Thursday, August 30, 2012

Public Decisions That Need to Remain Public

I wanted to post some thoughts on a couple of stories that appeared on this blog recently -- one the Dorfman and Harel article about prison and military privatization, and the other just yesterday on privatization in the Nebraska child welfare system.  One potential reaction to these articles is that they are two additional proof points that privatization of government services always fails.  I think a better response is to use them as learning exercises to tease out lessons as to when and why privatization may not succeed, as a precursor to developing a framework for thinking about where and how privatization is likely to succeed or fail.  In a future post, I am going to try to offer the rudiments of such a framework, both from such lessons as well as my personal experience in the sector.

This is the first of three articles on lessons I would draw out from these experiences.

1.  Certain Decisions Need to Remain Public

As it turns out, I have always been roughly in agreement with Dorfman and Harel on privatization of activities such as prisons and combat.  Even in most libertarian models of government (Rothbard and the anarcho-capitalists excepted), government has a virtual monopoly on the use of force.  In fact, it is this one power that  distinguishes it from private entities (and it is this power that caused the founders of this country to work so hard to create multiple layers of control and accountability over government officials).

I cannot get comfortable with delegation of this core power to private entities, especially given the fact that the enormous expansion of government activity over the last 200 years provides plenty of opportunities to find savings from privatization.  I worry that delegation of this power to use force to private actors will tend to weaken and evade limits we have put in place (though to be fair in a world where our President claims the right to assassinate Americans without due process, many of these controls have already been weakened.)  Besides, history in the form of arrangements like the Ferme Générale certainly does not give us much confidence in the delegation of the public power to use force to private actors.

But I think a more general lesson about privatization can be drawn, beyond just to avoid privatizing the use of force:  some decisions need to remain in the public realm.  If I understand it correctly, this is essentially the theme of Dorfman and Harel's work.

My sense is that this was also an issue in the Nebraska child welfare case, though the exact sources of failure were harder to parse from the article.   Certainly I get a bit queasy at the thought of the low-bidder on a government contract making life-changing decisions about kids' foster care.   But on the flip side I have no problem with a private company doing the paperwork and tracking and reporting.  Somewhere in here, I think, is a distinction between critical public decisions and less critical operational activities.

Let me try to illustrate this distinction with an example form my own work.

My company privately manages public parks.  If I just say those words, without further description, the average park lover is immediately nervous.  Why he or she is nervous is important.  When asked, they will say that private companies:

  • just want to build a McDonald's in front of old Faithful
  • will take the land I love and build a resort on it that only rich people can afford
  • will pave over all the wilderness to get more parking to make more money
These are very common, typical concerns.  I debated the head of the Arizona Sierra Club on private operation of public parks and the first slide she showed was an entrance to a popular Arizona state park with a McDonald's sign photoshopped in.

The key here is that the public has entrusted the land to the state because it wants public actors making decisions about the character and use of the land in a way that benefits the whole state.  The implicit assumption is that such a use may be different than the use that maximizes wealth generation from that land  (the strategy a private actor would presumably follow). On the flip side, though, I have met few people who really care if the park's bathrooms are cleaned by an employee of the state or a private company.   Herein lies the opportunity, by keeping public decisions public but putting operating tasks in the hands of lower-cost private companies.  Of course, actually achieving the promise of this cost savings is sometimes difficult, but that is for a later post.

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