Private sector can do it better

[radfringe]

We've all heard the mantra regarding privatizing various aspects of government because the private sector can do it better and/or cheaper...

something to think about:

-- the first obligation of a private corporation is to its stockholders, and this means the corporation has to make profits

as an example let's say your town or state decides to privatize all road maintenance. The contract is awarded to Roadway International Inc. (RII)

Previously as a citizen of your town/state, you owned a piece of those roads. your town/state were obligated to YOU for its condition and maintenance.

Now RII is maintaining the roads, its obligation is to it's stockholders - not you. And RII has to make a profit to keep its stockholders happy. Who are those stockholders? probably not you, and more likely RII stockholders doen't even know where Maple Ave in East Overshoe PA is located.

As a citizen residing on Maple Ave, East Overshoe PA, how concerned would you be about Oak Tree Lane in New Lampost NE? How concerned would a RII stockholder be about those roads?

Two ways a corporation can immediately increase profits - raise their prices if the contract allows it or cut back on services.

So a big hole opens up on Maple Ave. - previously you and your neighbors would be on the telephone notifying local DPW and demanding it be fixed. Now that RII is running things - which button on the auto-answer phone do you press? RII's first obligation is to its stockholders - not the residents of Maple Ave who have a big pothole in the road.

[bryant69]

1. I think there are areas that private companies can do better

Roads aren't one of them though because there isn't really any competition. Competition should lead to better service, better products, while keeping prices reasonable. With roads though the only real question is "Which road do I need to take to get to my destination." No competition.

Bryant
Check it out --> http://politicalcomment.blogspot.com

[Lydia Leftcoast]

5. But the point of government services is to provide services for all

Competition among private businesses is always ultimately for increasing profits, not about providing better service, unless that leads to greater profits. If there's a way that they can maintain profits by cutting services to customers and/or jobs for employees, they'll do it. Just look around you: automated phone services instead of human beings to answer your questions, outsourcing to Third World countries, fewer and less-informed sales clerks in retail outlets, pumping your own gas. These both worsen the experience for the customer and cost employees their jobs.

If you think competition is so great, look at what has happened to the airline industry. Flights are cheaper than they were 30 years ago (IF you buy your ticket at the right hour on the right day), but about a dozen airlines have been killed off, and even the majors have reduced their services to the sub-Greyhound bus level for the average flyer.

I'm in business myself as a self-employed translator, so I have nothing against profits, but the bean counters have taken over the world, and the private sector is meaner and less user-friendly as a result.

[Selatius]

8. There are some areas private enterprise does worse than non-profit gov't entities

A good example is providing public education as a service.

If that is privatized, your parents have to pay out of their own pockets to put you through school. If they cannot afford the tuition, tough luck. With a non-profit gov't entity running the schools, you still pay...in the form of taxes; however, because the school system is both non-profit and that it does not require a minimum amount of payment beyond simply establishing residency and paying taxes in the district, you get more per individual dollar than you would with a for-profit entity that is obligated by law to deliver a profit margin to the shareholders.

In other areas, private enterprise does better. A good example are many of the luxury goods you enjoy like ipods or televisions.

[bryant69]

15. Yes - but real competition leads to better service

In a lot of cases - airlines for example , there are artificial restraints to competition put in place by the industry. A lot of this created by the anti-regulation mania of Conservatives (and some Democrats). Obviously what business want isn't necessarily good for consumers.

Bryant

[Lydia Leftcoast]

19. On a micro scale, yes

You can prevail in a niche or local market with better service, but on a national level, the trend is the race to the bottom. Company X cuts its prices and recasts itself as a cheapo brand, and Companies Y and Z say, "Hey, why not?" and follow suit.

[rman]

23. Competition eliminates competition

There's competition until one becomes so successful that the others can not survive.
Unless it is properly regulated.

[bryant69]

27. That last line is the kicker - business needs to be regulated.

[Lydia Leftcoast]

2. Excellent points

And it's good to remind people that during the great California blackouts of 2001, the cities that had municipally owned power plants were somehow able to keep running at normal capacity and at reasonable prices. Hmmmm.

