Privatization Has Been a Colossal Flop

We have to face the fact that our massive privatization of what once were government functions has been a failure. There are some public services that get really loused up when done privately and for profit.
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Let's get this straight. I am a penny pincher, who hates waste and wants a lean and efficient government.

But, that said, we have to face the fact that our massive privatization of what once were government functions has been a failure. There are some public services that get really loused up when done privately and for profit.

This is a classic mismatch of wonderful theory and disastrous practice. The privatization theory is compelling. Government is inherently bloated, lazy, wasteful, dumb and inefficient because it does not have to face the discipline of the marketplace. Put public services up for private bidding and you will get the lower costs and greater efficiency that comes with free market competition.

But privatization practice is often a disaster. An inefficient government monopoly is replaced by an even more inefficient private monopoly that is more expensive, wasteful and lacking in accountability or responsibility for serving the public good.

The selection of private contractors is often rife with the corruption of political sweetheart deals. The profit motive consistently trumps public interest And shareholders and executives benefit at public expense, while public services deteriorate.

Let's do a quick review of the scorecard.

Mental Health: De-institionalization and the privatization of community mental health centers allowed the states to off-load responsibility for the severely mentally ill so that now about 300,000 are in prison and a like number are homeless.

Medical Health: Our chaotic, profit-driven system delivers poor health outcomes even though it costs about twice as much per person as the more government regulated systems in the rest of the developed world. People who don't need it get too much medical care because it is profitable to providers, while one in seven people lack any coverage at all.

Defense: We pay outrageously padded bills to private military contractors who deliver poor services with constant cost over-runs and virtually no accountability. Today's general becomes tomorrow's Raytheon vice president, negotiating sweetheart contracts.

Water: Privatizing this precious commodity has made water more expensive and private equity funds rich.

Prisons: Privatizing helped make prisons one of America's big growth industries. Lobbying for unrealistically draconian drug laws has kept the lucrative contracts coming at enormous public expense and judicial inequity.

Courts: Chronic public underfunding has led to a kind of private entrepreneurship extorting large court fees that keep defendants in constant debt. You have to buy justice now in America.

Police: The frequent inappropriate police shootings are no accident -- police are understaffed, underpaid, undertrained and under-screened. A demoralized and dangerous police force is a disaster for poorer communities that depend on police protection, no problem at all for gated communities with a private security force.

Schools: Charter schools, once a great hope to shake up our moribund educational bureaucracy, have so far failed to live up to their promise and seem destined to benefit shareholders more than kids.

The consistent failures of privatization are not self correcting. Privatization has a powerful political and economic momentum that defies logic and insulates it from public scrutiny and reform. All the leading Republican candidates for president promise more of the same -- the tea party radicals would even close down the IRS, the EPA, the Education Department and more. And countries all over Europe are following our bad example replacing their efficiently run public services with much less cost-effective private ones.

What propels privatization, despite its failures? You guessed it -- money doesn't just talk, it shouts. The profit motive can be very motivating.

Enormous campaign contributions from big corporations and the super-rich (expressing their Supreme Court protected, Citizen's United, right to free speech) promote the friendly politicians who support giveaway privatization. And there is a revolving door between government jobs and industry lobbying jobs that ensures sweetheart statutes and regulations that benefit the private contractors and harm the public interest.

And behind it all the greedy folks with the really big bucks who are selfishly eager to reduce tax-supported public services because they don't need or use them.

Capitalism and private corporations were invented in the the western world 400 years ago as a response to flourishing trade opportunities. We have since accumulated a vast experience on its pluses and minuses and on the best balanced relationship between public and private delivery of services.

Adam Smith was the father of the free market. He pointed out its irreplaceable value in providing rational pricing and an efficient allocation of goods, services and resources.

But Adam Smith also supported the role of government in providing services that the free market could not: national defense, post office, police, firefighting, public works, health, education, justice, transportation, banking, controlling monopolies, enforcing contracts and caring for the poor and infirm.

As Adam Smith predicted, unbalanced systems don't work. Top down, government directed economies result in rampant corruption and misallocation of resources. Free-for-all free market economies also result rampant corruption and misallocation of resources.

We have gone too far down the road of privatization and need to return to the kind of balanced economy that Adam Smith advocated. The multinational corporations and the super rich have used their vast political and economic power to evade paying their fair share in taxes. The eroded tax base cannot adequately support the public services that the public needs. Privatization is no more than a cover story for tax evasion by those who don't need public services and would greedily deny them to those who do.

Allen Frances is a professor emeritus at Duke University and was the chairman of the DSM-IV task force.

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