●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
In much of America, the electric company, casinos and horse tracks are privately owned, while streets, elementary schools and the lottery are publicly owned? Why?
The April 1, 2013 post, The myth of private enterprise superiority, reduced government and Ronald Reagan, said:
I believe the myth of universal private-sector superiority took hold when President Ronald Reagan included in his first inaugural address, the magical line, “In this present crisis, government is not the solution to our problem; government is the problem.”
It became an addictive slogan, a mantra for those who would rather not suffer the agony of thought and evaluation (though Reagan, himself a government worker, set records for increasing the size of government
The Tea Party claim, “Government must be downsized” is made without reference to facts. It is intuitive, similar to their, “Deficit spending must end.” — also intuitive and also unburdened by fact.
The April 12 post What President Obama learned from Mayor Daley said:
“To gain repeated reelection, (the 2nd Mayor) Daley paid off the local unions by giving them whatever they wanted, and paid off the aldermen, who obediently canvassed their neighborhoods for Daley votes. The ongoing payoffs cost the city’s taxpayers megabucks.
Daley was afraid to raise taxes even more, so he began to sell Chicago. First he sold the Chicago Skyway, a heavily traveled toll road. This deprived Chicago’s taxpayers of the road’s future income. The rich, new owners promptly raised tolls, a hidden tax increase, and a boon to the wealthy class.
Then Daley sold the city’s parking meters. This also deprived Chicago’s taxpayers of future income. The rich, new owners promptly raised parking fees, another hidden tax, also a boon to the wealthy class. Then Daley wanted to sell Midway airport, the 2nd busiest airport in the Chicago area.
Both the public and private sectors have their its crooks — their Daleys and Madoffs. Similarly, both sectors have strengths and weaknesses in customer service, productivity, creativity and efficiency.
The federal government built our highways, took us to the moon and defends our nation. Local governments provide police protection, clean water, streets and education.
The private sector feeds us, houses us and gives us medical care (though the public sector pays for much of it).
Saying the government (federal, state or local) is too big, is as stupid as saying the private sector is too big. The argument makes no sense, which probably is why the right wing supports it.
Privatization usually is a “Get out of jail, free” card for monetarily non-sovereign governments afraid to raise taxes or for Monetarily Sovereign governments falsely claiming taxes need to be raised. The result is a quick payment exchanged for long-term payments to wealthy investors — an endless tax on the middle- and lower-classes, without the word “tax” applied to it.
Privatization is a payoff to the rich private sector, exchanged for mega-dollars in campaign funds and promises of lucrative employment, later. It’s a gift from the 99.9% to the .1%.
We were reminded of this when an article appeared in the Chicago Tribune:
ComEd rate hike request would add $6 to monthly bills
By Julie Wernau, Tribune reporter, April 29, 2013
Commonwealth Edison said Monday that it will charge $6 more per month on average to deliver electricity to utility customers beginning in 2014 as a result of higher transmission costs and expenses it has incurred to modernize the electrical grid.
In a filing with the Illinois Commerce Commission Monday — its third under a new formula-based rate making system devised in 2011 — the utility requested $311 million in additional revenue from customers in 2014 for its role in delivering electricity, maintaining electrical lines and improving the electrical grid. That increase must be approved by the Illinois Commerce Commission.
It’s hard to understand why the private sector delivers our electricity, a product used and needed by every citizen — much like streets and elementary schools. In Illinois, we have the cockamamie system in which politicians approve pricing, while a private company delivers the electricity and maintains the electric lines, and having zero motivation for efficiency. ComEd managers are guaranteed their pay by the state, no matter the cost, and customers have no voice — neither via the ballot nor via patronage.
The above article was accompanied by this one:
ComEd ranks low in consumer satisfaction.
By Julie Wernau, Tribune reporter, April 18, 2013
Since 1999, ComEd has consistently ranked among the worst utilities in the Midwest for customer satisfaction in surveys conducted by The American Customer Satisfaction Index and J.D. Power and Associates. The company scored 69 on a 100-point scale.
The primary difference between public and private organizations is the profit motive, which can be a blessing or a curse. In a competitive business the profit motive more often is a blessing (one notable exception being the airlines, which never should have been deregulated). In a monopoly business, the profit motive is a curse (as witness the gasoline/oil business).
