Friday, July 18, 2008

Inevitable efficiency

One of the curious common beliefs, prevalent among academics and media types and pundits, is the idea that private industry is inevitably more efficient than government-run enterprises. I will grant that that is generally true, but I see that far more as a deficiency in the skill and accountability of public employees than in any inherent superiority of corporations.

The advantage I have over the luminaries mentioned above is that I've actually worked for real companies, and have seen exactly how sub-optimal they can be. The relentless competitive drive does little to prevent a remarkable amount of waste, in money and in time. I could tell plenty of stories, but The Corporate Cynic has even better ones.

What brings this topic to mind is a couple of posts from other blogs. Jill at Brilliant at Breakfast points us today to an example of how a former Halliburton subsidiary has killed our troops with shoddy electrical work. I would further guess that the contracts for this work haven't actually saved the American taxpayer any money at all.

Kevin Drum wrote a post yesterday about Larry Summers's comments about Fannie Mae and Freddie Mac, that a huge part of their problems had to do with their status as Government Sponsored Entities (GSEs), that they tried to combine private discipline with public protection, but got the worst of both modes.

I can't really speak specifically to the Mae and the Mac, but the key phrase is this: "gains privatized and losses socialized." This is actually the goal of any company, whether they're doing electrical work in the Green Zone or guaranteeing mortgages, to keep all the benefits and push the risks off on somebody, anybody else. Privatization is the most effective way yet devised to do this, and it fits neatly into the Reagan-esque narrative of incompetent government.

But let's not fool ourselves. The selling off of tollroads and bus shelters and parking garages by municipalities has nothing to do with providing more efficient services to taxpayers. There are two reasons to privatize: to turn long-term assets into short-term cash, allowing more services without raising taxes (and deferring the bill); and to break union contracts. Because we're not really opening those things up to competition and its benefits. Giving a 99-year lease to a company to run a tollroad does nothing to help the "customer," it simply creates the worst form of entity, the government-sponsored monopoly.

If you want to get the benefits from making a tollroad private, you have to sell each toll booth to a different company. Then you could have coupons, 50% off sales, and all the other consumer-focused things that competitive companies have to do. Of course, you might have some big-time accidents as cars cut across lanes to take advantage of a double-coupon day, but that's the price you pay for progress.


Democurmudgeon said...

One reason toll roads are being sold off is due to a lack of political courage. Republicans have been so relentless pushing tax cuts, that any sound business decision put forth by government to increase taxes, or tolls, is shouted down by ideologues.

Instead of increasing tolls, these partisans would rather have a private company increase fees, dramatically after the normal ten year freeze (less time for trucks).

All that needs to be done is allow the tolls to go up as neccesary, take responsibility for it, and maintain the infrastrature.

But the mantra "tax cut" is too strong to resist for Republicans, and a frightening label for Democrats.

Androcass said...

Thanks for your comment, I think you're dead on.

What is truly frightening is to look at what the quick-hit money is being used for. Here in Illinois it's being used to prop up unfunded pension liabilities, and to put forth new programs that are politically attractive but financially impossible.

The end result will be to fall farther and farther behind; eventually taxes will have to skyrocket (though who will have the courage to impose them?) or governments will default. It could well be that a public pension is not nearly as safe as promised.

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