Privatization: Pro's and Cons

In the U. S. when one hears the term "privatization" one immediately thinks of the Bush Administration's suggestion to privatize Social Security, and perhaps Medicare and Medicaid- three government-operated functions that are, literally, running out of money within the next few years. The reason given by most governments for either urging or contemplating privatization is that it is believed private enterprise may be better qualified to operate various functions that are probably mismanaged, without a clear budget and not answerable to anyone's bottom line.

As for the U. S., just what is privatization? One researcher provides this definition: "the discursive and programmatic restructuring of public sector organizations including nonprofits and government" (Junk 1). The goal, of course, is for these government agencies and organizations either to avoid incurring future losses, or to gain windfall profits from outright sales of property and management.

One can name a number of government-run activities that might have had better success if run by private companies: Certainly FEMA might have done better to handle the problems of hurricane Katrina. And it was the private contractors that won no-bid contracts from FEMA and other government agencies that have cost billions and not solved all the problems,. There are many critics who claim that offering government "business" for bid might save tens of billions annually. This includes Fanny Mae and Freddie Mac, mortgage and housing entities which are both in serious financial shaper today.

Of course, there are opponents to health care bills which would mandate government oversight and management of health insurance. But, the overcharging of Medicare by pharmaceutical companies might well be an argument against privatization of all health care activities.

While the idea of privatizing Social Security may never pass Congress, there are other areas where privatization is not only happening, but is happening profitably, in the U.S. and elsewhere. In a recent article in the Los Angeles Times (2008) there was serious talk about following the example of other cities and privatizing the L A airport. In part, this article makes a good point: "Other big cities have privatized their airport operations. Private companies run Britain's Heathrow and Gatwick airports, as well as airports in Frankfurt, Hamburg, Rome, Naples, Athens, Sydney, Auckland, Brussels and nearly every airport in Mexico' (Nelsoln M11). Nelson contionues with examples of U.S. airport successes. He mentions that Chicago is in the final stages of contracting out the operation of Midway Airport and expects to collect $2 billion to $3 billion in lease payments over the next 50 years from the winning bidder.

Privatization also has come to government itself. George now has several "new" cities, specifically in Fulton Coojnty (where Atlanta is located). These cities have voted to be independent from county government. They were unincorporated before. But, instead of running these cities themselves, the citizens voted to outsource ther administration. Sandy Springs was among the first new cities to go the privatization route. Now others are follopwing suit. A report in the Los Angeles Times (2007) states that following Sandy Springs' decision to outsource, three more unincorporated enclaves in the county. Fulton County, explaikns the article, "covers 529 square miles and is centered on Atlanta. Of Fulton County's more than 960,000 residents, only about 50,000 live outside a city -- and that number could shrink to zero if a proposed fifth new city is created in September" (Jarvie A 13).

Canada is another nation where many of its public works programs have been tendered to private companies. The obnjective is to get the projects done on time, on budget and using the companies' own employees rather than public employees which would be detailed to other work. Even as sopme other countries are looking to private invesators to take over some of thheir over-burd43ned pu9blic works programs, there is no guartantee that privatization necessarily works. In other words, politics plays far too important a role in some areas of privatization.

However, there is a reason, overseas, for privatization, Other nations are using privatization to erase some of their enormous debt structure. Turkey is a good example: "Since 2002, $40 billion worth of state assets have been sold off by Ankara, compared with just $8 billion worth in the previous 17 years... 'Turkey is a large country and has a significant appetite for growth, and we need to finance that growth,' says Turkey's Economy Minister Mehmet Simsek" (Robson 20). Turkey is now tendering all sorts of its industries, present and future to private industries. In fact, if one goes to an Internet website, (www.fdi.net/opportunities/infm_resource.cfm?parent_infid=100&srcpg=8&countrynum=198) one can find a number of current (2008) tenders for privatization in Turkey, including offers for two coal plants, for operation of the ports of Bandama and Samsun, and Tupras, the Turkish petroleum conglomerate. Each one of the listed opportunities for private investment to take over and manage them can help reduce Turkey's debts. Of course, with some nations there may well be the problem of objecting to foreigners coming in and taking over national industries and facilities. Xenophobia still runs deep in many nations. This is certainly true where Muslim or Arab nations are involved.

A good example of this distrust is when the U.S. offered the United Arab Emirates and Dubai a chance to operate several of U.S. ports, including Long Beach, CA and Newark, NJ. The uproar, especially during the fear campaign against terrorists which has broad brushed all Arabs, has caused that offer to be withdrawn.

Another area of great concern where privatization is concerned is outsourcing police work. In some cases, where budgets are strained beyond repair, city councils are seriously looking into the possibility of hiring private firms to handle police work. The negative impact of this is enormous. We have seen examples of how private police agencies have been hired by the U.S. government to handle situations in Iraq with devastating results in terms of human rights violations. There are, of course, numerous private "guard" firms, hired by wealthy enclaves- such as Bel Air, California among others, that patrol the streets, respond to alarms and ensure some sort of safety. But, again, there have been numerous violations, and one can always dispute the standards of hiring. With budget cutbacks for prisons, there are even some private firms hired to man age prisons. But, there have been many incidents reported of under-the-counter payoffs, even as politicians deny that political graft factors into their decisions to award lucrative privatization contracts for services normally reserved to the public sector.

There are- and will be- areas where privatization can save taxpayer money, improve efficiency, and even upgrade services. But, that does not mean there wshould be a rush to privatize merely because opportunities exist. Who the private investors are is just as important as what they may promise.

It goes without saying that publilc emplopyees and their unions are adamant against privatization. On the AFSCEME website, one quote bnasically sdays it all: "Driven by wrong-minded public officials and corporate greed, contracts for public services are doled out without regard to cost effectiveness or quality. Time and time again, the public pays more and gets lower quality of services while public workers are laid off and corruption scandals make the news" AFSCEME para 1.).

The union cites a study which shows the privatization of some toll roads is not cost effective: "The Pennsylvania Turnpike is one of the country's least cost-efficient toll roads, spending a whopping 62.4 percent of its toll revenues on operating and maintenance costs. Of 35 toll roads studied, only the Massachusetts and West Virginia turnpikes spend a higher percentage of their toll revenues on operating costs.

Again, privatization needs more careful consideration by governments, whether national, state or local, in order to ascertain the long-range, not merely the short-term successes. Of course, some labor unions will object. But, privatization, when and where useful, is certainly a step in saving tax dollars and improving cost efficiency.

WORKS CITED:

Jarvie, Jenny: "THE NATION; An experiment in government; New

cities in Fulton County, Ga., are taking privatizing

to the max" Los Angeles Times, Aug 19, 2007,p. A 13

Junk, Nancy C.: "IMAGINING JUSTICE: CHALLENGING THE PRIVATIZATION OF PUBLIC LIFE.Imagining Justice: Challenging the

Privatization of Public Life" Social Problems, vol. 51,

iss. 1, pp 1-15, 2004

Nelson, Greg: "A cash cow with wings; By allowing a private

company to operate LAX, the city could reap billions, By

allowing a private company to operate LAX, the city could

reap billions" Los Angeles Times, March 23, 2008, p. M 11

.

Robson, Victoria: "Ankara targets Gulf investors: Turkey is

turning to the Gulf to boost its privatization (sic)

programme" MEED Middle East Economic Digest 52.12 March 12,

2008

"Study: Pennsylvania Turnpike Is One of the Country's Least

Cost-Efficient Toll Roads"

accessed on April 26, 2008 at: www.afscme.org/issues/76.cfm

"Privatization" AFSCEME Issues accessed on April 26, 2008

at: www.afscme.org/issues