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The move towards privatization
U.C. Berkeley students walk through Sather Gate on the U.C. Berkeley campus. As cash-strapped local governments try to raise money, privatizing public universities could be the next move.
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Jeremy Hobson: Now to New Jersey, where the governor has just signed a bill to allow private firms to run some public schools. The move comes less than two weeks after the state of Ohio privatized several state prisons.
For more on this wave of privatization, let's bring in Marketplace Economics Correspondent Chris Farrell. Good morning.
Chris Farrell: Good morning, Jeremy.
Hobson: Well Chris, privatization of public space has been going on for a long time in this country, at least since the Reagan years. Is it happening a lot more now?
Farrell: Jeremy, it's happening a lot more now. Part of it is, you know, state and local governments are under enormous pressure, so they need to raise money, so they'll privatize some public housing, maybe the parks. They're moving all over, but it really came home to me last weekend. I was at a conference with Mark Hudoff, president of the University of California, and he was bemoaning and talking about the privatization of the public university, this sense that yes, you get a degree, you get lifetime earnings, that's a really good thing -- therefore you should pay more. But he's worried about that trend.
Hobson: Well obviously, these organizations -- whether they be universities or governments -- are doing this because they are low on cash, as you say. Is there any way around this, Chris?
Farrell: Oh yes there is, because in an earlier era, there's a lot more taxpayer support. There's a lot more public support. The public universities are just a private good. It also is about being citizens, about the knowledge in our society, innovation, creativity; everybody moving up together. So what I worry about, whether you're looking at universities or parks or even things like prisons -- are we losing a sense of a social good, a social compact, that commonwealth that we're all in this together?
Hobson: Is anybody pushing back against this in a big way?
Farrell: I think there's an enormous pushback going on. Now, privatization isn't exactly on the tip of everyone's tongue, but 99 percent is. And as part of this discussion, what's the good of private equity? What do we go about income inequality? How about social mobility? Has privatization gone too far? This is all part of an important, dynamic discussion that's going on in our society.
Hobson: Marketplace economics correspondent Chris Farrell. Chris, thanks a lot.
Farrell: Thank you.
We've seen the worst sort of privatization deals in Chicago - the Skyway Bridge, downtown parking garages and all our parking meters. They tried to deal away Midway Airport but the finances didn't work out. The corrupt and incompetent local government has also moved to privatize our schools, health clinics and waster removal services. Local reformers like myself have long been critical of the Democratic Machine and the handful of politicians who run local government like a family business. We believe in a strong and competent and transparent public sector. Giving private enterprise monopoly rights for essential public services is a bad idea. Right now we are working to establish a public bank for Illinois, along the lines of the 90-year old Bank of North Dakota. See http://www.illinoispublicbanking.org.
Deregulation and privatization—key tenets of supply-side economics—are two of the greatest crimes of the twentieth century, right up there with the holocaust. Rather than go through an industry-by-industry or country-by-country account of its abuses and failures (there are some good books out there on it: Chile’s Free Market Miracle – a second look; and Confessions of an Economic Hit Man), which would take much too long, I offer this personal experience of my own that relates:
I grew up in Southern California—West Torrance/Redondo Beach area. Anyone from this area will remember the small strawberry, soybean, corn, and turkey farms; dairies, horse stables, and miles of open, undeveloped land where eucalyptus trees and dirt-bike trails gave kids a natural playground that has since gone the way of the dinosaur. Well, that’s just the way it is. Or is it? One of the oddest experiences I remember of my childhood was stumbling upon this park near the city of Lawndale—a sort of urban oasis called Alondra Park. It was so huge you could get lost in it. It had a river running through it stocked with fish and crawdads (crawdads? In L.A.!). Families would go there on the weekend just to picnic, roam, fly kites, whatever. It had no commercial value whatsoever. Even back then, I had to ask myself how in the world this scene from the Twilight Zone could possibly be real. Well, it ain’t real no more. It’s a frickin’ golf course—two golf courses, in fact. The only thing left is a duck pond. I can’t say how and when it happened, or if there was a public fight over it. Corrupt politicians, an indifferent public, corporate perversions of eminent domain, or just another instance of valuing private over public anything; I don’t know. It might have been preserved if people had some appreciation for our commonwealth and public, non-commercial property. Something to think about the next time you drive by that abandoned condo construction site or foreclosed neighborhood.
Thank you Marketplace for finally covering a critical under reported trend in this country; the privatization of public institutions. Ever since Reagan the public sector has been demonized. The conservative mantra that “government is the problem” and 30 years of conservative propaganda have created a national mindset that there is no good in the public good. The ideology that the free market can do everything better is not only destroying our public discourse but out public institutions. The lack of trust in public institutions and government is directly attributable to this hard core conservative ideology. I know many conservatives who feel that ALL public institutions should be privatized. The goal to make money off of every good and service is undermining our country. Furthermore it is becoming impossible to have an honest discussion about how to improve public institutions when the goal is to destroy them by privatizing them. The growing trend to privatize education is especially troubling. This trend is an assault a family’s ability to educate their children and independent scientific research.
Profit making companies are good for producing and distributing widgets cheaply and providing some services, but when it comes to the goods we need for the public good such as infrastructure, education, research, and preservation of our public spaces these should not be run for profit. In a country of 310 million people lassiez faire economic policies is a terrible way to run a country. Increasingly we are becoming a country where everyone is on their own, the libertarian ideal. People are very angry about the economic crisis we are enduring but fail to see that much of this economic distress was caused not by the government but lack of effective governance. And yet the popular cure appears to be destroy the government.
Relying on the free market for everything will lead to an ever more increasingly stratified society as good and services are not amortized over the broad society. Families will increasingly pay directly for education, infrastructure, and health care at a time when wages are stagnant and falling. The tea party with the support of some libertarian wealthy individuals are pushing to end the social contract that made this country great.
