of private solutions to public problems
Minneapolis Star Tribune
Several recent Business Forum contributors have offered
welcome strategies for making government more efficient.
In this political climate, however, many readers might
view such articles as offering even more reason for restricting
or even abolishing the public sector.
Today, for all intents and purposes the privatization
debate is over. At the federal level, President Bush has
announced his intention to privatize some 800,000 government
jobs. Privately owned roads are making a comeback. Private
police forces outnumber public police forces. Water privatization
is on the table.
Gov. Pawlenty wants to cut state aid to cities, in effect
reducing their operating budgets by 15 to 50 percent.
He insists that local governments can absorb this cut
without raising additional revenue.
That means cutting services. Minnesota's new state auditor,
Pat Awada, has been more explicit. Cities and counties
should cut nonessential public services such as libraries,
parks, recreation centers and homeless shelters.
Few defend the public sector anymore. That's too bad,
because for all its shortcomings, the public sector is
often more effective at delivering services than the private
sector. And the public sector boasts additional attractive
characteristics. It is not driven by greed. It is not
One would think that given all these advantages, public
services would be given the benefit of the doubt when
it comes to public policy. Once upon a time, this was
At the birth of the American republic the very word private
had a somewhat sinister connotation. Derived from the
Latin privare, it means "to reduce" or "tear
apart." It implies acting independent of or even
against the public interest.
In the late 18th century a privateer was a pirate.
In the past two decades, changes in our language reflect
the increasing privatization of our thinking. Not that
long ago, if someone used the word "equity"
you were pretty sure they were talking about fairness.
Today you know they're discussing asset ownership. Health
analysts used to refer to "patients." Now they
call them "revenue bodies." Government leaders
more often than not describe those they serve as customers
rather than citizens.
Private has become a positive, even a boosterish word.
The private sector has become synonymous with efficiency
and innovation. The word public now carries a shady undertone.
The term "public sector" has become almost a
pejorative phrase, synonymous with bloat, unresponsiveness,
It is remarkable that this linguistic and attitudinal
love-affair with the private has taken place during an
era in which the empirical evidence is persuasive that
the costs to society of private malfeasance far outweigh
the costs of public bumbling.
Corruption in the savings-and-loan, energy and dot-com
sectors alone might have cost the society as much as a
For many services, the public sector is at least as efficient
as the private sector.
Consider health care, accounting for about 15 percent
of our economy.
Canada's health system provides 100 percent of its inhabitants
access to superior medical care at a cost one-third less
than a U.S. system that doesn't even cover 42 million
people. Why? Canada has only one nonprofit insurance company.
We have more than 400 for-profit insurance firms. Canada's
medical insurance overhead is about 2 percent; here it
is 15 to 20 percent.
Consider electricity, the nation's third-largest industrial
sector. Nonprofit utilities, cooperatives or munis provide
as good or better service to their customer-owners as
do their absentee-owned, for-profit brethren, and they
do it cheaper.
When privatization does lower costs, too often this is
accomplished not by improving efficiency but by lowering
wages and benefits.
Privatization carries hidden costs. Earlier this year,
after a disastrous experience with privatization, Atlanta
retook control of its water system from a private firm
-- even though doing so could raise the price of water.
Offering an interesting perspective on the public-vs.-private
debate, one Atlantan told the New York Times: "Is
it possible to have private water work right? I'm sure
it is. But if you have a political problem in your city,
you can vote in a new administration. If you have a private
company with a long-term contract, and they're the source
of your problems, then it gets a lot more difficult."
Sometimes privatization is occurring through the back
door, through public-private partnerships. Given their
different objectives, a marriage between public and private
can produce regrettable results. In 1997, the financially
hard-pressed Colorado Springs school district signed an
agreement with Coca-Cola requiring the district to sell
70,000 cases of soda a year. In return, every elementary
school would receive $3,000, every middle school $15,000,
and every high school $25,000.
During the first year of the contract, only 21,000 cases
were sold. The district sent a letter to principals warning
of slow sales and suggesting that the Coke machines be
moved to more highly trafficked areas and that students
be allowed to drink soda in classrooms.
One reason it is so easy to condemn the public sector
is that it is so, well, public. Government makes decisions
in front of everyone. Even a cub reporter can easily uncover
peccadilloes. The private sector, on the other hand, acts
in secret. It is frightfully difficult to discover chicanery
at privately owned ADM Corp.; it is relatively straightforward
to discover irregularities at the Minneapolis City Council.
In part we beat up on the public sector because we can.
We can "throw da public bums out." We can even,
if we choose, shutter the public sector. We can't throw
the private bums out. Nor can we go to the polls and close
down a private corporation, no matter what its level of
The debate about the relative merits of the public and
private sector is healthy. But a viable debate needs two
sides. Where are those leaders who will speak for the