Personal Finance

Why I (Usually) Support Privatization

Sometimes being too realistic is a major problem. It’s easier to get lost in a swell of partisan tribalism than deal with the uncomfortable merits of a specific, emotionally-driven issue.

Consider privatization as an example. Somewhere in the 1970s and 80s, the Neoliberalism train launched, promising increased efficiencies to ward off the corrupt and stagnant government organizations of before. Assets got sold and regulations were rolled back, all in the name of a leaner administrative state with less bureaucracy.

Today, it is difficult to measure how effective these approaches have been. On the one hand, we pay less generous pensions to federal workers under FERS than its juicier parent, CSRS, while ensuring money is injected into the market with 401ks. We have passed these claimed benefits on through the explosion of government contracting, which allows federal authorities to pay for services without shelling out cash for the expansive benefits enjoyed by its own workers. In the case of the Postal Service, they are actually demanding further reforms to reduce the pension liability.

Has it eliminated waste? This is a harder one to gauge. Certainly the Iraq and Afghanistan wars showed us how well contractors manage taxpayer dollars, and the recent Accenture story about a  $297 million heartbreak is cause for skepticism. At bare minimum, there is no question that government spending has exploded since the neoliberal era, so the tremendous savings are questionable.

Finally, we might examine the bureaucracy issue. People like to point towards the DMV as a bad instance of government administration, but anyone who has worked in a large corporation or government contracting company knows they have massive bureaucratic tendencies. It is easier to fire a contractor than a federal employee however, so perhaps that side bolsters the efficiency argument.

So with spending up and job security down, why would anyone support the privatization practice?

To make money. I am well past having optimistic ideas of the government or private corporations, but the only immediate benefit of state-run bureaucracies is for those employed full-time by them. Otherwise, the return on taxpayer investment is minimal.

With a privatized  state entity, just like with a private company that bids for federal contracts, there is an opportunity to invest in shares and earn more.  Governments don’t do that outside of bonds, and those are the poor man’s arsenal.