Governments have divided responses: To customers via elections, and to rich donors. Private companies also have divided responses — to officers, to shareholders and to customers. In the case of the privately-owned monopoly, ComEd, customers seem to come last.
Because ComEd cannot be trusted to set equitable rates, government bureaucrats set them. But the rates merely are based on what the private company says its costs are. So, in effect, the private company sets the rates. The profit motive doesn’t work, here.
1. The federal government neither is too big nor too small (nor just right). The concept is meaningless as are arguments about it. The right wing, Tea Party goal of small government is foolish at best and criminal at worst.
2. Large monopolies, whose product/service is needed by the majority of citizens, usually do better for the public with government ownership. The model is elementary education, in which public schools are government owned, but often compete with private schools.
Governments should own the providers of electricity, water, natural gas, sewage disposal, trash disposal, streets and street repair, police/army/espionage protection, education and the regulation of private business. “Own” can include government funding of private enterprises for specific tasks, but the overall project, including pricing and operational direction, should be wholly government controlled.
Turkey plans giant privatization campaign
Turkey has sold several state-owned assets worth nearly $41 billion in recent years, and the head of the country’s privatization agency said Thursday the government planned to launch an even more robust period of privatization in 2011.
Why Privatization? You have only to ask, “Who is getting rich from this?”
Rodger Malcolm Mitchell
Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports
12 thoughts on “Why Privatization? Here’s why:”
Based on your “bottom-line thoughts,” it seems that banks should also belong to the category of “better public than private.” North Dakota is conservative, but is the only state that has a state bank that puts profits back into the state economy. Small businesses in ND can get loans, while those same types of businesses in the rest of the country are stranded by Big Banks’ unwillingness to lend. ND’s publicly owned banking system came about because farmers and small businesses pushed the state legislature in 1919, during the age of the Robber Barons (just like our situation now!!). The State Bank of North Dakota was probably the only successful offshoot of the Populist movement.
The bank’s stated mission is to deliver sound financial services that promote agriculture, commerce and industry in North Dakota. The bank operates as a bankers’ bank, partnering with private banks in the state to loan money to farmers, real estate developers, schools and small businesses. It loans money to students (over 184,000 outstanding loans), and it purchases municipal bonds from public institutions. The ND banking system works for the little guy and local business, not the big multinational corporations. People in other states are working toward developing similar institutions for their states. See http://publicbankinginstitute.org/ IMO, this is the logical next step for MMT.
Thank you for commenting Lori. Some responses if I may.
Yes, I agree that every state should have a public bank like the BND.
Actually North Dakota has become so right-wing that I expect the BND to sooner or later be privatized . (I lived in “No-dak” for four years.)
Regarding Ellen Brown and the Pubic Banking Institute, they have several problems. One is that they erroneously think that all money in circulation is lent by banks. ALL of it. For them, there is no such thing as government spending. They are stuck in this delusion, and will not budge. I’ve often commented on it here.
However their main call is for public banks,. which I agree with.
Wrong Again Markie. And it is YOU who is stuck in delusion. How many times must I attempt to bring you back to reality. The BOND works because of reasons very specific to ND. I won’t provide your education for you. Try doing that on your own.
“The federal government built our highways, took us to the moon and defends our nation.”
There are great differences between the first two and the last. The members of the Military are government employees, and have virtually none of the workplace protections that are enjoyed by the private sector, never mind by civilian government employees, who have more protections than the private sector. Imagine the boss at DMV demoting or fining the clerk for being late to work, the way the Captain of a Navy ship can do to the seamen under his command!
Private sector contractors built our highways, and did most of the work involved in going to the moon, except for the military pilots who manned the spacecraft. Government funded them, but did not use government employees to build rockets and invent space suits, Tang, and velcro.
Imagine employees from DMV or the unemployment office working in the space program:
“Houston, we have a problem.”
“I’ll be with you in 15 minutes, I’m on my break now.”
Or “Please take a number and have a seat over there.”
If there is a natural monopoly, such as for national defense, then it makes sense for government to be involved, at least for regulation (although as you point out, the government regulators are easily compromised.) For the most part, monopolies cannot survive as such without government protection. What would your cable bill be today if you had a choice of two or three cable companies 20 years ago? What would it be today, with one cable TV company and no satellite companies or phone companies offering service? What about quality?
