Learning to Trust the Private Sector

Contracting out helps to build the case for a larger private sector role in public service delivery

In his recent response article, Sheldon Richman takes exception to my claim that government contracting with private firms to deliver public services offers a way to demonstrate to the public that ideas like privatization work on a smaller scale. He noted that this won’t happen “without equivocating over the word privatization and blurring the line between private and public sector.”

But for many people, a blurring of the lines is exactly what needs to happen to start shifting their belief systems on the role and necessity of government in different aspects of our lives. Richman notes the need to “[teach] folks that government is unneeded to provide public services,” and one powerful way to start teaching them is to have a private contractor show up to do a job they’re used to seeing a government employee perform.

For example, my town contracts out its entire fire department to the company Rural/Metro, a pioneer in privatized fire services. Their trucks are shiny, red, and full of water, just like a “traditional” fire department’s. Their firemen train just like their municipal counterparts do in neighboring jurisdictions. They respond to fire and EMS calls just like the government-run systems do.

The main differences I’ve discerned are that: (1) their logo-which otherwise looks much like other fire department logos-notes the name of the company underneath the name of the town, and (2) workers are covered under a private sector 401(k) plan, so our town is not on the hook for a massive future pension payout. Neither of these differences is relevant from a service delivery standpoint.

But most people who move to my town are not used to private fire services and have never heard of private fire contractors, so they tend to react as if it’s a foreign concept. Many folks have grown up to believe that firefighting and emergency medical services are inherently governmental functions, as if only government employees can be trusted to fight house fires and respond to EMS calls. Imagine their surprise and shock, then, upon discovering that their new fire department is run by a for-profit corporation. And imagine how powerful it is to realize over time that not only does this model exist, but it also works: what once may have seemed so “public” just doesn’t seem so “public” anymore.

I believe that before libertarians will be able to successfully convince the general public that fire services represent a “coercive monopoly” and something perfectly ripe for privatization, we’ll first need to convince them that there exists a legitimate private sector role in firefighting in the first place, a task that will be made difficult by the inevitable protestations made by public employee unions.

Contracting out helps to build the case for a private role. For many types of government services, more radical types of privatization are not likely to materialize tomorrow unless citizens can see that there is an existing batch of private providers demonstrating competency in delivering comparable services today. For example, if you did not have private fire services companies in existence today providing high-quality, cost-effective services to governments under contract, then most people would likely dismiss claims that the private sector can and should perform these services in the future. (They might ask, “What private sector?”) Fully private garbage collection exists today in large part due to the growth of contracted garbage collection over many decades, and now people tend to understand that this is a real business with viable private providers. This same market development and maturation process also needs to happen in areas where government almost entirely self-provides, like fire protection.

Hence, contracts along the lines of those described above can in my opinion play a critical part in deconstructing antiquated mental maps about what truly are “inherently governmental” functions and what aren’t. Like it or not, this will be required for many services traditionally conceived of as “public” in nature before true privatization can take place. Using my above example, if one can demonstrate to the uninitiated that cities can successfully contract out fire and EMS services to a for-profit corporation-even imperfectly, as a monopoly enterprise-then it’s not much further of a leap to conceive of even more aggressive privatization models and structures that could potentially eliminate the monopoly outright.

Leonard Gilroy is director of government reform at Reason Foundation. This column was originally published in the October 2012 edition of Cato Unbound as part of a conversation series on how and how not to privatize.