Submitted by James E. Miller of the Ludwig von Mises Institute of Canada,
The word “privatization” is a loaded term these days. Unions and big government worshippers scoff at the idea of any public services being in the hands of ruthless, greedy capitalists. The left has the distorted view that people in the private sector are driven primarily by their desire to cut costs and throw workers out on the street. To them, government workers are angels sent from heaven to do God’s work like picking up the neighborhood trash or maintaining a public pool filled with the bodily discharges of kids whose derelict parents decided to drop off and go shopping for a few hours. On the right, conservatives who supposedly hold high regard for market forces and Ronald Reagan’s classic declaration “government is the problem,” typically have a favorable view of privatization schemes.
Given that government creates no wealth and only consumes capital, privatization of services would seem like an obvious choice; especially for cash strapped states and municipalities. The rational behind privatizing public service is that the private sector is almost always more efficient in operation than bureaucracies unconcerned with earning a return on investment. Even leftists will grudgingly acknowledge the super quality markets tend to produce to a point.
So if common sense dictates allowing businesses with a vested financial interest in their own success to pick up the slack in delivering public services, why should free marketers be wary of such ventures?
There just so happens to be two different forms of privatization. The first type is genuine privatization; that is the political class and bureaucrats completely removing their hands of any dealings with the offering of a service. Supporters of the free market should applaud this type of privatization as it means entrepreneurs and investors can freely enter into the industries the government has just vacated. As long as consumers demand the service in question, the opportunity will exist for businessmen to devise new and profitable ways in ensuring its delivering.
The other type of privatization shouldn’t be so appealing. That’s because it isn’t true privatization but a deceptive form of political patronage. These rackets are commonly known as “public-private partnerships” and tend to garner bipartisan support due to the crooked dealings which are almost always their sole impetus.
According to the National Council for Public-Private Partnerships, PPPs are
a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.
In other words, PPPs result in the government still maintaining the final say over the delivering of the service. Taxpayers now have the noose of being forced to guarantee an “acceptable rate of return over the term of the partnership” to the contracted company around their neck.
Even though public-private partnerships are championed as cutting age methods to modernize the state, underhanded bribes on the taxpayer dime go back at least a century. Perhaps the biggest, most powerful public-private partnership around is the Federal Reserve System. The New York branch of the Fed, which has been given a monopoly on the supply of what has become the world’s reserve currency, is still technically a private entity that just so happens to have the guns of the state defending its open market operations.
Today, public-private partnerships are still offered as a way to mask ever-intrusive government. Recently Senator Rand Paul introduced a measure in the U.S. Congress to “privatize” the crotch fondlers in the TSA. “Privatize” is put in quotations because the bill would “require that the mostly federalized program be turned over to private screeners and allow airports — with Department of Homeland Security approval — to select companies to handle the work” according to Politico. Private screeners would still be under the guidelines of the Department of Homeland Security and be paid with tax dollars even though they would be employed by a non-government firm. Ironically, Rand’s father, Texas Congressman Ron Paul, pointed out the flaw in his son’s proposal last July when he wrote:
What we need is real privatization of security, but not phony privatization with the same TSA screeners in private security firm uniforms still operating under the “guidance” of the federal government. Real security will be achieved when the airlines are once again in charge of protecting their property and their passengers.
President Barack Obama has proposed public private partnerships numerous times during his time in office; namely in childhood education and infrastructure development. Last year when Obama pushed for an infrastructure bank to pool together capital already swindled from taxpayers to form a quasi-banking institution which would take out loans in order to pay for the rebuilding “roads, bridges, and ports and broadband lines and smart grids,” both the U.S. Chamber of Commerce and AFL-CIO were in favor of it. Along with the banksters who stood to make a hefty profit by charging above-market fees to finance such deals, the support of the CC and AFL-CIO should be a no-brainer considering unions and construction companies would most likely be paid to do the “shovel-ready” legwork. It was a PPP even the left could get behind since a portion of the funds went to their supporters.
Public-private partnership schemes haven’t been limited to just America lately. In Canada, the province of Ontario has recently considered granting a private company, Teranet Inc., the rights to operate its online service which delivers such things as birth certificates and driver license renewals. According to the World Bank, many European and Central Asian countries are opting for public private partnerships after tax receipts plunged in the wake of the financial crisis. PPPs are still popular among various governments for precisely one reason.
There is actually another, more accurate term for public-private partnerships. It’s called fascism; plain and simple. Private business may act as an administrator but the state still pulls the reigns. From a political perspective, public-private partnerships are quite ingenious. Politicians remain in control while convincing voters they believe in the efficiency of a robust private sector. And when issues arise over the performance of a service, whatever private firm granted the monopolistic privilege of delivery can be treated like a scapegoat despite having to operate within government established guidelines. The state escapes criticism as the public ignorantly clamors for more protection from those evil hearted businessmen. To the ruling establishment, public-private partnerships are “heads I win, tails you lose.”
What the non-exploitive supporters of public-private partnerships tend to forget is that it isn’t just the administration of the service in supposedly private hands that adds to its betterment. Why the market function so well is that it is driven by competition from businesses that don’t rely on assistance from the band of thieves who occupy the offices of the state. Government assistance gives some businesses an upper hand on competitors which can lead to diminishing innovation. Why compete when Uncle Sam has your back to ensure a decent rate of profit? Then there are government grants of monopoly which give the chosen company absolutely zero incentive to cut costs. All of the advantages of private ownership become effectively nullified in public-private partnerships to the detriment of the taxpayer.
In our world of unceasing centralization of power, lawmakers are finding more deceptive ways to mask their lust for dominance. Public-private partnerships are the embodiment of what Mussolini dubbed “corporatism;” that is the “merger of state and corporate power.” Under corporatism, the ruling class is able to expand unbeknownst to the Boobus Americanus and its equivalent in other countries. The Average Joe still has his wallet forcefully stripped of its contents but now the state’s cronies get to partake in the plunder. Meanwhile the same big businessmen who benefit from government privilege still maintain their praise for free markets while working with politicians to forcefully subdue their competition.
Murray Rothbard was quick to recognize why such parasites of men are dangerous for the blurring of the line between public and private when he wrote:
What’s needed is a corporate spokesman who embraces the government-business partnership with enthusiasm and joy – a kind of Big-Businessman-as-Philosopher. When such a champion emerges, Mr. and Ms. America, keep a sharp eye on your wallets – you are about to be fleeced.
Distinguishing between genuine privatization and outright fascism is the only way to make sense of the state’s manipulation of words and their meaning.