Another Facebook meme post, another debate with Michael and Carl. God help me, I love those guys, even if their opposing viewpoints only serve to prompt me to write out these posts. So here goes. First, the meme:
So, first of all, in all fairness, I knew that this (being that it has the word ‘socialism’ in it) would probably provoke a few comments from the two, so I suppose it was a bit of baiting, I’ll admit. And sure enough, I got the first comment, and made my first reply:
For those of you who don’t immediately know or understand what ‘privatization’ or ‘privately funded’ means, it means, basically: a utility or service that is owned, operated and managed by a private business or corporation. Think of charter or private schools as opposed to public schools; prisons run by private companies as opposed to by the government or law enforcement.
Immediately, you may think to yourself, “Well, that’s got to be the better option, because look how much our government is in debt, and look at how profitable all those corporations are. That means they must be doing something right, which means they could probably do all those things better than our inept government does them.” And at first glance, I might even forgive you for holding that viewpoint. But I don’t expect you to keep it, not after being informed of how things go, and have gone, when these decidedly necessary service change from public hands into private ones. This is mainly due to one reason: people don’t understand the primary legal responsibility of private companies/corporations. That reason is to make the greatest amount of profit for their owners/shareholders. They may be viewed legally as ‘persons’, but they don’t have any ethical responsibility, moral responsibility, or duty or concern to the public like you and I actual, genuine, flesh and blood human citizens. And that’s where the problem lies. They don’t, and won’t, put any priority above profits, even if that means people don’t get basic, necessary, life-sustaining things such as water.
The other thing you may not be immediately aware of is that there are numerous examples of how privatizing the services listed in the above meme have gone for people and countries around the world, and even here in the United States. And they’re, on the whole, not very positive results. In fact, they are usually very destructive to the people directly effected by them, and for our society and economy overall.
So, let me take a few things from the list as examples. First, lets start with ‘public works’, namely: water.
When towns and governments have turned over the control from public hands into private, especially when it comes to water (which is, after all, completely necessary and essential to life itself, and has no substitute thereof), it has generally gone like this example:
Ruby Williams, a 78-year-old Aqua Pennsylvania customer, got stuck with a $40,000 water bill because of a serious leak in the pipes under her home in Bristol Township, Pennsylvania. After her situation garnered national media attention, the private company agreed to reduce her bill to a few hundred dollars.
And that’s not the only example:
In the United Kingdom, two decades of privatization increased the average cost of water by 50 percent. In France, the price of water shot up 16 percent under private management, the result in part of the private water companies’ legal mandate to return profit to their shareholders. In contrast, a public water system puts any revenue from ratepayers back into the system, which is how Paris saved $46 million in the first year after taking back the water department from a private company — and lowered rates for residents.
In Stockton, California, four years of private water — as well as neglected infrastructure and contract noncompliance — ended with the city reclaiming public control. In fact, CAI reports that since 2002, more than 20 municipalities in the U.S. have taken back control from private companies such as United Water.
Private water companies pitch their services as a way to balance budgets, but Detroit’s public water system is struggling in large part due to policy decisions, not because of some inherent inefficiency of the public sector.
And, ‘public works’ doesn’t just include water (though I’d argue that water is the most important of them), but includes things such as sewage, and trash. Privatizing those services doesn’t go so well either:
Likewise, the Price family of Stallings, North Carolina recently had their sewage service cut off by Aqua North Carolina despite having paid an overdue bill. The company demanded $1,000 to restore it — hundreds of dollars more than the actual cost to do the work. Again, thanks to bad publicity and public outrage, Aqua backed down.
Traffic Departments and Road Maintenance/National Infrastructure (Interstate highways)
1. Chicago Parking Meters
The mother of all privatization horror stories is what happened with Chicago’s parking meters. In 2008 the city “financialized” its parking meter revenue stream. It leased the rights to collect from parking meters to a consortium led by Wall Street bank Morgan Stanley. The lease is for 75 years.
Right away parking-meter rates went up fourfold and meters stopped working. The city’s residents were unhappy, but there was nothing they could do about it.
But wait, it gets worse. Unsurprisingly, it turns out that the big Wall Street bank was more interested in making money than in giving Chicago the best deal it could. An inspector general looked into the deal and found that the city was shortchanged by at least $974 million. But a 2010 Forbes story says the Morgan Stanley consortium may realize a profit of $9.58 billion after paying Chicago only $1.15 billion.
To top it off, the city not only gave up 75 years of revenue for not nearly enough up-front cash, it had signed a contract prohibiting the city from interfering with Morgan Stanley’s ability to profit from the deal. This means the city can’t build parking structures where they are needed and can’t even give out disabled parking permits. The city can’t even close streets to have street fairs or festivals without paying Morgan Stanley for lost meter profits.
2. Toll Roads
Some states are considering privatizing their roads with “public-private partnerships.” The deal is that private companies maintain the roads and in exchange can charge a toll and make a profit. How is this working out?
In 2006 Indiana privatized I-80, the Indiana Toll Road. For $3.8 billion the state gave a 75-year lease to the Australian company Macquarie Group and Spain’s Cintra. (Goldman Sachs is said to have earned $20 million for brokering the deal.) At the time Washington Post business columnist Jerry Knight wrote that the deal sounded like “tossing the family furniture in the fireplace to keep the house warm.”
Since then tolls have just about doubled. And it’s going to get worse. Dave Jamieson at the Huffington Post explained, “The road’s leaseholders can now raise the toll annually at one of three rates — at a flat two percent, at the percentage increase in the consumer price index or at the percentage increase in gross domestic product — whichever is highest. Over the course of the coming decades, Hoosiers can expect to learn a hard lesson in compound interest, long after Gov. Daniels is gone.”
