Weaned from Government


When Government Goes Private: Successful Alternatives to Public Services, by Randall Fitzgerald, New York: Universe Books, 326 pages, $24.95

When future historians look back on the Reagan presidency and the domestic reforms that took root in the 1980s, the rise of the privatization movement will be remembered as one of this decade's most far-reaching legacies. In his absorbing new book, When Government Goes Private, Randall Fitzgerald captures the excitement and passion for the market-oriented, pro-choice ideas that are the heart and soul of this movement that is sweeping the world.

A reporter for Reader's Digest, Fitzgerald chronicles the success of numerous privatization initiatives on a variety of fronts—mostly on the state and local level in this country—from education to transportation, from housing for the homeless to environmental protection. Though often narrowly defined as turning over government services and enterprises to the private sector, privatization is treated in a broader context by Fitzgerald. He includes contracting out of public services to private businesses, as well as neighborhood self-help and community voluntarism "that wean people from dependence on government."

The questions he raises about why privatization hasn't been tried where government has failed are as fascinating as his exhaustive examples of where it's worked. How is it possible, he asks, that the nation's 283 Indian tribes remain one of America's most impoverished minorities, dependent upon $2.6 billion in government assistance, when together they own 58 million acres of land, or up to one-third of the nation's developable resources? Clearly, a program that turns Indian-Americans into independent investors and entrepreneurs would be far more preferable for their well-being, not to mention their self-esteem, and for the federal budget to boot.

If anyone is looking for the ultimate catalogue of privatization that works, this is it. The mass transit mess? Not in Phoenix, where a private corporation runs a bus system that saves the city 62 percent over what it would cost if government ran it. Inner-city slums? Not at the Kenilworth project in Washington, D.C., a once-blighted, crime-infested public housing project that has been turned into a safe, neat-as-a-pin, self-financing development run by tenants who will soon own their units. The Bush administration and its HUD secretary, Jack Kemp, want to make Kenilworth a model for the nation.

While Ronald Reagan never achieved the kinds of privatization initiatives his supporters had hoped for, he was the first president to truly champion the privatization cause and did chalk up a few significant victories during his administration. The sale of Conrail, the northwestern rail freight system nationalized by the government after Penn Central's bankruptcy in 1973, is clearly Reagan's most spectacular privatization reform. Then–Transportation Secretary Elizabeth Dole stumbled in the early rounds when she proposed selling Conrail to Norfolk Southern for $1.9 billion, a move that was correctly opposed by House Democrats who wanted a broad public stock offering. Eventually, Conrail's sale on the stock market yielded $1.6 billion for the government and put this quasi-public agency safely into private hands.

Reagan pushed privatization in other areas, too, selling some of the government's properties and other assets, including some of its loan portfolios. He and Education Secretary William Bennett also promoted educational vouchers to give lower-income families the choice of sending their kids to private or parochial schools, but Congress never bought the idea. Yet it remains a good one and a perfect example of how the administration failed to develop and energize natural interest groups—in this case inner-city minorities dissatisfied with poor public schools—who could mount massive public pressure for such proposals.

In his final budget, Reagan called again for the sale of the Naval Petroleum Reserves, the Alaska Power Administration, and other federal power marketing administration assets, as well as additional real property assets and loans. No one can say at this point whether George Bush will push them, but the chances are good that he will.

As with any movement, privatization needs the kind of institutional research and analysis that gives its ideas credibility and advances them to the next plateau in the public policy process. Yet the benefits of privatization and its growing acceptance on the local and state level is getting nowhere near the media attention it deserves.

A case in point is the President's Commission on Privatization, headed by liberal political scientist David Linowes, which last year came forth with an unprecedented menu of proposals, including privatizing the mails. To my knowledge, this is the first time any presidential panel has supported the breakup of the Postal Service's monopoly. While the report received relatively scant attention, it was another important step on the road to giving privatization proposals legitimacy and momentum.

It is particularly disappointing that major business organizations, such as the U.S. Chamber of Commerce, and other interest groups have not invested more political capital in the promotion of privatization in recent years. Businesses, especially small entrepreneurs, stand to gain much from its advancement.

Nevertheless, privatization supporters learned some valuable lessons during the Reagan years, many of them from Margaret Thatcher, who deftly implemented the privatization of dozens of nationalized enterprises through employee stock ownership plans and sold nearly one million public housing units to tenants. Chief among these lessons: the bureaucrats who manage and operate government-run enterprises must be made beneficiaries of any privatization initiative, through employee stock ownership plans or some other instrument. The people who derive services from programs to be privatized, whether public housing tenants or users of the mail, must be shown that they too will benefit—by becoming owners of private property in the case of tenant ownership, or by cutting their postal costs in half.

While still in its infancy, the privatization movement's growth path appears to be perfectly timed to intersect with the mounting government bills that will be crashing down upon us in the coming years—from out-of-control social security taxes to the huge costs of rebuilding the nation's deteriorating transportation infrastructure. "We simply have too many unmet needs competing for too few public funds to address them," Fitzgerald points out. His book points the way out of this crushing burden through privatization. It should be mandatory reading for every public official in the country.

Donald Lambro is a nationally syndicated columnist and the chief political correspondent for the Washington Times.