The basic fallacy of "privatization"

by: Adam L

Wed Mar 02, 2011 at 02:13:11 PM EST

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I put "privatization" in quotes because it is really corporatization, and quite frankly is a much better term for the further theft of taxpayer dollars for the well connected corporate class.

The arguments that the right and the pro-corporate/"free market" crowd make are in direct conflict with the entire rationale for privatization corporatization of public services - regardless of whether it is the school system, toll collecting, motor vehicle inspection (all of which have been done/proposed in New Jersey), or taking it a step further, the fire department.  It goes something like this:

Corporations are supposed to maximize profits and their responsibilities lie with their shareholders and increasing shareholder value.  So, cutting corners (BP, anyone), using cheaper materials (as we have seen in building houses as compared to decades ago, or even in household goods that break down after a few years) or reducing quality control in order to make more cheaper or do more with less.  Even if this isn't all willful and there are just fewer people doing the job, there is inherent quality control issues from less people doing more.  All in the name of maximizing profit and being accountable to shareholder value.

Contrast this with the basic premise of public service - to serve the public.  There is an underlying goal of making sure that the public receives the services that it needs as opposed to the services that a private company wants to deliver based on cost and interpretation of the contract, regardless of needs.

Now, let's take the argument for corporatization of services - it goes something like this:

Remembering the old adage, "you can only have two of the following three things: (1) quality, (2) timeliness and (3) inexpensive",  the arguments of corporatization and the "corporate priority manifesto" will ultimately lead  one of two things - neither of which is good:

• A lowball bid will get the job, and in the interest of maximizing corporate profits, a subpar effort would generally be undertaken, as "precious corporate resources" wouldn't want to be wasted on an effort that doesn't generate as much profit as other initiatives; or
• Bloat, waste, inefficiencies, mismanagement and overruns will increase the cost of the corporatization, or even worse, lead to a stalemate and potential disruption of services as a new agreement is negotiated.

The two ideals can't mutually coexist.  Either a corporation is interested in maximizing its' profits and shareholder value, or the pro-corporatist argument is a fallacy.  And if the interest is in maximizing profits, then doing the work that is in the public interest would only work if that also serves to (1) reduce the overall cost and (2) happens to also meet the goal of maximizing corporate profits and value, in which case it really isn't serving the public good.

Corporate profits and public service are at odds with each other at the very core as the primary driving force behind these goals.  And that's where the argument for corporatization of public services falls on its face.