Pay As You Go #2

September 2004


How privatization affects us all, but most especially those of us with less. The motivation behind the desire to strip government of its funding and prestige is simple greed.

In part I of this article, I discussed what governments and business are, what they are created to do for people, and how proposed privatization may not guarantee efficiency or competition.

Why would I want some private company to supply me with the same services as were formerly provided by my government? What is the effect on me of privatization?

The simple answer is easy: because if the government does fewer things for you, they will, at least in theory, collect less tax from you, too. Nobody likes to pay taxes. In many places in the world, where privatization has been tried, people do lower their taxes. They pay $10 less in tax. Then they give the money they used to pay in tax to some company as payment for a bill, plus any extra that the company adds so that they can make a profit. Most people like paying bills about as much as they like paying taxes.

The theory of the supporters of privatization is that taxes will go down and because the companies will be motivated to make a profit in competition with other companies, your bill will become smaller, too. Unfortunately, the facts seldom substantiate the theory. The only places where prices really fall in these circumstances are when the private company gets to slim down the number of people getting the service, shrink the area in which service is provided, or somehow cut out the least profitable customers and serve only the more profitable customers. This works for me, if you have an ice cream delivery business, but not if you're providing people with water or power.

That is, of course, another fault in the logic of people who want to privatize everything: capitalism and conservation are pretty much mutually exclusive. If I make a profit on the amount of power you use, I want you to use more power, so I can make more money. It just stands to reason that oil companies are the worst choice to rely on to reduce oil consumption.

Ghandi used to say that when he was thinking of recommending that the government do something, he always considered the effect of that action upon the weakest and poorest folks it would affect. Privatizing essential services means that some people get a good deal, some get a worse deal, and some get practically nothing. In India, for example, they're privatizing water supplies. Way out in the middle of nowhere, the water tap gets fitted with a gizmo so it only gives out water in metered amounts if you feed it money. Most of these people have little or no cash income. If they're going to have water, they have to sell things. They have practically nothing to sell, so they must send family members, usually children, into the towns to work so that the rest of the family can get water to drink. Problem is that there's no work, so the children either have to steal or become prostitutes. This privatization is the worst example of bad theories being put into worse practice.

If you want to see what a boon privatization is to an essential service -- how much lower it drives costs and how much better and more efficiently it works -- you have to look no further than our own health care delivery system. In this system, millions of people have no health care. Millions more have so little that if anyone in the family gets really sick, they lose the family home or business. How much will you pay to cure a sick child? How much is it worth to you to reduce the suffering of someone you love? Enough to make medical insurance companies and pharmaceutical companies some of the most profitable business concerns on the planet.

I wonder why people will gamble everything they have worked their lifetime to get and risk losing it all in a few short months rather than pay a modest amount every week or month? When they can afford it, and it is offered, they pay this kind of cost gladly to an insurance firm. But they get all bent out of shape if you suggest that they pay the same amount to a government agency that guarantees everyone a minimum standard of health care, regardless of their income.

In most cases, when things don't make sense the way they're always spun, it is easy to conclude that it is in someone's best interest for us to be confused or misinformed. In this case, there is a simple answer: when you take power, funding, prestige or goodwill away from the government, it does not just evaporate. All these things get redistributed: money, for example goes from our non-profit, publicly accountable government into private profit-making companies who are not held accountable for serving the people well. Businesses prosper and a great many people are harmed.

Devout capitalists will tell you that putting money into the private sector is better than putting it in the public sector. They say this like it is as proven as gravity, but it is not. The place most government departments "waste money" is by employing too many people. Ten people do the work that six or seven could probably accomplish just as well. Some of those people are supposed to watch what's going on with the money, because we're so paranoid about government graft -- we don't think of the profit the private company makes off us as graft. If the company was supposed to break even and the president of the company made this happen by cheaping up everything else and taking a whopping big salary, we'd say he was clever, enterprising and had a lot of business sense. If someone in a government department does the same thing, we have them arrested because they're stealing our money.

In the end, it is usually true that if you pay less taxes, you pay more somewhere else. When governments no longer subsidize higher education, it costs $80,000 to get a degree. When governments collect fewer taxes to pay for transportation, your car gets shaken to bits on bad roads, you have to pay real money to go over a big bridge or through a tunnel, and people die more often because the roads aren't as safe. The more money you make, the better it is to pay less taxes. The poorer you are, the more these tax cuts cost you out of pocket.

We pay government to do many jobs for us. Governments are made up of people and sometimes people are pretty rotten -- so governments are not immune from doing harmful, wasteful or just plain stupid things to the people they're supposed to be working for. But companies do the same thing sometimes. The government folks work for us -- they're supposed to do their jobs well or they're answerable to us. Private companies are answerable to their owners, not us, and giving all the power, money, and goodwill of our government over into private hands is a prescription for tyranny. Good government is not cheap, but you get what you pay for.

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