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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Privatization’s Sorry Track Record Merits More Coverage

In his Nation of Change article “8 Ways Privatization has failed America,” Paul Buchheit unwinds a compelling argument that Republican-driven initiatives to gut the public sector have backfired badly. Buchheit, author of “American Wars: Illusions and Realities,” assesses the track record of privatization and deregulation with respect to: health; water; internet, television and telephone; transportation; banking; prisons; education; and consumer protection.
Regarding privatization of water, for example, Bucheit explains:

…A 2009 analysis of water and sewer utilities by Food and Water Watch found that private companies charge up to 80 percent more for water and 100 percent more for sewer services…Numerous examples of water privatization abuses or failures have been documented in California, Georgia, Illinois, Indiana, New Jersey, Texas, Massachusetts, Rhode Island — just about anywhere it’s been tried. Meanwhile, corporations have been making outrageous profits on a commodity that should be almost free.

The experience with privatizing transportation has been equally unimpressive:

…With privatization comes automatic rate increases. Chicago surrendered its parking meters for 75 years and almost immediately faced a doubling of parking rates. California’s experiments with roadway privatization resulted in cost overruns, public outrage, and a bankruptcy; equally disastrous was the state’s foray into electric power privatization. In Pennsylvania, an analysis of school busing by the Keystone Research Center concluded that “Contracting out substantially increases state spending on transportation services.”

Deregulation also delivers little of benefit to consumers, as Buchheit writes:

Deregulation not only deprives Americans of protection, but it also endangers us with the persistent threat of corporate misconduct. As late as 2004 Monsanto had insisted that Agent Orange “is not the cause of serious long-term health effects.” Dow Chemical, the co-manufacturer of Agent Orange, blamed the government. Halliburton pleaded guilty to destroying evidence after the Gulf of Mexico oil spill in 2010. Cleanups cost much more than the fines imposed on offending companies, as government costs can run into the billions, or even tens of billions, of dollars.

None of this is to say that the private sector is inherently a bad thing. Instead, Buchheit is arguing persuasively that most major initiatives to dismantle a public sector entity or deregulate industries for the benefit of profit-driven enterprise have resulted in inferior services, higher costs and sometimes reduced safety for the people who were supposed to be helped.
Overall, the private sector in the U.S. does a good job of making needed stuff and offering myriad choices for purchasing houses, cars and consumer goods and services. But some needed products and services, particularly those related to health, safety and public welfare — which, after all, are more important than private profit for a few investors — should remain in the public sector.
Buchheit could also have added that privatization more often than not results in job losses. Indeed, reducing wages is often the reason behind privatization.
Buchheit’s case won’t change the minds of many Republicans, especially knee-jerk government-bashers. But Democrats, especially blue dogs and those whose economic philosophy bends toward the conservative end of the political spectrum, should read Buchheit’s article before supporting any privatization or deregulation initiatives.

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