the increasing fragmentation of America as a coherent society. If non-public schools become dominant, they or their corporate holders will have power to shape or eliminate educational regulations; and to influence or control curriculum, standards, and testing. Result: diminishing accountability to the public through its government.
The effect on curriculum will be further debasement. Today’s jobs-oriented curriculums will become more so, focusing on reading (not writing or literature), mathematics, some science (in some schools replaced by religious “science” like intelligent design), with little or no history or economics (in some schools shaped to the operators’ ideological views). Result: an education ironically less suitable for jobs and increasing unsuitable to citizenship in a democratic society. If government privatizes education, it loses its ability to perpetuate itself as a means to serve abiding public interests because private interests will have obscured or obliterated them.
Privatization involves economics and politics, but values one more than another: profits first, patriotism second. Its thirst for profits is a threat to freedom.
A Personal Note
My experience in the 1980s with the Grace Commission and a Fairfax County, Virginia, Blue Ribbon committee teaches me that the argument for increasing efficiency camouflages the ambition to diminish government authority. Even at the level of efficiency only, claims of bloat depend, not on findings of major waste, fraud, or abuse, but on begging policy questions; claims of savings from efficiency derive from cuts in goods, services, or their quality.
In the early 80s, at President Reagan’s request, J. Peter Grace directed an investigation by the Private Sector Survey on Cost Control known as the Grace Commission. It announced purpose was to identify waste, fraud, and abuse in the federal government—the standard GOP triad of its tirades against government—and to make recommendations to reduce or eliminate them. Committees of businesspeople scrutinized federal operations for efficiencies. A Democratic Congress ignored the Commission report. The report died the victim, not of Democratic, but of Republican, politics. Its real purpose was evident in its recommendations to diminish or dismantle many government programs which were traditional GOP targets.
In the mid 80s, Republicans won control of the Fairfax County Board of Supervisors and immediately chartered committees of Republican businesspeople to investigate many aspects of county government, again, purportedly, to reduce waste, fraud, and abuse. Although legally public, the committees, in contempt of citizens, tried to operate in secret. They announced meetings in fine print in out-of-the-way places, held them in corporate offices during working hours, and did not allow for public participation. In response to widespread outrage or ridicule, the Board rejected all but one of its committee reports. To the consternation of ideologues, the privatization committee, adopted sensible criteria for deciding the conditions which justified privatization on grounds of efficiency. According to them, the committee realized that privatization was not a viable candidate for controlling the costs of any county government operation at the time.
For those who may be interested, I report its criteria. A government decision to privatize an operation for efficiency uses a simple calculation: the total of estimated costs of privatization—continued administration of the operation (contracting, accounting, monitoring, etc.), allocated equipment and facility costs, transfer-of-function costs, and contract costs (business charges for costs and profit)—must be no more than the estimated cost of bloat. In its deliberations, the committee assumed a rule of thumb to justify privatization: bloat must equal about one-fifth, plus or minus, the budget for the operation.