Thursday, August 17, 2006

democratically run for profit organisation?

the other day, anon in the comments wrote:
as far as democracy is concerned, it's being eroded in many ways. of course the most overt form is the coup. but, especially in western europe, it has also been eroded by the gradual rise of the market in the domains of the democratic state: public services, public amenities etc. this 'hidden coup' means that democratic control is being substituted by for-profit managerial control. has anyone ever heard of a democratically run for profit organisation??
i replied:
i'm actually not ideologically opposed to the idea that local services are outsourced to private companies - so long as the allocation of the contracts is legitimate.

LeeB responded:
Luke, I disagree about outsourcing legitimate governmental services to private corporations. At first glance, it sorta sounds good, since they often pitch the idea on the basis of corporate efficiency.

HOWEVER, built into the idea is the notion of profit attached to services that are supposed to be part of the commons. As an example, water is a natural resource that is freely available. Putting water into a system of pipes, purifying it, and keeping the access to pure water consistently available and the recycling of used water controlled and repurified before releasing back into the rivers and oceans are necessary services that keep the "free" commodity safe for human and critter consumption, and the ecology in general.

When you think about it, it is one thing to cooperatively pay for the necessary processing and delivery services but quite another to enrich some corporate executives by adding a layer of profit to the entire enterprise. Same goes for building and maintaining roads and especially what we are seeing in action right now with the military vs. mercenaries crap playing out in Iraq and Afghanistan.

Under the old system, the military took care of its own essential services like moving supplies and feeding the troops. Who would have anticipated the likes of Haliburton (and KBR) giving contaminated drinking water to the troops and family members having to ship* bottled drinking water(and food) to soldiers and marines from the U.S. every three days! (* a story recounted by a caller on AAR Tuesday night!) The military also used to provide its own security services; it didn't hire $100,000+/yr mercenaries to work along side $24k soldiers, all paid by tax dollars.

If we allow corporations to take over the operation of the commons, we leave ourselves open to higher costs and more corruption. As it is, the traditional limits of purchasing necessary commodities from the private sector, hiring the construction companies to build roads and public buildings, etc., has to be carefully controlled in order to limit abuses. This outrageous bunch is focused only on shutting up and neutering the whistleblowers and guardians of the public purse, and this is after just a very few years of putting that private sector concept into play.

Do a little research on water companies and Argentina and it will curl your hair. I've seen enough to convince me that we do need government and that we, as citizens, need to permanently give up the idea that we can afford apathy and any assumptions that those within government are somehow "other." They work for us. Government is what we collectively make it; nothing more, nothing less. We let it get way out of control to the extent that these supercriminals have gained a huge foothold and we are the ones who will have to put it right.

Heaven help us stamp out election fraud!
LeeB and anon both make legitimate points. I have a typical neolib background (B.comm, MBA) - so that may color my thinking in some ways - but it also means that I'm familiar with the arguments and analysis pretty well.

In my response to anon's "has anyone ever heard of a democratically run for profit organisation??" I didn't really expand on my 'so long as the allocation of the contracts is legitimate' observation. A fuller answer would include the fact that the public domain isn't really 'democratically run' either. Decision makers are elected every now and again, and then we outsource the decision making to them for whatever period. If they are competent and uncorrupted, then I don't really have an ideological aversion to the services being provided externally (privately).

as anon notes, there is a 'gradual rise of the market in the domains' - the question, then, is what the 'appropriate' level should be.

and as LeeB notes "they often pitch the idea on the basis of corporate efficiency" - and they often have a good argument. so when LeeB says:
"When you think about it, it is one thing to cooperatively pay for the necessary processing and delivery services but quite another to enrich some corporate executives by adding a layer of profit to the entire enterprise. "
we need to consider whether the 'layer of profit' is justifiable. it might very well be that the corporately-delivered product, including the profit layer, is higher or lower (more efficient) than the cost otherwise. similarly, we also need to consider whether the 'product' is better, or more effective.

yes - there are problems with corporations running 'everything' - and/or some things - but there are also well-documented efficiency/effectiveness problems with government run things as well. obviously there's a trade-off to be made somewhere - and I have no idea where the line should be drawn.

