PRIVATIZATION: The Road to Perdition in the United States of Koch

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Mitchell’s laws:
●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 ultimately 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,
and the motive is the gap.

As we have repeated endlessly, politicians are bribed by the rich via campaign contributions and promises of lucrative employment later.

Chicago’s former mayor, Richard M. Daley, the latest in a long line of Chicago mayors leaving office under a cloud, accepted a lucrative “job” (i.e. “thank you” gift) from the law firm, Katten Muchin Rosenman (which not coincidentally, had received many millions of dollars in fees from the Daley administration.)

During Daley’s 5-term, 22-year tenure (a poster child for the need to impose term limits), Daley spent so much taxpayer money buying votes, the city’s debt became unsustainable. To cover part of the debt service, Daley began selling city assets (aka “privatizing”) – assets that formerly had provided income to the city.

Most notably, he sold a busy tollway and Chicago’s parking meters to rich business people, immediately after which Chicagoans were forced to pay much higher tolls and much higher parking fees, instituted by the wealthy new owners.

None of that money, formerly income to reduce taxpayer debt, will go to Chicago’s taxpayers for the next 99 years. Before Daley retired, he was negotiating to sell Chicago’s Midway Airport, the #2 airport in the region. His successor, Rahm Emanuel, continues the negotiation.

It was as though Microsoft had decided to sell the Windows patent, in order to obtain some quick cash.

The twin excuses for privatization are:

1. The private sector is more motivated, smarter and more creative than is the public sector, so will provide better service at a savings to the taxpayers.
2. We need quick money today, more than we’ll need income tomorrow.

In the cases of cities, states, euro nations and other monetarily non-sovereign entities, excuse #1 generally is a lie, because:
A. There seldom are savings to taxpayers. In fact, taxpayers lose the income they would have received from the assets. And,
B. The real motivation of the private sector is profits, not service. This especially is true for monopoly businesses like parking meters, toll roads, airports, jails, etc. While public officials are forced to provide at least a modicum of service, lest they be voted out of office, private monopoly CEOs feel no such obligation.

Excuse #2 always is a lie for Monetarily Sovereign governments (i.e. the federal government), which have the unlimited ability to create their own sovereign currency, so do not need income.

In the rarest of circumstances, perhaps excuse #2 could be true for some monetarily non-sovereign governments (state and local governments), if the reasons for the excessive debt have been cured and will not repeat. (But, really, does this ever happen?)

Privatization is nothing more than a payoff by politicians to the wealthy, at taxpayer expense, in exchange for which the politicians expect those above-mentioned campaign contributions and lucrative employment, later. Privatization is the ultimate sweetheart deal, paid for by the electorate, hiding graft and inefficiency from the public, and benefiting no one but the rich and the politicians.

Here are some examples: First, privatized prisons:

Prison Privatization

Private prisons are not beneficial to the country as a whole because of the negative effects on prisoners caused by the way they are run, the artificial situations private prisons use to boost business, and the low wages and benefits employees in private prisons receive.

Ever since the 1970s, there has been an increased interest in the privatization of public services.

The claim is that private companies seeking a profit can perform many services cheaper and more effectively than the public sector, which is perceived to be unmotivated, ineffective, and inadequately able to fulfill the public’s needs and demands.

Yes, that is the usual excuse given by crooked politicians, who sell government assets they themselves don’t own, in exchange for private campaign money, votes and personal employment. Politicians simply steal government assets and sell them for personal gain.

During the 1980s and early 1990s, the change in political climate favoring tax reductions and limited government. In addition, the increase in mandatory prison sentences from the start of the “war on drugs” resulted in an extraordinary increase in federal and state prison populations.

The prison population rose from 315,974 in 1980 to 883,656 in 1992, a 180% increase.

This demonstrates the criminality of austerity and the futility of the “endless war on drugs.”

Private prisons have negative effects on prisoners because they cut funding on security and educational programs which have been shown to drastically reduce recidivism rates.

These cuts make prisons more violent places resulting in the release of violent people into society.

By showcasing some of their private prisons, the private sector gives the public an inaccurate picture of how private prisons are generally run. In addition, private prisons are willing to sacrifice security to maximize their profits.