Competition is the reason that private sector companies must innovate and be efficient, else their competitors will eat their lunch. Competition is what disappears when government is the sole provider.
You are right, there are jobs for which one or the other is better-suited, but in the absence of an obvious advantage to having a monopoly provider, or a need for the service regardless of ability to afford it, the private sector usually can do a better job for less money.
The vast majority of military spending, indeed the vast majority of all government spending, is via the private sector. That’s one of the several reasons why complaints about “big government” are ridiculous.
Sometimes advantages for either public or private providers aren’t obvious. The airlines provided much better service with federally mandated pricing. That was not obvious in advance, to those who felt the government never should “intrude.”
The fundamental point of the post is, privatizing can have serious, negative consequences, and more often than not, is done for bad reasons, i.e instant cash in exchange for long-term benefits to wealthy investors (a disguised tax increase),
Privatizing usually is a gap widener.
By the way, you’re repeating the popular myth that government gives bad service and corporations give good service. My only repeated contact with government employees has been with the Social Security Administration folks. I’ve found them to be courteous and helpful and prompt. Every time.
People are people, whether they work for big companies or for big government. Some care; some don’t. Try calling, for instance, the Wells Fargo Bank with a mortgage complaint, and see whether their service is better or worse than what you get from the federal government.
I agree. In fact, if you scroll through the links on the left, you will see posts in which I advocate the end of private banking.
One is titled, “The end of private banking: Why the federal government should own all banks.”
I see no public purpose to private banking.
RODGER SAYS: “The vast majority of military spending, indeed the vast majority of all government spending, is via the private sector. That’s one of the several reasons why complaints about ‘big government’ are ridiculous.”
>>Actually ALL government spending is via the private sector. If the Social Security Administration credits my personal bank account, then that digital money is not spent until I personally use it in some way (e.g. buy something, pay a debt, make a personal loan to someone, etc). Therefore, when Tea Party clowns complain about “government spending,” they are complaining that there is money in circulation. When they call for reduced spending, they call for reduced money in circulation, i.e. they want a depression.
RODGER SAYS: “You’re repeating the popular myth that government gives bad service and corporations give good service.”
>> When someone says that some aspect of government gives bad service, it means the rich want it for themselves. The rich want to privatize it.
For example, we often hear people whine that the US Postal Service gives bad service, when in fact the USPS gives spectacularly good service. So good that the rich want it for their own. The rich want to privatize it. (By “spectacularly good service” I mean the USPS delivers to areas that are unprofitable for private companies to operate in. A letter sent from a small town in Alaska is transported across the country to a farm in Maine for 46 cents.)
The USPS handles 40 percent of the entire world’s mail. Privatized, it would be massively profitable to the Koch brothers, whose Cato Institute has been pushing to privatize the Postal Service (and the rest of government) for many years. The Koch brothers’ dream of privatizing the USPS is like Pete Peterson’s dream of privatizing Social Security.
To privatize the USPS, the Koch brothers must destroy it in its present form. Hence they issue propaganda that the USPS gives poor service, and is “in crisis,” and can only be “saved” via privatization. In 2006 they paid politicians to pass laws requiring that the USPS go into severe debt by front-loading its retirement fund. The USPS must immediately fund 75 YEARS of retirement benefits! That is, it must pay now for employees who are not even born yet. No other government agency or private company has to do this. It forces the USPS to pay $5.5 billion per year to the Treasury, which does not need or use the revenue. (This is why the rich claim that the USPS is “broke.”)
Yes, the rich want to kill the USPS in its present form, and take it for themselves. In 1970 the rich paid politicians to pass laws requiring the USPS to break even. (The Pentagon is not required to break even.) The rich paid politicians to pass laws restricting the USPS’s ability to raise rates, enter new lines of business, or take other steps to help it raise revenue. For example, politicians forced the USPS to remove public-use copiers from Post Offices. Congress also blocked the Postal Service from setting up a secure online system that allowed Americans to make monthly bill payments.
The rich are subjecting the USPS to austerity in steroids, whittling it down, step-by-step. Killing it. Since 2006, the USPS has fired 193,000 employees, and consolidated more than 200 mail processing locations. Now the rich want to end Saturday delivery, so as to give a massive advantage to private companies like Fed Ex and UPS.
