Commentary

Competition Is Necessary For Privatization

It is a pretty basic concept, but sometimes is lost in the haze of corruption: the value of privatization is driven by competition. The New York Times nailed this in an op-ed on Thursday:

Earmark spending — those thousands of customized budget items that Congress tailors as boons for favored contractors — is hardly the biggest dynamic driving the record federal deficit. But as President Obama warned in March, earmarking without competitive bidding requirements can be a “most corrupting” abuse of the budget process.

Competition is what creates incentives for companies to offer higher quality service. Competition pushes down prices, stretching taxpayer dollars farther. Competition encourages companies to honor the terms of their contract, or face losing the contract/not getting contracts in the future. Without these incentives, privatization can go awry. Contractors should have to bid against other companies in the private sector in order to achieve the full benefits of privatization. The government shouldn’t outsource jobs just for the sake of using the private sector.

Anthony Randazzo

Anthony Randazzo is a senior fellow at Reason Foundation, a nonprofit think tank advancing free minds and free markets.