There is no proof that prison privatization saves taxpayer dollars. Even if private prisons save taxpayers money, the savings don’t offset the safety risks and low-budget security practices associated with private prisons.

Private correctional companies also increase corruption within our government by lobbying for policies that keep more prisoners locked up for longer periods of time.

They also cut corners by hiring under-qualified staff and providing them with inadequate training.

The prison system is something that should remain under the control and discretion of the government because it is prone to unprecedented levels of corruption if turned over to the private sector. It is for these reasons that prison privatization is harmful to society as a whole.

Chicago is monetarily non-sovereign, so is limited in its ability to spend, and always must seek sources of income. Italy, too, is monetarily non-sovereign, having surrendered its sovereign currency, the lira, and adopted the “alien” currency, the euro:

Italy set to launch privatisation drive with Fincantieri
By Rachel Sanderson in Milan

Italian state-owned shipbuilder Fincantieri will apply to list in Milan as early as Tuesday, firing the starting gun for what officials predict will be Italy’s largest privatisation programme since the 1990s, with a plan to raise €12bn.

Following the listing of Fincantieri, the government aims to sell 40 per cent of postal services operator Poste Italiane and 49 per cent of air traffic controller Enav.

Separately, Cassa Depositi e Prestiti (CDP), the Treasury-controlled financing agency, plans to sell minority stakes in Sace, an export credit agency.

Also to go are the government’s 4 per cent holding in energy group Eni; a 13 per cent stake in STMicroelectronics, a semiconductor manufacturer that is partially owned by the French government; Grandi Stazioni, which manages Italy’s largest railways stations; and CDP holdings in Snam and Terna, operators of gas and electricity grids.

Slowly, Italy sells pieces of itself, a finger here, a toe there, then a lung, a kidney . . . and the fiscal crises, brought on by the euro, are not solved, only delayed. And the rich assume more and more control over former Italian assets.

But what about a Monetarily Sovereign nation like England?

The Guardian

In historical context, privatisation seems to answer a number of dilemmas for the Tories. By spreading market incentives, it erodes the public sector basis for Labourist politics. . . And by reducing the power of public sector workers, it suppresses wage pressures, thus in theory making investment more appealing.

Above all, perhaps, in shifting the democratic to market-based principles of allocation, it favours those who are strongest in their control of the market, and who also happen to represent the social basis of Conservatism.

Conservatives, more than liberals, favor the rich, so privatization is their perfect tool. It reduces the size of government (which hurts the middle-classes and the poor). It suppresses unions and wages. It favors the rich and widens the GAP between the rich and the rest.

And that is why the CATO Institute, a Koch Brothers mouthpiece, simply loves privatization:

Chris Edwards, CATO

Governments on every continent have sold off state-owned assets to private investors in recent decades. Airports, railroads, energy utilities, and many other assets have been privatized.

The privatization revolution has overthrown the belief widely held in the 20th century that governments should own the most important industries in the economy. Privatization has generally led to reduced costs, higher-quality services, and increased innovation in formerly moribund government industries.

And of course, as usual, CATO mouths the BIG LIE.

The presumption that government should own industry was challenged in the 1980s by British Prime Minister Margaret Thatcher and by President Ronald Reagan. But while Thatcher made enormous reforms in Britain, only a few major federal assets have been privatized in this country.

Conrail, a freight railroad, was privatized in 1987 for $1.7 billion. The Alaska Power Administration was privatized in 1996. The federal helium reserve was privatized in 1996 for $1.8 billion. The Elk Hills Petroleum Reserve was sold in 1997 for $3.7 billion. The U.S. Enrichment Corporation, which provides enriched uranium to the nuclear industry, was privatized in 1998 for $3.1 billion.

And there was not one penny of benefit to U.S. taxpayers, but billions to the rich, who purchased U.S. assets at bargain prices.

And ask yourself, why would the U.S. have helium and petroleum reserves, but now has given control to private, for-profit companies? Does the word “defense” come to mind?

There remain many federal assets that should be privatized, including businesses such as Amtrak and infrastructure such as the air traffic control system. The government also holds billions of dollars of real estate that should be sold.

The benefits to the federal budget of privatization would be modest, but the benefits to the economy would be large as newly private businesses would innovate and improve their performance.

