Analysis of Privatization

Opinion by Stephen Boyle

A fundamental requirement if you are going to hand a vital service over to be managed by someone is transparency. At any time anyone being serviced by that company can check what the conditions of service are and hold that provider accountable for service. Holding a corporation to account for public service is a daunting requirement. Corporations that take on the task need to know full well there will be lawsuits for breach of contracted services that will show up - it isn't a matter of if they will - they will and the question is how soon.

Lawyers and Courts are benefiting most

This trend toward lawsuit and litigation has proliferated as companies have generally moved from a meeting with the customer into a call-center approach to handling problems reported in volume. Ultimately the profession making out the best on all sides are the lawyers and our courts handling a staggering number of cases.

December 28, 2006 a Congressional Research Service report was produced on "Privatization and the Federal Government". The document offers purported claims of benefit, yet these benefits depend on implementation and accountability. There are degrees of outsourcing available as well. Marketization of services while still in government involves altering incentive structures facing a government agency to operate more efficiently. In effect this is retooling or process improvement and is a key manner of government reform.

Corporate accountability doesn't work the same way as public-serving elected and appointed officials. Public discourse on services provided requires a forum, which government service providers are required to provide, with an oath of service to provide for the people's well being.

The following list is a summary in brief of the criticisms to privatization:

• Union busting
• Adverse to affirmative action
• Loss of fiduciary relationship to serve the public
• Commitment to the public is likely more hollow and short term focus
• Prone to corruption through preferred arrangements
• If there are an insufficient number of competitive providers it limits selection and allows marginal providers greater opportunity
• Prone to waste, fraud, and abuse without oversight and well-trained staff
• Should a selected provider no longer be available there may be a significant lag in time and cost to find a new provider
• Does not imply cost savings, better service, or better production. Private firms can be worse than government agencies.

Searching through additional references also brought me to the teaparty aligned think-tank CATO Institute Downsizing Government website with a page on privatization that provides no basis for why but proceeds to indicate what needs to be privatized. The opening paragraph reads ...

Governments on every continent have sold off state-owned assets to private investors in recent decades. Airports, railroads, energy utilities, and many other assets have been privatized. The privatization revolution has overthrown the belief widely held in the 20th century that governments should own the most important industries in the economy. Privatization has generally led to reduced costs, higher-quality services, and increased innovation in formerly moribund government industries.

This is irrational hypothesis at best with a false claim. Numerous cases can be thrown up against this proving scandal, improper cost models, and failure to execute what was promised. Again what is missing is full corporate transparency that has to be demanded by any government agency.

These aren't simply industries being served, they are the core human services that government provides. Mistreatment of them leads to people out of work, homeless, without food, and dying. This country grew as a nation based on representation of the people's interests and the nation is dying as corporate interests have supplanted the people.

Conclusions

Detroit's current "Reform Agenda" is not on a path toward success. It is full of divestiture of assets and privatization of services to the public.

Corporate resources in the Detroit market are few and unskilled at providing public transparency. If profits need to be made then marketization of existing departments within City of Detroit is needed. The residents of the city need the opportunity to participate in turning the city around through jobs. Contracted assistance in identifying critical processes need city employed personnel picking up the skills and manner of evaluating. Every step of the way needs city involvement and transparency. When we know better we can do better - it is unfair to keep the people in the dark and unaware, which is the apparent strategy of the current administration.

All contracts need short windows of time (9-12 months at most) with requirements to provide public transparency and skill sharing.