The New York Times recently provided a trove of fodder for the anti-privatization crowd in an warning of the “heavy price” of pursuing privatization measures under President Trump. To the Times’ credit, this article, unlike most anti-privatization columns, presents opinion sympathetic to privatization working in certain circumstances, as well as government failing in tasks that the private sector can perform better.
Beyond that, what remains is a mostly a mess and demonstrates little knowledge of how privatization actually plays out in the different areas of the economy discussed.
For health care, the article cites studies faulting “for-profit” health care facilities for underperforming compared to nonprofit ones, but health care privatization measures across the country often involve nonprofits in the delivery of services. Nonprofits run North Carolina’s Medicaid system, as well as a set of hospitals previously operated by Louisiana State University, to provide just two recent examples.
Prisons provide another area of attack for the Times. The article cites an August 2016 report by the Inspector General for the Department of Justice that sought to improve the ways in which contract prisons within the federal Bureau of Prisons (BOP) are monitored, along with a subsequent decision by the Department of Justice to curtail contracting out the operation of BOP prisons.
Putting aside the fact that the report’s underlying data show comparable performance between the BOP itself and its contractors along various safety and security metrics, the OIG notes several times in the study that the vast differences in their respective inmate populations and other factors make comparisons between BOP-run prisons and contract prisons difficult and largely inconclusive. Importantly, there is no mention anywhere in the report that the BOP should curtail or end contracting out of its prisons; in fact, since the DOJ announcement to phase out BOP contracting, two BOP private prison contracts have been renewed.
The article also mentions private sector involvement in transportation and other infrastructure improvement projects, which clearly appears to be a major part of the Trump administration agenda, but the spends no time demonstrating why that is a bad thing, instead choosing to attack the mentality that the profit motive is the solution to all problems. Transportation public-private partnerships (PPPs) have a long track record of bipartisan support and use—PPPs were strongly supported by the previous two administrations, for example—and states and localities have long used the private sector to aid transportation and “social infrastructure” projects (e.g., non-transportation projects like university dormitories, courthouses, etc.). All involve a decision by elected officials to pursue the PPP path, such as the recent decision to renovate and upgrade the main terminal in New York City’s LaGuardia Airport, a project that relies on significant private sector financing.
The article’s discussion of education might be the most puzzling. Avoiding K-12 education entirely, the attack focuses on for-profit colleges (while giving some the backhanded compliment that they are not “fraudulent diploma mills”), noting their high cost compared to state universities. Perhaps I am missing something, but there appears to be no mass push to privatize state universities in the U.S. Use private sector financing and expertise to deliver student housing, manage bookstores, and implement campus improvement and expansion projects in state universities, or outsource support functions like maintenance or food services? Sure. But the core academic functions of state universities aren’t likely to go private anytime soon.
While the Times was more fair than most in the anti-privatization crowd in ceding that privatization can be effective in certain circumstances, the lack of understanding of how it works in practice leads to some dubious conclusions, with most of the case resting attacking on a strawman argument that sees the profit motive as the solution to everything.
In addition to the obvious fact that the private sector includes both for-profit and nonprofit entities, officials, lawmakers, and agency heads do not pursue privatization because they see the profit motive as the solution. Rather, they pursue privatization because they see it as a pragmatic course of action given their circumstances, and they tend to be agnostic on a company’s profit motive so long as the promised public services are delivered according to the terms of the contract to ensure that taxpayer interests are protected.
Austill Stuart is a policy analyst at Reason Foundation.