Business Forum: Beware of private solutions to public problems
By David Morris
Originally Published on Alternet, April 24, 2003
The words we use reflect the values we hold and the times in which we live.
At the birth of the American Republic the word “private ” had a sinister connotation. Derived from the Latin privare, meaning to reduce or tear apart, it described behavior that was independent of and often contrary to the public interest.
In the late 18th century a privateer was a pirate.
In the last two decades our language has changed to reflect the increasing privatization of our lives and thinking. Not long ago, if someone used the word “equity” you were pretty sure they were talking about fairness. Today you know they’re discussing asset ownership. Health analysts used to refer to “patients .” Now they call them “revenue bodies .” Government leaders more often than not describe those they serve as “customers” rather than “citizens.”
Today “private” has become a positive, even a boosterish word. The term “private sector ” has become synonymous with efficiency and innovation. It is the word “public” that now carries a shady undertone. The term “public sector” has become almost a pejorative phrase, synonymous with bloat and unresponsiveness, even corruption. The phrase “public good ” is all but seen as an oxymoron.
It is remarkable that this linguistic and attitudinal love-affair with the private has taken place during an era in which the costs to society of private malfeasance eclipsed the costs of public bumbling. Corruption in the private savings and loan, energy and dot-com sectors alone may have cost the society as much as a trillion dollars.
Contrary to the increasingly conventional wisdom the public sector delivers services at least as efficiently as the private sector.
Consider health care, accounting for about 15 percent of our economy. Canada’s health system provides 100 percent of its inhabitants access to superior medical care at a cost one-third less than a U.S. system that doesn’t even cover 42 million people. Why? Canada has only one nonprofit insurance company. We have over 400 profit-oriented insurance firms. Canada’s medical insurance overhead is about 2 percent; here it is 15-20 percent.
Consider electricity, the nation’s third largest industrial sector. Nonprofit utilities, whether cooperatively or municipally owned, provide better service to their customer-owners than their absentee-owned, profit-oriented competitors. And they do so at lower prices.
When privatization does lower costs too often it does so simply by lowering wages and benefits, not by improving efficiency.
The private sector has costs that often don’t appear on the balance sheet. Earlier this year, after a disastrous experience with privatization, Atlanta retook control of its water system even though many in the city thought that doing so could raise the price of water. Offering an interesting perspective on the public versus private debate, one Atlantan told the New York Times, “Is it possible to have private water work right? I’m sure it is. But if you have a political problem in your city, you can vote in a new administration. If you have a private company with a long-term contract, and they’re the source of your problems, then it gets a lot more difficult.
Sometimes privatization is occurring through the back door, through the much- too-benignly named public-private partnerships. Given their different objectives, marriages between public and private often produce unwanted results. In 1997, the financially hard-pressed Colorado Springs school district signed an agreement with Coca-Cola requiring the district to sell 70,000 cases of soda a year. In return, every elementary school would receive $3,000, every middle school $15,000, and every high school $25,000. During the first year of the contract, only 21,000 cases were sold. The district sent a letter to principals warning of slow sales and suggesting that the Coke machines be moved to more highly trafficked areas and that students be allowed to drink soda in classrooms.
Ironically, given our four-week victory in Iraq, the military remains one sector leaders of neither party want to privatize. I’m reminded of the instructive fact that in Ancient Greece political leaders were chosen by lot but the ability and character of military leaders were deemed so important that they were elected. We too believe that when we absolutely, positively need a job done right, when our very safety is at stake, we should do so under public ownership.
Which isn’t to say that the privatizers aren’t knocking on the military’s doors. It was General and President Dwight D. Eisenhower who first publicly warned of the dangers of a military industrial complex. These were the dangers of privatization. Indeed, as the career and seasoned military leaders have become subordinated to the wishes of Pentagon contractors, we have seen a commensurate rise in out-of-control spending and reckless military adventures.
Nevertheless, when it comes to the military, our language still reflects our suspicions of the private. Mercenaries, that is, private soldiers, are still viewed with distaste.
One of the reasons it is so easy to condemn the public sector is that it is so, well, public. Government makes decisions in front of everyone. Even a cub reporter can easily uncover peccadilloes. The private sector, on the other hand, acts in secret. It is frightfully difficult to discover chicanery at privately owned Cargill; it is relatively straightforward to discover irregularities at the Minneapolis City Council.
In part we beat up on the public sector because we can. We can throw da [public] bums out. We can even, if we choose, and we seem so to be choosing, shutter the public sector. But we can’t throw the private bums out. Nor can we go to the polls and close down a private corporation, no matter what its level of venality.
The debate about the relative merits of the public and private sector is a healthy one. But a viable debate needs two sides. Where are those political leaders who will stand up and speak forcefully about the need for an expanded public?
David Morris is vice-president of the Minneapolis and Washington, D.C., based Institute for Local Self-Reliance (www.ilsr.org).