After 3 Decades, Privatization Has Been Proven a Failure. Let’s Bury It for Good.

Handing public assets and services over to the free market has been a boon for corporate America and a disaster for the working class.

Jeremy Mohler January 17, 2019

The evidence is in and the verdict is clear: Privatization is bad for working people. (Photo by David L. Ryan/The Boston Globe via Getty Images)

New York Rep. Alexan­dria Ocasio-Cortez’s sug­ges­tion to raise the top mar­gin­al tax rate to 70 per­cent has reignit­ed a long over­due debate about tax­a­tion. The idea that low­er tax­es on cor­po­ra­tions and the wealthy is key to a healthy econ­o­my — known as trick­le-down eco­nom­ics” — has been the main­stream polit­i­cal con­sen­sus since the 1980s.

The time is ripe for progressives to demand public—i.e. democratically managed—solutions to our most pressing problems.

By explain­ing that mas­sive­ly increas­ing tax­es on the super-rich can help fund social pro­grams like Medicare for All, tuition-free col­lege, a jobs guar­an­tee and a Green New Deal, Oca­sio-Cortez has right­ly dis­rupt­ed the pol­i­tics of aus­ter­i­ty that has dom­i­nat­ed both major polit­i­cal par­ties for decades. 

Now is the time to burst a sim­i­lar — and deeply relat­ed — bub­ble: The myth that the pri­va­ti­za­tion of pub­lic goods and ser­vices saves tax­pay­er mon­ey.” Much like trick­le-down eco­nom­ics, pri­va­ti­za­tion is a choice — mean­ing, it’s ide­o­log­i­cal­ly and polit­i­cal­ly moti­vat­ed. And it’s pushed by the same cor­po­rate inter­ests that prof­it from its implementation. 

Like aus­ter­i­ty, pri­va­ti­za­tion has boomed at all lev­els of gov­ern­ment since the 1980s. There were more gov­ern­ment employ­ees when Ronald Rea­gan won reelec­tion in 1984 than when Barack Oba­ma won reelec­tion in 2012. It’s esti­mat­ed that three-quar­ters of work­ers that serve the Amer­i­can pub­lic actu­al­ly work for pri­vate con­trac­tors. The Pen­ta­gon alone oblig­ates more than $300 bil­lion to con­trac­tors each year.

This shift has been backed by the claim that the free mar­ket” is more effi­cient and inno­v­a­tive than gov­ern­ment. Pri­va­tiz­ers argue that out­sourc­ing school cafe­te­ria work­ers, bus dri­vers or nurs­es at Vet­er­ans Affairs hos­pi­tals cuts costs for tax­pay­ers. Yet they don’t men­tion that such cuts often come out of work­ers’ pay­checks — if those work­ers are even lucky enough to keep their jobs. When pri­va­ti­za­tion poli­cies are car­ried out, inno­va­tion” often sim­ply means lay­offs and decreased wages and benefits.

And when it comes to sav­ing mon­ey, the evi­dence is mixed at best. In many cas­es, pri­va­ti­za­tion turns out to be far more cost­ly. A 2007 sur­vey found that over half of the local gov­ern­ments that placed ser­vices back under pub­lic con­trol did so because pri­va­ti­za­tion didn’t cut costs. After Iowa hired insur­ance cor­po­ra­tions to man­age its Med­ic­aid pro­gram in 2017, the aver­age cost of insur­ing peo­ple climbed near­ly three times as fast as when it was under pub­lic con­trol. An Indi­ana toll-road built using pri­vate financ­ing — known as a pub­lic-pri­vate part­ner­ship” — launched in 2014 by then-Gov. Mike Pence turned out to be $137.3 mil­lion more expen­sive than if the state had used tra­di­tion­al pub­lic financ­ing. Char­ter schools, which are pub­licly fund­ed but pri­vate­ly oper­at­ed, are cost­ing San Diego’s school dis­trict $65.9 mil­lion a year. And then there’s health­care, an area where the Unit­ed States spends twice as much as oth­er coun­tries thanks to a free mar­ket” of pri­vate doc­tors, nurs­es, hos­pi­tals and drugs.