I've sometimes thought out an extended scenario of what it would look like if government were "run like a business."

For one thing, the members of your state legislature could also serve in the legislatures of other states and would outright own shares of the revenues that each state collected. :-)

[unblock]

3. this is a fundamental difference between private and publicsector goals

the public sector usually wants to distribute services equally for all, whereas the private sector uses money as a guide. the money tells them to focus on more lucrative markets, i.e., serve the rich and bigger population centers rather than the poor and rural areas.

in the pothole example, would a corporation put its resources into improving response time for occassional hard-to-reach areas where relatively few people drive? or to areas where the rich reside and are willing to pay more for faster service?


of course, true corporatists would argue that the unqual distribution is more efficient because it gets the pothole-fixing resources to the people who need/want it most....

[Warren Stupidity]

4. Yeah roads and bridges and other public goods

and services are best not run for profit. The private sector is very good at giving consumers a vast choice of toothpaste, an endless array of ever cheaper junk to clutter up our lives with, etc. none of which is to be disparaged although capitalism's need for continuous growth seems at odds with a non-infinite eco-system that contains and must sustain that growth.

What the neocon/neoliberal consensus won't discuss is that we have pushed up against the limits of growth and the evidence is all around us, from peak oil to catastrophic climate change. There are two solutions: kill a whole shitload of humans to lessen the strain, or change the economic system to support a sustainable stabile low growth human ecology. I leave it to you to figure out what choice they have made for us.

[Deja Q]

6. Why can't corporations keep CUSTOMERS happy?

Unlike shareholders, we buy their products and if we have to live on dirt salaries, we should demand a solid product so we can use it and not expect it to break after 6 months because it's our hard earned money we're spending for them and sure as heck won't anymore if their reputation is sawdust.

Big Government is less than ideal. But those who loathe it have yet to explain how Big Corporation is better. As they are typically 'Libertarian' garbage, they'd want us all to buy our own tar and fill the pothole ourselves. In which case none of us would because we're all being objectivists and would not squander our prize possessions on anyone else...

[annabanana]

21. The boardroom is REALLY more concerned with the

stockholder. The big boys are sucking up to the larger pockets, and that isn't the customers. They have PR departments who's job it is to keep the customers from kicking up much of a fuss.

[HereSince1628]

7. Yes, point taken, but if I could make a suggestion...

In your hypothetical, Roadway gets a contract for maintenance. It doesn't get ownership of the roads and that isn't merely a subtle distinction. And although I'm an academic biologist and not an attorney I think that's critical.

In your scenario there would probably be a contract with the city government (representing the people of Overshoe who still own the roads) with a performance clause since contracts are essentially quid pro quo performance agreements. on edit>> If Roadway doesn't perform the city attorney could probably void the contract and seek redemption for nonperformance.

If you want Roadway to own the streets and serve only its shareholders with no recourse for the good people of Overshoe then Roadway needs to gain ownership of the streets.

[Lydia Leftcoast]

9. But even that adds a layer of complexity to the situation that

can be avoided by having the city council hire its own road maintenance crew.

[HereSince1628]

16. Well, for sure. My point is just that the scenario of the OP seems to need a tweek

I personally think all infrastructure developed for the common good by the community should remain in public hands. But road construction and major road repair is typically done on a contract basis.

For example, Wisconsin is currently undertaking a major reconstruction of its central freeway interchange (the Marquette interchange near downtown Milwaukee) neither the state nor the city own the equipment or have the personnel to undertake that project. Rather, many contractors are involved.

Routine repair and mainenance is something a community might (and typically does) hire its own people to do. With the mark up for profit outside the equation it _might_ be expected to be cheaper but it might not always be.

[annabanana]

22. So.. You think the sale of the roadways is a good idea?

Are you willing to trust your safety to any entity whose primary concern isn't the safety of motorists, but to the profits that can be generated by skimping a little here and there on maintenance and materials?