In 2007 Colorado leased its Northwest Highway to a Portuguese/Brazilian company for 99 years. The company raised tolls 50% and taxpayers have to pay the company if too many carpoolers use the high-occupancy lanes. The contract includes a “non-compete” clause that “requires payments to the foreign corporation if certain roads or facilities are built in the area that would compete with the toll road.” In other words, if traffic gets really bad Colorado is not allowed to do anything to solve the problem for its citizens – mass transit, congestion-relief arteries, etc. — instead forcing citizens to use that highway and pay whatever the toll is. For 99 years.
Police Departments (a.k.a. Law Enforcement/Prisons)
There has been a big wave of privatizing this nation’s prison system by states and the federal government, especially over the past decade or so. And how does that go? Typically something like this:
Imagine a system where someone makes a profit if more and more people are put in prison. This is known as a “perverse incentive.” Really, can you think of anything worse than getting a profit to get people put in jail? What you think could go wrong is exactly what does go wrong. These companies want profits, so rehabilitation becomes a “cost.”
These companies push for government policies that put more people into prison for more crimes and for longer sentences. Prison-for-profit companies working with the corporate/right-wing lobbying outfit American Legislative Exchange Council (ALEC) came up with model legislation pushing things like “three strikes” and “truth in sentencing” which greatly increase the number of prisoners and the amount of time they serve.
But the worst part of prison privatization is companies saving on “costs” by cutting back on staff, food quality and you-name it. A 2013 Palm Beach Post investigation found that “dangerously low numbers of corrections officers — including local guards with criminal backgrounds — and reports of squalor, rape and riots dog corporate prison operators. …Audits, security reports, lawsuits, government records and state and federal investigations in 21 states unveil a startling pattern of murder, riots and sexual assault at private prisons nationwide. Often, those failures stem from not enough guards.”
Nine major riots erupted since 2000. At least 25 inmates died amid claims of mistreatment, inadequate medical care or in riots. Three prisons for teenagers were shuttered between 2000 and 2012 after discoveries of squalor and sex abuse. A women’s prison was emptied after widespread reports of rape by staff.
How does this compare to prisons that are not run by private companies for profit?
At Florida’s state-run prisons in the same 12-year period: No major damage or severe injuries from riots; no closures over squalor; no Justice Department investigations over human rights.
In another example in Mississippi, a private company called the GEO Group ran the Walnut Grove Youth Correctional Facility. The Justice Department spent two years looking into conditions at the facility and issued a report saying the facility engaged in “systemic, egregious and dangerous practices.” A judge wrote the company “has allowed a cesspool of unconstitutional and inhuman acts and conditions to germinate, the sum of which places the offenders at substantial ongoing risk.”
A recent In the Public Interest report, The Costs of Private Prisons, says “the promised cost savings often fail to materialize.” The report looked at more than 40 studies of private prisons and how this turned out, in five states. They found “no cost advantage” and that for-profit prison companies, “employ questionable methodology when calculating costs of private facilities. This includes finding ways to hide the costs of private prisons, ensuring that increased costs are not apparent until after the initial contract is signed, and using inflated public prison costs during comparisons.”
And if you’re thinking, “Well, that’s prisons, that’s not really the police or anything”, just remember that a corporations sole priority is making as much money as it can. Then watch John Oliver enlighten you on how some law enforcement already operates as it comes to ‘municipal violations’, and imagine if they didn’t have that pesky public duty thing to consider at all:
So What’s The Argument for Privatization/Why Does Anyone Do It?
If you examine the claim that private companies are always more efficient than government, the argument starts to fall apart. Just how are companies more efficient?
The first way companies are supposed to be better is cost-savings. But just how do they save money? There are two ways a company can save money over what government spends. The first is to reduce what it pays employees and suppliers. The second is to cut back on the amount or quality of the service the company is taking over.
So let’s say a town decides to “save money” by outsourcing its trash collection. The people who were employed by the city to do this are laid off and things are turned over to the company. Typically the company will hire people at as close to minimum wage as possible and likely with no benefits. It will employ fewer managers and pay them less as well. It will cut back on maintenance of the fleet, and it will try to cut back on the pickup service.
Does this actually save government money? If people with OK public-employee jobs are replaced by lower-paid workers the community is poorer in the aggregate. More people will need public “safety-net” services. There will be foreclosures. Tax revenue drops because of lower pay but also because poorer people can’t spend as much in stores. Sales taxes drop as stores face fewer customers able to get by.
Daphne Greenwood of the University of Colorado did a study of privatization titled, The Decision to Contract Out: Understanding the Full Economic and Social Impacts. The study found that the resulting wage and benefit cuts hurt the community at large, including declining retail sales, greater reliance on public assistance and a larger share of at-risk children in low-income families. On a recent phone call discussing the study Greenwood said that when governments outsource, “the availability of middle-class jobs is affected, even upward mobility.” She said, “Contracting to private corps usually means big reductions in worker benefits and benefits,” and “lower wages often mean a shift to less experienced employees.”
In addition, she said, “There are more workers and retirees who end up on public assistance, which means more children in poverty so local schools are dealing with more problems.”
Granted, I know this is not in any way a complete view of all the examples of the disastrous effects of the government handing over responsibility for services and such that most of us consider essential to the public in general, and have come to expect a certain degree of in terms of standards and fairness, but it is representative. And I know I left out public education, and fire departments, and some others that weren’t even on that list. By now, however, I think you can imagine how they would go.
If the sole, highest priority for things that we consider essential products and services isn’t the goal of the greater public good, and is instead the goal of greater private profit, why would we think that the public good would stop a ‘person’ (well, corporation, that is) who has no responsibility to it? Whose lack of morals and ethics are totally essential for them to be profitable? Being profitable is, after all, the only reason corporations and private business exists.