For a considerable period of time in the late 1900s, privatization of government functions was all the rage. (Not that it was true privatization; as I’ve noted before, actual privatization requires that government completely withdraw from whatever activity was involved, leaving its provision entirely to the private sector.)
What public entities call privatization is almost always contracting-out or outsourcing–providing a service through a third-party surrogate rather than through government employees.
Enthusiasm for the practice has abated considerably, as research has steadily deflated the claims made by proponents. Contracting out doesn’t usually save money, for one thing, and the ability of government to monitor those with whom it contracts has proved to be less than ideal, to put it mildly.
Also, in far too many situations, contracting has become the new patronage.
There are certainly public functions that lend themselves to outsourcing, but thanks to the American penchant to go “all in” on the latest management fad, contracting has often proved disastrous. From poor outcomes, to cost overruns, to outright corruption, analyses have been increasingly negative. A recent research project adds one: government outsourcing decreases employee diversity.
A new study by researchers at the University of Georgia revealed that when governments contract work out to private companies, fewer African-American, Hispanic, and female employees are hired.
Over the past twenty years, private contracting has become a popular way to improve efficiency in the public sector.
“Increasingly, services that were once performed by public employees, are provided under contract by private firms,” explained study author J. Edward Kellough, a UGA professor of public administration and policy in the School of International and Public Affairs. “The question,” he added, “is whether this growth in contracting has been detrimental to minority and female employment.”
That’s not nearly the worst of it.
The Trump Administration has been contracting with private prison companies to house refugees at our southern border. Private prisons are arguably the most striking misuse of government outsourcing, and their operation of border facilities has raised understandable outrage.
Is it cruelty, or is it corruption? That’s a question that comes up whenever we learn about some new, extraordinary abuse by the Trump administration — something that seems to happen just about every week. And the answer, usually, is “both.”
What about the detention centers at the border?
And the same goes for the atrocities the U.S. is committing against migrants from Central America. Oh, and save the fake outrage. Yes, they are atrocities, and yes, the detention centers meet the historical definition of concentration camps.
One reason for these atrocities is that the Trump administration sees cruelty both as a policy tool and as a political strategy: Vicious treatment of refugees might deter future asylum-seekers, and in any case it helps rev up the racist base. But there’s also money to be made, because a majority of detained migrants are being held in camps run by corporations with close ties to the Republican Party.
Krugman then sums up the whole sorry experiment with “privatization.”
Privatization of public services — having them delivered by contractors rather than government employees — took off during the 1980s. It has often been justified using the rhetoric of free markets, the supposed superiority of private enterprise to government bureaucracy.
This was always, however, a case of bait-and-switch. Free markets, in which private businesses compete for customers, can accomplish great things, and are indeed the best way to organize most of the economy. But the case for free markets isn’t a case for private business where there is no market: There’s no reason to presume that private firms will do a better job when there isn’t any competition, because the government itself is the sole customer. In fact, studies of privatization often find that it ends up costing more than having government employees do the work.
Nor is that an accident. Between campaign contributions and the revolving door, plus more outright bribery than we’d like to think, private contractors can engineer overpayment on a scale beyond the wildest dreams of public-sector unions.
Krugman makes an even more important point about accountability.
As he says, if you outsource garbage collection, it’s pretty easy to determine whether the garbage has been collected (although I’d note it’s not so easy to tell where it’s been dumped…). But if you hire a private company to do something the public can’t see–like prisons or migrant camps– it’s easy to hide poor performance and generous overpayments to political cronies.
And running a prison, which is literally walled off from public view, is almost a perfect example of the kind of government function that should not be privatized. After all, if a private prison operator bulks up its bottom line by underpaying personnel and failing to train them adequately, if it stints on food and medical care, who in the outside world will notice?
And of course, the administration and its cronies profit from these facilities. It’s hard to disagree with Krugman’s final observation:
Every betrayal of American principles also seems, somehow, to produce financial benefits for Trump and his friends.