LeeB describes the provision of the 'service' of water. Obviously water is important - should it be delivered by govt, or the private sector? I don't know. If the people involved are corrupt, it might not matter all that much.

as LeeB describes it:
"Putting water into a system of pipes, purifying it, and keeping the access to pure water consistently available and the recycling of used water controlled and repurified before releasing back into the rivers and oceans are necessary services that keep the "free" commodity safe for human and critter consumption, and the ecology in general. "
yep - obviously this is an integral service. are govt or corps best at delivering the 'pure' product? i'm not sure. delivering it 'consistently'? not sure. (both of those metrics are on the 'effectiveness' scale) - and in terms of delivering pure water, consistently - i'm not sure who wins on the 'efficiency' scale - and efficiency is important - because it *either* means higher taxes, or reduced service delivery elsewhere (eg electricity delivery, or education)

as far as i'm concerned, that's just inescapable arithmetic. if we want to argue that we need to raise taxes, then the question becomes 'who from?' - if we raise taxes across the board, then that hurts poor people, and we raise taxes on rich people (or undo the stupid tax cuts) - regardless, the money has to come from somewhere.

the other problem, when we look more closely at LeeB's 'govt should provide water' argument, is how far up the chain do we extend the 'the govt should do it' argument. LeeB essentially (perhaps inadvertently) argues that the govt should provide the 'retail' end of the service delivery - 'Putting water into a system of pipes' - should the government also own the pipes? should it manufacture the pipes? should it install them? should it make the steel/concrete?

At some point, those questions need to be answered (unless the state does everything) - and at each point, the question needs to be 'can we trust the decision makers?' and 'do we have the correct decision making process in place, with appropriate transparency?' - that's (one reason) why i'm not ideologically opposed to private (corp) participation in the public domain. Corruption and/or incompetence at any point in that 'value chain' can create a bunch of problems - regardless of who is actualy performing the tasks.

Similarly, LeeB also brings up the mercenaries in Iraq - and the absurb salary discrepancies compared to economic conscripts volunteers. Obviously this creates massive problems. But if we use a similar analogy to the water delivery / water pipes situation - which is the worst crime (in terms of private provision of public services)? - the mercenary/volunteer problem? or the fact that the military hardware manufacturers are private contractors who own the media and most congresscritters.

so while i agree with LeeB saying:
"I've seen enough to convince me that we do need government and that we, as citizens, need to permanently give up the idea that we can afford apathy and any assumptions that those within government are somehow "other.""
we also need to define the issues, and the problems, properly.

Similarly, i agree with anon that there is an invisible incursion by private interests into the public domain - but it's not necessarily a bad thing - but it sure as hell needs to be debated on the merits - not just incrementally, but in toto.

4 comments:

Anonymous said...

There are a whole range of government services that could be privatized, and the arguments are different for each of them. Cost and efficiency are not the only criteria -- there are also matters of control, of fairness, of the function of government to act as a redistribution system, and of the role of these serves as the glue which holds the commonwealth together.

Water seems to me like one of the things you would least want to privatize. It's a natural resource that belongs to everyone -- and is also needed by everyone. The poor are as dependent on it as the rich, and lack of safe water leads to disease, which again affects everyone. The very idea that somebody ought to make a profit off it -- and be able to turn off the tap for non-payment -- is morally offensive.

Natural monopolies or near-monopolies, like roads and railroad lines and (until recently) phone service, are also problematic in varying degrees, in part because the proprietors are being granted an exclusive license and in part because the public has no good alternatives. I'm especially concerned by the move towards private toll roads -- there's one current case where the state government has had to promise not to upgrade the public secondary roads nearby for the next 10 or 15 years.

Non-monopolistic provision of social services -- where competition keeps the providers small, honest, and eager to prove themselves -- may be the one area where private really can be better.

Another factor to consider is whether the private company is being paid by the government or by the citizens. Despite the threat of corruption, the former has definite advantages, since the government has far more clout than private citizens to enforce rates and standards, not to mention public health and national security concerns.

There's also the issue of redistribution. Contrary to what the libertarians like to claim, the earliest governments were *not* created to protect private property through police and military power, but rather to maintain public infrastructure (notably irrigation systems) and to ensure that wealth and essential goods didn't accumulate in the hands of a few. At the chiefdom level, redistribution was accomplished informally through cultural institutions like gift-exchange systems and potlatches. But the first civilized states were overwhelmingly involved in large-scale collecting, storing, and doling out of food supplies -- just think about setup assumed by the story of Joseph and pharaoh and the seven lean years.

Perhaps the most frightening examples of privatization are those, like water and toll roads, which place the poorest among us at the mercy of for-profit corporations with no incentive to provide for their well-being or make their lives more sustainable. But any change which reduces public accountability and restricts people's sense of acting together for their mutual benefit chips away at the concept of citizenship and unravels the fabric of society itself.

LeeB said...

Hear, hear!! Love it! Amen!

[Anon, pick a handle so we can sort you out from the other Anons who turn up here . . . please?]

Look what happens when you privatize the wrong services! This is a link to a Google search I ran this morning -- the one I was too lazy to do in the middle of the night when I wrote my original response on this topic.

I will just add that for a host of reasons, involving private enterprise in government services frequently looks much better in theory than it proves to be in practice. I'm no expert on the subject, and the public/private transactions of the past have certainly proven difficult to manage and keep *clean* which is why I stick to my earlier opinion that we must forever give up apathy. Pogo knew it, too.

Anonymous said...

Enron

need i say more?

-Jiminy Cricket

LeeB said...

Bingo!