Privatization: Good Idea or Just Misguided Thinking?

A funny thing happened to me a few weeks ago. I was in the Bellingham Prospect Street post office to mail a package where there was a single counter clerk on duty. An orientation of some sort was taking place down the corridor to the passport offices and the clerk had to stop her postal duties a couple of times to walk around to let folks into the back for this orientation. Since she was alone and each trip to unlock the door for people took a couple of minutes, the two fellows in front of me in line became impatient and started a brief conversation that went something like this.

“If this were a private enterprise, this would never happen.”

“Yea, it’s annoying that we have to wait for so long to be served.”

That struck a nerve with me, so when the fellow at the head of the line moved to the counter and the second fellow turned around to make small talk with me, I remarked, “The U.S. Postal Service has been around for more than 200 successful years, and we all keep using it pretty extensively. After all, you’re in line to use their services, and it was not ever necessarily intended to be a model of ‘corporate efficiency’: it is a public service.”

Jack Louws, our Whatcom County Executive, introduced himself at that point and made some conciliatory, politically-correct comments about the remarks he had made. I, in turn, told him I was the managing editor of Whatcom Watch, and he promptly said with raised eyebrows, “You’ve written about me!”

I told Jack I had not personally written about him, but his name may have come up in the paper a few times in the past, and about then his turn came to get some postal help and we parted cordially.

Well, another experience smacked me in the face just before the holidays that forced a revisit of Jack’s remarks in the Bellingham post office. We needed to mail a Christmas package to Deva’s daughter’s family, but we were heading out of town for the weekend and had a ferry to meet. We checked available post offices on the way to the Keystone ferry terminal and saw that a postal outlet in Oak Harbor would be open and handy if we left a few minutes early.

Lea, the postal clerk in Oak Harbor, didn’t look like the type to be short-tempered. She was helping a young mom with her two cute kids when we got in line and they finished up in short order. Deva had written her daughter’s address on both sides of the box in case one or the other side became wet and smudged or something. Lea took exception to that, but could not help us to remedy the issue. She would give us a small piece of paper to cover one of the addresses, but not tape to fasten the paper. Notably, Lea had the temerity to complain about how busy she was (there was one other old fellow standing in line with a small parcel at the time) and that she couldn’t just be passing out free tape to everyone who came along.

After an exchange of several sentences, Deva had finally had enough and we drove on to the Coupeville post office. It opened at 11 a.m. (we needed to be at the ferry at 11:15), but we lined up since it was warm in the anteroom and the post office was only a few minutes from opening. We had fun talking to everyone there and teased the posties about their party atmosphere when we got inside. The two postal workers manning the Coupeville station said they were the “bah-humbug” crew, but that’s certainly not the impression they made with their friendly, efficient service. We were in and out of there by 11:04 a.m. and made it to the ferry on time. And the postal worker said nothing about having the same address on both sides of the box – it was fine with him.

The Oak Harbor office was a privatized postal outlet run by a person who gave the impression of an unpleasant ill-mannered clerk; the Coupeville post office was a proper Postal Service outlet run by two wonderful postal workers nearing retirement who knew exactly what they were doing and did it well. The lesson is crystal clear and resonant.

Anecdotes are nice, but facts and research are even better. In numerous studies, privatization does not fare well as a solution to all our government cost problems. The website In the Public Interest (http://www.inthepublicinterest.org/node/457) identifies five common myths about privatization as a strategy to reduce costs. At the top of their list is the belief that privatization saves money. They claim it frequently raises cost for the public and for governments. The privatization of the parking meter concession in Chicago has resulted in Chicagoans paying $3.50 an hour to park downtown and a significant increase in the number of malfunctioning meters.

A few of the other misconceptions debunked in the article are that private companies do a better job than the public sector; privatization enables government agencies to anticipate and control costs more effectively; privatization allows government agencies more administrative flexibility, and the government can easily fire a private contractor when things go wrong.

The prison “industry” has especially suffered from privatization (http://www.corrections.com/news/article/30903-private-vs-public-facilities-is-it-cost-effective-and-safe and many other references). The U.S. Bureau of Justice statistics claims that cost savings promised by private prisons “have simply not materialized.” Numerous studies suggest that turning this public concern over to the private sector has been misguided from the beginning, resulting in substantially higher costs, more prison abuse (both inmates and guards), and the antithesis of the American ideal to “rehabilitate offenders,” to say nothing of the ultimate results where the U.S. prison system is little more than a training system for career criminals that provides slave labor to corporate America. Did you know that 36 percent of the appliances made in the United States are made by slave-wage prison labor? (http://www.globalresearch.ca/the-prison-industry-in-the-united-states-big-business-or-a-new-form-of-slavery/8289)

The Center of Local, State, and Urban Policy at the University of Michigan concisely summarized their 2004 findings regarding privatization (http://closup.umich.edu/files/pr-1-privatization.pdf))

• Private providers may or may not be more efficient than public providers. Whether privatization leads to greater cost savings depends largely on whether there is competition in service provision.

• The quality of privatized services may or may not be higher than publicly provided services. Governments can play an important quality assurance role by monitoring and evaluating the delivery of privatized services.

• In developing and transitional economies, privatization may reduce access to goods and services, particularly for low-income groups. Comparable studies need to be conducted to assess the distributional consequences of privatization programs in the United States.

• Privatization might lead to more rational labor market policies. However, the employment effects of privatization are more nuanced than commonly assumed by either proponents or opponents of privatization. Privatization tends to lead to substitution of high-skill for low-skill workers and reduction in total employment levels, but no change in net wages.

• Political considerations strongly influence both if and how policy makers contract-out services to private providers.

Although it seems certain that converting public services to private sector concessions is not always a bad thing, I believe we must recognize that certain services are best-suited to administration by the public sector where accountability is maintained. We pay our taxes in exchange for certain services that we know are beyond the capability of any one individual, the intention being an overall improvement for all segments of the society. Imagining we can “profitize” public services is unrealistic and truly counterproductive to the common good. Good business practices do not always make good public sector practices.

When will it finally dawn on those in power that the issue of unbalanced budgets is an issue of misplaced priorities? If we ceased placing high priority on murder in the name of defense, or on subsidizing corporations that don’t really need the help, the fiscal situation might look significantly different.