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
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
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
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."
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
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.