That is what the rich would like you to believe. But the lie should be obvious, if one gives even the most cursory thought to the profit motivations of a business vs. the motivations of an entity with unlimited access to money and no need for profits.

Privatization of federal assets makes sense for many reasons. First, sales of federal assets would cut the budget deficit.

To the detriment of the economy.

Second, privatization would reduce the responsibilities of the government so that policymakers could better focus on their core responsibilities, such as national security.

Congress ,the President and the 1000 federal agencies have too many responsibilities — like giving away assets to the rich.

Third, there is vast foreign privatization experience that could be drawn on in pursuing U.S. reforms.

No one needs to go to foreign countries to see the results of privatization. Just come to Chicago.

Fourth, privatization would spur economic growth by opening new markets to entrepreneurs. For example, repeal of the postal monopoly could bring major innovation to the mail industry, just as the 1980s’ breakup of AT&T brought innovation to the telecommunications industry.

Er. . . Ah . . . The breakup of AT&T was not privatization. But why worry about details.

Here is what CATA (aka Koch Brothers) says should be privatized (direct quote):

“end subsidies to passenger rail and privatize Amtrak;
privatize the U.S. Postal Service and repeal restrictions on competitive mail delivery;
privatize the air traffic control system;
help privatize the nation’s airports, while ending federal subsidies;
help privatize the nation’s seaports;
privatize federal electricity utilities, including the TVA and PMAs;
privatize parts of the Army Corps of Engineers, such as hydroelectric dams; and
sell excess federal assets, including buildings, land, and inventory.
These are some of the high-profile reform targets, but federal departments should be scoured for other large and small activities to transfer to new owners in the private sector.”

Hey, why not sell Yellowstone and Yosemite? Surely, we can trust the super rich not to build too many condo buildings in front of Old Faithful or cut down too many Giant Sequoias . . . on the privatization Road to Perdition . . . in the United States of Koch.

Rodger Malcolm Mitchell
Monetary Sovereignty

Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)

10. Tax the very rich (.1%) more, with much higher, progressive tax rates on all forms of income. (Click here)


10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

Monetary Sovereignty Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the lines rise. Federal deficit growth is absolutely, positively necessary for economic growth. Period.


15 thoughts on “PRIVATIZATION: The Road to Perdition in the United States of Koch

  1. Privately run US passenger trains (by the various railroads) began losing significant sums of money in the 1950s; this was the force that created Amtrak in 1971. Its privatization would mean wholesale discontinuance of most passenger rail in the US with the loss of thousands of union jobs; “union jobs”, perhaps that’s why the right wingers want to eliminate the system.


    1. Mayor Daley was a Democrat, but here’s the difference. All the Democrat politicians want to do is steal government assets and sell them for personal gain.

      The Republican politicians want to do the same, but they also have a second motivation. They want to widen the gap between the rich and the rest.


  2. Privatization is the process whereby the 99% cease helping each other, and become slaves to the 1%. The process is accelerated by austerity, and it creates a hell on earth.

    For example, when a prison is privatized, its profits depend on an ever-increasing number of inmates, and on exposing them to ever-harsher conditions in order to cut costs. If inmates sue the private prison, and win a judgment, then state taxpayers foot the bill, not the prison owners. Always and everywhere, private prisons suck extra dollars from the public. That is their purpose. Always and everywhere, they create nightmares. An example is the “kids for cash” scandal in Pennsylvania, in which judges sentenced vast numbers of juveniles to long prison terms for trivial infractions, or for no infractions at all. The judges did this because the prisons were privately owned, and the owners paid kickbacks to the judges. Such evil is unavoidable when prisons are privatized.

    Where is all this heading? Reader Tetrahedron720 thinks a revolt is inevitable. I agree. Here is why…

    ==Off topic == Off topic ==


    In speaking of the gap, we imply that all major social and political events are products of what Marx called the eternal “class struggle” – i.e. the endless drive to widen the gap at all levels, and especially between the rich and the rest.

    Americans had the luxury of pretending that Marx was wrong when the USA had a middle class (1945-75). Today, however, almost everything in politics and social life is designed to widen the gap between the rich and the rest.

    This pattern has existed throughout human history. In 1982, British historian Geoffrey Ernest Maurice de Ste. Croix published “The Class Struggle in the Ancient World,” which explained why the same phenomenon (the gap) characterized the ancient Greek and Roman worlds.