Polit­i­cal­ly, pri­va­ti­za­tion kills two birds with one stone for fis­cal con­ser­v­a­tives. It rein­forces the idea that pub­lic bud­gets are inevitably tight,” rather than because tax­es have been cut to the bone, par­tic­u­lar­ly for the wealthy. But more direct­ly, it weak­ens labor unions rep­re­sent­ing teach­ers, san­i­ta­tion work­ers and oth­er pub­lic sec­tor employees.

Last year’s Janus v. AFSCME Supreme Court rul­ing was the lat­est chap­ter in a con­cert­ed right-wing effort to shrink unions, one of the five pil­lars” of Demo­c­ra­t­ic Par­ty sup­port in the words of Repub­li­can strate­gist and tax cut guru Grover Norquist.

In fact, the decades-long cam­paign to push pri­va­ti­za­tion poli­cies has gone hand-in-hand with efforts to slash tax­es on the wealthy, bust unions and tar­get the rights of work­ing people.

As their prof­its began to wane in the 1970s, the lead­ers of pow­er­ful U.S. cor­po­ra­tions devel­oped what had been a free mar­ket-fun­da­men­tal­ist, intel­lec­tu­al pur­suit by thinkers such as Mil­ton Fried­man and Friedrich von Hayek into a polit­i­cal strat­e­gy, known today as neolib­er­al­ism. As just one sign of this coor­di­nat­ed effort, the num­ber of cor­po­rate PACs increased from under 300 in 1976 to over 1,200 by 1980. Con­ser­v­a­tive think tanks such as the Her­itage Foun­da­tion and pub­lic fig­ures like Norquist churned out influ­en­tial anti-gov­ern­ment pro­pa­gan­da, pop­u­lar­iz­ing the idea that the pub­lic sec­tor should be lim­it­ed.” These neolib­er­al cham­pi­ons were so suc­cess­ful that the idea of run­ning gov­ern­ment like a busi­ness” is now con­ven­tion­al — and bipar­ti­san — wisdom.

Cen­tral to this eco­nom­ic phi­los­o­phy is a focus on choice,” which now holds a mys­ti­fy­ing pow­er in Amer­i­can pol­i­tics. Char­ter schools, the cen­ter­piece of school choice” rhetoric, are expand­ing from red states like Ari­zona to blue cities like Los Ange­les and Wash­ing­ton, D.C. Don­ald Trump’s expan­sion of the VA Mis­sion Act fur­ther pri­va­tized vet­er­ans’ health care. Oba­macare, orig­i­nal­ly a Her­itage Foun­da­tion pipe dream, is meant to increase the num­ber of choic­es in the insur­ance marketplace.

Who doesn’t want choic­es? Yet the goal of the choice” rhetoric is to obscure the more sig­nif­i­cant choic­es that have already been made by pol­i­cy­mak­ers with­out input from work­ing peo­ple — to per­pet­u­al­ly cut tax­es on cor­po­ra­tions and the wealthy, to invest more and more in police and pris­ons, to close pub­lic schools and to defund social programs.

Ocasio-Cortez’s pro­pos­al of a 70 per­cent mar­gin­al tax rate on the wealthy, and its wel­come recep­tion from the Amer­i­can pub­lic, offers an impor­tant les­son. The time is ripe for pro­gres­sives to demand pub­lic — i.e. demo­c­ra­t­i­cal­ly man­aged — solu­tions to our most press­ing prob­lems, like slow­ing cli­mate change, pro­vid­ing health­care, fix­ing infra­struc­ture and guar­an­tee­ing high-qual­i­ty edu­ca­tion to all students.

We should bury the idea that pri­va­ti­za­tion as an approach to pub­lic pol­i­cy is any­thing but ide­ol­o­gy meant to make the wealthy wealth­i­er on the backs of work­ing peo­ple. Then, with any luck, the rest of the Demo­c­ra­t­ic Par­ty will fol­low suit.

Jere­my Mohler is a Wash­ing­ton D.C.-based polit­i­cal writer with In the Pub­lic Inter­est and a med­i­ta­tion teacher.
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