The rich hate everything about the USPS. They hate that the USPS is the second largest employer in the United States after Walmart. (But unlike Walmart, the USPS is unionized, pays reasonable wages and benefits, and receives no government subsidies.) The rich hate that the USPS workforce is 40 percent women, 40 percent minorities, and 22 percent veterans, many disabled.
When ordinary people denounce the USPS, they call for more austerity and poverty. They serve the rich.
Yup. The USPS is spectacularly good. Used to have a mail order business. Regularly, for $5-$9 delivery to Australia in under 72 hours. Once had a package to send to Canada, and unexpectedly had to go to Canada, and put it in my luggage. Had to bring it back, because the domestic delivery rate in Canada was almost 3 times the international rate from thousands of miles farther away in the USA.
The only reason that many people think that the government doesn’t do many, many things much better in all respects than the “private sector”: Innovation, scientific research, electrical power and other utilities, roads, mail, health care, low cost housing, etc is that they have been driven insane by incessant insane propaganda that says: “Who you gonna believe, me or your lying eyes?” Especially obvious if you compare historically and internationally, how the USA used to do things when “private sector” criminals did not run things so much, or how things are done better overseas.
You can still get good service from airlines, if you’re willing to pay the same sort of rates that they charged in the era of government price controls. Business class on British Air is as different from coach on US Airways as Ruth’s Chris is from McDonald’s. Or more. At least they feed you at McDonald’s. Most people prefer the lower price. Today airlines respond to their customers’ preferences.
What you describe having been done in Chicago sounds horrible, and may well have been a mistake.
OTOH, some small municipal water companies are being taken over by large private water companies, because the town has neglected the maintenance for so long that they can no longer provide safe water. The large companies have economies of scale, and the means to upgrade the systems and spread the cost over many more consumers.
Customer service in general has deteriorated noticeably in my lifetime. Very few companies (and fewer governments) have maintained a culture of good customer service. The companies that do it have empowered employees to solve small problems on the spot, something that government has never allowed, and would be considered illegal, mostly.
I’m new at Social Security, but I cannot imagine why I would ever have contact with them, unless it was because of poor service. I’ve never had to talk to a live person, which I think is wonderful. My deposits are made on time, and that’s all I ask. Whatever you’re talking to them about so often, I’m glad you’re getting good service.
I had intractable problems with Medicare, handling my Mother’s estate.
It’s true, people are people, some care, some don’t. The difference is that the ones who don’t care in the private sector can be fired, if the employer cares. And the customer can go elsewhere if he doesn’t like the service.
 The ideal of socialism is that we all work for each other. The ideal of privatization is that we all become slaves beneath an aristocracy. The latter is called “efficiency” and “fiscal responsibility.” Austerity is all about “fiscal responsibility.”
 One man’s “big government” is another man’s “small government.” The parts of government that serve me and my beliefs are “small government.” The parts that serve you and your beliefs are “big government.” If government serves only me alone, it is good. If government also serves you, it is evil. If government serves me and you both, it is again evil (but I still want my benefits). Thus, for right wing Tea Party types, one dollar for Social Security is “big government,” while one trillion-trillion dollars for Wall Street is not.
 The industries that should NEVER be fully privatized are those that serve everyone, regardless of race or rank. Examples include utilities, banks, prisons, and so on.
 Rodger says, “The federal government neither is too big nor too small (nor just right). The concept is meaningless as are arguments about it.”
Well put. Part of Rodger’s brilliance is knowing when an entire issue is meaningless, regardless of which side we take.
People at the NEP blog spend much of their time in meaningless chatter about nothing. For example, they are still crunching numbers and heavily analyzing why Reinhart and Rogoff were wrong about the 90% debt threshold. In reality the entire issue was meaningless from square one.
Moreover, Reinhart and Rogoff did not “flub” (as is claimed in the NEP blog). They LIED. If we reject this truth, then we remain stuck in meaningless chatter, while Reinhart and Rogoff laugh at us.
Here’s an interesting article giving examples of the public sector being more efficient and cost-effective than the private sector (mainly in the UK) that bolsters your point: http://dnwssx4l7gl7s.cloudfront.net/nefoundation/default/page/-/publications/public_private_full.pdf