    Mr. Ste. Croix says that Greek (specifically Athenian) Democracy fell because the gap became so wide that Athens could no longer resist Roman expansion. (more on that below.) Later the Roman Empire fell for the same reason: political corruption, the destruction of the middle class, and the appearance of a socially unsustainable gap between the rich and the rest. Clearly there cannot be a strong industrial economy when most people are impoverished and indebted slaves or serfs (i.e. exploited tenants). Whenever the rich destroy a nation’s middle class, they destroy the nation overall.

    As I said, the pattern is always the same. The rich initially rely on imperial plunder, and on capturing an ever-increasing number of foreign slaves, either directly or via debt. Their imperialism inevitably runs into problems and limitations, at which point the rich enslave their own people via debt, taxes, serfdom, privatization, imprisonment, a two-tiered justice system for the upper and lower classes, and so on.

    Thus, an imperialist civilization is a cancer than eats everything around it, and then eats itself. The Roman Empire expanded for almost 400 years until the first century AD, at which point rich Romans began to enslave Romans. The result was extinction for all.

    In both cases (Greece and Rome) the rich lived mostly in cities, and became parasites on agricultural areas. The development of urban civilization created a perpetually growing gap between the “propertied” (primarily in land) and “non-propertied” classes. The rich ceased to be economic (i.e. agricultural) producers, and could only sustain their supremacy by reducing the masses to slaves in one form or another (e.g. debt-bondage).

    One thing that Mr. Ste. Croix does not fully explain is the limitations of imperialism. Why couldn’t rich Romans keep stealing foreign resources, and keep taking more and more foreign slaves, and keep expanding the Empire?

    My explanation is that the pattern of civilization includes what I call “financialization.” At a certain point the rich cease to acquire wealth by direct conquest and theft. The rich turn to financial swindles, and to speculation in various markets. They become obsessed with making money from money. Meanwhile the real economy crumbles. To keep the casino going, the rich enslave their own people. Their neighbors and countrymen.

    There is one difference between the past and today. In the past, the gap weakened nations to the point where they were conquered by foreign nations that had less of a gap. (Usually because local peasants allied with foreign invaders.) Today the gap between the rich and the rest is global, and interlinked. Nationalism has been replaced by corporatism. There are no Mexicans, Americans, Chinese, or whatever. There are only the rich and the rest.

    Many people deny this. They hope that nationalism still exists. They long for a major war with China, for example, so they can root for “their side” like a sports event. They uphold the Big Lie, because it lets them cheer for “their side” and hate the “other side” (e.g. they hate Blacks, immigrants, Russians, or whatever).


    No, because the problem is not inequality per se, but the perpetual drive to increase inequality. Always and everywhere, the more the rich have, the more they seek to widen the gap still further; not only between the rich and the rest, but between the real economy and the financial economy. The more they impose austerity, the more they scream that they have not imposed austerity. No nation or society can survive this.

    When a nation’s middle class is wiped out, so is it real (i.e. industrial) economy. Today the remnants of America’s real economy can only be found at the extremes, among industries that cater to the rich (e.g. architects who design mansions and zillion-dollar condominiums) and the poor (e.g. Wal Mart and dollar stores). Anything in-between is going extinct (e.g. shopping malls).

    Meanwhile debt-slavery is at a fever pitch (e.g. student loans, which cannot be discharged via bankruptcy).

    The rich will not stop. They cannot stop, for they are a mindless and relentless cancer. They will continue to grind down the peasants until a mass revolt becomes inevitable, just as Rome had more and more peasant revolts until Roman peasants allied with foreigners to end the nightmare. Rome was not destroyed by “barbarians.” It was destroyed by the rich. By the gap.

    Already a revolt is happening in Ukraine. (The war on Syria is not a revolt, but a proxy war in which US-sponsored Sunni terrorists seek to topple the government, and to exterminate all non-Sunnis.) In Eastern Ukraine the separatists are not so much “pro-Russian” as anti-oligarch, anti-banker, anti-neo-liberalism, and anti-financialism. This is not to say that their struggle is ideological. Rather, it is physical. It is basic. They have no jobs or food. Everything has been stolen or destroyed by oligarchs inside and outside Ukraine (e.g. Lakshmi Mittal of India, a Goldman Sachs man who is one of the world’s richest people, and who owns many factories and mills in Ukraine). They separatists fight not from commitment, but from desperation. And since the people in Western Ukraine are also impoverished slaves of the oligarchs, they have little will to go to war with the east. Thus, the oligarchs cannot defeat the separatists.

