Privatization

Some things just aren’t meant to be for profit

© Bryan Zepp Jamieson

6/4/05

http://www.mytown.ca/zepp

I happened to stumble across the transcript of an interview Respect MP George Galloway had with Thom Hartmann this week, and during their wide-ranging discussion, they got around to the issue of privatization. Unsurprisingly, Galloway, a socialist, is not keen on the concept. He mentioned some of the horror stories that Britain has endured as a result of various privatization schemes, such as the railroads (he mentioned 80% of Britons want them returned to the public sector) and air traffic control (now there’s a horrifying thought!).

He mentioned, too, the fact that infection rates in British hospitals were up by huge amounts, the result of turning the task of cleaning and disinfecting in the public hospitals over to the private sector. He claimed that an extra 10,000 Britons a year were dying as a result.

He summed up by saying, "So I say to the people of the United States that the rest of the world is falling out of love with privatization. Some things are too important to be left to the private sector. And just as some things are too important or specialized to be left to the public sector, nobody's saying that every café or fish and chip shop on the corner should be owned by the state - that would be absurd. But there are some things like Air Traffic Control, like national railway networks, like the cleaning of hospitals, like the teaching of our children in schools which are too important to be left to people who are doing it for profit."

This comes at a time when the public is roundly rejecting Putsch’s efforts to privatize social security. Even before United Airlines reneged on their one billion dollar pension plan, forcing the government to take over the care and feeding of all of United’s retirees, public support for the plan had dropped from 55% at the outset into the low 30s. Of course, Putsch doesn’t care what the public thinks and is still pushing it.

Most people are shocked to learn that over a quarter of all private pension funds fail. Bartlett and Steele, in their brilliant series, "America: What went wrong?" note that the laws are set up so that if a corporation engages in a hostile takeover of another, they are pretty much free to rape the pension funds. Indeed, some pension funds have a stipulation wherein should such a takeover occur, the funds are to be immediately put in trust, and management of the trust turned over to an independent third party. There is an informal name for this arrangement: it’s called a "poison pill." Corporations don’t like the idea of protecting those pension funds from raiders.

As Galloway notes, there are a lot of things the private sector does better than the government ever could. The private sector should make cars, sell groceries, make clothing. I wouldn’t want to eat at a government restaurant. The Soviet Union and the Eastern Bloc nations provided a long lasting lesson of the pitfalls of nationalizing everything.

But there are some areas that need to be in the public sector for the simple reason that they are things that cannot turn a profit, or are simply too important for the vagaries of the so-called "free market."

Health care is the most obvious example. Having EMPLOYERS be responsible for health care for employees is one of the most crack-brained schemes ever invented, and when you have doctors, hospitals, HMOs and insurance companies all vying for profit and often colluding to maximize said profits, you end up with a system that is horribly inefficient and outlandishly expensive. In fact, you end up with a system like ours, where 45,000,000 people have no health care coverage, and hundreds of thousands more are made destitute because they became ill, and discovered that their health care plan only goes so far. Others are locked in long and expensive battles with insurance providers who are more interested in the bottom line than in actual health care. The result is that America’s health care costs run one-and-a-half times as much per capita as Canada’s do, while simultaneously failing to cover more Americans than Canada has Canadians!

The private sector is not leaner and more efficient than the government. That is a right wing myth that needs to be laid to rest. Take Social Security. The administrative overhead on that is 3%. That’s oh-three percent. Try to find any private pension fund that has less than a 15% administrative overhead. Good luck on that. And of course, private funds tend to favor the stock market (over treasury bonds) because it historically has had a high rate of return since about 1933. We won’t mention the market prior to 1933, or the fact that it will happen again. Anyone with a private pension is gambling that a) the company will stay solvent and b) that the market won’t crash until after they’re dead.

It applies in other areas. I was involved in a case where public government looked at their $15 an hour janitors, and decided they could save a lot of money by contracting out and getting $6 an hour janitors. But of course, the janitorial company also needed to pay their management and executives (those pesky administrative costs) and felt that sharing their equipment and material with their contractees should also be run on a for profit basis, and so chalked in markups on every mop head and bottle of bleach as a part of their bid. At least this was a privately owned company, so they didn’t have to pay for stockholders who expected a 20% return on investment each and every year. The end result was the government wound up paying about $17 for each janitor/hour. They found themselves in a situation where they no longer had control over the janitors, but had to cope with problems stemming from work crews that had a high rate of turnover and no-shows, where language was often a problem, and where the employees had absolutely no vested interest in the job. The government, after a year, abandoned the privatization scheme and went back to in-house civil servant employees.

Broadcast media should be a mix of private and public. One major reason the press has declined so terribly is that it has all been bought up by corporations who subsequently decided to try running the news on a for-profit basis, with the result that we hear far more about Michael Jackson’s testicles than we do about how Putsch lied the country into a bloody quagmire. Eventually, some corporation will be bold enough (or, more likely, desperate enough) to risk putting the news department outside the money generating machine and independent of the corporation in the hopes that it might develop the cachet (and ratings) of CBS News, back in the days of Walter Cronkite. For now, we have timid and inept corporations running much of the mainstream news, and loony right wing billionaires sinking millions a year into propaganda devices such as Faux News and the Moonie Times, which spend all their time persuading Americans that fascism is better than democracy – while never using the word "fascist."

Privatization of water is a big issue. It has been a disastrous failure every place in the world it has been tried, so the United States is having a go at it now. In my own locale, one small town has been working to get Nestlé in to create a bottling plant. The company wants to be able to have unlimited access to runoff water, plus the ability to draw up to 1,600 acre-feet a year off the water table. For one hundred years. In return, they propose to pay less per square foot on their land than the average homeowner does, and made a vague promise of 160 jobs. The town is divided over this, of course.

Selling bottled water is legitimate. Controlling the water supply, however, is something that must remain in the public’s hands. Same with electricity: California let their power supply be privatized after over 100 years of constant reliable cheap power with nary a brown out. Within a couple of years they got jacked by outfits such as Enron and Radiant to the tune of over $8 billion, and now we have only an inferior power grid and the threat of further corporate blackmail to show for it.

Last but not least, there is research. Private research is great for companies that hope to come up with profitable mint-flavored toilet plungers, but for long range research, and research into areas with no reasonable hope of return in our lifetimes, it needs to be publicly financed and controlled by public entities.