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

| Educate!

Above Photo: 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)

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

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.

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.

  • Max Mastellone

    I wish the editors at PR would learn and take a stance on Modern Monetary Theory. This profoundly revelatory approach to macroeconomics–specifically, how money operates at the federal level–can be incredibly useful to progressives and their effort to get progressive policies implemented.
    Once on board with MMT, PR would no longer be aiding the establishment by publishing articles perpetuating their lies about federal taxes, the deficit and the debt, as the current article does.
    Here’s a teaser:
    https://medium.com/@markfabian/we-the-people-do-not-finance-the-us-government-1be7d944357d

  • Steven Berge

    There is one glaring mistake in that article. The federal government gave away the power to create money to a private central banking system over a hundred years ago. The central bank creates money out of nothing then charges the government interest on it. It’s a can’t loose scheme if ever there was one. It’s the predominant financial system that the new world order uses for global control. It’s why virtually all governments and people in the world are deep in debt. Here’s a quote that will give you a taste of the intent of the central banking scheme,”The powers of financial capitalism had a far-reaching plan, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country …Their secret is that they have annexed from governments, monarchies, and republics the power to create the world’s money…” Prof. Carroll Quigley, author of “Tragedy & Hope: A History of the World in Our Time”. There was another quote from a Bank of England governor over a hundred years ago that went something like this, Take away all a bankers money but leave him with the power to create money, and he will soon own the world again.

  • Max Mastellone
  • Steven Berge

    Don’t believe everything you read. Take the statement, “Taxes are collected to drive the need for our currency.” Wouldn’t it be sweet to just stop taxes so we wouldn’t need currency? Yea right. I also remember fed. chairman Greenspan telling congress that it was a private bank. Besides, why would our government print money and then pay itself interest on it? And why would it pay a 5% dividend to the “stockholders” of the bank? The countries economy was strongest when tax rates were the highest on the wealthiest people because the general population had less tax burden and more money to spend, thus stimulating the economy. So, at least I agree that the economy will improve if the government gives the citizens more money. But it’s not limitless, otherwise why not just make everyone a millionaire?

  • Max Mastellone

    Sir, the assertions that I and Mark Fabian made are not opinions. They are reporting on the findings of 25 years of research by academic economists. It is not pie in the sky. It is a description of how federal money operations currently work and have worked since at least 1971, when the US came off the gold standard. Regardless of how many people believe the lies about taxes, deficits and the debt our govt has perpetuated for decades, they remain lies.
    I would be happy to provide you with MMT resources so you can get up to speed and become an advocate for bringing needed social programs to the public. Neat, eh?

  • J. Paul

    Please do so. Even if “Max Mastellone” doesn’t care to peruse, I’ve only just heard of the MMT and would appreciate any links you might be willing to provide. Gotta be honest, kinda wish you’d just put them in the above post. So much information to assimilate, I fear I might not revisit this thread to see your reply.

  • Max Mastellone

    Here you go–
    http://moslereconomics.com/mandatory-readings/innocent-frauds/
    wecanhavenicethings.com
    neweconomicperspectives.org
    https://m.facebook.com/groups/MMTforRP/

  • J. Paul

    I appreciate that. I actually read those links earlier this week. Damn it’s nice when a comment section does more than just piss ya off….