    However the separatists cannot win either, since they rely on Russia, rather than secede, and form a new nation. So…it is a stand-off for the time being.

    The “Occupy Wall Street” movement was not a revolt. It was kids throwing tantrums and begging the rich for mercy. They did not fight back against police thugs, as is happening in Eastern Ukraine. They did not take over police stations and government buildings. They did not have clear and unanimous goals. They were not truly starving.

    However, we will soon see real revolts everywhere.


    Because the rich will never stop widening the gap. If the gap doubles in size, the rich seek to quadruple it, and then expand it by 4×4 times, and then 16×16 times, then 256×256…and so on. Every arithmetical increase in the gap creates an exponential increase in the desire to widen it still further.

    This can’t go on forever. It hasn’t at any time in the past, and it will not in the present or future.


    1. As a regular reader of this blog, you know that “Everything in economics devolves to motive.”

      So imagine that you own a prison. What is your motive? Profits.

      One part of increasing profits is to increase the inmate population. That said, which is better: To educate prisoners and help them avoid future incarceration, or to treat prisoners badly, teach them nothing and assure that as soon as they hit then street, they again will commit crimes and be arrested?

      Compare this with government-owned prisons, that have no vested interest in creating more criminals.

      And there you have the bottom line about why private prisons are a bad idea for the public, but a profitable idea for the very rich.


  3. Which is worse? The rich, or their shills like Chris Edwards of the Koch-funded “CATO Institute? (Above).

    I say the shills are worse.

    The rich are the enemy, but the shills are traitors. By telling lies for the rich, they make their living by helping to enslave their fellow peasants. Pundits, professors, and politicians. They are subhuman scum.


    1. Anon:

      1. You are correct.

      2. The Fed’s balance sheet has nothing to do with inflation. Those dollars are not part of the money supply.

      3. Contrary to what the author says, raising interest rates will not “push the country into recession.” In fact, higher rates cause the federal government to pump more interest money into the economy, which is stimulative.

      Other than being completely wrong in every aspect, it’s a nice article.


  4. > Conservatives, more than liberals, favor the rich, so privatization is their perfect tool

    Here in Italy privatizations in the 90s were carried out by center and left wing parties (including what used to be the Communist Party), just as it is happening now. I wonder why they are still called “left”.


  5. “One part of increasing profits is to increase the inmate population. That said, which is better: To educate prisoners and help them avoid future incarceration, or to treat prisoners badly, teach them nothing and assure that as soon as they hit then street, they again will commit crimes and be arrested?”

    Why are they called correctional institutions? maybe corruptional. Kinda like a mental HEALTH facility when everyone in there is certified mentally ILLth.

    If the goal of privatization is motivated by profit obviously the owner is going to make more money off the state by increasing the prison population until it POPS. Then you have to build a bigger, or another, prison. Pretty soon they’ll be like Walmarts all over the place. But like the Canadian pipeline just think of the construction jobs– and criminal justice majors with a real future ahead of them. And like the pipeline, the criminal justice majors, guards and jailers will be handling an ever increasing amount of unnecessary sludge, and like the sludge it’ll be poison when it finally makes its way out to society.

    By the way, do you think the words ‘private and privacy’ may have been gradually, and dialectically, derived from pirate and piracy?


      1. Roger, I lifted this from the last paragraph in Wikipedia on the subject of “privateer.” I was guessing as to the root derivation due to the sound and pronunciation. Sort of like St. Nicholas evolving into Santa Claus.

        “Historically, the distinction between a privateer and a pirate has been, practically speaking, vague, often depending on the source as to which label was correct in a particular circumstance.[1] The actual work of a pirate and a privateer is generally the same (raiding and plundering ships); it is, therefore, the authorization and perceived legality of the actions that form the distinction. At various times, governments indiscriminately granted authorization for privateering to a variety of ships, so much so that would-be pirates could easily operate under a veil of legitimacy.”


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