From Medicare to our local recycling and refuse services, the signs are abundant, what has historically been owned by the public, is slipping into the for-profit sector. The justifications are simple enough. Our leaders tell us, “either we raise your taxes, or we outsource this service or department.” This message isn’t crafted by local politicians looking for ways to make their communities better. When you hear, “this partnership with Private Company X is a win, win.” take a deep breath, and think about this…
On a national scale, Medicare has been moving more into the private insurance sector and may end up as a voucher program. The United States Military has increased its reliance on contract workers at home and overseas. Often some of the most dangerous jobs in the Military are outsourced to private firms with little or no oversight. Our criminal justice system has become reliant on private prisons which rank as some of the worst prisons in the world, in more ways than one. All in the name of freedom, free markets, and efficiency.
Closer to home, our communities are turning over ownership and control of many aspects of their public services. Garbage collection, in many cities, has been contracted to private companies. Unionized sanitation engineers are replaced by workers who often work longer hours, for less pay and fewer benefits. 2014 in Lakewood, Ohio, every refuse driver made at least $50,000 per year, according to Ohio’s Treasurer. Waste Management, a Fortune 500 refuse service, pays entry-level drivers $16 per hour with a median for all truck drivers being just $16.48, according to self-reported data. Another source reported some drivers starting closer to the federal minimum wage.
Community hospitals are being handed over to healthcare conglomerates. In return for giving up hospital beds, municipalities are rewarded with outpatient facilities that promise nothing but high-profit margins for large “non-profit” hospital chains. With an opioid crisis looming over Ohio more patients are being sent home with prescriptions because there are simply fewer beds.
Schools systems, already starved of funds by rampant tax abatements, are losing even more resources to privately owned and managed charter schools. Charter schools are often run by less than reputable for-profit companies with the sole mission to make as much money as possible, as quickly as possible. In charter schools here in Ohio, children were receiving up to 36 days per year less instruction than their public school peers. Bribery of school leadership was rampant. Developmentally delayed children were completely neglected while over 27 million taxpayer dollars were “improperly spent” by the charter schools, four times what any other public agency has ever misspent.
“Outpatient services are the way things are going anyway.” ”Charter schools are the solution, not the problem.” ”This will improve efficiency and save you money.”
The question that should follow is: “Is it easier or harder to save money when 15% of the check that we hand over to the contractor disappears instantly?”
Upfront savings that privatization might claim to offer are offset by what’s called the Cost of Capital. Investors expect a return on what they have put into the company. The company is not beholden to the public like a municipal utility department would be; the company is beholden to the shareholders, who will take a portion of the profits of the company. The profits extracted by the shareholders from production of goods and services will, as certain as basic math, reduce efficiency. With some industries like energy production and insurance, extraction could be costing 15-20% of the total cost. More of these profits than ever are going straight to the shareholders.
From 1950 to 1970, US companies were reinvesting 65% of their profits, expanding their businesses, innovating and creating jobs. By 2000, companies were reinvesting only 6%, paying the rest in dividends to investors who are more interested in returns today than the longevity or viability of the company in the future. This has caused companies to focus on the next quarter rather than the next quarter century.
Turning a profit is not a bad thing. The private sector is necessary. It employs people and drives the economy. The problem starts when profits are not reinvested. Instead, these profit margins, created by our tax dollars, are increasing inequality, killing unions and feeding the wealth gap.
Governments working with the private sector are not always bad. Especially in cases where cities are too small to maintain a department, a public-private partnership might be necessary. Cities and towns coming together and regionalizing their resources is becoming popular. By creating economies of scale, two, three or more municipal governments can share police forces, fire departments or collectively contract out services they otherwise could not maintain.
Instead, what we must be critical of are highly profit motivated individuals and corporations, looking lustfully at what is owned collectively by the people. The scale of public sector spending can be very large thus very attractive, and taxes are one of the most secure forms of revenue. Weak political leadership will often be persuaded by the “everybody wins” argument presented by the corporate interests, as they have been time and time again.
It falls on us, to keep a sharp eye on what is community owned and controlled. The fight to keep what is collectively ours will be much easier than the fight to get it back once we lose it.
Further reading:
http://econpapers.repec.org/article/pioenvirc/v_3a30_3ay_3a2012_3ai_3a4_3ap_3a675-692.htm
https://www.youtube.com/watch?v=YOaJe68C-bU
https://www.glassdoor.com/Salary/Waste-Management-Salaries-E2094.htm
