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Great Lakes Article:

Beware of private solutions to public problems
David Morris
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 absentee owned.

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 true.

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, even corruption.

Private attitudes

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 trillion dollars.

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 venality.

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 public?

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