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July 05, 2014
Privatization Harms Public Services
    by Robert Kropp

A working paper published by the UK-based New Economics Foundation calls for a model of co-production of social services, in which front-line service providers and service recipients collaborate.


In the US, the failure of privatization of public services can best be illustrated by the activities of the nation's two largest operators of private prisons, the Corrections Corporation of America (CCA) and GEO Group. "Profiting from the separations of families, violations of human rights, and general pain caused by these prisons is inhumane and unacceptable," states the Private Prison Divestment Campaign of the nonprofit organization Enlace.

Both companies "lobby the federal and state government for more contracts and for policies that promote mass incarceration and inhumane immigration enforcement." Last year, the companies spend almost $2 million on lobbying.

But the privatization of public services, and the financial austerity measures that give rise to the practice, are no longer strictly an American phenomenon. In the UK, "Successive governments have pursued a public services agenda based on market competition, consumer choice and outsourcing to private providers," according to the New Economics Foundation (NEF). "The promise has been lower costs, increased quality and better responsiveness to ‘consumer preference’."

In a recently published working paper, James Angel of NEF writes, "High quality public services act as a form of redistribution from rich to poor. They are an important mechanism for tackling socio-economic inequalities." However, he argues, neither centralized control nor privatization have been successful in fulfilling the mission of public services.

Indeed, he continues, "The government’s agenda of cuts, marketization and outsourcing threatens to undermine the capacity of services to reduce inequalities."

The solutions, according to the working paper, include co-production, or an equal partnership between service providers and recipients; a participatory process that allows citizens to have more control over the services they require; and reform of the hierarchical structure that can stifle innovation, trust, and accountability.

"Power should be devolved to the lowest effective level, which means increasing the power of local government to make decisions about services and to raise funds," the paper states, although this devolution should be accompanied by the power of the federal government to formulate standards of excellence. Also, "New models of public ownership are needed," it continues. "Public services should be run by not-for-profit organizations, because the balance of evidence shows that profit-driven ownership leads to declining quality, increasing costs and worse pay and conditions."

Finally, the paper advises that a general redistribution of wealth is necessary to address the acute wealth inequality that prevents low- and middle-class citizens from fully participating in the democratic process. "Austerity cuts to public services are counterproductive," the paper states. "We need a new macroeconomic strategy based on government investment, including investment in public services."

Back here in the USA, despite the administration of a Democrat who cut his political teeth in community action, the likelihood of redistribution of wealth and even a reversal of fiscal austerity measures still seems like a pipe dream. It bears mentioning, however, that one of the philosophical sources cited in the NEF paper is Elinor Ostrom, who received the Nobel Prize in 2009. Ostrom's work focused on the concept of the commons, "demonstrating that ordinary people are capable of creating rules and institutions that allow for the sustainable and equitable management of shared resources."

In stark contrast to a hierarchical system in which the most money buys access to the most political power, Ostrom argues that cooperation led to a more responsible sharing of finite planetary resources.

Elinor Ostrom, who died in 2012, was born in Los Angeles.

 

 
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