You may remember from an introductory political science class, or from a high school civics class depending on the quality of your high school, the Tragedy of the Commons. In short, the dilemma goes like this: you have a bunch of different sheep/goat/cattle owners who share common grazing land. The commons are sufficient to feed all the existing herds, but each owner could make more money if they increase the size of their herd, while all the other owners would suffer a share of any overburdening of the commons caused by each additional animal. But if all owners increase the size of their herd, the commons is overwhelmed and overgrazed, and no one can support their herds any longer. The "tragedy" is that the "rational" decision--to pursue narrow self-interest at the cost of all others--will ultimately lead to a negative result to everyone. The moral of the Tragedy is that with certain Commons--public goods such as water, air, defense--government regulation and management is the only solution that won't result in a bad situation. We need government where narrow self-interest proves a threat to everyone's prosperity and well-being.
Enter the 1980s and Pres. Ronald Reagan's conservative revolution. To paraphrase revolutionary vanguard Grover Norquist, the goal was to make government so small that "you can drown it in a bathtub." The revolution eschewed the lesson of the Tragedy, instead pushing for the privatization of many traditionally government-operated or -regulated sectors, most famously public utilities.
Unsurprisingly, and to the great injury of all Americans, the Tragedy has proven true where privatization has occurred. Where a government, accountable to the people, is theoretically motivated by benefiting at least a majority of people, a private entity that is contract to provide a traditional government service, or which is no longer bound by government regulation, is motivated only by "rational" narrow self-interest, that is, profit and/or returns for shareholders. This has played out in practice; privatization of Chicago's parking infrastructure has eliminated accountability, allowing government officials to point a finger and blame contractors when, operating in their own self-interest, they rely on unqualified or temporary workers with no experience in the industry, leading to a surge in broken and mislabeled parking meters, increased parking violations and ticketing, and a generally chaotic parking situation.
The results of privatizing public goods has led to real suffering for both people and other businesses. The deregulation of public energy utilities in California in the 1990s, followed by the deregulation of energy commodities trading, allowed Enron (and others) to manipulate the energy market, leading to widespread blackouts (38 "Stage 3" rolling blackouts in California, as opposed to only 1 before the deregulation); Enron actually encouraged private suppliers to shut down plants for "repairs" during shortages in order to increase demand and allow for greater profits.
Despite these painful lessons, cities and states across the country, stuck between the rock of the recession and the hard place of 1990s "balanced budget" laws that prevent deficit spending, are turning toward yet further privatization of public lands, services, goods and Commons as short-term solutions to closing budget gaps. I wrote critically last month on California Gov. Schwarzenegger's short-sighted plan to sell off profitable state properties. Perhaps more disturbingly even than this sale of state properties, however, is the increasingly acted-upon misconception that outsourcing government services will somehow save money. John Petro of the Drum Major Institute has reported, for example, that "practically the entire child welfare system in Florida is privatized, meaning that services such as foster care were outsourced to the private sector." Petro continues on to explain that such privatization does not actually save governments money:
Cities pursue these types of arrangements in order to cut costs. The thinking is that competition drives down the cost of providing these services.
However, the reason that outsourcing these services is often less expensive is because private contractors do not have the same type of labor standards that municipal governments often do. [...]
By privatizing these services municipal governments are pushing down wages and benefits for all workers. As benefits such as health insurance are available to fewer and fewer workers, cities may see the demand for social services increase, possibly erasing any cost reductions that were gained by the privatization.
Another problem with privatization is that the quality of services may suffer. After all, private companies are interested in one thing: profit. These companies have incentives to cut costs by cutting corners.
But the greatest problem is not a problem of financial cost, though it is clear that the idea that privatization of public goods will save money is a faulty one. The greatest problem is the moral cost of privatization, the shunning and outsourcing of the very purpose of government. In Petro's more eloquent words:
What may be worst of all about these deals, however, is the erosion of the vital connection between government and the citizens that government is meant to serve. The privatization of city infrastructure and city services obscures the fact that governments exist in order to provide public goods.
Petro's post, appropriately, is entitled Municipal Governments Selling Our Soul to the Market.
Nowhere, perhaps, are the moral failures of privatization of public goods more evident than in the armed services. As I wrote last month, privatization of support services to Halliburton subsidiary and war profiteer Kellogg Brown and Root has led to the dangerous dehydration of American servicepersons in Iraq, leading to cases of dysentery and forcing troops to steal back their own water that KBR failed to distribute. It was unlikely an isolated incident, given that there are 130,000 contractors [mercenaries] in Iraq, and an additional 120,000 in Afghanistan, nearly half the size of the entire U.S. military presence in those two countries. National security and defense is a public good; when we privatize it, we get bizarre results that not only endanger our troops, but endangers civilians and national security [see the Blackwater/Xe murder-rape cases]. Worse of all, the narrow self-interest of mercenaries is, inevitably, to encourage conflict and greater war, as Democracy Now producer Jeremy Scahill discussed on Bill Moyers:
We've spent [...] $190 billion on the war in Afghanistan. And some estimates say that, within a few short years, it could it could end up at a half a trillion dollars. The fact is that I think most Americans are not aware that their dollars being spent in Afghanistan are, in fact, going to for-profit corporations in both Iraq and Afghanistan. These are companies that are simultaneously working for profit and for the U.S. government. [...]
I think that what we have seen happen, as a result of this incredible reliance on private military contractors, is that the United States has created a new system for waging war. [...] You intricately link corporate profits to an escalation of warfare and make it profitable for companies to participate in your wars. In the process of doing that you undermine U.S. democratic processes. And you also violate the sovereignty of other nations, 'cause you're making their citizens in combatants in a war to which their country is not a party. [... This could create] a scenario where you have corporations with their own private armies.
As a U.S. Senator, Barack Obama seemed to be one of the few in Congress who recognized this danger, and he called for strong legislation to regulate and reform mercenaries. In February 2007, he "sponsored legislation defining a legal structure to prosecute State Department contractor crimes in US courts." But as a candidate, and now as President, he has fallen backwards, seemingly resigned to continuing the Bush/Cheney privatization of national security of allowing mercenaries to operate in both combat and service support roles, and ignoring the moral costs involved. Letting private contractors, whether mercenaries or energy traders, manage public goods for their own self-interest is not just bad policy, it is an abdication of the very purpose of government.
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