I thought it was may a one or two time thing, but the more I read Paul Ogden, the more it seems he’s becoming a watchdog for political privatization in Indiana. Today’s installment is on possible privatization of parking garage and shuttle service at the Indianapolis Airport.
He’s probably a more credible critic of government privatization operations since he is (or at least was) temperamentally predisposed to be in favor of it but has seen good theory turn into corrupt practice. My first real, direct experience was seeing things work well in reverse — watching the legislature take bill printing in-house at a substantial savings over the private printer it had been using. That probably gives me a predisposition against privatization.
Says Ogden:
Bottom line is that the Airport Board overbuilt and is now scrambling to find the resources to cover CIB-type operating deficits that loom in the future. To close the inevitable gap, the Airport Board is looking at using the long term (50 years) privatization contracts to generate substantial upfront revenue.
This is something I have preached about before. To work, privatization has to be about instilling market competition into the delivery of services. Handing a company a long term contract to provide a service not only does not instill competition, it creates a government-sanctioned monopoly. Insulated from market competition by the long-term privatization contract, the service provided by these monopolies inevitably declines.
There seem to be a few Indy Republicans who have stellar integrity, and don’t mind calling out the corruption of their own party, and two of them do amazing blog work- Ogden and Gary Welsh. I read them regularly. They fairly render the Indy Star worthless, all by themselves.
I’d read me some Dems who do likewise, sticking to principle and take their own party to task when it begs for it, (hello, anti-war, anti-Patriot Act, anti-War on Drugs, anti-warrantless wiretapping, anti-indefinite detention…) but I can’t seem to find any.
Mike: neither Welsh nor Ogden have taken on their beloved Republican Party on the issues of “anti-war, anti-Patriot Act, anti-War on Drugs, anti-warrantless wiretapping, anti-indefinite detention…” but you expect Democrats to do so?
Additionally, Gary Welsh has such “stellar integrity” as to propagate whatever rumor, innuendo, slander he can dredge up against Barack Obama. He is a diehard “birther” like Orly Taitz but without her modesty, charm and fake eyelashes.
Mike, I guess it depends on where you stand, perhaps as much as who you read. For example, the only substantial criticism of the President, or his party, that I see comes from Glenn Greenwald, Paul Krugman, Charles Pierce, and Bob Somerby.
There is a thought that if it is ‘private’ it is inherently better than ‘public’ or ‘government’. These people don’t even do analysis. They will take the cash today and look like heros to some.
In general, I find the privatization arguments leveled to be tenuous at best in most cases. Miles is correct in that an intellectually honest assessment is not done in many cases.
If you have service A costing X dollars for the government to perform, then privatization will require service A to cost a private company .87X to imply a 15% profit (which is a pretty standard target). At that level, the decision between private vs. public is a wash – .87X * 1.15 = X, so we are paying the same amount, i.e. no reason to privatize. Only when the private sector can cut costs by more than 13% is any public savings realized. It is actually a bit higher because of various taxes, but I will leave those out to streamline the point.
There are only two ways to accomplish this:
1. Reduce services.
2. Increase productivity.
Leaving #1 alone for right now, a company would have to increase productivity by approximately 17-20% for the people to see even a 5% improvement in costs. Anyone involved in managing a business understands just how significant that goal is. If you have 1,000 people on the payroll, how do you improve productivity 20%? You could reduce wages by 20%, which will increase productivity (which is a ratio – work over expended resources), or you can have people put out 20% more work. If you cut your labor resources by 20%, a real risk of reduced services exists. Getting people to work 20% harder is monumentally difficult without spending more money.
So in many cases, the same level of services will suffer, or the public will see no real savings.
Most companies opt for the easier path – reduce services.
Privatization comes with large risks, because you are changing the incentive base from doing what is mandated by law (government run) to doing that which maximizes profit (privatized). In many, if not most cases, the private incentive is at odds with the public one. So the risk is huge that privatization ends up not fulfilling the goals originally set out by the legislature.