Submitted by James E. Miller of the Ludwig von Mises Institute of Canada,
The word “privatization” is a loaded term these days. Unions and big government worshippers scoff at the idea of any public services being in the hands of ruthless, greedy capitalists. The left has the distorted view that people in the private sector are driven primarily by their desire to cut costs and throw workers out on the street. To them, government workers are angels sent from heaven to do God’s work like picking up the neighborhood trash or maintaining a public pool filled with the bodily discharges of kids whose derelict parents decided to drop off and go shopping for a few hours. On the right, conservatives who supposedly hold high regard for market forces and Ronald Reagan’s classic declaration “government is the problem,” typically have a favorable view of privatization schemes.
Given that government creates no wealth and only consumes capital, privatization of services would seem like an obvious choice; especially for cash strapped states and municipalities. The rational behind privatizing public service is that the private sector is almost always more efficient in operation than bureaucracies unconcerned with earning a return on investment. Even leftists will grudgingly acknowledge the super quality markets tend to produce to a point.
So if common sense dictates allowing businesses with a vested financial interest in their own success to pick up the slack in delivering public services, why should free marketers be wary of such ventures?
There just so happens to be two different forms of privatization. The first type is genuine privatization; that is the political class and bureaucrats completely removing their hands of any dealings with the offering of a service. Supporters of the free market should applaud this type of privatization as it means entrepreneurs and investors can freely enter into the industries the government has just vacated. As long as consumers demand the service in question, the opportunity will exist for businessmen to devise new and profitable ways in ensuring its delivering.
The other type of privatization shouldn’t be so appealing. That’s because it isn’t true privatization but a deceptive form of political patronage. These rackets are commonly known as “public-private partnerships” and tend to garner bipartisan support due to the crooked dealings which are almost always their sole impetus.
According to the National Council for Public-Private Partnerships, PPPs are
a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.
In other words, PPPs result in the government still maintaining the final say over the delivering of the service. Taxpayers now have the noose of being forced to guarantee an “acceptable rate of return over the term of the partnership” to the contracted company around their neck.
Even though public-private partnerships are championed as
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