PREDATORY PRIVATIZATION: EXPLOITING FINANCIAL HARDSHIP,ENRICHING THE 1 PERCENT, UNDERMINING DEMOCRACY THE AMERICAN LEGISlative EXCHANGE it generates taxpayer-funded revenue that gets invested COUNCIL AND ITS Corporate AND in lobbying and political investments seeking ever-more RIGHT-WING ALLIES PROMOTE ANTI- taxpayer dollars. DEMOCratiC privatization OF PUBLIC Through privatization schemes that directly sell off assets ASSETS AND GOVERNMENT SERVICES. that belong to the public, legislators enrich corporate interests at the expense of the long-term interests of the The combination of state and local budget crises and the American people in assets their taxes have helped build. The 2010 election of anti-government ideologues in many states privatization of the people’s assets is essentially permanent. has left taxpayers and communities increasingly vulnerable Once buildings and lands are sold off to the private sector to predatory “privatization” of government services and by a temporary legislative majority, those assets that may public infrastructure. Privatization, whether promoted as a have taken years to build or maintain are lost forever to short-term way to fill a budget gap or as part of a long-term private, nondemocratic control. campaign against the government and unionized workers, can bring disastrous long-term consequences for American The agenda of privatization schemers was manifest at last families and taxpayers as well as for the democratic process. August’s American Legislative Exchange Council meeting in New Orleans where ALEC members urged that the Privatization is a wonky term that can obscure the real government, meaning the people, should not own buildings mechanism and process at work. Through privatization but should sell them to the private sector, which could schemes to outsource traditional governmental functions, then lease the space back to the government at a profit. taxpayer dollars are diverted from the building of public Their aim is to make the private sector the landlords of assets and institutions to create long-term revenue our public spaces to accrue more profit for the few while streams and profit for corporations. The privatization of rendering “we the people” the tenants of corporations in the governmental functions has resulted in the loss of public halls of our democracy. In 2009, the state of Arizona even sector jobs that have been crucial to the growth of the mortgaged its own capitol complex to investors and turned middle class in favor of lower-wage jobs for workers and the legislature itself into a tenant. new profit centers for CEOs and investors. The cycle of privatization weakens the institutions whose funding is In recent years, dozens of privatization initiatives have been proposed, passed, or implemented. They are aimed at water robbed to enrich the private sector. And, at the same time, 2 WWW.PFAW.ORG WWW.RIGHTWINGWATCH.ORG treatment, transportation infrastructure, education, prisons • leasing or selling public assets such as highways, parks and prison services, health care and other human services, and airports – or income from those assets – to for-profit government buildings, municipal maintenance, emergency companies or groups of investors services, and more. Those efforts are frequently promoted by the same Wall Street firms that helped create the recession A report by the nonpartisan Congressional Research and financial crisis; by right-wing foundations, think tanks Service in 2006 reviewed arguments pro and con and case and political donors who are eager to exploit the budget- studies of privatization, some more successful than others. balancing desperation of public officials; and, of course, The report notes an essential danger of privatization: “any corporations eager to tap public coffers and take over assets effort to shift bureaucratic functions to the private sector built with taxpayer funds. may risk transferring away some governing discretion into the hands of private parties who are not accountable to the Claims that privatization will improve efficiency and public and may not have its interests at heart.” accountability often turn out to be false, with legislators running interference to protect companies who do not The private sector firm, then, has one essential goal: welcome transparency. For example, according to the to pursue profits. All other goals are subordinate. February 2012 report from the American Friends Service Thus it faces strong incentives to undertake Committee, activities that promote this essential goal. This can prove beneficial to the Private prison government, should the companies largely ONCE BUILDINGS AND private firm devise more- are unaccountable efficient means of production to the state or the LANDS ARE SOLD OFF TO and develop new products taxpayers; they are and services. This might not subject to the THE PRIVATE SECTOR BY A also negatively affect the same transparency, TEMPORARY LEGISLATIVE government, should the reporting private firm lower its costs or oversight MAJORITY, THOSE ASSETS of production by reducing requirements the quality or quantity of the as government THAT MAY HAVE TAKEN product or service. The private agencies. YEARS TO BUILD OR firm, in large part, is rewarded This makes it for achieving results pleasing impossible, even for MAINTAIN ARE LOST to its owners and shareholders. state officials, to do How it achieves this may or a full comparative FOREVER TO PRIVATE, NON- may not prove beneficial to analysis of their DEMOCRATIC CONTROL. the government. operations. The report also noted that WHat IS large-scale privatization privatization? transforms the nature of government oversight in ways that “many federal administrators and public administration scholars have found vexatious.” The term privatization covers an array of actions, some described with other terms such as “outsourcing” or “public- Given the ways in which multinational companies and private partnerships.” They can include: anti-government ideologues have harmed taxpayers and • outsourcing jobs performed by public employees, such as undermined the public interest in the name of privatization, parks maintenance, food service, to for-profit companies those comments come across as cautious understatement. • giving private, profit-making companies managerial or operational control over public services such as the Privatization AS A PHONY PANACEA distribution of health and welfare benefits or diverting Medicare and Social Security resources to Wall Street • diverting tax dollars from public education to for- Privatization is almost always promoted as a way to save profit school corporations, including “virtual” schools” money, improve services, and shake up unaccountable as well as religious schools, plus reducing tax revenue by bureaucracies. But in reality, privatization often fails giving corporations a tax deduction for contributing to on all counts. Privatization plans can cost government scholarship funds for private schools and taxpayers more money, limit accountability and WWW.PFAW.ORG WWW.RIGHTWINGWATCH.ORG 3 transparency, and leave people who depend on public top priority was to “corporatize and privatize state-owned services worse off. enterprises” and to “wean people from the idea the state supports everything.” Krugman notes that author Naomi A study released last fall by the nonprofit Project on Klein, in her book “Shock Doctrine,” put the Baghdad Government Oversight found, for example, that in 33 fiasco in a larger context in which “right-wing ideologues of 35 occupations, the government paid billions more to have exploited crises to push through an agenda that has hire contractors than it would have cost to have the same nothing to do with resolving those crises, and everything to functions performed by government employees. do with imposing their vision of a harsher, more unequal, less democratic society.” And such policies also put more Some privatization efforts are windfalls that profits in the hands of their political allies and enrich major corporations or politically election funders. connected local businesses at the expense of taxpayers. Sometimes the cause is simply TAKING AdvantaGE OF a mismatch between the resources and DESperation expertise of a public official and a major Wall Street firm. An October 29, 2011, column in the Cleveland Plain Dealer by Gary Suhadolnik “There’s a reason that there’s been so much and Jacqueline Thomas, “Pitfalls of Leasing enthusiasm in the finance community for Turnpike,” includes this: privatization deals. You are dealing with a less savvy partner,” said David Johnson, a “Desperate government is our best partner in a firm that advises struggling customer. There will be a lot of municipalities. “The bigger sucker desperate governments out there,” is always the government.” said the chairman of a major Privatization can be good finance company specializing business, whether successful in infrastructure privatization, or not. When privatization addressing the annual meeting of plans fail and government the National Council for Public- steps back in, politically Private Partnerships in the midst connected financiers of the financial crisis in 2008. brokers, and law firms can still walk away with One harrowing example of millions of taxpayer dollars. civic desperation can be found in Harrisburg, PA. The city has been in Perhaps worst of all, a financial crisis caused by excessive privatization can undermine borrowing by former officials to pay for good public policy and democratic overhauling