Lessons in Privatization


When you shift from a monopoly run directly by the government to a monopoly that merely contracts with the government, you haven't exactly established a market. Nonetheless, civilian contractors have introduced two un-martial elements of private capitalism to the Iraqi occupation: Unlike soldiers, their employees can quit, and unlike the military, they have to pay more insurance when they enter a war zone.

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  1. Thanks thoreau for the first hand report.

    Privitization and deregulation sound good, and often they are. But before being seduced by such ideas, let’s remember that private companies are not INHERENTLY better than government bureaucracies (just as they’re not inherently worse, as liberals often think). All that ultimately matters are incentives to efficiently satisfy the customer, which free markets generally do a better job of providing than controlled ones. When reforming a market in which relinquishing ultimate control by a government bureaucracy is not an option, choose wisely, Grasshopper!

  2. Lest we forget basic libertarianism — if the government wasn’t providing those services in the first place (research at the DOE, etc.), then it wouldn’t have a natural monopoly created through coercion through which private enterprise has to haggle its way into the bureaucracy to get a footing. The free market is pretty much the trump card.

  3. I’ve worked both sides of this fence as a contract monitor for the government and as a government contractor. Thoreau has it right – outside contracting just adds a middle man.

    As a contractor our motto was “if you ain’t cheating, you ain’t trying” and 2 seconds after getting a contract we began plotting as to how to strip out features and/or employees to increase the bottom line. States, counties and cities were pushovers because they had weak regulations and no money for monitors. The only place we had to shape up was with the Feds and in the U.K. where penalties for even small violations were expensive and they had a monitor on your ass every minute of the day. They had to spend as much making contractors behave as they saved by outsourcing.

  4. Don’t worry Neil, I haven’t forgotten my basic libertarianism! 🙂 But even BL allows for the government to protect its citizens, presumably through government controlled law enforcement agencies and military forces. And as we all know, we don’t live in a very libertarian world, and sometimes we have to make choices between the lesser evils that the distinctly nonlibertarian political reality allows for….

  5. “we don’t live in a very libertarian world, and sometimes we have to make choices between the lesser evils that the distinctly nonlibertarian political reality allows for.”


    How about this POST OFFICE ID PLAN:

    “A government report urges the U.S. Postal Service to create “smart stamps” to track the identity of people who send mail.”

    And guess what …

    “Major high-tech companies, including Canon, Hewlett-Packard, IBM, Lockheed Martin, Pitney Bowes, Symbol Technologies and Stamps.com, are pushing the Postal Service to adopt intelligent mail systems. Each participates in a special committee on intelligent mail run by the Mailing Industry Task Force, a cross-industry group formed in 2001 with the support of Postmaster General John Potter.”


    SOURCE: http://news.com.com/2100-1028_3-5062617.html?tag=cd_mh

  6. Zathras,

    The UK & France, for the size of their economy and population, have very large and potent military forces. This is the reason why they are able to project force around the world.

  7. The UK has some limited force projection capabilities – it can put a couple of aircraft carriers and a heavy division overseas if it really strains itself.

    France has virtually no ability to project real force that I know of. France has some light infantry units that it will send when it decides a former colony needs kicking around, but it hasn’t projected force anywhere other than its former colonies to speak of, and doesn’t have any capability of projecting heavy forces anywhere. The one French aircraft carrier is a joke, and I don’t think the French of much of any heavy lift capacity.

  8. RC Dean,

    Chuckle, which of course why so many Mirage fighters are flying sorties in Afghanistan. How exactly is the DeGaulle a “joke?” America certainly continues to desire its presence in the Indian Ocean.

    Currently France has the ability to put around 20,000-30,000 soldiers on the ground in a conflict (not including the Foreign Legion); which is a sizable force considering that the US has a hard time putting a force of 150,000 on the ground. France and the UK spend comparable amounts of their GDP as a % of their GDP on national defense BTW.

    And very few countries if any have the heavy-lift capabilities of the US (the UK has the same problem that France has in this area); this issue is being remedied by a joint Franco-German endeavour.

    And this doesn’t even get into the radical, and to be frank, needed reform the French military went through after GWI and Bosnia demonstrated the need for such.

    See here: http://carlisle-www.army.mil/usawc/Parameters/00summer/bloch.htm

  9. For all the ragging they get, would you want to have a detachment of the Foreign Legion looking at you sideways. Back them up with a Ghurka regiment and watch Iraq be pacified REAL quick.

  10. J Canuck,

    Well, they’ve been giving the rebels in Cote D’Ivorie a pasting of late; the Western press has largely ignored the battles France has been fighting there. In late July there was a push by the rebels and the Foreign Legion severely punished the rebels.

  11. “And untrained civilians ‘can walk off the job any time they want, and the only thing the military can do is sue them later on,’ Singer said.”

    Would the military really sue KBR, a Halliburton company?

  12. Is a captured contractor considered to be the same as a captured soldier? Do the Geneva Convention principles apply? Can they be shot as spies? Does Worker’s Comp apply in Iraq (or Colombia)? How about health coverage – do Army doctors send you a bill?

    Can anybody out there who has some experience with this fill us in about how this works?

  13. Look, our choices are really pretty clear here. We can:

    1. Accept the price of private contractors taking over non-combat roles, including logistics;

    2. Accept a much smaller military that does not get involved in places like the Middle East or, for that matter, Europe; or

    3. Accept some form of conscription.

    So far, the American military has chosen Door No. 1, and most European militaries have chosen Door No. 2 (though a number of European countries have a token national service requirement). Each course has drawbacks; only the last one would be massively unpopular. Take your pick.

  14. Several summers ago I had my own brief experience with government privatization:

    I did an internship at a Department of Energy lab. (Yes, I know, you can give me a zero on the Libertarian Purity Test, but that internship helped persuade me that gov’t doesn’t work.) The lab was run by a private contractor. As far as I and my co-workers could tell, it meant that we had twice as many layers of bureaucracy, twice as many managers, twice as many rules, and twice the paperwork.

    Sometimes a government agency is actually more efficient than a government agency with a private contractor tacked on.

  15. Businesses work only because markets work – no market, not much work.

    The government remains a political, not a market, entity – it reacts not according to money, but votes (typically of the congressional and senatorial variety, especially from committees), and as such power and influence. It is better, from their prospective, to virtually give away cash and call it being efficient and in favor smaller government, no matter the expense. And thus the nature of the filth of involuntary enterprises – at least with businessmen you can say no when you realize or learn that they’re just trying to screw you.

    You didn’t think that “privatization” would actually be used to make the government smaller and more efficient, did you?

  16. Thanks for the update JB. That’s what the Legion is there for. The Ghurkas perform the same role for the Brits. They scare the hell out of whoever happens to be on the other side. Ask the Argentines. Urban myth time: WW 2 legend has it that a Ghurka regiment was set to be sent home in disgrace, as only 1/4 of the regiment had volunteered for an airborne assault against an enemy stronghold. Honor was restored, and the rest of the regiment volunteered, when it was explained that parachutes would be issued.

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