“So when people say Flint's tragedy is a failure of government they really mean it's a failure of running government like a business…But giving private corporations a stake in Flint's water system is clearly not the answer. That would be like trying to put out a fire with more fire.”
In Cohen’s analysis, then, danger is imminent when governments make decisions solely on profit and loss, and deciding to privatize essentially condemns a system to that very danger.
The parking meters of Chicago provide a good warning against privatization. In 2008, the city signed a 75-year lease agreement with Morgan-Stanley, giving it control of some 36,000 meters. Not only did Chicago accept a deal for far less than it was actually worth, but it also has to pay the Morgan-Stanley group for any lost meter revenue – such as when new parking facilities are constructed or when streets are closed for festivals. So, why did Chicago sign such a crappy deal? Because they were desperate to fill a budget gap caused by the recession. The deal was supposed to get Chicago out of a sticky situation at the time, but it did so “by effectively robbing the future to pay for the needs of the present. (By mid-2011, the city had spent all but $125 million of the $1.2 billion parking-meter payment.)”
Not only did Chicago fail to correct the budget deficit that got it into trouble in the first place, it used a bad deal with a private-sector entity to bail it out. Who hurts the most in such a deal? The taxpayer. The supposed appeal of privatization is that it is thought to cut out Big Evil Inefficient Government. Instead, the meter situation in Chicago caused protest and boycotts. Citizens of Chicago found that meter rates were hiked, meters failed to function correctly, and free parking on Sundays was removed. Privatizing the meters cost Chicago money, it angered the citizens and cost them even more money, and Morgan-Stanley gained almost 10-fold profit on the deal.
Now, Privatization does not have one meaning, and it is not wholly bad. Its definition, from the Library of Economics and Liberty:
“Broadly speaking, it means the shift of some or all of the responsibility for a function from government to the private sector. The term has most commonly been applied to the divestiture, by sale or long-term lease, of a state-owned enterprise to private investors. But another major form of privatization is the granting of a long-term franchise or concession under which the private sector finances, builds, and operates a major infrastructure project.” (http://www.econlib.org/library/Enc/Privatization.html)
In the broadest analysis, we can think of a situation like BLM land in the West and conceive how it might be beneficial for the feds to cede that land back to private land holders. One is also seduced by the idea that privatization cuts out much red tape, increases efficiency, improves quality, and encourages competition. As much as I’d like to believe in the privatization ideology, the fruits of this tree just seem rotten.
Phineas Baxandall, a senior analyst at the U.S. Public Interest Research Group, is quote in The Atlantic:
"Privatization has potential rewards, but a lot of it is really just about shifting money around for political reasons … There are a lot of dangers in terms of loss of control over public policy, not getting enough revenue for these assets, as well as a lack of transparency.”
Baxandall warns of the “loss of control over public policy.” I would not say “loss of control,” so much as I would say “sale of control.” Cohen opined that governments that act for profit are not doing their job. So, if governments are acting for the sake of profit, and the private sector investors are doing the same, who is looking out for the citizenry?
Before we address that question, let’s look at a few more examples of privatization in action. You know that huge military budget we always hear about?
“One of the reasons for the escalation in the cost of the US military budget is its privatization. The privatization of the US prison system has resulted in huge numbers of innocent people being sent to prison, where they are forced to work for Apple Computer, IT services, clothing companies that manufacture for the US military, and a large number of other private businesses. The prison laborers are paid as low as 69 cents per hour, below the Chinese wage.”
Another yummy quote from the same source (Paul Craig Roberts):
“This is America today. Corrupt police. Corrupt prosecutors. Corrupt judges. But maximum profits for US Capitalism from prison labor. Free market economists glorified private prisons, alleging that they would be more efficient. And indeed they are efficient in providing the profits of slave labor for capitalists.”
Privatization affects the quality of every sector of life in America, from hospitals and schools, to the corrupt prison system. Hospitals cut staff and over sell surgeries in order to make profit. Schools are encouraged to diagnose more disabilities in order to get more funding. The criminal justice system is nothing more than a chain link of private profit.
Yes, privatization has a very seedy underbelly and the ideology out of Reagan-era politics to popularize it reeks of vested interest. After all, this is a system that rewards Morgan Stanley at the expense of Chicago citizens. This is a system that keeps money flowing into the New Orleans School System, but continuously fails the city's students. This is a system that encourages incarceration without rehab or medicinal care. I see no evidence of a greater society as a result of privatization. Rather, I see Morgan Stanley get richer and the taxpayer get poorer. I see institutions that need to be treated with the utmost care, simply auctioned off to the highest bidder.
The word privatization, as an economic policy, first started making rounds in Nazi Germany. The privatization initiative was meant to focus money in the hands of the few, perpetuating an inequality of wealth. It is not surprising, then, that we see that system alive today – our nation is, indeed, a party to the conspiracy of focusing money and power into the hands of the very few. You might cry that I just drew a comparison between Nazism and current politics, but in some ways, it certainly walks like a duck. Since the moral capacity of privatization lies completely in its context, I see the necessity of discouraging the practice until the players in the game – until the whole game – has shifted more toward the care of the nation’s citizenry, and further from the cult of money for its own sake.