[HereSince1628]

29. I didn't say that, did I?

Oh frabjous day, Oh joy, oh joy... :rofl:

No. Actually I didn't. I was pointing out a problem in the OP.

What I communicated was that the OP was imprecise in equating a maintenance contract with an ownership contract--and that had significant impact on the validity of how he played the scenario out. To have the scenario play out the way the OP did-with the citizens of Overshoe losing ownership of their streets, and any ability to hold Roadway accountable to the citizenry-the OP needed to have his "Roadway" corp gain ownership of the streets.

Apparently this President's Day there's no room for making constructive criticism on DU.

[radfringe]

25. granted the corp doesn't own the road

but it's responsibile for its maintenance. If the corp needs to increase profits to satisfy its shareholders - how fast and how good of a job will they do?

If the town/state is responsible for the roads, there's a better chance of getting a quicker response because YOUR elected officials want to keep their jobs or risk being voted out of office. YOU are the shareholder for your town. YOU have a vested interest in the service.

The reason I used roads as an example is because there is a growing movement among states to do just that - privatize the highways.

How would you feel if you found out Roadway International Inc. was a subsidary of Halliburton or something similar to Enron?

To take the scenario further - RII and other companies say they won't bid on the contract because they are afraid of being sued by someone who busted an axel in a pothole. but they will bid if there are some lawsuit protections.

[HereSince1628]

31. The corp's performance must conform to the contract it entered into

if the people of Overshoe have any sort of competent representation, their contract would specify not only the standards of performance but it would also make clear it's ability to hold the corp accountable if it failed those terms.

With respect to your altered scenario, contract negotiations are normal. Hopefully the good people of Overshoe are well represented and get fair and reasonable protections written into their contract. That is certainly what many of us mean when we say we want "good government."

As I said above, I'm not in favor of cities selling off their infrastructurer to corporations. I said that very plainly.

IMHO it's an assumption to believe that local leaders respond better, faster, or with greater fairness than a corporation on a contract. I'm not at all sure that is always the case. I think it's not uncommon for communities to be biased in the distribution and quality of their services. If you need examples, I suggest you just look at the assymetries of quality of public service conducted by city utilities between poor and rich neighborhoods or between poor and rich communities in their receipt of services from counties.

[jus_the_facts]

10. Healthcare and Prisons shouldn't be for profit either....

:evilfrown:

[annabanana]

24. Boy Howdy, ain't THAT a fact!

"Turn off the heat for a day or two.. the bills will go down, and what're THEY gonna do, Complain?."

"Why the hell should we be paying for anything better than slop and spoils in the kitchen? It's not like they deserve better than, say, cream of wheat for a couple of meals a day, and what're THEY gonna do, Complain?."

[conscious evolution]

11. For a great example for how bad privatizing public services

can be check out Atlanta Ga and their experiences when they privatized the water works here.It was so bad the city ended up cancelling the contract and returning it to city control.Total fucking disaster.

[zeemike]

12. When I had this same argument years ago with a right winger

the rationale against government getting into private enterprises like health care or things like that, the rational then was that government could compete unfairly with the private sector because they paid no tax and had the advantage with a big budget. They could do it cheaper.
Now it has been turned on it's head and private enterprise , so we are told , can do it cheaper.
I remember my time in the Navy when I did my mess cooking duties and the Chief cook who had been in the Navy all his adult life, making good but not a lot of money has now been replaced by a private contractor making 100,000 a year in Iraq, and think you got to be kidding if you think this is cheaper.

[Commie Pinko Dirtbag]

13. That depends heavily on what "it" is. -nt

[madokie]

14. the whole purpose of privitation is decreased services, methinks

remember ronnie's 'getting the government off our backs' and what the results were.
As a for instance, one of the local results was the ceasation of mainitaning our parks and camping sites, went from mowing and taking care of a good 20 or more sites close to here and now spend all the money they spent before on a couple that are more intune with the folks who like to show off their money. When we go camping the last thing loaded is the lawnmower and weedeater so as to be on top cause we know we'll need both once we arrive. Sure it keeps down on the numbers of campers but my fellow compers are part of the allure of going camping in the first place to me, you meet the nicest people.

