Making Democracy Work

Privatization: The Public Policy Debate

Excerpts from LWVUS Article by Nora Leech

Claims and Concerns

Those promoting privatization claim that:
  • The private sector can provide increased efficiency, better quality and more innovation in services than the government;
  • A smaller government will reduce costs to the taxpayer; and
  • Less regulation will provide a better environment for business, thus creating more jobs. Those concerned about privatization suggest the following.
  • Profits: The mandate to make a profit will endanger public safety and reduce services available to the general public.
  • Costs: There will be increased costs to consumers.
  • Transparency and Accountability: Private companies will lack transparency, adequate oversight and accountability.
  • Corruption: There will be increased corruption between government and for-profit, private companies.
  • National Defense: Privatizing sectors such as ports, utilities and defense can result in foreign control and will put the country at risk in the event of war.
  • Inequality: The scale of privatized programs will result in chronic high unemployment, low wages and abusive labor practices, leading to growing inequality between the wealthy and poor.

History

In the 1970s, disillusioned with the Progressive Era vision, leadership in the increasingly global private sector became more active, asserting that burgeoning tax rates and government regulations of industry were inhibiting free trade. Efforts were launched to dismantle many Progressive programs such as restrictions on financial lending, elimination of worker's compensation, elimination of control over food and environmental safety, and a revamping of the tax system by eliminating progressive taxes and replacing it with a flat tax.

Privatization in Practice

The key strategies as to how to downsize government and transfer programs to the private sector are described as:
  • Privatization by attrition Cessation of public programs and disengagement of government from specific kinds of responsibilities. Example might be the U.S. postal system.
  • Transfer of assets direct sale or lease of public land, infrastructure, and enterprises. Examples might be federal and state parks, state-owned liquor stores and the proposed privatization of public libraries.
  • Contracting out (public/private partnerships) or vouchers Instead of directly producing some service, the government may finance private services, for example through contracting out or vouchers. Examples might be charter schools, prisons.
  • Deregulation of entry into activities previously treated as public monopolies. Examples might be utilities, water, waste management, air traffic control and ports.

Role of Government

The public agenda of privatization requires a close examination of the proper relationship between government, business and civil society. What should the role of government be in protecting the environment, helping the poor, defending the nation, providing justice, ensuring democracy, protecting public health, ensuring public safety, providing education, promoting a thriving economy, and ensuring safe work environments and a living wage? Our country must seek a pragmatic balance between social and economic returns.

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