The Nonsense of Privatization

Michael Fisher wrote: “I work for a trade union in London which is involved in campaigning against privatisation. I am looking for good radical/progressive critiques of the theory and practice of privatisation.”

Here is my quick, rambling response:

First of all, you might look at

Sclar, Elliott. 2000. You Don’t Always Get What You Pay For: The Economics of Privatization (Ithaca: Cornell University Press).

On the other hand, I don’t think you need a radical/progressive critique of privatization, anymore than you need a radical/progressive critique of the belief that the earth is flat. I think the onus should be on those who support privatization.

Privatization proved to be an enormous source of inefficiency and waste of money in Iraq and Hurricane Katrina. In England, I am under the impression that privatization led to more railroad accidents. In Atlanta, water privatization had to be reversed.

Privatization does have its advantages. Privatized schools do not have to pay janitors high wages or benefits.

The big problem is what economists call the principal/agent problem. How can you specify what a privatized school should do unless you can specify every aspect of its performance. If a public agency can produce a detailed blueprint of full performance standards, then it would be capable of running the operation efficiently.

Also, keep in mind, that privatization is typically associated with sweetheart deals.


2 comments so far

  1. Michael Fisher on

    Many thanks. The problem in the UK is that the trade union critique of privatisation is often limited to arguing that because privatisation is expensive and inefficient, those politicians who advocate it are either corrupt or foolish. While this may be true of some politicians, and a useful propaganda line to take, it is unconvincing as a general explanation for the contemporary enthusiasm for privatisation. However partial and incorrect it may be, there must be a broader logic that is motivating the policy – be it fiscal, monetary, ideological etc.

    I will read Sclar’s book. Thanks again.

  2. Seth Sandronsky on

    The Bill and Melinda Gates Foundation funded recent studies on education reform. California Governor Arnold Schwarzenegger praises the studies as a blueprint for solving the many problems that public school students and teachers deal with on a daily basis.

    Crucially, the B&MGF gave a couple of million dollars to privatize Sacramento High School, located in a low-income neighborhood, slowly gentrifying. See the March 15 editorial letter in The Sacramento Bee below concerning that privatization.

    Myths about Sac High

    Re “Sabotaging a school / Board should end freeze-out of Sac High,” editorial, March 13: The Bee needs both a history lesson and a lesson on charter schools. Sacramento High was not a failing school. It volunteered for the II/USP program, but failed to raise its test scores the requisite percentage points. The district chose to close it, although the only sanction leveled by the state was requiring a state evaluation team to visit the school.

    There are substantive differences between the charter schools mentioned in the editorial. All except Sacramento Charter High School are run by the district. Their teachers and staff are district employees and their administrations are accountable to the Sacramento City Unified School District board.

    Sac Charter is run by a private corporation whose board is not elected by or accountable to the voters. Its teachers and staff are employed at will by the corporation. The only thing public about it is the money it receives from the state for enrollment. It competes directly with the district for students and dollars. Every student that enrolls in Sac Charter means less money for the district and its students. Private schools don’t have access to recruit district students. Why should Sac Charter? If Sac Charter had a program that appealed to students, it would be full.

    – Kate Lenox, Sacramento

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