Reason Writers Around Town: Room for Debate on Privatization
The New York Times' Room for Debate blog sets up their latest topic: "Is Privatization a Bad Deal for Cities and States? To save money, New York is turning the clock back on outsourcing by replacing private contractors with city workers."
Reason Foundation Director of Government Reform Leonard Gilroy, editor of the Annual Privatization Report, writes:
Contracting works by introducing competition into an otherwise monopolistic system of public service delivery. Governments operate free from competitive forces and without a bottom line. Agency and program budgets are too rarely tied to results, so poor performance in government is often perversely rewarded with budget increases.
Contracting usually generates cost savings for taxpayers between 5 and 20 percent on average, though the benefits of competition extend far beyond cost control. For example, service quality improvements, improved risk management, innovation, and access to outside expertise are other benefits often cited by satisfied government customers.
Contracting out is simply a policy tool, and like any tool, it can be used well or poorly. There are two critical ingredients to successful government contracting. First, public managers should think carefully about the service quality standards they want to achieve, and then develop strong, performance-based contracts that hold contractors accountable for meeting them. Measurable performance standards should be built into contracts, along with incentives for exceeding standards and penalties for underperformance.
Second, once a performance-based contract is in place, government managers must monitor and enforce the terms of the contract to ensure that contractors perform.
Government contracting needs to be seen as part of a larger fiscal management toolkit that includes performance assessment, priority-based budgeting, sunset reviews, and many other approaches to reform.
Full Gilroy take here. The rest of the Room for Debate discussion is here. Stephen Goldsmith, deputy mayor of New York, helped prompt this topic and you can catch him in Reason.tv's Reason Saves Cleveland video "Privatize It."
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“Profits are yucky.”
Caroline Heldman, the blond-bimbo professor, responded to the question of whether roads should be privatized with “leaving roads to profit-seeking companies would lead to substandard roads and dangerous bridges.” That was last week on “Hannity.”
She seemed to have missed the irony of her comments.
The worst a department performs, the more money it receives to “fix the problem.”
I like that, but I would modify it slightly and propose the following axiom:
“leaving X to rent-seeking special interests will lead to substandard and expensive X”
where X is equal to any function currently performed by the government
Had the state legitimately privatized those services, they would have had no obligation to pay any contractors. Privatize means government doesn’t do that thing any more.
I’m amazed that it took 6 comments before a commentator on the NYT site invoked the Kochtopus bogeyman. Although, we did get the exploiting the middle class meme out of the way in the first comment.
Re: Montani Semper Liberi,
That’s what Feed subscription is for, I guess… To be able to publish your latest plaititude on a major publication’s blog before anybody else.
Contracting out is simply a policy tool, and like any tool, it can be used well or poorly.
Should we look at outsourcing the outsourcing?
I suggest we offshore the outsourcing.
Its the only way to be sure.
But you’re just a grunt – no offense.
Privatizing, done correctly, is most likely to be a benefit.
Privatizing, done corruptly, could very well turn out to be a detriment.
As Angus pointed out above, privatizing eliminates government involvement entirely.
“Privatize” can mean any of several things in the nomenclature the Reason Found’n endorsed 30 yrs. ago. The version you’re referring to they called “load shedding”.
In Iceland the banks were privatized in a wholly corrupt manner. One of the new owners had no experience in banking. That was one of the reasons for the collapse.
Privatization in the USSR sure worked out pretty terribly. Of course a libertarian could respond that the problem there was the massive government ownership in the first place, not only did it screw up everything it ran, it even f*cked up the transfer to the private sphere!
Re: MNG,
Only because privatizing with the added guarantee of a total monopoly is NOT privatizing: The government is still functioning as a partner.
Yeah, Russia sustained 7% growth rates for 10 years. That’s how you define “terrible” I guess.
Privatization is a great thing, I agree.
A Tale of Two Burnings: Qurans vs. Bibles.
http://libertarians4freedom.bl…..ibles.html
Bibol, Koran, Fone book. Doesn’t make much difference to me what kind of rice paper I smoke out of.
Re: gregory Smith,
What would be your guess as to why Congress did not try privatization when it came to nab Osama bin Laden?
I remember when all-purpose empty-head Gretchen Carlson said that “the free market failed to grab bin Laden,” presumably because an offer was made by the government which nobody took. It probably never dawned on her pretty little head that the offer might have been too low…
“What would be your guess as to why Congress did not try privatization when it came to nab Osama bin Laden?”
—They just hate the term “mercenaries” which I find ridiculous. You listen to the Democrats and they don’t even like private contractors in Iraq, they would rather see our troops cleaning toilets and sweeping floors, as if they were still in basic training!
So my guess is, political correctness.
There probably isn’t a shortage of people willing to go after Bin Ladle, but in order to capture or kill him might require doing things that the government has a problem with. So its also a regulation issue.
If privatization means contracting out I think that can be a recipe for corruption. If it means government abandons an area and lets markets take care of it then the only problem is if the area is one where we want pretty much equal services covering people regardless of their ability to pay for it or not.
Well if you have a problem with that, then reach into your pocket and help out.
Re: MNG,
Please use your head. A recipe for corruption is corruption, not contracting itself.
You mean fixing the freeloader problem but without fixing the freeloader problem when it’s politically not palatable to you? Ok.
And there’s no corruption in government? The beauty of the private sector is that if they screw you, you fire their asses and never work with them again.
> The beauty of the private sector is that if they screw you,
> you fire their asses and never work with them again.
Ask Michael Clauer how that worked out for him. And if you haven’t heard of Michael Clauer, ask yourself why. The “support the troops” and “private property rights” punditocracy ignored his story, leaving the left-wing Mother Jones to be the only national media outlet to report it just before Memorial Day weekend 2010 (followed a few weeks later by the liberal NPR).
Not a peep from Bill O’Reilly, Sean Hannity, Glenn Reynolds, Reason, National Review, Institute for Justice, Independence Institute, et. al about Captain Clauer’s home being stolen by a private corporation while he was deployed to Iraq.
Statements like “The beauty of the private sector is that if they screw you, you fire their asses and never work with them again” are evidence that libertarians are as ignorant of the real world consequences of their theories as your typical college campus communist wearing a Che Guevara t-shirt driving around in a Prius displaying a “Hope And Change” bumper sticker.
If privatization means contracting out I think that can be a recipe for corruption.
Both public and private enterprises contract out work the same banal reason: there is not enough work within the enterprise to sustain full-time employees to do it.
Corruption in the public sector occurs when employees are hired without enough productive work for them to do. The same is just foolish in the private sector.
Yes MNG, public sector contracting of private sector work can and does sometime does lead to corruption. At the same time, corruption is already ambient in the public sector, so hiring a larger public sector work force is only going to make that worse.
“If privatization means contracting out I think that can be a recipe for corruption.”
Single-payer health insurance is essentially health care contracted out.
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