[Thothmes]

17. Private Sector

One of the advantages to using private contractors is that it save the local governments capitol investment in expensive equipment that for the most part would be infrequently used. When was the last time you saw a section of freeway being built by city or state road crews. When was the last time you saw a local, state or Federal Government building being erected by government employees.
The government does not build ships, aircraft, vehicles etc. Why, because it is much more cost effective for the tax payers to let the contractors bear the financial burden of capital equipment investment. Road maintenance in town I live in is done by contract. However, when and where the contractor works is specified by the municipal public works director. They do not have the option to decide when and where they work. These types of arrangements work quite well, provided that the contracts are well written and the local government properly supervises the contractor.

[annabanana]

26. .. so, lease the equipment.... . . . . n/t

[Canuckistanian]

18. Citizens should be able to vote on the members of the board

Since tax money is going to pay for the services, shouldn't the citizens have veto power or at least be represented at annual meetings?

No, wait, in this situation, citizens are mere customers. And customers don't get a voice in the corporate model, other than for PR purposes.

You're right. Citizens are screwed.

[Parisle]

28. Yep,...screwed either way,....

--- the spirit of privatization (and deregulation, for that matter) is based on the capitalist hypothosis that nothing of worth should occur in society without a rich person making a profit off it,.....

--- And those corporations theoretically using "competition" to improve efficiency, etc,.. have gone to great and collusive lengths to erase competition from their activities.

--- Another "capitalist hypothesis" is that the prevailing majority of people have no right to organize into public efforts to deal with their own needs,.....

---Capitalism may have had its very useful period, but it is not now.

[Double T]

20. Privatizing government services and infrastructure with wall street powered........

corporations is an absolute train wreck. The ONLY thing that matters are profits; maintenance, repairs and upgrades will ALWAYS be secondary to the shareholder's returns on investments; YOU can ALWAYS be certain prices will escalate at a double digit annual rate. The sell off and sellout of government and taxpayer owned assets to cover budget deficits and shortfalls is AGAIN selling off our children's future. 'OUR' USA economy is in serious trouble despite the verbal pablum coming from the MSM economic propaganda network cheerleaders.

[BluePatriot]

30. *points to electric co. deregulation in Texas...

/waves $205.00 bill for 700 sq ft loft apartment
//shivers

Yeah, privatization not working so great down here. This bill is approaching half my rent.

*edit* a few stats:

http://liheap.ncat.org/dereg/states/texas.htm

"Since deregulation took effect in 2002, the four big power companies that control 70 percent of the Texas residential electricity market have increased their rates an average of 83.7 percent."

Additional reading:

http://www.electricity-texas.com/

[fasttense]

32. Another example of how the "free market" helps us all

Lead-laden lunch boxes OK'd by government
February 18, 2007


A researcher with the Center for Environmental Health, displays a swab with pink coloring indicating lead contamination on a lunch box in Oakland, California, in January.

(AP) -- In 2005, when government scientists tested 60 soft, vinyl lunch boxes, they found that one in five contained amounts of lead that medical experts consider unsafe -- and several had more than 10 times hazardous levels.

But that's not what they told the public.

Instead, the Consumer Product Safety Commission released a statement that they found "no instances of hazardous levels." And they refused to release their actual test results, citing regulations that protect manufacturers from having their information released to the public.

That data was not made public until The Associated Press received a box of about 1,500 pages of lab reports, in-house e-mails and other records in response to a Freedom of Information Act request filed a year ago....

***

"They found levels that we consider very high," said Alexa Engelman, a researcher at the Oakland, California-based Center for Environmental Health, which has filed a series of legal complaints about lead in lunch boxes.

"They knew this all along and they didn't take action on it. It's upsetting to me. Why are we, as a country, protecting the companies? We should be protecting the kids. I don't think in this instance they did their job."...

http://www.cnn.com/2007/HEALTH/02/18/lunchbox.lead.ap/i...

Thank you deregulation.